Evaluation of Credit Department of Dhaka Bank

History of Banking

Bangladesh inherited its banking structure from the British regime and had 49 banks and other financial institutions before the Partition of India in 1947. The Dhaka Bank established in 1806 was the first commercial bank in the Bangladesh region of British India. Bengal Bank, the first British-Patronized modern bank established in India in 1784, had opened its two branches in 1873 in Sirajganj and Chittagong of Bangladesh region.

Later in 1862, the Bengal Bank Purchased the Dhaka Bank and opened its first branch in Dhaka in the same year by reconstituting and merging the Dhaka Bank. Thereafter, another branch of Bengal Bank was opened in Chandpur in 1900. A number of other branches of Bengal Bank were opened in this region and some branches had been closed in Course of time. There were six other branches of Bengal Bank in operation in the territory of Bangladesh until the Partition of British-India in 1947 and these branches were at Chittagong (1906), Mymensing (1922), Rangpur (1923), Chandpur (1924), and Narayanganj (1926).

Following the emergence of Pakistan in 1947, Stat Bank of Pakistan, the Central Bank of the country, came into being in July 1948. Later, the National bank of Pakistan, a strong commercial bank was set up in 1949. In all, 36 scheduled commercial banks were in operation in the whole Pakistan until 1971. Pakistanis owned most of these banks and only three of them namely, National Bank of Pakistan, Habib Bank Ltd. and the Australasia Bank Ltd, had one branch of each in East Pakistan in 1949. During 1950-58, there other Pakistani owned banks, Premier Bank Ltd., Bank of Bhowalpur Ltd. and Muslim Commercial Bank, had Opened their branch in East Pakistan. Four Pakistanowned banks, the United Bank Ltd., Union Bank Ltd., Standard Bank Ltd. and the commerce Bank Ltd. Conducted banking business in the Province during 1959-1965.But all of them Had their headquarters in west Pakistan. East Pakistan had only two banks Owned by local business groups white headquarters in Dhaka. These were the Eastern Mercantile Bank Ltd. (Presently Pubali Bank Ltd.) and Eastern Banking Corporation Ltd. (Presently Uttara Bank Ltd.) established in 1959 and 1965 respectively.

Modern banking system plays a vital role for a nation’s economic development. Over the last few years the banking world has been undergoing a lot of changes due to deregulation, technological innovations, globalization etc. These changes in the banking system also brought revolutionary changes in a country’s economy. Present world is changing rapidly to face the challenge of competitive free market economy. It is well recognized that there is an urgent need for better, qualified management and bettertrained staff in the dynamic global financial market. Bangladesh is no exceptions of this trend. Banking Sector in Bangladesh is facing challenges from different angles though its prospect is bright in the future.

History of Private Banks in Bangladesh

There were no domestic private commercial banks in Bangladesh until 1982; When the Arab-Bangladesh Bank Ltd. commenced private commercial banking in the country. Five more commercial banks came up in 1983 and initiated a moderate growth in banking financial institutions. Despite slow growth in number of individual lbanks, there had been a relatively higher growth of branches of nationalized commercial banks (NCBs) during 1973-83. There number had increased from 1512 in 1973-74 to4603 in 1982-83.

Financial sector reforms to strengthen the regulatory and supervisory framework for banks made headway in 2006 although at a slower than expected pace. Overall health of the banking system showed improvement since 2002 as the gross Non-performing Loans (NPL) declined from 28 percent to 14 percent while net NPL (less Provision) reduced to 8 percent from 21 percent. This led significant improvement in the profitability ratios.

Although the Private Commercial Banks (PCB) NPL ratio registered a record low of 6 percent, the four Nationalized Commercial Banks (NCB) position are still weak and showed very high NPL at 25 percent.

Modern banks play an important part in promoting economic development of a country. Banks provide necessary funds for executing various programs underway in the process of economic development. They collect savings of large masses of people scattered through out the country, which in the absence of banks would have remained idle and unproductive. These scattered amounts are collected, pooled together and made available to commerce and industry for meeting the requirements. Economy of Bangladesh is in the group of world’s most underdeveloped economics. One of the reasons may be its underdeveloped banking system. Government as well as different international organizations have also identified that underdeveloped banking system causes some obstacles to the process of economic development. So they have highly recommended for reforming financial sector. Since, 1990, Bangladesh government has taken a lot of financial sector reform measurements for making financial sector as well as banking sector more transparent formulation and implementation of these reform activities has also been participated by different international organization like world Bank, IMF etc.

Introduction

The purpose of this study is to find and analyze the Credit facilities (its outstanding, recovery, classified loans etc), approval and monitoring process of Dhaka Bank Limited, Local office. It will also include the performance of credit facilities in recent years. Find out different credit facilities that Dhaka Bank is providing for their customers. Also to give an idea about the securities behind the loan facilities and issuing different bank guarantees.

Objectives

The objectives of this report are:

To identify the credit approval, their securities and monitoring process of Dhaka Bank Limited
Identify the lending activities at DBL
To identify the recovery rates of the loans in different sectors in last 4 years and have a comparison among them.

Scope

The scope of this report is the Head office and Uttara Branch of DBL and their operations throughout the country. The report also touches the banking industry and its trends and competitors of DBL.

Overview of Dhaka Bank Limited

Bangladesh economy has been experiencing a rapid growth since the ’90s. Industrial and agricultural development, international trade, inflow of expatriate Bangladeshi workers’ remittance, local and foreign investments in construction, communication, power, food processing and service enterprises ushered in an era of economic activities. Urbanization and lifestyle changes concurrent with the economic development created a demand for banking products and services to support the new initiatives as well as to channelize consumer investments in a profitable manner. A group of highly acclaimed businessmen of the country grouped together to responded to this need and established Dhaka Bank Limited in the year 1995. The Bank was incorporated as a public limited company under the Companies Act. 1994. The Bank started its commercial operation on July 05, 1995 with an authorized capital of Tk. 1,000 million and paid up capital of Tk. 100 million. The paid up capital of the Bank stood at Tk 1,547,402,300 as on December 31, 2007. The total equity (capital and reserves) of the Bank as on December 31, 2007 stood at Tk 3,125,688,713.The Bank has 41 branches and 1 Business Center including 2 Offshore Banking Units across the country and a wide network of correspondents all over the world. The Bank has plans to open more branches in the current fiscal year to expand the network.

The Bank has a total number of 50 branches and 1 Off Shore Banking Unit at DEPZ Savar Dhaka, 7 SME Service Centers, 1 Klosk (Business Center) and 1 Central Processing Centre as of March 2010. and plans to open more by the end of 2010 to expand its network.

The Bank offers the full range of banking and investment services for personal and corporate customers, backed by the latest technology and a team of highly motivated officers and staff. The Bank has launched Online Banking services (i-Banking), joined a countrywide shared ATM network and has introduced a co-branded credit card. A process is also underway to provide e-business facility to the bank’s clientele through Online and Home banking solutions.

Mission of the Dhaka Bank Limited

“To be the premier financial institution in the country providing high quality products and services backed by latest technology and a team of highly motivated personnel to deliver Excellence in Banking.”

Values of the Dhaka Bank Limited:

Customer Focus.
Integrity and Honesty
Quality
Teamwork.
Respect for the Individual
Responsible Citizenship
Transparency and Accountability
Environmentally Conscious
High Morale

Corporate Social Responsibility

Dhaka Bank is committed to their corporate responsibility toward the community. They allocate 2% of their tax profit for CSR practices each year. They have also taken numerous initiatives towards social welfare and community development. They also donated-

Anti-Drug Campaign in Chittagong
Donation to Prime Minister’s Relief Fund for bereaved family members of the
Army Officers during the recent carnage at BDR Head Quarter, Peelkhana, Dhaka on March 10, 2009 of taka 25 Lac.
Donaton to Prime Minister’s Relief Fund for bereaved family members of the
Army Officers during the recent carnage at BDR Head Quarter, Peelkhana, Dhaka on April 1, 2009 of taka 9.60 Lac.
Donation to BIRDEM Hospital in 2009 of taka 24 Lac.
Donation to Center for Women &Child Health Hospital in 2009 of taka 24 Lac.
Contribution to Bangladesh Tennis Federation (BTF) as sponsorship of 23^rd Bangladesh International Junior Tennis Championships 2009 of taka 5 Lac.
Financial assistance for Shahidbagh Jame Mosque, Dhaka of taka 50 Lac.
Financial assistance for Kapasatia Jame Mosque, Hossainpur, Kishoreganj of taka 20 Lac.
Donation to Bangladesh Hockey Federation for sponsorship of Jawharlal Nehru Cup Hockey Tournament of taka 10 Lac.
Donation for the Aila Cyclone Victims of taka 10 Lac.
Donate 2 unit of Ambulances to be used by the Highway Police of taka 48.86 Lac.
Donation to the Players and Officials of National Hockey Team for winning 3rd
AHP Cup Tournament held in Singapore of taka 2 Lac.
Donation to Bangladesh Athletic Federation Sponsorship of 25th National Junior Athletic Championships 2009 of taka 8 Lac.
Sponsorship of Air Ticket an international player to participate in International Chess Tournament to be held in Hungary of taka 0.80 Lac.
Donation to Bangladesh Olympic Association for sponsorshipof BOA Sports Development Lottery 2009 of taka 10 Lac.

Departments of DBL

Dhaka Bank maintains the jobs in a proper and organized considering their interrelationship that are allocated in a particular department to control the system effectively. Different departments of DBL are as follows:

Human Resources Division: Dhaka Bank Limited recognizes that a productive and motivated work force is a prerequisite to leadership with its customers, its shareholders and in the market it serves. Dhaka bank treats every employee with dignity and respect in a supportive environment of trust and openness where people of different backgrounds can reach their full potential.

The bank’s human resources policy emphasize on providing job satisfaction, growth opportunities, and due recognition of superior performance. A good working environment reflects and promotes a high level of loyalty and commitment from the employees. Realizing this Dhaka Bank limited has placed the utmost importance on continuous development of its human resources, identify the strength and weakness of the employee to assess the individual training needs, they are sent for training for self-development. To orient, enhance the banking knowledge of the employees Dhaka Bank Training Institute (DBTI) organizes both in-house and external training.

The major responsibilities of HR are as follows:

Employee recruitment
Posting
Transfer
Increment
Established yearly performance bonus
Provident fund
Confirmation
Training
Travel policy
Telephone policy

Personal banking Division: The personal banking department deals with the consumer credit schemes such as the personal loan, car loan, education loan, tax loan, personal secured loan that are tailored to meet the demand of individual customers. The manager of DBL credit who approves and administers all the activities heads this department. The approval officer mainly rejects or approves the credit requests. After being checked by the approval officer, the credit requests go to the processing officer for further processing of the application.

Treasury Division: Their main job is to take decisions regarding purchase and sell of foreign Currency. The purpose of Treasury’s operations is to utilize the funds effectively and arrange funds at a lowest possible rate of interest, through maintaining effective relationship with other banks and following the Government rules and foreign exchange regulations

Computer and Information Technology Division: This department gives the software and hardware supports to different departments of the bank. As Dhaka Bank is engaged in online banking, the role of IT is very crucial for the bank. This department is the most active department of DBL where employees always stand by to solve any problems in the system. The managers and executives of IT division work continuously to develop the total IT system of DBL so that it can be operated with ease, accuracy, and speed. Since its journey as commercial Bank in 1995 Dhaka Bank Limited has been laying great emphasis on the use of improved technology. It has gone to online operation system since 2003. The main softwares that DBL uses are:

Flexcube
DBCube
SWIFT Manager
Word
Excel
El Dorado
Dhaka Bank Server
Nikash
UNIX
Western Union
Dhaka Bank Foreign Trade

Credit Division: The borrowing capacity provided to an individual by the banking system, in the form of credit or a loan. The total bank credit the individual has is the sum of the borrowing capacity each lender bank provides to the individual. Credit Policy Committee is composed of the managing director, the general manager, the Chief Risk Officer and the assistant general manager responsible for credits. Committee meets every other week, evaluates the banks overall lending portfolio and determines principles and policies regarding portfolio management.

Operation Division: This is an integral and vital part of the bank. The services department ensures smooth operation and functioning within and between all the departments of DBL. It also provides continuous support to the core banking activities of DBL. The Manager of Services heads the department who formulates and manages various critical issues of the services function of DBL. He is followed by a group of executives who are the heads of various subsidiary divisions that operate within the services department. The Services Department is considered as the backbone of all other departments.

Card Division: DBL is the first domestic commercial bank in Bangladesh to introduce Visa Electronic and Visa Credit Card at the same time. DBL is also the only bank in Bangladesh to introduce Visa ATM Acquirer along with POS Acquire, which opened the opportunity for all the Visa Cardholders (domestic and international) to use the ATMs.

Finance & Accounts Division: This is considered as the most powerful department of DBL. It keeps tracks of each and every transaction made within DBL Bangladesh. It is headed by Manager of FCD who ensures that all the transactions are made according to rules and regulation of DBL group. Violation of such rules can bring serious consequences for the lawbreaker. The functions of FCD are briefly discussed below along with an organ gram of the department.

Audit & Risk Management Division: The Risk Management Division is responsible for measuring risks that the Bank might face in the course of its operations, developing corporate risk management policies and ensuring that risks remain within the limits in which the Bank prefers to bear such risks in line with its own strategic targets and risk appetite. The primary goal of risk management is to provide capital to businesses in line with their risks (economic capital), maximize risk-adjusted return and increase the added value.

The risk management function consists of Market Risk, Credit Risk and Operational Risk Management Units. Bank Risk Committee, Asset-Liability Committee (ALCO), Credit Policy Committee, and Operational Risk Management Committee are the other risk management bodies.

Risk Management Unit

During the 3rd quarter of the year 2009 the Management of the Bank has set up a Separate Risk Management Unit (RMU) in line with Bangladeshi Bank directives. The RMU functions under direct supervision of the Managing Director, who is assigned by the Deputy Managing Director ( Risk Management). The Risk Management Unit supervises and monitors independently and consistently the management of following Main Risks:

Credit Risk
Asset- Liability Risk
Foreign Exchange Risk
Internal Control & Compliance
Anti Money Laundering
Information and Communication Technology
Balance Sheet Risk
Operational Risk
Market Risk
Liquidity Risk
Reputational Risk
Insurance Risk
Sustainability Risk

The main purpose for establishing the RMU is to prevent the Bank from taking too much risk and build up a Capital Adequacy, which is more risk sensitive. The RMU tends to take necessary measures and find out strategy against financial crisis, unusual market condition, and different investment vulnerabilities.

Products of DBL

Different banking products and services are being offered exclusively to the Non Government Organizations and international projects in Bangladesh and its staff, both local and expatriate, based in Bangladesh. With the assistance of the Marketing Team, who have prior experience of serving diplomatic missions with other multinational banks, the Bank has tailored a list of products to address the NGO / International Organization’s unique banking requirements in Bangladesh. Dhaka Bank Limited is committed to developing and delivering to the corporate relationships total banking solutions while ensuring a level of service that exceeds customer expectations.

Retail Banking:-

In 2001 DBL. introduced its personal banking program responding to the market demand for a complete range of modern banking products & services. Last year they introduced a new product called Savings bundles Product. Designed exclusively for the salaried executives, Excel Account offers a packaged solution to companies and organizations in processing their employees’ salaries and funding employees’ loans.

Retail Banking consists of the following products:

Liability Products-

Savings bundled Products
Deposit Pension Scheme
Special Deposit Scheme
Deposit Double Scheme
Gift Cheque

Asset Products-

Home Loan
Personal Loan
Vacation Loan
Car Loan
Any Purpose Loan

Services-

Internet Banking

SMS Banking

Locker

ATM Card

VISA Credit Card

Utility Bill/Tuition Fee Collection

Letter of Credit

Western Union and other money transfers like Placid, Rupali etc (Note: they do not provideMoneyGram Services)

Savings Bundle Product

Dhaka Bank Saving Bundle Product is the first of its kind in Bangladesh. A unique blend of all flexibilities of a current account and provision high interest on daily balance and monthly interest paid savings account in three schemes, namely-

Dhaka Bank Silver Account
Dhaka Bank Gold Account
Dhaka Bank Platinum Account

Deposit Pension Scheme

Dhaka Bank is well poised to be the leading Personal Banking business amongst the local private banks. Bank’s conscious efforts in brand building, introducing and supporting new packaged products, developing PB organization along with non-traditional delivery channels have resulted in good brand awareness amongst its chosen target markets.

Installment based savings schemes are a major category of saving instruments amongst mid to upper middle-income urban population. DPS is an installment based savings scheme (Deposit Pension Scheme) of Dhaka Bank for individual clients.

Excel Account

Excel Account has been tailored in the manner of having both asset and liability characteristics blended into a single product for salaried individuals employed in any institution. On virtue of this product, prospective clients receive a credit interest based on the credit balance available in the account. The clients will also be required to pay the bank OD interest if the balance of the account becomes overdraft.

The tenure of the account will be for 3 years maximum, having renewal facility for every year until the client resigns from the institution. OD facility is a pre-embedded feature of the Excel Account. An OD limit is given to the account up to the amount of the salary of the individual employed at the institution. For a credit balance this facility provides an interest rate of 4.5% p.a. based on the daily balance of the account. If in the case, the account is utilized for an OD limit, the debit balance will be subject to a debit interest rate of 16% p.a.

Salary Account Dhaka Bank has launched a special package of savings account for employees belonging to institutions with which Dhaka Bank has a corporate agreement. With this package salaried employees of these institutions enjoy interest on a daily balance. The key features of the Salary Account are:

Interest to be calculated on a daily balance basis
No Periodic Service Charge
ATM Card Facility
Credit Card Facility
On-line Banking Facility
Internet & SMS Banking Facility

Personal Loan

As part of establishing a personal banking franchise of Dhaka Bank Limited, the bank has successfully launched Personal Loan. The product is a term financing facility to individuals to aid them in their purchases of consumer durables or services. The facility becomes affordable to the clients as the repayment is done through fixed installment s commonly known as EMI (equal monthly installment) across the facility period. Depending on the size and purpose of the loan, the number of installments varies from 12 to 48 months.

Any Purpose Loan

Any Purpose Loan is a term financing facility to individuals to meet their immediate requirements. The facility becomes affordable to the clients as the repayment is done through fixed installments commonly known as EMI (Equal Monthly Installment) across the facility period. Depending on the size and purpose of the loan, the number of installments varies from 12 to 48 months.

This facility is available for Salaried Employees, Self Employed / Professionals or Businessmen. Loans are restricted to Bangladeshi Nationals within 21 years to 57 years age limit with a minimum verified Gross Family Monthly Income of BDT 10,000. The amount of loan may vary from BDT 25,000 to 5,00,000 depending on the applicants requirement and repayment capability.

Corporate Banking

Corporate Banking business was performed fairly well in 2002 despite a sluggish credit demand in the market. This year priority has been given to expand business in low risk sectors. Besides we have designed a comprehensive risk management system to monitor and control our asset quality. Letter of Credit, Guarantee, Import & Export Finance, Syndicate Loan, Project Financing, Leasing, Working Capital Financing etc. all are Corporate Banking Products.

Services of DBL

The Bank offers the full range of banking and investment services for personal and corporate customers, backed by the latest technology and a team of highly motivated officers and staff. The Bank has launched Online Banking service, joined a countrywide shared ATM network and has introduced a co-branded credit card. Dhaka Bank Limited offers various types service. Those are:

Corporate Banking
Personal Banking
Islamic Banking
Capital Market Services
SME
ATM Card Services
Credit Card Services
Locker Services

Credit Department of Dhaka Bank Limited-

The loan and credit department is a very important department of a bank. The money mobilized from ultimate surplus units are allocated through this department to the ultimate deficit unit (borrower).the success of this department keeps a great influence over the profit of a bank. Failure of this department may lead the bank to huge losses or even to bankruptcy. Loan and credit department receive application from client in a prescribed application form supplied by the Dhaka Bank Limited.

The Bank implemented the system of credit risk assessment and lending procedures by stricter separation of responsibilities between risk assessment, lending decisions and monitoring functions to improve the quality and soundness of loan portfolio.

Functions of the Credit Department

Lending money is one of the main functions of a commercial bank. In the lending process, selection of borrower is the most crucial and vital job for a banker. Before a customer enjoys credit facilities it is important that the applicant should qualify for five Cs. The five Cs are:

Character – Intention to pay back the loan
Capacity – Borrower’s competence in terms of utilizing the fund profitably and generate income
Capital – Financial strength to cover the risk
Conditions – General business condition between two parties
Collateral – Implies additional securities

Overall Credit Policy of DBL

Lending being the most important function of commercial bank, every bank should have own credit policy. Credit policy generally aims at (a) creating healthy loan assets to ensure goods interest earning for the bank (b) ensuring ultimate safety through judicious selection of based on its salability.

The credit policy of Dhaka Bank Limited has been formulated of the plan of “ALL NEW LOANS TO BE GOODS LOANS”, The plan was formed on the basis of the following objectives:

To maximize the profit of the bank by making sound lending
To deliver credit to viable borrowing at a reasonable cost
To provide satisfactory return on investment
To assist the social and economic development of the country
To deliver general banking services to the public and credit to viable borrowers at a reasonable cost

Overdraft (O.D.)

Overdraft is an arrangement between a banker and customer by which the latter is allowed to within over and above his credit balance in the current up to an agreed limit. This is only a temporary (usually for one year) accommodation usually granted against sufficient security. This facility is renewable after expiry. The borrower is permitted to draw and repay any number of times, provided the total amount overdrawn does not exceed the agreed limit. The interests charged only for the amount drawn and not for the whole amount sanctioned.

O.D. AGAINST HYPOTHECATION OF GOODS:

O.D facility is also extended against hypothecation of goods/stocks. In this case both the ownership and physical possession remain with the borrower. The borrower binds himself to surrender the hypothecated goods to the bank as and when called upon to do so. The bank only acquires a right over the goods. Therefore, the band insists upon the borrower to give other secondary securities. Overdraft facility against hypothecation of goods is allowed go only trustworthy and prudent clients.

O.D. AGAINST PLEDGE OF GOODS:

Overdraft facilities may be provided to the borrowers against pledge of raw materials or finished goods as security. In this matter the borrower surrenders the physical possession of the goods, under effective control of the bank. The ownership of the goods however, remains with the borrower. In case of default by the borrower in repayment if the credit, the bank has the authority to sell the pledged goods and realize the due loan with interest.

But the bank has to give a notice to the borrower before attempting to sell the goods. The following thing must be considered while allowing O.D. facilities against pledge of goods or stocks

The quality and quantity of the goods,
The goods are readily sellable and have a stable demand in the market,
The borrower has an absolute title to the goods,
Goods must be checked regularly by the authorized representative of the bank,
The lacks of the go-down are to be sealed and keys are to be kept in the branch.

Impaired Asset Management Department

This department of the bank looks after the default loans and tries to recover them. It is said that the less job load this department has, the better it is for the bank itself. The head of IAM directly reports to the Managing Director of the Bank and this division is an administrative division of the bank. This department of the bank has two wings. One wing looks after the impaired assets of SME wing and another wing looks after the impaired assets of retail business. Normally if a loan installment is six months over due, then the credit department hands over the file to IAM for recovery. IAM first issues a letter in soft language. Then if it does not work, IAM issues further three letters to the defaulter. If it does not work either, then IAM files a case against the defaulter. Usually this case filing is done in the 11 month of the default.

Loan Admin – The posting is done in the system in the Asset Operations Department. Then Loan Admin sends requisition to Fin Admin.

Fin Admin: Fin Admin take care of the other expenses.

Recovery: Recovery Dept. prepares an overdue report and informs the TM. Recovery dept. keeps track of the money. Legal notices are given to the defaulters.

MIS: MIS dept. keeps the total record of loan from its sanction to repayment.

The Process of Giving Credit (Loan Sanction Activities)-

The respective unit office sanctions loan to the clients if it is between 2 & 5 lacs and then send the sanction letter including all necessary charge documents to the asset operation division for disbursement the loan. If the amount is higher than 5 lacs then the respective unit office sends the proposal to SME head office for sanction. The head of SME sanctions the loan and sends the sanction letter including all documents to the AOD for disbursement and inform the respective unit office regarding sanction of the loan.

Select potential enterprise: For loan, in this step the CRO conduct a survey and identify potential enterprise. Then they communicate with entrepreneurs and discuss the loan program.

Loan Presentation: The function of CRO is to prepare loan presentation based on the information collected and provided by the entrepreneur about their business, land property (Where mortgage is necessary).

Collect confidential information: Another important function of a CRO is to collect confidential information about the client from various sources. The sources of information are suppliers regarding the client’s payment, customers regarding the delivery of goods of services according to order, various banks where the client has account which shows the banks transactions nature of the client.

Open client’s accounts in the respective bank: When the CRO decided to provide loan to the client then he/she help the client to open a bank account where Dhaka bank has a STD.A/c. Dhaka bank will disburse the loan through this account. On the other hand the client will repay by this account. Although there is some exception occur by the special permission of the authority to repay by a different bank account.

Fill up CIB form: CRO gives a CIB form to the client and the client fill and sign in it. In some case if the client is illiterate then the CRO fill the form on behalf of the client. Then CRO send the filled and signed form to the SME, head office.

Sending CIB to Bangladesh Bank: The SME, head office collects all information and sends the CIB form to Bangladesh Bank for clearance. Bangladesh Bank return this CIB form within 10-12 days with reference no.

CIB report from Bangladesh Bank: In the CIB report Bangladesh Bank uses any of the following reference no:

NIL: if the client has no loan facility in any bank or any financial institution then BB (Bangladesh Bank) use ‘NIL’ in the report
UC (Unclassified): if the client has any loan facility in any bank or financial institution and if the installment due 0 to 5.99 then BB use UC in the report
SS (Substandard): if the client has any loan facility in any bank or financial institution and if the installment due 6 to 11.99 then BB use SS in the report
DF (Doubtful): if the client has any loan facility in any bank or financial institution and if the installment due 12 to 17.99 then BB use DF in the report
BL (Bad lose): if the client has any loan facility in any bank or financial institution and if the installments due for more than 18 or above months then BB use BL in the report. This report indicates that the client is defaulter and the bank should not provide loan the client.

SWOT Analysis

Strengths

Strong corporate identity: According to the customers, DBL is the leading provider of financial services identity worldwide. With its strong corporate image and identity, it has better positioned itself in the minds of the customers. This image has helped DBL grab the personal banking sector of Bangladesh very rapidly.

Strong employee bonding and belongings: DBL employees are one of the major assets of the company. The employees of DBL have a strong sense of commitment towards organization and also feel proud and a sense of belonging towards DBL. The strong organizational culture of DBL is the main reason behind its strength.

Efficient Performance: It has been seen from customers’ opinion that DBL provides hassle-free customer services to its client comparing to other financial institutions of Bangladesh. Personalized approach to the needs of customers is its motto.

Young enthusiastic workforce: The selection & recruitment of DBL emphasizes on having the skilled graduates & postgraduates who have little or no previous work experience. The logic behind is that DBL wants to avoid the problem of ‘garbage in & garbage out’. And this type of young & fresh workforce stimulates the whole working environment of DBL.

Empowered Work force: The human resource of DBL is extremely well thought & perfectly managed. As from the very first, the top management believed in empowering employees, where they refused to put their finger in every part of the pie. This empowered environment makes DBL a better place for the employees. The employees are not suffocated with authority but are able to grow as the organization matures.

Hospitable Working Environment: All office walls in DBL are only shoulder high partitions & there is no executive dining room. Any of the executives is likely to plop down at a table in its cafeteria & join in a lunch, chat with whoever is there. One of the employees has said,

Strong Financial Position: It has been seen that the net profit has been gradually rising over the years. Furthermore, DBL is not just sitting on its previous year’s success, but also taking initiatives to improve.

Weaknesses

High charges of L/C: Presently DBL charges same rates for all types of import L/C. But for import L/C of exports-oriented industry, DBL should reduce the charge of L/C. As a result, exporter will be benefited and the country will earn more foreign exchange. The commission often even rises up to 30%.

Discouraging small entrepreneurs: DBL provides clean Import Loan to most of its solvent clients. But they usually do not want to finance small entrepreneurs whose financial standing is not clean to them.

Absence of strong marketing activities: DBL currently don’t have any strong marketing activities through mass media e.g. Television. TV ads play vital role in awareness building. DBL has no such TV ad campaign. Although they do a lot of CSR activities compared to other banks.

Not enough innovative products: In order to be more competitive in the market, DBL should come up with more new attractive and innovative products. This is one of the weaknesses that DBL is currently passing through but plans to get rid of by 2010.

Diversification: DBL can pursue a diversification strategy in expanding its current line of business. The management can consider options of starting merchant banking or diversify it to leasing and insurance. As DBL is one of the leading providers of all financial services, in Bangladesh it can also offer these services.

Lack of Proper Motivation: The salary at DBL is very decent, but it lacks other sorts of motivation. Incentives such as bonuses are given for acquiring a particular figure, but all in all these are the only motivational factors.

High Cost for maintaining account: The account maintenance cost for DBL is comparatively high. Other banks very often highlight this. In the long run, this might turn out to be a negative issue for DBL.

Outdated Software and Hardware at DBL: Some of the PCs in this branch have very outdated hardware which is very slow and affects the customers and hence the performance of the bank as a whole. The softwares themselves are pretty old – Flexcube is from 2003, Microsoft Office XP is used. All of these prevent smooth operations.

Opportunities

Distinct operating procedures: Repayment capacity as assessed by DBL of individual client helps to decide how much one can borrow. As the whole lending process is based on a client’s repayment capacity, the recovery rate of DBL is close to 100%. This provides DBL financial stability & gears up DBL to be remaining in the business for the long run.

Country wide network: The ultimate goal of DBL is to expand its operations to whole Bangladesh. Nurturing this type of vision & mission & to act as required, will not only increase DBL’s profitability but also will secure its existence in the log run.

Experienced Managers: One of the key opportunities for DBL is its efficient managers. DBL has employed experienced managers to facilitate its operation. These managers have already triggered the business for DBL as being new in the market.

Huge Population: Bangladesh is a developing country to satisfy the needs of the huge population, a large amount of investment is required. On the other hand, building EPZ areas and some Govt. policies easing foreign investment in our country made it attractive to the foreigners to invest in our country. So, DBL has a large opportunity here.

El Dorado Program: It is software which enables customers to deposit and withdraw money from any bank with the cheque or deposit of any other bank. Although a select few has implemented this program, this poses as an opportunity for DBL as the number of transactions would drastically increase.

Bigger Market: Although the GDP per head decreased a bit in 2009 from 2008, there is a huge untapped market that requires loans and intends to deposit also.

BASEL II: Implementation of BASEL II would definitely provide benefits. But it requires a lot of monitoring. For this DBL has formed BIU (BASELL II Implementation Unit). BASEL II is basically a framework set forth by Bangladesh Bank to reduce credit risk, operational risk and market risk. This would definitely aid DBL if it is stringently followed.

Threats

Upcoming Banks/Branches: The upcoming private, local, & multinational banks posse’s serious threats to the existing banking network of DBL: it is expected that in the next few years more commercial banks will emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against and win the battle of banks.

Similar products are offered by other banks: Now-a-days different foreign and private banks are also offering similar type of products with an almost similar profit margin. So, if all competitors fight with the same weapon, the natural result is declining profit.

Default Loans: The problem of non-performing loans or default loans is very minimum or insignificant. However, this problem may rise in the future thus; DBL has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem.

Industrial Downturn: Bangladesh is economically and political unstable country. Flood, draught, cyclone, and newly added terrorism have become an identity of our country. Along with inflation, unemployment also creates industry wide recession. These caused downward pressure on the capital demand for investment.

Financial Crisis: Although people have recovered a bit from the shock, it may still pose as a threat. People are still hesitant to take loans or even deposit them.

Recommendations

DBL should increase their LTR interest on the document retirement then their import business can be increase. Their LTR interest is 13% to 16%. If they decrease LTR interest on 14% then their import business can be increase.
If DBL increases number of employee they can provide more satisfactory service to the customers.
DBL should increase the number of PCs with updated hardware and software
To create better client the bank should increase the amount of consumer loans in a short-term basis.
The bank can provide a loan, which may be student loan. Though in other countries many bank provide this facility. This may encourage the students to come forward do something for the economy.
DBL should fix their margin of decrease their margin; if they fix their margin into 35% to 45% then their import business can be increase.
If anybody wants to import then he must have an account. But in DBL if any body wants to open an account in DBL that time he must have an introducers which was doing anything in the DBL or employee of DBL. For that reason they lost many client or deposit.
Most of Dhaka Bank’s loans are in the large sector. If the performance of that sector crash then the bank will fail to continue though the profit is very high. So, the bank should provide more loans of small scale in different sectors though it will decrease the profit a little. But it will be very safe.
Maximum number of the loan is provided in the long-term industrial loans. Bank’s clients are also limited. So, they can’t serve the economy of the country that much. So, they should diversify their loans more in agriculture, new industries etc for better economic growth of the country.
Improve and maintain a consistent relationship with customers, expecially at retailing.
In a competitive financial market, their products & services need to focused more on customers needs then simply offering what the customers are offering
They should do more marketing activities to improve their presence in the minds of the target market and also the potential target market. As we see that, Media coverage of DBL is not so strong. To attract new clients, they should go for mass media coverage.
DBL has 52 branches all over the country. It is very hard to provide full range services with those branches. They already are but they need pay more attention toward the expansion the branch network. The latest branch that was opened was Barisal Branch.
Even though DBL is running online business very successfully they should open more ATM booths to meet customer needs and to meet the competitions

Conclusion

The last 3 months was quite intriguing to do my internship at Dhaka Bank Limited, Uttara Branch. I found out about the nature of actually working in a professional environment. Credit policy is a very convenient banking tool for the business world. The value of this service is immense. It has gathered such a position in the banking sector that people at developed and also developing counties are very much depended on this service. In Bangladesh credit facilities or loans started to become very attractive in recent periods. But still lots improvements in services and facilities have to be made in this department. The study of the report refers to the fact that people are aware of loan facilities in our country but they are not fully aware of the services or features of the loan process and its rules and regulations especially in case of individual or consumer loans. From the study it seems that Dhaka Bank focuses on the corporate sectors for the credit facility. But in case of consumer loans there are lots of restrictions created by the bank.

Credit Division of Dhaka Bank has a very qualified and dedicated group of officers and staffs who are always trying to provide the best service to the clients. They always monitor the credit in different sectors and their position. Before providing the loan they analyze whether the loan will be profitable and whether the client is good enough to repay the loan within the given period of time.

Credit department diversified their loans in different sectors classified by them. Among the sectors they don’t provide any loans in the agricultural side. The reason they showed is that this sector is very risky and depends on natural climate and they still didn’t expand their service in the rural side. They also didn’t provide any loan in the small & cottage industry. The reason is that the return from this sector is not very good and also the sector is very uncertain. They provide most of the credit facility in term loan mainly in long- term loans. Return from short-term loan is very good and also proves to be very safe to finance.

The main competitive advantage DBL is enjoying that it has online banking where as other local commercial bank cannot yet achieve that advantage. But all the commercial banks are now trying to achieve this. In this bank the employees are highly motivated by their remunerations and other benefits. Here, all the employees are very much cooperative with their customers, colleagues and simply visitors.