Evaluation on Micro Credit Loan of Trust Bank Limited

Trust Bank Limited is one of the leading private commercial banks having a spread network of 52 branches, 7 SME centers, 45 ATM Booths and 48 Branch POS across Bangladesh and plans to open more branches to cover the important commercial areas in Dhaka, Chittagong, Sylhet and other areas. This bank is sponsored by Army Welfare Trust and the bank mainly focuses on providing quality services to its customers. TBL have various ranges of deposit and retail product and it also have various credit cards designed to fulfill customers’ needs.

The report is mainly based on Micro Credit Loan (RRDH) and analysis through questionnaire for getting insight on customer’s perception on necessary sectors needed to be improved. The procedure of Micro Credit Loan (RRDH), limit and installment amount, required documents and regulation and other aspects are covered. In findings and recommendation, some points of improvement and observation have been pointed out on the basis of overall bank situation. An analysis has been given in the report on the basis of the response of Micro Credit Loan (RRDH) customers on the questionnaire.

To improve customer service TBL have introduced Consumer Durable Scheme”, “Free of cost ATM Card”, “Security Deposit based Locker Service” on flexible term and conditions and also Western Union Money transfer to facilitate the foreign currency transfer by the members of armed forces working in the UN and emigrant Bangladeshis instantly.

Company History:

Trust Bank Limited is one of the leading private commercial banks having a spread network of 52 branches, 7 SME centers, 45 ATM Booths and 48 Branch POS across Bangladesh and plans to open more branches to cover the important commercial areas in Dhaka, Chittagong, Sylhet and other areas in 2011. The bank, sponsored by the Army Welfare Trust (AWT), is first of its kind in the country. With a wide range of modern corporate and consumer financial products Trust Bank has been operating in Bangladesh since 1999 and has achieved public confidence as a sound and stable bank. The idea of setting up a Bank by Bangladesh Army was first conceived in 1987 and on November 29, 1999 the first branch of the Trust Bank Ltd came into operation.

Composition of the Board of TBL consists of Ex-officio Directors of in-service senior Army personnel, with the Chief of Army Staff as its Chairman and the Adjutant General as its Vice Chairman.

In addition to ensuring quality customer services related to general banking the bank also deals in Foreign Exchange transactions. In the mean time the bank has extended credit facilities to almost all the sectors of the country’s economy. The bank has plans to invest extensively in the country’s industrial and agricultural sectors in the coming days. In January 2007, Trust Bank successfully launched Online Banking Services which facilitate Any Branch Banking, ATM Banking, Phone Banking, SMS Banking, & Internet Banking to all customers.

Customers can now deposit or withdraw money from any Branch of Trust Bank nationwide without needing to open multiple accounts in multiple Branches. Trust Bank is a customer oriented financial institution. It remains dedicated to meet up with the ever growing expectations of the customer because at Trust Bank, customer is always at the center.

Vision and Mission of Trust Bank Limited:

Vision:

“We aim to provide financial services to meet customer expectations so that customers feel we are always there when they need us, and can refer us to their friends with confidence. We want to be a preferred bank of choice with a distinctive identity.”

Mission:

“Our mission is to make banking easy for our customers by implementing one-stop service concept and provide innovative and attractive products & services through our technology and qualified human resources. We always look out to benefit the local community through supporting entrepreneurship, social responsibility and economic development of the country.”

Core Values of Trust Bank Limited:

In all types of banking activities Trust Bank Ltd follows six core values. In any way the bank does not compromise with any of these values. The bank believes the values are the guidelines in its banking operation and building relationships with customers. The core values of the bank are as follows:

Dependable
Professional
Dynamic
Reliable
Trustworthy
Fair.

Trust Bank Limited (Kafrul Branch):

Trust Bank Kafrul Branch is one of the reputed branches in TBL because of its performance and advancement towards success in a short time of its establishment. TBL kafrul branch is in Dhaka Cantonment (Kafrul) for covering and providing more effective services to Army personnel and also civil customers. It’s been three years of this branch’s establishment and within this short period of time this branch is effectively competing with Millennium branch and Principal Branch which is very reputed branch in TBL also seen as benchmark for other branches performance.

TBL kafrul branch have quite a huge number of deposit and loan amount of 30 crores taka and expanding. Kafrul branch have 18 officers and 5 sub-staffs in total. There are five departments, they are:

Cash department
Clearing department
Account Opening department
FCAD department (supply and logistics)
Credit department

Credit Department of TBL (Kafrul Branch):

During my internship period I have was also assigned into credit department and worked there for 2 months. Loans or credits comprise the most important asset as well as the primary source of earning for the banking institutions. On the other hand, loan/credit is also the major source of risk for the bank management. In Trust bank kafrul branch the total amount of loan is around 30 crore taka. There are three officers who work dedicatedly in this department and try to provide the best services to its customers. There are some principals which are followed by the bankers in terms of lending to the customers. They are:

Background, Character and ability of the borrowers
Purpose of the facility
Term of facility
Safety
Security
Profitability
Source of repayment
Diversity

Lending Procedure in TBL (Kafrul Branch):

The lending procedure of Trust Bank Ltd. starts with building up relationship with customer through account opening. Control of credit operations is done at branch and Corporate Office Level. There are twelve steps in the lending procedure of TBL which are as follow.

Step 1: A loan procedure starts with a loan application from a client who must have an account with the Bank. At first it starts form the branch. Branch receives application from client for a loan facility. In the application, client mentions what type of credit facility he/she wants form the bank including his personal information and business information. Branch Manager or regarding Officer in-charge of credit department conducts the initial interview with the customer.

Step 2: After receiving the loan application form, the bank sends an official report about the loan to Bangladesh bank for obtaining a credit inquiry report of the customer from there. This report is known as CIB (credit information bureau). This report is usually collected when the loan exceeds 50 thousand tk for checking whether this client have taken loan from other banks or not.

Step 3: If Bangladesh Bank sends positive CIB report on that particular borrower and if the Bank thinks that the prospective borrower will be a good one, the bank will inspect the documents. In this stage, the Bank will look whether the documents are properly filled up and signed. Credit in charge of the relevant branch is responsible to know about the ins and outs of the client’s business through discussing with him.

Step 4: Bank officially inspects the project for which the loan is applied. Project’s existence, distance from bank office, viability, monitoring cost and possibilities are examined.

Step 5: Any loan proposal needs to be evaluated on the basis of financial information provided by the applicant. Experienced personnel of Credit department in Trust Bank do an analysis through Credit Risk Grading Score. It is a ranking whose total score are 100. Among this score, minimum score is 75 to grant any commercial loan. For individual borrower this score is not required. This step is mainly conducted by the Head office (Motijheel).

Step 6: Then comes the processing stage of loan. In this stage, the Bank will prepare a Proposal. The proposal contains following relevant information.

Name of the Borrower/borrowers
Nature of Limit
Purpose of Limit
Extent of Limit
Collateral
Margin
Rate of Interest
Repayment
Validity

Step 7: If the proposal meets Trust Bank’s lending criteria and is within the manager’s discretionary powers, the credit line is approved. The manager and the sponsoring officer sign the credit line proposal and issue a sanction letter to client. If the value of the credit line is above the branch managers’ limit then it is sent to head office or zonal office for final sanction with detailed information regarding clients, business or purpose of the loan, security papers.

Step 8: Head office processes the credit proposal and afterwards puts up a note to credit committee. The credit committee reviews the credit proposal and accepts or rejects the proposal.

Step 9: After approval by the Credit Committee, head office or zonal office gives an approval letter to the branch and branch gives a sanction letter to the client. The client should accept sanction with seal, which will prove his agreement with the terms and condition offered by the bank.

Step 10: After the sanction advice, Bank will collect necessary charge documents. Charge documents vary on the basis of types of facility, types of collateral.

Step 11: Finally loan is disbursed and monitoring of the disbursed loan starts as well.

Micro-Credit Loan (RRDH):

Micro Credit Loan –

Micro-credit loan is a retail product of TBL and this product is mainly designed for non-ranking officer of army, navy and air force. Micro-credit loan is also known as RRDH which stands for “Reconstruction and Repairing of Dwelling House”. The credit officers of TBL see this loan as goodwill gesture towards the customers. Up to this year the number of customers received this loan is around 1125.

Limit and Installment Amount of RRDH:

The limit and installment of RRDH is divided according to the rank of the soldiers. One of the major requirements of this loan is that, soldiers must have the salary account in the bank from where they are willing to take the RRDH loan. But in case of emergency, soldiers can take loan from any TBL branch in spite of not having salary account on that branch. In this case the officer of credit department contacts with the other branch where the soldier have the account for checking the validity of the information and then the loan is provided.

Documents and Regulation of RRDH:

There are some regulations and documents to be checked before providing RRDH loan to soldiers. They are described below:

Signature Requirement in form:

Commanding officer (CO) – 5 signs
Guarantor- 4 signs
Borrower- 13 signs

Three copies of passport size photo from borrower and one copy from guarantor is required. The required photos must be certified.

Photo-copy of national ID card and office ID card from both guarantor and borrower is required. If national id is missing, it is required to have official note from CO about the situation.

Original Pension certificate of borrower is required and should be collected from Record office from their respected unit.

Borrower must be ten years in the service and also have 5 years left before retirement.

The soldiers should have a forwarding letter from respected unit mentioning their name, time span of their service and the amount of loan required with CO’s sign.

Requirements of Stamp:

In the RRDH loan application form adhesive and revenue stamps are used for certification. Customers (soldiers) have to pay for this amount when they are submitting the form. The requirements are given below:

Revenue Stamp: 25tk (5tk X 5)
Adhesive Stamp:
Letter of Revival- 50tk
Letter of Guarantor-150tk

Steps of Providing RRDH Loan:

There are several steps to be followed in RRDH loan. They are given below:

Customers bring forwarding letter which consists of name, time span of their service and the amount of loan required with CO’s sign.

After analyzing the forwarding letter and if all the criteria’s are meet, they are permitted to take RRDH loan application form by providing 20tk which is the price of the form that bank charges

When the soldiers return the form with all required documents, they are provided with a date to come to the bank and receive the loan amount.

The next step is to prepare an offer sheet and sanction letter for approving the loan. RRDH loan proving authority completely belongs to the bank because the amount is small.

Next step is to use Flora Banking System to create loan account for the customers by using the CRM number of the salary account. In this loan account all the personal information and information on loan. The information of loan is given below:

Loan/ Advance type: Loan
Interest rate: 11%
Instalment size: fixed
Code for the loan: Term loan up to 5 years and House Financing (303)
Instalment amount: (according to loan amount)
Number of instalment: 60
Instalment period: Monthly
Sanction number: (last 3/4 digits of loan a/c)
Expire date: (five years from the approval)

The offer sheet and sanction letter requires the sign of an officer of credit department, sub-manager and manager.

After preparing the documents and when customers arrive, one sanction letter is provided to the customer where the loan account number is written and another copy is signed by customer and remains in the dept as “office copy”.

Then they amount of loan is disbursed in the salary account of the customer and the limit is set for the loan, vat on banking service and the service charge is cut from the customer’s account.

This is the whole procedure of providing RRDH loan. The major point that is to be analyzed that the customer who is taking RRDH loan from Kafrul branch shouldn’t have loan from any other branch.

Findings on Microcredit loan:

The major findings in RRDH loan will be on one of the rules and regulation of the The time span required to be eligible for this loan is too broad and for this in the edge of emergency some soldiers can’t get the loan because they don’t have 10 years in service and 5 years left before pension.
Another finding will the complexity of the loan application form. Sometimes this creates problem for soldiers because they aren’t well educated.
There is another finding in RRDH loan is the installment amount is automatically cut from their salary account. For this service the customers are happy and they appreciate this decision.
The services provided in RRDH loan by credit officers are very good and appreciated by the customers.
The credit officers build good relationship with the customers (soldiers) which helps the bank to get more deposit and loan for word of mouth influence between soldiers
Another finding was discovered from customer’s point of view. The finding is on the amount of time taken for providing RRDH loan. According to bank policy, RRDH loan should be provided to soldiers after returning the form is 15 days. So according to customers this time span should be reduced because in crisis the soldiers can’t get the loan for this rule and run into trouble.
Customers think that more loan schemes should be introduced for them at different amount because the only loan that gets sanctioned for them is RRDH loan.

Recommendation:

On the basis of the findings the recommendation is given below:

In RRDH loan, TBL should try to reduce the time span required to be eligible for RRDH loan for soldiers.
The complexity of RRDH loan form should be at minimum level because the customers think that this complexity leads them to confusion
TBL should provide more loan schemes like RRDH loan to fulfill the needs of soldiers. EX: marriage loan, education loan etc with small scale amounts and low interest rate
An officer should be totally devoted for RRDH loan, because of the huge pressure. The loan amount is less that other retail products but the amount of customer is huge in number. So by introducing a single officer on RRDH loan can be very helpful for bank as well as kafrul branch in terms of customer service and efficiency.

Conclusion:

Trust Bank Limited (TBL) is a scheduled commercial bank, in spite of its being a sole initiative of the Army Welfare Trust (AWT). The profit earned by the bank is used to the welfare activities of the Trust. The economic service of the bank is open to all caste and class of people. The bank is formatting and accomplishing various welfare projects and activities for the socio economic infrastructural development of the country and the active participation to the up gradation of the comparative feeble class of the society, in stead of accumulating profit. It has introduced various schemes to create long term deposit investable to development activities of the country and short term deposit for availing the opportunity of saving propensity. To improve the standard of living, it has introduced “Consumer Durable Scheme”, “Free of cost ATM Card”, “Security Deposit based Locker Service” on flexible term and conditions. It has also be linked with many foreign banks & foreign money Exchanger like “Western Union Money Transfer” to facilitate the foreign currency transfer by the members of armed forces working in the UN and emigrant Bangladeshis instantly. The financial performance of the bank in recent years is pretty well.

Moreover, any laxity in operational ground can considerably be compensated through the cordial services provided by a staff of talented officers or employees. To improve customer service TBL have introduced.