Loan Disbursement and Recovery Status of Krishi Bank

The main objective of the report is to have an overview of Loan Disbursement and Recovery Status by Bangladesh Krishi Bank. Other objectives are to identify the strengths and weaknesses of the loan approval and monitoring process in BKB and make recommendations regarding the Bank’s loan activities. Here discuss to understand the loan disbursement and recovery the bank follows in the competitive market and provide a brief description of different operations areas of   Bangladesh Krishi Bank Limited. Finally, discuss Guidelines on Loan Disbursement and Recovery issued by Bangladesh Bank.

Introduction

The loan is the primary financial activities in the banking system. The report provides a detailed discussion about how Bangladesh Krishi Bank manages its loan activities. In doing so, the standard operating procedures of the bank have been delineated in details. The report also discusses banks procedures for managing its non-performing loans. Loan classification procedures have also been discussed in the report. The bank is recognized as one of the pioneers in maintaining compliance with the Bangladesh bank directives. The report provides a detailed discussion of some of the crucial issues of credit risk management and tries to focus on the practice of Bangladesh Krishi Bank Limited in this regard under the regulatory framework prevailing in the country. The findings and their implementations are delineated adequately for the reader to enable them to get the gist of the core idea behind the study.

BKB follows some specific principals for its loan activities, which involve Know Your Customer (KYC), safety, liquidity, profitability, purpose, and spread.

The lending procedure followed by BKB consists of a set of sequential activities. In these sequential activities, both bank officials and potential borrowers play a significant role.

Loan analysis if the borrower is found a sound for lending, the bank proceeds to prepare the credit proposal. The credit proposal consists mainly of a brief description of the borrower, purpose of the loan, collateral, and expiry of the credit line, amount, interest rate and the result of the credit analysis. The credit proposal is prepared to facilitate the approval of that particular loan either by Corporate Office credit committee or by the Board of Directors.

BKB does not have any fixed time duration to complete the lending process for a particular loan proposal. The total duration of the time required to complete the lending process varies with the nature of credit, collection of information, nature of information, analysis of information, preparation of the proposal, corporate office scrutiny, board approval, preparation of sanction advice, creation and collection of charges documents and actual disbursement of the loan.

BKB must try to reduce the time required by a particular lending process to be completed. The Higher the duration, the higher the loan processing cost. A number of banks operating in the market are more but the number of the potential and the good borrower is less. The bank must find unexpected but profitable sector for financing. Alongside, to expedite the lending process right borrower has to be selected with strict adherence to KYC, relevant information has to be collected quickly, analysis must be done precisely and faster, credit proposal has to be prepared in a way that will represent a transparent picture of the borrower’s financial strength and business potential and finally to reduce the time involved in the lending process.

Lending is the main income generating activity for all banks including Bangladesh Krishi Bank. Lending involves both risk and profit. But a sound lending process supported by quantitative analysis, qualitative judgment and a separate credit monitoring cell can reduce the risk to a certain extent.

OBJECTIVES OF THE REPORT:

To provide a thorough understanding of the Credit Risk Management Practice followed by Shiddirgonj Branch of BANGLADESH KRISHI BANK for credits. The report attempts to show whether the Credit Risk Management Practice followed by BKB is in compliance with Bangladesh Bank guidelines. Some core issues like Classification procedures and Non-performing Loan handling procedures will also be discussed thoroughly. Credit Risk grading procedure proposed by Bangladesh Bank has also been intended to be scrutinized in the report with the existing risk rating system followed by BANGLADESH KRISHI BANK.

So I can categorize my study objectives into two types. They are-

1. Broad objectives.
2. Specific objectives.

These are the objectives of the study are described as follows:

Broad Objective:

• The broad objective of the report is to have an overview of Loan Disbursement & Recovery Status by BKB.

Specific Objectives:

• To develop knowledge about Loan Disbursement & Recovery in BKB.
• To identify the strengths and weaknesses of the loan approval and monitoring process in BKB.
• To make recommendations regarding the Bank’s loan activities.
• To understand the loan disbursement and recovery the bank follows in the competitive market.
• To provide a brief description of different operations areas of Bangladesh Krishi Bank Limited.
• Prudential Guidelines on Loan Disbursement & Recovery issued by Bangladesh Bank.

METHODOLOGY:    

SOURCES OF DATA

To complete my internship report I have used information collected from two sources.They are-

1. Primary sources.
2. Secondary sources.

Primary sources: Primary sources of the information are the information

Collected by the practical office desk work, direct conversations with the employees of the bank, direct observations of the functions, relevant document studies provided by the concerned officers.

Secondary sources: Majority of the information were collected from the secondary sources, which include books, publications, reading materials and various circulars and reporters, published by Bangladesh Krishi Bank. I have also collected information from various websites. For the analysis part, I have collected data from the loan proposal and from other documents.

DATA ANALYSIS   

This is a descriptive report mainly aiming to depict the loan approval process and monitoring techniques of BKB. The data gathered from both primary and secondary sources were arranged orderly to get a clear picture of the BKB’s loan management regarding the lending process and monitoring. The study includes both qualitative and quantitative analysis of the loan approval process and monitoring tools. Based on the observational information I have also tried to evaluate and analyze the problems involved in various phases of the loan disbursement & recovery status.

INTRODUCTION AND BACKGROUND OF BKB:

Bangladesh Krishi Bank is 100% govt. owned specialized bank in Bangladesh. KRISHI means agriculture in Bangladesh. Since its inception, Bangladesh Krishi Bank (BKB) is financing in the agricultural sector remarkably. BKB also performs commercial banking. People work abroad can easily send home through our “TAKA DRAWING” arrangement. The major occupation of Bangladeshi people is KRISHI which means agriculture. About 85% of our people depend on agriculture which contributes a significant portion to our GDP. And BKB is working to improve the agricultural sector of Bangladesh.

Bangladesh Krishi Bank has been established as a full Government-owned bank under Presidential Order 27 of 1973. BKB is a Financing company under Banking Company Act-1991. Now it has 948 branches all over Bangladesh. Objectives of BKB is to provide credit facilities to the farmer for the development of agriculture and entrepreneurs engaged in the development of agro-based as well as Cottage industries. The bank is guided in accordance with the policies and principles of the Government of the Peoples Republic of Bangladesh. In providing a loan bank always give priority to the poor farmers and SME loans for the small entrepreneurs. It is somewhat different in some respects of risks because the loan risk is higher in this bank. And it also takes an essential part in the national development process.

PRINCIPLE ACTIVITIES:

The bank provides all kinds of commercial banking services to its customers through its branches in Bangladesh. Generally, it provides loan to individuals and corporate bodies related to:

• Production of Crops.
• Purchase of Irrigation Machinery and Equipment
• Development of Horticulture
• Pisciculture and finally
• Animal Husbandry.

The bank gives emphasis to establish small agro-based cottage industries at both urban and rural areas by way providing technical and financial support. The Bank, within its constitutions, put priority as far as possible and extend a loan to small and marginal farmers. The bank as such is discharging its duty to the society side by side its responsibility as a financial institution.

OBJECTIVES OF BKB:

Bangladesh is mainly an agricultural country. The infrastructures of the country are mainly based on agriculture. More than 60% of our labor force is related to agriculture or agriculture-based industries. As its name suggests, Bangladesh Krishi Bank is mainly established for the development of the agricultural sector. If it can be possible to make the agricultural sector of a country as one of the profitable sectors than it would also be possible to reduce the poverty level of Bangladesh. So the main objective of BKB is to make the agricultural sector as one of the profitable sectors of the country. And to increase the standard of the living of the people. Agriculture is one of the most uncertain and risky sectors to finance. But BKB is financing in the agricultural sector. The main objectives of the BKB are as follows:

• Development of the agricultural sector and the agricultural based activities of the country.
• Help to make the agro-based product marketable.
• To strengthen the rural economy.
• To ensure proper economic development of Agro-based industries and small entrepreneurs by providing loans.
• To select the new sectors of agro-based products and take initiatives to develop the sector by providing loans and marketing support.
• BKB provides financial support to the entrepreneurs of the products which have enough probability to export.
• Financing the marginal farmers is one of the important objectives of BKB.

These are the prime objectives of Bangladesh Krishi Bank. Besides BKB also provides financial help to the poor farmers after every calamity to cope up with the situation.

FEATURES OF BKB:

• BKB has an authorized capital of Tk. 15000 Million only and paid-up capital Tk. 9000 Million only which is fully paid by the government.
• Bank has started commercial functioning since 1977.
• The bank operates its function through 952 branches (Rajshahi Division) of which 822 (86%) rural and 130 (14%) are Urban.
• It has 14 Foreign exchange (Authorized Dealer) branches.
• In the field level, the bank has 8 divisional and 51 regional offices for close supervision of the branch activities.
• For smooth working bank has also 56 field level audit offices at divisional and regional levels.
• Among the 952 branches, 212 branches have already been computerized.

DEPOSITS:

Deposit is the largest source of bank funds. It is assumed that a medium-size bank collects 85%-90% of its bank fund through deposits. To strengthen the base of the bank’s fund BKB emphasizes collecting deposits. There are mainly four types of deposits. They are given below:

1. Fixed deposits.
2. Savings deposits.
3. Current deposits.
4. Short Notice Deposit (SND)

The year wise deposit mixes are given below:

(Figures are in Core TK)

Deposit mix is the combination of various types of deposits of Bangladesh Krishi Bank. These deposits are consists of Fixed, Savings, Current deposits and other types of deposits. For the year 2011 the DEPOSIT MIX of BKB, Fixed is 48% of the total, Savings are 29%, Current deposits are 7% and others are 16% of the total deposit. This can be graphically shown as follows

PROFIT AND OPERATING RESULT:

The Bank earned as operating profit Tk. 3304,001,494tk during 2011. And the amount of provisions for the year is 125,215,275tk Provision for income tax.Provision for the tax was nil for the year. There was no profit no loss situation and in the previous year net loss was (1,966,375,453). So the performance of the bank is better than the previous year.

LOAN AND ADVANCES:

Bangladesh Krishi Bank is following the “PONCHO BARSHIKI NITIMALA” of the government from the year 2007-08. And working for the establishment of these planning.  BKB has provided 4003.20 cores Taka as loan and advance in the year 2011. And in the year 2010, it was 3441.56 cores. Which are approximately 561.64 cores more than the previous year. The lion portions of the loans provided by BKB are provided to the agricultural sector and in the agro-based industry. And which is also an indicator of banks dedication towards the development of the agricultural sector of the country.

INVESTMENT

BKB also does the work of investments. Investment is one of the major sources of the uses of fund. BKB mainly invests on various Bonds, Debentures and shares. In the year 2011, the total amount invested by BKB was 1,511,989,500 Taka. Of which Share was 34,439,000 Taka and Bond was 1,477,550,500 and in the previous year, it was about 1,491,694,500 taka.

EXPORT BUSINESS

The total quantum of Export business handled by the Bank in 2011 stood at Tk.1346.70 core Taka as compared to the volume of Tk.1084.45 in 2010 registering an increase of 262.25 cores Taka.

IMPORT BUSINESS

Import business handled by the Bank during the year 2011 amounted to Tk. 2297.94 core Taka as against Tk.1813.00 core Taka of the preceding year registering an increase of 484.94 cores Taka.

REMITTANCE

There are two types of remittances, one is the inward remittance and another one is the outward remittances. In the year 2010 total inward remittances were 687.78 cores but in the year 2011, it is 951.27 cores. Which were 263.49 cores higher than the previous year. And the outward remittance was 9.46 in 2010 and in 2011 it is 17.21.

MODERNIZATION OF THE BRANCHES

To ensure the quality of services to the customers BKB is computerizing its branches. At present regional office, Head office and other Divisional Branches are computerized. In 2010-11 fiscal years there 162 branches have been computerized. And to ensure quality and quick service there has been opened one-stop services in these branches. Providing online Banking service is under processing in some important branches.

AUDITORS OF THE BANK

The Audit Firms M/s. Zoha Zaman Kabir Rashid & Co and Kazi Zahir & co. jointly has done audit and Inspection of the Books of Accounts of the Bank for the accounting year ended 30^th June 2011 jointly.

CORPORATE GOVERNANCE & REGULATORY COMPLIANCE

Eastern Bank Limited practiced the principles of good corporate governance over the years that covered compliance of regulatory requirements, responsive to various stakeholders. Spirit of corporate governance also included practicing the corporate culture within the organization and shared this by the employees.

Eastern Bank Limited complied with all the regulatory guidelines prescribed by the Banking Companies Act, Bangladesh Bank, National Board of Revenue and Securities & Exchange Commission, International Accounting Standards, etc.

BRANCH INFORMATION:

I got a chance to work as an internee in the Shiddirgonj Branch of Bangladesh Krishi Bank. The bank is located at Chittagong Highway Road, Shiddirgonj, and Narayangonj. There I obtained practical knowledge of working at various departments. (Amounts are in Taka)

SWOT ANALYSIS

SWOT analysis is the detailed study of an organization’s exposure and potential in perspective of its strength, weakness, opportunity, and threat. This facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in comparison to their competitors. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization.

Strengths:

• Bangladesh Krishi Bank has already established a favorable reputation amongst the people in the banking industry of the country. It is one of the leading specialized banks in Bangladesh.
• Bangladesh Krishi Bank has provided its banking service with a top leadership and management position.
• Bangladesh Krishi Bank has gained enough confidence in the poorer section of the country. They feel quite comfortable to make any transaction with the bank as it is fully Government owned specialized bank.
• Bangladesh Krishi BANK has an interactive corporate culture. The working environment is very friendly, interactive and informal. And, there are no hidden barriers or boundaries while communicating between the superior and the employees. This corporate culture provides a great motivation factor among the employees.
• Bangladesh Krishi Bank has 952 branches across the whole country. This is considered as one of the strengths of BKB.
• Bangladesh Krishi Bank has some definite objectives. So it can conduct its activities towards its objectives.
• BKB is fully a government company. BKB is financially strong as a result customers feel comfortable in dealing with the company.
• BKB’s lending rate is lower than any other private commercial banks.

Weaknesses:

• Bangladesh Krishi Bank has less manpower than needed. BKB has 10272 employees. But manpower needed 13680.
• The bank failed to provide a strong quality-recruitment policy in the lower and some mid-level position. As a result, the services of the bank seem to be Deus in the present days.
• Poor service quality has become a major problem for the bank. The quality of the service at BKB is lower than the other private commercial banks.
• Profit making is not the prime objective of BKB. So in some sector of BKB, there is no or slow growth.

• In terms of the promotional sector, BKB has to more emphasize on that. They have to follow an aggressive marketing campaign.
• The bank is not fully computerized so the banking procedure is time-consuming.
• BKB cannot provide enough customer satisfaction.

As previously mentioned, the world is advancing e-technology very rapidly. Though Bank Asia has taken effort to join the stream of information technology, it is not possible to complete the mission due to poor technology and infrastructure of our country.

Opportunities:

In order to reduce business risk, BKB has to expand their business portfolio. The management can consider options of starting merchant banking or diversify into leasing and insurance sector.

• BKB can improve the quality of service by introducing automation and online banking.

• Opportunity in retail banking lies in the fact that the country’s increased population is gradually learning to adopt consumer finance. The bulk of our population is lower class and middle class. Different types of retail lending products have great appeal to this class. So a wide variety of retail lending products has a very large and easily pregnable market.

• A large number of private banks coming into the market in recent time. In this competitive environment, BKB must expand its product line to enhance its sustainable competitive advantage. In that product line, they can introduce the ATM to compete with the local and the foreign bank. They can introduce credit card and debit card system for their potential customer.
• BKB can use customer confidence and expand its activities towards the development of the country by providing quality services and customer satisfaction.
• BKB has to identify the emerging agricultural sector and finance the sector to make the sector more profitable.
• If BKB can be able to establish agricultural sector as one of the profitable sectors than people will get interested more in the agricultural sector and agro-based industries. Thus the rural poverty can be eradicated.

Threats:

• BKB performs commercial banking activities. So all sustaining multinational banks and upcoming foreign and private banks pose significant threats to BKB Limited. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against these local and foreign banks.

• If BKB cannot provide sufficient help and support to the poorer section and the marginal farmers than the development of agricultural will not be possible.

• BKB is financing in the development of the agricultural sector of the country. And we all know that the Agricultural sector is one of the most uncertain and risky sectors to invest. These uncertainties are considered as one of the major threats for BKB.

LOAN MANAGEMENT:

Loan management is the process of controlling and collecting payments from your customers. A good loan management system will help you reduce the amount of capital tied up with debtors (people who owe you money) and minimize your exposure to bad debts.

Good loan management is vital to cash flow. It is possible to be profitable on paper and but lack the cash to continue operating in the business.

LOAN MANAGEMENT POLICY:

Loan management policies help the loan department operate more efficiently. Loan management policies are rural & guidelines established by top management that govern the company’s loan department and its performance in the extension of loan privileges. Loan procedures are employed to achieve the goals of loan management policies.

TYPES OF LOAN MANAGEMENT:

Significance:

Loan management policies allow the loan department to operate more efficiently. Ambiguity is reduced over how to proceed when policies are clearly defined. Loan management policies can offer specifies rules in regard to the loan amounts, type of customers, debt-to-income ratio, collateral requirement, payment terms, and interest rates.

Types:

There are several types of loan management policies. They are based on the industry, lending activities, and top management’s business style or approach to lending. Automotive, academic, home, retail, wholesale and credit card lending all may have different loan management policies. A tight loan management policy to conservative and restrictive guidelines for the extension of credit. A loose policy allows for more flexibility and may focus more on simply making sure debt is repaid instead of credit analysis and review.

Procedures:

Loan procedures are specific ways in which top management requires the loan department to achieve loan management policies. They can include instructions on what data is to be used for the loan investigation and analysis process and other procedures. Loan procedures can also provide information for the loan approval process, account suspension and instances requiring management notification.

Cash Flow:

A major influence on loan management policies is cash flow. Cash flow requirements describe the amount of money a business needs to meet its financial obligations or pay its bills. A loose loan policy in which little customer loan investigation is performed can lead to higher default rates and slower repayment of debt. This can have a significant impact on a company’s cash flow. Companies with small cash reserves or other sources of capital may be inclined to adopt tighter loan management policies.

Communication:

Part of a good loan management policy should stress communication with other departments. Communication with the sales department can reduce conflict sometimes occurs when a sale is declined or affected because the loan department determines there is a high level of risk involved in doing business with a particular customer. Communication with the collections department can provide warning signs of loan or credit default.

Guidelines:

The purpose of this document is to provide directional guidelines that will improve the risk management culture, establish minimum standards for segregation of duties and responsibilities, and assist in the ongoing improvement of BKB.

The guidelines have been organized into the followings:

Policy guidelines:

• Lending Guidelines.
• Credit Assessment & Risk Grading.
• Approval Authority.
• Segregation of Duties.
• Internal Audit.

Management structure & responsibility.

Procedural guidelines:

• Approval Process.
• Credit Administration.
• Credit Monitoring.
• Credit Recovery. 

Lending guidelines:

The lending guidelines include the following:

• Industry and business segment focus.
• Types of loan facilities.
• Single borrowers/group limits/syndication.
• Lending caps.

Loan assessment & risk grading:

Loan applications should summarize the result of the risk assessment & include, as a minimum, the following details:

• Environment or social risk inputs.
• Amount and type of loan (s) proposed.
• Purpose of loans.
• Loan structure (Tenor, Covenants, Repayment schedule, Interest).
• Security arrangements.
• Any other risks or issue.
• Risk triggers & action plan-condition prudent, etc.

Approval Authority:

• Loan approval authority has been delegated to Branch Manager, loan Committee by the MD/Board.
• Delegated approval authorities shall be reviewed annually by MD/Board.
• Approvals must be evidenced in writing. Approval records must be kept on file with the loan application.
• The aggregate exposure to any borrower or borrowing group must be used to determine the approval authority required.
• Any loan proposal that does not comply with lending guidelines, regardless of amount, should be referred to Head Office for Approval.

Segregation of Duties:

Bank will aim at segregating the following lending function:

• Loan approval/Risk management.
• Relationship management/marketing.
• Loan administration.

ANALYSIS AND FINDINGS

Introduction

Loan facilities, principals, procedures and lending guidelines should provide a clear and consistent point of reference for all employees and prevent misunderstanding, confusion or omission by personal dealing with loan issues. Additionally, loan policies help prevent deviation from the overall lending principles and loan culture.

Loan procedures support the delivery of loan products, help to avoid undue process and serve as an efficient mechanism in granting of facilities and the administration of the risk asset portfolio.

Types of Credit Facility by BKB

The total loan disbursement of BKB can be classified into three major groups these are:

1. Short term loan
2. The medium-term loan and
3. Long term loan

BKB offers both funded and non-funded loan facilities. Among all the funded and non-funded facilities BKB does not provide all but those, which are commensurate with the Bank’s policy and strategy. The various funded and non-funded loan facilities that BKB provides to its borrowers are:

• Funded Facilities:

The funded loan facilities are those, which involve direct cash. In other words, any type of loan facility, which involves direct outflow of Bank’s fund on account of the borrower is termed as, funded loan facility. The following funded loan facilities are provided by BKB.

Bangladesh Krishi Bank provides different kinds of funded loan especially in Agriculture sector of our country. These loans have a low-interest rate which facilitates our people who involve in agriculture. In this section of the report, we will discuss the different types of loan that BKB offer.

BKB finances the following seven sectors, which are given below:

1. Crop
2. Fisheries
3. Live Stock
4. Agro-equipment and farm machinery
5. Agro-processing industries
6. Continuous Loan
7. Poverty Alleviation and Micro Credit Programs
8. Special Recovery Activities/ program
9. SME
10. Others

CROP:

The crop is one of the important sectors of Bangladesh agriculture. In this sector, the total number of manpower involved is more than 57% of the total. And in the national GDP, the portion of the CROP sector is approximately 11.7%. So 60% of the total allocation of the loan of Bangladesh Krishi Bank is reserved for crop alone. This program attends all the seasonal crops and the target people are landowners, share cultivators, and marginal farmers. Rate of interest is very much within the reach of these people around 8%. The important sectors of Crop sector are:

1. Loans in food crops. (Rice, Jute, Wheat, etc.)
2. Cash crops.
3. Loan for gardening and nursery.
4. Tea state.
5. Small Holding Tea State in the Chittagong Hill Tracts.
6. Loan in the emerging sectors of agriculture.

FISHERIES:

In the development of Bangladesh’s economy, it is one of the important sectors. This sector can create the employment of people, meets the local demand for fish and also can earn foreign currency through exports of fish. BKB disburses loan for fish culture and fish hatcheries.  Cultivation of sweet water fish and Shrimp gets a loan. Hatcheries for fish and Shrimps are considered for BKB’s loan. The loan disbursed in this year in this sector is 296.47 cores.

LIVESTOCK:

In our country, the Livestock sector has enough importance to the development of our economy. In our country, this sector can meet the local demand for meat, milk, skin, bones, etc. And this sector can earn foreign currency also. To reduce the dependence of import and increase the export of child food, meat, and skin. BKB provides the loan in this sector. Aim of the project is to create self-employment.  BKB provides loan for:

1. Buying cows.
2. Beef fattening.
3. Dairy farm.
4. In Poultry farming.
5. In goat farming.

CULTIVATION & IRRIGATION:

Bangladesh Krishi Bank presents loan for mechanizing cultivation and irrigation. People are interested now to switch over from traditional machinery system to the modern one. So this timely approaches to provide the loan in this sector. BKB also patronize the manufacture and marketing of farm equipment. Besides the bank offers credit for poultry and dairy farms and for export-oriented food and fish processing plants.

POVERTY ALLEVIATION PROGRAM:

BKB is working to ensure the development of rural and poor people. BKB is providing the loan in this sector to make the proper use of the rural manpower towards the development of the country. BKB is providing the loan in the 13 sectors under this program. They are:

1. Loan to the landless and marginal farmers.
2. Joint lending for poverty eradication.
3. Self are sustaining lending.
4. Improvement of the labor force.
5. South Asian Poverty Eradication Program.
6. United Nation’s farmer’s development program.
7. BKB-NGO microcredit program.
8. Cow farming for women.
9. Autistic development program.
10. SME development for Manipuri.
11. The development program for Rakhains.
12. Special loan for Manipuri people in Shylet.
13. Working facility for rural women.

SME LOAN:

SME plays a vital role in our economy. SME is one of the major sources of self-employment. To make a skilled entrepreneur BKB finance in this sector. To establish the Brain Resource as an important alternative to Venture capital SME loan is provided. BKB logically imposes sufficient emphasis on it. Major Fields for banks interest are-

1. Electrical and electronics.
2. Light engineering.
3. Agro-based all fields.
4. Leather and leather goods.
5. Plastic and synthetics.
6. Health care.
7. Faison goods.

The credit range in this sector is Taka 2.0 lac to Taka 500.00 lac. The interest rate is quite logical and viable.

Corporate Finance and Other Project Loans

Project loan normally has fixed maturity and it relates to term investment. As such it requires appraisals of those proposals to have a rational decision. The appraisal may be termed as the assessment of viability over a period of time.

These loans are usually made for:

• Setting up of industries and to meet working capital
• Balancing, Modernization, Replacement and Expansion (BMRE) of existing industries.

OTHERS TYPES OF LOANS BY BKB:

Over Draft

Overdraft facility is also a continuous loan arrangement on a customer’s current account permitting him/her to overdraw up to a certain approved limit for an agreed period. Here the withdrawal of deposits can be made any number of times at the convenience of the borrower, provided that the total overdrawn amount does not exceed the agreed limit. Customer can return any amount at any time within the pre-fixed time of the facility. Turn over of an Over Draft facility is the most important phenomenon on which renewal of the facility depends. Over Draft, the facility is given to the businessmen for financing working capital requirement and high net worth individual to overcome temporary liquidity crisis.

Secured Over Draft

This is a type of overdraft facility given to the borrowers keeping sufficient collateral from the customer in the most liquid form. This facility provides a specific right to a client to overdraw within a prefixed limit for a certain period of time. Secured over Draft is normally granted against the security of tangible asset such as lien of Fixed Deposit Receipt (FDR), Bonds, Sanchaya Patra but currently Secured Over Draft is given only against Fixed Deposit Receipt because Bangladesh Bank has recently prohibited Secured Over Draft against Bonds and Sanchaya Patra. Interest charged on the Secured over Draft is calculated on the basis of the security lined.

Term Loan

Terms loans are given to finance the acquisition of capital assets. Loan agreements often contain restrictive covenant and loan is repayable in accordance with the amortization schedule. Collateral is a must for a term loan. Under term loan, there are three categories:

Short term Agricultural loan- loans having a maturity less than one year falls under this category. The loan items under this category are:

1. General short term loan.
2. Special lending activities of 100 core Taka.
3. Loan in the disastrous region.
4. Lending activities with Bangladesh Mission.
5. Lending activities for the process and marketing of agricultural products.

Midterm Agricultural loan- this loan facility is extended for loans having maturity more than one year but less than three years. The loan under this category are:

1. Mid-term general loan activities.
2. Midterm Loan in the disastrous region.
3. D.B.I loan 1&2.
4. D.B loan 1&2.
5. USAID IRI cultivation program.
6. Ret culture.

Long term Agricultural loan- tenure of long term loans is more than three years. The loans under these types are:

1. D.B loan 1&2.
2. USAID IRI cultivation program.
3. Japan assistance.
4. Improvement of the tea sector.
5. Ret culture.

Syndicate Loan

A Bank can lend up to 15% of its paid-up capital without any approval by Bangladesh Bank. If the loan amount exceeds 50% of the paid-up capital then Bank goes for Syndicate loan. Lead Bank makes the arrangement and Head Office makes the facility agreement by the Bank’s lawyer. All terms and conditions such as security sharing, mode of creating charges, mode of repayment, covenants of the loan are written on the facility agreement.

Cash Credit

BKB also offers personal cash credit facility to its customers for buying household appliances, agricultural machineries, for business. Securities are kept for such type of credit facility but a guarantee from the third party is required who ought to be a prominent person or government service, holder. Anyone with continuous employment for a reasonable length of time in an organization is entitled to enjoy this facility. A quotation needs to be submitted on the office pad from where the goods will be purchased. Limit of personal credit ranges varies with the financial strength of the mortgage. And the interest rate is 15.00%, which is subject to change.

The objective of this loan is to provide cash credit durables to the fixed income group (Service holders) and other eligible borrowers under the scheme for the following business area.

Items of Investment under Cash Credit:

1. Refrigerator / Deep Freeze
2. Television / VCR / VCP / Dish Antenna
3. Buying cows.
4. Beef fattening.
5. Dairy farm.
6. In Poultry farming.
7. In goat farming.
8. MusicCenter
9. Motor Car / Motor Cycle
10. Air –Cooler / Air – Conditioner
11. Personal computer
12. Washing Machine
13. Household Furniture & Fixtures
14. Sewing Machine
15. Kitchen appliances like Oven, Toaster, Pressure Cooker, Blender, etc.
16. Any other item not specified above but considered essential.

Non funded facilities:

Non funded facilities are also known, as contingent facilities are those where bank’s fund is not required directly. A non-funded facility can be turned to a funded facility as per situation creates. Bank receives commission rather than interest income by providing non-funded facilities. Following non-funded facilities are provided by BKB:

Letter of Credit (L/C)

A letter of credit can be defined as a Credit Contract whereby the buyer’s bank is committed (on behalf of the buyer) to place an agreed amount of money at the seller’s disposal under some agreed upon conditions. Since the agreed-upon conditions include, amongst other things, the presentation of some specified documents, the letter of credit is called Documentary Letter of Credit. The Uniform Customs & Practices for Documentary Credit (UCPDC) published by the International Chamber of Commerce (ICC, 1993) Revision, Publication No. 500 defines Documentary Credit.

Any arrangement however named or described, whereby a bank (the “issuing bank”), acting at the request and on the instructions of a customer (the “applicant”) or on its own behalf,

• Is to make a payment or to the order of third party (the Beneficiary), or is to accept and pay bills of exchange (Drafts) drawn by the Beneficiary, or
• Authorized another bank to effect such payment, or to accept and pay such bills of exchange (Drafts),
• Authorizes another bank to negotiate, against stipulated document (s), provided that the terms and conditions are complied with.

BKB provides only an irrevocable letter of credit (L/C) facility.

LOAN DISBURSEMENT BY BKB:

The amount of money disbursed by BKB in the year 2010-11 is given below: (Figures in core TK)

Bangladesh Krishi Bank has been engaged in foreign exchange business since 1980. It deals with all kinds of export, import, remittance and other sorts of foreign exchange business.BKB has got 200 major correspondent banks globally and maintain a sufficient number of Nostro Accounts in various foreign currencies with different leading banks in the important business center of the world. BKB has taken massive foreign exchange programs to increase business. Import of capital machinery and raw materials for agro-processing industries and export of agricultural products, foreign remittance and all sorts of foreign exchange transactions and services provided by BKB. Products and services in case of international banking are given below:

• Letter of Credit. (LC)
• Bill purchase/ Discount.
• Export Credit. (Pre-shipment and Post shipment).
• Remittance (Inward/ Outward)
• Collection, purchase, and sale of foreign currencies and Travelers’ cheque.
• Maintenance of student education file.\
• Guarantees in foreign currencies.
• Foreign Currency accounts.
• NFCD (Non-resident Foreign Currency Deposit) A/c.
• RFCD (Resident Foreign Currency Deposit) A/c.
• Forward Contracts.
• Correspondent Banking Relations.
• Taka Drawing Arrangement.
• Dealing room.
• W.I.F.T (Society for Worldwide Interbank Financial Telecommunication.)

PRODUCTS AND SERVICES OF BKB:

Although the central attention of BKB is agriculture. It doesn’t abandon other fields of the economy at all. All the businesses of the bank may be defined as follows:

• Corporate Financing.
• Credit Program.
• Deposit scheme
• International Banking.
• Loan services of BKB.
• Poverty Alleviation.
• Micro-credit program.

CORPORATE FINANCING

The Bank has started financing to renowned corporate bodies of the country for the last 2/3 years. This has opened a new arena of utilizing Agri-product marketing channel of the companies in easy terms and at a lower interest rate. Such companies are:

1. PRAN GROUP (Agriculture Marketing Company Ltd.)
2. SQUARE GROUP (Square Consumer Products Ltd.)
3. PARTEX GROUP (Partex Furniture Ltd.)
4. SUPREME SEEDS
5. PADMA GROUP
6. H.P GROUP
7. K. GROUP
8. ISPAHANI GROUP
9. SA GROUP
10. D.S GROUP
11. CITY GROUP
12. ALAM GROUP
13. MEGHNA GROUP
14. National Pharmaceutical Co. Ltd. (NPCL)

CREDIT PROGRAM:

Credit program may be called the prime function of the bank. This program includes the loans provided for crops, fisheries, livestock, farm and irrigation, agro-based industries project, SME, Microcredit. More about credit program will be discussed in the credit section of the project part.

DEPOSIT SCHEME:

As a commercial bank BKB offers some well-designed deposit scheme for the customer. These are Special Notice Deposit (SND), Fixed Deposit, Time deposit, Savings scheme, Educational Savings, etc. Under time deposits there are subheads like DPS, SPS, Teachers Savings, Hajj Deposit, and Krishan-Krishani,

Types of deposits and interest rate related to particular deposits are given below:

FIXED DEPOSITS

POVERTY ALLEVIATION:

Bangladesh Krishi Bank has taken up poverty alleviation as one of the fundamental jobs. It extends Micro Credit services for the people below the poverty level. Some of these services arranged by BKB alone and some are joint efforts. Local and international agencies collaborate in some cases. The international organization like the United Nations, Asian Development Bank, SAARC are working with BKB in some projects.

It is now possible to say that BKB is performing its duties efficiently in developing the agricultural sector of the country. And at the same time helping the downtrodden millions to come up above the poverty level through sustainable growth.

AN OVERVIEW OF CREDIT POLICIES AND ACTIVITIES OF BKB

Agriculture is the most important and profitable sector in Bangladesh. All of our economic activities have been developed based on agriculture. In this case, Bangladesh Krishi bank is the leading financial institution for financing in agriculture. Bangladesh Krishi Bank strictly adheres to the regulatory policies, rules, etc as regards to credit

Management and is in compliance with regulatory requirements as stipulated by Bangladesh Bank from time to time.

CREDIT POLICY OF BKB:

Bangladesh Krishi bank in the fiscal year 2011-2012 decided to prepare five years to plan to disburse the loan in a different sector. The key point of their planning is given below:

• To develop and expansion of agriculture the bank will provide loan to all agro-based sector which involves in Agriculture.
• To facilitate, modernized, profitable of and to improve the lifestyle of rural people BKB will pay special attention to the 7 sectors such as- Crops, Fisheries, Livestock, Agro-equipment, and farm machinery, Agro-based industries, Continuous loan, Poverty alleviation, and Micro-credit program.
• To identify different sector which increases the price of agro product and distribution BKB work for those sectors and gives loan to improve the situation.
• To face the growing amount of loan demand in every year BKB will increase the amount of loan disburse in the agricultural sector. To reduce the use of traditional systems in agriculture.
• Using advanced scientific technologies.
• Exporting agricultural food products.
• To change the current cropping pattern and increase the cropping intensity.

DISBURSEMENT YEAR BY YEAR

LOAN LENDING PLANING OF BKB:

Bangladesh Krishi Bank declares their loan disbursement goal for the upcoming fiscal year in the last week of the month of June. For the 2012-13 fiscal years, the 6000 core Taka will be disbursed. Special features of lending procedure for the year 2012-13 are-

• To reduce the use of traditional systems in agriculture.
• Using advanced scientific technologies.
• Exporting agricultural food products.
• To change the current cropping pattern and increase the cropping intensity.

Loan disbursement target of BKB for the year 2012-13 is given below:

PRINCIPLES OF LENDING:

Banks are a profit-oriented organization for which a bank invests its funds in many ways to earn income. At the same time bank runs the risk of default in repayment. As such the banks are required to follow certain basic principles of lending. The lending principles of BKB govern its extension of credit facilities. These principles are strictly followed to shape and define the acceptable risk profile of Bank Asia. These principles are:

• Know Your Customer: Know Your Customer (KYC) is the most important guiding principle of BKB for extending credit facilities to its prospective borrowers. Complying with this principle helps the bank to avoid money laundering crime and adverse selection of borrowers.
• Safety: Safety depends first upon (i) the security and its value offered by the borrower and (ii) the repaying capacity and willingness of the borrower to repay the loan with interest.
• Liquidity: It refers to the ability of an asset to be converted into cash without loss and within a short time to meet depositor’s demand for cash.
• Profitability: BKB must employ its fund in such a way that they will bring an adequate return for the bank, which should be more than the cost of the funds.
• Purpose: The purpose for which BKB will provide loan should be productive so that the money not only safe but also provides a definite source of repayment.
• Spread: It refers to the diversification of advance. BKB always provide loans at a lower rate than the other commercial banks. Though profit is not the main aim of lending of BKB So far BKB could maintain considerable margin on its disbursed loan. Recently Bangladesh Bank has imposed a restriction on lending rate and to comply with Bangladesh Bank policy guidelines, BKB always follows lending guidelines of Bangladesh Bank.

STRATEGIES OF LENDING PROCEDURE:

A loan policy gives loan officers, relationship managers and the Bank’s management specific guidelines in making individual loan decisions and in shaping the Bank’s overall loan portfolio. One of the most important ways a Bank can make sure its loans meet the regulatory standard and are profitable is to establish a written loan policy.

BKB also has a good loan policy and the most important elements of the policy are stated below:

• A goal statement for the Bank’s loan portfolio (in terms of types, maturities, sizes, and quality of loans).
• Specification of the lending authority given to each loan officer and loan committee (measuring the maximum amount and types of loan that each person and committee can approve).
• Lines of responsibility in making assignments and reporting information within the loan department.
• Operating procedures for soliciting, reviewing, evaluating, and making decisions on customer loan applications.
• The required documentation that is to accompany each loan application and what must be kept in the Bank’s credit files (required financial statements, security agreements, etc).
• Lines of authority within the bank regarding who is responsible for maintaining and reviewing the Bank’s credit files.
• Guidelines for taking, evaluating and perfecting loan collateral.
• A presentation of policies and procedures for setting loan interest rates and fees and the terms for repayment of loans.
• A statement of quality standards applicable to all loans.
• A statement of the preferred upper limit for total loans outstanding (i.e. the maximum ratio to total loans to total assets allowed).
• A description of the Bank’s principal trade area, from which most loans should come.
• A discussion of the preferred procedures for detecting, analyzing and working out problem loan situations.

A written loan policy statement carries a number of advantages for the bank adopting it. It communicates to employees working in the loan department what procedures they must follow and what their responsibilities are. It helps the Bank moves forward a loan portfolio that can successfully blend multiple objectives such as promoting the bank’s profitability, controlling its exposure and satisfying regulatory requirements.

CLASSIFICATION OF LOANS AND PROVISIONING

Loan classification is a process by which the risk or loss potential associated with the loan accounts of the Bank on a particular date is identified and quantified. It is done to determine the level of reserves to be maintained by the Bank for the probable loss on that risky loan account.

Unclassified Loans

An unclassified loan or commitment is one that is set by Bangladesh Bank or the Head Office of the Bank. Unclassified loans are those loans in which repayment is regular.

Classified Loans  

A classified loan or commitment is one that is classified as substandard, Doubtful or Loss as per the policy of loan classification set by Bangladesh Bank or Head Office of the bank.

Loan Classification means to categorize the debt information in a systematic manner. But in the true sense, it is defined in terms of the degree of risk associated with these loans. The objectives/importance of loan classification is:

• To find out Net Worth of a bank;
• To assess the financial soundness of a bank;
• To calculate the required provision and the amount of interest suspense;
• Strengthen credit discipline;
• To improve loan recovery position and
• To put the bank on sound footing in order to develop sound banking practice in Bangladesh.

Position of classified loans and advances and other assets should be placed before the Board of directors of the bank.

EVALUATION OF THE BKB’S LOAN PRODUCTS, PRINCIPALS AND STRATEGIES

LOAN PRODUCTS EVALUATION

Bangladesh Krishi Bank was established due to work for the development of the agricultural sector of the country. It was established in 1973 but started its commercial banking activities in the year 1976. Now is the period of innovations. There are 52 commercial banks operating in the country excluding other non-banking financial institutions. In this competitive banking arena, a bank must come up with new and easily accessible customer focused loan products. BKB offers a limited number of loan products to its customers. BKB’s targeted customer is poor and minor people. BKB also helps in foreign business for the businessman. And for helping the international business of agricultural products and development of agro-based industries.

The loan mix of the bank is very conventional. It has been observed that the existing loan products are insufficient to meet up the existing borrower’s need. The bank has no loan products for religious Muslim borrowers. It has caused the bank to lose a large segment of the potential borrowers. The bank has yet to establish a credit card facility which could pull a large number of borrowers because due to safety need, an increasing number of people are being interested in having this facility. BKB is still lagging behind the other commercial banks in terms of product diversity in credit.

But BKB has promised to incorporate new loan products in its loan mix portfolio. The bank is trying to computerize all its branches. BKB is planning to start online banking for providing good services to its customers.

EVALUATION OF LENDING PRINCIPLES

Bank Asia follows well-constructed lending principles starting with KYC or Know Your Customer and ending with Spread. KYC is getting increasing emphasis in the banking arena because the loan default rate is high in our country. Proper compliance with KYC can help the banks to avoid bad loans. The BKB still maintains adequate safety in its loan portfolio, which is reflected in its low default rate. The bank was able to establish confidence in the minds’ of the customers regarding maintaining adequate liquidity to meet up the borrowers’ requirement.

At the same time, the bank was able to remain profitable in terms of interest income maintaining a higher spread. So far BKB was able to perform well in its loan portfolio but the scenario is changing very rapidly. The lending rate is lower than any other banks of Bangladesh. The bank has to adopt the necessary strategy to maintain its profitability from the loan portfolio. And also BKB should follow their existing lending principle towards the development of the agriculture of our country.

 STRATEGY EVALUATION

The strategy provides guidelines to BKB to device a smooth lending procedure. As mentioned earlier, BKB does not have a very diverse loan product but it provides short term, mid-term, and long term loans. Size of the credit varies from fifty thousand Taka for personal credit to several cores for syndicated loans. BKB has a preference for rural farmers, minor people development of the women.

BKB also finances SME (Small and Medium Enterprise), provides personal credit, export, and import finance. BKB finances in the corporate sector mainly agricultural based industries. But BKB is in constant search of the profitable business sector for extending the credit line. Bank has also taken safeguard against a predicted alteration in the world trade policy. As MFA (Multi Fiber Agreement) was phased out from December 2004, many of the country’s garments factories were under the threat of lay off. The experts of the bank are anticipating that the situation after last year seriously jeopardized the banking sector because most of the banks have heavily financed in the export-oriented RMG (Ready Made Garments) sector.

BKB’s main motto is to ensure the proper development of agriculture by modernizing, marketing and improving the standard of living of the rural and urban people. That’s why BKB is not confining their lending activities in limited sectors. Rather providing loan to ten sectors. BKB has ensured the quality of loan by proper mortgage loan in a different sector.

Agriculture is the most uncertain sector to finance but BKB is financing successfully in this sector. Agro-based industry’s improvement is dependent on the loan provided by BKB.

Recovery Status of BKB

The perspective of the Basel 2 implementation has encouraged the bank to conduct a number of studies on the impact that new rules will have on credit management, according to the specific characteristics of the lender. With regard to BKB, studies tend to highlight the opportunities related to the use of complex credit management tools for internal management purposes, as well as the limitations related to the assessment of the value of the relationship between customer and bank.

Available studies on credit management for BKB focus on the characteristics of this type of bank, such as size, type of customer base and field of activity, showing how its specificity can affect the riskiness of its loan portfolio. In detail, the evidence provided attempts to prove the greater capacity of this bank to select and monitor their borrowers, compared to the banking system as a whole.

This paper focuses on the phase subsequent to borrower default, with the aim of assessing whether the special nature of these banks is also reflected in the effectiveness of the loan recovery process. Therefore, the analysis is aimed at assessing the significance of the characteristics of the BKB, with respect to another driver of the expected credit loss, with a view to highlighting if the differences proposed in the relevant literature–in terms of the probability of insolvency–are consistent with the differences reported in terms of the effectiveness of the recovery process, or if the two risk factors offset each other.

Internal controls of loan recovery:

An area that plays a crucial role in the control of loan recovery is its system of internal controls. Effective internal controls enhance the safeguards against system malfunctions, errors in judgment and fraud. Without proper controls in place, management will not be able to identify and track its exposure to risk. Controls are also essential to enable management to ensure that operating units are acting within the parameters established by the board of directors and senior management.

Seven aspects of internal controls deserve special attention:

1. Information Systems. It is crucial that effective controls are in place to ensure the integrity, security, and privacy of information contained on the credit union’s computer systems. In addition, the loan recovery should have a tested contingency plan in place for the possible failure of its computer systems.
2. Segregation of Duties. The loan recovery should have adequate segregation of duties and professional resources in every area of operation. Segregation of duties may be limited by the number of employees in smaller loan recovery.
3. Audit Program. The effectiveness of the loan recovery’s audit program in determining compliance with the policy should be reviewed. An effective audit function and the process should be independent, reporting to the Supervisory Committee without conflict or interference with management. An annual audit plan is necessary to ensure that all risk areas are examined and that those areas of greatest risk receive priority. Reports should be issued to management for comment and action and forwarded to the board of directors with management’s response. Follow-up of any unresolved issues is essential, e.g., examination exceptions, and should be covered in subsequent reports. In addition, verification of members’ accounts needs to be performed at least once every two years.
4. Record Keeping. The books of every loan recovery should be kept in accordance with well-established accounting principles. In each instance, loan recovery records and accounts should reflect its actual financial condition and accurate results of operations. Records should be current and provide an audit trail. The audit trail should include sufficient documentation to follow a transaction from its inception through to its completion. Subsidiary records should be kept in balance with general ledger control figures.
5. Protection of Physical Assets. A principal method of safeguarding assets is to limit access by authorized personnel. Protection of assets can be accomplished by developing operating policies and procedures for cash control, joint custody (dual control), teller operations, and physical security of the computer.
6. Education of Staff. Loan recovery staff should be thoroughly trained in specific daily operations. A training program tailored to meet management needs should be in place and cross-training programs for office staff should be present. Risk is controlled when the loan recovery is able to maintain continuity of operations and service to members.
7. Succession Planning. The ongoing success of any loan recovery will be greatly impacted by the ability to fill key management positions in the event of resignation or retirement. The existence of a detailed succession plan that provides trained management personnel to step in at a moment’s notice is essential to the long-term stability of loan recovery. A succession plan should address the Chief Executive Officer (or equivalent) and other senior management positions (manager, assistant manager, etc.).

 LOAN-PRICING METHOD:

In pricing a business loan, Bank management must consider the cost of raising loanable funds and the operating costs of running the Bank. This means that Banks must know what their costs are in order to consistently make profitable, correctly priced loans of any type. There is no substitute for a well-designed management information system when it comes to pricing loans.

The BKB is generally used the simplest loan-pricing model which assumes that the rate of interest charged on any loan includes four components: (1) the cost to the Bank of raising adequate funds to lend, (2) the Bank’s non-funding operating costs (including wages and salaries of loan personnel and the cost of materials and physical facilities used in granting and administering a loan), (3) necessary compensation paid to the Bank for the degree of default risk inherent in a loan request, (4) Bank’s desired profit margin.

Why Recovery takes so much time

Only because of existing rules and regulation recovery is a time-consuming procedure. I think an example will make this thing clear. Let, Mr. X took a loan from Y bank by giving land as a registered mortgage and become bad. Now the bank cannot sell the land without the permission of court though the land was as registered mortgage to the bank. So the bank has to use against Mr. X and the court send notice to Mr. X. But Mr. X can delay his coming by saying he is sick and asking for more time. Court gives a new date to settle the matter. Then on a new date, a person came to the court saying that he is the brother of the client and the land is their father’s property. And most importantly, the client didn’t notify him before giving the land to the bank. So the court asks him to prove his claim.

Criteria of loan:

Source of BKB

Recovery Data (for 2012):

Recovery of Classified Loan

Recovery of Unclassified Loan

Bad Loan (for 2012)

Source of the annual report of BKB 2012.

Recommendations:  

Based on the evaluation of different aspects of the loan process of Bangladesh Krishi Bank, the following recommendations have been made:

• To combat the problem of mobilizing deposit in the form of a loan, Bangladesh Krishi Bank should focus on intensive marketing effort.
• Entrepreneurship lending should be given due emphasis.

• As borrower selection is the key to successful lending, BKB should focus on the selection of true borrower.

• Care should also be taken so those good borrowers are not discarded due to strict adherence to the lending policy.
• Monitoring of a loan should be conducted at a regular interval to enhance the borrower is properly maintaining the mortgaged property and utilizing the borrowing money.
• In case of a mortgage, care must be taken to accept collateral on the second charge.
• In the case of assignment, the bank must ensure that the assignment debtor has given an undertaking.
• Reporting of all loans should be periodically made to Bangladesh Bank.
• Loan monitoring is a continuous task and requires expert manpower.

CONCLUSION:

Most of the Banks in Bangladesh are offering a wide array of financial services including new types of loans and advances and some whole new services are being launched every year. BKB, a bank of difference, also has discovered new avenues to reach its goals.  For the brand name, it is gone to people’s heart by updating various services. Bank BKB should diversify its credit portfolio BKB so that in the near future when competition among Banks will serve, it can stand with its own identity. The Credit Risk Management method that may seem fit today may not work tomorrow. So all the Financial Institutions must find their own method in order to sustain in the changing world. The central focus in this regard would be to have a comprehensive Information Technology system, sufficient expertise and above all very relaxed management to adopt the new idea to update the Credit Risk Management method.  Now BKB is continuing business operation successfully in Bangladesh through developing an image and goodwill among its clientele by offering its excellent services. The success has resulted from the dedication, commitment and dynamic leadership of its management. During the short span of time of its operation, BKB has successfully grabbed a position as a highly progressive and dynamic financial institution in the country. By proliferation of new advanced services, expanding the use of automated equipment and electronic transfer of financial inform BKB action, will be the country’s first largest institution in the near future.