Practices and Policies in Credit Management of Rupali Bank

Main purpose of this report is to analysis Practices and Policies in Credit Management of Rupali Bank Limited. Other objectives are to present the financial performance of the bank and pinpoint the operational procedure of the bank. Report also discuss on to know the management skillfulness and to know about the products regarding the deposit, loan and advance. Finally find out the strengthen the bank’s brand recognition and get the ways for solving the problems.

Introduction

In order to know about a financial organization like a bank, a person should know all section of the financial organization in times. so I think that credit management system is an important topic.

This section is intended to provide minimum background and procedural guidelines to examiners, responsible for evaluating a bank’s credit management system within Individual bank and global banks.

Loan is the main component of a bank. It is the lending of a sum of money by a lender to a borrower to repay with a certain amount of interest. Loans refer to a formal agreement between a bank and borrower to provide a fixed amount of credit for a specified period.

So as a profit oriented business organization , if a bank gives its resources temporarily under certain conditions and for a specific duration , it will be called loan time to time , the term loan , credit and advance are used separately in different spheres.

Objectives of the study

• To find out the d have some real world experience in the major field of study on the career choice that interest him/her strength, weakness, opportunity and threat.
• To present the financial performance of the bank.
• To Pinpoint The operational procedure of the bank
• To know the management skillness
• To get the ways for solving the problem
• Strengthen the bank’s brand recognition
• To know about the products regarding the deposit, loan and advance.

Methodology

Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically.

The study will focus on deposit and loan scheme and foreign exchange of banking and customer satisfaction through practicing modern E-business systems. There is a growing independence between business strategy, rules & procedures on the one hand & marketing management is the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value on the other

Data collection and analysis

Method of data collection

There are two types of data: Primary data and Secondary data.

Primary Data Collection

For this study, at first I selected the primary sources of data and collected data through interview. In selecting the primary sampling units, PPS (Probability proportion to size) sampling method is implemented. I took interview different executives of MIS, HR & Admin, Accounts, Development, SME departments of the Rupali bank ltd.

Secondary Data Collection

I collected previous and current data from different levels of employee of Rupali bank ltd and from different types of customers. I also went through different books, journals and internet data & information. Collecting the information it is entered into computer and MS word & Ms Excel is used to analyze the data. The steps of processing data is included the following steps.

• Collection
• Classification
• Sorting, adding, merging & so on
• Summarizing
• Storing
• Retrieval
• Dissemination

Historical Background

Rupali Bank Ltd. was constituted with the merger of 3 (three) erstwhile commercial banks i.e. Muslim Commercial  Bank Ltd. Australasia Bank Ltd. and Standard Banks Ltd. operated in the then Pakistan on March 26, 1972 under the Bangladesh Banks (Nationalization) Order 1972 (P.O. No. 26 of 1972), with all their assets, benefits, rights, powers, authorities, privileges, liabilities, borrowings and obligations. Rupali Bank worked as a nationalized commercial bank till December 13, 1986.

Rupali Bank Ltd. emerged as the largest Public Limited Banking Company of the country on December 14, 1986.

Vision

Rupali Bank Ltd. dreams poverty free Bangladesh, where sports & athletics, science and education, health and hygiene, clean and pollution free environment and above all a society based on morality make all our lives worth living.

Mission

• The Bank participates actively in socio-economic development of the country by performing commercially viable and socially desirable banking functions.
• Develop Long-term relationships that help our customers achieve financial success.
• Offer rewarding career opportunities and cultivate staff commitments.

Core Values

• Social Responsibility
• Performance
• Integrity
• Respect
• Innovation
• Teamwork

Guidelines  Principles of Rupali Bank Ltd.

• Transparency and accountability.
• Zero tolerance on corruption and inefficiency
• Flexibility in operation
• Constant review of clients’ performance
• Other guiding principles includes decentralization and devolution, defining roles and responsibilities, use of state of art modern technologies, bottom-up approach in planning, partnership etc.

Strategic Objectives

• Develop a customer oriented service culture with special emphasis on customer care and convenience.
• Increase our market share by following a disciplined growth strategy.
• Achieve a significant share of deposit and credits from the existing and niche markets.
• Leverage our technology platform and pen scalable systems to achieve cost-effective operations, efficient MIS, improved delivery capability and high service standards.
• Develop innovative products and services that attract our targeted customers and market segments.
• Maintain a high quality assets portfolio to achieve strong and Sustainable returns and to continuously build shareholders’ value.
• Strengthen the bank’s brand recognition.
• Explore new avenues for growth and profitability, particularly by diversifying loan portfolio through structured finance and expansion of retail and SME financing.

Divisions of Rupali Bank Limited

Rupali Bank Limited. has some major divisions comprising of various Departments, The major divisions are as follows:

• Investment Division: This division has the authority to determine the party or the client who will get the credit facility from the bank. The credit clients are selected according to the criteria of credit policy.
• Financial Administration Division: This division can handle the credit proposal, disbursement, monitoring and credit recovery position that is given by all branches.
• Audit and Inspection Division: This division can control all the financial position, activities of overall organization. They provide the total budgetary limitation to every department for the respective year.
• Marketing and Public Relation Division: This division mainly works for improving the marketing network, Implementing the marketing strategies and the concept of Trade Marketing.
• Common Service Division: This division can handle all the genera activities except the credit and financial sector. All the administration activities are designed and implemented by this division.
• Human Resource Division (HRD): This division deals with the employees as the core resources of the organization.
• Computer (IT) Division: This division can handle the IT activities. Each branch has their own IT division and all branch-wise activities are reported to the head office IT division.

Financial Analysis

Total Assets

Total asset of RBL stood at Tk 12443.45 crore in 2010 from Tk 8779.14 crore in 2009 registering a growth of 41.73 percent. The increase in asset of RBL was mainly driven by growth of customer deposits. The growth of deposits was used for funding growth in credit and holding of securities for SLR purpose. The economy witnessed a lower growth scenario in credit and deposits mobilization.

Growth of Balance Sheet Items

Cash and Balance with Bangladesh Bank

RBL’s position increased from Tk 528.64 crore in 2009 to Tk 754.26 crore in 2010 showing a growth of 42.68 percent. The growth in deposits increased the Cash Reserve Requirement of the Bank which is maintained with Bangladesh Bank and its agent. CRR was maintained adequately through out the year.

Balance with other Banks and Financial Institutions

RBL’s position increased from Tk 206.97 crore in 2009 to Tk 268.85 in 2010 registering a growth of 61.88 crore. Adequate funds were also maintained with correspondent banks for payment against LC commitments.

Money at Call & Short Notice

* This was the major area of operation of the RBL’s Treasury Division. The total money at call and short notice of RBL stood at Tk.320.00 crore in 2010 from Tk.370.00 crore in 2009.

Investment

RBL’s investment increased during the year by Tk. 141.42 crore and stood at Tk 1571.71 crore as at 31 December, 2010.

Loans and Advances/Investments

Loans and advances of RBL increased by Tkl370.48 crore showing a growth of 26.18 percent during 2010. Yield on loans and advances of RBL decreased to 01.11 percent due to reduction of lending rates on corporate and medium scale financing as imposed by Bangladesh Bank. Concentration of loans and advances was well managed and details of credit are given at notes to accounts no 7.00. Ratio of non performing loan of RBL decreased to 11.96 percent as against 19.48 percent of previous year.

Liabilities

The total liabilities (excluding equity) of RBL stood at Tk 11028.30 crore in 2010 from Tk.9337.32 crore in 2009 registering a growth of 18.11 percent. The increase in liability was mainly due to growth in deposits.

Borrowings from Financial Institutions and Agents

The borrowing represents, RBL’s borrowing against refinance from Bangladesh Bank. Refinance was taken for rural financing and against nostro accounts in abroad.

Deposits

The deposits of RBL grew by 23.46 percent in 2010 Customer deposits of the Bank grew by 22.95 percent. The growth was supported by branch network and high standard service provided to customers along with liability.

Deposit Mix

Campaign carries out by retail liability team for mobilization of no cost and low cost deposits. No cost and low cost deposits comprised of 16 percent of the deposits as against 15 percent in the previous year indicated significant improvement of deposit mix. However, fixed deposits remained the main component of deposits contributing about 26 percent of the total deposits. Interest cost of deposit decreased to 4.16 percent as against 4.52 percent of previous year. The clientele group of the Bank was individuals’ corporation, NGO, NBFI, government and private bodies etc.

Shareholders’ Fund

RBL’s Shareholders’ fund position is Tk 1,973.33 crore by during 2010. Paid-up capital of RBL is Tkl25.00 crore during 2010. The Statutory reserve increased by Tk 28.51 crore during the year and stood at Tk 153.54 crore. Distributable profit stood at Tk 31.51 crore during the year. The strong growth in Shareholders’ fund will help the Bank to expand its business.

Analysis of Income Statement of RBL

Taka in crore

Net Interest Income

RBL’s net interest income grew by 20.06 percent during 2010. Interest earned from loans and advances and profit earned on investment remained the principal component of interest income. However interest cost of deposits was the main component of interest expenses. Net interest income was the highest contributor to total income,

Investment Income

RBL’s investment income consists of interest earned on treasury bills & bonds and dividend received on shares. Investment income increased by Tk 20.38 crore during the year registering a growth of 13.07 percent over the previous year and became the main contributor to total income, accounting for 72.04 percent of the operating income.

Non-interest Income

The non-interest income of RBL is 29.91 percent from the previous year. Fees and exchange based income of the Bank grew by 4.52 percent during the year. Other charges and recoveries increased during the year

Taka in crore

Non-interest Income

Total Operating Expenses

Total operating expenses increased by 42.07 crore during the year mainly due to increase in personnel and other operating expenses. To match with the growth of SME and retail business and Branch expansion substantial number of manpower was recruited especially in SME and retail segments will benefit the Bank in broad spectrum. RBL also made donation amounting to Tk 2.54 crore to carry on various CSR activities. RBL also focused on developing brand image and increased promotional and advertisement expenses. This strategy added value to the business. The Bank’s cost income ratio is 70.35 percent in 2010 from 82.96 percent in 2009. Considering these factors, the ratio indicates the satisfactory operating efficiency of the Bank.

The productivity of the employee continued to grow which is evident from the following ratio:

Taka in crore

Provision for Classified Loans

Total provision against classified loan was Tk 680.87 crore as against Tk 852.86 crore of previous year.Provision against unclassified loans was made to Tk 62.00 crore during 2010 as against Tk 45.53 crore of previous year. General provision requirement on off-balance sheet outstanding had to be provided Tk 81.70 crore as against Tk 31.54 crore of previous year. The bank has provided Tk 8.83 crore as provision for diminution in value of investments. This is to be noted that general provision is regarded as Tier-ii capital of the Bank and provides safeguard against future default as well supports business growth by strengthening the capital base.

Recovery against Classified and Written-off Loans

RBL was able to recover Tk 266.41 crore against classified loans and Tk 27.51 crore against witten-off loans during the year 2010.

Net Profit before Tax

After making above provisions, net profit before tax of RBL stood at Tk 142.57 crore. Higher investment income especially from treasury increased the net profit before tax.

Provision for Income Tax

Provision against current year income tax of RBL was Tk 82.54 crore. Net Profit after Tax

Net Profit afte Tax stood at Tk 60.03 crore during the year 2010.The calculated Earning per Share (EPS) is Tk 48.02 at December 31, 2010. Average ROA and ROI stood at 1.15 percent and 11.22 percent respectively.

Statutory Reserve

As per Bank Company Act 1991, 20 percent of operating profit before tax is required to be transferred to Statutory Reserve. As such an amount of Tk 28.51 crore has been transferred to Statutory Reserve.

Dividends

Thus fund available for distribution is Tk 31.51 crore from current year profit. In order to maintain a satisfactory capital adequacy ratio of the Bank, the Board decided to recommend 10 percent stock dividend for the year 2010. Satisfactory Capital Fund will enable the Bank to increase business activities.

Shareholders’ Value

RBL remains fully committed to delivery of higher shareholder value. The high profitability track record underpins the value, the shareholders’ derived from investing in the shares of Rupali Bank Limited. The earning per share stood at Tk 48.02 on 2010.

Corporate Social Responsibility (CSR)

Rupali Bank Ltd. RBL has been rendering various services for attaining greater social goals and objectives. In this process, we aim to the development of the society as a whole and fulfillment of corporate social obligation in particular. To reinforce CSR activities, the bank has undertaken fresh initiatives in line with Bangladesh Bank guidelines in the areas of social service. Internship employment of poor, sports and culture, banking for the disadvantaged group, disaster and relief and activities.

Rupali Bank Training Institute

Since 2009, as many as 602 officers were imparted training by Rupali Bank Training Institute through 24 courses/ workshops including 10 foundation courses to the newly joined probationary officers throughout the month and the course relating to Fake Note Detection, BACH program, Money Laundering Prevention Act, Core Risk, Foreign Exchange and Computer. As many as 105 trainees have participated in 43 courses in BIBM. In addition to this, 18 trainees took part in 12 courses conducted by Bangladesh Bank and other institutions outside.

Computer Operation and Application of Information Technology

Extensive activities on computer technology and their implementation have been undertaken by this bank during the year in question. Till 2009, the number of computerized branches stood at 145. The work relating to change of old computers in previously computerized 31 branches is in progress. Remittance and EFT System have been modernized and arrangement for Money Transfer through Western Union in 71 branches has been made operative. On-line Banking with foreign Exchange Branches at Dhaka and Agrabad Branch of Chittagong has been introduced. The vendor institution has started preliminary activities to introduce On-Line banking operation on test basis in 10 more branches of the bank. The information of 25 Divisions of Head Office are being publicized through Bank’s own website (www.rupalibank.org). In order to expedite the flow of information 10 Internet of 64 kbps (shared line) and 10 Internet line of 256 kbps (dedicated line) have been installed in Head Office. The supply and installation of necessary hardware and software including communication link with Bangladesh Bank have been made. SIT (System Integrity Test) with Bangladesh Bank is in completion and prepared to operate in live at any time as per instruction of Bangladesh bank.

Legal Activities

As regards the recovery of default loans, the number of the suits such as original suits under trial, execution suits, appeal/ others and suits in Bankruptcy Court field by the Bank stood at 4570 with an involvement of Tk. 1603.29 crore. The number of the suits in which the certificates issued for possession and enjoyment of the mortgaged property by the court is 501 involving Tk. 82.03 crore; the suits field against the bank were 156 involving Tk. 327.93 crore; the IRO suits 110; the suits disposed of 294 involving Tk. 222.28 crore. The suits newly filed 42 involving Tk. 89.18 crore and the recovery through suits amounts to Tk. 222.28 crore. The number of lawyers conducting the suits in Dhaka Metropolitan area is 110 and in other areas 236. Besides these, the number of writs arising from Artha Rin Adalat Act, 2003 pending for disposal is 304 at the end of the year in question.

Other Banking Activities

94 branches of our bank are engaged in works relating to the payment of portion of salaries afforded by the government to the teachers and employees of registered non-government educational institutions including teachers of non-government educational institutional, 98 branches relating to the payment of scholarship and stipends to the girl students at primary and secondary levels and 69 branches relating to the payment of stipends to the girl students at primary and higher secondary level. In addition to those, almost all the branches of Rupali Bank are engaged in work relating to the payment of pension bill to the retired government, civil and military personnel and the receipt of utility bills such as PDB, DESA, REB, WASA, GAS & Telephone etc. including other service-related work of the government (such as receipt of Municipal Tax and Land Development Tax, purchase and sale of Prize Bonds, receipt of Hajj money etc).

Products and Services

Deposits

• Current Deposit (CD)
• Call Deposit (CDR)
• Special Notice Deposit (SND)
• Savings Deposit (SB)
• Savings Deposits Earned from Foreign Remittance (SB)
• Fixed Deposit (FDR)
• 3 months and above but less than 6 months
• 6 months and above but less than 1 year
• 1 year and above but less than 2 years
• 2 years and above but not more than 3 years

Deposit Schemes:

• Rupali Deposit Pension Scheme (RDPS)
• Rupali Deposit Pension Scheme-2 (RDPS-2)
• Rupali Deposit Scheme (RDS)
• Rupali Monthly Earning Scheme (RMES)

Loans and Advances

General Products

• Cash Credit(Hypothecation)
• Cash Credit (Pledge)
• Overdraft (OD)
• Loan against FDR
• Loan against Deposit Schemes
• Industrial Project Loan (Long and Mid Term)
• Short Term Loan
• SOE Loan
• Syndicate Loan
• Housing Loan— General and Commercial
• Personal Loan/    Professional Loan
• Household Loan
• Self Reliance   and   SpecialProgram Loan
• Local Bank Guarantee
• Loan under, Equity Entrepreneurship Fund (EEF)
• Student Loan

Rural and Agro Credit

• Young Farmers’ Loan
• Solar-Energy and Bio-Gas Plant Establishment Loan
• Fishery Loan
• Shrimp Cultivation Loan
• Goat/Sheep Rearing Loan
• Poultry Loan
• Dairy Loan
• Loan Against Crop Storage in Silos
• Small Loan
• Micro-Credit
• Micro-Credit for the Handicapped
• Loan for Tree Plantation
• Peas, Bean, Maze and Spices Loan
• Other

 Other Loans

• Bank-NGO Linkage Credit
• Loan Against Share/Debenture
• Loan Against Brickfield/ Gold Ornaments
• Loan for Preservation of Potatoes in the Cold Storage
• Transport Loan/Car Loan
• Woman Entrepreneur Financing Program
• Consumer Credit/Travel Agency and Diagnostic Centre Business Loan

Foreign Exchange Business

All sorts of Foreign Exchange Transactions are made in Rupali Bank Limited following ‘Guidelines for Foreign Exchange Transactions (GFET-2009) by Bangladesh Bank such as-

Foreign Currency Accounts

• Foreign Currency Account
• Resident Foreign Currency Deposit Account
• Non Resident Foreign Currency Deposit Account
• Exporters’ Retention Quota Account

Import Finance

• Letters of Credit
•  Loan Against Imported Merchandise (LIM)
• Loan Against Trust Receipt (LTR)

Export Finance

Pre-shipment Credit

• Cash Credit Against Hypothecation of Raw Materials/Exportable Goods
• Cash Credit Against Pledge of Raw Materials /Exportable Goods
• Packing Credit (PC)
• Back to Back L/C
• Back to Back L/C under Export Development Fund (EDF)

Post-shipment Credit

• Negotiation of Export Documents
• Collection of Export Documents
• Foreign Bills Purchased (FBP)
• Inland Bills Purchased (IBP)

Bond

• Wage Earners Development Bond
• Investment Bond
• Premium Bond

Guarantee

• Bid Bond
• Performance Guarantee
• Warranty Guarantee
• Shipping Guarantee
• Guarantee Against Foreign Bank’s Counter Guarantee
• Advance Payment Guarantee
• Customs and Excise Guarantee

Forex and Fund Management

• All sorts of Dealing Room Operation

Foreign Remittance

• Foreign Currency Endorsement
• Issuance and Encashment of Traveler’s Cheque
• Foreign Currency Encashment
• Issuance and Encashment of Foreign Drafts
• Opening of Student File and remittance there against

Treasury

• Treasury Bills
• Treasury Bonds
• REPO
• Reverse REPO
• Money Market Operation

Fund Transfer

• Inter-Branch Money Transfer
• Telegraphic Transfer

Modern Banking Services

• SWIFT
• ATM Service
• Debit Card

Value Added Service

• Locker Service

New Products and Services

• Merchant Banking Services
• ELDORADO EFT System (will be introduced soon)

1. Local Remittance
2. Foreign Remittance

 SWOT ANALYSIS

Rupali Bank Ltd. is a State-owned Commercial Bank. Rupali Bank came into being in 1972 with the integration of Muslim Commercial Bank, Australasia Bank and Standard Bank Ltd. From the very inception of its birth, this Bank, as a prospective bank, has been passing its time through diverse Strengths, Weaknesses, Opportunities and Threats. The present Board, on assuming the responsibility, has identified those strengths, Weakness, Opportunities and Threats the Bank possess for the year 2011 in the following manner and chalked out all plans purely on the basis of the same.

Strengths

1. The Bank has well-arrayed network with 492 branches in rural, semi-urban and urban areas for rendering services throughout the country.
2. The Bank has reputation and tradition for a long time.
3. The Bank has well-acquainted and independent brand.
4. The Bank has sound, reliable and extensive deposit base of long duration.
5. The Bank has worldwide 163 correspondence arrangement and 22 exchange houses through which foreign trade transactions and remittance activities are accomplished.
6. The Bank has a huge number of tested customers.

Weaknesses

1. Lack of long-term business planning
2. Weakness in credit management.
3. Tangle of a huge number of suits.
4. Defaulted loan for a colossal amount.
5. Blocked loan at interest free rate or nominal rate of interest.
6. Weak automation and lack of application of modern information technology.
7. Lack of efficient and experienced officers.
8. Training weakness.
9. Lack of marketing planning.
10. Absence of time suited products.
11. Lack of foreign branches and a limited number of correspondents and exchange houses.
12. Absence of subject related and specialized (such as CA, lawyer, IT Specialist etc.) officers.

Opportunities

1. Branch modernization and automation.
2. Introduction of On-Line banking and delivery of ATM services.
3. Relocation of branches in commercially important locations.
4. Strengthening of marketing activities.
5. Introduction of competitive modern banking products.
6. Expansion of local and foreign remittance business through vast branch network.
7. Introduction of mobile banking service.
8. Introduction of Merchant Banking.
9. Setting up of Mini branches at the outlying areas of the country under ‘Mini Banking’ programme.
10. Expansion of corporate branches.
11. Expansion of AD branches.

Threats

• Competitive State-owned Commercial Bank.
• Competition with private & foreign commercial banks working in Bangladesh.
• Lack of competitive pay & allowances and facilities for the officers/staff.

Credit Management

Conceptual Framework

Credit is general sense means an act of allowing person or persons immediate use of money with payment deferred until an agreed future date

Steps in Credit Operations

1. Client of the bank A/C
2. Receiving loan application
3. Collecting necessary information
4. Credit analysis
5. Taking final decision
6. Preparing documents
7. Sign of agreement and loan disbursement
8. monitoring and supervising the implementation of loan agreement

Considerable factors of sanctioning advances

1. Liquidity
2. Safety
3. Solvency of Client
4. Honesty of Client
5. Profitability
6. Qualities of Security
7. Marketability of Security
8. Business efficiency of client

Two Kinds of Securities followed by Rupali Bank

Primary Security :

Five Cs Approach to follow the Rupali Bank Limited in Loan Sanction :

• Character
• Capital
• Collateral
• Capacity
• Capability

Collateral Security

• Land
• Pledge
• Mortgage
• Hypothecation

Small and Medium Enterprise

Small and medium Enterprise Financing contributes to a positive impact in the economy of the country. In developing countries like Bangladesh, the demand for expanding SME business is increasing day by day. Even the donors are also encouraging to expand the volume of such kinds of business to face the challenge of poverty and to create employment opportunities in the country. Rupali Bank Ltd. also play a vital role in this sector and can help to promote the expansion of SME business in the country.

Activities & Achieving of SME in 2011

• SME circular issued for extending SME
• Publishing loan policy guideline brochures and booklest encompassing the procedure for entrepreneurs seeking loan, loan proposal preparation, sanction and disbursement of SME loan.
• Field level executive and officers have been empowered for approval loan within short time
• Young officers have been trained in SME program and services to proper entrepreneurs
• Formation of SME monitoring cell in all divisional workstation and corporate branches for running SME activities
• In the year 2011 TK 274.52 crore has been disbursed to 2287 clients
• Project supported by Rupali’s SME financing support are supposed to generate 6610 permanent and 3018 temporary employment position
• Successful participation of RBL on several SME fair conducted by NASIB in collaboration with Bangladesh Bank

Target for SME loan disbursement in the year 2012

• The SME sector loan disbursement target set by Rupali’s board for 2012 is taka725 crore
• The plan aim at promoting women entrepreneurs increasing loan distribution to the manufacturing sector and reaching the target through prompt activities financial solvency of the low income peoples alleviate poverty and increase employment with the help of SME
• Strengthening 45 clusters for cluster based financing development of f sustainable and competent opportunities through technology development and expansion development of entrepreneurs experience reducing risk of loan and in general starting from introduction of product development
• Planning for special upgraded training for development of bank officials in the year 2012

There are four Product under SME financing.

These are

• Sahaj Rin
• Sulav Rin
• Businessman Rin
• Majhari (medium) Rin

Sahaj Rin

• Loan facilities up to 2.00 (two) lac
• Proprietorship and partnership firm only included in this scheme
• Loan will be approved by branch manager (But loan information must be furnished by weekend)
• Personal guarantee of a solvent family member and 3^rd party guarantee of an acceptable individual or collateral security of equal value of loan will be taken against this loan.
• A plan about the use of loan will be taken by borrower. And how much worker / employee (Full time or part time) will be employed should be mentioned in this plan.
• Post dated cheques equivalent to loan installment with interest and one cheque covering full loan from borrower.
• Loan processing fee TK= 1000/=(Nonrefundable)
• Trade license, photograph, partnership deed (if applicable) stock report, Income& Expenditure statement will be taken from borrower.
• Term loan (1-3) year by monthly or quarterly installment and exiting rules will be applicable in case of working capital / continuous loan.
• Interest rate 15 % (changeable), 1% rebate in case of regular payment.
• Interest rate 14% in following specialized sectors.
• Solar installation.
• Bio-gas based project.
• Agro – based project.
• Skillness (at least three months Training from government approved institution
  • Women enterprenure can get loan up to10,00,000(ten lac)without any security& interest rate is 14%

Sulav Rin:

• Loan facilities up to 5.00 (five) lac
• Proprietorship & partnership firm included in this scheme. Besides professionals (engineer, doctors, lawyers etc.) will be given priority.
• Inially branch manager will approve and Zonal head will counternigh after verification
• Personal guarantee of a solvent family member and Declaration of asset (equimlent to loan amount) must be given. 3^rd party guarantee of an acceptable individual to Bank will be taken.
• A plan about the use of loan will be taken by borrower. And how much people (full time or part time) will get employment opportunity should be mentioned in plan.
• Post dated cheques equivalent to loan installment with interest and one cheque covering full loan will be taken from borrower.
• Loan processing fee TK = 5000/=(Nonrefundable)
• Trade license, Rupali Bank account, photograph, partnership deed (if applicable) stock report will be taken
• Term loan (1-4) years by monthly or quarterly installment and exiting rules will be applicable in case of working capital / continuous loan.
• Interest rate 15 % (changeable), 1% rebate in case of regular payment.

Interest rate 14% in following specialized sectors.

• Solar installation.
• Bio-gas based project.
• Agro – based project.
  • Female entrepreneur will get 10.00 lac loan facilities under this scheme by complying same formalities.

Business Rin

• Loan facility up to 3 (three) crore.
• Approval authority

• Managing director : Above 30.00 to 3.crore
• DGM (Zonal head): Upto 30.00 lac
• AGM: Upto 20.00 lac
  • Personal guarantee of a solvent family member and collateral security of forced sole Value equivalent to loan.
  • A detailed plan about the objective, uses and payment of loan must be submitted. How much people will get employment opportunity (full time or part time) must be mentioned in this plan.
  • Post dated cheques equivalent to loan installment with interest and one cheque covering full loan will be taken from borrower.
  • Loan processing fee TK = 10000 /= (Nonrefundable)
  • Business license, trade license, Rupali Bank account, photograph, partnership deed (if applicable) Income expenditure statement, stock report, and personal networth statement will be furnished.
  • Interest rate 15 % (changeable), 1 % rebate in case of regular payment
  • Interest rate 14% in following specialized sectors.
• Solar installation.
• Bio-gas based project.
• Agro – based project.

Mazhari (medium) Rin

• Loan facility above 3.00 core to 20.00 core.
• Approval authority – board of directors
• Personal guarantee of a solvent family member and collateral security of force sale value 1:1.25]
• A plan about the objective, use and payment of loan will be taken from borrower. How much people (full time or part time) will work in this project must be mentioned in this plan.
• Post dated cheques equivalent to loan installment with interest and one cheque covering full loan will be taken from borrower.
• Loan processing fee TK = 15000 /=(Nonrefundable)
• Business license, trade license, Rupali Bank account, photograph, partnership deed (if applicable), profit and loss statement, memorandum or article of association, audited balance sheet, financial statement, stock report, and other related paper will be furnished.
• In case of term loan period will be 1 – 5 years by monthly or quarterly installment and in case of working capital, existing rules will be applicable.
• Interest rate 15 % (changeable), 1 % rebate in case of regular payment.
• Interest rate 14% in following specialized sectors.
• Solar installation.
• Bio-gas based project.
• Agro – based project.

Household loan (consumer financing)

People of developing countries like Bangladesh earn low income. They can not purchase household item like TV, refrigeration, Air cular etc. in spite of being necessary. For this reason they cannot improve their life standard. In order to help people specially limited income service holder to buy household item Rupali Bank Ltd. introduce this loan scheme.

Objectives of scheme

• To help people / service holder in buying house item.
• To help people / service holder in improving life standard.

Qualification of applicant

• Employee of government institution, semi government, sector, corporation and autonomous body, state owned commercial banks and insurance company, universities, government college, government school and madrasha , teacher of government primary, member of armed forces (military, BGB, Police and Ansar)
• Besides Executives of NGOs, professional (doctor, engineer, lawyers, chartered accountant, journalist etc.) and business.
• Age of applicant: Age limit will be from 21 to 55 years.

Usages of loan

Only in buying household item- such as refrigerator, TV, DVD, motorcycle, washing machine, ac, sewing machine, personal computer.

Type of household item & highest loan limit

Principles of Borrower Selection

Incase of borrower mentioned in 2.1 serial, personal guarantee of employer/departmental head must be taken, loan proposal will be considered according to their recommendation and guarantee. Personal guarantee from an acceptable person to bank in case of borrower mentioned in 2.2.

Rules of application

Applicant must apply with prescribed bank form mentioning name, address, monthly salary etc. At least 3 quotations of desired articles will be submitted with application. Price of articles will be paid to seller/ supplier through bank draft/cheque/pay order. Cash memo will be in the name of bank and it will be changed in favour of client after realizing payment of bank.

Loan approval power

Security

• Letter of hypothecation and undertaking
• Employer’s undertaking in case of service holder
• DP note $ C.F. 11

Rules

• Installment size should not above 50% of monthly salary
• 1% rebate in case of timely payment
• Any damage or repairing of product must be born by borrower. Registration cost or license of product will be at the expense of borrower.
• Only borrower will be articles/product, he has no right to rent or hand over product without bank permission.

Export financing

An exporter requires finance at two stages, namely-

• Pre – shipment stage &
• Post – shipment stage

We may classify export finance into two categories

• Pre – shipment credit &
• Post – shipment credit

Pre-shipment Credit

Pre – shipment credit, as the name suggests, is given to finance the activities of an exporter prior to the actual shipment of goods for export. The purpose such credit is to meet working capital needs starting from the point of purchasing of raw materials to transportation of goods for export to foreign country. Before allowing such credit to the exporters the Bank takes into consideration the credit worthiness export performances of the exporters, together with all other necessary information required for sanctioned the credit in accordance with the existing rule sand regulations. Pre – shipment credit is given for the following purposes:

• Cash for local procurement and meeting related expenses
• Procuring & Processing of goods for export
• Packing & transporting of goods for export
• Payment of Insurance Premium
• Inspection fees
• Freight charges etc.

An exporter can obtain credit facilities against lien on the irrevocable, confirmed, and unrestricted export letter of credit.

Pre – shipment credit takes the following forms

• Export cash credit (Hypothecation)
• Export cash credit (Pledge)
• Export cash credit against trust receipt.
• Packing credit
• Back to back letter of credit
• Credit against Anticipatory letter of credit

Export cash credit (Hypothecation)

Under this arrangement a credit is sanctioned against hypothecation of the raw materials or finished goods intended for export. Such facility is allowed to the first class exporters. As the Bank has got no security in this case, expect charge documents and lien of export L / C contact, Bank normally insists on the exporter in furnishing collateral security. The letter of hypothecation creates a charge against the merchandise in favor of the Bank but neither the ownership not the possession is passed to it.

Export cash credit (Pledge)

Such credit facility is allowed against pledge of exportable goods or raw materials. In this case cash credit facilities are extended against pledge of goods to be stored in go – down under Bank’s control by singing letter of pledge and other pledge documents. The exporter surrenders the physical possession of the goods under Bank’s effective control as security for payment of Bank dues. In the event of failure of the exporter to honour his commitment, the Bank can sell the pledge merchandise for recovery of the advance.

Export cash credit against trust receipt

In this case, credit limit is sanctioned against trust receipt (T. R.).In this case also unlike pledge, the exportable goods remain in the custody of the exporter. He is required to execute a stamped export trust receipt in favor of the Bank. Where in a declaration is made that goods purchased with financial assistance of Bank are held by him in trust for the bank. This type of credit is granted when the exporter wants to utilize the credit for processing, packing & rendering the goods in exportable condition when it seems that exportable goods cannot be taken into Bank’s custody. This facility is allowed only to the first class party and collateral security is generally obtained in this case.

Packing Credit

In this case credit facilities are extended against security of railway receipt/ steamer/receipt/barge receipt/ truck receipt evidencing transportation of goods to the port for shipment of the goods in addition to the usual charge documents and lien of export letter of credit. This type of credit is sanctioned for transitional period from dispatch of the goods till negotiation of the export documents. The drawings under export cash credit limit are usually adjusted by drawings in packing credit limit which is in turn liquidated by negotiation of export documents.

Back to back letter of credit:

Under this arrangement the bank finances export business by opening a letter of credit on behalf of the exporter who has received a letter of credit from the overseas but is not actual manufacturer or producer of the exportable goods. The letter of credit is opened in favor of the producer or supplier within or outside of the country. Since the letter of credit is opened on the strength of and of and backed by another letter of credit it is called “Back to Back credit”. The need for the Back to Back credit arise the beneficiary of the original (export) letter of credit  may have to procure the goods from the actual producer who may not supply the goods unless its payment is guaranteed by the bank in form of  letter of credit collateral security before opening the letter of credit. The back to back letter of credit must conform the terms and conditions of the original letter of credit with the following exceptions:

1. Names of the original beneficiary shall be submitted by that of the actual supplier.
2. The credit amount shall normally be lower than that of the original letter of credit, the difference being the amount of profit the exporter exports to earn from the deal.
3. The back to back letter of credit shall be made valid for shipment and negotiation prior to expiry of the corresponding date.

Advance against Anticipatory letter of credit (Red Clause L / C)

Under Red clause letter of credit, the opening bank authorizes the Advising bank / negotiating bank to make advance to the beneficiary prior to shipment to enable him to procure his exportable goods in anticipation of his effecting such authority is printed / typed in red ink and in green ink on the top of the L/C is called Red clause L/C.

The following documents papers are usually called for depending on the nature of the export credit facility to be provided at the Pre – shipment stage:

• Lien on confirmed irrevocable and unrestricted letter of credit from a first class Bank.
• Letter of Hypothecation duly stamped
• Letter of pledge duly stamped
• Detailed stock statement duly verified by Bank officials
• Insurance coverage under Bank mortgage clause
• Letter of disclaimer to be signed by the owner of the go – down in case of rented go – down
• Documents of little to goods
• Trust Receipt
• Export Credit Guarantee Scheme
• Export from duly signed by the exporter
• EPC / ERF duly certified by Bangladesh Bank
• Change and other documents, if any

Post Shipment Credit

This type of credit refers to the credit facilities extended to the exporters by commercial banks of the goods against export documents. Necessity for such credit arises as the exporter can not afford to wait for a long time for payment to local manufacturers/ suppliers. Before extending such credit, it is necessary to obtain report on creditworthiness the exporters and financial soundness of the buyers as well as other relevant documents connected with the export in accordance with the rules and regulations in force. Banks in our country extend post-shipment credit to the exporters through:

1. Negotiation of Documents under L/C.
2. Purchase of DP & DA bills.
3. Advance against Export Bills surrendered for collection
4. Negotiation of Documents under L/C

Under this arrangement, after the goods are shipped, the exporter submits the concerned documents to the negotiating bank for negotiation. The documents should be negotiated strictly in accordance with the terms and conditions and within the period mentioned in the letter of credit.

Purchase of DP &DA bills.

In such a case, the banks purchase/ discount the DP (Documents against payment) and DA (documents against Acceptance) bills at rate published by the Exchange Rate Committee of authorized dealers. While doing so, the Bank should scrutinize all the export documents separately and minutely and clear instructions are to be obtained from the drawer of the bill in regard to all important issues related to the negotiation of the bills.

Advance against Export Bills for collection

Banks generally accept export bills for collection of proceeds when they are not drawn under a L/C or when the document, even though drawn against an L/C contains some discrepancies. Bills drawn under L/C, without any discrepancy in the documents, are generally negotiated by the bank and the export gets the money from the bank immediately. However, if the bill is not eligible for negotiation, he may obtain advance from the banks against the security of export bills. Banks may give advance ranging from 50 to 80 percent of the document’s value. In addition to the export bills, banks may ask for collateral security like a guarantee by a third party and equitable/ registerd mortgage of property. Rate of interest 8%

Import Financing

One of the important functions of the commercial banks in the world is to undertake import of merchandise into the country and payment of foreign exchange towards the cost of the merchandise to foreign suppliers. In such an international trade, because of distance involved, buyers and sellers do not know each other. Therefore, assure these things to happen simultaneously by opening letter of credit guaranteeing payment to seller and goods to buyer.

While opening letter of credit at the request of buyer, bank normally examines:

• Buyer’s creditworthiness.
• Import Trade Regulations.
• Exchange Control Regulations.

Supplier’s Creditworthiness Report.

• Marketability of goods.

The buyer must submit the following papers at the time of opening a letter of credit.

i) L/C application (a guarantee executed by third party is also insisted)

ii) Import License/ Import Authorization from or Import Registration certificate as the case may be.

1. Indent/ Performa Invoice.
2. Insurance Cover Note.
3. IMP form and other documents/ papers etc.

Payment against documents (PAD)

The negotiating bank, on receipt of the shipping documents from the exporter, scrutinizes the documents to ensure that they are in strict conformity with the terms of L/C. If the documents are in order, the payment is effected by the negotiating Bank to the beneficiary (exporter) and debit the opening Bank’s account with it or claim reimbursement from the designated / reimbursing bank as instructed by the opening bank and in fact, the amount so debited or lodging claim for  reimbursement stands advanced on behalf of the importer. The shipping documents along with debit advice are thereafter forwarded to the opening bank by the designated / reimbursing bank.

If the shipping documents are found in order, the opening bank will lodge the documents to their book by converting the foreign currency representing the bill and foreign correspondent charges etc., and will respond to the debit entry originated there against by the designated / reimbursing bank to the debit of “Payment Against Documents (PAD)” account or “Bill of Exchange (B / E)” account as the case may be and an intimation is sent to the importer asking him to retire the import bills immediately sending there with a cost memo indicating the amount payable by the importer under different heads.

Thus, liability under the letter of credit is converted to bank’s advance. It is a prac ice to allow the importer to retire the documents till the ship carrying the goods arrives. Normally, ontstanding under PAD should not take more than 21 days for adjustment. If the importer retires the import bill against payment, the transaction ends there and the outstanding under PAD stands liquidated.

Loan against Imported Merchandise (LIM)

At the time of opening the letter of credit the banks obtain from the importer an agreement on stamped paper which provides for financing and, if necessary, clearance and storage of goods by debiting importer’s account at his risk and responsibility.

Importer may also request the bank on bank’s prescribed form for clearance of goods from the port when the consignment arrives. In most of the cases, banks extend credit facility to the importer for retirement and clearance of the consignment. In that case, the bank recovers further margin from the importer to cover the customs duty, sales tax or VAT etc. A definite repayment schedule is also given to the importer to take delivery of the goods from bank’s custody against payment.

In case the importer does not come forward to retire the documents inspite of repeated reminders, it is in the interest of the credit issuing bank to take proper care of the goods and, on forced circumstances, clear the imported consignment on arrival of the same for fear of heavy demurrage at the which adds to the burden of commitment.

In both the cases, whether the importer requests the bank for clearance of goods or fails for retirement of documents against payment, the liabilities under PAD or B/E is converted to “Loan against Imported Merchandise (LIM) account” and the overdue interest from the date of accompanying Bill of Exchange or negotiation date to the date of transfer to LIM liability.

The advances against merchandise account is a loan account and only amounts for clearance charges , such as, customs duty, sales tax or VAT etc., are allowed to be debited to LIM account.

After clearance, consignments are stored in bank’s go – down under its effective control waiting for taking delivery by the importer on full payment of bank’s liability. Normally part delivery is not allowed while on LIM account. When the delivery in part is desired by the importer, the LIM is converted into Cash Credit account retaining proper margin and executing proper charge documents. The delivery is effective there after on obtaining pro rata payment till adjustment of the entire liability.

Rate of interest 14%

Documents

1. Demand promissory note
2. Letter of continuity
3. Letter of agreement of opening letter of credit
4. Letter of Lien
5. Letter of indemnity (in case of clearance of consignment)
6. Letter of guarantee

House Building Loan

Principles of selection of borrower

• Individuals, partnership firm, public & private Ltd. company will be eligible for receiving such loan for the purpose of general house building (Residential ), commercial house building , residential cum commercial house building, Flat house building for sale & for buying flat.
• Minor will not be eligible for this loan.
• Applicant must be owner of land and client of bank.
• Land location should be in City Corporation or in any commercial place.
• If land is allotted by RAJUK or any divisional development authority, approval letter should be taken by such authority for giving registered mortgage in favor of bank.
• There should be at least 12 feet road and connection with proposed building. And utility facilities (eg. Electricity, gas, water supply) must be available.
• The area of land must be at least 2 katha (3.30 decimal) and proposed land must be viti.
• Application for Extension of old building can also be accepted if previous construction is strong.
• In case of married borrower his wife or her husband must be guarantor.
• Approved design of house by authority, approval letter for house building, estimated cost of house and expected sent for house and other related paper should be enclosed with loan application.

Disbursement mode

At least four installments in case of residential house building. One time payment  through pay order in case of flat buying. Before Dishousement of every installment, progress report from branch manager and engineer about proposed house building must be kept in loan file.

Rebate: 1.50% on interest if all installments are paid within stipulated time.

Student loan

The purpose of this loan is to co-operate student specially those who want to study abroad .They (student or Guardian) need bank solvency certificate in studying abroad.

Qualification for applicant

• Student who is willing to study abroad, they are qualified to get this loan.
• Applicant must be resident of Bangladesh.
• Applicant must be student.
• Admission seeking student should possess qualification according to requirements of foreign Universities/Colleges.

Rules of application

• Application in white paper with resent two photographs should be taken.
• Offer letter from foreign Universities/Colleges with other related papers will be taken.
• All educational certificates with passport.
• Statement of education expenditure.
• Photocopy of national ID card.
• Character certificate from local authority.
• Applicant must have a saving s account in related Bank branch and money of 15% margin must be deposited.

Loan limit

• Highest 30.00 lac under 15% margin
• Rate of interest – 13% (changeable)
• Period of loan: Highest 6(six) months. Not renewable.

Securities of loan

• CF, 1, 11, 19 should be taken before loan disbursement.
• Money of loan with margin must be deposited in saving account. This account should be under lien. Letter of lien must be taken from applicant.
• After expiry loan will be adjusted by debiting saving a/c.
• Letter of lien, letter of agreement and letter of authority must be taken with consulting legal adviser.

Conditions

• No other student can apply for this loan without abroad going student.
• No Cheque Book will be issued in lien savings certificate.
• To serenities whether all conditions are met according to offer letter.
• Approval authority of loan: Branch manager.

The Recovery system of credit

Rupali Bank Considers the Following Criteria to recover the credit from the client :

Business loan :

At first Rupali Bank finds out a good borrower in loan sanction.

Primary Security : five Cs Approach to follow the Rupali bank. Such as :

• Character
• Capital
• Collateral
• Capacity
• Capability

Next Rupali Bank is taken another steps in loan sanction

• Commodity of business
• Size of business
• Age of business
• Business out Look
• Industry growth
• Market competition

Collateral Security :

• Land
• Pledge
• Mortgage
• Hypothecation

In this Stage the Rupali Bank is taken to examine the good securities features. Such as :

1. Acceptability
2. Marketability
3. Liquidity
4. Ownership
5. Price
6. Stability of price
7. Non-encumbrance
8. Quality and possession

b) House Building loan

Security :

• In case of Married Borrower his wife or husband must be guarantor
• Approved design of house by authority
• Approval Letter for house building
• Original Deed of Building
• Power of deed
• Registered of deed is prepared for bank name

c) Household loan

Security :

• Account of the client
• Letter of hypothecation
• DP Not $ C.F.II

d) Student Loan

Security :

• Account of the client
• CF, 1,11,19 should be taken before loan disbursement
• Letter of lien
• Letter of agreement
• Letter of authority must be taken with consulting legal adviser.

e) Financial Risk management :

• Leverage
• Liquidity
• Profitability
• Coverage

f) Relationship Risk Management

• Personal deposits
• account conduct
• Utilization of limit

Findings

From general point of view, I gathered a lot of experiences in credit management system of banking while working at Rupali Bank Limited as an intern :

• Worked in a corporate environment and interacted with employees from different hierarchies
• Gained ability to interact with client of the bank
• Rupali Bank has already established a favorable reputation on the banking industry of the country. It is one of the leading nationalized sector commercial bank in Bangladesh. The bank has already shown a tremendous growth in the profit.
• Loan facilities are very attractive for the employees
• The bank is highly liquid and earns much profit on advances
• The interest of banking loan is 16%
• The loan interest is very high than other banking sector.
• Loan department is very careful to sanction any loan. so they have taken more security.
• Loan department uses their own lawyer to justify the Land, Place and Deed of building
• Rupali bank has own training institute for its employees, so that they don’t require to train them from other training institutions.
• Rupali bank has 452 branches which have Ad licenses. As a result it total foreign exchange business is very large in respect of total market.
• The most number of branches is sufficient to cover credit management system
• Loan recovery system is very fast than other banking sector.

lengthy process. The record keeping system is also backdated, not followed computerized system properly. The transfer and promotion process is fair but the promotion is not faster. Loan facilities are very attractive to the employees of Bangladesh bank. The employees of outside of head office deprive of foreign training facilities only 10 to 15 percent employees can get the opportunities of foreign training.

On the other hand we have seen that the bank profit increasing rate is poor but increasing. The bank is highly liquid and earns much profit on owner’s equity. Bank’s operating efficiency is good. EPS is increasing  every year. Earning spread is also increasing.

So after all we can say that as a nationalized bank commercial bank Rupali Bank Limited is a bank earning better.

Recommendations

• The Top management of Rupali Bank Limited should be more effective to the employee then current situation. Because they should take care the branch level employee’s benefits, opportunities etc.
• The bank has highly skilled employee in the branch level. But the bank should be able to utilize these employees at appropriate way to take out the bank’s output.
• The website design is need to improve. Therefore, the website should be changed and can put more information about the bank. The existing design cannot capture the customer’s attention.
• The cheque’s design is poor. The good looking cheque design can motivate the customer.
• The human resource division can be more effective. Because this human resource department should think about the employee benefit much.
• In the training institute, the training process should be used latest technology to provide to the trainee. The bank should give training about the office package, basic idea on computer and internet.
• The higher management should be more effective about the employee, to take right strategy, right decision making.
• In the branch level employee is working so many extra time, so management should provide some extra incentives to motivate the employee.
• On-line banking is coming soon so the responsible employee should be trained effectively.
• The training evaluation process and form is to be more modernized.
• Infrastructure should be modernized.

Conclusion

As a bank Rupali Bank Limited has to do a lot of things for the betterment of the country. The Bank is strongly positioned in the market and with its core strengths it can match shareholders’ expectations and thus raise their wealth in future through ethical banking and best pricing. Thus, it has to take initiative so that it can fulfill the desire of the govt. as well as people. It will enhance more public services and build up working teams to provide the best services to its valuable customers. It must be run in organized way and discipline must be ensured in all sphere of its performance. Efficient export team, import team and remittance team must be formed and perform duties properly. More training, computerization, data collection, market analysis and swiftness in servicing are essentially required. To do these the recommended suggestions can be used. Although it is theoretical suggestions, it is not valueless. It has great impact on the banking business and other sectors of the economy. For this, govt. help is essential and it is expected that govt. will broaden its hand for implementing the recommendations for the welfare of the people of Bangladesh.