Report on Credit Management Procedure of Uttara Bank

Introduction

Dissertation program is the practical aspect of our theoretical learning. It makes a bridge between the gap of classroom learning and practical learning. In this view, Internship plays a pivotal role for each professional degree like MBA. The study will help formulate suitable policies taking into consideration different ideas, suggestions and feelings of the customers and bankers. Further more, it may note that Uttara Bank executives who are really executing the policies undertaken by the top management will have a chance to communicate their interaction and provide necessary feedback.

Financial institutions are very much essential for the overall development of a country. Especially banks play an important role in the field of promotion of capital, encouragement of entrepreneurship, generation of employment opportunities etc. Market economy or free economy is widely used-concept about the present economy of Bangladesh. The country adopted the concept in the late seventies with the privatization of significant number of enterprises. The practices of free market economy started from the eighties with the changing of the world economy. A number of initiatives were taken from the nineties to increase the competition and efficiency in money market, relaxation of unwanted rules and regulations, improvement of loan related law and other situations and improve the financial base of the banks of the country.

Origin of the Report

Now we are living in the age of competition at anything in any places. From that tendency recently Education is also in the age of competition. So different universities and institution in our country upgrade the procedures and standards of teaching. In respect to that, Dissertation is mandatory for our MBA program offered by Asha University of Bangladesh. This program is a partial fulfillment of our MBA curriculum. To do so I decided to complete my Dissertation in Uttara Bank Limited.

Rationality of the Study

Due to the increased competition of the increased number of commercial banks and the growing economy, the expectations of the customers have also increased than ever before. Realizing the present condition, banks, especially the commercial banks are trying to elevate their banking service as much as reachable to their customers. The most serious difficulty facing the financial sector is the high level of interest rate and inflation rate. So it is the duty of the top management of the commercial banks to work with the situation.

Benefits to the Institution through this Report

The Institution will get an overall picture on credit management of the bank through this report. It may take steps to overcome its shortages or weakness; at the same time it may explore the opportunities it does have.

Specific Objectives of the Report

Objectives regarding this study are as follows:

• To fulfill academic requirement
• To gain practical knowledge in banking
• To compare UBL credit management with Bangladesh Bank’s standards
• To make a general evaluation of UBL activities among different professionals
• To find out the real picture of UBL in terms of disbursement and collection process of loans and advances
• To get an overview of the private Banking in our country
• To identify major strength and weakness of UBL in respect to other Banks
• To analyze the different type of interest rates and ratios of UBL with other Banks
• To assess and evaluate the growth trends on UBL among other Banks
• To recommend ways and means to solve problems regarding credit management

Scope of the Study

Uttara Bank is one of the largest commercial Banks in Bangladesh. Uttara Bank operates through 207 branches. It is linked with 686 foreign correspondents all over the world. I am assigned to learn practical knowledge from Uttara Bank Limited. In this study I would try to concentrate on the theoretical aspect of credit management, that is, the definition of credit policy, fund investment by Uttara Bank Limited, loan disbursement procedure, recovery performance, classified loans & Bank’s performance and Evaluation of credit management by customers of Uttara Bank Limited. I would analyze the data on the bank and various programs for credit disbursement, classified loan and guidelines for credit management.

So, this report covers only “Credit Management of Uttara Bank Limited”. Especially this report emphasizes on the disbursement procedure, recovery performance, classified loans & Bank’s performance, in a word loans and advances handled by the bank.

Limitations of the Study

To prepare a report on the topic like this in a short duration is not easy task. In preparing this report some problems and limitations have encountered which are as follows:

a)      The main constraint of the study was insufficiency of information, which was required for the study. There are various information the bank employee cannot provide due to security and other corporate obligations.

b)     As the data, in most cases, are not in organized way, the bank failed to provide all information.

c)      Due to time limitation, many of the aspects could not be discussed in the present report.

d)     Since the bank personnel were very busy, they could not pay enough time.

e)      Lack of opportunity to access to internal data.

f)       I had to base on secondary data for preparing this report.

g)      Legal action related information was not available.

h)     All the clients whom I interviewed did not want to provide necessary information.

Introduction

Bank is an establishment which makes such advances of money to individual, as may be required with which individuals entrust money when not required by them for use. A bank is one, who in the ordinary course of his business receives money, which he repays by honoring cheques of persons from whom or on whose account he receives it. Banks deal mainly with money and credit. They purchase and sell money and credit.

Evolution of the word “Bank”  

Etymology deals with the roots and origin of the word ‘bank’. Regarding etymology or origin of the word bank there is no unanimous opinion among the writers of banking. According to some writers the word bank derived from the word BANCO, BANCUS, BANQUE, and BANC, all of which mean bench upon which the early bankers used to display their coins and transact business in the market place.

According to the some other writers the word ‘bank’ has been derived from the German word ‘BANKE’ which means a joint stock fund. The 1^st version is widely accepted because at one time the banking history, money changing was looked upon as the most widely accepted function of a banker. Banking in the ancient times was largely confined to money changing and money lending.

Emergence of Modern Banking

In middle Europe the bankers of Lombardy were very famous. To them belongs the credit of modern banking. In other words they planted the seed of modern banking in England. They settled in London at a place known as Lombard Street.

Florence was the capital of Lombardy. Lombardy was a province in North Italy. Most of the prominent bankers of there present were from Lombardy. Among those prominent bankers we can named one who were famous not only in banking but also in political history in Europe. These Lombardy people were very much disturbed in 13’s by internecine work which was followed by plunder by Kaiser Frederick two.

Lombardy people in large number as a result started migrating to more settled countries such as England, French, and Belgium. In England these Lombardy people brought the idea of modern banking and thus England becomes the home of modern banking.

Bank Development in Bangladesh

Indigenous banking in Bangladesh is as old as banking in other parts of the world. Money used to be accepted as a deposit and advances used to be given. During Mughal period, indigenous banking flourished. The subarna banik the bullion trading community used to do banking in the then Bengal. Subsequently, larger banking in Bangladesh was gradually taken over by the upcountry bankers who were known as Seth, shah etc. but subarna baniks continued to operate in rural Bengal. With the British gradually coming over to Bengal and settling here, banking in the form of agency house, exchanging house started to flourish in kolkata. Entry of the Bengalese into   banking started in the part of this century, especially in the wake of the swadeshi movement.

In 1947 after the separation of India and Pakistan, bank business faced a severe disaster as non-Muslim bankers migrated to India. In order to rebuild the bank business State bank of Pakistan was established as a central bank of Pakistan in 1948.

In 1971 Bangladesh became independent. After liberation “Bangladesh bank was automated with the asset and liabilities of former “State bank of Pakistan”.  There were several banks before independence of Bangladesh as follows:

(1)                           The National Bank of Pakistan.

(2)                           The Premier Bank Ltd.

(3)                           The Habib Bank Ltd.

(4)                           The Commerce Bank Ltd.

(5)                           The United Bank Ltd.

(6)                           The Union Bank Ltd.

(7)                           The Muslim Commercial Bank Ltd.

(8)                           The Standard Bank Ltd.

(10)                         The Australasia Bank Ltd.

(11)                         The Eastern Mercantile Bank Ltd.

(12)                        The Eastern Banking Corporation Ltd.

Bangladesh Bank nationalization Order promulgated on 26 March in 1972. After the liberation war the above 1^st three banks were converted to The Sonali Bank, The 2^nd two banks were converted to The Agrani Bank, the next two banks were converted toThe Janata Bank, the next three banks were converted to The Rupali Bank, the next one bank was converted to The Pubali Bank and the last bank was converted to The Uttara Bank.

Banks in Bangladesh have correspondent relationship with other banks in foreign countries in order to sell their services or to purchase services from them. A summary picture of the country’s commercial banks is presented in the table on Banks of Bangladesh.

Concluding Note

Today’s banking in Bangladesh has not developed over night. Before and after independence of Bangladesh the concept of banking was developed in Bangladesh gradually. So I can easily say that banking history is as ancient as the human civilization.

Credit Management

As Uttara bank Ltd. is providing credit facility out of its total available funds; it has to manage these credits very efficiently. An efficient credit management system comprises many things and this cover the pre-sanction activities to post-sanction activities. Credit management is important as it helps the banks and financial institutions to understand various dimensions of risk involved in different credit transactions.

At the pre-sanction stage, credit management helps the sanctioning authority to decide whether to lend or not to lend, what should be the loan price, what should be the extent of exposure, what should be the appropriate credit facility, what are the various facilities, what are the various risk mitigation tools to put a cap on the risk level.

At the post-sanctioning stage, the bank can decide about the depth of the review of renewal, frequency of review, periodicity of the grading, and other precautions to be taken.

Having considered the significance of credit risk, it becomes imperative for the banking system to carefully develop credit management. For this reason, the bank is maintaining a division, which is well known as credit division.

Process of Credit Management

Credit Management Policy for any commercial bank must have been prepared in accordance with the Policy Guidelines of Bangladesh Bank’s Focus Group on Credit and Risk Management with some changes to meet particular bank’s internal needs.

Credit management must be organized in such a process that the bank can minimize its losses for payment of expected dividend to the shareholders. The purpose of this process 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 concerned bank.

The guidelines for credit management may be organized into the following sections:

Policy guidelines

a. Lending guidelines
b. Credit assessment and risk grading
c. Approval authority
d. Segregation of duties
e. Internal control and compliance
4.2.2 Program guidelines
a. Approval process
b. Credit administration
c. Credit monitoring
d. Credit recovery
Now the guidelines are discussed in the following:4.2.1 Policy guidelines

a. Lending guidelines: The lending guidelines include the following:

1.  Industry and Business Segment Focus
2.  Types of loan facilities
3.  Single borrowers/ group limits/ syndication
4.  Lending caps
5.  Discouraged business types

As a minimum, the followings are discouraged:

•  Military equipment/ weapons finance
•  Highly leveraged transactions
•  Finance of speculative investments
•  Logging, mineral extraction/ mining, or other activity that is ethically or environmentally sensitive
•  Lending to companies listed on CIB black list or known
•  Counter parties in countries subject to UN sanctions
•  Lending to holding companies.

b. Credit Assessment and Risk Grading:
A thorough credit and risk assessment should be conducted prior to the granting of loans, and at least annually thereafter for all facilities.
Credit Applications should summaries the results of the risk assessment and 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 arrangement
•  Any other risk or issue
•  Risk triggers and action plan-condition prudent, etc.

Risk is graded as per Lending Risk Analysis (LRA), Bangladesh Bank’s Guidelines of classification of loans and advances.
c. Approval Authority:
Approval authority may be as the following:

1.  Credit approval authority has been delegated to Branch Manager, Credit Committee by the MD/ Board
2.  Delegated approval authorities shall be reviewed annually by MD/ Board.

MD/ Board:

1.  Approvals must be evidenced in writing. Approval records must be kept on file with credit application
2.  The aggregate exposure to any borrower or borrowing group must be used to determine the approval authority required.
3.  Any credit proposal that does not comply with Lending Guidelines, regardless of amount, should be referred to Head Office for approval.

d. Segregation of Duties:
Banks should aim at segregating the following lending function:

1.  Credit approval/ risk management
2.  Relationship management/ marketing
3.  Credit administration

e. Internal Control and Compliance:
Banks must have a segregated internal audit/ control department charged with conducting audits of all branches.

Program guidelines

a. Approval process: The following diagram illustrates an example of the approval process:

b. Credit administration: The credit administration function is critical in ensuring that proper documentation and approvals are in place prior to the disbursement of loan facilities.
c. Credit monitoring: To minimized credit losses, monitoring procedures and systems should be in place that provides an early indication of the deteriorating financial health of borrower.
d. Credit recovery: The recovery unit of branch should directly manage accounts with sustained deterioration (a risk rating of sub-standard or worse). The primary functions of recovery unit are:
▪ Determine account action plan/ recovery strategy
▪ Pursue all options to maximize recovery, including placing customers into receivership or liquidation as appropriate.
▪ Ensure adequate and timely loan loss provisions are made based on actual and expected losses.

Tools of Credit Management

For credit management, a firm may use tools available to them. Such tools include Credit Risk Grading (CRG) and Financial Spread Sheet (FSS). Credit risk grading is an important for credit risk management as it helps the banks and financial institutions to understand various dimensions of risk involved in different credit transactions. The aggregation of such grading across the borrowers, activities and the lines of business can provide better assessment of the quality of credit portfolio of a bank or branch.

The Lending Risk Analysis (LRA) manual introduced in 1993 by the Bangladesh Bank has been in practice for mandatory use by the banks and financial institutions for loan size of BDT 1.00 crore and above. However, the LRA manual suffers from a lot of subjectivity, sometimes creating confusion to the lending bankers in terms of selection of credit proposals on the basis of risk exposure. Meanwhile in 2003 end, Bangladesh Bank provided guidelines for credit risk management of banks wherein it recommended, interalia, the introduction of Risk Grade Score Card for risk assessment of credit proposals.

Bangladesh Bank expects all commercial banks to have a well-defined credit risk management system, which delivers accurate and timely grading. In practice, a bank’s credit risk grading system should reflect the complexity of its lending activities and the overall level of risk involved.

Definition of Credit Risk Grading (CRG)
◘ The Credit Risk Grading (CRG) is a collective definition based on the pre- specified scale and reflects the underlying credit-risk for a given exposure.
◘ A Credit Risk Grading deploys a number/ alphabet/ symbol as a primary summary indicator of risks associated with a credit exposure.
◘ Credit Risk Grading is the basic module for developing a Credit Risk Management system.

Functions of Credit Risk Grading (CRG)
Well-managed credit risk grading systems promote bank safety and soundness by facilitating informed decision-making. Grading systems measure credit risk and differentiate individual credits and groups of credits by the risk they pose. This allows bank management and examiners to monitor changes and trends in risk levels. The process also allows bank management to manage risk to optimize returns.
Use of Credit Risk Grading
◘ The Credit Risk Grading matrix allows application of uniform standards to credits to ensure a common standardized approach to assess the quality of individual obligor, credit portfolio of a nit, line of business, the branch or the bank as a whole.
◘ As evident, the CRG outputs would be relevant for individual credit selection, wherein either a borrower or a particular exposure/ facility is rated. The other decisions would be related to pricing (credit-spread) and specific features of credit facility. These would largely constitute obligor level analysis.
◘ Risk grading also be relevant for surveillance and monitoring, internal MIS and assessing the aggregate risk portfolio level analysis.

Number and short name of grades used in the CRG

The proposed CRG scale consists of 8 categories with short names and numbers are provided as follows:

Grading Short Name Number
Superior SUP 1
Good GD 2
Acceptable ACCPT 3
Marginal/ Watch list MG/ WL 4
Special Mention SM 5
Sub Standard SS 6
Doubtful DF 7
Bad and Loss BL 8

Financial Spread Sheet in Credit Management

1. Financial Spread Sheet provides a quick method of assessing business trends and efficiency
▪ Assess the borrowers ability to repay
▪ realistically show business trends
▪ Allow comparisons to be made within industry

2. Borrowers that provide Financial Spread Sheets are more likely to be good borrowers
• At two of the client banks the FSRP consultants could not find 10 bad loans with 3 consecutive years of financial statements available.
• Out of 25 good loans reviewed by the FSRP consultants, at two of the client banks, 3 consecutive years of financial statements were available on all of them.
• The willingness of the customer to provide detailed financial information and to answer question regarding that information, is indication of the cooperation the bank will receive in the future.

3. A Financial Spread Sheet is an important tool in a discipline of organized approach to credit analysis.

4. The historic financial reports of a company are a primary indicator of its future financial position. Spreadsheets allow proper analysis of financial statements.

Definition of Credit Policy

Policy entails projected course of action. Uttara Bank has its own policy granting credit although credit is always a matter of judgment applying common sense in the light of one’s experience.

A sound credit policy includes among other things safety of funds invested vis-à-vis profitability of the bank. Encouraging maximum number of small loans is better than concentration in a particular type of advances, which ensures sufficient liquidity with least incidence of bad debts.

It has to be borne in mind that a good loan allowed to a properly selected borrower is half collected. In order to make a good loan there should have a good loan policy.

Purposes of Credit Policy

There are some objectives behind a written credit policy of Uttara Bank Ltd. that are as follows:

1.  To provide a guideline for giving loan.
2.  Prompt response to the customer need.
3.  Shorten the procedure of giving loan.
4.  Reduce the volume of work from top-level management.
5.  Delegation of authority of work from top level of management.
6.  To check and balance the operational activities

Formulation of a Credit Policy

One of questions that should arise in a discussion of credit is who should formulate the policy. Although the ultimate responsibilities lay at the highest level in the organization i.e. the board of directors. Yet the actual drafting shall have to be done by the senior lending office in consultations with the chief executive officer and with contribution from senior officers, associates and subordinates. Obviously the level of origin will vary with the size and structure of the organization. The matter then referred to the board for approval after careful examination consideration and discussion.

Essential Components of a Sound Credit Policy

There can be some variations based on the needs of a particular organization, but at least the following areas should be covered in any comprehensive statement of credit policy and Uttara Bank’s policy also covers these areas:

1. Legal consideration: The bank’s legal lending limit and other constraints should be set forth to avoid inadvertent violation of banking regulations.
2. Delegation of authority: Each individual authorized to extend credit should know precisely how much and under what conditions he or she may commit the bank’s funds. These authorities should be approved, at least annually, by written resolution of the board of directors and kept current at all times.
3. Types of credit extension: One of the most substances parts of a loan is a delineation of which types of loans are acceptable and which type are not.
4. Pricing: In any profit motivated endeavor, the price to be charged for the goods or services rendered is of paramount without it, individuals have few guidelines for quoting retag or fees, and the variations resulting from human nature will be a source of customer dissatisfaction.
5. Market Area: Each bank should establish its proper market area, based upon, among other things, the size and sophistication of its organization its capital standpoint, defining one’s market area is probably more important in the lending function than in any other aspect of banking.
6. Loan Standard: This is a definition of the types of credit to be expended, wherein the qualitative standards for acceptable loans are set forth.
7. Credit Granting procedures: This subject may be covered in separate manual, and usually is in larger banks. At any rate, it should not be overlooked because proper procedures are essential in loan establishing policy and standards. Without proper procedure for granting credit and constant policing to ensure that these procedures are meticulous carried out, the best conceived loan policy will not function and inevitable, problems will develop.

Lending Guidelines

The bank has a rate of non-performing loans. Banks risk taking applied should be contained and our focus should be to maintain a credit portfolio keeping in mind of bank’s capital adequacy and recovery strength. Thus bank’s strategy will be invigorating loan processing steps including identifying, measuring, containing risks as well as maintaining a balance portfolio through minimizing loan concentration, encouraging loan diversification, expanding product range, streamlining security, insurance etc. as buffer again unexpected cash flow.

Focus on Industry and Business Segment

Industry segment focuses on Textile, Pharmaceuticals, Agro-based, Food and allied, Telecommunication, Power generation and distribution, Health care, Entertainment Services, Chemicals, Transport, Infrastructure development, Linkage industry, Information technology, Ceramics, Others as decided from tome to time. And business segment focuses on Distribution, Brick field, Rice mill/ flour mill/ oil mill, Work order, Yarn trading, Cloth merchant, Industrial spares, Hardware, Electronic and electrical goods, Construction materials, Fish trading, Grocery, Wholesale/ retail, Others as dedicated from time to time

Types of Credit Facilities: Bank will go for

• Term financing for new project had BMRE of existing projects (large, medium, SME).
•  Working capital for industries, trading services and others (large, medium, SME).
•  Trade finance for import and export
•  Lease finance
•  Small loan for traders, micro enterprise and other productive small venture.
•  Consumer finance
•  Fee business

Evaluation of credit management of Uttara Bank Ltd. from the customers’ point of view

During of my dissertation period in Uttara Bank Ltd. I asked a number of customers regarding the credit management of the bank. The interpretation of the data (at a glance) is given below:

Subject of asking questions:

1.         Image of the Uttara Bank Ltd. to the customers is satisfactory.

2.          Bank’s relation with customers is good.

3.         The formalities followed by the bank-providing loan are necessary.

4.          The processing of providing loan is quick.

5.        The bank keeps customers informed about when loans and advances are provided.

6.        The bank’s authority tries to provide its services at the same time it promises to do                                                 so.

7.          You feel safe in your loan-transaction with UBL.

8.          When problems arising from loan facilities the UBL authority shows sincere concern                                 on it.

9.          The terms and conditions are flexible regarding loan sanction.

10.       The loan interest rate is competitive

11.       The amount of security against loan amount is tolerable.

12.       Circumstances arising from loan default are strict.

Total number of sample is 20 in every subject.

In this table all the attributes are having specific points.

  The table ratings are as follows:

Image of Uttara Bank to the customer is satisfactory

Source: survey of primary data

Calculation:

Total points = 10*5+60*4+20*3+10*2+0*1 = 370

The weighted average is 370/15 = 24.67

Interpretation of the data:

In the point “Image of the Uttara Bank to the customers is satisfactory”, 10% of the sample customers strongly agree, 60% agree, 20% neutral, 10% disagree with this.

Bank’s relation with customers is good

Source: survey of primary data

Calculation:

Total points = 15*5+70*4+10*3+5*2+0*1 = 395

The weighted average is 395/15 = 26.33

Interpretation of the data:

In the point “Bank’s relation with customers is good” as answer of this question, 15% of the sample customers strongly agree, 70% agree, 10% neutral and 5% disagree with this.

The formalities followed by the bank-providing loan are necessary

Source: survey of primary data

Calculation:

Total points = 10*5+30*4+50*3+10*2+0*1 = 340

The weighted average is 340/15 = 22.67

Interpretation of the data:

In the point “The formalities followed by the bank providing loan are necessary” as answer of this question, 10% of the sample customers strongly agree, 30% agree, 50% neutral, 10% disagree with this.

The processing of providing loan is quick

Source: survey of primary data

Calculation:

Total points = 0*5+10*4+20*3+60*2+10*1 = 230

The weighted average is 230/15 = 15.33 

Interpretation of the data:

In this point “The processing of providing loan is not quick” as answer of this question, 10% of the sample customers agree, 20% neutral, 60% disagree, and 10% strongly disagree with this.

The bank keeps customers informed about when loans and advances are provided 

Source: survey of primary data

Calculation:

Total points = 0*5+20*4+70*3+10*2+0*1= 310

The weighted average is 310/15 = 20.67

Interpretation of the data:

In the point “The bank keeps customers informed about when loans and advances are provided” as answer of this question, 20% of the sample customers agree, 70% neutral, and 10% disagree with this.

The bank’s authority tries to provide its services at the same time it promises to do so

Source: survey of primary data

Calculation:

Total points = 5*5+25*4+60*3+10*2+0*1 = 325

The weighted average is 325/15 = 21.67

Interpretation of the data:

In the point “The bank’s authority tries to provide its services at the same time it promises to do so” as answer of this question, 5% of the sample customers strongly agree, 25% agree, 60% neutral, and 10% disagree with this.

You feel safe in your loan-transaction with Uttara Bank Limited 

Source: survey of primary data

Calculation:

Total points = 20*5+70*4+10*3+0*2+0*1= 410

The weighted average is 410/15 = 27.33

Interpretation of the data:

In the point “You feel safe in your loan-transaction with Uttara Bank Limited” as answer of this question, 20% of the sample customers strongly agree, 70% agree, and 10% neutral with this. 

When problems arise from loan facilities, the UBL authority shows sincere concern on it 

Source: survey of primary data

Calculation:

Total points = 10*5+20*4+55*3+15*2+0*1=325

The weighted average is 325/15 = 21.67

Interpretation of the data:

In the point “When problems arise from loan facilities, the UBL authority shows sincere concern on it” as answer of this question, 10% customer strongly agree, 20% agree, 55% neutral, and 15% disagree with this.

The terms and conditions are flexible regarding loan sanction

Source: survey of primary data

Calculation:

Total points = 0*5+80*4+20*3+0*2+0*1 = 380

The weighted average is 380/15 = 25.33 

Interpretation of the data:

In the point “The terms and conditions are flexible regarding loan sanction”, as answer of this question, 80% of the sample customers agree and 20% neutral with this.

The loan interest rate is competitive

                                                                                                                                                                                                                                                                                                                                                                                                                                                Source: survey of primary data

Calculation:

Total points = 25*5+70*4+5*3+0*2+0*01= 420

The weighted average is 420/15 = 28 

Interpretation of the data:

In the point “The loan interest rate is competitive” as answer of this question, 25% of the sample customers strongly agree, 70% agree and 5% neutral with this.

The amount of security against loan amount is tolerable

                                                                                                                                                                                                                                                                                                                                                                                                                                                Source: survey of primary data

Calculation:

Total points = 0*5+0*4+15*3+55*2+30*1 =185

The weighted average is185/15 =12.33

Interpretation of the data:

In this point “The amount of security against loan amount is not tolerable” as answer of this question, 15% of the sample customers neutral, 55% disagree and 30% strongly disagree with this.

Circumstances arising from loan default are strict

Source: survey of primary data

Calculation:

Total points = 20*5+50*4+30*3+0*2+0*1 = 390

The weighted average is 390/15 = 26

Interpretation of the data

In the point “Circumstances arising from loan default are strict” as answer of this question, 20% of the sample customers strongly agree, 50% agree, and 30% neutral with this.

Concluding Remarks

From the survey, we can conclude that sometimes without proper investigation, the management values the security randomly which is less than the actual value of the security. The customers also criticize the margin rate of the bank.

From my survey, I also find that the customers, who are also involved in getting loan from another private bank, complain the loan giving procedure of Uttara Bank Ltd. They comment that the procedure of getting loan is slower than the private bank. And the cooperation of the private banks is comparatively better.

Though the customers complain the valuation process of security, which is pledged against the loan, they choose Uttara Bank Ltd to get loan and advances because of its competitive interest rate. Though the customers face the problems, they prefer Uttara Bank Ltd. for its comparative lower interest rate, safety of their security, excellent behavior of officers including cooperation of Assistant General Manager and availability of the branches of the bank.

So the decision-making body, i.e. Board of Directors / Top Management should take proper steps in all aspects of loan giving procedures and overall banking systems. The security valuation system must be flexible and accurate and verified by the independent and the efficient persons as well as rate of keeping margin on collateral should be as minimum as possible. The terms and conditions must be flexible from now. The authority may arrange different programs and publish bulletin for the loan providing procedure and which sectors are emphasized more as most of the people do not know the loan procedure of the Uttara Bank Ltd.

I have discussed so far about the different aspects of credit management Uttara Bank. For my report, I have selected Uttara bank. UBL plays an important role in the banking sector as well as in our economy. The success of a bank depends largely on the efficient credit management. A successful credit management is not only need for a bank’s own performance but also it is needed for the smooth development of an economy.