Report on Loan Policies of Standard Bank Limited (Part-1)

Executive Summary 

Banks and other financial institutions play an important role in the financial intermediation and thereby contribute to the overall economy. Standard Bank Limited started banking operation on 11^th of May, 1999 & commenced commercial operation on 3^rd June, 1999; and since then it is trying to satisfy customers’ needs in full speed.

The credit department of the bank plays a vital role in keeping its operation smooth. In the case, the relationship of banker & customer take the form of creditor and debtor. Standard Bank offers different types of loans and advances, which are mainly, categorized under 2 heads, namely

Small Enterprise Loan &

Consumer Financing.

The various types of loans that fall under the category of Small Enterprise Loan are: Easy Commercial Loan, Retailers Loan, Transport Loan, Commercial House Building Loan, Possession Right Loan, Contractor’s Loan, Letter of Guarantee, Working Capital Loan, Letter of Credit, Loan against Imported Merchandise, Loan against Trust Receipt, Builders’ Loan, & Project Loan.

And the loans under Consumer Financing are: Easy Loan, Consumer Durable Loan, Parua Loan, Thikana Loan, Flexi Loan, Peshajeebi Loan.

This report highlights the loan policies of Standard Bank Limited; explain different issues regarding the disbursement of loans such as: sector where loans are provided, purposes of the loan, eligibility to get loans, documents required, interest charged on loans, & also the rate of penal interest in case of late repayment.

From my observation, some weaknesses of the loan policies of Standard Bank Limited are detected, such as high interest rate, charging of loan processing fee, penal interest, maximum size of the loan is small, maximum term of the loan is low etc. And finally, few changes are recommended in the policy to remove the pitfalls & to improve the overall loan policies.

1.1   Background

It has long been recognized that credit is an important tool in increasing productivity and thereby increasing the income of borrower. Adequate flow of credit can remove the financial constrains on the borrower. There has been phenomenal growth in the flow of credit after liberation due to government’s desire to increase productivity in the country. All the credit institutions were glared up through a dynamic credit policy to disburse both short term and long term credit. As a result, the flow of credit has increased significantly. As the volume of the loans has increased substantially over the years, the percentage of loan default increased gradually. This study is kind of analyzing the Loan Management of Standard Bank. It is providing different types of Loan Secured Overdraft (SOD), Loan (general), House Building Loan (Staff), Term Loan (Industrial) Term Loan (Others), Staff Loan Against Provident Fund, Consumer Credit Scheme (CCS)

1.2   Origin of the report

This report originates to fulfill the requirement of studying BBA Program of Dhaka University. This program has been designed to facilitate the students with basic theoretical and practical knowledge in the job activities in the context of Bangladesh as well as worldwide.

Since the BBA program is an integrated, practical and theoretical method of learning, the students of this program are required to have practical exposure in any kind of business organization after the completion of his theoretical part in the classroom. This report has been prepared on practical orientation.

1.3   Objectives of the Report

Objectives of this report are as follows

To identify the sectors the bank is providing loans.

To identify the customer segment.

To have some practical exposure that will be helpful in the practical life.

To gather knowledge about loan and advance.

1.4. Scope of the Study

I have prepared my report on SBL, Topkhana Road Branch. I focused only on the Loans & Advances Division of the Topkhana Road Branch. Necessary data and information was collected mainly from the credit division of this Branch.

1.5. Methodology

This report is based on primary & secondary data. For more clarification and better understanding, I have collected primary data in the form of depth interview and personal observation.

The Primary Sources

Conversation with the respective executives & officers of the concerned branch of the Bank.

Informal conversation with the clients.

Practical work exposures from the different desks of the various departments of the Branch covered.

The Secondary Sources

Annual Reports of Standard Bank Ltd.

Periodicals published by Bangladesh Bank.

Web site of Standard Bank Limited.

1.6 Limitations

This study is subject to the following limitations:

Access to the required information was restricted.

Most of the employees of the bank were busy and they did not co-operate me substantially in spite of having desire to do that.

There are lack of adequate data and information on the relevant topic as these data are treated as very much confidential.

To prepare such report it is needed more time, but the report is made only within the one & half months time period.

2.1. Profile of Standard Bank Limited

Standard Bank Limited (SBL) was incorporated in Bangladesh as a Public Limited Company with limited liability under the Companies Act, 1994 on 11^th May 1999 & commenced commercial operation on 3^rd June, 1999. The Bank went for the public issue of shares on in 2003 and its shares are listed with Dhaka Stock Exchange and Chittagong Stock Exchange. Now it has 30 Branches all over Bangladesh.

2.2 Financial Highlights

                                                                                           (Figure in Million Taka)

2.3. Human Resource Department

The Bank has a Human Resource Development & Research Department to develop human resources internally. The Academy is equipped with professional library, modern training aids professional faculty and other facility. It is now under Personnel & Human Resource Development & Research Division. The Academy conducts regularly foundation courses, specialized courses and seminars on different areas of banking to take care of the professional needs.

2.4. Vision & Mission

Vision: To be a modern Bank having the object of building a sound national economy & to contribute significantly to the Public Exchequer.

Mission: To be the best private commercial bank in Bangladesh in terms of efficiency; capital adequacy, asset quality, sound management and profitability having strong liquidity.

2.5. Corporate Information

2.6. Profile of Topkhana Road Branch

Topkhana Road Branch of Standard Bank Limited, one of the profitable Branch is located at Press Club (2^nd Floor), Topkhana Road, Dhaka. It started its journey  31^st October 1989, Now it has 26 employees (Male 18 & Female 08) which includes one VP & relationship manager, one AVP, four SSO, four SO, Seven officer Grade-I & Three Officer Grade-II, Three computer officer, three cash officer, one office assistant (SG), two security staff, two office attendant.

2.7. Organ gram of Topkhana Road Branch

3.1 Loan Documentation

For all facilities, bank must obtain (as applicable) and limiting to following documents before disbursement of loan can be made:

1) Loan Application Form duly signed by the customer.

2) Acceptance of the terms and conditions advice.

3) Trade license.

4) In Case of Partnership firm:

Copy of Registered partnership Deed duly as true Copy or a Partnership Deed on one- judicial Stamp of TK. 150 denomination duly notarized.

5) In Case of Limited Company:

a)      Copy of memorandum & articles of association of the company including ‘certificates of incorporation’ duly certified by Registrar of Joint stock companies (RJSC) and attested by the Managing Director (MD) accompanied by an up- to- date of directors.

b)      Copy of Board Resolution of the company for availing credit facilities and authorizing Managing Director/ Chairmen/ Director for execution of documents and operation of the accounts.

c)      An undertaking of not changing the management of the company and the memorandum and articles of the company without prior permission of the bank.

d)      Copy of audited financial statement up to last 3 years.

e)      Personal Guarantee of all the Directors including the Chairman and Managing Director.

f)       Certificate of registration of charge over the fixed and floating assets of the company duly issued by RJSC.

g)      Certificate of registration of memorandum of charges over the fixed & floating assets of the company duly issued by RJSC in case of repeat loan or charge terms and condition of sanction advice loan amount, securities etc.

6) Demand promissory note.

7) Letter of hypothecation of stock and goods.

8) Letter of hypothecation of book debts & receivables.

9) Letter of hypothecation of plant & machinery.

10) Charge on fixed assets.

11) Personal letter of guarantee.

12) Wherever practical, insurance policy for 110% of the stock value covering all risks with banks mortgage clause in joint name of the bank client.

In the case of individual person-

2 (two) copy passport size photographs of intending borrower & guarantor.

Letter of introduction from employer (where required).

Bank Statement (for last 6 months).

Personal net worth statement.

Copy of passport/ Voter ID/Driving License (if any).

Utility bill copy (Telephone/ Gas/ Electricity) – any one.

Salary Certificate/ Trade License.

T.I. Number.

Copy of offer letter from recognized College/ University for studying abroad.

For local private university/ medical college, submission of evidence related to admission and cost. CIB report on the borrower as required.

In the case of sole proprietorship firm-

One copy passport size photograph of the owner.

Copy of trade license.

Personal net worth statement.

Hypothecation of stock.

Personal guarantee of a businessman having business at the same area or any person acceptable to the bank.

3.2. Policy Guidelines for Bank:

1. Product Program Guidelines.

2. Segmentation of Duties.

3. Credit Approval.

4. Credit Administration.

5. Risk Management.

6. Collection & Remedial Management.

3.3. Guidelines for bank for giving loan

These guidelines include objective/ quantitative parameters for the eligibility of the borrowers and determine the maximum permission limit per borrower. Fundamentally, credit policies and procedures can never sufficiently capture all the complexities of the product. Therefore, the following credit principles are the ultimate reface for making financing decisions:

Assess the entrepreneur’s character for integrity and willingness to repay.

Only lend when the entrepreneur has capacity and ability to repay.

Only extend credit if bank can sufficiently understand and manage the risk.

Use common sense and past experience in conjunction with through evaluation and credit analysis.

Do not base decision solely on customer’s reputation, accepted practice, other lender’s risk assessment or the recommendation of other officers.

Be proactive in identifying, managing and communicating credit risk.

Be diligent in ensuring that credit exposures and activities comply with the requirement set out in product program.

3.4. Small Enterprise Loan

SBL Bank provides the following different types of loans for Small Enterprise:

A brief description on the most favorable loans are given below-

Easy Commercial Loan

Retailers’ Loan

Transport Loan

Commercial House Building Loan

Possession Right Loan

Contractors’ Loan

Letter of Guarantee

Working Capital Loan

Loan against Imported Merchandise

Bidders Loan

Some more parts of this post-

Report On Loan Policies Of Standard Bank Limited (Part-1)

Report On Loan Policies Of Standard Bank Limited (Part-2)

Report On Loan Policies Of Standard Bank Limited (Part-3)