Report on National Bank Credit Management

ORIGIN OF THE STUDY

MBA academic program is the building up to the theoretical knowledge about business

Administration. One semester internship program is an attempt to provide business students an orientation to a real life business situation in which we can observe and evaluate the use and applicability of the theoretical concepts, which were taught in the classroom.  Then I got a chance to complete the program in a leading private commercial bank; “The National Bank Limited. It was a challenge for me to complete a report on such an important topic. But I have tried my level best to make it as comprehensive and informative as possible.

OBJECTIVES OF THE STUDY

• To fulfill the course requirement of MBA Program
• To gather ideas about various function of Banks
• To acquire knowledge about the every day banking operation of NBL.
• To acquire knowledge about different loan and Advance of NBL
• To present an over view of National Bank Ltd
• To analysis the Lending procedures maintained by
•  Identify the limitations in the credit management system of NBL

        ●       To observe principal Lending activities of National Bank Ltd.

        ●      To evaluate Lending performance of NBL Ltd.

        ●    To  measure  the  actual  position  in  classified Loan  and provisions maintained by the NBL

        ●     To evaluate the success of credit operations compare with other Banks.

•  To analysis the Lending procedures maintained by the NBL
• To observe principal Lending activities of The National Bank Ltd.
• To  measure  the  actual  position  in  classified Loan  and provisions maintained by the NBL
• To appraise the actual Recovery position of the NBL
• To recommend suggestions for the successful Lending Operations of National Bank Ltd

METHODOLOGY OF THE STUDY

Methodology includes direct observation, face-to-face discussion with employees of different departments, study of files, circulars, etc. and practical work. In preparing this report, both primary and secondary sources of information have been used.

The Primary Sources of Data are:

•    Face to face Conversation with the respective officers of the bank.

•    Personal experience gained by visiting different desks of the bank

•   Relevant files and official records provided by the officers concerned.

The Secondary source of Data are:

•    Annual report of NBL.

•   Working Papers of NBL.

•   Office Files.

•    Selected Books.

•   Published & Unpublished Documents.

•    Website.

SCOPE OF THE STUDY

The National Bank Limited is one of the leading Banks in Bangladesh. The scope of the study is quiet wide as this report has covered both general banking activates and credit management of National Bank The introductory part covers the background, history, objective, goal, function and service of NBL. In the general banking part detail depiction of various task of each department has been given. In the credit management section focus was given on the credit origination process and on credit assessment and approval procedure.Moreover loan disbursement pattern from various viewpoints has been illustrated. In addition detail procedure of loan monitoring and recovery has been thrashed out

DEFINITIONSOFTERMSUSEDINTHESTUDY

Pay Slip

Pay slip is like pay order but it is generally used for bank’s internal payment purpose, such as encashment of FDR, encashment of NMS

Demand Draft

According to section 85(A) of the negotiable instrument Act, a demand draft is “an order to pay money drawn by one office of the bank upon other office to the same bank for sum money payable to order on demand.”

Clearing house

Clearing  house is the place of central bank, where banks conduct their inter transactions.

Telegraphic Transfer CTT)

Telegraphic transfer is by far the quickest method of transferring fund from one place to another. The remitting branch sends a telegraphic message to the branch on other end, to pay a certain sum of money to a named payee. In order to purchaser a TT, the purchaser has to maintain as account in that branch.

LIMITATION OF THE STUDY

I have tried my best to provide with all necessary information about National bank Ltd. But due to exhaustive nature of this study most secret & strategic ethics could not be brought in this report. This report is subject to following limitations.

•    Within such a short period of time (three months), it was not possible for me to study everything about National bank, Babubazar Branch

•    A worthwhile study requires the analysis of as much data as possible covering various aspects of the study. But I did not have access to the certain types of information about Loans & advances.

•    Since some of the fields of banking have not been covered by our courses, there was difficulty in understanding some activities.

•    To protect the organizational loss in regard of maintaining confidentiality some parts of the report are not in depth.

•    The bank was a busy one having rush of people with whom officers need to deal with. So allocation of time for an internee is very much tough for the officers of the bank.

SCENARIO OF CREDIT SYSTEM AND CREDIT MANAGEMENT IN BANGLADESH

Bangladesh is a developing country. Most of the people of this country lives under  the poverty level. Industry of this country is also less developed. And banking institutions is growing fast. Bankers are always ready to issue loan for industrial sectors and also for personal sector. And bankers are trying to influence different types of buyer to get loan. So loan are available. And competition of customer service is also lies within bankers. Credit management of them is also smart. But main problem is that we don’t have enough sector for investment. The interest rate is not tolerable for all. Another problem is that some of credit buyer is not repaying or back their fund timely sometime they are not paying  ever. They are using this way for being rich in our society. Basically I am trying to said that our perception as a buyer of credit is not sound but  our perception as a banker or loan provider is changing. I think bankers should try to provide highly standard credit service than present time and their credit management systems should develop also. All systems should be digital and automated.

BACKGROUND OF NATIONAL BANK

National bank Limited is one of the leading first generation private sector banks in Bangladesh. It is the first private commercial bank which was fully owned by Bangladeshi entrepreneurs. The Bank started its commercial operation on 23 March 1983 with an authorized capital of Tk. 10.00crore and paid-up capital of Tk.4.00crore.

At present, authorized capital, paid-up capital and reserve fund & surplus stood at Tk. 245.00crore, Tk. 120.82crore and Tk.315.01crore respectively as on 31.10.11. NBL has been carrying on business through its 101 branches spread all over the country- The Bank has 405 correspondent relationships with 230 banks in 75 countries of the world as well all established drawing arrangement with 38 overseas exchange companies abroad. NBL was the first domestic bank to establish agency arrangement with the world famous Western Union in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. NBL was also the first among domestic banks to introduce international Master Card in Bangladesh. In the meantime, NBL has also introduced the Visa Card and Power Card. The bank has in its use of the latest information technology services of SWIFT and REUTERS.

CORPORATE INFORMATION

Registered Office:

18, Dilkusha commercial Area

Dhaka-1000, Bangladesh

GPO Box:                    3424, Dhaka

Cable:                          Nation Bank, Dhaka

Tel: PABX:                  9563081-5, 7168729-31

Telex:                          642791 NBL HO BJ

                                    642410 NBL HO BJ

E-mail:                         nblho@citechco.net

URL/Website: www.nblbd.com

SWIFT:                        NBLBBDDH

ORGANIZATION STRUCTURE

Functional oriented structure Organization structure plays an important role on the profitability of any organization. National bank limited is a centralized organization. Its activities are designed on the basis of traditional banking business, such as credit, international division, investment, administration, and operation etc. NBL has a formal organizational structure that is highly specialized and centralized.

Organizational setup of the National bank Limited is consisting of three organizational domains.

Firstly the central top management, which contains Board of Directors, Managing Director, Additional Managing Director and Deputy Managing director, Major responsibilities of this are to take central decision and transmit it to the second step. Secondly, Central executive level management, which contains executive vice president, senior vice president, vice president and Assistant vice president. Major responsibilities of this part are to supervise and control division/ department.

Thirdly, branch operation management, which contains branch manager and other mid/ lower level management. Major responsibilities of this part are to the 75 branches of this bank and report to the Head office from time to time.

MANAGEMENT STRUCTURE OF NATIONAL BANK

In 2001 National Bank Limited made commendable progress in all business, like deposit, credit, fund management, investment, foreign remittance, credit card & foreign exchange related business. Bank has expended business activities as holding previously & parallel by diversification its investment to a new product.  As a major financier remarkable portion of total exports of the country. The total assets of the bank were Tk.  48732.1 million As on 31^st December 2001, which is higher than Tk. 1584.02 million than the previous year. This is the sign of good management. The management processes are as follows:

PLANNING

The strategic planning approach in NBL is top-down. Top management formulates strategy at the corporate level, and then it is transmitted through the division to the individual objectives. Board of directors or Executive committee usually takes the decision. In this process lower level manager are detached in making process, even brainstorming of lower level manager is absent in decision-making and planning process.

ORGANIZEING

Organizing of the National Bank Limited is based on Departmentalization. The organization is divided into twelve departments headed by Executive vice President or Senior Vice President. In the National Bank Limited the whole operation is centralized and authority is delegated by written guidelines. These guidelines are:

Operational manual approved by Head Office, where each aspect or banking operation is elaborately defined.

•   Advance manual including advances limit for different management level.
•   Bad and doubtful recovery manual.
•   Code of conduct.
•   Foreign banking guidelines.
•   Central bank directives.
•   Different management position holders in departments and branches practice their authorized power in different cases with administrative loophole.

STAFFING 

Entry-level recruitment process of the National Bank Limited is conducted in three ways.   One way is recruitment of probationary officer. Each probationary officer has one-year probation period. After completion of probation period the officer joins as officer grade III (b). The career path of probationary officer is headed toward different management positions. Second way of recruitment is to recruit non-probationary officer who joins as an assistant officer. The career path of an assistant officer is lengthier than probationary officer. The third way of recruitment is recruitment of staff and sub-staff such as typist, messenger, driver, guard, attendant, cleaner and other lower level positions. Promotion policy of NBL is basically based on seniority basis. Sometimes, employees are promoted to the higher position for their outstanding performance. However, it is found that the average length of a position held by an employee is around five years.

CONTROLLING

The bank has strict control over its all-organizational activities. The Bangladesh Bank directives indicate some control measures. The central bank conducts credit inspection by a team. The National Bank Limited has audit and inspection department to take controlling measures in internal operations. Audit and inspection team send to the branches now and then and is responsible for preparing report that will be submitted to the chief Administration to take necessary actions.

INTRODUCING THE BRANCH

National Bank Babubazar  Branch is one of the largest branches of NBL is located in It started its function in the year 1997.

Presently there are 35 employees in this branch as of 20.09.1999, which includes

One SVP, 1 AVPs, 3 SPOs, 4 Pos, 18 Officers, 5 SOs, 4 Officers, One assistant and others are messengers, tellers, typist and security guards.

GOAL OF NATIONAL BANK

•    Become the most profitable bank.

•      Provides highest level of satisfaction to customers.

•     Enhance the value of shareholders investments and optimize return on their       investment

VISION OF THE NATIONAL BANK LIMITED

The vision of National Bank Limited is, “To Become the Trendsetter for Innovative Banking with Excellence & Perfection”. Efforts for expansion of NBL’s activities at home and abroad by adding new dimensions to its banking services are being continued unabated. Alongside, the bank is also putting highest priority in ensuring transparency, account ability, improved clientele service as well as to their commitment to serve the society through which they want to get closer and closer to the people of all strata.

MISSION OF THE NATIONAL BANK LIMITED

The mission is, “To be the best performing Bank in the country”. National Bank Limited is focused on maintaining the best performance and thus to provide excellent service to its clients. The bank’s positioning statement is, “A Bank for Performance with Potential.

COMMITMENTS OF NBL

In Carrying Ourselves at Work

Customer-first

Quality-focus

Credibility

& secrecy  Loyalty

Total commitment & dedication

Excellence through teamwork

   Discipline

Honesty & Integrity

Sincerity

Caring

Creativity

PRODUCT AND SERVICES OFFERED BY  NATIONAL BANK

General Products:                   

1. Savings Account

2. Current Account

3. Corporate Account

4. Short Term Deposit

Deposit Scheme:                       

1. Special Deposit Scheme

2. Monthly Saving Scheme

3. Education Scheme

4. Double scheme

Loan Scheme:                  

1 .Loan General

2. Terms Loan

3. SOD

4. Cash Credit

5. Loan against Imported Merchandise

6. Loan against Trust Receipt

7. Loan against HouseBuilding S. Housing Loan Scheme

9. House repairing / Renovation loan Scheme

10. Consumers Finance Scheme

12. Festival Personal loan Scheme

13. Small Business loan Scheme

14. Personal loan Scheme

Services:

1. Western Union money transfer

2. First Solution

3. Locker Services

4. Remittance- T.T., D.D

5. Online Banking

 POWER CARD OF NATIONAL BANK

NBL is committed to provide better and modern services to its clients and thus march forward. With this aim in mind NBL has introduced E-cash and ATM card on Ocotber’2002, NBL believe this has helped them to improved client service. NBL thinks ATM is a part of our regular life and provides round the clock drawing facilities to make life easy and fast. With this philosophy in mind NBL launched ATM service.

 Special features of  power card of  NBL

• It is a Pre-paid card.
• No need of any account with NBL Branch.
• No annual fee for 1^ffl year.
• Renewal fee only TK 200.
• Local card limit- TK. 1000-at minimum.
• International card limit-US$ 500-at minimum.
• Refill through any NBL Branch.
• Drawing Cash from NBL ATMs-Free of charges.
• Charge TK. 10 (Under Q-Cash Network)
• Charge TK. 100 (Under others Network)
• Loading fee for International card will be charged @1% of the
• loaded amount
• Cash withdrawal (Abroad)-2% on the drawn amount or
• US$ 2, whichever is high
• Accepted at all VISA POS merchants.

NBL CREDIT CARD

NBL is the first local bank, which introduced credit card & MasterCard in Bangladesh in both local and international market in 1997. MasterCard captured 35% of credit card through the world. However present market analysis reflects that a large number of people whose average income ranges in above Tk.10000 are using the credit card. Credit card division is continuing their all-possible efforts for the participation in the globalize MasterCard program.

Types of Credit Card

National Bank Limited offers mainly two type of credit card according to the geographical area. These are Local credit card and International credit card. According to the level of income the local and international credit cards are divided into two categories viz. Gold card and Silver card. These types of credit cards are described

below:

 Local credit card:

Local credit card is valid only in Bangladesh. Out side Bangladesh, the card is invalid. Local card are two types. They are Gold local card and Silver local card. The card limit of gold local card is Tk.50000 to Tk. 100000 and silver local card is below Tk. 50000.

International Credit Card:

International credit card is valid mainly outside Bangladesh. But for the payment of roaming facilities for Grameen phone, cardholders can use international credit card in Bangladesh. International credit cards are of two types. These are gold international credit card and silver international credit card. The card limit of gold international credit card is $ 2000 to $4000 and silver international credit card below $2000.

Yearly Charges on credit cards

LOAN AND ADVANCE OFFER BY NATIONAL BANK

The main business of bank is to settle Loan & Advance. Bank collects deposits or saving from one kind of people of society and invests these deposits as loan, subject to certain conditions, to other kind of people. National Bank provides following types of loand to its customer.

Current or continuous loan:

Current loan is also call ed revolving credit. Current loan holder can withdraw or deposit money in his account in several times with in the loan period. If loan holder wants to renew his loan amount then it can be done with the authorization of the bank. Current loan duration time is one year and interest is charged by quarterly basis. At the end of the loan period borrower pays loan amount with the interest.

Cash credits:

There are two type of cash credit. These are

* CC-pledge

* CC-Hypothecation

a) CC-Pledge:

CC-Piedge is sanctioned against pledge of marketable commodities. When such advance is allowed to traders or wholesalers or stockiest the underlying merchandise is pledged with the banker. When manufacturing concern is allowed CC-pledge facilities, commodities such as raw materials, finished products, stores and spares are taken under pledge,

b) Cash credit-Hypothecation:

Another type of cash credit is Hypothecation- in short CC (HYPO) This is also an advance against stock of commodities and finished products but CC (HYPO) is also extended against work-in process, Bills receivable, commercial vehicles etc. for a borrower CC (Hypo) is advantageous because in hypothecation neither ownership nor possession of goods is transferred to the bank but an equitable charge is created over the movable assets in favour of the bank. The goods remain under the possession of the borrower who binds himself to give the possession to the banker whenever the latter requires him to do s

Secured Over Draft (SOD)

•    Overdrafts are those drawings, which are allowed by the banks in excess of the balance in the current account up to a specified amount for definite period as arranged for.

•    Usually provide against FDR. PSS, i.e. financial obligation or any primary securities. The interest charges from the date of first withdraw.

•   Interest is calculated and charged only on the actual debit balance on daily product basis.

•    Balance of OD account are fluctuates

•    The interest rate of SOD is 3% above of FDR interest rate if the FDR is in our Bank.

•    If the FDR is in other bank then the interest rate is 14.50%

a) SOD against Work order:

Advances may be allowed in the form of overdraft to genuine contractors against work orders from various Government and semi-government agencies and other reputed organizations.

b) SOD (Bid Bond)

SOD (Bid Bond) is given to those borrowers who want to participate in a bid for collection of work. In SOD (Bid Bond) payment is making by the pay order. If borrower gets that work then interest is charged on that amount If borrower does not get that work then he deposit that amount which he has issued by pay order.

Demand Loan:

The loan that becomes repayable on demand by the bank will be treated as Demand

Loans. If any contingent or any other liabilities are turned to forced loans those too will be treated as Demand loan.

a) LEVJ (loan against trust receipt)

When the importer fails to pay for the import bills, bank can allow certain facilities. In case LIM facility is given, the bank itself arrange clearance of the goods on payment of import duty, sales tax etc. and store the goods at the bank’s godown subject to its release in part or in entirely against payment at a time or gradually as per arrangement with the importer.

b) Payment against Document (PAD)

Payment made by the bank against lodgement of shipping documents of goods imported through L/C falls under this type head. It is an interim type of advance connected with import and is generally liquidated shortly against payments usually made by the party for retirements of documents for release of import goods from the customer authority.

c) Loan against Trust Receipt (LTR)

Advances allowed for retirement of shipping documents and release of goods imported through L/C without effective control over the goods delivered to the customer fall under this head. The goods are handed over the importer under trust with arrangement that sales proceed should be deposited to liquidate the advances within a given period. This is also temporary advance connected with import that is known post-import finance under category ‘Commercial lending’

d) Inland Documentary Bill Payment (IDBP)

Payment made through purchase of Inlands Bill to meet urgent requirements of customer fall under this type of credit facility. This temporary advance is adjusted from the proceeds of bills purchased for collection.

e) Foreign Documentary Bill Payment (FDBP)

Payment made to a party through purchase of foreign documentary bills fall under this head. This temporary advance is adjustable from the proceeds of negotiable shipping/export documents. It falls under category ‘Export Credit’

f) Packing Credit (PC)

Packing credit limit is sanctioned to the exporter against the security of R/R, B/R, truck receipt etc evidencing transportation of goods from up-country to the port for shipment, in addition to the usual charge document and original export letter of credit contract. This type of credit is given for transit period starting from despatch of the goods by the exporter to finance transportation and freight of goods to sustain the export activity.

House Building Loan: Purpose:

To help people of all classes to purchase house/flat or to construct house Size of Loan: Maximum limit 75 lac taka Debt Equity ratio:

A. Max 70:30 for purchasing flats/houses.

B. Max 80:20 of construction cost (for-Construction),

Repayment period:

The loan is to be repaid by monthly equal installments including interest within maximum period of 20 years (including grace period) depending on the size of loan and repayment capacity of the borrower.

Grace period:

For purchase of fiat (s)/houses(s):

The client will enjoy maximum 9 month’s grace period from the date of availing of the loan. Repayment will start from the 10th monih of availing of the loan and the entire loan will be adjusted within the validity period. For Self-Construction:

The client will enjoy maximum 12-month’s grace period from the date of availing of the loan within which construction is to be completed. Repayment will start form 13th month of availing of the loan and the entire loan will be adjusted within the validity period.

Interest

Floating Rate

13.50% P.A subject to change by the bank from time to time. Interest to be charged at monthly rate.

(n)

Fixed Rate

14.00%-15.0G% P.A to be charged at monthly rest

Employees house building loan (EHBL)

The employee of NBL can take house-building loan from bank but the range of loan amount depends on person’s designations. Simple interest rate is charge on employee’s house building loan and interest rate is 8%.

4,5 Consumer Credit-The products of National Bank with their financing items under CCS loan are given below:

•    Household Durable Loan: Motor Cycle, , Personal Computer. Photocopier, Fax machine. Small PABX system, Television, Mobile Phone set, Refrigerator, Audio-video equipment, Other home electric appliances ,Furniture and any other household items.

•    Car Loan.- Car, Jeep, Station Jeep, Pick up Van, Cover Van, Bus, Truck, Ambulance and any other vehicle for own use.

•   Advance Against Salary; Any qualified person

•   Education Loan.- For Study purpose only.

•    Travel Loan: For traveling purpose.

•     Wedding loan.- For wedding only.

•   CNG Conversion Loan: To convert into CNG.

•     Any Purpose Loan.’ For emergency need.

•   Hospitalization loan: For treatment m hospital.

Credit Limit, Period of Loan, Down Payment:

Under CCS program of National Bank Limited a borrower can get maximum of taka 4,000,000 and minimum taka 20,OOO. The down payment is 10% of the loan for each products

Interest and other charges:

The interest rate is 15% for the all products. And National Bank charges 1% service charge and 1% risk fund for all products other than for Car loan, Doctor’s loan, Advance against salary and CNG Conversion loan.

WORKING CAPITAL LOAN

 Business Enterprises (other than public limited company) engaged in manufacturing, trading business.

 Purpose:

 To meet working capital requirement

 Nature of Loan:

 Cash Credit

 Eligibility:

 Firm/Companies incorporated in Bangladesh

 Age Omit of person:

 . •    Minimum age 25 years.

*   Maximum age 65 years

 Loan Size:

 Maximum TK. 10000000 only.

 Debt-Equity Ratio:

 Depending on the nature and risk in the business.

 Security /Collateral:

 *    Hypothecation of stock in trade duly insure with bank mortgage clause. •    Pledge of stocks duly insure with bank mortgage clause.

•   Legal mortgage  of land,   building,   machinery within city corporation and/or Municipal area preferably 1^s‘ party, where required.

 Rate of Interest

 (a),] 4.59% p.a. with quarterly rest or received from time to time.

 Penal interest

 Additional 2% on the overdue/excess over limit, if any

 Legal documents:

 *    D.P note

CONTRACTOR LOAN:

Individual, Business Enterprises

Purpose:

To execute work order awarded by Govt /semi Govt. & autonomous bodies.

Nature of Loan:

Secured Overdraft (SOD).

Eligibility:

Any business house in the command area having at least two years experience in their line of business

Age limit of person:

•    Minimum age 25 years. •    Maximum age 65 years.

Loan Size:

50:50

Security /Collateral:

•    Legal mortgage of land, building, machinery within City Corporation and/or Municipal area. •    Registered power of attorney to sell the   mortgaged   property   without intervention of court. •    Assignment of work order.

Rate of Interest

@1 5.00%   p.a.    with   quarterly   rest   or received from time to time.

CREDIT MANAGEMENT

Credit management is the part of bank management which decides what type of lending product will be offered, to whom it will be offered, how much it will be offered and analyze and measure the credit risk on loans and manage all the activities regarding the loans. The aim of the credit management is to have a secured loan portfolio so that the bank can earn profit by keeping the depositors savings secured. The entire job regarding that consist the credit management.

Credit_principles of NBL

To achieve goal for maximizing the stockholders’ value and protect the interest of the depositors as well as to improve the quality of banks assets as fundamentally sound financial institution, National Bank follows the following Credit principles

2

Customers having capacity and ability to repay shall only be lent Possibility of default will be worked out before lending

3

Credit will be extended in the areas risks of which can be sufficiently understood and managed

4

Independent credit participation in the credit process shall be ensured

5

Ethical behavior in all credit activities shall be ensured

6

Be proactive in identifying, managing and communicating credit risk

7

Risk and reward to be optimized

8

Diversified credit portfolio to be built and maintained

9

Credit will normally be financed from customer’s deposits and not out of short-term temporary funds or borrowing from other banks

10

The bank shall provide suitable credit services and products for the market in which it operates

Lending Policy of NBL

National bank’s focus on various lending is as following

focus

Trading business

Grow

Ready made garments

Grow

Textile(yarn/fabncs manufacturing)

Grow

Chemicals/Toiletries

Grow

Entertainment

Grow

Telecommunication/ IT

Grow

Power generation and distribution

Grow

Energy (Power/Fuel/Gas)

Grow

Electric Goods

Grow

Service, freight Forwarder, Airlines, etc

Grow

Steel and Re-rolling Mills

Grow

Engineering and construction

Grow

Small Trades/SME

Encourage

Agro-basedindustry/dairy products/fishery/tea/crop

Encourage

Export oriented industries

Encourage

Pharmaceuticals

Encourage

Consumer loan

Encourage

Food and Allied

Maintain

Ship Scrapping

Maintain

Real Estate

Maintain

Paper

Maintain

Transport

Discouraged

Cold storage finance

Discouraged

Financing cement industries

Discouraged

Single Borrower/ Groupjjmits/ syndication

National Bank Ltd. Pursue the policy of avoiding too much loan concentration to a single borrower/group in order to by pass possible threat in the event of such advances turning sticky. For this reason National bank follow the following Guidelines of Bangladesh Bank on lending to single borrower/group:

Amount

Total exposure (funded and non funded)

35% of Bank’s total capital

Maximum funded exposure

15% of bank’s total capital

Maximum non-funded exposure where there will bi no funded exposure

35% of bank’s total capital

Maximum exposure for export sector

50% of bank’s total capital (but funded facility will not exceed 1 5% of the total capital)

Sector wise Lending caps

 National bank limited is very much aware of over concentration of credit in a particular area, which may under some situation, create disaster for the. So national bank is currently maintain the following cap

Percentage

Trade &commerce

45%

SME

10%

Industry-working capital

10%

Projected finance-long tern

10%

Retail/consumer(C CS)

10%

Agro credit

5%

Work/Supply order (Contractual finance)

5%

Others

5%

Total

100%

Discouraged Business Types

Though National bank follows the policy of financing prospective, feasible & rewarding areas, it currently discouraged the following areas of lending

•  Military equipment/weapon finance

•  Highly leveraged Transactions

•  Finance of speculative business

•  Logging, Mineral Extraction /Mining for other activity that is ethically or
environmentally sensitive

•  Lending to companies listed on CIB black list or Known defaulters

•  Counter parties in countries subject to UN Sanctions

•  Share lending

•  Taking an equity stake in borrower

•  Bridge Loans relying on equity /debt issuance as a source of repayment

•  New cold storage finance

•  Financing cement industr

LOAN PROCESS

Application for the Loam

The loan process starts with the submission of loan application by the borrower. The borrower submits an application for loan to the branch manager. In the loan application borrower provide following information

•    Personal Details of Applicant

•    Nature of business

•     Amount and duration of the loan

•    Purpose of the loan

•    Details of the collateral

Preparation of Loan proposal

Loan proposal are prepared in prescribed format. At the time of originating a proposal accuracy of all information is ensured. Originating officers follows credit principles, credit policy and guidelines and conduct due diligence on new borrowers, principals and guarantors. That is also adhering to the NBL’s established Know Your Customer (KYC), Money Laundering guidelines, and Bangladesh Banks regulations.

For initiating credit relationship credit officer call on (he client, visit factory/business center to see Production facility/stock/storage pattern/business transaction/reputation etc and through these, assess possibilities of establishing a remunerative relationship, He/She also conduct due diligence to get market information on the borrower from industry sources, competitors, local area. Branch Manager may also be part of this process, hi this regard, if required, the BM/Credit officer also take help of head Office Engineer/HO personnel for initial assessing credit needs of large borrowers

Based on findings of such calls/visit/inspection, Credit Office Officer, along with the Branch Manager, initiate proposal, containing information on client’s background, business, market share, integrity, credit exposure/existing banking relationships, and credit needs along with pricing etc.

Required Document for loan proposal

Before sending proposal to the approving authority, the originating official of the branch ensures mat the following document have been completed properly and incorporated in the credit proposal appropriately:

•   Current CIB Report

•    Audited financial statement of the business

•   Forecasted Financial Statement of the Business

•   CRG score sheet of the business

•   Bank statements regarding the bank transaction of the borrower

•   Net worth of the business

•   Net worth of the individual

•    Total debit and credit of the business

•    List of projects allied concern

•   Trade license of the business

•   Income tax return of the borrower

Assessment of Loan Proposal

National Bank makes a through assessment of the credit and risk before granting the loan. Usually assessment are made in the following areas

a) Borrower Analysis:

Character:

Bank tries to determine for the bank whether the borrower has responsible attitude towards borrowed funds and whether he will have every effort to repay what is owe

Capacity:

Whether customer has the capacity to request a loan and have the legal standing to sign loan agreement and documents (minor / resolution of the Board of Directors in case of limited company, partnership deed in case of partnership firms, etc)

Economic Condition/Assets:

Bank analyses whether borrower has sufficient assets to repay the loan (cash business assets plus other immovable and movable property. Bank also looks for other loans and liabilities of the borrower

Credit history /credit habit:

Bank analyses other Loans borrowed by the customers and how those earlier loans were handle. Bank search for whether there is any loan default by the Borrower

b) Industry Condition:

In loan assessment condition of the industry is carefully measured. Bank tries to determine total demand, growth rate, completion status, and future condition of the industry.

c) Supplyer and Buyer Analysis

Lending decision will be preceded by an intensive analysis on whether the borrower depends on a single or a very few customer or gets the supply of the materials/dealing items from a single supplier. Such sales and supply concentration will be given careful consideration, because it may have significant Impact on the future viability of the borrower

d) Historical Analysis

An analysis of a minimum of 3-year historical financial statement of the borrower shall be presented. Where reliance is placed on a corporate guarantor guarantor’s financial statements shall also be analyzed. The analysis shall address the quality and sustainability of earnings, cash flow and the strength of the borrower’s balance sheet

e) Projected Financial Performance

Where terms facilities (tenor more than I year) are proposed, borrower future/projected financial performance should be provided, indicating an analysis of the sufficiency of cash flow to service debt repayments. Loans should not be granted if projected cash flow is insufficient to repay debts.

f) Account Conduct

For existing borrowers, historic performance in meeting repayment obligations (trade payments, cheque, interest and principal payment etc) shall be addressed. Credit-debt summation, maximum-minimum balance recycling and adjusting of the liability will be looked into which generally will back our renewal decision.

g) Adherence to lending guidelines

Credit proposal to be prepared in line with Bank’s lending Guidelines. A credit application/proposal will clearly mention whether or not the proposal complies with the banks lending guidelines. Proposal that will not adhere to be bank’s lending guidelines will not be approved.

h) Mitigating Factors

In credit assessment, possible risks (such as margin sustainability , volatility, high debt load (leverage/gearing), over stocking or debtor issues, rapid growth, acquisition or expansion, new business line/product expansion, management changes or succession issues, customer or supplier concentrations and lack of transparency or industry issues and their mitigating factors will be identified.

purpose of loan

•    Customer must have an well-defined purpose for requesting the loans

•    The purpose of the loan must be consistent with the bank’s existing credit policy.

•    The purpose of the loan also should have consistent with Govt regulations.

Loan amount

Loan amount should be fixed such a way that it will require the needs of the customer or his business. Proper accommodation of a customer may involve lending more or less money than asked for over a longer or shorter period than requested. May customers do not know their own financial needs?

Loan terms and conditions

Loan terms and conditions should be framed in such a way that they will protect bank’s interest as well as customer’s purpose. The loan agreement must be structured in such a way that the borrower may be able to service the loan and be able to comfortably repay the loan as per schedule

Loan documents:

Loan documents must be executed properly, so that bank can establish its claim against the assets or earnings of the customer to recover the bank’s funds rapidly at low cost and with low risk, in the event of default by the borrower.

CUSTOMER SERVICES

Locker Service:

For safekeeping of customers’ valuables like important documents and goods like jewelries and gold ornaments, National Bank locker service is available in most of the Branches in urban areas. For using a locker customer must have an account in National Bank.

b)             Yearly Tk. 4,000/- for large size locker

Western Union Money Transfer

Joining with the world’s largest money transfer service “Western Union”, NBL has introduced Bangladesh to the faster track of money remittance- Now money transfer between Bangladesh and any other part of the globe is safer and fester than ever before. In 1993, National Bank has made and arrangement with Western Union Remittance services, which has over 127 years experience for speedy remittance of money with more then 140 countries. The bank handles a substantial number of inward remittances from Western Union. The beneficiaries receive payment within minutes and they do not need to maintain any bank account. During the year 2011 NBL received sizable amount of foreign exchange of USD 215.37 million with growth of 13.88 percent than the year 2010.

Merchant Banking

NBL has been participated in capital market since long to generate more income. Besides investment in secondary market, the bank invested Tk. 15,05 crore in primary portfolio during 2010. It helped the capital market remain vibrant The purchase price of total quoted shares held by the bank on 31.12-2010 was Tk. 107.23 crore, market price of which was Tk. 289.55 crore on that day.The bank earned Tk. 72.30 crore from share trading and received Tk. 7.21 crore as cash dividend the year 2010. The bank also earned Tk. 35.07 lac from its market intermediary activities i.e. Banker to the issue, underwriter, etc.NBL purchased a membership of the Dhaka Stock Exchange Limited and got registration as NBL Capital Services and become a corporate member of DSE.

Five year’ performance of NBL at a glance:

2006

2007

2008

2009

2010

Authorized Capital

1000.00

1000.00

1000.00

2450.00

2450.00

Paid-up Capital

430.27

516.33

619.33

805.47

1208.20

Reserve Fund

1270.63

1345.99

2115.03

2468.79

33360.18

Deposits

27762.12

28973.39

32984.05

40350.87

47961.22

Loan &Advance

22257.15

23129.65

27020.21

32709.68

36475.74

Investment

4044.20

4374.17

3564.82

6239.28

7760.38

Foreign Trade Business

35606.30

39133.60

52992.30

70477.70

94583.00

Foreign Remittance

88.12

170.02

271.67

507.49

1238.11

Income Fixed Assets

889.61

895.35

143.23

1627.29

1842.28

Total Assets

35670.33

35127.30

38400.37

4679.04

56526.96

4.30

5.16

6.20

8.05

12.08

Earning per share

17.07

27.44

43.85

63.01

102.47

Dividend     Loan as a % of total Deposit

28.23

17.37

7.07

6.01

4.53

Non-performing Loan as of total Loan

166.64

185.00

251.13

307.43

514.91

Capital Adequacy Ratio

11.13

10.55

10.45

10.10

13.11

Number of Branches

76

76

76

91

101

No. Of Foreign Correspondents

358

410

391

400

405

Number of Employees

2285

2263

2283

2370

2532

 GENERAL BANKING

General banking is the starting point of all the banking operations. This department does the most important and basic works of the bank. It is also the department, which provides day-to-day services to the customers. All other departments are linked with this department. It also pays a vital role in deposit mobilization of the branch. General Banking activities are carried on through the following department

Dispatch Department

Dispatch is one of the primary departments of banking activities. Dispatch can be categorized into two parts:

1)        Inward Register

2)         Outward Register   (a) Courier, (b) By Post

 Inward Register

In inward register all the incoming documents are received and registered according to date. Then, Documents are transferred to different departments according to their destiny.

Outward Register

The documents, which are needed to mail to different branches of NBL in Bangladesh or outside Bangladesh, are registered in outward register and mailed by courier or by post, which one is suitable.

Cash Section

The most vital and important section of the branch is Cash Department. It deals with all kinds of cash transactions. This department starts the day with cash in vault. Each day some cash that is opening cash balance are transferred to the cash officers from the cash vault Opening cash balance is added by cash receipts and payments. The figure is called closing balance. This balance is then added to the vault This is the final cash balance figure for the bank at the end of any particular day.

Steps in receipt of cash

On receipt of pay-in-slip the receiving cash officer usually accomplish the following tasks

1.   Check the tile of account, its a/c number, amount in words and figures.

2.   Receive cash duly counted and checked

3.   Write denomination of currency on the back of the pay-in-slip.

4.   Enter particulars of credit voucher in cash receive register

5.   Give sign and seal in the credit voucher

Cheque Cancellation or Cash Payment Process:

Step 1             1. Receiving Cheque by the employee in the cash counter

2. Verification of the followings by the cash Officer in the computer

 Section

Step 2             1. Date of the Cheque (it is presented within 6 months from issue date)

2. Issued from this branch

3. Amounts in figure and sentence written does not differ

4. Signature of the drawer does not differ

                        5.Cheque is not torn or mutilated

Step 3              Gives pay cash seal and sends to the payment counter
Step 4              Payment officers make payment

Account Opening section:

Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank collect funds for investment.

•    The form is filled up by the applicant himself/ herself

•    Two copies of passport size photographs from individual are taken; in case of               firms photographs of all partners are taken.

•           Applicants must submit required documents Application must sign specimen signature sheet and give mandate.

Step 2

•    The account should be properly introduced by Any one of the following:

•    An existing Current Account holder of the Bank.

•     Or Officials of the Bank not below the rank of an Assistant officer.

Step 3

• Receiving filled up application in bank’s prescribed form mentioning what type of account is desired to be opened.

• Introducer’s signature and accounts number – verified by legal officer.

Step 4

Authorized Officer accepts the application.

StepS

Minimum balance is deposited – only cash is accepted.

Step 6

Account is opened and a Cheque book and pay-in-slip book is given.

REQUIRED DOCUMENTS         (for opening a bank account.)                                                                      

Individual /Joint Account:

 1.   Introduction of the account.

 2.   Tow photographs of the signatories duly attested by the introducer.

 3.   Identity (copy of national ID card/passport).

 4.   Joint Declaration Form (For joint a/c only).

Partnership Account :

 1. Introduction of the account.

 2. Two photographs of the signatories duly attested by the introducer.

 3. Valid copy of Trade License.

  4.  Rubber stamp.

  5.       TIN number certificate.

 6. Permission letter from DC/Magistrate (in case of newspaper)

 7. Identity (copy of national ID card/passport).

Limited company:

 1.   Introduction of the account.

 2. Two photographs of the signatories duly attested by the Introducer.

 3. Valid copy of Trade License.

 4. Board resolution of opening A/C duly certified by the Chairman/Managing Director.

 5.   Certificate of Incorporation.

 6. Certificate of Commencement (In case of Public limited company).

 7. Certified (joint stock) true copy of the Memorandum and Article of Association of the
Company duly attested by Chairman or Managing Director.

 8. List of directors along with designation & specimen signature.

 9. Latest certified copy of Form – xii (to be certified by register of joint stock
companies) (In case of Directorship change).

 10.Rubber Stamp (Seal with designation of each person)

Club / Societies account:

1.  Introduction of the account.

2.  Two photographs for Opening A/C duly certified by President/Secretary.

3.  Board Resolution for Opening A/C duly certified by President/Secretary.

4.  List of Existing Managing Committee.

5.  Registration (if any).

6.  Rubber Stamp.

7   Permission letter from Bureau of N.G.O. (In case of N.G.O. A/C).

 Remittance & bills Section

Remittance means transmission of money from one place to another. And local remittance is that one which takes place within the territory of our country. National Bank Limited has a wide network of branches all over the country and offers various types to remittance facilities to the public.

MODES OF LOCAL REMITTANCE

CHARGE OF PAY ORDER

CHARGE OF DD                           

But minimum commission is 25 TkVat on commission15%

Telegraphic Transfer CTT)

Telegraphic transfer is by far the quickest method of transferring fund from one place to another. The remitting branch sends a telegraphic message to the branch on other end, to pay a certain sum of money to a named payee. In order to purchaser a TT, the purchaser has to maintain as account in that branch.

TT charge

But minimum commission is 25 TkVat on commission15%Telex charge40TK

SWOT Analysis of NBL

1.         I.      NBL availability of capital is good.
2.       II.      Customer satisfaction is positive; Bank reduces service support of the unprofitable customer.
3.    III.      Honest, reliable, knowledgeable and helpful workforce.
4.     IV.      Customer retention is increase so profit level is increase.
5.       V.      NBL can be relatively an important player among the private sector banks in this area.

Weakness:

1. The bank should try to arrange more training programs for their officials, quality training will the officials to enrich them with more recent knowledge of international trade financing.
2. Lower capacity.
3.   The bank lacks a division for customer service, because there are customers who have no banking knowledge.
4. High price product deposit, loan, L/C
5.    Low liquidity.

Opportunity:

1. Bank has installed returns screen for smooth operation of foreign currency dealing.
2. Remittance and fund transfer purpose customer could take the advantage to online facility.
3. Deposit down turn in international trade, it has produced steady steam of revenues.
4. Banker expresses deep apperception to the clients for their support.

Threats:

1. The earth quake disaster by Tsunami and Seedor is expected to cost is adverse impact in the coming year.
2. Government policy change, some government banks are turn into public bank.
3. Islamic Shariah based banking system.
4. Lack of planning, organizing and supervising to establishes culture.

CONCLUSION

Bank is the blood of present financial system. Deposit Mobilization is the bread & butter of any bank. The endurance of any bank depends on how competently it can administer its customers with its services & facilities through Credit Management. I have work with National Bank as an internee for three months & found many positive reasons of people trust on NBL.I have acquainted with the Credit Management procedure of the NBL as it was the part of my internship program. It is an institution which is not only serving people with quality & special service but also serving with great courage. For this reason, the report of NBL is drastically increasing from last year. The analysis shows that NBL has secured its position in the banking business of our country. The track record of NBL mentioned on the analysis is a proof of its tremendous success in banking business. The comparative analysis with some other banks verifies the competitiveness of Credit Management of NBL.

However, people do trust on the officers & listen to their advices. The bankers also provide counseling to the clients who need to improve themselves financially. The deposit of NBL is increasing from its inception because people trust on the bank & the relationship with NBL maintains with its clients.Thus, I conclude basing on the analysis that the theme line of National Bank Ltd appropriately matches with the services it offers. The theme of National Bank Ltd is “A Bank for Performance with Potential”.