Credeit Policy.al Amin

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Credit Policy Of JBL

Letter of Transmittal

Tanvir Ahmad TorophderLecturer

Dept. of Business Administration

Leading University, Sylhet.

Subject: Submission of the internship report on Credit Policy A case study on Jamuna

Bank Ltd. Sylhet Branch.

Dear Sir,

It is a great pleasure for me that I have the opportunity to submit the internship report on Credit

Policy A case study on Jamuna Bank Ltd. Sylhet Branch.

The internship program gave me an opportunity to have an exposure to the working environment

and on-the-job experience at Loan Department of Jamuna Bank Ltd., Sylhet Branch. I have

acquired a good understanding about different characteristics of loan management attributes, which

I believe, will help me in the future.

The report contains a small amount of internal information. As a result, I would obediently request

you to be vigilant about the confidentiality of the report.

I have attempted to put the best effort in the preparation of this report, and will welcome any

inquiry and suggestion about any views and conceptions disseminated through this report.

With best regards,

____________________

Md. Al Amin

ID- 1002010521

Department of Business Administration


Sylhet Branch, Sylhet 1


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Letter of Acceptance

I am pleased to declare that Md. Al Amin, ID NO-1002010521, student of MBA program of

Leading University, Sylhet has performed his internship work at Jamuna Bank Ltd., Sylhet Branch

on Credit Policy A case study on Jamuna Bank Ltd. Sylhet Branch. His working is quite

satisfactory and I am glad to affirm that the entire internship work has been conducted under my

direct and active supervision.

Now I am convinced to permit him to defend his internship work before the respective panel of

judges.

I also certify that the project paper is an original one and has not been submitted elsewhere

previously for publication in my form. He is sincere, honest and hard working. I hope that this

project work will contribute in his career.

I wish him all the success in life.

--------------------------------------

Tanvir Ahmad Torophder

Lecturer

Dept. of Business Administration




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Student Declaration

I am Md.Al Amin, hereby declare that the presented report of Internship titled Credit Policy of

Jamuna Bank is uniquely prepared by me after completion of three months Internship in Jamuna

Bank Limited Sylhet Branch.

I also confirm that, the report is only prepared to my academic requirement not for any other

purpose. It might not be used with the interest of opposite party of the corporation.

Md. Al Amin

MBA

ID NO. : 1002010521

Major in Finance & Banking



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Acknowledgement

At first I express my gratefulness to the greatest creator almighty ALLAH for granting me hisblessings in starting and completing the MBA course and preparing this report.

I would like to express my heartiest thank to my Internship Supervisor, my honorable teacher

Tanvir Ahmad Torophder, Lecturer in Business Administration, Leading University, Sylhet, for

his valuable advices and spontaneous encouragement which has increased my attention to prepare

successfully my Internship Report on Credit Policy of Jamuna Bank Limited. To say frankly,

without his cordial help and direction it would have been impossible to submit today.

The all officers and executives of Jamuna Bank Limited, Sylhet Branch, were also so much cordial

to me to prepare this report.

I extend my gratitude to Chowdhury Reza Shahzaman Mahmud, Senior Assistant Vice

President & Branch Manager, Jamuna Bank, Sylhet Branch, for his kind support. I would like

to express my profound gratitude to Tapon Battacharjee (EO), Alamgir Jahan (FEO), Ayaz

Uddin (FEO)And Md. Shams Uddin (General Officer) for helping me to enrich my knowledge

about banking activities as well as Credit Policy. I also like to give my special thanks to all

employees of JBL, Sylhet Branch, who helped me a lot with the information and data collection for

the improvement of my report.

Last, but not the least, I owe the greatest debt to my parents for not only their never-ending

affection, love and patience, but also their encouragement and unconditioned support to me in all

my decisions. Their guidance helped me to keep my motivations high throughout my studies.

Whole-hearted thanks to my Brother for giving me confidence all though the journey of my student

life. Without the continual support from my family, there is no way I would be where I am today.



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Preface

By the Blessing of Almighty, I have able to complete my Internship Report on Credit Policy A

case study on Jamuna Bank Ltd. Sylhet Branch. JBL has started its business at 6th June, 2001

and Sylhet Branch has started its journey in the business field on 31 st July, 2002. A highly

professional and fully dedicated team is managing Jamuna Bank Limited with long experiences in

Baking sectors. It has establishes 68 branches all over Bangladesh in a short period of time which

indicates an upward trend of success of Jamuna Bank Ltd.

My Reports especially deals with various Products and Services as well as the Loan activities of

Jamuna Bank Limited, Sylhet Branch. I have tried to depict the problems of my related issues and

give them reliable solutions in this report.

Todays world is running very fast and fully service oriented and especially the Business world is

going more competitive to sustain their customers because they have to compete with so many

rivals now. Financial institutions like banks are directly engaged to upgrade the social economy.

Many banks are trying to satisfy their existing and potential customers by providing various types

of loan facilities.

In this report I have discuss about all the arena of Credit Policy practicing by JBL, Sylhet branch.

You will find the practical idea how they conduct their loan operations. You will be experienced

with the information about their loan section. Which I have discussed descriptive in this report. I

hope my findings and analysis will meet the standard and will serve the desired purpose.

There have some strength, weakness, opportunities and threats which are prevailing in JBL. I

believe that the bank will get an overall picture from my report to overcome their drawbacks and

enhance their opportunities.



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Table Of Contents Pages

Chapter one: Orientation of the Study ...........................7

1.1 Introduction: ................................................................7................................................................................................................................................. 7

1.2 Objective of the study: ..................................................................................................8

3.5 Types of credit facilities provided by Jamuna Bank Ltd: ..............................................33



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Chapter one: Orientation of the Study

1.1 Introduction:

Internship is a system by which we can familiarize ourselves with the practical situation. Moreover,we can bridge up the gap of the theoretical knowledge and practical situation. As an indispensable

part of BBA program, I was placed in JBL for completing my internship. I was rotated all the desks

of JBL to learn their day-to-day act ivies.

Banking Industry is one of the most promising industries of our country. The importance of this

sector revealed through its contribution in the economic growth of the country. This sector

accelerates economic growth through mobilizing funds from surplus unit to the deficit unit.

Banking Industry is moving towards rapid changes due to technological innovation and diversified

needs of its customers.

Banks deal with the most important factor of the economy i.e. Money. It commonly streams funds

from surplus unit to deficit unit and through this it facilitated the efficient allocation of the

resources as well as accelerated economic growth.

Jamuna Bank is more sensitive about their customer service. On my observation at Sylhet Branch, I

have seen they are serving culture oriented banking service. They serve what the customer really

expects from them. Surprising matter is that they even help customers to write their cheque, deposit

receipt, A/C opening form, pay order, DD that means they just help them from all sides. Online

banking system of Jamuna bank is in satisfactory level though Sylhet branch are not getting the full

fledged facilities of this technology because their online system is based on V-sat which should be

broad band to access swiftly.

In this report, I have discussed almost about Credit Department How they do their Credit portfolio

measurement, classified loan, how they measure total loan and advance, daily activities, how they

treat customers, how they manage their credit policy, and how they coordinate their daily activities.

I have analysis credit management (loan and advance).



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1.4 Methodology of the Report:

A wide range of literature will reviewed to gather necessary information about the subject matters

of this study. These literatures include the texts, profile, annual reports, documentation; different

Manuals etc. The data collected for this study was the means of a survey. The survey will be done

on the customers and staff of the Bank by personal observation and interview and some data will

be collected from the journal and website of Jamuna Bank Ltd. A thorough and insightful

observation will be conducted on the various Administrative, Interventional and Marketing

philosophies, approaches and practices to collect necessary information. Discussion with the staffs

and other related Persons to generate standard information for the study are also a comprising tool

and also important instructions from the project supervisor.

Collection of primary data: I have collected many of the data and information from my practical

experience and queries from the officers while doing my internship at Jamuna Bank Ltd.

Information and data regarding products & services, banking operations, organization structure,

management personnel and policies were collected from this source.

Literature review: A wide range of literature has been reviled to gather necessary information

about the subject matters of this study. These literatures include the texts, profile, annual reports,

and documentation, different Manuals etc.

Observation: A thorough and insightful observation has been conducted on the various

Administrative, Interventional and Marketing philosophies, approaches and practices to collect

benchmark information.

Working involvement: Study and information gathering has been vitally conducted through

involvement in work interventions, administration and other activities.

Field visits: Visit to the field level activities has generated vital information and enhanced the

study greatly.

Discussion: Discussion with the staffs and other related persons have generated benchmark

information for the study as a comprising tool and enhanced it towards a holistic point of view. I

have also received important instructions from my project supervisor.



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1.5 Limitation of the study:

There were some problems while I doing internship. A wholehearted effort was applied to conduct

the internship and to bring a reliable and fruitful result. In spite of having the wholehearted effort,

there exit some limitations, which acted as a barrier to conduct the program. The limitations were:-

Sometimes I was assigned to do some jobs without explaining why this work is to be done.

This situation has created a lot of problems to understand why a specific function is being

performed.

Another problem is concerned with data collection. JBL starts from 1999 , so there are

shortage of sufficient data for comparing. Moreover, the bank has supplied me the annual

report only for one year.

Another problem is time constraint. It is not enough time to prepare such a report.

Because of bank secrecy they are disagreeing to reveal important information related to

credit management.

A well-organized paper requires sufficient data. The sources of primary data are not easily

available.

Articles and books on this subject are not available.



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Chapter Two : An Overview of Jamuna Bank Ltd

2.1 History of JBL:

Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994

with its Head Office at Chini Shilpa Bhaban, 3, Dilkusha C/A, Dhaka-1000. The Bank started its

operation from 3rd June 2001.

Jamuna Bank Limited is a highly capitalized new generation Bank with an Authorized Capital and

Paid-up Capital of Tk.1600.00 million and Tk.390.00 million respectively. Currently the Bank has

19 (nineteen) branches 9 in Dhaka, 1 in Gazipur, 4 in Chittagong , 3 in Sylhet and 2 in Naogaon

(including five Rural Branches).

The Bank undertakes all types of banking transactions to support the development of trade and

commerce of the country. JBL's services are also available for the entrepreneurs to set up new

ventures and BMRE of industrial units.

Jamuna Bank Ltd., the only Bengali named new generation private commercial was established by

a group of winning local entrepreneurs conceiving an idea of creating a model banking institution

with different outlook to offer the valued customers, a comprehensive range of financial services

and innovative products for sustainable mutual growth and prosperity. The sponsors are reputed

personalities in the filed of trade, commerce and industries.

The Bank is being managed and operated by a group of highly educated and professional team with

diversified experience in finance and banking. The Management of the bank constantly focuses on

understanding and anticipating customers needs. The scenario of banking business is changing day

by day, so the bank's responsibility is to device strategy and new products to cope with the

changing environment. Jamuna Bank Ltd. has already achieved tremendous progress within only

two years. The bank has already ranked as one of the quality service providers & is known for its

reputation.

At present the Bank has real-time centralized Online banking branches (Urban & Rural) throughout

the Country having smart IT-Backbone. Besides these traditional delivery points,



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the bank has ATM of its own, sharing with other partner banks & Consortium throughout the

Country.

The operation hour of the Bank is 9:00 A.M. To 5:00 P.M. from Sunday to Thursday with

transaction hour from 9:00 A.M. to 3:00 P.M. The Bank remains closed at Friday and Saturday

including government holidays.

Jamuna Bank offers different types of Corporate and Personal Banking Services involving all

segments of the society within the purview of rules and regulations laid down by the Central Bank

and other regulatory authorities. Their corporate slogan is Your Partner for Growth.

2.2 Vision & Mission :

Vision of the bank:

To become a leading banking institution and to play a pivotal role in the development of the

country.

Mission of the bank:

The Bank is committed to satisfying diverse needs of its customers through an array of

products at a competitive price by using appropriate technology and providing timely

service so that a sustainable growth, reasonable return and contribution to the development

of the country can be ensured with a motivated and professional work-force.

Objectives of the Jamuna Bank Ltd:

To earn and maintain CAMEL Rating 'Strong'.

To establish relationship banking and improve service quality through development of

Strategic Marketing Plans.

To remain one of the best banks in Bangladesh in terms of profitability and assets quality.



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To introduce fully automated systems through integration of information technology.

To ensure an adequate rate of return on investment.

To keep risk position at an acceptable range (including any off balance sheet risk).

To maintain adequate liquidity to meet maturing obligations and commitments.

To maintain a healthy growth of business with desired image.

To maintain adequate control systems and transparency in procedures.

To develop and retain a quality work-force through an effective human Resources

Management System.

To ensure optimum utilization of all available resources.

To pursue an effective system of management by ensuring compliance to ethical norms,

transparency and accountability at all levels.

2.3 Corporate Strategies of Jamuna Bank Ltd:

To manage and operate the Bank in the most efficient manner to enhance financial

performance and to control cost of fund.

To strive for customer satisfaction through quality control and delivery of timely services.

To identify customers' credit and other banking needs and monitor their perception towards

our performance in meeting those requirements.

To review and update policies, procedures and practices to enhance the ability to extend

better service to customers.

To train and develop all employees and provide them adequate resources so that customers'

needs can be reasonably addressed.



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To promote organizational effectiveness by openly communicating company plans,

policies, practices and procedures to employees in a timely fashion.

To cultivate a working environment that fosters positive motivation for improved

performance.

To diversify portfolio both in the retail and wholesale market.

To increase direct contact with customers in order to cultivate a closer relationship between

the bank and its customers.

2.4 Board of Directors & Sponsors:

Chairman

1. Mr. Sakhawat, Abu Khair Mohammad

Vice Chairman

2. Mr. Md. Ismail Hossain Siraji

Directors

3. Engr. A. K. M. Mosharraf Hussain

4. Engr. Md. Atiqur Rahman

5. Al-Haj Nur Mohammed ---- (Chairman of Jamuna Bank Foundation.)

6. Mr. Md. Tajul Islam

7. Al-Haj Md. Rezaul Karim Ansari

8. Mr. Md. Belal Hossain

9. Mr. Md. Mahmudul Hoque

10. Mr. Farhad Ahmed Akand

11. Mr. Mr. Kanutosh Majumder

12. Mr. Gazi Golam Murtoza

13. Mr. Mohammad Nurul Alam

14. Mr. Md. Motior Rahman (MD CC)

http://www.jamunabankbd.com/profile/chairman.htmhttp://www.jamunabankbd.com/profile/vc.htmhttp://www.jamunabankbd.com/profile/chairman.htmhttp://www.jamunabankbd.com/profile/vc.htm


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Sponsors

1. Al-Haj M. A. Khayer

2. Mr. Arifur Rahman

3. Mr. Golam Dastagir Gazi (Bir Protik)

4. Mr. Fazlur Rahman

5. Mr. M. N. H. Bulu

6. Mr. Md. Sirajul Islam Varosha

7. Mr. Md. Irshad Karim

8. Mr. Shaheen Mahmud

Company Secretary

Mr. Md. Anwar Hossain

Executive Vice President



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2.5 Organizational Structure of Jamuna Bank Ltd:

Organizational Structure of JBL

Chairman

Managing Director

Deputy Managing Director

Senior Executive Vice President

Senior Vice President

Vice President

Assistant Vice President

First Assistant Vice President

Senior Executive officer

Executive officer

First Executive officer

Probationary Officer

Officer



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2.6 JBL Group Profile:

Name: Jamuna Bank Limited

Incorpor Date of Incorporation: 03 June, 2001

Assets 16,863,765,215 at 31st December 2005

Head Office: Chini Shilpa Bhaban, 3, Dilkusha C/A, Dhaka-

1000.

Name of the Chairperson

of the board:

Mr. Sakhawat, Abu Khair Mohammad

Products: All types of Banking Products.Number of Branches: 43

Diversification of

Products & services:

Corporate Banking and Consumer Banking,

SME Banking.

Paid up capital: 1, 313.265,200

Profit after tax &

provision (2008):

Total Loan And Advance

31,646,629,499

21,036,861,012

Publicly Traded

Company:

Share quoted daily in DSE & CSE

Debit Card: Q CASH ATM Card

Banking Operation

System:

Consumer Banking, Corporate Banking,

Treasury, Online Banking.

Technology Used: Member of SWIFT, On-line banking, UNIX

based Computer System.

Earning per share (2008): 38.21

E-mail: [email protected]

Fax: 9565762

Phone: 9555141, 9570912-16



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2.7 The Management:

Managing Director

Mr. Md. Motior Rahman

Deputy Managing Director

Mr. M. A. Salam

Mr. Md. Alauddin Al-Azad

Senior Executive Vice President

Mr. M. Shamsul Huq Mr. A.K.M. Rashiduzzaman

Executive Vice President

Mr. Md. Yunus Ali Mr. Mirza Elias Uddin Ahmed

Mr. M. Shamsul Arefin Mr. Md. Habibur Rahman

Mr. Md. Abrar Hossain Khan Mr. Md. Zobaidul Islam

Senior Vice President

Mr. Shahedul Alam Khan Mr. A. K. M. Saifuddin Ahamed

Ms. Nur-E-Jannat Begum Mr. Mahbubul Huq Choudhury

Mr. Md. Balayet Hossain Mr. Manzurul Ahasan Chowdhury

Mr. Mahboob Alam Choudhury Mr. Muhammad Ali Ashraf Mr. Md. Anwar Hossain Mr. Md. Nazmul Hossain

Mr. Md. Elias Ali Akanda Mr. Khorshed Ahmed Nayeem

Vice President

Mr. Md. Zashim Uddin Mr. Mokhlesur Rahman

Mr. Md. Mofazzal Hossain Mr. Ghulam Mustafa

Mr. Monsur-Uz-Zaman Mr. Ahmed Nawaz

Mr. Md. Belal Hossain

Mr. Khandaker Zia Hassan

Senior Assistant Vice President

Engr. S.M. Anisuzzaman Mr. Ashim Kumar Biswas

Mr. Md. Kamal Uddin Mr. A. H. M. Monjur Morshed

Muhammad Bazlul Huq Mr. Mr. Malaik Montasir Reza

Mr. Mr. S. M. Jamal Uddin Mr. Md. Fazle Elahi Chowdhury

Mr. Md. Monirul Alam Chowdhury Mr. Anwar Hakim

Mr. Md. Mokshed Ali Hawlader Mr. Md. Shamsur Rahman Majumder

Syed Shakir Uddin Mohd. Munir Mr. Md. Harunoor Rashid

Mr. Md. Shahidul Islam Mr. Sikder Mohammad Ali

Mr. Md. Mostafizur Rahman Mr. Md. Abdullah

http://www.jamunabankbd.com/profile/md.htmhttp://www.jamunabankbd.com/profile/md.htm


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Mr. Md. Abdus Sattar Mr. Iqbal Akram Khan

Md. A.F.M. Quamrul Hassan Mr. Parvez Ahmed Khan

Mr. Md. Zahurul Islam Khondoker Mr. Mohammad Azam

Mr. Md. Shahid Ullah Mr. Md. Yasin Siddiqui

Mr. Sayed Shakir Uddin Md. Munir Mr. Md. Shah Alam

Mr. Chowdhury Reza Shahzaman Mahmud Mr. Borhan Uddin Ahmed

Assistant Vice President

Mr. A.K.M. Shah Alam Mr. Md. Raisul Alam

Mr. Md. Nazrul Islam Mr. Md. Mizanur Rahman

Md. Mofazzal Mamun Khan Mr. Md. Masudur Rahman

Mr. Sudatta Sebak Barua Mr. Md. Hafizul Haque

Mr. Md. Nurul Islam Khan Mr. Abu Rushd Md. Zubair

Mr. Md. Ayub Ali Mr. Md. Mozharul Haque

Mr. Md. Abu Syed Md. Yousuf Mr. Md. Jamil Uddin Akhter Mr. Md. Abul Hamid Chowdhury Mr. S. M. Ashafuddoulah

Mr. Md. Mustaq Ahmed Rizvi Mr. Md. Mahfuzul Karim

Mr. Md. Abdul Mannan Mr. Mohammed Shaharior Islam

Mr. Md. Billal Hossain Mr. Md. Mominul Abedin

Mr. Sadhan Kumar Chakma Mr. Md. Abul Bashar Mazumder

Mr. Md. Molla Belayet Hossain Mr. Md. Shahnewaz Sarker

Mr. Md. Ariful Ferdous Mr. Md. Majibur Rahman

Mr. S. M. Mofizur Rahman Mr. Md. Shahid Ullah

Mr. Md. Farukuzzaman Mr. M. A.Wadud

2.8 Commitments to the Clients:

The bank is a customer driven modern banking institution. It is a competence center where

quality customer service is both a source of professional pride and a recipe for success. The

defined commitments to the clients are:

Belief in professionalism

Personalized banking service based on mutual trust

Continuity of facilities

Use of new and latest banking technology in service

Building life-long customer banker relationship

Responding quickly to customer needs



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Sharing value and belief

Tie with customers thinking

Highest safety

Time saving one point service

Mutual growth

Financial advice

Solving customers problems

1.9 Customer Service and Automation

It is a fully online based bank. Every operation is done by online. It will extend fully automated

services with quickness and accuracy. JBL shall use latest banking technology to reinforce internal

control, improve the accuracy of records maintained, to facilitated introduction of new products

and services, to reduce cost and increases productivity. Bank starts computerized banking

operations from day one. There is plan for on-line banking service. The Jamuna bank is cordially

committed to increase the online banking activities.

1.10 Creed of JBLs personnel

Service to the nation hard work

Flexibility

Discipline and obedience

Constructive thought

Honesty and Fairness

Quest for professional excellence

Goal orientation

Adjustment and assimilation



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2.11 Corporate goal

Steady return to shareholders equity

Deep Commitment to the society

Well-being of employees

Personalized customer service in good days and in adversity

Strong capitalization

Competitive pricing of Products and services

High standard business ethics

Fully automated banking service

Making our leading rewarding to the borrowers

We shall allocate corporate resources to areas having the greatest growth opportunities and

national interest.

2.12 Operational Areas:

Jamuna Banks operational areas encompass:

Export and Import handling and financing

Commercial Banking

Corporate banking

Project Finance

Syndicate

Investment Banking

Consumer Credit Scheme

Mortgage loan

Retail banking

Internet and Telephone banking

Lease Financing



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2.13 Business Areas of Jamuna Bank Ltd:

Jamuna Bank Limited consists of some major functional divisions. Those are as follows:

A. Corporate Banking Division

-------Foreign Trade & Treasury

-------Credit Administration (Loan and Advance)

B. General Banking Division

C. Financial & Admin Division

D. Personal Banking Division

E. IT division

2.14 SWIFT:

Jamuna Bank Limited has recently become a member of SWIFT (Society for Worldwide Inter-

bank Financial Telecommunication). SWIFT is a member owned co-operative, which provides a

fast and accurate communication network for financial transactions such as Letters of Credit, Fund

transfer etc. By becoming a member of SWIFT, the bank has opened up possibilities for

uninterrupted connectivity with over 5,700 user institutions in 150 countries around the world.

Advantages of SWIFT are as follows:

It is most secured.

It is swift. Massage can be received or transmitted faster than any other means.

It is accurate. No distortion of message occurs during transmission as it uses digital system.

Cost effective.

Several terminals can be used to process the messages.



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Chapter Three: Credit Procedure of Private Commercial Bank

3.1 Definition of Bank:

The name bank is derived from the Italian word banco which means "desk/bench" and used

during the Renaissance by Florentine bankers, who used to make their transactions above a

desk covered by a green tablecloth. However, there are traces of banking activity even in

ancient times.

A Bank is a financial institution whose task is to channelize funds from surplus unit to deficitunit in the form of loans and advances to generate sufficient spread for its sustainable

existence.

According to Crowther, a bank collects money from those who have it to spare or who are

saving it out of their incomes, and it lends this money to those who require it.

According to Kinley, a bank is an establishment which makes to individuals such advances of

money as may be required and safely made, and to which individuals entrust money when not

required by them for use.

In short, from the above, the term Bank in the modern times refers to an institution having the

following features:

It deals with money. It accepts deposits and advances loans.

It also deals with credit; it has the ability to create credit. i.e., the ability to expand its

liabilities as a multiple of its reserves.

It is commercial institution; it aims at earning profit. .

It is a unique financial institution that creates demand deposits which serve as a medium of

exchange and, as a result, the banks manage the payment system of the country.



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3.2 Objectives of Bank:

The objectives of a bank can be looked at from three different perspectives of the three key parties

to the banking activities: the bank owner, the Govt. and the bank client

From the bank Owners perspective:

Earning Profit: Just like any owner(s) of a commercial institution, a bank owners main

objective is to earn profit, which is achieved mainly through monetary exchanges.

Rendering Service: Banks provide different types of services to the government and people

of the country.

Good Will: In order to earn profit through rendering services, banks need to have a lot of

good will, may be a bit more than other commercial institutions.

Raising Efficiency: To earn maximum profit, banks need to provide efficient service for

which they require expert workforce.

From the bank Governments perspective:

Issue of Notes and Currencies: Since civilizations have moved along from the barter

system, it has been the objective of the Government of different countries to provide its

economy with a proper exchange media through issuance of notes and currencies through

banks, which also take upon the duty of maintaining the system.

Capital Formation: The Government wants that bank assist in the macroeconomic objective

of capital formation by encouraging people to participate in saving.

Capital Investment and Industrialization: The Government as a part of their secondary

macroeconomic objective wants the bank to assist in capital investment and

industrialization by lending out their accumulated capital.

Money Market Control: Government tries to stabilize the money market through banks.

Employment: As a part of their primary macroeconomic objectives, they expect banks to

provide employment for its people.

Advice on Financial Matters: Since banks hire lot of financial expert and advisors, it often

seeks advice from banks to help them develop policies.



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From the bank Clients perspective:

Deposit: One of the banks main objectives is to accept its clients deposits.

Safety: Providing safekeeping of its clients monetary possessions and valuables is another

one of banks essential objectives.

Advisors and Consultants: Banks provide its clients with advisors and consultants to help

them chalk out an appropriate saving plan.

Representatives or Trustees: Both the clients and government rely on the bank to act as

their representatives and trustees of monetary exchanges activities.

Raising Living Standard: Providing interests against their deposits, banks help their client

to improve their living standards.

3.3 Commercial Bank and Its Important Function:

Generally, the term Commercial Bank refers to that category of banks that raises funds by

collecting deposits from businesses and consumers via checkable deposits, savings deposits,

and time (or term) deposits. It makes loans to businesses and consumers. It also buys corporate

bonds and government bonds. Its primary liabilities are deposits and primary assets are loans

and bonds. Some important among various function of commercial bank are:

Accepting Deposit

Advances of Loans

Credit Creation

Agency Functions

General Utility Function.

3.4 What is credit?

The word credit is derived from Latin word Credo meaning I Believe. It is usually defined as

ones ability to buy with a promise to pay. From the bankers point of view, credit is the confidence

of the lender on the ability and willingness of the borrower to repay the debts at a future date.



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People use the credit if they have with financial institutions, businesses, and individuals to obtain

loans. And they use the loans to buy goods and services.

The credit a person has typically determines how much they will be permitted to borrow, for what

purpose, for how long, and at what interest rates.

The level of "confidence" lenders have in potential borrowers depends on many factors. A person's

income is an indicator of a person's ability to repay, particularly when compared to the amount of

debt they already have. The amount of borrowing a person has already done and how well they

handled repayment is an indicator of their intention to repay.

3.4.1 Why use credit?

The reasons people borrow are varied and personal. Loans allow you to obtain goods and services

today, such as homes and automobiles, and spread the cost over time. This makes these purchases

more affordable than they might otherwise be. Most Americans could not afford homes or cars

without the ability to borrow.

Many people who have built up their savings use loans instead because they consider rebuilding

their savings more difficult than repaying the loan. Many people who already have the money to

pay for items use credit cards because it is more convenient and safer than using cash or checks.

They just pay the full balance when the bill comes.



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Chapter Four : Credit Policy Of JBL (Sylhet Branch)

3.1 Introduction:

A credit policy is an important wing of any bank. The banks asset is its interests against loans it

distributes to its customers. One of the major profits earned by bank is through its credit that it

lends to its customers. The JBL is a leading bank in loans and advances, which grants loans to

various business and industrial sectors. Although some precautionary policies are taken intoaccount yet, the amounts of defaults are pretty high!

Jamuna Bank Ltd. is a new generation bank. It is committed to provide high quality financial

services/products to contribute to the growth of G.D.P of the country through stimulating trade and

commerce, accelerating the pace of industrialization, boosting up export, creating employment

opportunity for the educated youth, poverty alleviation, raising standard of living of limited income

group and overall socio-economics development of the country.

In achieving the aforesaid objectives of the bank., credit operation is of paramount importance as

the greatest of the total revenue of the bank is generated from it, the success of a bank, therefore,

depends on how efficiently and judiciously it makes use of its available resources. In other words,

prudent & efficient management of its very essential for the success of a bank. The ability to judge

the genuineness, character and cried worthiness of borrower is an inseparable prerequisite for

quality asset; In order to provide a board guideline for the Credit Operation towards achieving the

objectives of the Bank, for efficient and profitable development of its mobilized resources and also



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to administer the credit portfolio in the most efficient way, a clearly defined, well planned,

comprehensive and appropriate credit of the bank in necessary.

With this end in view, a credit policy of the bank is hereby formulated with provision for revision

and refinement from time to time as may be warranted by the change of the circumstances due to

the passage of time to suit the requirement of the bank.

3.2 Credit Policy of JBL:

One of the most important ways, a bank can make sure that its loan meet organizational and

regulatory standards and they are profitable is to establish a loan policy. Such a policy gives loan

management a specific guideline in making individual loans decisions and in shaping the banks

overall loan portfolio. In Jamuna Bank limited there is a credit policy which the bank uses in case

of providing loan facility to their customer. It has well designed policy for providing different kind

of loan which is cover in the credit manual of the bank.

3.3 Credit Principles of JBL:

JBL Credit Policy shall be based on the following principles:

Safety

Security

Expansion and segregation

Earning and profitability

Quick return

Avoidance of high risk

Control and monitoring

Welfare

Integrity and expertise

Value creation

Social commitment



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National interest

JBL strategies are:

a) General:

The Bank shall provide suitable credit services and products for the markets it operates.

Loans and advances shall normally be financed from customers deposits and not out of

short term temporary funds or borrowing from other Banks.

Credit will be allowed in manners which will in no way compromise the Banks standards

of excellence and to customers who will complement such Standards.

All Credit extension must comply with the requirement of Bank Companies ACT-1991 and

Bangladesh Banks instructions as may be amended from time to time.

b) Administration:

The administration of the loan shall ensure compliance of all laws and regulations at both

local and global levels.

Proper analysis of credit proposals is complex and requires a high level of analytical ability.

To make the overall credit portfolio of the Bank healthy, proper staffing of the credit

departments shall be done through placement of qualified officials who have got the right

aptitude, formal training in finance, credit risk analysis etc.

Lending in areas from where repayment and interest servicing performance deteriorates

shall be identified at the early stage and closely monitored in order to avoid loan losses.

Customers who show sign of weakness in loan repayment shall be put on a watch-list.

Related security against loans shall be monitored and reviewed by a separate unit not

connected with the credit approval process on a regular basis in order to assess the collect

ability of the loans and effectiveness of the security.

At all levels of processing of loans & advances (To be approved by Management/Board),

Cases have to be evaluate and recommended through credit committees.

3.4 Types of Credit:



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Bangladesh Banks latest guidelines have subdivided different kinds of lending into 7 sectors for

fixation of interest by the Individual Banks on competitive basis reviewing the prevailing market

condition and monetary policy of the country.

Loans and advances have primarily been divided into major groups:

a) Fixed term Loan: These are the advances made by the Bank with fixed repayment

schedules. The term of loan are defined as follows:

Short term : Up to 12 months

Medium term : More than 12 and up to 36 months

Long term : More than 36 months

b) Continuing Credit: These are the advances having no fixed repayment schedule but have

an expiry date at which it is renewable on satisfactory performance. Further all categories of loans

have been accommodated under the 7 prime sectors as under:

i. Agriculture:

Credit facilities to the agricultural sector under this category. It subdivided into two major

heads:

a) Loans to Primary Producers: This sector of apiculture refers to the credit facilities

allowed to production units engaged in farming, fishing, forestry or livestock. Loans to

processors or traders of agricultural products are to be categorized as agricultural loans.

Loans to tea-garden for, production are treated as agricultural loan, but loans to tea-gardens

for export should be treated under the category Export Credit similarly medium and

loping years loans to tea-garden are categorized as industrial term lending.

b) Loans to input dealers/distributor: It refers to the financing allowed to input dealers and

(or) distributors in the agricultural sector. Agricultural loans may include short, medium



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and long term as well as continuing credits. As such, it may fall under the head, (Loan

General, Cash Credit).

ii. Term Loan for Large & Medium Scale Industry: This category of advance

accommodates the medium and long term financing for capital structure formation of new

industries or for BMRE of the existing units who are engaged in manufacturing goods and

services. Term financing to tea garden may also be included in this category depending on

the nature and size. As the financing under this category has repayment schedule it falls

under head Loan (General).

iii. Term Loan to Small & Cottage Industries:These are the medium. And long term loans allowed to small & cottage industries [Small

industries are presently defined as those establishment whose total investment in capital

such as land, building, machinery and equipment (excluding taxes and duties) does not

exceed 30 million take and investment in machinery and equipment (excluding taxes and

duties) does not exceed 10 million take cottage industries also fall within this definition.

Bangladesh Bank gives inters subsidy @ 3% to the bank on loans extended under this

category. No short term or continuing credits are to be including. Medium & Long term

waver credits are also including under this category. Like the Large & medium Scale

Industry it is also allowed in the form of Loan (General)/Hire-Purchase/Lease Financing.

iv. Working Capital:

Loans allowed to the manufacturing units to meet their working capital requirements,

irrespective of their size-big, medium or small, fall the category. These are usually

continuing credits and as such fall under the head Cash Credit.

v. Export Credit:

Credit facilities allowed to facilitate export of all items against Letter of Credit and/

confirmed export orders fall under this category. It is accommodated under the heads

Export Cash Credit (ECC), Packing Credit (PC), Foreign Documentary Bills Purchased

(FDBP), and Local Export Bills Purchased etc.

vi. Commercial Lending:

Short-term loans and continuing allowed for commercial purposes other than export fall

under this category (LIM/LTR/PAD/CC/Loan-Gen, etc.)



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vii. Others:

Any loan that does not fall in any of the above categories is considered under the category

OTHERS which include SOD/ Loan for (1) Transport equipments (2) Construction

works including housing (3) Work order finance (4) Personal Loans/ Hire Purchase etc.

3.5 Types of credit facilities provided by Jamuna Bank Ltd:

Jamuna Bank limited, the highly capitalized private commercial bank in Bangladesh has introduced

various types of loan facilitates requirement of valued customers and growth of their business

houses. Generally it can be classified in to two categories:

1. Funded and

2. Non funded

1. Funded Credit Facilities: Any type of credit facility which involve direct outflow of banks

fund on account of the borrower is termed as funded credit facilities may be classified in to four

types:

Loan

i. Demand loan

ii. Term loan

iii. Project loan

iv. House building loan

Cash crediti. Cash Credit (Hypothecation)

ii. Cash Credit (Pledge)

Overdrafts

i. Secured overdrafts (SOD)

Bill purchased and discount

i. Inland bill purchased and discount



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ii. Foreign bill purchased and discount

Against Import Bills (bills under L/C i.e. BLC )

Against Imported Merchandise(LIM)

Against Trust Receipts (LTR)

2. Non-Funded Credit Facilities: Though these types of credit facilities are primarily non-

funded in nature but at times it may turn in to funded facilities. As such, liabilities against this

type of credit facilities as termed as Contingent Liability. The facilities are:

Letter of credit

Bid Bond

Performance bond

Advance payment guarantee

Foreign counter guarantee.

The process of creating charge over the assets is called perfection of security. Charging a security

means making it available as a cover for a credit. Not only security has to be good but also the

method of charging should be legal and perfects. There are different types of charge created on

securities considering types of assets, nature of credit and the degree of control over the debtors

properly required by the banker.

The common ways of charging securities are as follows.

Lien

Pledge

Hypothecation

Mortgage

Assignment

St-off

From whom documents to be obtained: Document to be obtained from the following:

i. Borrower

ii. Holder of the instrument such as FRD, BSP, ICB unit

etc.iii. Owner of the property



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3.6 Types of Loans and Advances:

1) Term Loan:

a) Loan (General):

Short term, Medium term & Long term Loans to individual/firm/ industries for a specific

purpose but for a definite period and generally repayable by instilments fall under this head.These types of lending are generally repayable by instilments fall under the categories (1)

Large & Medium Scale Industry and (2) Small & Cottage Industry. Very often term

financing for (i) Agriculture & (ii) Other lending are also included here.

House building loan (General & Staff):

This kind of loans is two types- Residential and commercial.

Purpose of the loan:

Construction of residential house

Completion of under construction house

Purchase of Flat/Apartment

Construction of commercial complex for sale of space/shop/flat.

Construction of multistoried building/apartment for sale of flats.

Construction of commercial complex for rental purpose.

Projected Size of building for applying for loan is up to six storied for residential and ten

storied for commercial purpose.

Proposed site of the house/project must be well communicated by puce road of minimum

12 feet.

c) Lease Financing:



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Lease means a contractual relationship between the owner of the asset and its user for a specified

period against mutually agreed upon rent. The owner is called the lesser and the user is called the

Lessee.

Jamuna Bank Ltd., the highly capitalized private Commercial Bank in Bangladesh has introduced

lease finance to facilitate funding requirement of valued customers & growth of their business

houses.

Lease Items:

Factory equipment

Medical equipment

Machinery for Agro Based Industry

Construction equipment

Office equipment

Generators, Lift & Elevators for commercial place.

Sea or River Transport.

Computer for ITS Education Center.

Vehicles like luxury bus, Mini bus; Taxi cabs cars, Pick-up, CNG.

2) Time Loan:

This is one time financial accommodation for short period maximum 12 months to meet some

specific purpose. The loan adjustable within the validity and not renewable and no transaction is

allowed.

3) Continuous Loan:

a) Cash Credit:

Borrower selection is very much important for this type of product. It is an arrangement between

the customer and the banker, where the customer is allowed to borrow a certain limit. This is an

arrangement where the customer doesnt need to withdraw the entire amount at a time. The

borrower can draw money whenever required. Interest is not charged on the whole amount

available but on the amount withdrawn. Two types of cash credit are: cash credit pledge and cash

credit hypothecation. In both cases the insurance must be 10% above the limit. For example, if we

have goods of Tk two lac (200000) then he insured amount should be two lac twenty thousand

(220000).



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i) Cash Credit (Pledge):

Customer can receive Cash Credit Pledge rather than taking cash Credit fully.The possession of

the goods belongs to the bank and the ownership of the goods belongs to the client (who in this

case is mostly the importer). This happens when an importer imports goods taking loan from the

bank and when the goods arrive at the port cannot make payment to the bank. Therefore, the bank

and the client makes an arrangement that the possession of the goods would be under the bank and

al payment received after selling of the goods would be deposited to the bank against the loan

borrowed by the client. The goods stored in the storeroom under lock and key is by supervision of

the bank.

ii) Cash Credit (Hypothecation):

In case of cash credit hypothecation the possession of goods is not under the bank. Unlike the cash

credit pledge, the possession of goods is under the client. This type of advance is not encouraged

and takes place on a very rare occasion based on the bank / client relation, provided that the bank

has immense confidence in the client. This type of loan is normally accompanied with mortgage of

immovable properties.

b) Over Draft:

Overdraft is in general allowed on a current a/c operated upon by cheque. There is no limit to the

number of times a client can make deposit or withdraw from an O/D account. Interest is charged

based not on the total amount allowed for overdraft but on the actual amount that has been

withdrawn. Three types of overdraft are very popular:

i) Temporary Overdraft (TOD):

This is allowed only to valued customers to honor their important cheque without any prior

arrangement.

ii) Clean Overdraft (COD):

When overdraft is allowed with no other security except the personal security of the borrowers,

such overdraft is called clean overdraft.

iii) Secured Overdraft (SOD):



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Secured overdrafts are allowed against securities. This is generally given to contractors or suppliers

to carry on their construction works and supply order and to business personals to carry on their

trades and business.

- SOD (General):

These are advances allowed to individual/firms against financial obligation (i.e. lien on

FDR/PSP/BSP/ Insurance Policy/ Share etc). This may not be a continuous Credit.

- SOD (OTHERS):

Advances allowed against assignment of work order for execution of contractual work falls under

this head. This advance is generally allowed for a definite period and specific purpose i.e. it is not a

continuous credit. It falls under the category SOD OTHERS.

4) SME Loan:

SME Loan is special financing facility for small and medium sized trading, manufacturing and

service industries spread in the surrounding areas of our Branches and SME Centers across the

country. The product offers term loan/lease finance/hire purchase facilities for the purpose of

working capital finance, fixed assets purchase or lease or expansion of business premises under

equal monthly installment loan facility or structuraral repayment method.

As per ACSPD Circular-08 dated 26/05/2008, Small and Medium Enterprise (SME) is defined as

under:

SME Enterprise:

Classification Fixed Asset(Excluding Land & Building)

Maximum Number ofEmployees

Trading/ Service Sector BDT-50,000.00 to

BDT-50,00,000.00

25

Manufacturing Sector BDT-50,000.00 to

BDT-1,50,00,000.00

50

Medium Enterprise:

Classification Fixed Asset

(Excluding Land & Building)

Maximum Number of

Employees

Trading/ Service Sector BDT-50,00,000.00 toBDT-10,00,00,000.00

50



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Manufacturing Sector BDT-1,50,00,000.00 to

BDT-20,00,00,000.00

150

SME Loan is four types:

a. Capital Loan

b. Deposit Top up Loan

c. Capital Machinery Loan

d. Women Entrepreneur Loan

a) Capital Loan:

Most of the Small Enterprise (SE) customers suffer from capital Shortage. Business is raising

concern and to survive in the market, capital is essential for further expansion. In most Small

Entrepreneurs do not own adequate immovable property that can be accepted by basis collateral for

Loans. Movable assets that the SE can provide are rarely accepted as principal security for loans.

To overcome this problem, Jamuna Bank Ltd. has come forward with a new product for SE

customers named as Capital Loan.

Under this Product, if the customer has regular cash-flow to pay installments, then further security

shall not be insisted other than the hypothecated stock and items financed and personal guarantee

of the customer as well as third party guarantor(s). Loan amount BDT-5.00 Lac to BDT-10.00 Lac.

b) Deposit Top up Loan:

Most of the Small Enterprise (SE) customers suffer from capital Shortage. But capital is essential

for further expansion of business. In general, the Small Entrepreneurs do not own adequate

immovable property and at the same time movable assets that SE can provide are rarely accepted as

principal security for loans. To overcome this problem, Jamuna Bank Ltd. has come forward with a

new product for SE customers under which loan amount shall be given on the basis of certain

percentage of FDR amount named as Deposit Top up Loan.

Under this Product, if the loan amount is covered by FDR up to 30% of the loan amount and the

customer has regular cash-flow to pay loan installments, then further security shall not be insisted



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other than the hypothecated stock and items financed and personal guarantee of the customer as

well as third party guarantor(s). For repeat as well as experienced others banks good customer, this

security clause may be relaxed and we may take FDR amount up to 25% of the loan amount. Loan

amount BDT-5.00 Lac to BDT-50.00 Lac.

c) Capital Machinery Loan:

Business is an on going process and to survive in the market, new machinery & vehicle with new

technology is essential. To overcome this problem, Jamuna Bank Ltd. has come forward with a

new product for SE customers named as Capital Machinery Loan.

Under this product, if the customer is able to provide at least 20% of machinery in the form of FDRand has regular cash-flow to pay loan installments, then further security may not be insisted other

than personal guarantee of the customer as well as third party guarantor(s).

d) Women Entrepreneur Loan:

Most of the Women Entrepreneurs suffer from capital Shortage. But capital is essential for

business expansion. Most of the bankers do not show their interest for financing in Women

Entrepreneurs business concern. To overcome this problem, Jamuna Bank Ltd. has come forward

with a new product for WE customers named as Women Entrepreneur Loan.

Under this Product, if the Women Entrepreneurs has regular cash-flow to pay installments, further

security shall not be insisted other than the hypothecated stock and items financed and personal

guarantee of the customer as well as third party guarantor(s). Loan amount BDT-5.00 Lac to BDT-

10.00 Lac.

5) Retail Banking:

a. Consumer Credit Scheme

b. Auto Loan

c. Salary Loan Personal Loan

d. Any purpose Loan

a) Consumer Credit Scheme (CCS):



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This is the type of loan available to customers then they want to make use of the sum of purchase

households items like refrigerator, air conditions, computer etc. this is a special type of credit

scheme of the JBL. In order to get this CCS, me customer has to have his own contribution into

buying the good of amount 20% and the bank would provide the rest 80%. The loan amount is

provided by the bank at an interest rate of 148%, where 14% is the amount of interest, 4% being

the service charge and the rest 2% is the provision for risk. This loan amount is repayable on

installment basis in a period of 12-24 months.

3.7 Procedure of Loan Classification:

The loan classification procedure for all types of loan is governed by the guidelines contained inBCD Circular no 34 issued by Bangladesh Bank, in 1989 and subsequently revised partially

through BRPD Circular no 16, issued in 1999. After that there was another BRPD Circular (No. 16

dated may 14, 2001) circulated that brings some changes in case of continuous & demand loans.

1) General Principles:

a) Responsibility Each Schedule Bank expects BKB. RAKUB. and BSB.

b) Inspection: the department of banking Inspection and agricultural Credit Inspection department,

Bangladesh Bank inspect the classification, interest suspense and provisioning carried out by the

banks.

c) Branch level action: Classification, interest suspense calculations and provisioning calculations

should be done so that the results are available at both the head quarters and the branch level on a

loan-by-loan basis.

2) Types of classified loan (C.L.):

a) C.L.-1: Summary of classified loan

b) C.L.-2: Cash Credit (SOD)

c) C.L.-3: Demand loan

d) C.L.-4: Term loan up to 5 years

e) C.C.L.-5: Agricultural / Micro credit



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Categories of loans and Advances of bank:

a. Un-classified: The repayment of loans and advances are regular.

b. Special Mention Account: Early warning mechanism to look at accounts with potential

problems on focused manner.

c. Sub- standard: The repayment of loan and advances are irregular but reasonable prospect of

improvement.

d. Doubtful debt: It is unlikely to be repaid but special collection efforts may result in partial

recovery.

e. Bad/ loss: There is little chance of recovery of loans and advances.

3) Type of Classified loans:

a. Continuous loan:

The loan, which has no particular repayment schedule, but contains date of expiry,

credit limit is called continuous loan. e.g. CC, OD etc.

Basis of classification:

Irregular: Next day after the date of expiry, if not adjusted/ renewed at

expiry date.

Substandard: Un recovery for more than 3 months but less than 6 months.

Doubtful: Un recovery for more than 6 months but less than 12 months.Bad/loss: Un recovery for more than 12 months.

b. Demand Loan:

The loans which is payable only after demand of bank. Moreover, if any contingent

on other liabilities that is turned into forced loan (not sanction as regular loan

earlier) is be treated as demand loan. e.g. Forced LIM, PAD, FBP, IBP etc.




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Substandard: Un recovery for more than 3 months but less than 6 months.

Doubtful: Un recovery for more than 6 months but less than 12 months.

Bad/loss: Un recovery for more than 12 months.

c. Fixed Term Loan:

The loan, which is repayable within a particular period of fane as per repayment

schedule, will be termed as fixed term loan.


If any installment is left un recovered within the scheduled date, the amount falling due on account

of un recovered installment will be classified as Overdue Installment.

1. Fixed Term Loan which is repayable within a maximum period of 5 years:

Substandard: Overdue installment equals or exceeds the amount repayable within 6

months.

Doubtful: Overdue installment equals or exceeds the amount repayable within 12 months.

Bad/loss: Overdue installment equals or exceeds the amount repayable within 18 months.

2. Fixed Term Loan which is repayable within after 5 years.

Substandard: Overdue installment equals or exceeds the amount repayable within 12

months.

Doubtful: Overdue installment equals or exceeds the amount repayable within 18 months.


If the fixed term loan is repayable in monthly installment then the amount of recoverable

installment will be equal to the sum of 6 installments (monthly). Similarly, in case of

quarterly repayable installment total amount repayable within 6 months will be equal to the

amount of the total of 2 quarterly installments.

d. Short term agricultural and Micro-credit:

Short-term credit will include credit extended to Agricultural sector and it is

repayable within a period not exceeding 12 months. The short-term micro-credit will be that which



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will not exceed an amount of Tk. 10,000.00 and will be repayable within a period not exceeding 12

months.

Irregular: If not recovered within the scheduled date as per contract of the credit.

Substandard: After exceeding 12 months as irregular credit.

Doubtful: After exceeding 36 months as irregular credit.


Provision of classified Loan:

Substandard: This classification contains accounts where irregularities have occurred but where

such irregularities are considered to be either technicalities or temporary in nature. The maincriterion for a sub standard advance is that despite these technical or temporary irregularities

no loss is expected to arise. These accounts will require close supervision by management to ensure

that the situation does not deteriorate further. A Provision -@ 20% of the base is required for in this

classification.

Doubtful debt: This Classification contains debt where doubt exists over the full recoverability of

the principal and interest. Although a loss is anticipated it is not possible at this state to quantify

the exact extent of that loss. A Provision -@ 50% of the base is required for in this classification.

Bad/Loss: There facilities are considered to be un collectible or worthless even after all security

has been exhausted and shall be provided for @ 100% of the base.

3.8 Processing of Credit Proposals:

Credit proposals shall be prepared in the approved format of the Bank Enclosing / furnishing

documents / papers / information:

1. Pre-sanction Inspection Report containing KYC



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2. Request for credit limit of customers

3. Project Profile/ Profile of Business

4. Copy of Trade License duly attested

5. Copy of TIN Certificate

6. Certified copy of Memorandum and Articles of Association, Certificate of Incorporation,

Certificate of Commencement of Business, Resolution of Board of Director, Partnership

Deed (where applicable)

7. Personal Net Worth Statement of the Owner/Director/Partner in Banks format

8. Valuation Certificate in Banks format along with photograph of collateral security with

detail particulars on the back duly authenticated by the Branch Manager

9. Three years Balance Sheet and profit and Loss A/C

10. CIB Enquiry Form duly filled in

11. Credit Report from other Bank

12. Stock Report duly verified

13. Statement of A/C (CD/SB/CC) for the last 12 months.

14. Declaration of the customer of the name of sister/allied concerns and liabilities with other

Banks, if any and an undertaking to the effect that they have no liability beyond those

declared.

15. In Case of L/C proposal, detailed performance of L/C during the last year.

16. Whether the applicant is Shareholder/Director of Jamuna Bank Limited as per definition of

Banking Companies Act.

17. Financial Analysis to be prepared by the Branch Manager based on the financial

performance of the company and should show trends in sales in sales/profitability, liquidity,

leverage etc.

18. Justification/ consideration for the facility.

3.9 Approval Authority:

The Banks existing policy is to centralize the delegated power to be vested to Committees. This

policy is adopted with the view to minimize the risk by screening the proposal at the approval

stage. The sharing of knowledge and experience for taking decisions enables the management to

avoid the unnecessary risk. The following guidelines are to be applied in the approval/sanctioningof Loans.



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The credit approval authority must be delegated in writing from the MD and Board (as

appropriate) and records of all delegation to be retained in CRM.

Before approving any facility the authority must be ensured that the borrowers CIB reportas obtained is updated and clean.

Delegated approval authorities should be reviewed annually by MD/CEO/Board.

The credit approval function should be separated from the marketing/relationship

management (RM) function.

Approvals must be evidenced in writing, or by electronic signature. Approval records must

be kept on file with the Credit Applications.

All credit risks must be authorized by Committee within the authority limit delegated tothem by the MD/CEO/Board. The pooling or combining of authority limits should not be

permitted.

Credit approval should be centralized within the CRM function. Regional credit centers

may be established; however, all large loans must be approved by the Head of Credit and

Risk Management or Managing Director/CEO/Board or delegated Head Office Credit

Executives.

The aggregate exposure to any borrower or borrowing group must be used to determine theapproval authority required.

Any credit proposal that does not comply with Lending Guidelines, regardless of amount,

should be referred to Head Office for Approval.

MD/Head Office Credit Committee / Head of Credit Risk Management must approve and

monitor any cross-border exposure risk.

Any breaches of lending authority should be reported to MD/CEO, Head of Internal

Control, and Head of CRM. It is essential that executives/members of the Committee charged with approving loans

have relevant training and experience to carry out their responsibilities effectively

3.10 Credit Approval Authority of Jamuna Bank Limited (JBL):

3.10.1 Credit approval Authority of JBL:



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Credit decisions are heart of all credit works. Generally branch manager and the credit in-charge of

a branch are held responsible for appraising of a loan proposal. The customer request for credit

limit and the credit officer prepares a credit memo and send it to the head office, credit division.

After taking all the relevant information from the branch the head office credit division sent the

credit memo to the credit committee. Credit committee of JBL is comprised of Managing Director

and other top-level executives, that is, DMDs and EVPs. If credit committee is convinced about the

merit of the proposal then it is sent the broad of directors. The board is final authority to approve or

decline a proposal. The whole process takes a month or more. In JBL broad meeting occurs once

in every week.

3.10.2 Credit Evaluation Principles

Some principles or standards of lending are maintained in approving loans in order to keep credit

risk to a minimum level as well as for successful banking business. The main principles of lending

are given below:

Liquidity:

Liquidity means the availability of bank funds on short notice. The liquidity of an advance means it

repayment on demand on due date or after a short notice. Therefore, the banks must have to

maintain sufficient liquidity to repay its depositors and trade off between the liquidity and

profitability is must.

Safety:

Safety means the assurance of repayment of distributed loans. Bank is in business to make money

but safety should never be sacrificed for profitability, to ensure the safety of loan. The borrower

should be chosen carefully. He should be a person of good character & capacity as well as bank

must have to maintain eligible number of security from borrower.

Profitability:



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Banking is a business aiming at earning a good profit. The difference between the interest received

on advances and the interest paid on deposit constitutes a major portion of the bank income,

besides, foreign exchange business is also highly remunerative. The bank will not enter into a

transaction unless a fair return from it is assured.

Security:

The security offered for an advance is an insurance to fall bank upon incases of need. Security

serves as a safety value for an unexpected emergency. Since risk factors are involved, security

coverage has to be taken before a lending.

3.11 Pre-disbursement Compliance

When the credit proposal are approved the credit officer must have to be ensured that the

disbursement of the credit facilities must comply with the directions written in the credit policy and

circular made by time to time along with checking all the following terms and conditions.

The officer of Loan Administration must collect the acceptance of the customers of the

terms and conditions on the duplicate copy of the sanctioned advice.

They will thoroughly examine and ensure that the subject credit facility does not contradict

to any law, rules and regulation of the country, Bangladesh Bank and Deed of the Mortgage

and power of the Attorney to be drafted and executed under the Supervision of the Banks

Legal Advisor.

Lawyers certificate to the effect that all the legal formalities (Equitable/ Registered

Mortgaged) has been properly created on the land and building in favor of the bank & bank

has acquired the effective title of the property.

Registered power of attorney has been collected form the borrower (contractor) assigning

the work order favoring the JBL and the power of attorney has been registered with the

work order given agency and they have agreed that they will issue all the cheques favoring

JBL.

The legal documents of the vehicle have been obtained.

Collection of the satisfaction certificate in respect of all the documents both legal and

banking from the lawyer.



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Entry has been made in the Safe -in and Safe-out register and the documents are preserved.

After being satisfied all the above terms and conditions the credit in-charge will disburse

the loan amount to the client.

3.12 Documentation of the Loan:

Documentation is obtaining such agreement where all the terms and condition and securities are

written and signed by the borrower. It specifies rights and liabilities of both the banker and the

borrower. In documentation each type of advances requires a different set of documents. It also

differs with the nature of securities. The documents should be stamped according to the stamp Act.There are no hard and fast rules of documentation and it varies from bank to bank. Generally, the

documents are taken in the case of a secured advance by JBL:

i. Demand promissory note: Here the borrower promises to pay the loan as and when

demand by bank to repay the loan.

ii. Letter of arrangement.

iii. Letter of continuity.

iv. Letter of hypothecation of goods and capital machinery.

v. Stock report: This report is used for OD and CC. In this report, information about the

quality and quantity of goods hypothecated is furnished.

vi. Memorandum of deposit of title deed of property duly signed by the owners of the

property with resolution of Board of Directors of the company owning the landed.

vii. Personal guarantee of the owners of the property.

viii. Guarantee of all the directors of the company.

ix. Resolution of the board of directors to borrow fund to execute documents and

completes other formalities

x. Letter of Revival.

xi. Letter of lien for advance against FDR.

3.13 Security:



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Security accepted against facilities shall be properly valued and shall be affected in

accordance with the laws of the country in which the security in held. An appropriate

margin of security will be taken to reflect such factors as the disposal cost or potential price

movements of the underlying assets. Professional surveyors duly checked by the bankofficials should do the valuation of the real asset.

The following securities are acceptable:

Ownership of lease assets i.e. the lease assets will remain in the name of the bank; in

addition the following collaterals are acceptable to the bank.

Collateral securities in the form the land and building, fixed deposits, other cash collateral,

wage earners development bond having liquidation value covering at least covering 100%

of the amount of finance.

Deposits of listed A category share, national saving certificates, ICB unit certificates,

assignment of life insurance policies; bank or insurance guarantee will also be acceptable as

collateral securities. Creation of charge of the fixed assets of the existing industrial unit

requiring BMRE.

3.14 Credit Administration:

The principal elements of Bank credit administration are as follows:

a. Credit approval

b. Credit files maintenance

c. Change documents maintenance

a) Credit Approval:

The primary factor determining the quality of the Banks credit portfolio is the ability of each

borrower to honors, on a timely basis, all credit commitments made to the Bank. The authorized



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credit personnel prior to credit approval must accurately determine this. The credit approval

process shall be governed by the Bank Credit policy framework;

It can be summarized under the following heads:

Credit Evaluation Principal:

To have the optimum return from the deployed funds generated by the different kinds of lending,

more emphasis shall be given on refund of loans and advances out of funds generated by the

borrowers from their business activities (cash flow) instead of realization of money by disposing of

the securities held must be adhered to at every level of approval. The lending risk analysis tools

containing of both the business risk and security risk and security risk provides overall rating of

risk in a particular loan under the following leading process:

Asses risk of failure to repay.

Decide whether to accept or reject a loan proposal.

Set price and terms.

Obtain sanctioning document disburse loan.

Monitor performance and ensure repayment/recovery.

The most pertinent and prime of the process is assessment of risk failure to repay which deals with

the overall lending risk combining risk and the security risk in a matrix derive out of,

Six segments of the business risk:

i. Supply risk

ii. Sales risk

iii. Performance risk

iv. Resilience riskv. Management competence risk

vi. Management integrity risk and

Two segments are security risk:

i. Security control risk

ii. Security covers risk.



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Credit Risk Evaluation:

The importance of a detailed and complete credit risk assessment for each facility. And customer

relationship cannot be over emphasized. The steps that should be followed in carrying out such an

assessment are out in the Bank credit manual and facilities must be supported by a complete

analysis of the proposed credit. A comprehensive and accurate appraisal of the risk in every credit

exposure of the Bank is mandatory. No proposal can be put up for approval unless there has been a

complete written analysis. It is the absolute responsibility of the proposing officer to ensure that all

necessary documentations are collected before the proposal is sent sanction officer.

Credit files maintenance:

The Credit file on each facility shall contain all information necessary to facilitate ready

monitoring of that facility. It should contain a through history of the customer relationship to; help

credit officers track any problems assist a newly assigned credit officer in understanding the

customer and make the lending process transparent.

The maintenance of credit files shall be disciplined to force the lending officer to obtain all relevant

documents and encourage him to consider all relevant information when analyzing customer risk.

Complete credit files prevent loan losses resulting from imperfect security documentation. Primary

items in credit files include:

Section (A)

Credit application, Credit approval notes/analysis. The analysis should contain information about

the borrower, credit purpose, credit repayment sources, details of collateral security with valuation

and guarantees; it should-also contain an assessment of the competence and quality of the

borrowers management, the general economic and competitive environment of the borrowers

industry and any other pertinent factors, which may affect the borrowers ability to repay the

facility.

Section (B):

Evidence of credit approval and data upon which approval was granted together with any

comments, if appropriate, copy of letter and loan agreement, a check list along with copies of all



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legal and banking documents obtained/to be obtained.

Section (C):

Details and 6 monthly-updated information of all related facilities to the same customer group

(group liabilities information).

Section (D):

All supporting data such as financial statements and analysis thereof, reference investigation result,

CIB report and notes of all discussions with the borrower and other relevant parties with paper

clipping.

Section (E):

Correspondences, call reports, site visit report, stock report etc. Each credit file shall be maintained

in a secured location and access restricted to authorized personal. Copies of the information may be

kept where regular access is required.

Charge documents maintenance:

a) All legal and banking documentation and register of security shall be maintained, at the Branch,

separately from the credit file in a location of utmost security. Such documentation may include:

All charge documents as prescribed by the Bank and local laws for the relevant credit facility

- Signed credit agreement

- Signed guarantees or other evidence of credit security or collateral agreement.

b) All legal & Banking documentation i.e. charge documents shall be kept in fire proof safe under

dual custody of Branch Manager or his designated alternate and another officer. A register of

charge/security documents shall be maintained under the supervision of Branch Manager.

c) A check list of charge documents should be maintained in credit file under section-B.

3.15 Credit Monitoring and Review of JBL



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3.15.1 Credit Monitoring and Review:

It is the last step in credit policy and procedure framework of JBL. Credit monitoring and review is

very important, because it ensures proper utilities and repayment of bank fund. Credit monitoring

and review feature of JBL is concerned was assessing the quality of different type of loan.

Periodic review and follow up should, inter-alias aims at ensuring:

That conduct (Turnover, regularity of repayment etc) of the borrowing accounts during the

period under review has been satisfactory or as expected.

The account is not having excess over limit

The terms and condition of the sanctioned letter are strictly followed.

The value of the collateral security is adequate.

There is not any unfavorable situation in market, economy and political conditions, which

may endanger the reliability of the borrower account.

The analysis of the borrowers business performance and comparison of the projected and

actual to find any deviations.

Apparent profitability from the loans.

3.16 Credit Recovery:

Advances granted in any form are repayable either on demand or on the expiry of the

validity period, or through agreed installments. When repayment is not forth coming in

accordance with the repayment terms, recovery efforts should be launched.

When the repayment pattern of the advance is such that continuance of the facility is not

worthwhile or while the advance allowed on installments has been defaulted or the advance

allowed confronts with the following circumstance advance should be recalled:

Borrower or the Guarantor dies.

Borrower or the guarantor has become insolvent.

Borrowing Company has been liquidated.

Partnership has been dissolved.



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Borrower does not come forward to renew the docu

Documents

Credeit Policy.al Amin