Chapter One

Introduction

1
1.1 Background of the Study:

Banking system of Bangladesh has gone through three phase of development of

Nationalization, Privatization and Financial Sector Reform. Bank Asia is the largest Private
Commercial Bank from beginning with new hope and promise to serve the countrymen.

A thorough credit and risk assessment should be conducted prior to the granting of loans, and
at least annually thereafter for all facilities. The results of this assessment should be presented
in a Credit Application that originates from the relationship manager/account officer (RM),
and is approved by Credit Management (CM). The RM should be the owner of the customer
relationship, and must be held responsible to ensure the accuracy of the entire credit
application submitted for approval. RM must be familiar with the bank’s Lending Guidelines
and should conduct due diligence on new borrowers, principals, and guarantors. It is essential
that RM know their customers and conduct due diligence on new borrowers, principals, and
guarantors to ensure such parties are in fact who they represent themselves to be.
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
bank’s overall loan portfolio. In Bank Asia Limited there is perhaps a credit policy but there
is no credit written policy.
The issue of credit management has a profound implication both at the micro and macro
level. When credit management is allocated poorly it raises costs to success full borrows,
erodes the fund and reduces banks flexibility in redirection towards alternative activities.
Credit evaluation decisions are important for the financial institutions involved due to the
high level of risk associated with wrong decision.
Adequately management credit in financial institution is critical for the survival and growth
of the financial institution. The issue of credit management is of even greater concern
because of the higher levels or perceived risks resulting from some of the characteristics of
clients, business conditions and economic environment in which they find themselves.

2
1.2 Objectives of the Study:

The main objective of the study is to evaluate the credit management practices of Bank Asia
Limited, Bahaddarhat Branch. To achieve the main objective following specific objectives
has been covered:

1. To highlight the overview of Bank Asia Ltd.

2. To identify the Credit related products of Bank Asia Limited.
3. To explore the credit management policies of Bank Asia Limited.
4. To examine the Credit performance of Bank Asia Limited, Bahaddarhat Branch.
5. To identify problems associated with Credit Management practices of Bank Asia
Limited & provide the corrective measures to overcome those.

1.3 Rationale of the Study:

This study is descriptive. The main Rationale of this study is as follows: The researcher got
idea about the banking sector of Bangladesh, investigate the bank’s credit functions and also
understand the recent Growth & practices in managing credit. It is all about the overall
performance of Bank Asia Ltd and its position in the banking industry. The research report is
an overview of BAL’s Credit Management System/Investment. There are a variety of
educational and career options in credit management.

1.4 Scope of the study:

Bank Asia Ltd. is operation widely with all branches all over the Bangladesh. This paper is
strictly confined Bank Asia Ltd. operation. The Internship Report is based on the observation
and studies during Bank Asia, Bahaddarhat Branch. According to the study at first researcher
will focus on the company’s background, management style, present status and specially the
products, profitability & performance of Bank Asia etc. The study has covered of credit
management of Bank Asia Ltd. for 5 years from 2014 to 2018.

3
1.5 Methodology of the Study:

The information incorporated in this report has been gathered from primary and secondary
sources. Apart from this, a review of related circular and office circular as well as face-to face
interview of the executives, officials and clients were carried out.

1.5.2 Data Collection

The Internship Report in completed by the information collected from secondary data.

Primary sources-
 Face-to-face conversation with the respective officers and staff of the Branch.
 Informal conversation with the clients.
 Practical work exposures from the different desks of the department of the branch.
 Relevant file and documents study as provided by the concerned officers.

Secondary sources-
 Unpublished data received from the branch.
 Annual Report.
 Banks record.
 Different paper of the bank.
 Various books, periodical seminar papers, training papers, manuals, Web site, etc.
related to the topic.

1.5.2 Analysis of Data

For the study the researcher has used correlation, ratio analysis, average for the analysis data,
standard deviation and covariance. The study has also used for absolute Growth analysis.

4
1.6 Limitations of the Study:

In every program or activities, one has to face numerous constraints. During preparation
period of this report, I have also faced some problems. These are as follows-

 Limitation of time was one of the most important factors that shortened the present
study. Due to time limitation many aspect could not be discussed in the present
study.
 Rush hours and business was another reason that acts as an obstacle while gathering
data.
 Confidentiality of data was another important barrier that was faced during the
conduct of this study. Every organization has their own secrecy that is not revealed
to others.
 Though I am one of their Internees, while collecting data on Bank Asia, personnel
did not disclose enough information for the sake of confidentiality of the
organization.
 Sufficient books, publications and figures were not available. If these limitations
were not been there, the report would have been more useful.
 One of the major sources of collecting information is the Organization’s web site.
But the web site is not up-to-date comprising with other Banks.

5
 Chapter Two
Overview of Bank Asia Ltd.

6
2.0 Introduction:

Conducting international business requires the proactive management of diverse and

uncertain variables. Risks associated with the political and legal climate, the business
environment, the economy, and the social culture are an ever present reality. Other risks stem
from limitations in legal jurisdiction, since international customers may not be subject to the
same laws and enforcement mechanisms as their foreign suppliers. Knowing how to manage
risk in international business can help to keep your company profitable around the world.
Do your homework before entering a foreign market. Do not enter any nation without being
fully aware of the unique risks and issues presented by that nation. Assess political risks and
the legal environment as well as the business and competitive environment, and develop
strategies to minimize or circumvent these risks. Study the histories of local and international
companies in the specific country and industry to gain deeper insight into what your own
experience may be like. Pay careful attention to exchange rates, including their histories and
expected future actions. Utilize the services of local consulting firms specializing in
international investment. These firms will have thorough knowledge of the challenges and
opportunities presented to international businesses in their specific country.
Conducting international business requires the proactive management of diverse and
uncertain variables. Risks associated with the political and legal climate, the business
environment, the economy, and the social culture are an ever present reality. Other risks stem
from limitations in legal jurisdiction, since international customers may not be subject to the
same laws and enforcement mechanisms as their foreign suppliers. Knowing how to manage
risk in international business can help to keep your company profitable around the world.

2.1 Historical Background

Bank Asia has been launched by a group of successful entrepreneurs with recognized
standing in the society. The management of the Bank consists of a team led by senior bankers
with decades of experience in national and international markets. The senior management
team is ably supported by a group of professionals many of whom have exposure in the
international market. Bank Asia Limited is a scheduled commercial bank in the private sector
established under the Banking Company Act 1991 and incorporated in Bangladesh as a
public limited company under the Companies Act 1994 to carry out banking business in
Bangladesh. It set milestone by acquiring the business operations of the Bank of Nova Scotia
7
in Dhaka, first in the banking history of Bangladesh. It again repeated the performance by
acquiring the Bangladesh operations of Muslim Commercial Bank Ltd. (MCB), a Pakistani
bank. In the year 2003 the Bank again came to the limelight with oversubscription of the
Initial Public Offering of the shares of the Bank, which was a record (55 times) in our capital
market's history and its shares commands respectable premium. The asset and liability
growth has been remarkable. Bank Asia has been actively participating in the local money
market as well as foreign currency market without exposing the Bank to vulnerable positions.
The Bank's investment in Treasury Bills and other securities went up noticeably opening up
opportunities for enhancing income in the context of a regime of gradual interest rate decline.
Bank Asia Limited started its service with a vision to serve people with modern and
innovative banking products and services at affordable charge. Being parallel to the cutting
edge technology the Bank is offering online banking with added delivery channels like ATM,
Tele-banking, SMS and Net Banking. And as part of the bank's commitment to provide all
modern and value added banking service in keeping with the very best standard in a globalize
world.

2.2 Vision of Bank Asia

Bank Asia's vision is to have a poverty free Bangladesh in course of a generation in the new
millennium, reflecting the national dream. Our vision is to build a society where human
dignity and human rights receive the highest consideration along with reduction of poverty.

2.3 Mission of Bank Asia

 To assist in bringing high quality service to our customers and to participate in the
growth and expansion of our national economy.
 To set high standards of integrity and bring total satisfaction to our clients,
shareholders and employees .
 To become the most sought after bank in the country, rendering technology driven
innovative services by our dedicated team of professionals

2.4 Objectives of Bank Asia

 Place customer’s interest and satisfaction as first priority and provide customers
banking product and services.
 Value addition to the stakeholders through attaining excellence in banking operation.
 Maintain high standard and transparency in dealings.

8
 Be a compliant institution through adhering to all regulatory requirements.
 Contribute significantly for the betterment of the society.
 Ensure high degree of motivation and dignified working environment for our human
capital and respect optimal work-life Bank Asia.
 Committed to protect the environment and go green

2.5 Corporate Information

Letter of intent received 24/02/1999

Letter of intent received 24/02/1999

First meeting of the Promoters held 15/04/1999
Certificate of incorporation received 28/09/1999
First meeting of the board of Directors 01/10/1999
held
Banking license received 06/10/1999
First branch license received 31/10/1999
Inauguration of Bank 27/11/1999
Date of IPO Subscription 23/09/2003, 24/09/2003
Date of first share trading in Bourse 08/01/2004
Date of agreement with CBANK ASIA 20/12/2005
Numbers of Promoters 22
Numbers of Directors 15
Date of first scrip less trading 30/01/2006
Date of publication of Prospectus 29/06/2003
Numbers of Branches 98
Number of SME center 6
Number of Islamic windows 5

9
2.6 Management Hierarchy
CHAIRM
AN
MANAGIN
G
DIRECTOR
(MD)

DEPOTI
MANAGING
DIRECTOR (DMD)

SENIOR EXECUTIVE VICE

PRESIDENT (SEVP)

EXECUTIVE VICE PRESIDENT (EVP)

SENIOR VICE PRESIDENT (SVP)

VICE PRESIDENT (VP)

FIRST VICE PRESIDENT (FVP)

ASSISTANT VICE PRESIDENT (AVP)

FIRST ASSISTANT VICE PRESEDENT (FAVP)

SENIOR EXICUTIVE OFFICER (SEO)

EXECUTIVE OFFICER (EO)

SENIOR OFFICER (SO)

OFFICER (OFF)

JUNIOR OFFICER (JO)

ASSISTANT OFFICER (AO)

2.7 Products & Services

10

BANKING OFFICER (BO)

 TRAINEE OFFICER (TO)

Bank Asia has on offer a broad array of innovative financial services specially designed to
match the specific requirement of the clientele ranging from large corporate houses, small
and medium enterprises, to private individuals. The team of professionals assists the clients
in finding the most appropriate financing package to help the clients realize their short-term
goals and long-term aspirations. Bank Asia offers several products and packages through
different banking systems. Such are-

Corporate Banking
Corporate Banking unit offers banking products and services to the corporate clients
customized to meet the specific needs of those organizations. Apart from the traditional
current and short-term deposit facilities, Bank Asia helps in import and export financing
through different services offered to their corporate clients. The products and services offered
by Bank Asia Limited to the corporate clients can be divided into the following categories –
 Corporate Credit: Overdraft, Import and Export Finance, L/C, Payments Against
Documents (PAD), Loan against Trust Receipt (LTR), Guarantees and Bonds, etc.
Bank Asia presents several effective credit schemes for corporate clients. Major programs
are:
 Working Capital Financing
 Term Loans
 Equity Financing
 Structured Finance

Other than these schemes the bank may arrange consultative and documentary services for
corporate clients. Thus Bank Asia supports big businesses and industries of the country in
their endeavor for expansion and growth.

Payments and Cash Management:

Management Services, Countrywide Payments/Countrywide Collections, etc.

Customized Loans:
Trade Services include Export Services, Import Services, Trade Express, Document Tracker
etc.

Electronic Banking:
Cash Management Services and Trade Services

11
International Trade, Remittance:
International Division at the Head Office is fully equipped with expertise including
computerizes operations to deal with foreign trade and foreign exchange operations of all
kinds including L/C, Bills, Travellers Cheques, Foreign Drafts, Remittances from
Bangladeshi staying abroad and handling students remittance studying abroad, etc. Such
operations are conducted through 18 AD (Authorized Dealer) branches throughout the
country. Bank Asia Ltd has launched Foreign Remittance in September 2003. Starting from a
unit under Scotia Branch, Dhaka, this operation is now handled by a dedicated team of young
energetic and yet highly experienced officers. Bank Asia, now-a-days, has Agency
Arrangement with 41 Exchange houses in various countries around the world like UK, USA,
Canada, UAE, Kuwait, Mauritius, Oman & Malaysia. Moreover, bank Asia brands like
Western Union, Xpress Money and Instant Cash Worldwide are also satisfactorily been
served by Bank Asia Ltd. Some other companies like Placid NK Corporation, IME,
Merchantrade, Choice Money Transfer etc. Has been one of the pioneers in supporting
environment friendly.

Collection from services;

During 2015the remittance inflows to the country stood at USD15.31 billion, inward
Remittance of Bank Asia was USD 552 million a 3% growth over the previous year. Bank
Asia’s position was 9th in 2015 among all the banks in Bangladesh.

Syndication Financing:
On many occasions, the financial requirement of the client, particularly for new investments
is so large that it is not possible for Bank Asia to meet the demand from the Bank’s own
resources, and also because of regulatory restrictions. In such cases the syndication
department is entrusted with the responsibility of raising the required funds through
syndication arrangement with other banks

Small and Medium Enterprises:

Bank Asia has entered into an agreement with South Asian Enterprise Development Facility
(a concern of the IFC) for Technical Assistance and training program for creating a Small
and Medium Enterprise lending segment. Under the agreement SEDF has conducted an in-
house diagnostics of the existing facility to assess the quality of corporate governance, credit

12
risk management structure, sales and delivery channels, quality of information technology,
and the MIS structure. Such a SME product named “Shachondo Loan” has already launched
in two semi-urban branches in Dhaka and Chittagong.

Retail Banking:
Retail Banking provides individual and self-employed customers with a wide range of
banking and related financial services. These includes –
Savings Account Any Branch Banking Current Account Short Term Deposit SMS Banking
Personal Instalment Loan Bonus Savings Schemes Real time online Banking Personal Credit
Deposit Pension Scheme (DPS) Evening Banking Fixed Deposits Monthly Benefit Plus (MB
+) Double Benefit Plus (DB +)

Branch Network:
Bank Asia intends to achieve to attain Bank Asia growth and expansion of its branch
network. Aiming to extend their service and to increase their reach rapidly to their growing
and valuable clients. Bank Asia always looking for opportunities for adding more branches to
their growing network.

ATM:
Bank Asia’s ATM Service has been well embraced by the clients since it provides them most
flexibility in handling cash money and ensures uninterrupted banking facilities round the
clock. In the face of growing demand they arranged for addition of new ATMS and set up 10
additional machines during the year 2007. Now they have ATMS of their own also they have
under share arrangements 20 ATMS of E-cash booths and 226 ATMS of Dutch Bangla Bank
Ltd.

Internet Banking:
Internet banking facilities change their business process, since many customers feel
comfortable to execute transaction through internet. The transaction through internet has
grown very fast in the recent year. Their internet banking further improved in 2007 and their
customer can change their profile, stop payment of issued cheques, see the status of cheques,
request a cheque book etc. In addition to existing facilities like fund transfer, Bank Asiaance
and transaction enquiry etc.

13
 Chapter Three
Credit Management Policy and
Procedures of Bank Asia Ltd.

14
3.1 Introduction

Credit is a contractual Agreement, in which a borrower receives something of value now,

with the agreement to repay the lender at some date in the future. One of the basic functions
of the bank is to deposit extraction and credit extension. And managing credit operations is
the crying need for any bank. The objective of the credit management is to maximize the
performing asset and the minimization of the non-performing asset as well as ensuring the
optimal point of loans and advances and their efficient management. The loan and credit
department is one of the most important departments of any bank. The money mobilized from
ultimate surplus units are allocated through this department to the ultimate deficit unit
(borrower). Success of this department keeps a great influence on the overall profit of a bank.
Again, Failure of this department may lead the bank to huge losses or even to bankruptcy.
Like any other bank Mercantile Bank’s credit division also tries to do their job perfectly.

3.1.1 Authorities involved in Credit Management of Bank Asia Ltd.:

1. Head Office is responsible for formulating Credit Policy for the Bank, for proper conduct
of advances in the Branches and for the system of control over them. They will delegate
business powers to Branch-in-charges, devise methods of forwarding credit proposals to
Head Office for sanction and instructions regarding submission of periodical returns.

2. Branch Manager is primarily responsible for all advances at his Branch. His responsibility
for proper conduct and safety of the advances of his branch is enormous. So he must exercise
common sense, wisdom, prudence and judiciousness in the use of powers delegated to him
and in recommending proposals to Head Office for sanction. In all cases, he must ensure that
Bank’s interests are fully safeguarded. The fact that an advance sanctioned by Head Office
does not, in no way, lessens the responsibilities of the Manager as proposals are initiated and
recommended by him.

3. Selection of the prospective borrower is the most vital point. The Branch Manager must
see that the selection of borrowers is judicious, the accounts of the borrowers are properly
conducted, the security is sufficient and in order, effective and constant follow-up and
supervision is made and the position of the borrowers have not deteriorated. He must
supervise the end-use of the Credits.

15
4. In respect of returns of Credits, even though the details are checked by a subordinate
officer, remains a primary responsibility of the Manager.

3.1.1.1 Credit Departmental Role as Sowing Below

Department Administrator, Policy:  Required Role
The person can be the Department Administrator (DA) or any other individual deemed
appropriate by the Budget Officer.  We recommend that this person be someone different
than any of the individuals in the other roles.  However, if no other option is available, we
strongly recommend that role overlap is limited to only the ‘Local Cash Handling Control
Manager or Cash Collection Point Supervisor’. Overlap with other roles will be allowed if
necessary provided the assignments are in compliance with the role overlap restrictions
described below.

Description of Role
 Maintain timely, accurate & effective communication with all local cash handling control
managers in the department.
 Update cash handling roles for all payment receipt locations at the sub-department level in
a timely and accurate manner.
 Monitor cash handling training compliance for all payment receipt locations in the
department.
Audit Control: None. If role overlap is necessary, we strongly recommend that it is limited
to only the ‘Local Cash Handling Control Manager & Cash Collection Point Supervisor’.

Sub-department Level
Policy:  Required Role
We recommend that this person be someone different than any of the individuals in the roles.
However, if no other option is available, it may be the same person as the ‘Cash Collection
Point Supervisor’.

Description of Role
 Maintain strong internal controls for payment collections at the payment receipt location
level and safeguarding against loss.
 Annually, or when staff roles change, review local cash handling procedures and update
as needed. At minimum, resubmits procedures every 3 years to AFR for approval.
16
 Notify the Departmental Cash Handling Role Administrator of changes in roles.
Audit Control: No overlap in roles except with ‘Departmental Cash Handling Role
Administrator & Cash Collection Point Supervisor’.

3.1.1.2 Biller
 Policy: Optional Role
we recommend that this person be a different individual than any of the other roles. However,
if no other option is available, it may be the same person as ‘Reconciler’.
Description of Role
 Create and send invoices.
 Record sales as appropriate.
 Update the accounts receivable system.
Audit Control: No overlap in roles except with ‘Reconciler’.

3.1.1.3 Cash Collection Point Cashier

 Policy: Required Role
We recommend that this person be a different individual than any of the other roles. 
However, if no other option is available, it may be the same person as ‘Credit Preparer'.
Description of Role
 Conduct cash transactions with customers
 Provide a receipt to customer paying in person.
 Endorse all checks immediately upon receipt with a restrictive University of Iowa
endorsement.
 Enter transactions into accounts receivable system, cash register or cash receipt
journal/log.
 Count the cash and submit the cash & supporting documentation to the Cash Collection
Point Supervisor at the end of their shift.
Audit Control:  No overlap in roles except with ‘Credit Preparer’.

3.1.1.4 Cash Collection Point Supervisor Policy:

Optional Role
We recommend that this person be a different individual than any of the other roles. 
However, if no other option is available, it may be the same person as ‘Local Cash Handling
Control Manager’.
17
Description of Role
 Monitor cash receipting functions.
 Authorize various transactions, such as refunds, voids, and cash drawer reconciliations.
Audit Control: No overlap in roles except with ‘Departmental Cash Handling Role
Administrator & Local Cash Handling Control Manager’.

3.1.1.5 Credit Preparer

 Policy: Required Role
We recommend that this person be a different individual than any of the other 5 roles. 
However, if no other option is available, it may be the same person as ‘Cash Collection Point
Cashier’.
Description of Role
 Retrieve & count cash receipts from the business day.
 Prepare the Credit.
 Store the cash in a secure location until it is credited.
 Deliver Credit to the bank or designated credit drop location.
 Submit accounting information through the e credit system.
 Deliver each validated credit slip/e credit form to the reconciler.
Audit Control: No overlap in roles except with ‘Cash Collection Point Cashier’.

3.1.1.6 Reconciler
 Policy: Required Role
We recommend that this person be a different individual than any of the other roles.
However, if no other option is available, it may be the same person as ‘Biller’.
Description of Role
 Verify that the Credit Preparer has credited all cash received.
 Cannot have access to the cash at any point, i.e., cash drawer or box, safe.
Audit Control: No overlap in roles except ‘Biller’.

18
3.1.1.7 Organization of Credit Management:

Fig-03: Organizational Set-up at Credit Division at Head Office

Source: Annual Report of the Bank Asia Ltd.

3.1.2 Credit policies Bank Asia Ltd.

The bank formulates its own credit policy keeping it flexible to accommodate changes that
are taking place. In line with the policy guideline issued by the Central bank from time to
time, at present, several credit schemas are on the offer, which received quit well response
from the customers and may help the bank to expand its customer base. The bank also
engaging in syndication with other banks for allowing large loans converging Bangladesh
bank‘s rules and regulation.

19
3.1.2.1 Policy Guidelines
This section details fundamental credit risk management policies that are recommended for
adoption by all banks in Bangladesh. The guidelines contained herein outline general
principles that are designed to govern the implementation of more detailed lending
procedures and risk grading systems within individual banks.

Lending Guidelines:
All banks should have established Credit Policies (“Lending Guidelines”) that clearly outline
the senior management’s view of business development priorities and the terms and
conditions that should be adhered to in order for loans to be approved. The Lending
Guidelines should be updated at least annually to reflect changes in the economic outlook and
the evolution of the bank’s loan portfolio, and be distributed to all lending/marketing officers.
The Lending Guidelines should be approved by the Managing Director/CEO & Board of
Directors of the bank based on the endorsement of the bank’s Head of Credit Risk
Management and the Head of Corporate/Commercial Banking. Any departure or deviation
from the Lending Guidelines should be explicitly identified in credit applications and a
justification for approval provided. Approval of loans that do not comply with Lending
Guidelines should be restricted to the bank’s Head of Credit or Managing Director/CEO &
Board of Directors. The Lending Guidelines should provide the key foundations for account
officers/relationship managers (RM) to formulate their recommendations for approval.

3.1.2.2 Credit Management Strategies

Making advances is the primary function of a bank. A major portion of its funds is used for
this purpose and this is also the major sources of bank’s income.
Loans are the right to receive payment or an obligation to make payment on demand or at
some future time on account of the immediate transfer of goods (securities).
Loans are the largest asset item, which generally account for half to almost three-quarters of
the total value of all banks assets. A bank’s loan account typically is broken down into
several groups of similar type loans.
The Loan and Advances made by the BAL can broadly be classified by following categories-
1. Continuous Loan
2. Demand Loan
3. Term Loan
4. Other Special Scheme

20
3.1.2.3 Steps Involved to Sanctioning a Loan

1. The applicant needs to apply in prescribed application such as ‘Form A’

2. Then (3) three additional form to be filled up.
 Inquiry form-CIB 1A (Provides such information as amount for fresh loan or
renews the loan.)
 Inquiry form- CIB 2A (If the applicant is an institution; all the information to
be provided by the owner)
 The inquiry form CIB-3A (Seeks the applicant to supply information of group
or related business concern)
3. Then the applicant gives a list of assets which can be kept as collateral. The applicant
will declare in faith that such assets offered as collateral are owned by the business
owner and are not already kept as collateral to other financial institution against any
sanction of loan or credit limit.
4. Then the bank makes the valuation of fixed assets (to be kept as collateral) to be
assessed and valued by independent inspection services. The inspection company
submits the survey report and provides an independent valuation of the assets that
were offered as collateral.
5. Then the bank will perform a lending risk analysis or LTA. The LRA is a kind of
assessment where some scoring is made on various risks to which the applicant’s
business or project is exposed. The scoring result is arriving at the level of risks of the
business or project. A detailed discussion or LRA is made later.
6. After the lending risk analysis net worth is calculated by subtracting total liabilities
from total assets. This net worth is calculated both for the organization and for the
individuals including the Managing Directors and Directors.
7. A prescribed form ‘Form B’ is to be filled in by case of proposal for loans and
advances for individuals, proprietorship, partnership limited company(private or
public), other bank’s loan proposal acceptance certificates. If the applicant has
received any sanction of loan or advance from other banks a certificate showing such
acceptance of loan proposed must be submitted.

3.1.2.4 Approval Process

The approval process must reinforce the segregation of Relationship Management/Marketing
from the approving authority. The responsibility for preparing the Credit Application should
21
rest with the RM within the corporate/commercial banking department. Credit Applications
should be recommended for approval by the RM team and forwarded to the approval team
within CRM and approved by individual executives. Banks may wish to establish various
thresholds, above which, the recommendation of the Head of Corporate/Commercial Banking
is required prior to onward recommendation to CRM for approval. In addition, banks may
wish to establish regional credit centers within the approval team to handle routine approvals.
Executives in head office CRM should approve all large loans. The recommending or
approving executives should take responsibility for and be held accountable for their
recommendations or approval. Delegation of approval limits should be such that all proposals
where the facilities are up to 15% of the bank’s capital should be approved at the CRM level,
facilities up to 25% of capital should be approved by CEO/MD, with proposals in excess of
25% of capital to be approved by the EC/Board only after recommendation of CRM,
Corporate Banking and MD/CEO.

3.1.3 Credit Products of Bank Asia Ltd.

Classification on The Basis of Time

On the basis of elements of time, bank credit may be classified into three heads:

Continuous loans:
These are the advances having no fixed repayment schedule but have a date at which it is
renewable on satisfactory performance of the clients. Continuous loan mainly includes “cash
credit both hypothecation and pledge” and “overdraft”.

Demand loan:
In the case of a demand loan, however, the drawing is only made at the time advance is
disbursed / sanctioned and thereafter no further drawings are allowed , but debits are raised
only in respect of interest and other charges till the entire loan is liquidated by partial or on
lump sum repayment. On demand loans interest is charged on daily balance periodically-
usually on quarterly basis.

22
Fixed Term loans:
These are the advances made by the bank with a fixed repayment schedule. Term loans
mainly include “consumer credit scheme”, “lease finance”, “hire purchase”, and “staff loan”.
The term loans are defined as follows:
i. Short term loan: Up to 12 months.
ii. Medium term loan: More than 12 months & up to 36 months.
iii. Long term loan: More than 36 months.

3.1.3.1 Operational Guidelines for Different Credit Facilities

Broadly, there are two types of loan such as-
1. Retail Loan And
2. Corporate Loan
For each different types of loan, credit officer have follow different steps to accomplish credit
activities appropriately. Each and every step is given below for various purposes of loan.
1. Retail Loan:
Retail loan can be classified into different types which are as follows-

A. Secured Overdraft (FO-FDR, DPS)

In case of Fresh loan:
 Receiving customer Application
 Receiving the Instrument (FDR, DPS) duly discharged by the client
 Verification of the Instrument, signature verification & lien marking from General
Banking Division
 Preparation of Office Note
 Preparation of Sanction Advice & get it accepted by the client
 Obtain charge documents from the clients
 Mail limit request form to Credit Admin, Head Office for limit insertion
 Deduct charges
 Stamping the charge documents
 Entry of Security Documents in the SISO Register
 Safekeeping of Security Documents in the Safety Vault.

23
In case of Renewal:
 Receiving customer Application
 Preparation of Office Note
 Preparation of Sanction Advice & get it accepted by the client
 Obtain charge documents from the clients
 Mail limit request form to Credit Admin, Head Office for limit insertion
 Entry of Security Documents in the SISO Register
 Safekeeping of Security Documents in the Safety Vault.

In case of Enhancement:
 Receiving customer Application
 Receiving new Instrument (FDR, DPS) duly discharged by the client
 Verification of the Instrument, signature verification & lien marking from General
Banking Division
 Preparation of Office Note
 Preparation of Sanction Advice & get it accepted by the client
 Obtain charge documents from the clients
 Mail limit request form to Credit Admin, Head Office for limit insertion
 Deduct charges
 Stamping the charge documents
 Entry of Security Documents in the SISO Register
 Safekeeping of Security Documents in the Safety Vault.

In case of Reduction:
 Receiving customer Application
 Ensure outstanding has brought down (By cash or encashment of FDR)
 Preparation of Office Note
 Preparation of Sanction Advice & get it accepted by the client
 Mail limit request form to Credit Admin, Head Office for limit reduction
 Return of Original Instrument (if adjustment by cash)
 Entry the release of Instrument in the SISO Register (Take client’s signature on the
register)

24
In case of closing the Account:
 Receiving customer Application with cheque book (if issued)
 Ensure adjustment of outstanding liability (By cash or encashment of FDR
 Mail limit cancellation request form to Credit Admin, Head Office
 Close the account
 Return of Original Instrument (if adjustment by cash)
 Entry the release of Instrument in the SISO Register (Take client’s signature on the
register)

And Follow-up:
 Issue Letters to the clients for renewal before one month of the expiry date.
 Call the clients for renewal at least one week before the expiry date.
 Issue Letters to the clients for payment of Interest/EOL within one week of each
quarter end.
 Call the clients for payment of Interest/EOL on regular basis.
 Regular update of the spread in line with the change of FDR interest rate
 Regular follow up of the EOL SOD Accounts so that outstanding does not exceed the
security (encashment) value.
 Regular follow up of the Expired SOD Accounts so that it does not become classified.

B. Personal Loan
Application & Disbursement:
 Receiving customer Application in prescribed form along with required documents &
Application fee.
 Receiving CIB Undertaking for the Applicant & Guarantor along with fee
 Scrutinize the Application Form & attached documents carefully
 Forward the Application Form & CIB Undertaking to Head Office (if found in order
and you are satisfied)
 Follow-up the progress of the file in Retail Banking Division
 Preparation of Sanction Advice & get it accepted by the client after getting approval
from Head Office

25
  Obtain signature on the charge documents from the client
 Obtain 3 unfilled Cheques from the client
 Ensure deposit of charges by the client in the link account
 Disburse the Loan by transferring the amount to client’s Savings Account after
Completion of documentation as per H.O. approval
 Stamping the charge documents
 Entry of Security Documents in the SISO Register
 Safekeeping of Security Documents in the Safety Vault.

Follow-up:
 After disbursement, ensure regular payment of monthly instalment by the clients
 Prepare the overdue list in the first working day of every month
 Call all the defaulting borrowers for recovery of overdue instalments throughout
month
 Call the Guarantors if the client is unreachable over phone or if the client breach
commitment of payment several times.
 Issue 1st reminder letter to client if 1 instalment due
 Issue 2nd reminder letter to client if 2 instalment due
 Issue 3rd reminder letter to client & guarantor if 3installment due and forward the
shadow file to Monitoring Unit, Head Office
 Visit client’s residence if above procedure does not work.

C. Home Loan

Application & Disbursement:

 Receiving customer Application in prescribed form along with required documents &
Application fee.
 Receiving CIB Undertaking for the Applicant & Guarantor along with fee
 Scrutinize the Application Form & attached documents carefully
 Visit the property to physically verify the possession & ownership and also obtain
valuation Report by the Surveyor

26
  Forward the Application Form & CIB Undertaking to Head Office (if found in order
and you are satisfied)
 Follow-up the progress of the file in Retail Banking Division
 Obtain 3 unfilled Cheques from the client
 Execute Tripartite Agreement as per Lawyer’s draft
 Complete all other documentation formalities as per H.O. approval
 Ensure deposit of all charges by the client in the link account
 Disburse the Loan vide Pay Order favouring Car Vendor after completion of
Documentation as per H.O. approval
 Stamping the charge documents
 Entry of Security Documents in the SISO Register
 Safekeeping of Security Documents in the Safety Vault.

Documentation:
 Obtain Charge Documents, Cheques, Tripartite Documents & Land related documents
before disbursement,
 Follow-up regularly whether registration formalities has been completed or not
 Obtain Title Deed, DCR, Mutation, Rent Receipt, DCC Holding Tax Receipt after
completion of registration of the Flat
 Obtain NOC for Mortgage if property
 Obtain Draft of Mortgage Deed from lawyer
 Complete Mortgage formalities in the concerned Sub-Registry office
 Obtain Certified Copy of Mortgage Deed
 Entry of Security Documents in the SISO Register
 Safekeeping of Security Documents in the Safety Vault.

2. Corporate Loan:
Again corporate loan can be classified under two types which are as follows-
A. Bank Guarantee
Case to Case:
 Receiving customer Application

27
  Receiving the Instrument (FDR) duly discharged by the client (if margin given by
FDR)
 Verification of the Instrument, signature verification & lien marking from General
Banking Division (if margin given by FDR)
 Preparation of Office Note
 Preparation of Sanction Advice & get it accepted by the client
 Obtain charge documents from the clients
 Draft the Bank Guarantee as per format & Print it.
 Pass issuance Entry in the system (taking required margin & deduct charges)
 Stamping the charge documents
 Entry of Security Documents in the SISO Register.

Amendments:
 Receiving customer Application
 Draft the amendment letter & Print it.
 Pass amendment Entry in the system (deduct charges)

Reverse:
 Receiving customer Application along with Original Bank Guarantee
 Pass reversal/closing Entry in the system (refund the margin)

Follow-up:
 After Expiry of the BG immediately inform the client to return the BG or extend time
 If the client does not come forward within 1 week, issue 1st Reminder Letter to the
beneficiary of BG giving 15 days time
 If the beneficiary does not return the BG within 15 days, issue 2nd Reminder Letter to
the beneficiary of BG giving 15 days time
 If the beneficiary does not return the BG within 15 days, issue 3rd & Final Reminder
Letter to the beneficiary of BG giving 15 days time
 If the beneficiary does not return the BG within 15 days, reverse the BG without the
original one.

B. SME

28
In case of New Proposal:
 Receiving customer Application along with required documents
 Receiving CIB Undertaking for the Applicant & owners along with fee
 Forward the CIB Undertaking to Head Office
 Scrutinize the attached documents carefully
 Visit client’s business places (office, factory, godown etc.) and proposed mortgage
property & prepares visit report
 Valuation of proposed mortgage property by enlisted surveyors
 Prepare & forward the Proposal to Head Office (if you are satisfied)
 Follow-up the progress of the file in SME Unit
 Preparation of Sanction Advice & get it accepted by the client after getting approval
from Head Office
 Obtain land related documents from the client and forward to Lawyer for vetting
 If the docs are in order get the draft of Mortgage Deed & other security documents(as
per sanction) from the lawyer
 Complete the Mortgage formalities in the concerned Sub-Registry office
 File charge with RJSC (if limited company)
 Obtain Notarized IGPA to sell Hypothecated Stock& Machinery (where applicable)
 Obtain signature on the charge documents from the client
 Obtain undated Cheques from the clients as per sanction
 Obtain Insurance Policy from the clients as per sanction
 Obtain Undertaking in 150 Taka stamp paper as per sanction
 Collect certified copy of Mortgage Deed
 Stamping the charge documents
 Entry of Security Documents in the SISO Register
 Insert Signboard on the mortgage property/factory and preserve a photograph of that
in the file
 Send all the Documents to lawyer for obtaining Letter of Satisfaction
 Safekeeping of Security Documents in the Safety Vault.
 Send Compliance Certificate to Credit Admin, Head Office with copy of LS

In case of Renewal & Enhancement:

29
  Receiving customer Application along with required documents (Stock Report,
Renewed Trade License)
 Receiving CIB Undertaking for the Applicant & owners along with fee
 Forward the CIB Undertaking to Head Office
 Scrutinize the attached documents carefully
 Visit client’s business places (office, factory, godown etc.) and proposed mortgage
property & prepares visit report
 Prepare & forward the Proposal to Head Office (along with security compliance
certificate & LS)
 Follow-up the progress of the file in SME Unit
 Preparation of Sanction Advice & get it accepted by the client after getting approval
from Head Office
 Obtain signature on the fresh set of charge documents from the client
 Obtain Insurance Policy (renewal) from the clients as per sanction
 Stamping the charge documents
 Entry of Security Documents in the SISO Register
 Safekeeping of Security Documents in the Safety Vault.
 Send Compliance Certificate to Credit Admin, Head Office
 Mail limits request form to Credit Admin, Head Office for limit insertion/
Disbursement.

Follow-up:
 Issue Letters to the clients for renewal before one month of the expiry date.
 Issue Letters to the clients for payment of Interest/EOL within one week of each
quarter end.
 Call the clients for payment of Interest/EOL on regular basis.
 Regular visit of the clients as per sanction letter prescribed frequency
 Collect Stock Report on regular basis from the clients as per sanction letter prescribed
frequency
 Collect yearly financials from the clients
 Regular follow up of the Expired OD Accounts & Term Loans/Leases with overdue
instalments so that it does not become classified.

30
3.1.3.2 Steps Involved to Sanctioning a Loan:
1. The applicant needs to apply in prescribed application such as ‘Form A’
2. Then (3) three additional form to be filled up.
 Inquiry form-CIB 1A (Provides such information as amount for fresh loan or
renews the loan.)
 Inquiry form- CIB 2A (If the applicant is an institution; all the information to
be provided by the owner)
 The inquiry form CIB-3A (Seeks the applicant to supply information of group
or related business concern)
3. Then the applicant gives a list of assets which can be kept as collateral. The applicant
will declare in faith that such assets offered as collateral are owned by the business
owner and are not already kept as collateral to other financial institution against any
sanction of loan or credit limit.
4. Then the bank makes the valuation of fixed assets (to be kept as collateral) to be
assessed and valued by independent inspection services. The inspection company
submits the survey report and provides an independent valuation of the assets that
were offered as collateral.
5. Then the bank will perform a lending risk analysis or LTA. The LRA is a kind of
assessment where some scoring is made on various risks to which the applicant’s
business or project is exposed. The scoring result is arriving at the level of risks of the
business or project. A detailed discussion or LRA is made later.
6. After the lending risk analysis net worth is calculated by subtracting total liabilities
from total assets. This net worth is calculated both for the organization and for the
individuals including the Managing Directors and Directors.
7. A prescribed form ‘Form B’ is to be filled in by case of proposal for loans and
advances for individuals, proprietorship, partnership limited company(private or
public), other bank’s loan proposal acceptance certificates. If the applicant has
received any sanction of loan or advance from other banks a certificate showing such
acceptance of loan proposed must be submitted.

3.1.4 Credit Disbursement of Bank Asia Ltd.:

31
Credit decisions are heart of all 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 prepare a credit officer prepares a credit memo and sends 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 MTBL 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 BAL board meeting occurs once in every week.

3.1.4.1 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. 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 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: 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 assets.

3.1.4.2 Disbursement:
The loan administration department performs the following responsibilities in connection
with the disbursement to ensure that:
a) All standard security and charge documents are in place.
b) Documentation check list has been prepared.
c) Credit administration department has duly authorized the disbursement.
d) A proper back up of all the documents is maintained in the computer system.
32
 e) A proper back up of all the documents is maintained in the computer system.
f) Incomplete documentation has received temporary waiver from the authority.
g) Pricing of the facility is appropriate.
h) All disbursements / drawings are in the form of approved credit facility.
i) Excess over limit are allowed under pre-fact approval.
j) A clean updated CIB report is obtained before disbursement.
3.1.4.3 Credit Documentation:
Credit administration department ensures the following in connection with documentation:
a) All approvals and documents are in place.
b) Documents are prepared in accordance with the approved terms and conditions and
are legally enforceable.
c) Vetting of required documents is done.
d) Protection of the bank's security interest.
e) Any exception from the standard loan facility is duly authorized from the Head of
Credit.

3.1.4.5 Credit Recovery of Bank Asia Ltd.:

The collection process for personal loans starts when the account holder has failed to meet
one or more contractual payment (Installment). It therefore becomes the duty of the
Collection Department to minimize the outstanding delinquent receivable and credit losses.
This procedure has been designed to enable the collection staff to systematically recover the
dues and identify / prevent potential losses, while maintaining a high standard of service and
retaining good relations with the customers. It is therefore essential and critical, that
collection people are familiar with the computerized system, procedures and maintain
effective liaison with other departments within the bank (Prudential regulations for consumer
financing 2004, Bangladesh Bank)

3.1.4.6 Credit Recovery functions:

The credit division performs the following recovery related functions:

a) Directly managing accounts with sustained deterioration (a risk rating of substandard
or worse)

33
 b) Determining work out plan / Recovery strategy.
c) Pursuing all avenues to maximize recovery, including placing customers into
receivership or liquidation as appropriate.
d) Ensuring adequate and timely loan loss provisions are made based on actual and
expected losses.
e) Keeping top management appraised of grade 6 or wore accounts.
1.1.4.6.1 Recovery Steps:

1. Contact by Original Credit:

When payments on loan or credit account, creditor may contact through the mail or call
attempt to collect the payments. These actions may continue for 30 to 60 days after first
delinquency according to the Discover Debt Freedom website. Creditor may also report
delinquency to all three major credit-reporting bureaus during this time. If creditor is
unsuccessful in obtaining payments needed to bring account current, creditor may sell debtor
account to a debt collection agency. This action can further damage credit score.

2. Confirmation of Debt:

A debt collector must first confirm the contact information he has for the debtor is accurate
and that the debt is bailed. The collector usually attempts to confirm the debt by contacting
the debtor either through the mail or over the phone.

3. Collection Calls:

The debt collection agency usually begins collection calls once it confirms that the debt is
valid. These collection calls are made in an attempt to contact the debtor and secure payment
for the debt or arrange a payment plan that can pay off the debt over time.

34
 Chapter Four
Credit Management Performance
of Bank Asia Ltd., Bahaddarhat
Branch

35
4.0 Credit Performance of Bank Asia Ltd., Bahaddarhat Branch

4.1 Performance of Loans and Advances of Bank Asia Ltd., Bahaddarhat

Branch.
Year Loans and Advances Growth
(Figure in Corer BDT)
2014 42.33 ------
2015 39.89 -5.76%
2016 51.88 30.06%
2017 52.84 1.85%
2018 64.10 21.31%
Source: Annual Report, 2014-2018

Graphical Representation of above Percentage Figures:

Total Loans and Growth

Advances 35.00%
30.06%
70 64.1 30.00%
60 52.84 25.00% 21.31%
42.33 39.89 51.88
50 20.00%
40 15.00%
30 10.00%
1.85%
20 5.00%
10 0.00%
-5.00% 2015
-5.76% 2016 2017 2018
0
2014 2015 2016 2017 2018 -10.00%
year year

The endless effort of the bank steered its growth and helped to maintain its dominating
position in the industry. Although there were ups and downs in the economic and political

36
phenomena in 2018, the accumulated loans and advances of the bank rose significantly and
ascended up to BDT 64.10 Corer as on 31 st December, 2018 compared to previously BDT
52.84 Corer. Like previous years, for ongoing growth of loans and advances, bank’s sound
and endless effort in credit operation and advancement also sustained in 2018. Total lending
of the bank stood at BDT 64.10 Corer as on 31st December, 2018.
4.2 Performance of Loans and Deposits ratio of Bank Asia Ltd.,
Bahaddarhat Branch.

(Figure in Corer BDT)

Items 2014 2015 2016 2017 2018
Total Loans 42.33 39.89 51.88 52.84 64.10
Total Deposits 46.52 62.58 55.55 61.52 70.56
Total loan/Total 90.99% 63.74% 93.39% 85.89% 90.84%
deposit
Growth ------ -29.94% 46.51% -8.03% 5.76%
Source : Annual Report

Graphical Representation of above Figures

Performance of Loans and Growth

Deposits ratio (2012-2016) 0.6
0.5 46.51%

100.00% 90.99% 93.39% 0.4

85.89% 90.84%
0.3
80.00%
63.74% 0.2
60.00% 0.1 5.76%
0.00%
40.00% 0
-0.1 2014 2015 2016 2017 2018
20.00% -8.03%
-0.2
0.00%
2014 2015 2016 2017 2018 -0.3
-29.94%
-0.4

It shows how much loan is provided from the total deposit. If the
ratio is higher, credit risk associated with the loan tends to be higher. Bank Asia Ltd.,
Bahaddarhat Branch has provided 93.39% total deposits as a loan in 2016 and 90.84% loan
were provided in the year 2018 out of total deposit.

37
4.3 Performance of Sector –wise allocation of Loans and Advances of Bank
Asia Ltd., Bahaddarhat Branch in 2018.

Since inception Bank Asia Ltd. is consistently contributing to the economic development of
the country by ensuring smooth flow and sustainable growth of credits in different sectors.

Investment Area Percentage

Commercial Credit 58.52%
Small and Cottage Industries 25.22%
Others 16.26%

Source: Annual Report, 2018

Graphical Representation of above Percentage Figures:

Sector-wise allocation of Loans and Advances

16.26%
Commercial Credit

Small and Cottage Industries

25.22% 58.52%

Others

38
The bigger portion of Bank Asia Ltd., Bahaddarhat Branch portfolio consists with
Commercial Credit and Industry Credit. And they also have a great amount of investment in
Others Project. But Small and Cottage Industries have very small investment.

4.4 Performance of Credit Portfolio of Bank Asia Ltd., Bahaddarhat

Branch in 2018.

Bank Asia strictly follows the rules and regulations of Bangladesh Bank regarding
classification of loans and advances. The unclassified loans of the bank stood at BDT 56.94
Corer and classified loans stood at BDT 7.16 Corer as on 31st December, 2018.

Status Amount Percentage

BDT in Corer
A. Unclassified Loans
 Standard 56.94 88.83%
Sub-Total 56.94 88.83%
B. Classified Loans
 Sub-Standard 5.16 8.02%
 Doubtful 2.00 3.12%
 Bad/ Loss 00 00%
Sub-Total 7.16 11.17%
Grand Total 64.10 100%
Source: Annual Report 2014-2018

Graphical Representation of above Percentage Figures

39
 Performance of Credit Portfolio 2018

11%

Unclassified Loans
Classified Loans

89%

Performance of Credit Portfolio of Bank Asia, Bahaddarhat Branch in 2018, we can see that,
the 89% of total credit is unclassified based on standard. Rest amount is unclassified into
different sector. The rate was 11% of total credit.

4.5 Performance of Non Performing Loan of Bank Asia, Bahaddarhat

Branch.

Total loan disbursement position of Bank Asia Ltd.

Year Volume of Non-performing Total Loan % of Non- Growth
Loans (Corer) (Taka in Corers) performing loans
2014 1.78 42.33 4.25% -----
2015 1.45 39.89 3.64% - 14.35%
2016 2.04 51.88 3.94% 8.24%
2017 2.36 52.84 4.47% 13.45%
2018 7.16 64.10 11.17% 149.88%
Source : Annual Report

Graphical Representation of above Percentage Figures

40
 Non-performing loans Growth
12.00% 11.17% 1.6 149.88%
1.4
10.00% 1.2
1
8.00%
0.8
6.00% 0.6
4.25% 4.47%
3.64% 3.94% 0.4
4.00% 0.2 8.24% 13.45%
0
2.00% 2014 2015 2016 2017 2018
-0.2
0.00%
0.00% -0.4
2014 2015 2016 2017 2018 -14.35%

The percentage of non-performing loan is fluctuated in 2017 it was highest and in 2015 it was
lowest and in 2018 it was 11.17%. Over the five years the non performing loan position is not
good of Bank Asia Ltd., Bahaddarhat Branch.

4.6 Performance of Recovery Loan at Bank Asia, Bahaddarhat Branch

Total loan recovery position of Bahaddarhat Branch, Bank Asia Ltd.

Year Volume of Recovery Total Loan % of Recovery Growth
Loans (Corer) (Taka in Corers)
2014 40.55 42.33 95.75% -----
2015 38.44 39.89 96.36% 0.64%
2016 49.84 51.88 96.04% -0.33%
2017 50.48 52.84 95.53% -0.53%
2018 56.94 64.10 96.49% 1.01%
Source : Annual Report

Graphical Representation of above Percentage Figures

41
 Recovery-performing loans Growth
96.60% 96.49% 1.20%
96.36% 1.01%
96.40% 1.00%
96.20% 0.80% 0.64%
96.04%
96.00% 0.60%
95.75% 0.40%
95.80%
0.20%
95.60% 95.53% 0.00%
0.00%
95.40% -0.20% 2014 2015 2016 2017 2018
95.20% -0.40% -0.33%
95.00% -0.60% -0.53%
2014 2015 2016 2017 2018 -0.80%

The percentage of non-performing loan is fluctuated from 2014 to 2018 it was highest in
2015 and in 2017 it was lowest and in 2018 it was 96.49%. Over the five years the recovery
loan position is good of Bank Asia Ltd., Bahaddarhat Branch.

4.7 Performance of Operating Profit for Credit Management of Bank Asia

Ltd., Bahaddarhat Branch.

Showing the following table Performance of Operating profit for Credit Management and
represent it’s graphically.
(Taka in Corers)
Particulars 2014 2015 2016 2017 2018
Operating 1.89 2.58 3.25 2.07 3.37
Profit
Growth ----- 36.50% 25.96% -36.30% 62.80%
Source: Annual Report

42
 Graphical Representation of above Percentage Figures

Operating Profit for Credit Man- Grwoth rate

agement 80%
4 62.80%
3.37 60%
3.5 3.25
3 40% 36.50%
2.58 25.96%
2.5
2.07 20%
2 1.89
0.00%
1.5 0%
1 2014 2015 2016 2017 2018
-20%
0.5
0 -40% -36.30%
2014 2015 2016 2017 2018
-60%

The above chart and graph are showing the operating profit for Credit Management. In 2014
it was large and in 2018 it was 62.82%. From 2014 to 2018 the percentage of operating profit
for Credit Management of Bank Asia Ltd. Bahaddarhat Branch is fluctuated over the year.

43
 Chapter Five
Summary of Findings,
Recommendations and Conclusion

5.1 Introduction
The credit analysis is a necessity for all financial institutions. Bank Asia is issuing different
types investment every month among customers of different target markets. As the credit
analysis methods of Bank Asia Ltd. are practiced very extensively to evaluate investment
applications it is asked: ‘‘How Credit Control analysis is used as a tool for borrower
evaluation for Bank Asia Ltd. A number of simple and practical ways in which corporations
can use credit analysis to manage risk are explored and the practical strengths and
weaknesses of following such approaches are emphasized.

5.2 Summary of the Findings

44
After analysis of collected data some useful observation were found. The observations are
given below:

 The accumulated loans and advances of the bank is fluctuating over the year. It’s rose
significantly and ascended up to BDT 64.10 Corer as on 31 st December, 2018 compared
to previously BDT 52.84 Corer.
 Bank Asia Ltd., Bahaddarhat Branch has provided 93.39% total deposits as a loan in
2016 and 90.84% loan were provided in the year 2018 out of total deposit. If the ratio is
higher, credit risk associated with the loan tends to be higher.
 Performance of Credit Portfolio of Bank Asia, Bahaddarhat Branch in 2018, we can see
that, the 89% of total credit is unclassified based on standard. Rest amount is
unclassified into different sector. The rate was 11% of total credit.
 The percentage of non-performing loan is fluctuated over the year. in 2017 it was
highest and in 2015 it was lowest and in 2018 it was 11.17%. Over the five years the
non performing loan position is not good of Bank Asia Ltd., Bahaddarhat Branch.
 The percentage of non-performing loan is fluctuated from 2014 to 2018 it was highest in
2015 and in 2017 it was lowest and in 2018 it was 96.49%. Over the five years the
recovery loan position is good of Bank Asia Ltd., Bahaddarhat Branch.
 The operating profit for Credit Management. In 2014 it was large and in 2018 it was
62.82%. From 2014 to 2018 the percentage of operating profit for Credit Management
of Bank Asia Ltd. Bahaddarhat Branch is fluctuated over the year.
 Bank’s Credit policy is not revised properly considering with the demand of telecom,
transportation, knit and packaging and plastic industry.
 Effective rate of interest is very high and the terms and conditions of loan are very
inconvenient and discourage people.
 Lengthy procedure for processing loan.
 Bank does not sanction loan to all sectors equally as they require, rather it concentrates
its loans and Advances within some limited fields and category.
 Disbursement of Loan and Advance are increasing year to year.
 Day by day non-performing loan of Bank Asia is increasing that means their current
strategy of loan recovery is not working appropriately.

45
5.3 Policy Recommendations:

Most major banking problem has been either explicitly or indirectly caused by weaknesses in
credit management. The following are some of the recommendations that may help in
improving Credit policy & practices of Credit Department of Bank Asia Limited,
Bahaddarhat Branch, and Chittagong:

 Bank should maintain to steady growth rate of loan and advances all over the year.
 Bank Asia should balance the total loan to deposit ratio. When the ratio is increased at
the same time credit risk associated with the loan tends to be higher.
 Performance of Credit Portfolio of Bank Asia, Bahaddarhat Branch in last couple of
years is good and bank should maintain it.
 Bank should reduced the percentage of non-performing loan by increasing the amount
of loan recollection.
 Bank should try to keep the percentage of operating profit for Credit Management of
steady over the year.
 Bank’s Credit Policy can be revised being considered with the increase demand of
telecom, transportation, knit and packaging and plastic industry.
 The rate of interest of loans & advances should be minimized.

46
  They should also make necessary training arrangement for the existing officer &
executive regarding credit risk management guideline, rules & policies in credit
division.
 Loan sanctioning and disbursement procedure should be easy and flexible being
consider the requirements of different classes of people.
 Loan sanctioning time must be minimized.
 Bank should also give tight monitoring on credit monitoring.
 Bank should take necessary steps so that it can keep its loans and Advances as well as
its growth at stable level.
 Sector wise loan such as agro based industries and firms, leather technology can be
convenient and flexible for the receiver.
 Bank should disburse their loans in various sector rather than specific scheme.
 Bank should try to keep up its condition of disbursement.
5.5 Conclusion

Now a day the all the banks are contributing much than the previous years for the growth and
development of the country. Banking industry is now much organized because of strong
vigilance and supervision of Bangladesh Bank. In the industry, Bank Asia Ltd is one of the
pioneers in many criteria. Bank Asia Ltd is committed towards the excellence in the service
with efficiency, accuracy and proficiency. Bank Asia Ltd is unique in terms of constitution,
its mandate, its objectives and modes operandi. Through this the bank has, in the meantime,
found its own special position in the sector at a higher rank. Bank Asia Ltd is expected to
continue maintaining strong competitive edge in banking sector in Bangladesh in the years
ahead. Through its specialization and integrated approach, the bank aims to build a strong
position in the industrial development of Bangladesh. The Bank also plans to maintain its
focus on managing capital and costs to maximize shareholders’ value. In this environment,
the bank expects to make further gains of revenue, income and return on capital .Recently the
bank’s performance in different arena of banking strongly testifies that Bank Asia is one of
the soundest banks operating in the country. Bank Asia is a leader in banking industry.
Continuous improvement in different segment with a proactive attitude can make a difference
in the banking business.

47
 REFERENCES

Bibliography
Books:
1. Dr. Khan, A.R. (2014) “Bank Fund Management”, 5th Edition, Puni Traders.
2. Varshney, P.N.(2010) “Banking Law and Practice”, Revised Edition, Sultan Chad &
Sons.
3. Aytar, G.S.(2010) “Theory and Practice of Banking”, International Edition, Saxena
Traders.

Publications:
1. Economic Growths, March-2016, Statistics Department, Bangladesh Bank.
2. Economic Growths, January-2017, Statistics Department Bangladesh Bank.
3. Economic Growths, December-2018, Statistics Department, Bangladesh Bank.

Annual Report:
1. Annual Report, Bank Asia Ltd, 2014.
2. Annual Report, Bank Asia Ltd. 2015.
3. Annual Report, Bank Asia Ltd, 2016.
4. Annual Report, Bank Asia Ltd, 2017.
5. Annual Report, Bank Asia Ltd, 2018.

Website:

48
Website of Bank Asia Limited, https://www.bankasia.com.bd

49