Bank Asia Intern Report - 3

An Internship Report on
Credit Risk Management of Bank Asia Limited:

A Study on Rupnagar Branch
Prepared By
Fariha Jahan
ID: 16-038
B.B.A. 16th Batch
Department of Finance
University Of Dhaka
Supervisor
Mr. M. Shahjahan Mina
Professor
Faculty of Business Studies
University of Dhaka
Date of Submission
May 22, 2014
Credit Risk Management of Bank Asia Limited: A Study

on Rupnagar Branch
Credit Risk Management of Bank Asia Limited: A Study

on Rupnagar Branch
Prepared By
Fariha Jahan
ID: 16-038
B.B.A. 16th Batch
University of Dhaka
Supervisor
Professor
University of Dhaka
Date of Submission
May 22, 2014
Letter of Transmittal
May 22, 2014

Professor
University of Dhaka
Subject: Submission of an internship report on "Credit Risk Management of Bank Asia

Limited: A Study on Rupnagar Branch ".
Sir
I, Fariha Jahan, bearing ID number 16-038, B.B.A. 16th batch of your department, hear by
submit my internship report on “Credit Risk Management of Bank Asia Limited: A Study on
Rupnagar Branch" that I have been assigned as an important requirement of B.B.A. program
at University of Dhaka. I have found the study to be quite interesting, beneficial and
knowledgeable. I have tried my level best to prepare an effective & creditable report.
I sincerely thank you for your careful guidance. I express my gratitude toward Bank Asia
Limited to provide me such a wonderful opportunity.
Sincerely yours
..........................
Fariha Jahan
ID: 16-038
B.B.A. 16th Batch
University of Dhaka
Declaration
I here declare that the internship report namely “Credit Risk Management of Bank Asia
Limited: A Study on Rupnagar Branch” under the supervision of Mr. M. Shahjahan Mina,
Professor, Department of Finance, Faculty of Business Studies, University of Dhaka,
submitted by Fariha Jahan, ID: 16-038, B.B.A. 16th Batch, Department of Finance, Session:
2009-2010, University of Dhaka, after completing of 3 (three) months (2 February to 30
April) of internship period with Bank Asia Limited, Rupnagar Branch, Dhaka existing
activities and its implementation.
I also declare that this report is my original work of my experience and prepared for academic
purpose which is a part of B.B.A. program and in this paper, I used in actual present scenario
of the organization and mentioned branch.
Fariha Jahan
ID: 16-038
B.B.A. 16th Batch
University of Dhaka
Certification of Supervisor
This is certifying Fariha Jahan has done the internship program under my supervision. She
has prepared a report “Credit Risk Management of Bank Asia Limited: A Study on
Rupnagar Branch” submitted it to me. I think on the basis of declaration the student given
this work in her own and she has fulfilled the rules and regulations of the internship as per.
I there certify that this report wills that Fariha Jahan fulfill the partial required of the award at
the degree B.B.A.
Professor
University of Dhaka
Acknowledgement
In conducting this report, I have received munificent help from many quarters, which I like to
put on record here with deep gratitude and great pleasure.
At first I express a lot of thanks to my almighty Allah who made me able to prepare this
Internship report.
I want to express my very special thanks to my respected supervisor Mr. M. Shahjahan Mina,
Professor, Department of Finance, Faculty of Business Studies, University of Dhaka. He
allowed me to encroach upon his precious time from the very beginning of this work till the
completion. His expert guidance, affectionate encouragement and critical suggestions
provided me necessary insight into the research problem and paved the way for the
meaningful ending of this report work in a short duration. I have no hesitation to say that,
without this constant supervision and valuable advices and suggestions from time to time, I
could not able to complete the whole work in an efficient manner.
I also express my warm gratitude and cordial thanks Mr. S.M. Salahuddin (AVP & Head of
Branch), Bank Asia Limited, Rupnagar Branch for giving me his valuable time and thus
enabling me to prepare the Internship report. In addition I remain grateful to Mr. Ali Adnan
(EO and Manager Operations) and Mr. Md. Abdul Hakim (SO and Head of Credit), Bank
Asia Limited, Rupnagar Branch for his corporation during the internship period and
providing various data, information.
I would like to thank all who extended their heartiest support and help in preparing this
internship report.
Fariha Jahan
ID: 16-038
B.B.A. 16th Batch
University of Dhaka
Executive Summary
Financial institutions are investment intermediaries linking the savers and users of fund.
These intermediaries interpose between the ultimate borrowers and lenders permitting them
efficient transfer of funds. Individuals having surplus funds can lend them for reasonable
return to entrepreneurs who need funds to take the advantage of economically and financially
viable investment opportunities.
Now a day it is completely impossible to think a country without a bank, because banks play
a diversified role in the development of an economy. The most important task of bank is
building of capital which is the key factor of the development of an economy. Banking sector
helps to flourish the industrial sector by supplying the capital of the industries and other
services like intermediaries role in case of foreign business.
Bank Asia Limited is a scheduled commercial Bank under private sector in Bangladesh
established under the Banking Company Act, 1991 and incorporated as a Public Limited
Company under the Company Act, 1994 on September 28, 1999. BAL is one of the top
performing third generation banks in Bangladesh.
I was given the topic, “Credit Risk management of Bank Asia Limited: A Study on Rupnagar
Branch”. This report is based on the Credit Risk Management of Bank Asia Limited keeping
light on the performance of Rupnagar branch.
BAL is listed both in DSE and CSE. I have collected the annual reports of last 5 years of
BAL. To analyze branch performance, I collected Trial Balance Statement and Profit and
Loss Statement of the branch for the year 2010 to 2013. CRM manual of BAL, office
circulars, Bangladesh Bank circulars and study papers were gone through during this period.
This report covers the details of Bank Asia’s practices about credit management activities
emphasizing the approval and risk management process. The report mainly emphasizes the
sequential activities involved in credit approval process, analytical techniques used by Bank
Asia for credit analysis as an integral part of the credit approval process. The report also
focuses on the risk management techniques adopted by Bank Asia both in pre-sanction and
post-sanction period of a credit.
These learning experiences are described in detail in the various sections of this report. The
total internship paper is divided into nine major chapters. Chapters are again divided into
subchapters according to the content of the chapters.
In chapter one, a brief introduction of this report is given. It includes statement of the
problem, rationale of the study, origin of the study, objectives of the study, scope of the
study, methodology that was chosen for this study and limitations faced while preparing this
report.
In chapter two, a brief historical background of BAL with its’ different products and services
are shown. An idea of BALs’ performance over last five years is also given in this chapter.
In chapter three, an overview of the Rupnagar branch of Bank Asia Limited is given. Credit
Scenario of the branch over last three or four years are presented graphically in this chapter.
Also a SWOT analysis on the Rupnagar branch is given in this chapter.
In chapter four, the job rotation and responsibilities during the three months internship
program in Rupnagar branch, Bank Asia Limited is given in brief.
In chapter five, the credit facilities and the credit strategies of BAL are described
sequentially. A description of the loan classification, lending criteria in credit analysis,
lending process, loan rescheduling, single borrower exposure limit, securities and modes of
charging securities, documentation in credit, risk management in BAL and problems in it can
found in this chapter.
In chapter six, credit policy guideline of BAL is explained. Here, credit policy statement and
credit risk grading system are described.
In chapter seven, credit procedural guideline is explained in brief. Credit approval process,
administration, monitoring and recovery guideline for credit in BAL are explained.
Moreover, the Organogram of the credit department in a branch is also illustrated in this
chapter.
In chapter eight, financial analysis, SWOT analysis of BAL and some findings about the
Rupnagar branch is presented. In financial analysis part, different financial ratios are
calculated and analyze the findings. A regression model has been established using Microsoft
Excel software. Data analysis tool helps to find out the output of this model.
In chapter nine, some related recommendations are given that may help to improve the
present scenario. At the end of this report, a short conclusion is given on the study.
A level best effort was given to prepare this internship paper effective and relevant that can
give a realistic view on the credit risk management of Bank Asia Limited and the
performance of Rupnagar branch.
Table of Contents
Title Page
Letter of Transmittal
Students Declaration
Certificate of Supervisor
Bank Certificate
Acknowledgement
Executive Summary
Chapter Contents Page

Number
1.00 Introductory Part 01-05
1.1 Introduction 01
1.2 Statement of the problem and its rationale for study 01
1.3 Origin of the report 02
1.4 Objectives of the report 02
1.5 Scope of the report 02
1.6 Methodology 02-04
1.7 Limitations of the report 04-05
2.00 Profile of Bank Asia Limited 06-22

2.1 Historical Background of BAL 06-08
2.2 Mission, Vision, Values and Corporate Objectives 08-09
2.3 Corporate Information of BAL 09
2.4 Products and Services offered by BAL 09-11
2.5 Performance of BAL in recent years 12-22
3.00 Bank Asia Limited, Rupnagar Branch 23-39

3.1 Background of the Branch 23-24
3.2 Branch Structure 24
3.3 Services and Products available in Branch 24-25
3.4 Performance of the Branch 25-33
3.5 Credit scenario of the Branch 33-39
3.6 SWOT Analysis of the branch 39
4.00 Job Rotation and Responsibilities During Internship 40
5.00 Credit Facilities and Strategies: BAL 41-66

5.1 Credit facilities and Coverage products at a glance 41-44
5.2 Rate of interest on Loans and Advances 44-45
5.3 Classifications of Loans and Provisions 45-49
5.4 Basic Lending Criteria for Credit Analysis 50-52
5.5 Single Borrower Exposure Limit 52-53
5.6 Loan Rescheduling 53-55
5.7 Lending Process 55-58
5.8 Modes of Security 58-59
5.9 Modes of Charging Security 60-61
5.10 Documentation 61-63
5.11 Risk Management 64-65
5.12 Problems in Credit Risk Management 65-66
6.00 Credit Policy Guideline 67-79

6.1 Credit Policy Statement 67-72
6.2 Credit Risk Grading 72-79
7.00 Credit Procedural Guideline 80-82

7.1 Approval Process 80
7.2 Credit Administration 80-81
7.3 Credit Monitoring 81
7.4 Credit Recovery 81-82
7.5 Organogram structure of Branch Office 82
8.00 Findings and Analysis 83-87

8.1 Financial Analysis 83-86
8.2 SWOT Analysis 87
8.3 Findings 87
9.00 Concluding Part 88-89

9.1 Recommendations 88
9.2 Conclusion 89
Bibliography
Appendix
List of Figures
No. Particulars Page Number

1 DuPont Analysis 23
2 Working Segment: Rupnagar Branch 24
3 Organogram of Rupnagar Branch 24
4 Job Rotation 40
5 Sector wise Credit Facility 41
List of Tables
No. Particulars Page

Number
1 DuPont Breakdown 22
2 Deposit and Advance Performance 25
3 Ratios in 2013 26
4 Outstanding mix of Corporate Loan 34
5 Outstanding mix of Classified Loan 34
6 Outstanding mix of SMA Loan 34
7 Loans and Advances Outstanding 35
List of Graphs
No Particulars Page Number

1 Total Assets of BAL 12
2 Deposit and Advance of BAL 12
3 Import and Export of BAL 13
4 Inward Remittance of BAL 13
5 Net Profit After Tax of BAL 14
6 Shareholders’ Equity of BAL 14
7 ROA of BAL 15
8 Profit per Employee of BAL 15
9 ROE of BAL 16
10 Total Capital of BAL 16
11 No. of Employee of BAL 17
12 Number of Foreign Correspondents of BAL 17
13 Non-Performing Loan Ratio of BAL 18
14 Non-Interest Income and Non-Interest Expense of BAL 18
15 No. of Branches of BAL 19
16 EPS of BAL 19
17 NAV per Share of BAL 20
18 Dividend of BAL 20
19 Market Capitalization of BAL 21
20 Burden Ratio 26
21 Deposit Mix of Rupnagar Branch 26
22 Deposit Mix in Percentage 27
23 Income Breakup as Percentage 27
24 Operating Profit 28
25 Deposit and Advance 28
26 Expense Breakup 29
27 Income Breakup in Amount 29
28 Profit of Rupnagar Branch 30
29 Interest Income and Expense 30
30 Interest Income to Total Income 31
31 Salary to Total Expense 31
32 Interest Expense to Total Expense 32
33 ROA of Rupnagar Branch 32
34 Cash Position 33
35 Loan Mix 33
36 Loan Outstanding-General 35
37 Loan Outstanding-Coverage 35
38 Loan Outstanding-Staff Loan 36
39 Loan Outstanding-SME Trading 36
40 Loan Outstanding-SME Manufacturing 36
41 Loan Outstanding-SME Women Entrepreneur 37
Abbreviations
BAL Bank Asia Limited

BFTN Bangladesh Fund Transfer Network
LC Letter of Credit
BG Bank Guarantee
SWIFT Society for Worldwide Interbank Financial
Telecommunication
ALCO Asset Liability Committee
BB Bangladesh Bank
CRM Credit Risk Management
GDP Gross Domestic Production
KYC Know Your Customer
CRG Credit Risk Grading
ROA Return on Asset
CIB Credit Information Bureau
SME Small and Medium Enterprise
ROE Return on Equity
CLR Classified Loan Review Report
EWS Early Warning Signals
RU Recovery Unit
SWOT Strength Weakness Opportunity Threat
RO Relationship Officer
AVP Assistant Vice President
Chapter: One
Introductory Part
Credit Risk Management of Bank Asia Limited: A Study on Rupnagar Branch
1.1 Introduction
Commercial Bank is committed to provide high quality financial services and products to
contribute to the growth of the country through stimulating trade and commerce, accelerating
the pace of industrialization, boosting up export, creating employment opportunity for the
youth, poverty alleviation, raising standard of living of limited income group and overall
sustainable socio-economic development of the country.
In achieving the objectives of the commercial Bank, Credit Operation of the Bank is of
paramount importance as the greatest share of total revenue of the Bank is generated from it.
Maximum risk is centered in it and even the very existence of Bank depends on prudent
management of its credit portfolio. Credit risk is one of the most significant risks a bank is
exposed to, needs to be managed in a prudent manner in order to minimize losses, sustainable
development and earn an acceptable level of return to stakeholders.
The failure of a commercial Bank is usually associated with the problem in credit portfolio
and it’s less often the result of shrinkage in the value of other assets. As such, credit portfolio
not only features dominant in the assets structure of the Bank, it is crucially importance to the
success of the Bank also.
1.2 Statement of the problem and its rationale for study
Risk is inherent in all aspects of a commercial operation, however for Banks credit risk is an
essential factor that needs to be managed. Credit risk is the possibility that a borrower or
counter party will fail to meet its obligations in accordance with agreed terms. Credit risk,
therefore, arises from the bank’s dealings with or lending to corporates, individuals, and other
banks or financial institutions.
Credit risk management needs to be a robust process that enables banks to proactively
manage loan portfolios in order to minimize losses and earn an acceptable level of return for
shareholders.
Given the fast changing, dynamic global economy and the increasing pressure of
globalization, liberalization, consolidation and disintermediation, it is essential that banks
have robust credit risk management policies and procedures that are sensitive and responsive
to these changes.
Also an effective and sound management system in credit sector is needed for the
improvement of banking business in Bangladesh. As a business studies student it is necessary
for me to have vast acquaintance regarding Credit Risk and Credit Risk Management and I
wanted to be acquainted with the whole procedure.
Bank Asia Limited is one of the leading commercial banks in private sector in Bangladesh.
Bank Asia Limited plays a vital role in banking business in Bangladesh. It contributes much
to have achievement in every sector, especially in credit sector and boosts the economy of the
country. This report is an effort to reflect a clear idea about the activities and performance of
Bank Asia Limited regarding Credit Risk Management.
1.3 Origin of the Report
The internship report is a basic requirement for the B.B.A. program, University of Dhaka.
The proposed topic is "Credit Risk Management of Bank Asia Limited: A Study on Rupnagar
Branch ". The topic is assigned and supervised by Mr. M. Shahjahan Mina, Professor,
Department of Finance, Faculty of Business Studies, University of Dhaka.
1.4 Objectives of the Report
In this report, I tried to furnish all sorts of practical dealings that are conducted in case of
handling various types of activities in credit department, the theoretical aspects, that is what
should be the procedures and requirements maintained from first to last, and actual practices
as well as the ultimate gain for the bank in conducting financial activities are mainly
discussed.
The broad objective of practical orientation is to get an idea about Bank Asia Limited (BAL),
to analyze the BAL contribution towards country’s economy that I gained through the
theoretical training in the university and from various documents of the bank. Another
objective is to have an overview on credit approval and risk management techniques adopted
by Bank Asia.
My specific objectives are:
To review the activities of credit department.

To assess the performance of bank’s credit activities.
To develop knowledge about credit risk management, policies and strategies of Bank
Asia Limited.
To highlight the method used in minimizing bank’s risk associated with credit.
To find out major problems faced by both the bank & the customer associated with
credit.
To give some recommendation based on the findings of the study.
1.5 Scope of the Report
This report consists of the observation and on the job experiences during the internship period
in the credit department of Rupnagar Branch, Bank Asia Limited. The report mainly
emphasizes the sequential activities involved in credit approval process, analytical techniques
used by Bank Asia Limited for credit analysis as an integral part of the credit approval
process. The report also focuses on the loan risk management techniques adopted by Bank
Asia Limited both in pre-sanction and post-sanction period of a credit. Finally the report
incorporates an evaluation of the different aspects of the lending process and monitoring
techniques and findings problems and makes some recommendations.
1.6 Methodology
For making any report or statistical survey most of the data should be taken that reflect actual
situation. The study requires a systematic procedure from selection of the topic to final report
preparation. To perform the study the data sources are to be identified and collected, they are
to be classified, analyzed, interpreted and presented in a systematic manner and key points
are to be found out.
Information used in this report has been collected while I was performing my internship in
Bank Asia Limited, Rupnagar Branch.
In order to complete this report I went through a process. They are-
Literature study
Collecting practical data
Combining my knowledge
Calculating and analyzing data available
Preparing a rough of report
Revising and correction
Prepare final report
Selection of the topic
Before selecting the topic of the study I discussed with my supervisor, so that a well
organized internship report can be prepared.
Collecting practical data
The reports are an exploratory research and for qualitative survey open ended question were
ask to the Bank official. I have collected various data from various sources, by interviewing
the respective officers and from journals published by the authority - Annual Reports,
Prospectus, Brochures, CRM Manual, Bangladesh Bank Policies, Related Bank Circulars and
different Policies. I have also collected data from their Training Institution’s papers those are
supplied to the trainee.
Through various sources data can be collected. In a disciplined way I can say that the Report
input were collected from two sources —
Primary data
Primary data are collected by using interviewing technique-
Practical deskwork experience in the different desk of the department of the

branch covered
Face to face conversation with the officers of Rupnagar Branch, BAL
Face to face conversation with the clients visited the branch
Relevant files study as provided by the concerned officers
Secondary Data
Annual Report of Bank Asia Limited

Periodic Reports of Bank Asia Limited
Policies and CRM Manual of Bank Asia Limited
Office Circulars of Bank Asia Limited
Published or unpublished or personally collected data from Officers,

Rupnagar Branch
Publications and Policies of Bangladesh Bank
Relevant books, newspapers, journals, etc.
Website of the Bank Asia Limited
Daily diary (containing my activities of practical orientation in Bank Asia
Limited) maintained by me
Collected data are not influenced by any self thoughts or views. But all data are not accurate;
they are represented in an apparent form. I found some irrelevant data as I analyze collected
data keeping in mind the competition, environment, other sources and real world.
Calculating and analyzing data available
All the Branches of Bank Asia Limited located in everywhere inside Bangladesh has been
taken into consideration as population. Bank Asia Limited, Rupnagar Branch, is the vital
sample. I have presented my experience and findings with the help of different diagrams and
tables in the analysis part. Some graphical tools are used in this report for analyzing the
collected data. The collected data were scrutinized very well and were pointed out and shown
as findings. Few recommendations are also made for improvement of the current situation.
Prepare final report
On the basis of the suggestions of our honorable faculty advisor some corrections were made
to present the paper in this form.
1.7 Limitations of the Report
I worked hard to prepare an informative Report. But in every step of our personal and
professional life we face some problems or limitations. I also faced some difficulties while
preparing the report.
There are some limitations that I have faced during preparing the report.
Short Time Period
The first obstruct is time itself. Due to the time limit, the scope and dimension of the study
has been curtailed. For an analytical purpose adequate time is required. But I got a short time
period to prepare the report. A period of twelve week is not sufficient to collect and
understand such a big subject like credit risk management. For time shortage it was
difficult for me to collect elaborate information. If I had more time to collect
information, then it would be prepared in a more complete manner.
Lack of experience
Experience makes a man efficient. I do such kind of research activity for the first time. That’s
why inexperience creates obstacle to follow the systematic and logical research methodology.
Due to lack of experience, there is a chance of having some mistakes in the report though best
effort has been applied to avoid any kind of mistake.
Data Insufficiency
The most obvious limitation is the unavailability of information. It was not possible to gather
all information. Information collected for the report is both primary and secondary in nature.
Due to some legal obligation and business secrecy banks reluctant to provided data. For this
reason, the study limits only on the available published data and certain degree formal and
informal interview. There is Shortage of manpower in credit department of the branch, I
could not get information as required my study although they have good intention to provide.
Though all of the information used in this report is authentic, I should make this report more
informative and practical. It is actually very tough to learn and cover all the components of
the analysis within a specific time span. Although this study tried to cover all the relevant
concerns, it has some shortcomings.
As I am new in this sector, hope my limitations will be considered.

Chapter: Two
Profile Of
Bank Asia Limited
2.1 Historical Background of BAL
Bank Asia Limited started its journey on November 27, 1999 with an aim to be fully
customer focused through rendering technology driven innovative products and services by a
group of successful entrepreneurs of the country with the basic objective of bringing high
quality services in the banking sector and actively participating in the growth and expansion
of the national economy.
Bank Asia Limited is a scheduled commercial Bank under private sector in Bangladesh
established under the Banking Company Act, 1991 and incorporated as a Public Limited
Company under the Company Act, 1994 on September 28, 1999. The Bank obtained
Certificate of Incorporation and Certificate of Commencement of Business on September 28,
1999 and banking license on October 06, 1999.
In February 2001, Bank Asia Limited took over the Bangladesh operation of The Bank of
Nova Scotia. It was the first acquisition of a foreign bank by a local bank in the banking
history of Bangladesh. Later, Bank Asia took over the Bangladesh operation of Muslim
Commercial Bank of Pakistan in December 2001.
These courageous moves were possible for some visionary decision makers and also
dedicated team of professionals who are constantly putting their best efforts to establish the
bank as one of the leading concerns in the industry.
Subsequently the Bank was listed with Dhaka Stock Exchange (DSE) and Chittagong Stock
Exchange (CSE) on January 06, 2004. Since inception Bank Asia is working efficiently and
achieving a strong prominent position in banking sector.
After 14 years of operation, today Bank Asia proudly stands among the top rated banks of the
country with an extensive network of business outlets comprising of conventional banking
branches, Islamic windows, off –shore banking unit, brokerage branches, agricultural
branches, and SME centers. During this short span of time the Bank had been successful to
position itself as a progressive and dynamic financial institution in the country. The Bank had
been widely acclaimed by the business community, from small entrepreneur to large traders
and industrial conglomerates, including the top rated corporate borrowers for forward-
looking business outlook and innovative financing solutions. Thus within this very short
period of time it has been able to create an image for itself and has earned significant
reputation in the country’s banking sector.
Besides, most of the city areas under Dhaka and Dhaka are covered by ATMs with 24 hours
banking facilities for the customers. As of end 2013, Bank Asia had 1,600 dedicated
employees for serving its clients across the country offering a full suite of financial products
and services. With its assets of more than Tk. 163,778 million, Bank Asia commands
significant market share in both deposits and advances with Tk. 113,489 million and Tk.
104,911 million respectively. In the year 2013 the Bank also recorded an impressive foreign
trade business as well as inward remittance than previous two financial years.
The bank is combining the expertise of other financial products to cater its customer under a
single roof. The Bank considers the society as one of its contributor of business development
and tries to compensate it by playing major role in CSR program. The Bank specially
emphasizes on the automation of the banking activities through the use of online banking, M-
Banking, Telebanking, and Internet Banking, 24/7 ATM services, Card services etc. Bank
Asia is also trying to adopt other online mechanisms to minimize the use of papers resulting
into going green.
Bank Asia has so far been highly successful in keeping its customers satisfied with its high
quality service, while continuing its expansion to reach more people around the country.
Bank Asia conducts all types of commercial banking activities. The Bank is involved in most
of the areas of commercial banking operations. The core business of the Bank comprises of
trade finance, term finance, working capital finance and corporate finance. Bank Asia has
acted as the lead arranger in raising term loan for a number of projects under syndicated
finance and also participated in some cases under such financing arrangement.
The Bank is also providing personal credit, service related to local and foreign remittances
and several other products. The “Personal Credit” scheme of the Bank, which is designed to
help the fixed income group in raising standard of living is competitively priced and has been
widely appreciated by the customers. Bank Asia’s program under “Poverty Alleviation
Scheme” delivered through rural branches in the form of micro credit is playing an important
role towards socio economic development of the poor people in the rural areas.
By this time Bank Asia has consolidated its strength manifold through extending its business
rapidly while ensuring sustainable growth. Bank Asia started its most cherished Islamic
banking operation in 2008 for providing strict Shariah based products. It established its 1st
subsidiary company named “Bank Asia Securities Limited” on March 16, 2011 and another
subsidiary company “BA Exchange Company (UK) Limited” in United Kingdom in the same
year. Now the Bank is rendering services through its 86 Branches, 5 Islamic Windows, 6
SME Service Centers, 1 Off-shore Banking Unit, and 2 Subsidiary companies.
Bank Asia Limited is one of the few banks permitted by the Bangladesh bank in the late 90s.
These banks are known as the third generation banks and are fortunate to remain immune
from the bad loan culture. However, Bank Asia Limited remained as one of the top
performers among them.
Bank Asia Limited has been licensed by the Government of Bangladesh as a Scheduled Bank
in the private sector in pursuance of the policy of liberalization of banking and financial
services and facilities in Bangladesh. In view of the above, the Bank within a short period of
its operation (14 years) has achieved a remarkable success and met up capital adequacy
requirement of Bangladesh bank. Credit Rating Agency of Bangladesh Limited (CRAB)
awarded Bank Asia Limited “AA3” in the Long Term and ‘ST2’ rating in the Short Term
based on the financial of 2012.
Bank Asia Limited was awarded several times by the reputed organizations for disclosure of
corporate governance and best published accounts and reports. The Annual Report 2012 was
awarded Certificate of Merit by ICAB for Best Presented Annual Report in the Private Sector
Banks including Cooperative Banks and SAARC anniversary award for Corporate
Governance. More over Bank Asia Limited achieved commendation for first time
Sustainability Report and special commendation for Most Progressive Reporter 2012 by
National Center for Sustainability Reporting (NCSR) in Pejaten, Jakarta.
The management of Bank Asia is determined to maintain and upgrade the quality of these
resources through continuous training and upgrading technology to keep pace with market
demands, new developments and practices of the competitors. Bank Asia entered the market
at a time when economic policy environment of the country is poised for higher level of
business activities and growth. The prevailing macroeconomic management and the
government’s determination to carry on reforms in the banking sector provide a supporting
and encouraging environment.
2.2 Mission, Vision, Core Values and Corporate Objectives
Vision
Vision of Bank Asia Limited is to have a poverty free Bangladesh in course of a generation in
the new millennium, reflecting the national dream. The bank’s vision is to build a society
where human dignity and human rights receive the highest consideration along with reduction
of poverty.
Mission
To assist in bringing high quality service to the customers and to participate in the
growth and expansion of the national economy.
To set high standards of integrity and bring total satisfaction to the clients,
shareholders and employees.
To become the most sought after bank in the country, rendering technology driven
innovative services by the dedicated team of professionals.
Core Values
Place customer interest and satisfaction as first priority and provide customized
banking products and services.
Value addition to the stakeholders through attaining excellence in banking operation.
Maintain high ethical standard and transparency in dealings.
Be a compliant institution through adhering to all regulatory requirements.
Contribute significantly for the betterment of the society.
Ensure higher degree of motivation and dignified working environment for our human
capital and respect optimal work life balance.
Committed to protect the environment and go green.
Corporate Objectives
Highly Personalized service

Customer driven focus
Total commitment to quality
Outstanding product
Contribute in the economy
Commitment to its clients at each level
2.3 Corporate Information of BAL
Name Bank Asia Limited

Registered Office Rangs Tower
68, Purana Paltan, Dhaka-1000, Bangladesh
Date of Incorporation September 28, 1999
Authorized Capital Tk. 15000 million
Paid up Capital Tk. 6936.32 million
Credit Rating AA3 (LT), ST2 (ST)
Number of Branches 86
Subsidiary Companies 2
Technology For online banking Bank Asia use STELAR and
iStelar
Telephone 04470009098, 7110042, 7110062, 7110173,
7110147
Fax +88 02 7164311
E-mail [email protected]
Website www.bankasia-bd.com, www.bankasia.net
SWIFT Code BALBBDDHCTS
2.4 Products and Services offered by BAL
Business Banking
Overdraft Time Loan
Secured Overdraft Transport Loan
Secured OD (Earnest Money) House Building Loan(Commercial)
Working capital finance Term loan
Loan against Trust Receipt Lease Finance
Loan against Cash Incentives Letter of Guarantee
Bill discounting Letter of Credit
Loan Syndication and Structured (Sight/Deferred/UPAS)
Finance Back to back Letter of Credit
Packing Credit (Local & Foreign)
Demand Loan Agriculture Financing
Demand Loan (work order) Staff Loan ( Car Loan, House
Building Loan, Provident Fund
Loan)
Small and Medium Enterprise (SME)

Term Loan Over Draft
Subidha -Unsecured Trading Somadhan – Secured
Sondhi -Secured Trading Special Products
Sristi – Unsecured Manufacturing Utshob- Seasonal Business
Shombridhi- Secured Manufacturing Subarno- Women Entrepreneur
Shofol – Unsecured Service
Sheba- Secured Service
Consumer Finance
Auto Loan House Finance
Consumer Durable Loan Loan for Professionals
Unsecured Personal Loan Senior Citizen Support
Credit Card
VISA Platinum Card (with Priority Hajj Card
Pass) Travel Card (prepaid card)
VISA Classic Local Card Virtual Card
VISA Classic Dual Card Master Silver Card
VISA Butterfly Card Master Gold Card
VISA Gold Local Card SME Credit Card
VISA Gold Dual Card LankaBangla Card Cheque
Treasury
Money Market Foreign Exchange Market
Overnight Lending and Borrowing Spot
Repo and Reverse Repo Forward
Swap Currency Swap
Sale and Purchase of Treasury Bill &
Bond
Placement of Fund
Term Borrowing
Investment
Deposit Products
Saving Account Monthly Benefit Scheme
Current Account Double Benefit Scheme
Short Notice Deposit Triple Benefit Scheme
Fixed Deposit Bank Asia Sanchoy Plus
Foreign Currency Account Shonchoy E Koti Poti (SKP)
Deposit Pension Scheme
Islamic Banking
Deposit Products Investment Products
Al-Wadiah Current Account Bai Murabaha Muajjal
(AWCA) Hire Purchase Shirkatul Melk
Mudaraba Savings Account (MSA)
(HPSM)
Mudaraba Special Notice Deposit
Account (MSNDA) Musharaka
Mudaraba Term Deposit Account Quard against Accepted Bills
(MTDA) of different tenure
Mudaraba Hajj Savings Scheme
(MHSS)
Mudaraba Deposit Pension Scheme
(MDPS)
Mudaraba Monthly Profit Paying
Deposit
Scheme (MMPPDS)
Smart Junior Saver (SJS)
Cash Waqf
Service Products
ATM Services Student File
Remittance Service Travellers’ Cheque
Locker Service E-Commerce
Online Banking E-Procurement
Internet Banking Debit Card
Phone Banking Call Centre
Mobile Banking Remote Banking (EBEK)
SWIFT Agent Banking
Centralized Trade Services
Off-shore Banking Unit (OBU) Products Capital Market Operation

On-shore Import & Export Bill Brokerage Operation
Discounting Margin Loan
Working Capital Finance
Trade Finance
Loans & Advances to wholly foreign
owned entities
Term loan to local entities subject to
BOI approval
Nostro account services to other local
banks
2.5 Performance of BAL in recent years
Total Assets
Figure in million Taka
Total Assets
163,778
140,361
117,729 Total Assets
105,198
68,663
2009 2010 2011 2012 2013
Graph 1: Total Asset
Total asset of BAL in last 4 years are increasing in almost a stable rate. It is possible for a
effective asset management technique of BAL.
Deposit and Advances


Deposit Advances
133,489
110,062 104,911
86,366 95,131 92,329
79,504 82,820
54,832
50,268
2009 2010 2011 2012 2013
Graph 2: Deposit and Advances
Gap between Deposit and Advances are increasing over years. Deposit is increasing, that
reflects the good management decisions and steps in deposit collection.
Import and Export

Figure in million USD
Import and Export

Import Export
1,435 1,324
1,304 1,196
902 830 946 890
775
429
2009 2010 2011 2012 2013
Graph 3: Import and Export
Import performance is very much satisfactory as it shows growth after e decline in 2010.
Export is recovering after a decline in 2012.
Inward Remittance
Figure in million USD
Inward Remittance
Inward Remittance
440
394
296
266
223
2009 2010 2011 2012 2013
Graph 4: Inward Remittance
Inward Remittance shows a fair performance over last years with a steady growth.
Net Profit After Tax


1,930 1,916
1,460
1,327
908
2009 2010 2011 2012 2013
Graph 5: Net Profit After Tax
NPAT shows a sharp decline in 2012 after a growing position in previous years. It is because
economic and political instability of Bangladesh. But in 2013, NPAT shows a recovering
position.
Total Shareholders’ Equity

Total Shareholders' Equity

Total Shareholders' Equity
14,618
12,479 13,045
7,060
4,954
2009 2010 2011 2012 2013
Graph 6: Total Shareholders’ Equity
Shareholders Equity is increasing year by year. A sharp fluctuation is in 2011 because of split
of shares.
Return on Assets (ROA)
Return on Assets
ROA
2.18% 2.22%
1.72%
0.96%
0.70%
2009 2010 2011 2012 2013
Graph 7: Return on Assets
ROA shows a sharp declining trend after 2010. It is because assets position of BAL is getting
stronger year by year while return is in a steady growth.
Profit Per Employee
Profit per Employee

Profit per Employee
3.43 3.4 3.38

3.18
2.54
2009 2010 2011 2012 2013
Graph 8: Profit per Employee
PPE is increasing after a decline in 2011. Number of employee is not so large as other banks.
But in recent policy and expansion decision in terms of banking activity, it is increasing.
Return on Equity
Return on Equity
ROE
32.03% 32.12%
19.61%
10.55%
7.11%
2009 2010 2011 2012 2013
Graph 9: Return on Equity
ROE takes a sharp decline in 2011 as share split took place. It increase in 2013 than previous
years.
Total Capital
Total Capital
Total Capital
15,575
13,930
12,447
8,157
5,538
2009 2010 2011 2012 2013
Graph 10: Total Capital
Total Capital position of BAL shows a increasing trend over last years. It shows effects of
good management and decision making.
Number of Employees
Number of Employees
No. of Employees
1,600
1,485
1,237 1,270
1,031
2009 2010 2011 2012 2013
Graph 11: Number of Employees
Number of employees is increasing over last years. It is because new HR policy and decision
to expand business activities over more areas.
Number of Foreign Correspondents
Number of Foreign
Correspondents
No. of Foreign Correspondents
770 775 776 761

625
2009 2010 2011 2012 2013
Graph 12: Number of Foreign Correspondents
Number of FC shows a steady position over last years. It is not a sign in foreign exchange
performance.
Non-Performing Loan Ratio

5.69% 5.60%
2.72%
1.56% 1.62%
2009 2010 2011 2012 2013
Graph 13: Non-Performing Loan Ratio
Nonperforming loan is increasing over last years. It is because total loan is in increasing
manner.
Non Interest Income and Non Interest Expense

Non Interest Income and Non Inteset

Expense
Non Interest Income Non Intesert Expense
3,117
2,5472,422 2,769
2,4172,361 2,210 2,299
1,3671,512
2009 2010 2011 2012 2013
Graph 14: Non Interest Income and Non Interest Expense
Noninterest expense shows a sharp increase in 2013. On the other hand noninterest income,
charge and fee based income is in a stable growth.
Number of Branches
Number of Branches
Number of Branches
86
73
63
49
41
2009 2010 2011 2012 2013
Graph 15: Number of Branches
Number of branches of BAL shows a satisfactory growth year by year.
Earnings per Share- After Split

Figure in Taka
Earnings Per Share

EPS
6.19 6.43
3.65
2.1
1.44
2009 2010 2011 2012 2013
Graph 16: Earnings per Share
EPS fluctuates in 2011 for share split. In 2012, poor market condition makes it downward.
But in 2013, EOS is in increasing trend, which is a ray of hope for investors.
Net Asset Value (NAV) Per Share-After Split

Figure in Taka
NAV per share

NAV per share
23.51 23.75
23.1
21.07
20.69
2009 2010 2011 2012 2013
Graph 17: NAV per Share- After Split
NAV per share shows a sharp decline in 2012 for hostile market condition. But in 2013 it
recovers and shows a future growth.
Dividend
Dividend
Dividend
40% 40%
20%
10% 10%
2009 2010 2011 2012 2013
Graph 18: Dividend

Dividend position is now in a stable situation after a fluctuation in 2011.
Market Capitalization
Share Value
Share Value
25748.47
20073.3
15953.49
13557.36
9152.9
2009 2010 2011 2012 2013
Graph 19: Market Capitalization
Market capitalization is recovering in 2013 after a decreasing trend in previous years.
DuPont Analysis-5 Factors Model
DuPont analysis is an approach to decomposing return on equity to better understand return

ratios and why they change over time. Over the years, Bank Asia Limited has maintained a
strong Return on Equity (ROE) and it turned to increase in 2013 after last two consecutive
years’ decline. This analysis will help us to understand which factor contributed to the ROE
most and which factor caused the ROE to move.
DoPont-BAL ROE
First Level Breakdown Net Profit Total Asset Financial

Margin Turnover Leverage
Effect of Non
Second Level Breakdown Operating
Operating Tax Effect
Profit Margin
Items
Figure 1: DuPont Analysis

Particulars 2009 2010 2011 2012 2013

ROE 32.03% 32.12% 19.61% 7.11% 10.55%
NPM 15.38% 15.93% 12.96% 5.21% 7.41%
TAT 0.1414 0.1393 0.1326 0.1351 0.1295
FL 14.7258 14.4714 11.4094 10.1116 10.9945
OPM 30.33% 35.08% 27.34% 28.97% 27.49%
ENOI 0.8736 0.8425 0.8491 0.5390 0.6501
TE 0.5805 0.5391 0.5583 0.3335 0.4147
Table 1: DuPont Analysis Breakdown
Over the years 2009 and 2010, Bank Asia Limited has maintained a strong Return on Equity
(ROE), which hovered around 32%. In the year 2011 and 2012, the ROE came down to
19.61% and 7.11%. But in 2013, BAL has an increased ROE, 10.55%, than previous two
years.
Net profit margin consists of three important components namely operating profit margin,
effect of non-operating items and tax effect as mentioned in second level break down.
Operating profit margin was decreased to 27.49% compared to previous year’s 28.97% in
2013. Also a decline was happened in 2010 in OPM.
Effect of non-operating items includes loan loss and other provision which was increased to
0.6501 from 0.5390 in 2013 after a sharp decline in 2012. The main reason was the decrease
of CL ratio to 5.60% in 2013 from 5.69% in 2012 which caused less requirement of
additional provision on loans and advances. In 2013, BAL kept total provision of Tk.
1,895.17 million which was Tk. 2,328.81 million in 2012, declined by 18.62%.
Tax effect turned higher for the increase of profit before tax. The combined effects of these
three components resulted in upward of net profit margin. Efficiency of utilizing the assets as
implied by total assets turnover which was consistent for last four years but declined to
0.1295 in 2013 as the growth of revenue is not proportionate to the growth of total assets.
Bank Asia’s financial leverage was increased to 10.9945 in 2013 from 2012, 10.1116 which
helped to increase return on equity.
Chapter: Three
Bank Asia Limited,
Rupnagar Branch
3.1 Bank Asia Limited, Rupnagar Branch: Background
Bank Asia Limited, Rupnagar Branch opened on 29 April, 2010. It is the outcome of the
BAL growth strategy. This branch was started as SME centre. But very soon it started its
branch banking activities, in 2011. From the very beginning it has provided many products
and services of BAL to the local people of the Rupnagar area.
Thirteen (13) employees are involved to run the bank smoothly, headed by an AVP. All the
employees are from strong educational background and they are skilled, energetic and
knowledgeable. The workforce is comparatively young.
The branch is a Non-AD branch. So, CTSU of BAL facilitates this branch in foreign trade
operations. Islamic Window-Salamah facilities are available to the people from this branch.
Some working segments of this branch are given below-
Inlamic
Foreign General Customer
Cash Credit Window- Remittance
Exchange Banking Service
Salamah
Figure 2: Working Segments of Rupnagar Branch
Rupnagar area is mainly a residential area. Commercial or business activities are not up to
mark. But the economic value of the area is growing very rapidly. There are many successful
businessman and family of many foreign wage earners live in this area. Also in nearby area,
many factories and garments are running successfully. It is may be helpful to increase the
number of the customers, not in the value of deposit amounts. Remittance collection service
is meeting demands of local people. Different types of credit facilities are offered to the
people, business persons or firms according to credit regulations of BAL. Clearing here is
done in automated manner. BFTN is also available from this branch.
Thus the Rupnagar branch of BAL contributes to the economy of our country. The expanding
demand of the business of Rupnagar area is fulfilled by the BAL Rupnagar branch.
But the competition in this area is very high. Threats from existing competitors are very high
in the sectors of product offerings, services and marketing policy. Threats of new entrants are
also very high.
Rupnagar branch should take innovative and effective ideas to beat the competitors and
perform according to the target given by headquarter by offering customers with their
products and services, satisfy them and by attracting more people and organizations as valued
customers.
Brief Description: Rupnagar Branch
Name Bank Asia Limited, Rupnagar Branch

Date of Opening 29 April, 2010
Address 16/34, Rupnagar R/A, Mirpur, Dhaka
Number of Employees (2013) 13
Profit (2013) 24.22 million
Deposit (2013) 1150 million
Total Loans and Advances (2013) 1651 million
Classified Loans and Advances (2013) 0.88 million
AD Ratio (2013) 144%
Telephone 9016692-3
Fax 880-02-9008757
3.2 Branch Structure
Head of the
Branch
Sub-Manager/
Manager in
Operations
Foreign General
Credit
Exchange Banking
Customer Islamic
Cash Remittance
Service Banking
Teller
Figure 3: Organogram of Rupnagar Branch
3.3 Services and Products available in Branch
Deposit Products Service Products

Saving Account-SB ATM Services
Current Account-CD Remittance Service
Short Notice Deposit-SND Locker Service
Fixed Deposit-FDR Online Banking
Foreign Currency Account-FCA Internet Banking
Deposit Pension Scheme-DPS Phone Banking
Monthly Benefit Scheme-MB+ Mobile Banking
Double Benefit Scheme-DB+ SWIFT
Triple Benefit Scheme Centralized Trade Services
Shonchoy E Koti Poti (SKP) Debit Card/Credit Card
Call Centre
Agent Banking
Credit Facilities
 Cash credit  Letter of Credit

Funded Credit Non- Funded Credit
 Over Draft  Guarantee

 Secured Over Draft  Syndicate loan
 Term loan
 Personal Credit
 Loan against trust receipt
In addition, Rupnagar branch of BAL provides services of Islamic Banking-Salamah and

BFTN facilities to the customers. Moreover, corporate banking, private banking and retail
banking facilities are offered to the customers with different schemes and special features.
3.4 Performance of the Rupnagar Branch
Performance in 2013
In the year 2013, the Rupnagar branch contributed 0.44% of global operating profit, 1.57 %
of global advance, 0.86% of global deposit, 0.13% of import and 0.04% of export. In the
command area, BAL’s position was 1st in operating profit, deposit, advance, import and
export. Classified loan of Rupnagar branch was 0.05% of loans and advances of the branch
and CL growth was Tk. 0.47 million or 114.63% over last year which indicates special
attention is required for recovery. At the end of 2013, the number of active savings, current
and SND accounts were 4850, 508 and 22 which were 3573, 397 and 20 respectively at the
end of year 2012.
Particulars 2013 2012 Budget Achievement Growth

Deposit 1,150 818 117.73% 40.59%
Advance 1,651 95 972.50% 1,637.89%
Import 145 2 69.05% 7,150.00%
Export 30 4 - 650.00%
OE 15 12 - 25.00%
OP 24 9 184.62% 166.67%
Table 2: Deposit and Advance Performance
Ratio Costs of Cost of Yield Spread Burden CL
Deposit Fund Ratio
BAL 8.81% 11.44% 14.99% 6.18% 0.55% 5,868
Rupnagar 9.94% 11.51% 16.20% 6.25% 1.12% 0.88
Branch
Budget 9.50% 11.00% 16.50% 7.00% 1.00% -
Table 3: Ratios in 2013
Burden Ratio 2013
Burden Ratio
1.12% 1.00%
0.55%
BAL Rupnagar Branch Budget for

Rupnagar Branch
Graph 20: Burden Ratio 2013
Burden ratio of the Rupnagar branch is significantly higher than global burden ratio of the
bank. During 2014, Rupnagar branch is advised to increase fee-based income to bring the
burden ratio down to an acceptable level, around 1.0%. Besides, operating expenses should
be at reasonable level. So that burden ratio can be within 1%. Moreover, if the average asset
grows significantly, burden ratio can be lowered down. So, we have to increase average asset
as well.
Deposit Mix
Deposit Mix
No cost Low cost High cost
625 891
472 407
38 73 33 126 47 146 75 184
2010 2011 2012 2013
Graph 21: Deposit Mix
No-cost deposits and low cost deposits are not increasing to keep the portfolio up to mark. On
the other hand, high cost deposits are increasing year by year in this branch. Management
should take initiatives to recover this situation.
Deposit Mix
7%
16% High Cost
Low Cost
No Cost
77%
Graph 22: Deposit Mix in 2013
77% of total deposit is high cost deposits. Deposit portfolio should be diversified to minimize
such costs.
Income Backup
Income backup
Interest Income BA Gen. Int. Income
Commission Income Other Income
1% 2%
31%
66%
Graph 23: Income Backup in 2013
66% of total income of Rupnagar branch is from general interest income. Interest income is
31% but fee based income is only 1% that should be taken in consideration.
Branch Performance over Last Years
Operating Profit
Operating Profit
Operating Profit
24
9 9
2011 2012 2013
Graph 24: Operating Profit
OP took a sharp rise in 2013 than previous years as loans and advances is in a large amount
in this year.
Deposit and Advance

Deposit Advance
1,651
1,150
818
582 565
23 24 94
2010 2011 2012 2013
Graph 25: Deposit and Advance
Deposit is increasing in a growing rate over years. Advance shows an extraordinary

performance in 2013 than previous years.
Expenditure Breakup
Expenditure Breakup
Int Exp Salary Exp Rent Exp Other Exp
98
52 58
6 7 4 9 6
0.8 2.2 1 1
2011 2012 2013
Graph 26: Expenditure Breakup
Interest expenditure is increasing sharply over years than other expenditures. High cost
deposits are main reason behind this.
Income Breakup
Income Breakup
Int Income Commission Income
134
69 77
1 2 4
2011 2012 2013
Graph 27: Income Breakup
Income from interest is far more than income from fees and commission. Income from fees
and commission should be increased at the same time.
Profit Scenario
Profit over years

Income Expense Profit
138
114
79
70 70
61
24
9 9
2011 2012 2013
Graph 28: Profit over years
Profit shows a constant position in 2011 and 2012. But in 2013, it took a sharp increase.
Large loan amount is a reason behind this.
Interest Income and Expense
Interest Income and Expense

Int Income Int Expense
134
98
68 78
52 58
2011 2012 2013
Graph 29: Interest Income and Expense
Interest income shows a growth over years. But the difference between interest income and
interest expense is visible and satisfactory.
Interest income to Total Income
Ratio
98%
97% 97%
2011 2012 2013
Graph 30: Interest Income to Total Income
Interest income is on an average 97% of total income. That is an alarming for a sound
banking activity.
Salaries and Allowances Coverage to Total Expense
Salary and Total Expense

Salary TE
114
71
61
4 5 8
2011 2012 2013
Graph 31: Salary and Total Expense
Salary expense is very small in terms of total expense over the years. It is because manpower
is in similar number over years.
Interest Expense to Total Expense
Interest Expense to Total

Expense
Int Exp TE
114
98
71
52 61 58
2011 2012 2013
Graph 32: Interest Expense to Total Expense
Interest expense covers the maximum portion of the total expense that is alarming for a bank.
It means high cost of deposit is in large amount in this branch.
Return on Asset
ROA
ROA
1.52%
1.31%
1.05%
2011 2012 2013
Graph 33: ROA of Rupnagar Branch
ROA increase in 2013 after a decline in 2012. It may happen because a sharp increase in
return of the branch in 2013.
Cash to Total Asset
Cash Position
Cash TA
1854
818
583 566
2 20 11 13
2010 2011 2012 2013
Graph 34: Cash Position
Cash position over the year is not increasing as total asset increases over years. Management
should keep a careful eye on it.
3.5 Credit Scenario of the Branch
Distribution Mix of Loan Portfolio (Amount)
Loan Mix
Corporate Sector SME Retail Sector
1535
11 10 2 9 14 2 63 19 13 24 92
2010 2011 2012 2013
Graph 35: Loan Mix
Corporate sector over the years takes the largest portion of the loan of the branch. SME and
retail sector should be given more emphasis and portfolio should be diversified.
Outstanding Mix of Customer 2013
Name of Clients Outstanding Loan Amount

Nasir Printing & Packaging Industry Ltd. 444.73
Nasir Energy Savings Lamp Industry Ltd. 950.83
Al-Mostafa Printing & Packaging Industry Ltd. 46.3
Union Oxygen Ltd. 23.93
Green Paradise 27.14
K. R. Trading International 1.4
Table 4: Outstanding Mix of Corporate Loan

Four Star Trading Ltd. 0.22
Khaza Plastic Ltd. 0.11
Esha Electronics Ltd. 0.55
Table 5: Outstanding Mix of Classified Loan

Nasima Sultana Rashid 0.47
Helal Uddin 0.29
Ratna Enterprise 0.55
Table 6: Outstanding Mix of SMA Loan

Loans and Advances: Classification wise Outstanding Position
Loans & Advances 2010 2011 2012 2013

General 11,478,159.49 9,131,739.6 63,200,341.91 1,533,897,813.7
7 7
Coverage 552,655.55 875,601.27 12,204,953.10 91,963,612.59
Staff Loans 1,256,457.89 996,908.99 717,187.03 417,687.79

SME Trading 3,823,188.88 6,640,146.8 12,335,960.10 13,447,585.44
2
SME Manufacturing 4,952,522.42 4,891,617.2 4,202,888.85 6,424,731.06
4
SME-Women 1,067,705.85 2,204,969.0 2,115,442.34 3,347,863.29
Entrepreneur 2
SME Service - - - 170,058.18
Documentary Bills - - - 1,406,088.23
Purchased
Table 7: Loans and Advances Outstanding over years
General Loan
General Loan
1534
63.2
11.5 9.13
2010 2011 2012 2013
Graph 36: Loans Outstanding: General
General loan took a sharp increased position in 2013 than other years. It includes SOD and
different term loans of BAL.
Coverage
Coverage
92
12.2
0.55 0.88
2010 2011 2012 2013
Graph 37: Loans Outstanding: Coverage
Coverage loan is increased in 2013 in large amount. In this, house loan and Auto loans are
most available.
Staff Loan
Staff Loan
1.3 1.07 0.72 0.42

2010 2011 2012 2013
Graph 38: Loans Outstanding: Staff Loan
Staff loan is in decreasing trend over last years. Mainly SOD and Auto loans are taken by the
staffs of BAL.
SME Trading
SME Trading
13.45
6.6 12.34
3.8
2010 2011 2012 2013
Graph 39: Loans Outstanding: SME Trading
SME trading advances show a satisfactory performance over last years. It increases to 13.45
million Tk in 2013.
SME Manufacturing
SME Manufacturing
5.05 4.99 6.4

4.2
2010 2011 2012 2013
Graph 40: Loans Outstanding: SME Manufacturing
SME Manufacturing advances show a satisfactory performance over last years. It increases to
6.4 million Tk in 2013 than 4.2 million Tk in 2012.
SME-Women Entrepreneur
SME-Women Entrepreneur
3.3
2.2 2.1
1.07
2010 2011 2012 2013
Graph 41: Loans Outstanding: SME-Women Entrepreneur
SME Manufacturing advances show a satisfactory performance over last years. It increases to
3.3 million Tk in 2013 than 2.1 million Tk in 2012.
Loans & Advances 2010 2011 2012 2013

General 49.62% 36.91% 66.68% 92.90%
Coverage 2.39% 3.54% 12.88% 5.57%
Staff Loans 5.43% 4.03% 0.76% 0.02%
SME Trading 16.53% 26.84% 13.02% 0.81%
SME Manufacturing 21.41% 19.77% 4.43% 0.39%
SME-Women
Entrepreneur 4.62% 8.91% 2.23% 0.20%
SME Service - - - 0.01%
Documentary Bills - - -
Purchased 0.09%
Table 8: Table: Loans and Advances in Percentage of Total Loan
2010-Loan Mix
General Coverage Staff Loans SME Trading
23%
7%
3% 67%
Graph 42: Loan Mix in 2010
Most loan amount is covered by general-SOD and Term loans in 2010. It is 67 % of total loan
amount outstanding of that year.
2011-Loan Mix
37%
52%
6% 5%
2012-Loan Mix
14%
1%
14%
71%
2013-Loan Mix
General Coverage SME Trading
1%
6%
93%
3.6 SWOT Analysis of the Branch
Strengths
Young, enthusiastic and empowered workforce: more than 1000 SB Account deposits
in June, 2013
Efficient performance: profit per employee around 18 lac Tk. on December 31, 2013
Online banking facilities
Weaknesses
In sufficient office space
Lack in senior and experienced manpower
Time constraints for marketing initiatives for raising funds as deposits
Opportunities
May cover large area having huge population: Rupnagar, Pallabi, Sheyalbari and
Mirpur
Focus on home loan and consumer credit sector, though it is mainly a residential area
Bigger market: GDP rate 6.5% for FY 2013-2014, forecasted by World Bank. It was
6.01% in FY 2012-2013.
Threats
Upcoming and contemporary banks/branches: Pubali Bank Limited, Janata Bank
Limited, Southeast Bank Limited
Similar products are offered by other banks
Industrial downturn, financial crisis and political instability
Though it is in a residential area, business and industrial loans are very few
The large portion of the loan portfolio of Rupnagar branch is held by one giant group.
Around 85% loan is held by Nasir Group.
Chapter: Four
Job Rotation and
Responsibilities
during Internship
4.00 Job Rotation and Responsibilities during Internship
I started my job as an intern of Bank Asia Limited at Rupnagar branch. During the internship
period of three months I identify myself working with some brilliant professionals of one of
the country’s leading private commercial banks. This internship program provides me
practical experience & knowledge in several areas.
During the first few weeks of my intern period, I was able to get to the working environment
of Bank Asia Limited. However, it is hardly able to become familiarized with the total
operation of the bank completely within a short period.
Within this short period of time, to give an insight into the operations of the bank, especially
in the areas of customer service, general banking, credit and foreign trade, the management
decided to continue a job rotation program.
During the job rotation period, level best efforts were given to be acquainted with the
operational activities of Bank.
Customer General Foreign

Credit
Service Banking Exchange
Figure 4: Job Rotation
During the internship period of three months all weekly meetings, knowledge sharing
sessions and events were attended. Some assignments and projects are properly
completed which were assigned during this period.
Chapter: Five
Credit facilities and
Strategies: BAL
5.1 Credit facilities and Coverage products at a glance
Credit facilities are classified according to different industry, prime sectors of credit and on
the basis of nature of the credit facility.
Sector wise credit facilities are of mainly three types. They are presented below.
Service
Trading
Manufacturing
Figure 5: Sector wise Credit Facilities
Loans and Advances have primarily been divided into three major groups. They are given
below.
Continuous
Term Loan Demand Loan
Loan
Short term
Medium
Term
Long Term
Figure 6: Classification of Loans and Advances on the basis of Nature
On the basis of the prime sectors of credit, all categories of loans and advances are
accommodated. Sectors are presented below.
term Loans to
Agriculture Small & Cottage Working capital
Industries
Commercial
Export Credit Others
Lending
Figure 7: Credit Classification according to Prime Sectors
On the basis of various nature of financing all the credit facilities have been bought under two
major groups.
Funded
Credit Non-funded
Credit
Figure 8: Credit facilities depending on financing
Funded Credit Facilities
The followings are the funded credit facilities/limits usually in the industries:
Payment Against Documents Lease Finance

Loan Against Trust Receipt House Building Loan
Loan Against Imported Merchandise Demand Loan (Work Order Finance)
Secured Overdraft (Earnest Money) Cash Credit Against Hypothecation
Packing Credit (Export) Cash Credit (Pledge)
Local Documentary Bill Purchase Export Cash Credit
Foreign Documentary Bill Purchase Secured Overdraft (Financial
Loan Against Export Development Obligation)
Fund Overdraft
Non-Funded Credit Facilities
1. Letter of Credit
Sight L/C
Usance or Deferred L/C
Back to Back L/C
2. Accepted Bills for Payment
3. Bank Guarantee
Bid Bond
Performance Guarantee
Advance Payment Guarantee
Retention Bond
Payment Guarantee
Customer Guarantee
Guarantee Against Counter Guarantee of Other Bank/NBFI
Other Bank Goatee
Coverage Products at a Glance
Products Loan Age Limit Equity Processing Risk Loan

Limit (At loan Fees Fund Period
Maturity)
House Finance 3-75 25-65 years 30% 0.5% or tk. NIL 15 years
lac. 5000/-
Auto Loan Upto 25-65 years 70% 1% or tk. NIL 5-6 years
20 lac. 5000/-
Consumer 0.5-5 25-57 years 70% 1% or tk. 1% 4 years

Durable Loan lac 1000/-
Loans for 0.5-5 25-65 years 70% 1% or tk. 1% 4 years

Professionals lac 1000/-
Unsecured 0.25- 25-57 years 70% 1% or tk. 1% 4 years

Personal Loan 10 lac 1000/-
Senior Citizen 0.25-2 57-65 years 70% Waiver 1% 3 years

Support lac
Table 9: Coverage Products
List of Discouraging Borrower
Lawyer Military Equipment/ Weapon Finance

Journalist Finance of Speculative Investment
Defense Person Share Lending
Politician Lending to Holiday Companies
Jewelers Debt Issuance as a Source of
Broker Repayment
Celebrity Known Defaulters
Common Documents for Coverage Products
Passport Size Photograph

National ID
Valid Passport/Driving License/Additional Identification
Last Tax Return/TIN Certificate
Utility Bills for last 2/3 months

PNW Statements
Valid Letter of Introduction for Service Holder (supported by pay slip & A/C
statement)
Valid Trade License for Businessman (last 3 years), Memorandum of Association &
Article of Association (private ltd. company)
Business/Personal Account Statement (minimum last 6 months)
Up to date CIB Report
Quotation of the item to be purchased
Two personal Guarantees (personal guarantee of spouse/parents/immediate relatives
and an individual acceptable to the bank)
Borrower and Guarantors’ detail
Any other document for the proof of income
Two reference from immediate relatives
Additional Documents
Surveyors’ valuation report

Branch visit and valuation report
Approved lay out plan
Cost estimation
Sell/purchase agreement
Legal opinion
Full furnished quotation accepted by the client
5.2 Rate of Interest on Loans and Advances
The given rate is effective from May 05, 2014. This revised rate of interest on loans and
advances was decided after a meeting of the Asset Liability committee (ALCO) of Bank Asia
Limited. A penal interest of 2% per annum will be realized in case of overdue loans and
advances.
In case of SOD i.e. Secured Overdraft, the head of the branch ensures to change the interest
rate at the time of renewal of FDR.
Rate of Interest
Sl. Type Rate

Mid Rate Maximum
Rate
1 Agriculture 11.50% 13.00%
2 Term Loan to Industries 14.00% 15.50%
3 Working Capital to Industries 14.00% 15.50%
4 Trade Finance for rice, wheat, edible oil, pulse, peas, 14.00% 15.50%
onion, dates & sugar
5 Other Trade Finance 15.50% 17.00%
6 Export 7.00% 7.00%
7 Others Commercial Lending 15.50% 17.00%
8 Cottage Industries
With Govt. Refinance 10.50% 12.00%
Without Govt. Refinance 13.50% 15.00%
9 Housing 13.50% 15.00%
10 Overdraft Against
FDR issued By BAL 3% above the weighted
average rate of interest
given/applied on cash
collaterals subject to
minimum at 11.50%
MB+, DB+, TB+, DPS+, BASP of BAL 14.50% 16.00%
Similar Instruments issued by other Banks 12.50% 14.00%
11 Consumer Credit
Micro Credit Scheme 11.50% 13.00%
Unsecured personal Loan 15.50% 17.00%
Consumer Durable Loan 15.50% 17.00%
Auto Loan 15.50% 17.00%
House Finance 13.50% 15.00%
Loan to professional 15.50% 17.00%
Senior Citizen Support 14.00% 15.50%
12 Loans to Non Banking financial Institution 15.50% 17.00%
13 Others 15.50% 17.00%
Table 10: Rate of Interest on Loans and Advances

5.3 Loan Classification and Provisioning
All loans and advances, that means credit products have been classified into four categories
for the purpose of classification.
Continuous
Loan
Short Term
Loan- Loans Demand Loan
Agriculture &
Microcredit
Fixed Term
Loan
Figure 9: Loan Classification
Continuous Loan
The loans accounts, which have certain transaction limit and have an expiry date usually 1
year for full adjustment, will be treated as continuous loan. Example: Cash Credit, Over Draft
etc.
Demand Loan
The loans, which are repayable on demand by bank, will be treated as demand loan. If any
contingent or any other liabilities turned into forced loan, without any prior approval as
regular loan, will be treated as demand loan. Example: Forced Loan against Imported
Merchandise, Payment against Document, Foreign Bill Purchased, and Inland Bill Purchased,
etc.
Fixed Term Loan
The loans, which are repayable within a specific time period under a specific repayment
schedule, will be treated as Fixed Term Loan.
Short-term Agricultural & Micro-Credit

Short-term Agricultural Credit will include the short-term credits as listed under the Annual
Credit Programme issued by the Agricultural Credit and Financial Inclusion Department
(ACFID) of Bangladesh Bank. Credits in the agricultural sector repayable within 12 (twelve)
months will also be included herein. Short-term Micro- Credit will include any micro-credits
not exceeding an amount determined by the ACFID of Bangladesh Bank from time to time
and repayable within 12 (twelve) months, be those termed in any names such as Non-
agricultural credit, Self-reliant Credit, Weaver's Credit or Bank's individual project credit.
Basis for Loan Classification
Two Basic criteria of loan classification-
Objective Qualitative
Criteria Judgement
Figure 10: Basis of Loan Criteria
Objective Criteria
(1) Past Due/Over Due

Any Continuous/Demand/Fixed Term Loan if not repaid/renewed within the fixed expiry
date for repayment or after the demand by the bank from the following day of the expiry date.
The Short-term Agricultural and Micro-Credit if not repaid within the fixed expiry date for
repayment will be considered past due/overdue after six months of the expiry date.
(2) Standard Loan
All unclassified loans other than Special Mention Account (SMA)
(3)Special Mention Account (SMA)
A Continuous loan, Demand loan or a Term Loan which will remain overdue for a period of
02 (two) months or more, will be put into this account. This will help banks to look at
accounts with potential problems in a focused manner and it will capture early warning
signals for accounts showing first sign of weakness. Loans in the "Special Mention Account
(SMA)" will have to be reported to the Credit Information Bureau (CIB) of Bangladesh Bank.
(4) Loans except Short-term Agricultural & Micro-Credit in the "Special Mention
Account" and “Sub-Standard” will not be treated as defaulted loan for the purpose of section
27KaKa(3) [read with section 5(GaGa)] of the Banking Companies Act, 1991.
(5) Classification of Continuous Loan and Demand Loan
• It it is past due/overdue for 03 (three) months or

Sub-Standard
beyond but less than 06 (six) months
• If it is past due/overdue for 06 (six) months or

Doubtful
beyond but less than 09 (nine) months
• If it is past due/overdue for 09 (nine) months or

Bad/Loss
beyond
Figure 11: Classification of Continuous Loan & Demand Loan
(7) In case of any installment(s) or part of installment(s) of a Fixed Term Loan is not repaid
within the due date, the amount of unpaid installment(s) will be termed as ‘past due or
overdue installment’. In case of Fixed Term Loans: -
i. If the amount of past due installment is equal to or more than the amount of installment(s)
due within 03 (three) months, the entire loan will be classified as ''Sub-standard''.
ii. If the amount of past due installment is equal to or more than the amount of installment(s)
due within 06 (six) months, the entire loan will be classified as ''Doubtful".
iii. If the amount of 'past due installment is equal to or more than the amount of installment(s)
due within 09 (nine) months, the entire loan will be classified as ''Bad/Loss''.
(8) The Short-term Agricultural and Micro-Credit will be considered irregular if not repaid
within the due date as stipulated in the loan agreement. If the said irregular status continues,
the credit will be classified as 'Substandard ' after a period of 12 months, as 'Doubtful' after a
period of 36 months and as 'Bad/Loss' after a period of 60 months from the stipulated due
date as per the loan agreement.
Qualitative Judgment
If any uncertainty or doubt arises in respect of recovery of any Continuous Loan, Demand
Loan or Fixed Term Loan, the same will have to be classified on the basis of qualitative
judgment be it classifiable or not on the basis of objective criteria.
(1) Special Mention
i. Assets must be classified no higher than Special Mention if any of the following
deficiencies of bank management is present: the loan was not made in compliance with the
bank’s internal policies; failure to maintain adequate and enforceable documentation; or poor
control over collateral.
ii. Assets must be classified no higher than Special Mention if any of the following
deficiencies of the obligor is present: occasional overdrawn within the past year, below-
average or declining profitability; barely acceptable liquidity; problems in strategic planning.
(2) Sub-standard
i. Assets must be classified no higher than Sub-standard if any of the following deficiencies
of the obligor is present: recurrent overdrawn, low account turnover, competitive difficulties,
location in a volatile industry with an acute drop in demand; very low profitability that is also
declining; inadequate liquidity; cash flow less than repayment of principal and interest; weak
management; doubts about integrity of management; conflict in corporate governance;
unjustifiable lack of external audit; pending litigation of a significant nature.
ii. Assets must be classified no higher than Sub-standard if the primary sources of repayment
are insufficient to service the debt and the bank must look to secondary sources of repayment,
including collateral.
iii. Assets must be classified no higher than Sub-standard if the banking organization has
acquired the asset without the types of adequate documentation of the obligor’s net worth,
profitability, liquidity, and cash flow that are required in the banking organization’s lending
policy, or there are doubts about the validity of that documentation.
(3) Doubtful
Assets must be classified no higher than Doubtful if any of the following deficiencies of the
obligor is present: permanent overdrawn; location in an industry with poor aggregate earnings
or loss of markets; serious competitive problems; failure of key products; operational losses;
illiquidity, including the necessity to sell assets to meet operating expenses; cash flow less
than required interest payments; very poor management; non-cooperative or hostile
management; serious doubts of the integrity of management; doubts about true ownership;
complete absence of faith in financial statements.
(4) Bad/Loss
Assets must be classified no higher than Bad/Loss if any of the following deficiencies of the
obligor are present: the obligor seeks new loans to finance operational losses; location in an
industry that is disappearing; location in the bottom quartile of its industry in terms of
profitability; technological obsolescence; very high losses; asset sales at a loss to meet
operational expenses; cash flow less than production costs; no repayment source except
liquidation; presence of money laundering, fraud, embezzlement, or other criminal activity;
no further support by owners.
Maintenance of Provision
a) General Provision: Banks will be required to maintain General Provision in the following
way:
(1) At 0.25% against all unclassified loans of Small and Medium Enterprise (SME) as
defined by the SME & Special Programmes Department of Bangladesh Bank from time to
time and At 1% against all unclassified loans (other than loans under Consumer Financing,
Loans to Brokerage House, Merchant Banks, Stock dealers etc., Special Mention Account as
well as SME Financing.)
(2) At 5% on the unclassified amount for Consumer financing whereas it has to be
maintained At 2% on the unclassified amount for (i) Housing Finance and (ii) Loans for
Professionals to set up business under Consumer Financing Scheme.
(3) At 2% on the unclassified amount for Loans to Brokerage House, Merchant Banks, Stock
dealers, etc.
(4) At 5% on the outstanding amount of loans kept in the 'Special Mention Account'.
(5) At1% on the off-balance sheet exposures. (Provision will be on the total exposure and
amount of cash margin or value of eligible collateral will not be deducted while computing
off-balance sheet exposure.)
b) Specific Provision: Banks will maintain provision at the following rates in respect of
classified Continuous, Demand and Fixed Term Loans:
(1) Sub-standard: 20%
(2) Doubtful: 50%
(3) Bad/Loss: 100%
c) Provision for Short-term Agricultural and Micro-Credits:
(1) All credits except 'Bad/Loss' (i.e. 'Doubtful', 'Sub-standard', irregular and regular credit
accounts): 5%
(2) 'Bad/Loss’: 100%
Eligible Collateral
In the definition of 'Eligible Collateral' as mentioned in the above paragraph the following
collateral will be included as eligible collateral in determining base for provision:
100% of deposit under lien against the loan
100% of the value of government bond/savings certificate under lien
100% of the value of guarantee given by Government or Bangladesh Bank
100% of the market value of gold or gold ornaments pledged with the bank.
50% of the market value of easily marketable commodities kept under control of the
bank.
Maximum 50% of the market value of land and building mortgaged with the bank.
50% of the average market value for last 06 months or 50% of the face value,
whichever is less, of the shares traded in stock exchange.
5.4 Basic lending Criteria for Credit Analysis
Credit analysis is the method by which a financial institution calculates the creditworthiness
of a person, business or organization. While each lending situation, bank utilizes some
variation of "The Five C's of Credit" when making credit decisions.
Character
Condition Capital
Collateral Capacity
Figure 12: The Five C's of Credit

Character
Character is the personal impression borrowers make on the potential lender. The lender
decides whether or not borrowers are sufficiently trustworthy to repay the loan. It is
important that loan applicants get a copy of their personal credit report and score before they
apply for the loan and make sure that the information is accurate and that there are not errors.
Managerial capacity is another important factor. Educational background and experience in
the business as well as past achievements in the industry will be reviewed. If a borrower does
not have experience in the new business, she/he needs to build a strong management team
that will show professional experience and commitment to start/grow the business.
Capital
Business loan applicants must have a reasonable amount invested in their business, equity
investment. This reflects a personal commitment and ensures that, when combined with
borrowed funds, the business can start and continue operations. For start-up businesses, banks
usually will require at least 20 percent of the total funds to be invested by the owners; for
some businesses the percentage could be higher. Funds for the equity investment have to be
available at the time of the loan application.
Capacity
Borrowers have to be able to demonstrate their ability to repay the intended loan from their
business operation. Banks will require detailed financial projections showing when business
income will become cash and when the expenses must be paid. Financial projections include
a cash flow statement, broken down on a monthly basis and covering three years after the
loan is received. A critical factor in loan approval is making sure the lender understands how
revenue projections will be generated. This is especially important when the projections are
for a new business.
Collateral
It is well known that cash flow and not collateral will repay the loan. However, collateral is a
form of security which can be used to assure a lender that borrowers have a second source of
loan repayment. Assets such as equipment, buildings, accounts receivable, and (in some
cases) inventory are considered possible sources of repayment if they can be sold by the bank
for cash. Banks will usually take for collateral assets that are usable in the business; however,
if the value of the business assets is not sufficient to secure the loan, banks can require
personal assets that remain outside the business as collateral.
Conditions
Lenders will also consider local economic conditions and the overall climate, both within the
industry and in other industries that could affect the business. Borrowers should prepare
market research. The research will provide important information about the industry and
enhance business decision-making. If an industry is expanding, this will provide a positive
factor for the credit analysis of the loan.
Understanding these concepts and the process that banks use for the credit analysis can help
business owners to develop an approach to maximize their creditworthiness and more
effectively access business credit and financing.
These traditional Cs of credit should be thought of as commandants: Do this, check this, and
look for that. These rules have worked fairly well in the past, but in recent years, bankers
have learnt a few more Cs: Complacency, Carelessness, Communication, Contingencies and
Competition. The five things of bad credit to guard against the lessons learnt from the most
recent lending mistakes.
Complacency
Competition Carelessness
Contingencies
Communication
Figure 13: Additional C's of Credit
Basic lending criteria show some flexible principles work as guidelines for protecting loans
and advances. In a practical competitive world, risks are identified, accepted and an advance
is often granted even though a proposal does not strictly meet with some of these criteria.
The basic lending criteria According to BAL can be considered under these six main heading:
Character &
Source of Purpose of Term of the
Profitability ability of Safety
repayment the facility facility
borrower
Graph 14: Basic Lending Criteria
5.5 Single Borrower Exposure Limit
A bank can finance to any single person or enterprise or organization of a group shall not at
any point of time exceed 35% of the bank's total capital subject to the condition that the
maximum outstanding against fund based financing facilities (funded facilities) do not exceed
15% of the total capital.
In case of export sector single borrower exposure limit at 50% of the bank's total capital. But
funded facilities in case of export credit shall also not exceed 15% of the total capital.
Large Loan
Loan sanctioned to any individual or enterprise or any organization of a group amounting to

10% or more of a bank's total capital shall be considered as large loan.
Maximum ceiling for providing large loan:
Rate of net classified loans The highest rate fixed for large loan against
bank's total loans & advances
Upto 5% 56%
More than 5% but upto 10% 52%
More than 20% 40%
Table 11: Maximum ceiling for providing large loan
Exception of large loan ceiling
In the cases of credit facilities provided against government guarantees, the aforementioned
restrictions shall not be applicable.
5.6 Loan Rescheduling
Bank Asia recognizes that in some cases, a legitimate banking practice may allow for the
renewal of a continuous loan or line of credit. Occasionally, even a term loan is renewed or
extended under unfortunate circumstances that are beyond the control of the borrower and do
not signify that the borrower's willingness or ability to repay has deteriorated the loan.
Time Limit for Rescheduling
The rescheduling shall be for a minimum reasonable period of time. Time limit for
rescheduling of different categories of loans will be as follows:
Continuous Loan
Frequency Classified as Classified as Classified as

Sub-standard Doubtful Bad/Loss
First Maximum 18 (eighteen) Maximum 12 (twelve) Maximum 12
Rescheduling months from the date of months from the date of (twelve)
rescheduling rescheduling months from the date
of
rescheduling
Second Maximum 12 (twelve) Maximum 09 (nine) Maximum 09 (nine)
Rescheduling months from the date of months from the date of months from the date
rescheduling rescheduling of
rescheduling
Third Maximum 06 (six) Maximum 06 (six) Maximum 06 (six)
Rescheduling months months from the date of months from the date
from the date of rescheduling of
rescheduling rescheduling
Table 12: Time Limit for Rescheduling Continuous Loan
Demand Loan

First Maximum 12 (twelve) Maximum 9 (nine) Maximum 09 (nine)
Rescheduling months from the date of months from the date of
months from the date
rescheduling
Second Maximum 09 (nine) Maximum 06 (six) Maximum 06 (six)
Rescheduling months from the date of months from the date of months from the date
rescheduling
Third Maximum 06 (six) Maximum 06 (six) Maximum 06 (six)
Rescheduling months months from the date of months from the date
from the date of rescheduling of
rescheduling rescheduling
Table 13: Time Limit for Rescheduling Demand Loan
Fixed Term Loan

First Maximum 36 (thirty six) Maximum 24 (twenty Maximum 24 (twenty
Rescheduling months from the date of four) four)
rescheduling months from the date of
months from the date
rescheduling of
rescheduling
Second Maximum 24 (twenty Maximum 18 (eighteen) Maximum 18
Rescheduling four) months from the date of (eighteen)
months from the date of rescheduling months from the date
rescheduling of
rescheduling
Third Maximum 12 (twelve) Maximum 12 (twelve) Maximum 12
Rescheduling months months from the date of (twelve)
from the date of rescheduling months from the date
rescheduling of
rescheduling
Table 14: Time Limit for Rescheduling Fixed Term Loan
Short-term Agricultural and Micro-Credit
Frequency Time Limit

First Repayment time limit for rescheduling should not exceed
Rescheduling 2 (two) years from the date of rescheduling.
Second Maximum 1(one) year from the date of rescheduling.
Rescheduling
Third Maximum 6(six) months from the date of rescheduling.
Rescheduling
Table 15: Time Limit for Rescheduling Short-term Agricultural and Micro-Credit
Down Payment of Loan
Term Loan
a) Application for first time rescheduling will be taken into consideration upon receiving cash
payment of at least 15% of the overdue installments or 10% of the total outstanding amount
of loan, whichever is less;
b) Application for second time rescheduling will be considered upon receiving cash payment
of minimum 30% of the overdue installments or 20% of the total outstanding amount of loan,
whichever is less.
c) Application for rescheduling third time will be considered upon receiving cash payment of
minimum 50% of the overdue installments or 30% of the total outstanding amount of loan,
whichever is less.
d) The rate of down payments for Short-term Agricultural and Micro-Credit will be same as
above.
Demand and Continuous Loan
a) If a Demand or Continuous Loan is converted into a Term loan, first rescheduling may
take place against down payment on the basis of loan amount in the following manner.
Amount of Overdue Loan Rate of Down payment
Up to Tk.1.00 (one) crore 15%

Above Tk.1.00(one) crore and up to 10%
Tk.5.00(five) crore (but not less than Tk.15.00 lac)
Above Tk. 5.00(five) crore 5%
(but not less than Tk.50.00 lac)
Table 16: Down Payment of Overdue Loan
b) If any Continuous or Demand Loan is rescheduled for the second time (first time after
being converted partly or wholly into Term Loan) and the repayment installments are fixed,
the application for rescheduling of such loans shall be considered upon receiving cash
payment of minimum 30% of the overdue installments or 20% of the total outstanding
amount of loan, whichever is less. Similarly, for third rescheduling (second time after being
converted partly or wholly into Term Loan) minimum 50% of the overdue installments or
30% of the total outstanding amount of loan, whichever is less, shall have to be repaid in
cash.
Restriction on Expanding the Term to Maturity of a Term Loan
The term to maturity of a term loan may be extended subject to the following conditions and
restrictions:
a) The loan must be performing (Unclassified: Standard or SMA)
b) The decision should be made at the level where the loan was originally sanctioned
c) The maturity date may be extended by a period of time not exceeding 25% of the current
remaining time to maturity
5.7 Lending Process
The lending procedure starts with building up relationship with customer through account
opening. The stages of credit approval are done both at the branches and at the corporate
office level.
The lending procedure as observed in Bank Asia is described in sequential order:
Application Scrutinizing
Getting CIB Project
for loan from Documents
Report Inspection
Customer Available
Approval
Preparation of Valuation of Credit
Authority
loan proposal Collateral Analysis
Determination
Issuing Collection of
Approval of Loan
Sanction charge
Head Office Disbursement
Letter Documents
Figure 16: Steps in lending Process
Application for Loan from Customer
A loan procedure formally starts with a loan application from a client who must have an
account with the Bank. At first it starts from the branch level. Branch receives application
from client for a loan facility. In the application client mention what type of credit facility
he/she wants from the bank including his/her personal information and business information.
Branch Manager or the Officer-in-charge of the credit department conducts the initial
interview with the customer.
CIB Report
After receiving the loan application from the client, the bank sends a letter to Credit
Information Bureau (CIB) of Bangladesh Bank for obtaining a credit inquiry report of the
customer from there. This report is called CIB (Credit Information Bureau) report. The
purpose of this report is to be informed that whether or not the borrower has taken loans and
advances from any other banks and if so, what is the status of those loans and advances i.e.
whether those loans are classified or not.
Scrutinizing Documents Available
If Bangladesh Bank sends positive CIB report on that particular borrower and if the Bank
thinks that the prospective borrower will be a good one, then the bank will scrutinize the
documents. Required documents are:
In case of corporate client, financial documents of the company for the last
three years. If the company is a new one, projected financial data for the same
duration is required.
Personal net worth of the owner (s).
In this stage, the bank requires whether the documents are properly filled up
and duly signed. Credit in charge of the relevant branch is responsible enquire
about the ins and outs of the customer’s business through discussing with
him/them.
Project Inspection
Bank officials of the credit department will inspect the project for which the loan is applied.
Project existence, its distance from the bank originating the loan, monitoring cost and
possibilities are examined.
Approval Authority Determination
Any credit proposal needs to be evaluated on the basis of financial information provided by
the loan applicant. Financial spread sheet analysis which consists of a series of quantitative
techniques is employed to analyze the risks associated with a particular loan and to judge the
financial soundness and worthiness of the borrower. Besides, lending risk analysis is also
undertaken by the bank to measure the borrower’s ability to pay considering various risks
associated the loan. These quantitative techniques supported with qualitative judgment are the
most important and integral part of the credit approval process used by Bank Asia Limited.
This is the credit analysis phase. In fine, the ability & willingness of the borrower to repay
the loan is most important to determine.
Preparation of loan proposal
Obtain legal opinion on the collateral provided by the applicant, whether those are properly
submitted- regular and up to date or else those documents are fake. Furthermore, the
valuation of the collateral is done by Third Party Valuation Company. Both the market value
and distress value are determined.
Valuation of Collateral
The branch starts processing the loan at this stage. Based on the analyses (credit analysis)
done by the branch, the branch prepares a loan proposal. The proposal contains following
important and relevant information:
Name of the borrower (s) Margin

Nature of credit Rate of interest
Purpose of the credit Repayment schedule
Extent of the credit Validity
Collateral Repayment Schedule
Extent of Profitability
Credit Analysis
If the proposal meets Bank Asia’s lending criteria and is within the manager’s discretionary
power, the credit line is approved. The manager and the sponsoring officer sign the credit line
proposal and issue a sanction letter to the client.
If the value of the credit line is above the branch manager’s limit then it is sent to head office
for final approval with detailed information regarding the client (s), credit analysis and
security papers.
Approval of Head Office
Head office processes the credit proposal and afterwards puts forward an office notice if the
loan is within the discretionary power of the head office Credit Committee or board
memorandum if the loan requires approval from the Board of Directors.
Issuing Sanction Letter
If the Credit Committee of the head office or the Board, as the case may be, approves the
credit line, an approval letter is sent to the branch. The branch then issues a sanction letter to
the borrower with a duplicate copy. The duplicate copy duly signed by the borrower is
returned to the branch of the bank. This duplicate copy returned by the applicant proves that
the borrower agrees with the terms and conditions of credit line offered by the bank.
Collection of charge Documents
After issuing the sanction advice, the bank will collect necessary charge documents. Charge
documents vary on the basis of types of facility, types of collateral.
Loan Disbursement
Finally loan is disbursed by the branch through a loan account to the name of the borrower
and monitoring of the loan starts formally.
5.8 Modes of Security
To make the loan secured, charging sufficient security on the credit facilities is very
important. The banker cannot afford to take the risk of non-recovery of the money lent.
Security is an asset deposited by the borrower at the time of borrowing, covering the
borrowed money which acts as an insurance against emergency.
BAL charges the following two types of security:
Primary Security
These are the security taken by the ownership of the items for which bank provides the
facility. It is the main cover against credit proposed or sanctioned.
Collateral Security
Collateral securities refer to the securities deposited by the third party to secure the advance
for the borrower in narrow sense. In wider sense, it denotes any type of security on which the
bank has a personal right of action on the debtor in respect of the advance. It is the additional
security against credit.
Primary Tangible
Security Collateral Security Intangible
Security Security
Movable
Security Immovable
Security
Figure 17: Different Types of security
Acceptable Securities
Cash and Equivalent Precious Metal

Sanchay Patra and FDR Inventory
Wage Earners’ Bond L/C and Guarante
ICB Unit Certificate Documentary Bills
Shares Real Estate
Quality of Good Security
Easily
Saleable
Easily
Clean Title
Controlled
Price Easily
Stability Valuable
Figure 18: Quality of Good Security

5.9 Modes of Charging Securities
Charge
It is legal right of the lender to get the asset/property existing or future given as given as
security available for payment of debt. It means the right to make the security available for
sale in order to adjust the loan. But, all securities are properties but all properties are not
securities.
Types
Legal Equitable Fixed Floating

Charge Charge charege Charge
Figure 19: Types of Charges
Creation of Charges
Pledge
Hypothecation
Mortgage
Lien
Right of Set off
Assignment
1. Pledge
Pledge is the bailment of the goods as security for payment of a debt or performance of a
promise. A pledge may be in respect of goods including stocks and share as well as
documents of title to goods such as railway receipt, bills of lading, dock warrants etc. duly
endorsed in bank’s favor.
2. Hypothecation
In case of hypothecation, the possession and the ownership of the goods both rest the
borrower. The borrower to the banker creates an equitable charge on the security. The
borrower does this by executing a document known as Agreement of Hypothecation in favor
of the lending bank.
3. Lien
Lien is the right of the banker to retain the goods of the borrower until the loan is repaid. The
bankers’ lien is general lien. A banker can retain all securities in his possession till all claims
against the concern person are satisfied.
4. Mortgage
Mortgage is the ‘’transfer of an interest in specific immovable property for the purpose of
securing the payment of money advanced or to be advanced by way of loan, existing or future
debt or the performance of an engagement which may give rise to a pecuniary liability”. In
this case the mortgagor does not transfer the ownership of the specific immovable property to
the mortgagee, only transfers some of his rights as an owner. It can be in simple form or as
equitable.
5. Right of Set off

It is a right of the bank exercised by the bank. Where there is more than one account of the
customer remains with the bank, the accounts can be combined if there is an agreement to
this effect between the bank and the customer precluding the necessity of issuing a notice.
No such notice is necessary if there is an agreement to this effect. Otherwise Bank should
issue a certificate of notice to the customer intimating the intension of combining the
accounts.
The decision and judgment in different cases reveal that the following cases where branches
can exercise the right of set-off-
 To combine two or more accounts of the same customer in the same branch of Bank
 To combine two or more accounts of a customer maintained in different branches of

Asia.
 To adjust the surplus amount of the sale proceeds or realization of the securities
the same bank.
held as cover for one particular debt for liquidation of any other debt after
realization of that particular debt.
6. Assignment
In banking, assignment is actionable claim. It means transfer one ones’ right, property or debt
(existing or future) to another person. It can be legal or equitable in nature. Common
assignments are- contract money, supply bills and life insurance policy. The person who
assigns the right, property or debt is called the assignor. The person to whom the right etc. is
assigned is called the assignee.
5.10 Documentation
Documentation can be described as the process or technique of obtaining the relevant
documents. In spite of the fact that banker lends credit to a borrower after inquiring about the
character, capacity and capital of the borrower, he must obtain proper documents executed
from the borrower to protect him against willful defaults. Moreover, when money is lent
against some security of some assets, the document must be executed in order to give the
banker a legal and binding charge against those assets. Documents contain the precise terms
of granting loans and they serve as important evidence in the law courts if the circumstances
so desire. That’s why all approval procedure and proper documentation shall be completed
prior to the disbursement of the facilities.
Types
Charge
Documen Legal
ts Documents
Figure 20: Types of Loan Documents
General Documents
Credit Application of the borrower

Borrowing authority of the customer
Notice of situation of register office, annual return and latest form certified by RJSC
Deed of Partnership (Partnership concern)/ Registered deed of partnership (Registered
by RJSC)
List of directors/partners with specimen signature certified by the company
secretary/managing director/chairman/managing partner
Search report from RJSC
M & AoA with Certificate of Incorporation with update amendment, if any (duly
certified from RJSC), certificate of Commencement (Public Ltd. Company)
Certificate of Registration with By laws (for NGOs, Universities, Schools and trustee
Boards)
Joint Venture Agreement (In case of joint venture)
Sanction Letter: Accepted unconditionally by the borrower
Demand Promissory Note (D.P. Note): Single/Joint
Letter of Disbursement
Letter of Agreement/Arrangement
Letter of Installment
Letter of Continuity
Letter of Revival
Letter of Acceptance/ Confirmation from 3rd party mortgage/ instrument holder
Letter of Continuing Guarantee
General Loan and Collateral Agreement
Letter of Approach, Letter of Consent, Separate Charge Document (from all sister
concerns covering credit limit)
Memorandum of deposit of title deed, Legal papers (Mortgage)
Letter of Hypothecation (in case of hypothecation)
Letter of Pledge (in case of pledge)
Letter of Lien: 1st party/ 3rd party, FDR/Instruments (Lien)
Letter of Lien and Set Off
Charge Documents
Demand Promissory note

Borrowing Resolutions.
Letter of Personal Guarantee
Letter of Corporate Guarantee
Letter of hypothecation over stocks, Book Debts and Plant & machinery
Loan Subordination Agreement
Power of Attorney
Registered mortgage over Land & Building
Equitable mortgage over Land & Building
Letter of Continuity & Revival
Letter of Pledge
Supplemental hypothecation over stocks, book debts, plant.
Pari-passu Security sharing Agreement
Trade finance General Agreement
Letter of Lien
Blanket Counter Indemnity
Letter of disclaimer
Tax Identification Certificate
Legal Documents
Memorandum and Articles of Association (Limited Company)
Registered partnership deed (Partnership firm)
Trade License
Board resolution covering corporate borrowing power and execution of security
documents (Limited Company)
Resolution of the partners for availing of credit facility and for execution of security
documents
Notarized irrevocable power of attorney
To sell hypothecated stock in trade / machinery / equipment.
To receive payments against bills receivables / other receivables
For mortgage of property
Original title deed
Non - Encumbrance Certificate
City Corporation / Municipality Tax payment receipt
5.11 Risk Management
Valuation certificate
Risk management from
Clearance the Lawyer of the Bank (Legal vetting)
Process
Memorandum of deposit of title deed (For Equitable mortgage)
Registered mortgage deed (For Registered / Legal mortgage)
Certified copy of original title deed(in case of new purchase)
Original money receipt duly endorsed in favor of the bank (in case of new purchase).
Documentation
Establishing Goals & Context
Risk Indentification/ Risk Source
Risk Analysis/ Evaluation
Risk Assessment
Risk Monitoring and Review
Risk Control and Coverage
Figure 21: Risk Management Process
Deposits and Advances Policy
Deposits Strategy
Taping different government agencies e.g. Foreign Missions, Roads & Highway,
LGED, Bangladesh Bridge Authority etc, and also other different corporate houses,
e.g. Foreign Air Lines, Telecom companies etc. and maintaining regular intense social
interaction.
Cross Selling of different products including retail to corporate customers.
Exploiting the growing rural deposit basket setting- up smaller size low cost rural
branches and most important channels like EBEK (Ektee Bari Ektee Khamar), Agent
Banking etc.
Offering cash management services, i.e. collection of institutional accounts and
effective use of EFTN service to ensure fast & secure cash service.
Rigorous CASA campaign, Hajj deposits campaign and so on.
Exploit mobile banking services to tap huge low ticket domestic remittance and
mobile wallet to facilitate retail shopping.
Advances Strategy
New emerging sectors like power, ship building, ship breaking, jute yarn, ceramic,
pharmaceuticals industry etc. to be more focused
Existing thrust sectors like agro based industries, leather, frozen food, textile industry
to be more focused.
Backward linkage industries to be targeted which will provide a good source of SME
business through availing the benefit of supply chain management.
More priority to export oriented industries to help increase forex flow, earn through
multi channel and also to help increase no cost fund of the Bank.
Special attention will be given to expand SME credit portfolio to achieve relatively
higher yields and also to reduce adverse effects of large volume defaults.
Risk Management techniques to be effectively applied to ensure strong internal
control over business operation.
Identifying probable problem accounts through Early Warning System (‘EWS’)
taking appropriate care of those and formulating exit plan, where necessary.
Disbursement of loan to high yield generating business segments commensurate with
calculative risk and maintain high quality asset portfolio.
Risk management Principles
Independent
Risk
management
Function Heavily
Involved
Objective Management &
Decisions Board
Tools &
Reporting &
Technique
Review
Integrated Risk
Control and
Management
Figure 22: Risk Management Principles
5.12 Problems in Credit Risk Management
Proper Credit Management is the most important function of any Bank. But the credit
management activities suffer from some kinds of problems that are learnt from discussion
with officers, clients and also problems identified from the job observations. The problems
are as follows:
Lack of Deposit for Credit Extensions
Discussion with officers it revealed that if the Bank collects more deposit, it would be able to
advance credit to more viable projects.
Mentally of not to repay the loan
A culture has been developed among the common people in Bangladesh that Bank loans need
not to be repaid.
Defective Legal System
Existing bad legal system is another greatest blow and curse to the credit management system
and alarming factor recovering loan from defaulter. In reality it is very difficult, lengthy and
expensive to have a verdict in favor of the Bank.
Delay in Loan Sanction

Lengthy process of loan sanction or delay is a common problem of credit management.
Higher Rate of Interest for Credit
Clients generally complain that rate of interest for various type of credit is quite high. In
many cases productivity from loaned investment is inadequate that borrower become
incapable in repaying loan.
Changes in Policies and rates
Due to changes in the credit policy as well as monetary and fiscal policy, long term financing
suffers a lot.
Irregularity in Providing Loan

Usually Banks are responsible to provide loan to those who are eligible for the loan. But in
reality, small investors do not get the loan easily. They have to fulfill more terms and
conditions than those who have greater influence in the business community.
Chapter: Six
Credit Policy
Guideline
6.1 Credit Policy Statement
The credit policy is a statement of basic principles that govern the extension of credit. It
provides a framework within which to conduct the banks’ business and also enables the bank
to have a long term business plan. It is a document though which the Board of Directors
communicates the lending strategy of the bank to the management and lending officers and
also to the other authorities.
Mission
Bank Asia Limited’s credit mission is to actively participate in the sustainable growth and
expansion of our national economy and social development by providing credit viable
borrowers, efficiently delivered and competitively priced.
Client Base
Bank Asia’s client base consists of individual, corporate, institutional and private clients to
help them realize their short term business goals and long term aspirations.
Legal Consideration
Bank Asia Limited complies with all applicable Bangladesh laws and regulations.
General Policy Guidelines
BAL makes loan only to eligible and reputed clients who are involved in legitimate
business activities and whose income and wealth are derived from legitimate source.
BAL encourages lending to social desirable, nationally important and financially
viable sectors and will not lend for unproductive purposes or socially undesired
projects.
At all times a policy of “Know Your Customer” must be foremost in the credit
application processing.
BAL extends credit in its discretion, only to qualified borrowers where the amount
and intended purpose or use of proceeds are clear and legitimate and where the
amount and use is reasonable in the context of what is known about the particular
client and the intended use or purpose.
BAL requires that borrowers have a source of repayment established at the inception
of the credit, and that any exception must be specifically addressed in the approval of
credit.
BAL discourages clients with relatively low or no funds of their own, as clients with a
relatively high ratio of borrowed to own funds tend to face liquidity problems, with
adverse repercussions on their ability to serve their obligations.
BAL discourages financing tobacco and narcotics production and/ or trade.
BAL does not engage in Name Lending based on only on the general reputation of
the borrower.
BAL does not extend any credit facility against cheque or pledge of
goods/merchandise.
BAL engages primarily in the extension of credit in Bangladesh Taka or in the same
currency as the collateral.
BALs’ unsecured lending practices favor extensions of credit for short term, self
liquidating transactions.
Overdraft lines should have an annual cleanup period unless there is evidence of
credit to the relevant accounts annually two times the average credit.
BAL may consider term loans with the maturities up to five years, or longer. The
management reviews the term loan portfolio periodically.
BAL extends venture capital to start up business or businesses, which are entirely
dependent on new technologies, but are considered with extreme caution and also
secured by first class or other acceptable securities.
BAL does not extend credit where it does not have the industry knowledge or
specialized skills needed to properly evaluate the proposal.
BAL extends credit facilities to the area in which the branch is located and the size
and the ability of its staff to supervise and monitor the same is also considered.
Exclusion List
BAL will not finance any activity involving mentioned sectors.
Production/Activities involving forced labor or child labor
Production of/trade in any product/activity deemed illegal under Bangladesh

legislation/regulations/international cenventions and agreements
Production/trade in weapons and ammunitions
Trade in wildlife/wildlife products
Production/use of/trade in hazardous materials
Figure 23: Exclusion List in Credit
Loan Portfolio Mix
After annually reviewing the performance of existing loan portfolio of BAL as well as market
prospect of different sectors/sub-sectors of the country, the senior management prepares the
annual budget at the beginning of the year. It provides guidelines for limiting exposure to the
annual plan/budget, and also the guidelines for limiting exposure to different sectors/sub-
sectors and terms, which are approved by the Board of Directors.
Some factors are considered in preparing credit budget. These are given-
General Economic Outlook (global/local)
Policies and Role of the Government in the Industry
Economic Importance of the Industry
Cyclical Aspects of the Economy
Market Size and level of Competition of Industry
Industry Maturity
Risks Specific to the Industry
Market Segmentation
Figure 25: Factors considering in Credit Budget
Terms of lending are determined based on some factors given below-
Deposit Mix and Average Cost of Funds

Volatility and Seasonal Fluctuation of the Deposit
Base
Amount of Purchased Funds
Composition of the Investment Portfolio
Liquidity of other Bank Assets
Figure 26: Base of the Terms of Lending
Credit Assessment
A thorough credit and risk assessment must be conducted prior to granting any loan/advance.
Sufficient information has to be collected to enable a comprehensive assessment of the true
risk profile of the client. The results of this assessment have to be presented in the BALs’
prescribed credit proposal format. Depending upon the types, amount and the term of credit
exposures as well as clients’ background, the nature and scope of appraisal is determined and
carried out and documented in the credit proposal.
There should not be any option to interchange the limits amongst different concerns of the
group in case of corporate clients.
Lending Authority
BALs’ organization structure has three levels-
Corporate
Office
Zonal Office
Branch
Office
Figure 27: Organizational Structure of BAL
Credit proposal moves through various management approval levels according to the amount
of risk involved. There are five approval levels-
Deputy
Branch
Zonal Head Managing
Manager
Director
Board of President &

Directors of Managing
the Bank Director
Figure 28: Approval Level of BAL
Pricing
Interest rates on lending are determined keeping in view the prevailing rates offered by other
financial institutions. At the same time, the management has to keep in mind the following
points while piecing a loan-
Risk Account
Term of
Exposure Cost of Balances &
Loan
(obligor and Funds other
(maturity)
industry) Relationship
Figure 29: Pricing Loans

Security Structure
BALs’ position should not be subordinate to other lenders. Second liens, second mortgages
etc; should not be accepted as primary security for lending, but should be in pari passu terms
vis-à-vis other lenders. In case of corporate financing, maximum emphasis is given on
company’s projected Cash Flow Statement based on realistic assumptions and past track
record.
Documentation and Custodial Duties
Each credit exposure is to be supported by proper documentation and standard form of

documentation should be used whenever possible. In case of corporate clients with exposure
of Tk. 50.00 million or above, a certificate regarding compliance of security documentation
as per terms of sanction advice is to be obtained from banks’ approved lawyer. Security
documentation is to be held under strict control preferably in strong room and storage of
security documents should be under duel custodian control at branch level properly recorded
in the respective registers.
Disbursement
The branch incumbent has to approve the prescribed “Credit Disbursement Authorization
Memo” before allowing the first drawing favoring the client against
sanctioned/renewed/enhanced limit.
Monitoring of Credit
The control of credit operations falls into two part-
Monitoring and Monitoring of

Review of all Delinquent
Accounts Accounts
Figure 30: Monitoring of Credit
Relationship management unit at branch level monitors all existing loans on day to day basis
and takes remedial measures as and when any deterioration occurs. Credit Administration
unit and Recovery Unit at Corporate Office level control the credit operations of the BAL.
In case of delinquent accounts, BBs’ “Procedures of Loan Classification and Provisioning”

are complied with strictly by BAL.
Internal Audit and Control
Corporate Offices’ Internal Audit and Control team visits the branches. They evaluate the
effectiveness of the Credit Policy as well as monitor the compliance status and report the
same to Senior Management to review.
6.2 Credit Risk Grading
Credit Risk Grading (CRG) is an important tool for credit risk management as it helps the
banks and financial institutions to understand various dimensions of risk involved in different
credit transactions and provides better assessment of the quality of credit portfolio of the bank
or a branch.
CRG is a collective definition based on the pre-specified scale and reflects the underlying
credit-risk for a given exposure. A Credit Risk Grading deploys a number/alphabet/symbol as
a primary summary indicator of risks associated with a credit exposure. Credit Risk Grading
is the basic module for developing a Credit Risk Management system.
Functions of CRG
Pomote bank safety and soundness by informed decision making
Measures credit risk and differentiate individual and groups of

credit
Allow bank management and examiners to monitor changes and
trends in risk level
Allow bank management to manage risk to optimize returns
Figure 31: Functions of CRG
Use of CRG
The Credit Risk Grading matrix allows application of uniform standards to credits to
ensure a common standardized approach to assess the quality of individual obligor, credit
portfolio of a unit, line of business, the branch of the bank as a whole.
As evident, the CRG outputs would be relevant for individual credit selection, wherein
either a borrower or a particular exposure/facility is rated. The other decisions would be
related to pricing (credit-spread) and specific features of the credit facility. These would
largely constitute obligor level analysis.
CRG would also be relevant for surveillance and monitoring, internal MIS and assessing
the aggregate risk profile of a bank and for portfolio level analysis.
Number of Short Name of Grades used in the CRG

Grading Short Name Number
Superior SUP 1
Good GD 2
Acceptable ACCPT 3
Marginal/Watch list MG/WL 4
Special Mention SM 5
Sub standard SS 6
Doubtful DF 7
Bad & Loss BL 8
Table 17: Short Name and Number of CRG
Credit Risk Grading Definitions
A clear definition of the different categories of Credit Risk Grading is given below-
Superior - (SUP) -1:
Credit facilities which are fully secured i.e. fully cash covered
Credit facilities fully covered by Government Guarantee
Credit facilities fully covered by the guarantee of a top tier international bank
Good – (GD) - 2
Strong repayment capacity of the borrower
The borrower has excellent liquidity and low leverage
The borrower demonstrates consistently strong earnings and cash flow
Borrower has well established, strong market share
Very good management skill & expertise
All security documentation should be in place
Credit facilities fully covered by the guarantee of a top tier local bank
Aggregate score of 85 or greater based on the Risk Grade Score Sheet
Acceptable – (ACCPT) - 3
These borrowers are not as strong as good grade borrowers, but still demonstrate
consistent earnings, cash flow and have a good track record
Borrowers have adequate liquidity, cash flow & earnings
Credit in this grade would normally be secured by acceptable collateral (1st charge over
inventory/receivables/equipment/property)
Acceptable management
Acceptable Parent/sister Company guarantees
Aggregate score of 75-84 based on the risk grade score sheet
Marginal/watch List – (MG/WL) - 4
This grade warrants greater attention due to conditions affecting the borrower, the
industry or the economic environment
These borrowers have an above average risk due to strained liquidity, higher than normal
leverage, thin cash flow and/or inconsistent earnings
Weaker business credit and early warning signals of emerging business credit detected the
borrower incurs a loss
Low repayments routinely fall past due
Account conduct is poor, or other untoward factors are present
Credit requires attention
Aggregate score of 65-74 based on the risk grade score sheet
Special mention – (SM) - 5
This grade has potential weaknesses that deserve management’s close attention. If left
uncorrected, these weaknesses may result in a deterioration of the repayment prospect of
the borrower
Severe management problems exist
Facilities should be downgraded to this grade if sustained deterioration in financial
condition is noted (consecutive losses, negative net worth, excessive leverage
An aggregate score of 55-64 based on the risk grade score sheet
Substandard – (SS) - 6
Financial condition is weak and capacity and inclination to repay is in doubt
These weaknesses jeopardize the full settlement of loans
Bangladesh Bank criteria for sub-standard credit shall apply
An aggregate score of 45-54 based on the Risk Grade score sheet
Doubtful – (DF) - 7
Full repayment of principal and interest is unlikely and the possibility of loss is extremely
high
However, due to specifically identifiable pending factors, such as litigation, liquidation,
procedures or capital injection, the asset is not yet classified as Bad & Loss
Bangladesh Bank criteria for doubtful credit shall apply
An aggregate score of 35-44 based on the Risk Grade Score Sheet
Bad & Loss- (BL) - 8
Credit of this grade has long outstanding with no progress in obtaining repayment or on
the verge of wind up/liquidation
Prospect of recovery is poor and legal options have been poor and legal options have been
pursued
Proceeds expected from the liquidation or realization of security may be awaited. The
continuance of the loan as a bankable asset is not warranted, and the anticipated loss
should have been provided for
The classification reflects that it is not practical or desirable to defer writing off these
basically valueless assets even though partial recovery may be affected in the future.
Bangladesh Bank guidelines for timely write off of bad loans must be adhered to. Legal
Procedures/suit initiated
Bangladesh Bank criteria for bad & loss credit shall apply
An aggregate score of less than 35 based on the risk grade score sheet
Computation of CRG
The following step-wise activities outline the detail process for arriving at credit risk grading.
Identify all the Principal Risk Components
Credit risk is most simply defined as the probability that a borrower or counterparty will fail
to meet its obligations in accordance with the agreed terms and conditions. In other words, it
is the loss associated with degradation in the credit quality of borrowers or counterparties.
Credit risk for counterpart arises from an aggregation of the following-
Market Risk
Relationship Risk Liquidity Risk
Business/
Operational/
Industry Risk
Management Risk
Information
Security Risk
Figure 32: Different Credit Risk
Each of the above mentioned key risk areas require be evaluating and aggregating to arrive at
an overall risk grading measure.
a) Evaluation of Financial Risk

Risks that counter parties will fail to meet obligation due to financial distress. This typically
entails analysis of financials i.e. analysis of leverage, liquidity, profitability & interest
coverage ratios. To conclude, this capitalizes on the risk of high leverage, poor liquidity, low
profitability & insufficient cash flow.
b) Evaluation of Business/Industry Risk

Risk that adverse industry situation or unfavorable business condition will impact borrowers’
capacity to meet obligation. The evaluation of this category of risk looks at parameters such
as business outlook, size of business, industry growth, market competition & barriers to
entry/exit. To conclude, this capitalizes on the risk of failure due to low market share and
poor industry growth.
c) Evaluation of Management Risk

Risk that counter parties may default as a result of poor managerial ability including
experience of the management, its succession plans and teamwork.
d) Evaluation of Security Risk

Risk that the bank might be exposed due to poor quality or strength of the security in case of
default is security risk. This may entail strength of security and collateral, location of
collateral and support.
e) Evaluation of Relationship Risk

This risk area covers evaluation of limit utilization, account performance,
condition/covenants compliance by the borrower and deposit relationship.
Allocate weight ages to Principal risk components
According to the importance of risk profile, the following weight ages are proposed for
corresponding principal risks:
Principal Risk Components Weight

Financial Risk 50%
Business/Industry Risk 18%
Management Risk 12%
Security Risk 10%
Relationship Risk 10%
Table 18: Weight Distribution of Risk Components
Establish the Key Parameters
Principal Risk Components Key Parameters

Financial Risk Leverage Ratio
Liquidity Ratio
Profitability Ratio
Coverage Ratio
Business/Industry Risk Size of the business

Age of Business
Business Out look
Industry growth
Market Competition
Entry / Exit Barriers
Management Risk Experience

Succession
Team Work
Security Risk Security coverage

Collateral coverage
Support
Relationship Risk Account conduct

Utilization of limit
Compliance of covenants / condition
Personal deposit
Table 19: Key Parameters of Risk Components
Assign Weights to each of the key parameters
Principal Risk Components Key Parameters Weight

Financial Risk Leverage Ratio 15%
Liquidity Ratio 15%
Profitability Ratio 15%
Coverage Ratio 5%
50%
Business/Industry Risk Size of the business 5%
Age of Business 3%
Business Out look 3%
Industry growth 3%
Market Competition 2%
Entry / Exit Barriers 2%
18%
Management Risk Experience 5%
Succession 4%
Team Work 3%
12%
Security Risk Security coverage 4%
Collateral coverage 4%
Support 2%
10%
Relationship Risk Account conduct 5%
Utilization of limit 2%
Compliance of covenants / 2%
condition
Personal deposit 1%
10%
Table 20: Assigned Weights to Key Parameters
Input Data to arrive at the score on the key parameters
After the risk identification and weighted assignment process, this step will be to input actual
parameter in the score sheet to arrive at the scores corresponding to the actual parameters.
The program requires inputting data accurately in particular cells for input and will
automatically calculate the risk grade for a particular borrower based on the total score
obtained.
Arrive at the credit risk grading based on total score
The following is the proposed CRG matrix based on the total score obtained by an obligor-
Grading Short Name Score



Superior SUP 100% cash covered

Government Guarantee
International Bank Guarantee
Good GD 85+
Acceptable ACCPT 75-84
Marginal/Watch list MG/WL 65-74
Special Mention SM 55-64
Sub standard SS 45-54
Doubtful DF 35-44
Bad & Loss BL <35
Table 21: Score in CRG
Early Warning Signals
Early warning signals (EWS) indicate risks or potential weaknesses of an exposure requiring
monitoring, supervision or close attention by management. Despite a prudent credit approval
process, loans may still become troubled. Some risk symptoms that may be highlighted by
EWS-
Marginal/Watch List
If any loan is-
Past due/overdue for 60 days and above

Frequent drop in security value or shortfall in drawing power exists
Special Mentioned
If any loan is-
Past due/overdue for 90 days and above

Major document deficiency prevails
Significant petition or claim is lodged against the borrower
The CRG form of EWS should be completed by the RM and sent to the approving authority
in the Credit Risk management Department. The CRG should be updated as soon as possible
in referring EWS accounts or any problem accounts to the CRM Department for their early
involvement and assistance in recovery.
CRG Review
Frequencies of the review of the CRG are mentioned below-
Grading Short Name Score

Superior SUP Annually
Good GD Annually
Acceptable ACCPT Annually
Marginal/Watch list MG/WL Half Yearly
Special Mention SM Quarterly
Sub standard SS Quarterly
Doubtful DF Quarterly
Bad & Loss BL Quarterly
Table 22: CRG Review
Financial Spread Sheet (FSS)
A FSS has been developed which may be used by the branches while analyzing the credit risk
elements of a credit proposal from financial point of view. The FSS is well designed and
programmed software having two parts-
Input
Output
Sheets
Sheets
Figure 33: FSS Parts
The financial numbers of borrowers need to be inputted in the input sheets, which will then
automatically generate the output sheets.
Chapter: Seven
Credit Procedural
Guideline
7.1 Approval Process
The following diagram illustrated the approval process-
Credit application/proposal recommende by RM

as well as branch manager
Head of Credit (CRM Unit)
President & Manging Director through Credit

Committee
Board of Directors
Figure 34: Approval process
7.2 Credit Administration
The credit administration function is critical in ensuring that proper documentation and
approvals are in place prior to the disbursement of loan facilities. For this reason, it is
essential that the functions of credit administration be strictly segregate from the CRM Unit
in order to avoid the possibility of controls being compromised or issue not being highlighted
at the appropriate level.
Disbursement
Security documents are prepared in accordance with approval terms and are legally
enforceable. Standard loan facility documentation that has been reviewed by legal counsel
should be used.
Disbursement under loan facilities are only be made when all security documentation is in
place. An updated clean CIB report must be obtained before any disbursement of facility
favoring the borrower.
Custodial Duties
Security documentation is held under strict control, preferably in a fireproof cabinet in the
strong room. Storage of security documents should be under dual custodians control and their
alternatives in writing at branch level till such time as this function is centralized at corporate
office. The documents should be recorded in the Security Document Register and the Safe
In Safe Out Register.
Compliance Requirements
All required BB returns are submitted in the correct format in a timely manner
BB circulars/regulations are maintained properly and advised to all relevant
department to ensure compliance
All third party service provider (valuers and lawyers) are approved and performance
reviewed on regular interval basis
7.3 Credit Monitoring
To minimize credit losses, monitoring procedures and systems should be in place that
provides an early indication of the deterioration financial health of a borrower. At minimum,
systems should be in place to report the following exceptions to relevant executives in CRM
and RM team-
Past due principal or interest payments, account excesses and breach of loan
covenants
Loan term and conditions are monitored, financial statements are received on a
regular basis, and any covenant breaches or exceptions are referred to CRM and the
RN team for timely follow up
Timely corrective action is taken to address findings of any internal, external or BBs’
inspection/audit
All borrower relationship/loan facilities are reviewed and approved though the
submission of a Credit Application/Proposal at least annually
Computer system- STELAR is able to produce the exceptions reports for branches or
corporate office review. All the exceptions should be followed up on and corrective action
taken in a timely manner before the account deteriorates further.
7.4 Credit Recovery
The recovery unit (RU) should directly manage accounts with sustained deterioration
(substandard or worse). CRM will transfer EXIT accounts graded 6-8 the RU for efficient
exit.
Non-Performing Loan Account Management
All Non-Performing Loan should be assigned to an account manager within the recovery
unit, who is responsible for coordinating and administering the action plan/recovery of the
account, and should serve as the primary customer contact after the account is downgraded to
sub-standard.
Account Transfer Procedures
Within the 7 days of an account being downgraded to sub-standard, a request for action with
a checklist for file handover should be completed by CRM unit and forwarded to recovery
unit for acknowledgement. The account should be assigned to an account manager within the
recovery unit, who should review all documentation, meet the customer and prepare a
Classified Loan Review Report within 15 days of the transfer. The CLR should be approved
by the President and MD and copied to the concerned branch where the loan was originally
disbursed and the CRM unit.
Non-Performing Loan Monitoring
On a quarterly basis, a CLR should be prepared by the RU account manager to update the
status of the action/recovery plan, to review and assess the adequacy of provisions and to
modify the banks’ strategy as appropriate. The CLR should be approved by the President and
MD for Non-Performing loans.
Non-Performing Loan Provisioning and write Off
The guidelines furnished by BB for CIB reporting, provisioning and write off of bad and
doubtful debts, and suspension of interest should be followed in all cases. The approval to
take provisions or release of provisions/upgrade of an account should be restricted to the
President and MD of the bank based on recommendation from the RU of credit department of
corporate office. In case of write off, approval of the board of directors of the bank is
required.
7.5 Branch Organogram of Credit Department
With a view to mitigating the operational risk, the function o credit department of the
branches has been segregated into two units-
Relationship Management Unit

Credit Administration Unit
Branch
Manager
Credit
Credit in
Administration
Charge
Unit
Credit Officer-
Relationship Relationship Credit Officer- Credit Officer-
Monitoring &
Officer Officer Disbursement Custodian
Compliance
Figure 35: Branch Organogram of Credit Department

Chapter: Eight
Findings and
Analysis
8.1 Financial Analysis
Ratio Analysis
Ratios Calculated Value Findings

Credit Deposit Ratio CD Ratio is increasing year
2011 4.41% by year. That means credit is
2012 11.61% more than the deposit amount
2013 143.57% in 2013.
Interest Expense to Total Expense Interest expense coverage is
2011 84.60% largest portion of total
2012 82.45% expense. It indicates high cost
2013 86.63% of deposits.
Interest Income to Total Income Interest income covers almost
2011 98.61% the total income of the
2012 98.10% branch. It creates an alarming
2013 96.96% dependency.
ROA Assets are employed fairly in
2011 1.52 efficient way that increases
2012 1.05 the return of the branch.
2013 1.31
Ratio of Fee based Income Fee based income ratio is
2011 1.39% very much poor.
2012 1.91% Management should try to
2013 3.02% increase this earning sector.
Interest Coverage This ratio shows an average
2011 1.17 situation where interest
2012 1.15 payments that creditors will
2013 1.25 continue to receive 1.25 times
a year in 2013 of this branch.
Fixed Asset Turnover This ratio shows a
2011 14.06 satisfactory situation where
2012 22.70 income covers fixed asset of
2013 72.01 the branch 72.01 times a year.
It is in increasing trend.
Cash to Total Asset Ratio Cash position is worsen year
2011 3.60% by year to meet any sudden
2012 1.39% obligation or operating
2013 0.71% expense.
Net Profit Margin The ability of the branch to
2011 0.12 generate profit/net income
2012 0.12 from each unit of
2013 0.18 revenue/income is increasing
over years.
Debt Service Coverage Ratio This ratio shows that the
ability of the branch is
2011 1.35 increasing over years to serve
2012 1.36 from its operations interest
2013 1.40 payments that are due to non
equity suppliers of capital.
Cash Position Ratio Over the years it is found that
2011 0.29 the cash resources are
2012 0.14 decreasing to the branch to
2013 0.10 meet any obligations and
operating expense in
emergency.
Current Ratio The ability of the branch to
2011 0.037 meet the current liabilities
2012 0.014 with the current asset is not
satisfactory. It is below the
2013 0.012
average standard.
Table 23: Ratio Analysis of Rupnagar Branch, Bank Asia Limited
Regression Analysis
For the analysis, we take-
Dependent Variable:
 Loan Size
Independent Variables:
 Deposit
 Cost of fund
 Interest Rate on Loan
The analysis is done to observe how loan size is influenced with these three variables and
whether these variables are enough to explain loan size or not. For this analysis, last 4 years
data of the branch have been used in quarterly basis.
Here, a hypothetical test has been done with multiple regression.
H0: µ≤µ0
Ha: µ>µ 0
Figure 36: Summary of Multiple Regression Analysis
Regression Equation:
Y (Loan size) = 3775533958 + 0.299386046 Deposit + (-16857893523) Interest Rate – (-

20216929409) Cost of Fund
Interpretation:
R2: It is the coefficient of determination. In this model, R2 is 54.85%, which indicates that
loan size can be explained 54.85% by the independent variables: Deposit, Cost of fund,
Interest Rate on Loan..
Intercept: The intercept value of 3775533958 indicates that loan size will increase by
3775533958 units, when all the variables are zero.
Deposit: The deposit coefficient of 0.299386046 suggests that 1 taka of increase in deposit
will increase the loan size by 0.299386046 taka. As the coefficient is positive, this variable is
positively related with loan size.
Interest Rate: The interest rate coefficient of -16857893523 indicates that 1% increase in
interest rate will increase the loan size by TK. -16857893523 which means, interest rate is
negatively related with loan size.
Cost of fund: The cost of fund coefficient of -20216929409 indicates that 1% increase in
cost of fund will decrease the loan size by TK. -20216929409 which means, cost of fund is
negatively related with loan size.
F value: the calculated F value is 4.858390557 whereas critical value is 3.49. Using the F
table for the .05 level of significance, numerator of 3 (k) and denominator of 12 (n-k-1). It
indicates that the null hypothesis, all the regressions coefficients are zero, is rejected. That
means, some of the independent variables do have the ability to explain the variation in the
dependent variable.
We can conclude that, H0: µ>µ 0 that is, 4.85 (actual) >3.49 (critical)
Here, Numerator, k = 3, Independent Variable, Denominator = 12, n=Number of observation
A Comparative Analysis with other branches
Branch wise Comparison December 2013

Deposit Advance Profit
5516.25
5033.89
4681.02
3850.7
1812.88 1651.08
1037.65 1150.17
346 491.72 364.88

318.16
30.07 12.44 24.22
Corporate Branch Scotia Branch Mirpur Branch Shyamoli Branch Rupnagar Branch
Graph 46: A comparative Analysis
In comparison with the other branch, advance is more than deposit amount. It is found special
case in this analysis. As a new branch than other branches, profit is satisfactory. But deposit
position should be increased.
8.2 SWOT Analysis of BAL
Strength
Superior Quality of service
Dynamism and adaptability in technology and banking services
Financial Strength
Efficient Management
Experienced workforce
In-House Utility
Excellent Working Environment
Wide banking network
Weaknesses
Limited Workforce
Problem in Delivery and Marketing
Opportunities
Government Support
Evaluation of E-Banking
Threats
Merger and Acquisition
Poor Telecommunication Infrastructure
Frequent Currency Devaluation
Emergence of Competitors
8.3 Findings
From different analysis, it is found-in 2013
Loans and Advances- BDT. 1,651,088,940.35

Deposit- BDT. 1,147,891,589.97
Profit- BDT. 24,215,952.20
Income- BDT. 138,084,912.96
Expense- BDT. 113,868,960.76
Total Asset- BDT. 2,406,585.11
Loans and Advance is not dependent only on deposit, interest rate and cost of fund.
Economic condition, growth, political situation, government regulations may have a
huge impact on loan amount.
Chapter: Nine
Concluding Part
9.1 Recommendation
Based on the evaluation of different aspects of the credit process of Bank Asia Limited,
Rupnagar branch, the following recommendations have been made:
In the face of competitive and borrower dominated credit scenario, bank must come
up with innovative loan products to meet up the demand of time. In this connection
bank can focus on some more loan products to compete with existing and upcoming
competitors.
To combat the problem of mobilizing deposit in the form of credit, bank should focus
on intensive marketing effort.
Entrepreneurship lending and SME sector should be given due emphasis.
As borrower selection is the key to successful lending, bank should focus on the
selection of true borrower. But at the same time it must be taken into account that
right borrower selection does not mean that Bank Asia has to adopt conservative
lending policy but rather it means that compliance with the KYC or Know Your
Customer to ascertain the true purpose of the loan. Care should also be taken so that
good borrowers are not discarded due to strict adherence to the lending policy.
At the branch level credit department must be adequately capable of collecting the
correct and relevant information and analyzing the financial statements quickly and
precisely.
Credit officers must be skilled and experienced enough to understand the manipulated
and distorted financial statements.
Monitoring of a loan should be conducted at regular interval to enhance the borrower
is properly maintaining the mortgage property and utilizing the borrowing money.
Reporting of all loans should be periodically made to Bangladesh Bank.
Loan monitoring is a continuous task and requires expert manpower.
Charge documents should be strictly maintained according to the BALs’ credit policy.
The bank has shortage of people in their customer service and credit department. That
creates problem for providing the service to their valued customers. Sufficient
workforce is necessary.
Find out corporate clients from different areas to increase the loan portfolio of the
branch.
Proper nursing should be done for the existing client of the branch.
The loan portfolio should be diversified based on different criteria.
9.2 Conclusion
As an organization Bank Asia Limited has earned the reputation of top banking operation in
Bangladesh. The organization is much more structured compared to other commercial banks
in Bangladesh. It is relentless in pursuit of business innovation and improvement. It has a
reputation as a committed partner in Progress. Most of the Banks in Bangladesh are offering a
wide array of financial services including new types of loans and advances and some whole
new services are being launched every year. Bank Asia Limited, a bank of difference, also
has discovered new avenues to reach its goals. For the brand name, it is gone to people’s
heart through updating various services. Bank Asia should diversify its credit portfolio so that
in near future when competition among Banks will serve, it can stand with its own identity.
The Credit Risk Management method that may seem fit today may not work tomorrow.
Central focus in this regard would be to have a comprehensive Information Technology
system, sufficient expertise and above all very relaxed management to adopt new idea to
update Credit Risk Management method. Now Bank Asia is continuing business operation
successfully in Bangladesh through developing an image and goodwill among its clientele by
offering its excellent services. The success has been resulted from the dedication,
commitment and dynamic leadership of its management. During the short span of time of its
operation, has s Bank Asia successfully grabbed a position as a highly progressive and
dynamic financial institution in the country. By proliferation of new advance services,
expanding use of automated equipment and electronic transfer of financial inform Bank Asia
action, will be the country’s first largest institution in the near future. The current situation of
BAL is satisfactory. But in the age of competition if the bank does not provide extra ordinary
that means superior services than it will be difficult to continue banking because everybody
wants to maintain quality. And when BAL is able to overcome this type of problem then it
would be more structured compared to any other bank operating local in Bangladesh.
Bibliography
I collected information from related book on the topic “". The name of the book which really
helped me a lot-
1. P. N. Varshney, “Banking Law and Practice”

2. Syed Ashraf Ali, “Foreign Exchange and Risk Management”
Websites
1. www.bankasia-bd.com
2. www.bangladesh-bank.org
3. www.google.com
Others
1. Annual Report of Bank Asia Limites,2009-2013

2. Profit and Loss Statement of the Branch,2010-2013
3. Trial Balance Statement of the Branch, 2010-2013
4. Circulars issued by Bank Asia Limited time to time
5. CRM Manual of Bank Asia Limited
6. Related Circulars by Bangladesh Bank
7. Study papers and notes provided by Bank Asia Limited and the Branch
Different briefings of my supervisor also helped me to prepare this internship report more
correctly and informatively.
Appendix
Figure: Loan Calculator
Figure: Installment Schedule Calculator

Interest Rates
Particulars Interest Rate
Saving Account 5.00-6.50%
SND 3.50%-7.00%
FDR 5.00%-10.50%
General Account Interest for Branches for Borrowing: 12.00%
LCY Lending: 11.50%
General Account Interest for Branches for Borrowing: 2.00%
FCY Lending: 2.00%
Operations of BAL
Graph: Operations of BAL

Management structure/Organogram
President &
Managing Director
Deputy Managing
Director
Senior Executive
Vice President
Executive Vice
President
Senior Vice
President
Vice President
First Vice
President
Assistant Vice
President
First Assistant
Vice President
Senior Executive
Officer
Executive Officer
Senior Officer
Officer
MTO/Probetionary
Officer
Junior Officer
Assistant Officer
Banking Officer
Trainee officer
Figure: Hierarchy of Management
Capital and Reserve of BAL

Particulars 2009 2010 2011 2012 2013
Authorized Capital 4450.00 4450.00 15000.00 15000.00 15000.00
Paid up Capital 2144.81 3002.74 5,254.79 6,305.75 6,936.32
Risk Weighted Assets 45,150.28 100,545.90 83,664.20 106,719.00 140,976.92
Core Capital (Tier-I) 4,644.40 6,569.16 9,536.33 10,444.33 11,904.15
Supplementary 893.77 1,587.80 2,911.00 3,485.86 3,670.70

Capital (Tier-II)
Capital Surplus/ 1,023.15 (892.14) 4,080.90 3,258.29 1,477.16
Deficit
Total Capital 10.01% 8.11% 14.88% 13.05% 11.05%
Adequacy ratio
Basel-II
Total Assets 68,663.20 105,198.05 117,729.41 140,361.37 163,777.74
Reserve Fund 2,809.33 4,057.20 7,224.14 6,739.42 7,681.38
Total Deposits 54,832.82 86,365.64 95,131.10 110,061.78 133,489.37
Table: Capital & Reserve

Value Addition of BAL

Items 2010 2011 2012 2013
Income from banking 12,092 14,782 17,437 19,699
Services
Less: Cost of Services (6,616) (9,360) (10,753) (12,442)
& Supplies
Value added By 5,476 5,422 6,684 7,257

banking Services
Non-banking Income - - - -
Provision for loans & (669) (610) (2,329) (1,895)

Off-balance sheet
exposure & others
Total 4,806 4,812 4,356 5,362

Table: Value Addition of BAL
Particulars 2010 2011 2012 2013

Total Market Value 25,748.47 20,073.30 13,557.36 15,953.54
of the Equity
Less: Total Book 7,059.94 12,478.93 13,045.17 14,617.70

Value of the Equity
Market Value 18,688.53 7,594.37 512.19 1,335.84

Added
Table: Market Value Addition of BAL
Five Year Performance of BAL
Table: Performance Matrix of BAL
Credit Approval System of BAL
Graph: Credit Approval System of BAL

Ratio Analysis Formulas
Ratios Findings
Credit Deposit Ratio Loans and
Advances÷Deposits
Interest Expense to Total Expense Interest Expense÷Total
Expense
Interest Income to Total Income Interest income÷Total
Income
ROA Profit/Net Income÷Average
Assets
Ratio of Fee based Income Fee Based Income÷Total
Income
Interest Coverage EBIT/Profit÷Interest Expense
Fixed Asset Turnover Income÷Average Fixed

Assets
Cash to Total Assets Ratio Cash÷Total Assets
Net Profit Margin Profit/Net Income÷Total

Income
Debt Service Coverage Ratio Operating Income÷Annual
Interest Payments
Cash Position Ratio (Cash+Marketable
Security)÷Total Assets
Current Ratio Current Assets÷Current
Liabilities
CRG wise loan Outstanding 2013
Sl. CRG Grade No. of A/C Funded outstanding as

on 30.12.2013
1 Superior 62 37.78
2 Good 1 444.61
3 Acceptable 39 1051.40
4 Marginal / Watch list - -
5 Special Mention - -
6 Substandard - -
7 Doubtful - -
8 Bad & Loss - -
9 Non graded(SME, Consumer Credit, 164 192.86

Credit Card, Staff loan, Micro
Credit etc)
Total 266 1651.09
Table: CRG wise Loan Outstanding 2013
No of Loan Account
Superior Good Acceptable Non Graded
9%
10%
23% 58%
Graph: Number of Loan Accounts Based on CRG

Data for Regression Analysis
Year Loans & Deposits Interest Rate Cost of Credit

Advances Fund Deposit Ratio
31/03/2010 1254332.03 400364793.4 13.50% 8.00% 0.31%
31/06/2010 1874381.63 405275445.6 13.50% 7.50% 0.46%
30/09/2010 2194632.33 63265663.42 13.50% 7.50% 3.47%
31/12/2010 23130690.08 581650772.43 13.00% 8.00% 3.98%
31/03/2011 11364852.47 121325521.05 14.50% 8.00% 9.37%
31/06/2011 23913844.9 454814215.9 15.00% 7.50% 5.26%
30/09/2011 5237524.56 212514543.21 15.00% 7.50% 2.46%
31/12/2011 24740983.01 565325550.34 14.50% 7.50% 4.38%
31/03/2012 30651353.71 564896639.23 14.50% 7.50% 5.42%
30/06/2012 27533276.58 665383253.50 14.50% 6.50% 4.13%
30/09/2012 46533265.95 756432333.28 14.00% 6.50% 6.15%
31/12/2012 94776773.33 814333143.86 14.00% 6.50% 11.64%
31/03/2013 93613546.84 831655699.25 13.50% 6.50% 11.26%
30/06/2013 214187886.55 903154191.78 13.50% 5.50% 23.71%
30/09/2013 956362663.26 1032665656.36 13.00% 5.50% 92.61%
31/12/2013 1651075440.35 1148400042.91 13.00% 6% 143.77%
Table: Data for Regression Analysis
CREDIT RISK GRADING SCORE SHEET
Reference No.: *************** D a te : *******
Borrower *****************
Group Name (if any) NA Aggregate Score: 82
Branch:
Industry/Sector Risk
Grading: Acceptable
Date of Financials ****************
Completed by
Approved by
Number Grading Short Score
1 Superior Fully cash secured, secured by
government guarantee/international
SUP bank guarantee
2 Good GD 85+
3 Acceptable ACCPT 75-84
4 Marginal/Watchlist MG/WL 65-74
5 Special Mention SM 55-64
6 Substandard SS 45-54
7 Doubtful DF 35-44
8 Bad/Loss BL <35
Criteria Score
Weight Parameter Score Actual Parameter Obtained
A. Financial Risk
50%
1. Leverage: (15%) Less than 0.25× 15 0.63 12
Debt Equity Ratio (×) - Times 0.26× to 0.35 x 14
Total Liabilities to Tangible 0.36× to 0.50 x 13
Net worth
0.51× to 0.75 x 12
All calculations should be 0.76× to 1.25 x 11
based on
annula financial statements of 1.26× to 2.00 x 10
the
borrower (audited preferred) 2.01× to 2.50 x 8
2.51× to 2.75 x 7
More than 2.75× 0
2. Liquidity: (15%) Greater than 2.74× 15 1.52 12
Current Ratio (×) -Times 2.50× to 2.74 x 14
Current Assets to Current 2.00× to 2.49 x 13
Liabilities
1.50× to 1.99 x 12
1.10× to 1.49 x 11
0.90× to 1.09 x 10
0.80× to 0.89 x 8
0.70× to 0.79 x 7
Less than 0.70× 0
3. Profitability: (15%) Greater than 25% 15 20.78% 14
Operating Profit Margin (%) 20% to 24% 14
(Operating Profit/Sales) X 100 15% to 19% 13
10% to 14% 12
7% to 9% 10
4% to 6% 9
1% to 3% 7
Less than 1% 0
4. Coverage: (5%)
Interest Coverage Ratio (×) -
Times
Earning before interest & tax More than 2.00× 5 4.74 5
(EBIT)
Interest on debt More than 1.51× Less than 4
2.00×
More than 1.25× Less than 3
1.50×
More than 1.00× Less than 2
1.24×
Less than 1.00× 0
Total Score- Financial Risk 50 43
B. Business/ Industry Risk
18%
1. Size of Business (in BDT > 60.00 5 2.66 1
crore)
30.00 – 59.99 4
The size of the borrower's 10.00 – 29.99 3
business
measured by the most recent 5.00 - 9.99 2
year's
total sales. Preferably audited 2.50 - 4.99 1
numbers.
< 2.50 0
2. Age of Business > 10 Years 13 3
> 5 - 10 Years 2
The number of years the 2 - 5 Years 1
borrower
engaged in the primary line of < 2 Years 0
business
3. Business Outlook Favorable 3 Stable
2
Critical assesment of medium Stable 2
term
prospects of industry, market Slightly Uncertain 1
share
and economic factors. Cause for Concern 0
4. Industry Growth Strong (10%+) 3 Good (>5% - 10%) 2
Good (>5% - 10%) 2

Moderate (1%-5%) 1
No Growth (<1%) 0
5. Market Competition Dominant Player 2 Moderately Competitive 1
Moderately Competitive 1
Highly Competitive 0
6. Entry/Exit Barriers Difficult 2 Difficult 2
Average 1
Easy 0
Total Score- 18 11
Business/Industry Risk
C. Management Risk
12%
1. Experience More than 10 years in the 5 More than 10 years in 5
related line of business the related line of
business
Quality of management based 5–10 years in the related line 3
on total of business
# of years of experience of the 1–5 years in the related line 2
senior of business
management in the Industry. No experience 0
2. Second Line/ Succession Ready Succession 4 Ready Succession 4
Succession within 1-2 years 3
Succession within 2-3 years 2
Succession in question 0
3. Team Work Very Good 3 Very Good 3
Moderate 2
Poor 1
Regular Conflict 0
Total Score- Management 12 12
Risk
D. Security Risk
10%
1. Security Coverage Fully Pledged 4 Fully Pledged 4
(Primary) facilities/substantially cash facilities/substantially
covered / Reg. Mortg. for cash covered / Reg.
HBL Mortg. for HBL
Registered Hypothecation (1st 3
Charge/1st Pari passu
Charge)
2nd charge/Inferior charge 2
Simple 1
hypothecation/Negative lien
on assets
No security 0
2. Collateral Coverage Registered Mortgage on 4 Negative lien on 1
(Property Location) Municipal corporation/Prime collateral
Area property
Registered Mortgage on 3
Pourashava/Semi-Urban area
property
Equitable Mortgage or No 2
property but Plant and
Machinery as collateral
Negative lien on collateral 1
No collateral 0
3. Support (Guarantee) Personal Guarantee with high 2 Personal Guarantee 2
net worth or Strong with high net worth or
Corporate Guarantee Strong Corporate
Guarantee
Personal Guarantees or 1
Corporate Guarantee with
average financial strength
No support/guarantee 0
Total Score- Security Risk 10 7
E. Relationship Risk
10%
1. Account Conduct More than 3 years Accounts 5 More than 3 years 5
with faultless record Accounts with faultless
record
Less than 3 years Accounts 4
with faultless record
Accounts having satisfactory 2
dealings with some late
payments.
Frequent Past dues & 0
Irregular dealings in account
2. Utilization of Limit More than 60% 2 80.00% 2
(actual/projection) 40% - 60% 1
Less than 40% 0
3. Compliance of Covenants Full Compliance 2 Full Compliance 2

/
Conditions Some Non-Compliance 1
No Compliance 0
4. Personal Deposits Personal accounts of the key 1 No depository 0

business Sponsors/ relationship
Principals are maintained in
the bank, with significant
deposits
No depository relationship 0
Total Score- Relationship 10 9

Risk
Grand Total - All Risk 100 82

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An Internship Report on

Credit Risk Management of Bank Asia Limited:

Credit Risk Management of Bank Asia Limited: A Study

Credit Risk Management of Bank Asia Limited: A Study

May 22, 2014

Subject: Submission of an internship report on "Credit Risk Management of Bank Asia

B.B.A. 16th Batch

Mr. M. Shahjahan Mina

Faculty of Business Studies

B.B.A. 16th Batch

Chapter Contents Page

2.00 Profile of Bank Asia Limited 06-22

3.00 Bank Asia Limited, Rupnagar Branch 23-39

4.00 Job Rotation and Responsibilities During Internship 40

5.00 Credit Facilities and Strategies: BAL 41-66

6.00 Credit Policy Guideline 67-79

7.00 Credit Procedural Guideline 80-82

8.00 Findings and Analysis 83-87

9.00 Concluding Part 88-89

No. Particulars Page Number

No. Particulars Page

No Particulars Page Number

BAL Bank Asia Limited

1.2 Statement of the problem and its rationale for study

1.3 Origin of the Report

1.4 Objectives of the Report

My specific objectives are:

To review the activities of credit department.

1.5 Scope of the Report

In order to complete this report I went through a process. They are-

Selection of the topic

Collecting practical data

Practical deskwork experience in the different desk of the department of the

Annual Report of Bank Asia Limited

Published or unpublished or personally collected data from Officers,

Calculating and analyzing data available

Prepare final report

1.7 Limitations of the Report

Short Time Period

As I am new in this sector, hope my limitations will be considered.

2.1 Historical Background of BAL

2.2 Mission, Vision, Core Values and Corporate Objectives

Highly Personalized service

2.3 Corporate Information of BAL

Name Bank Asia Limited

2.4 Products and Services offered by BAL

Small and Medium Enterprise (SME)

Off-shore Banking Unit (OBU) Products Capital Market Operation

2.5 Performance of BAL in recent years

2009 2010 2011 2012 2013

Graph 1: Total Asset

Deposit and Advances

Deposit and Advances

2009 2010 2011 2012 2013

Graph 2: Deposit and Advances

Import and Export

Import and Export

2009 2010 2011 2012 2013

Graph 3: Import and Export