Chittagong University Center for Business Administration (CUCBA)

Faculty of Business Administration

University of Chittagong

Internship Report on:

Credit Operation of Jamuna Bank Limited, Jubilee Road, Chattogram.
An internship report presented in partial fulfillments of the requirement
for the degree of Master in Business Administration (MBA).

Submitted To:
Dr. Tanvir Mohammad Hayder Arif
Ph.D. (Entrepreneurial Finance), MBA & BBA (Finance) (CU)
MSc. International Business Management (UK)
Professor of International Business Management and Finance, University of
Chittagong
Ex-Assistant Professor, USTC; Ex-Lecturer AUB
Ex-Regional Head, NITOL-TATA Group
YouTube: Dr. Tanvir, Talent Management Coach
Email: [email protected]
Mob. +8801715-174403
Submitted By:
Sanjida Ashrafi Ananya
ID: BG213071509,
18th Batch (BG),
MBA (Finance & Banking)
Chittagong University Center for Business Administration (CUCBA).

Date of Submission: 15th February, 2023.

 Letter of Transmittal

15th February, 2023

Dr. Tanvir Mohammad Hayder Arif
Professor, Department of Finance
Faculty of Business Administration
University of Chittagong.
SUBJECT: Submission of Internship Report on “Credit Operation of Jamuna Bank
Limited, Jubilee Road, Chattogram”.
Honorable Sir,
It is my great pleasure that I am going to submit the Internship Report on- “Credit Operation
of Jamuna Bank Limited, Jubilee Road, Chattogram”. I have tried my best to follow your
guidelines preparing my paper. While making this report, I came across many hurdles and
pleasant experience. I tried sincerely to comprehend and translate my knowledge in preparing
this paper.
This paper is based on the knowledge and experiences that I have acquired throughout my
MBA program and internship at the Jamuna Bank, Jubilee Road Branch. I must admit that this
report has given me a wide range of exposure.
I will be grateful to you if you accept the report. Your support in this regard will be highly
appreciated.

Sincerely,
Sanjida Ashrafi Ananya
ID: BG213071509,
18th Batch (BG),
MBA (Finance & Banking)
Chittagong University Center for Business Administration (CUCBA).

[i]
 CERTIFICATE OF APPROVAL

This is to certify that, Sanjida Ashrafi Ananya, ID: BG213071509, 18th Batch (BG), MBA
(Finance & Banking), Chittagong University Center for Business Administration (CUCBA)
has completed her Internship Program entitled "Credit Operation of Jamuna Bank Limited- A
Study on Jubilee Road Branch”. She has completed this internship satisfactorily under my
supervision as the partial fulfillment for the award of MBA degree.
She has done his job according to my supervision and guidance. She has tried her best to do
this successfully. I think her study will help her in the future to build up his career. Now, the
report has been approved for presentation & Viva-voce.

I wish her every success in life.

---------------------------------------------
Dr. Tanvir Mohammad Hayder Arif
Professor, Department of Finance
Faculty of Business Administration
University of Chittagong.

[ii]
 Students Declaration

I hereby declare that the Internship Report on "Credit Operation of Jamuna Bank Limited- A
Study on Jubilee Road Branch” includes the results of my own analysis during the intern period
of the branch, pursued under the supervision of Dr. Tanvir Mohammad Hayder Arif, Professor,
Department of Finance, Faculty of Business Administration, University of Chittagong.

I further affirm that the report has been submitted to, in any form, has not submitted to any
other University or Institution for any degree or any other purpose.

Sanjida Ashrafi Ananya

ID: BG213071509,
18th Batch (BG),
MBA (Finance & Banking)
Chittagong University Center for Business Administration (CUCBA).

[iii]
 Acknowledgment

Internship Program is a complement of the subject Management as it is provide practical

knowledge to the outgoing students of MBA, as they are going to participate in Management
successfully of organization in Globalization.
I express my deep gratefulness to the almighty “Allah” for giving me every assistance in the
way of life.
I am highly grateful and indebted to the employees of Jubilee Road Branch, Jamuna Bank
Limited. Md. Yusuf (SVP & Branch Manager) , Mohammad Mahabubul Alom (FAVP & Inv.
In-charge, Investment Department), Md. Nurul Akther (SEO) & others of the branch, for their
excellent guidance in establishing this report.
Their instruction and encouraging attitude and artistic technique of giving knowledge helped
me is an outstanding way to worked out this difficult task. I have faced various kinds of problem
from beginning to end. I couldn’t solve all those problems without the help of their most cordial
instruction, intellect advice and sympathy. They gave me valuable suggestion, note of how to
prepare the report, its rule and method and analyzing system.
I am grateful to the authors of those books from where I have received necessary help in
preparing this report.
My special gratitude goes to my honorable internship supervisor Dr. Tanvir Mohammad
Hayder Arif, Professor, Department of Finance, Faculty of Business Administration,
University of Chittagong, who motivated me to choose this topic. He helped me in every step
of my internship & report writing by giving proper guidance, advice, & inspiration.

[iv]
Internship is must to fulfill academic requirement. This internship report is based on practical
experience at the Jamuna Bank Limited, Jubilee Road Branch, Chattogram. This study selected
three specific objectives i.e. To present the overview of Jamuna Bank Limited, and the credit
products provided by the Islami Banking Branch of Jubilee Road, Chattogram, to portray the
credit operation followed by Jamuna Bank Ltd, to analyze JBL's financial changes from 2017
to 2021 and illustrate the effectiveness of the credit department, Jubilee Road Branch, to which
I have been assigned, as well as to identify problem areas to operations in that branch and to
make possible recommendations.
In the beginning of this study contains some description about the banking sector and
perspective of the Jamuna Bank Limited. I collected both primary & secondary information for
fulfill this study. The next part is some Literature Reviews from the scholars, articles, and
research papers regarding the credit & credit operations in the Bangladesh and over the world.
In the next part, I have tried to present Overview of the Bank & their corporate mission and
vision. This part also covered the Islami Banking products provided by the Credit Department
of Jubilee Road Branch.
In the next chapter, I have tried to portray the credit operations followed by the Jubilee Road
Branch. I found that the credit policy is required for better performance of the bank. In later
chapter, I tried to analyze JBL's financial changes from 2017 to 2021 and illustrate the
effectiveness of the credit department, Jubilee Road Branch.
After that I also found that some problems of Jamuna Bank Ltd. under the study period. It is to
be mentioned that this is from my point of view. I have also pointed out some recommendations
which I believe to be the best form to solving that the problems and Jubilee Road Branch, will
be better perform in future and bank will be a great position among the all banks in Bangladesh.
Finally, I observed that this branch will ensure the better services to the people of Bangladesh
and they will be more contribution on development of the economy of Bangladesh

[v]
 Table of Contents

Chapter No. Topic name Page No.

Letter of Transmittal i
Certificate of Approval ii
Students Declaration iii
Acknowledgement iv
Executive Summary v
Chapter 01 Introduction 1
1.1. Objective 3
1.2. Methodology of study 3
1.2.1. Primary Sources 3
1.2.2. The secondary sources of information 3
1.3. Limitations 3
Chapter 02 Literature Review 5
Chapter 03 Overview of Jamuna Bank Limited & Credit 8
Products of Islami Banking
3.1. Historical background of the company 9
3.2.Strategies of Jamuna Bank Ltd. 10
3.3.Objectives of Jamuna Bank Ltd 10
3.4.Credit Department of JBL 11
3.5.Credit Facilities of Jamuna Bank Ltd. 11
3.6.Loans & Advances 12
3.7.Investment System Islami Shariah Performed By 12
JBL, Jubilee Road Branch
3.7.1. Investment in Imports 12
3.7.1.1.Investment in imports by Islami Banking 13
branches
3.7.1.2.Investment in exports 15
3.8.Lending Criteria 17
3.9.Credit Principles 18
Chapter 04 Credit Operation of Jamuna Bank Limited, 19
Jubilee Road Branch
4.1.Customer Information 20
4.2.Customer Analysis 20
4.3.Preparation of a Loan Proposal 21

[vi]
 4.4.Credit Risk Assessment and sanctioning the loan 25
4.5.Disbursement of Loan 26
4.6.Monitoring the Business Transactions of 26
Customer
4.7.Recovery of the problematic loan 26
Chapter 05 Financial Analysis, Findings, Recommendations & 29
Conclusion
5.1.Financial Analysis 30
5.1.1. Overall financial highlights of Jamuna Bank 30
Ltd. Related to credit department
5.1.2. Performance of Credit Department, Jubilee 31
Road Branch
5.1.3. Comparison between overall JBL performance 32
& Jubilee Road Branch of JBL
5.2. Findings 35
5.3.Recommendations 36
5.4.Conclusion 37
References 38

[vii]
 List of Tables

No. Topic name Page No.

Table 01 Internal Credit Risk Rating Scores 23
Table 02 Financial situation during 2017-2021 30
Table 03 Financial situation of credit department during 2017- 30
2021

Table 04 Financial Highlights of Credit Department, Jubilee Road 31

Branch

Table 05 Operating profit comparison 2017-2022 32

Table 06 Deposit comparison during 2017-2022 33

Table 07 Comparison of Loan & Advances 33

[viii]
 List of Figures

No Topic name Page No.

Figure 01 Overview of Credit Department of JBL 31

Figure 02 Percentages shared by Jubilee Road Br., for Operating Profit 32

Figure 03 Percentages shared by Jubilee Road Br., for Deposit 33

Percentages shared by Jubilee Road Br., for Loans &
Figure 04 34
Advances

[ix]
 Chapter-01
Introduction

Page 1 of 38
Banks provide short-term loans to businesses for working capital, such as to pay wages and
purchase raw materials. These loans are usually unsecured, meaning that the borrower does not
have to pledge collateral for the loan. Banks also provide long-term loans for large capital
investments, such as for a new factory or equipment. These loans frequently require collateral
and may be secured by the borrower's assets (Rose, Hudgins, & Sylvia , 2005). Additionally,
banks provide trade finance, such as letters of credit, which allows businesses to purchase from
suppliers without having to pay upfront. Banks also provide services such as currency
exchange, payment and clearing services, and merchant services. Banks play an important role
in the global economy, providing essential services to businesses and individuals.
The banking sector was one of the major beneficiaries of the reform process. The government
allowed the emergence of private commercial banks and the Bangladesh Bank was made the
sole regulator of the banking sector. The number of commercial banks increased from 4 to 45
in the last two decades. The financial sector has been further strengthened by the introduction
of several new measures. These include the introduction of the Credit Information Bureau to
improve banks’ credit risk management. The introduction of the online banking system and the
Automated Teller Machine (ATM) have revolutionized the banking industry in Bangladesh.
The banking sector has also adopted several measures for financial inclusion. These include
the introduction of mobile banking and the Bangladesh Post Office Savings Bank, which aims
to increase financial inclusion for the unbanked. Overall, the banking sector in Bangladesh has
become much more efficient and customer-friendly over the last two decades. This has been
possible due to the liberalization of the sector and the adoption of new technology. The banking
sector will continue to play an important role in the country’s economic development
(AHAMED, 2012).
Jamuna Bank Ltd. has been providing several modern banking facilities to its clients. It has
introduced Online Banking, Automated Teller Machine (ATM) services, SMS Banking,
Mobile Banking, E-payment, Credit Card services, etc. to make banking services more
convenient for its customers. It is also providing several loan schemes for different sectors such
as agriculture, education, small and medium enterprises (SMEs), housing, etc. The bank has
opened different branches in more than 200 locations in Bangladesh to serve its customers. It
also has correspondent banking relationships with more than 140 international banks.
Apart from banking services, Jamuna Bank Ltd. is also involved in various CSR activities such
as providing financial assistance to the poor and needy people, helping underprivileged
children, and taking part in various educational and health awareness campaigns. It is also
involved in various sports activities, and cultural programs to promote the local culture, and
has also taken part in various environmental protection activities. Jamuna Bank Ltd. is striving
hard to make banking services more efficient and convenient for its customers.
Jamuna Bank Limited (JBL) is one of the leading commercial banks in Bangladesh. It is a
second-generation private commercial bank with more than 300 branches all over the country.
Its commitment to providing quality services to its customers makes it one of the top banks in
Bangladesh. The main objective of the bank is to provide banking services to its customers and
to make a profit.

Page 2 of 38
In this report, the “Credit operations of Jamuna Bank Limited-Jubilee Road Branch” have been
discussed. The study was conducted to understand the credit operations of the bank, its policies
and procedures, and to identify the challenges and opportunities for improvement.

1.1.Objectives of the Study

1.1.1. Broad objective:
The broad objective of preparing this report is to fulfill the mandatory requirement of the MBA
program and to represent the “Credit Operation of Jamuna Bank Limited- A study on Jubilee
Road Branch, Chattogram”. The internship was conducted to find out the depth of the credit
department regular operation performed by the branch of JBL.
1.1.2. Specific Objective:
✓ To present the overview of Jamuna Bank Limited, and the credit products provided by the
Islami Banking Branch of Jubilee Road, Chattogram.
✓ To portray the credit operation followed by Jamuna Bank Ltd.
✓ To analyze JBL's financial changes from 2017 to 2021 and illustrate the effectiveness of
the credit department, Jubilee Road Branch, to which I have been assigned, as well as to
identify problem areas to operations in that branch and to make possible recommendations.

1.2.Methodology of the Study:

This report is the reflection of two months internship program at the Jamuna Bank Limited at
Jubilee Road Branch, Chattogram. To prepare this internship report I have collected data and
information both from primary and secondary sources which was helpful to understand the
operations followed by the branch.
1.2.1. Primary Sources:
✓ I had observed the operations and worked with the officers at the same time.
✓ I had talked with the JBL authorities for getting more data.
✓ Direct observation,
✓ File study of the clients.

1.2.2. The secondary sources of information

✓ Annual report of the Jamuna Bank Limited during 2017-2021.
✓ Website of the Jamuna Bank Limited.
✓ Jamuna Bank Limited's various publications.
✓ Theoretical books relating banking & investment sector.
1.3.Limitation of the Study
Two months isn't sufficient to be aware of business banking activity I have been getting the
most extreme help from each person at the JBL Jubilee Road Branch. Most certainly, I was

Page 3 of 38
unable to create an exceptional report for the time limits. Because of as far as possible, the
degree and aspect of the review have been abridged.
The report is probably going to have the following constraints:
✓ Since the ideal size of information couldn't be taken, recommended working interaction
may not be valuable without suitable alterations.
✓ Due to the absence of time, the accuracy of information probably won't have been
absolutely wonderful. Just a functional use of this might legitimize viability wasn't
possible because of time restriction.
✓ The absence of understanding of the respondents was a serious issue that made
numerous disarrays in regard to the check of the calculated questions.
✓ Classification of information was one more significant obstruction that was looked at
during the lead of this review. Each association has its own mystery that isn't uncovered
by other people.
✓ While gathering information on JBL, staff didn't uncover sufficient data for the privacy
of the association. Busy times and business were one more explanation that goes about
as a snag while get-together information.
✓ Seeing and separating the wide displays of a Bank and one of its Branches, other than
when it is an Advancement branch, is certainly not a straightforward occupation in this
short timeframe (only two months).
In any case, overlooking this, the report will assist us with figuring out the Credit Activity
divisions of the bank.

Page 4 of 38
 Chapter-2:
Literature Review

Page 5 of 38
Every day, Commercial Bank fulfills various obligations. Offering Credits and Advances is
one of their continuing legacy. Essentially, credit is the systemic course of action of the
financial organization loaning reserves principally to dealers and modern business visionaries.
The most beneficial use of the bank's assets is the use of a large portion of its reserves through
various methods of credits and advances. The majority of bank pay is derived from revenue
and rebates on assets loaned. The work in this office begins with the client's application;
support something very similar, which is distributed to clients.
In Bangladesh, A comprehensive and accurate appraisal of the risk in every credit proposal of
the Bank is mandatory. No proposal can be put on place before approving authority unless there
has been a complete analysis (Rahman, 2011). A comprehensive view of the capital, capacity,
integrity of the borrower, adequacy, nature of security, compliance with all regulatory / legal
formalities, condition of all documentation, and finally continuous and constant supervision on
the account are required to safeguard the Bank's interest over the entire period of the advance.
The Credit Risk Manager / RM is strictly responsible for gathering all necessary documents
before submission the proposal for approval. Loans/Advances/Credit facilities granted against
the guarantee of a third party must be subject to the same lending decisions as the principal
borrower.
In an article (Banerjee, et al., 2016) mentioned that, healthy credit operation is an important
contributor to economic growth and macroeconomic stability of a country. In addition,
governments can also take steps to promote healthy credit operations by introducing measures
such as financial literacy initiatives, tighter regulation of lending practices, and improved
access to financial services. These measures can help reduce the number of irresponsible
borrowers, give access to finance to those who need it, and strengthen the credit infrastructure
of the country. This in turn will help promote economic growth, financial stability, and job
creation.
Bangladesh Bank has taken considerable steps to ensure the efficient credit operation of
commercial banks. These steps are expected to improve the quality of credit operations and
ensure that credit is given to all segments of society (Banerjee, et al., 2016). For example, SME
Banking, agent banking, rescheduling for regulation of loans, new credit rating system like
ICRR instead of CRG etc. the other steps like the restrictions provided for the particular
industry sectors or groups for taking loan. The steps are helping the commercial bank to come
out from the culture of giving loan to influential sectors or individual.
Other study of (Mosharrafa, 2013), which suggests that the banks should develop and use a
sound credit risk grading system for effective credit management. The banks should also ensure
that the credit portfolio is diversified and the credit granted is within the credit risk level
accepted by the bank. The banks should also have a system of effective monitoring of the credit
portfolio and ensure that the credit granted is performing. The banks should also ensure that
the borrowers are regularly updated about their credit status and repayment schedules.
Moreover, the banks should ensure that there is proper coordination between the credit and
operations functions. Furthermore, the banks should also have an effective system of follow up
and collection of overdue credit.

Page 6 of 38
in 2020. The NPL ratio for the banking sector as a whole was 2.2% as at June 2020, compared
to 2.3% as at June 2019. Similarly, the NPF ratio was 1.9% as at June 2020, compared to 1.7%
as at June 2019.
The overall NPL ratio has been below 3% throughout the last three years, and the NPF ratio
has stayed below 2%. This is due to the proactive steps taken by the banking sector to manage
the non-performing loans and forborne exposures, including increased efforts to collect
payments and streamline loan processes, as well as the implementation of prudent risk
management practices. The Malaysian banking sector is also closely monitored by Bank
Negara Malaysia, which has taken a number of measures to support the banking sector and
promote financial stability, such as increasing the capital buffer for banks and allowing for
extended loan repayment periods. As a result of these measures, the NPL and NPF ratios for
Malaysian commercial banks have been kept under control, thus providing a stable and secure
banking environment for customers (Muhammad, Alwi, & Muhammad, 2020). This is an
indication of a stable banking system in Malaysia. The Bank Negara Malaysia (BNM) has also
implemented several initiatives to ensure the banking system remains sound and healthy. These
include credit risk management framework and guidelines for the banking sector, risk-based
supervision and enforcement of prudential requirements. These initiatives have enabled banks
to manage their risk better and mitigate the impact of potential losses.
Furthermore, in order to increase awareness of the importance of credit risk management and
financial literacy, the BNM has also conducted credit risk management seminars and
workshops for the banking sector (Muhammad, Alwi, & Muhammad, 2020). The seminars and
workshops were mainly targeted at the banks’ senior management, credit risk officers, and
other relevant personnel involved in credit risk management.
In general, Malaysian commercial banks have been able to maintain their NPL and NPF ratios,
though the challenging economic conditions occurring in the world (Muhammad, Alwi, &
Muhammad, 2020). This is due to the stringent credit management procedures, risk-based
supervision and enforcement of prudential requirements, as well as the initiatives taken by the
BNM to increase awareness of credit risk management and financial literacy.
According a study of (Tamura & Tabakis, 2013), Whether a credit claim can be used as
collateral for Euro system credit operations depends on the creditworthiness of the obligor who
is underlying the claim and the structure of the credit claim. The collateral value of a credit
claim is assessed based on its credit quality and the conditions under which it was issued. Credit
claims must also meet certain legal requirements.
The Euro system requires that credit claims used as collateral are sufficiently diversified, both
in terms of the number of obligors and the type of credit claim. This is to ensure that there is
no excessive concentration of risk in the Euro system’s collateral portfolio.

Page 7 of 38
 Chapter 3:
Overview of Jamuna Bank Limited
& Credit Products of Islami Banking

Page 8 of 38
In Bangladesh, commercial banking services are offered by Jamuna Bank Limited (JBL).
Corporate banking, trade finance, project financing, retail banking, small business finance,
consumer finance, and syndication are the bank's main business lines. Cash management
services, payments and clearings, safe deposit locker services, employee benefits, collection
services, treasury services, asset management services, and SWIFT for international commerce
are among the wide variety of services it provides. A total of 390 million taka have been
invested in the operations of Jamuna Bank.
Chini Shilpa Bhaban, 3 Dilkusha C/A, Dhaka-1000 is the location of the company's registered
office and headquarters. Its branches are located in all of the country's main cities, with the
exception of 09, which is located in rural areas. There were 83 bank branches in existence.
3.1.Historical background of the company
Jamuna Bank Limited is a well-funded new generation bank with authorized capital and paid-
up capital of Tk. 10,000,000,000 and Tk. 7,492,256,500, respectively. To assist the growth of
the nation's trade and commerce, the Bank engages in all forms of banking activity.
Entrepreneurs can also use JBL's services to establish new businesses and BMRE of industrial
units.
A group of successful local businessmen came up with the concept to build a model banking
organization with a unique vision to provide the valued clients with a wide array of financial
services and cutting-edge products for sustained mutual progress and prosperity. This resulted
in the creation of Jamuna Bank Ltd., the only Bengali-named new generation private
commercial bank. The sponsors are well-known figures in trade, business, and industry.
A team of highly qualified individuals with a range of banking and financial experience
manages and runs the Bank. Understanding and foreseeing consumer demands is the bank's
management's ongoing attention. The banking industry is evolving daily, thus it is the bank's
duty to devise a strategy and new products to adapt to the current conditions. In just 22 years,
Jamuna Bank Ltd. has made enormous strides. The bank is well-known for its reputation and
has already attained the top spot among providers of high-quality services.
Within the confines of the guidelines established by the Central Bank and other regulatory
agencies, Jamuna Bank Ltd. provides various forms of corporate and personal banking services
that involve all societal groups. According to the terms of Bangladesh Bank's license, the bank
first offered its shares to the public through a pre-IPO and then sold shares to the public through
an IPO in 2004. Both the Dhaka Stock Exchange Ltd. and the Chittagong Stock Exchange Ltd.
list the Bank's shares.
Our Vision:
To become a prominent financial organization by contributing significantly to the country's
growth.
Our Mission:
The bank is committed to meeting its customers' different needs through a broad range of goods
at a competitive price, utilizing suitable technology, and offering prompt service, so that a
Page 9 of 38
motivated and competent staff can assure sustainable growth, acceptable return, and contribute
to the country's progress.
3.2.Strategies of Jamuna Bank Ltd.
Financing the construction of small industrial and commercial units, as well as facilitating their
expansion.

• To manage and operate the Bank in the most efficient manner to enhance financial
performance and to control cost of fund
• To strive for customer satisfaction through quality control and delivery of timely services
• To identify customers' credit and other banking needs and monitor their perception towards
our performance in meeting those requirements.
• To review and update policies, procedures and practices to enhance the ability to extend
better service to customers.
• To promote organizational effectiveness by openly communicating company plans,
policies, practices and procedures to employees in a timely fashion
• To cultivate a working environment that fosters positive motivation for improved
performance
• To diversify portfolio both in the retail and wholesale market
• To increase direct contact with customers in order to cultivate a closer relationship between
the bank and its customers.
• To strive for customer satisfaction through quality control and delivery of timely services
• To identify customers' credit and other banking needs and monitor their perception towards
our performance in meeting those requirements.
• To improve the ability to provide consumers with better service, rules, processes, and
practices should be reviewed and updated.
• To adequately equip all workers with the training, development, and resources they need
to effectively meet the demands of consumers.
• To enhance organizational performance by promptly informing staff members on firm
plans, rules, practices, and procedures.
• To diversify the portfolio in both the retail and wholesale markets.
• To enhance direct contact with customers in order to establish a deeper relationship
between the bank and its clients.
• To create a work atmosphere that generates positive motivation for increased performance.

3.3.Objectives of Jamuna Bank Ltd.

• To get and keep the CAMEL Rating 'Strong'
• To build Strategic Marketing Plans in order to establish relationship banking and increase
service quality.
• To remain one of Bangladesh's finest banks in terms of profitability and asset quality.
• To implement completely automated systems through information technology integration.
• To guarantee a reasonable rate of return on investment.

Page 10 of 38
• To maintain the risk position within reasonable bounds (including any off-balance sheet
risk).
• Maintaining sufficient money to satisfy maturing obligations and commitments.
• To seek an effective management system by assuring ethical norm compliance,
transparency, and responsibility at all levels.

3.4.Credit Department of JBL

To responsibly and effectively offer credit facilities to Jamuna Bank Limited clients and to
position JBL as the preferred credit service provider in the nation in terms of a broad choice of
credit products, affordable prices, adherence to credit standards, performing due diligence, and
efficient risk asset management. The credit department of every bank is critical. The
performance of the bank's credit department determines whether or not a bank will fail. The
credit department of Jamuna Bank Ltd. has numerous responsibilities. They must maintain a
high level of inspection. They must make good use of the bank's deposits by making loans in
order to sustain liquidity. The interest on loans and advances accounts for a significant portion
of the revenue.
Again, if they make so many loans, the bank's liquidity may suffer, and market risk would rise.
But, in the end, if banks do not lend to their customers, their income production will be poor,
and the bank would eventually fail. As a result, banks must make loans and advances to
businesses and employees. The issue now is how effectively they will do it. They must ensure
that the loans they provide to their consumers are secure. When Jamuna Bank Ltd. makes a
loan to a customer, several questions must emerge-

• Is the client financially capable of repaying the loan and interest?

• How will it be measured?
• On what basis will the bank make the loan to the client?
• How would Jamuna Bank Ltd. recover the loan if it goes into default?
Credit Risk Analysis is the only way to find answers to these concerns and keep credit activities
running smoothly. Analyzing the risk linked with the loan provides a clear picture of the credit
department's next step, which is what choice they will take further. This significant credit
department aspect, Jamuna Bank Limited Credit Risk Analysis, is detailed in detail in the
report's subsequent section.
3.5.Credit Facilities of Jamuna Bank Ltd.
Jamuna Bank Ltd. Credit Line/primary Program's goal is to finance commercial, commerce,
and industrial operations through an efficient delivery system.
▪ Jamuna Bank Ltd. provides loans to nearly all business activity with a profitable objective.
▪ The Bank's loan portfolio includes a diverse variety of lending packages.
▪ Credit is also made available at a reduced interest rate to important thrust sectors
designated by the government in order to build frontier businesses.

Page 11 of 38
 ▪ Individuals such as housewives, businesspeople, small and large business houses, traders,
manufacturers, corporate entities, and so on are given credit.
▪ Loans are made available to rural residents for agricultural production and other non-farm
pursuits.
▪ The loan pricing mechanism is user-friendly.
▪ Prime consumers receive prime rates on loans and other services.
▪ Quick appraisal, appraisal, conclusion, and payout are guaranteed.
▪ Credit facilities are granted in accordance with Bangladesh Bank (Central Bank of
Bangladesh) norms and the Bank's operational processes.

3.6.Loans & Advances

The emphasis placed by Jamuna Bank Ltd. on credit quality and customer service resulted in
the intended increase in profit, capital assets, and shareholder value. However, in order to get
loans and advances, investors must adhere to certain terms and conditions outlined in the bank's
instruction handbook.
3.7.Investment System Islami Shariah Performed By JBL, Jubilee Road Branch:
3.7.1. Investment in Imports:
The import industry is essentially classified into three categories:
i. Commercial Goods Import.
ii. Import of raw materials for manufacturing.
iii. Capital/machinery import.
The importers use investment opportunities for all types of imports. However, investments are
made using the Shariah-approved Bai-Murabaha and Bai-Muajjal modes for imports in
categories I and (ii), respectively, and using the Shariah-compliant Hire Purchase method
through Shirkatul Meelk for imports in category (iii) (HPSM). Additionally, financing options
are made available for import businesses using the Bai-Salam, Musharaka, and Mudaraba
modes. The Islami Banking branches will also adhere strictly to all national and international
standards and regulations governing the export and import of goods.
I. Import under the Bai-Murabaha system
➢ Definition of the Bai-Murabaha: A Bai-Murabaha is an agreement between a buyer and
a seller whereby the seller offers the buyer certain particular products that are allowed under
both local and Islamic law at a price established by adding an agreed-upon profit, margin,
or markup to the cost price. In this scenario, the customer might choose to pay for the items
in full up front, in installments, or at a predetermined later date. The profit mark-up may be
set as a fixed dollar amount or as a percentage of the cost of the items.
➢ Some key characteristics of the investing strategy known as Bai-Murabaha
• The customer (buyer) asks the bank to buy specific commodities, and in exchange, agrees
to buy those things from the bank at a price determined by adding profit to the cost price.
• Once the price is set, there is no room for rise under the Bai-Murabaha style of investing.

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 • The Bank is required to assume all risk following the purchase of the products until the
client is actually served with the items.

➢ Import of goods under Bai-Murabaha mode of investment

In the import industry, the importer gives the bank an irrevocable letter of authorization
authorizing it to purchase certain items from a foreign seller on his (the client's) behalf. In
this instance, the Bank is listed on the bill of lading as an onsignee and then gives it to the
importer by endorsement, transferring ownership of the goods to the importer. According
to established norms and procedures, the seller submits a bill of exchange with a claim for
payment to the buyer's bank, which then pays the claim on the buyer's behalf. The
aforementioned import system is completely endorsed and approved by the Islamic Shariah

3.7.1.1.Investment in imports by Islami Banking branches

When opening L/C, Bills, and Shipment in the import company, Bai-Murabaha investment is
completed through a single deal. For instance:
a) Murabaha Import Bills and
b) Murabaha Import L/C (MIB)
c) Post-Murabaha Import (MPI)

➢ Post-Murabaha Import (MPI)

In order to pay the invoice value of the products to the seller or supplier, which includes custom
duty, VAT, and other expenditures, importers apply for investment facilities against imported
goods after shipping. Islami branches permit a Bai-Murabaha investment facility in this
scenario using the single deal principle. The Letter of Credit is how it is referred to. Opening
the letter of credit for the import of the items coincides with the settlement of bills and the
processing of post-shipment under one agreement.
Accounting procedure for purchase price, profit and sale price
a) Price should be paid to the supplier
b) Additional costs associated with the acquisition
i. Transportation - TA/DA
ii. Agents will receive commission.
iii. The costs associated with the supplier's payment.
iv. The expense of transportation to the bank's godown.
v. Transit Insurance and Additional Costs
vi. Costs incurred prior to the sale of products, such as godown rent and employee salaries.
c) Additional costs
1. Duty
2. VAT
3. Cost of the license
4. Fee for C&F agency, etc.
d) Total value or cost price = a + b
e) Estimated profit (profit margin on purchase price/cost price)
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 f) Sale price is calculated as follows: Sale price = c + d
g) Net investment amount is calculated after deducting any down payments from figure at "e"
above.
II. Import under the Bai-Muajjal mode of investment
Bai-Muajjal, which translates to "delayed payment sale" or "Sale on Credit,"
In this type of investment, a contract is created between the buyer and seller for the purchase
and sale of products that are compliant with both local and Islamic law, with the agreement
that the amount would be paid in full at a future date or in predetermined installments.
 Some important features of the Bai-Muajjal mode of investment:
With the following exceptions, Bai-Murabaha and Bai-Muajjal mostly have the same
characteristics:
i. The whole Bai-Muajjal sale is conducted via a deferred payment arrangement.
ii. The sale price is calculated by multiplying the profit by the cost. The cost price and the
profit mark-up do not have to be disclosed to the client separately. The cost price and
the profit mark-up percentages, however, must be declared to the client separately in
Bai- Murabaha.
iii. Both the Bai-Muajjal and Bai-Murabaha accounting processes for imported items are
similar. However, as far as contracts go, they are distinct. For imports under the Bai-
Murabaha and Bai-Muajjal modes, respectively, Bai-Murabaha and Bai-Muajjal
contracts are completed.
Import under diminishing proprietorship method (Hire Purchase under Shirkatul
Meelk-HPSM)
Under this technique, capital equipment and other reusable products are imported. Combining
three modes, it is
a) Rent (Ijara): The bank rents its share for a specific amount of money.
b) Partnership (Shirkat): Through a partnership agreement, the Bank and the client invest
their funds together (Shirkat)
c) Purchasing and selling: In this method, the Bank sells its share to the client after
receiving payment.
III. Import under Musharaka mode of investment
➢ Definition of Musharaka:
 Musharaka is a Shariah-compliant investing strategy in which the client and the bank
contribute funds jointly. Unlike in Bai-Murabaha or Bai-Muajjal, no predetermined profit
is set aside in this case. If there is a profit, it is divided in accordance with the customer and
bank's agreement; if there is a loss, it is distributed in accordance with the capital ratio.
 Some general features of Musharaka mode of investment:
• The amount of capital investment to be supplied by the bank and the customer, as well
as the profit/loss sharing ratio as agreed upon by them, should be expressly stated in the
Musharaka agreement.
• The bank and the customer will get their agreed-upon share of the real company profit.
However, they must bear any losses in accordance with the capital ratio.

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 • The client is responsible for keeping proper records of everything, including ledgers,
registers, books of accounts, etc., and is required to produce these upon request to any
authorized bank personnel.
• The bank will have the authority to make any decisions and oversee company
operations for the benefit of the client's enterprise.

 Prior to creating a letter of credit, the customer must apply in the format required by the
bank, which must include the following:
1. The C&F price of the imported products in accordance with the quotation or indent.
2. The wholesale or retail cost per piece, ton, bag, or carton.
3. Import expenses, both actual and projected.
4. The anticipated selling cost of imported items.
5. The anticipated sale price per ton, bag, or cartoon of the imported products.
6. Information on any additional costs incurred above the import fee.
7. Projected net income.
8. Ratios for capital and profit/loss sharing.
Following receipt of the client's equity part and upon completion of the necessary paperwork,
the Bank will pay the import responsibility and all associated costs in accordance with the
Musharaka agreement. If there is a profit, the bank will receive its part in accordance with the
agreement, and if there is a loss, it will suffer it in accordance with the capital ratio.
 Fixation of liability in case of loss:
If a loss occurs after fulfilling all obligations under the contract, the bank and the customer
will split the cost in accordance with their respective capital ratios. But the customer would
be responsible for the loss if it was brought on by carelessness, negligence, or a violation
of any agreement.Import under Mudaraba mode of investment
➢ Definition of Mudaraba: The client, businessperson, or capital user makes no investments
in the Mudaraba form of investing. In this instance, the bank alone makes all of the
necessary investments, and the firm is run and managed directly by the entrepreneur (the
customer).
➢ In this arrangement, the bank is responsible for covering all import-related costs. In this
situation, the bank oversees the use of capital, the way in which businesses are run, how
much money they make, etc. The customer is responsible for keeping track of all records,
accounts, and registers related to the purchase and sale of commodities.
➢ In this scenario, any profit, if any, is split between the bank and the customer according to
the predetermined ratio, and the bank bears the complete burden of any loss.
3.7.1.2.Investment in exports:
An exporter requires financial and other banking facilities urgently in order to complete the
export process or order in accordance with the terms and conditions of the letter of credit (L/C)
and the agreement signed by the seller and buyer. Therefore, one of a bank's key responsibilities
is to offer the exporter financing and investment opportunities at various phases of the export
operation. Both the pre-shipment and post-shipment stages of the export process require

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 financial resources from the exporter. Therefore, financial services to the export sector might
be categorized as:
i. Pre-shipment Financing
ii. Finance after shipping (Post Shipping).
At both phases of the export process, financial aid and facilities that adhere to Shariah
principles are offered.

i. Investment at Pre-Shipment stage as per Islami Shariah:

An exporter requires a variety of financial resources up until the shipment of products. Finance
is required for the purchase of raw materials as well as to cover transportation costs and other
associated expenses up until shipping. The following objectives are often served by pre-
shipment facilities:
✓ To process the exportable items;
✓ To get raw resources.
✓ To pay for shipping and packing, insurance premiums, utility costs (such as gas,
electric, and water), etc.
✓ To pay wages, salaries, and bonuses to employees.
✓ For the ship's freight to be paid.

 Pre-shipment financing methods that are Shariah compliant:

1. Back to Back Letter of Credit (Back to Back L/C)
The bank offers exporters a Back-to-Back letter of credit (L/C) facility to help them purchase
or import raw materials for manufacturing or producing exportable items in the pre-shipment
stage using the Bai-Muajjal mechanism. When a back-to-back L/C is opened, a financial
facility from the bank is not initially necessary. However, if the exporter does not pay the L/C
value by the due date or at maturity, the bank offers the customer financial resources in the
Bai- Muajjal method.

2. Bai-Murabaha TR (Trust Receipt):

The Bank offers investment facilities to the customer in accordance with the Murabaha TR
mechanism in order to obtain or purchase raw materials for carrying out export orders. In this
instance, the Bank gets a Trust Receipt that has been signed by the customer and gives the
exported items to the importer.
3. Bai-Salam:
➢ Under the Bai-Salam style of investment, money is provided in advance to acquire the
products, and the supplier promises to deliver the items at a later date.
➢ Investment under the Bai-Salam mode is made to cover other exporter costs, except the
cost of producing exportable commodities. A part of the exportable items are acquired
by the Bank under the Bai-Salam approach, and the Bank provides advance payment

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 for those purchases, with the understanding that the exporter will make preparations to
export the Bank-purchased commodities alongside the exporter's other goods.
➢ Fixing the purchase price of the items and recovering the bank's investment: To arrive
at the purchase price, take the projected profit from the bank's purchase of the
exportable goods into account. When export revenues are realized, the Bank pays off
its debts.

4. Musharaka: If there is a pre-established investment structure, pre-shipment investments

may be made using the Musharaka form of investing.
ii. Post-Shipment Investment:
By purchasing export bills and engaging in FBN negotiations, the bank offers post-
shipment investment possibilities. If the paperwork/bills provided by the exporter are
judged to be in order/correct in all respects, it often negotiates or acquires the export
documentation. After receiving the export revenues, the bank adjusts the obligations against
FBN/FBP and receives exchange income as a result. This investing strategy complies with
Islamic Shariah.
3.8.Lending Criteria
1. Entrepreneur
The entrepreneur or promoter needs to be reliable and skilled enough to manage the
targeted industry.
2. Viability of the project
From an organizational, technological, commercial, financial, and economic standpoint,
the project must be feasible.
I. Technical Viability
✓ The project need to be both technically and environmentally sound.
✓ In the event of borrowed know-how, technology transfer must be assured.
✓ Buildings should be carefully designed and built.
II. Commercial viability
✓ The product's market potential and potential must be completely guaranteed at
prices that are competitive, and the entrepreneur should have access to the
product's marketing channel.

✓ Market prospect and potential for the product has to be fully assured at competitive
prices.
✓ Marketing channel for the product should be accessible to the entrepreneur.
III. Financial Viability
✓ A fair debt-to-equity ratio must exist, as decided by the Bank in each particular
situation.
✓ At the peak of production, the debt service coverage ratio should be at least 2.5
times, and the IRR should ideally be no lower than 20%.
✓ There should be reasonable debt equity ratio as determined by the Bank on
individual case basis.
✓ Debt service coverage ratio should be at least 2.5 times at the optimum level of
production.

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 ✓ IRR should preferably be not less than 20 %.
IV. Economic Viability
✓ The project should provide benefits to the national economy, generate enough
opportunities for employment, and be environmentally benign.

3.9.Credit Principles:
Some credit standards should constantly direct your conduct in our lending choice in order to
maximize the stakeholders' value by establishing JBL as a fundamentally solid financial
institution:
i. The Bank must offer credit services and products that are appropriate for the market
in which it competes.
ii. Loans and advances must often be financed from client deposits rather than through
short-term reserves or money market borrowing.
iii. Credit facilities must be granted in a way that ensures quality, i.e., no compromise
with the Bank's level of excellence, while credit expansion continues. Customers
who will uphold such criteria are given credit.
iv. All credit extensions must adhere to Bangladesh Bank directives, circulars,
guidelines, the bank's memorandum and articles of association, the bank companies
act as modified from time to time, and all other relevant laws, rules, and regulations.
v. The management of the loan portfolio should support the attainment of profitable
growth and excellent return on the bank's capital, within set risk limits.
vi. Although individual transactions should also be lucrative, credit advancement will
focus on the growth and improvement of customer relationships and will be
evaluated on the basis of the overall yield for each connection with a customer (on
a worldwide basis).
vii. Credit facilities shall be provided to businesses and individuals who can best utilize
them, maximizing both our profit and national economic progress. The borrower's
capacity to repay must be the primary consideration in every loan decision to assure
the attainment of this purpose.
viii. The Bank shall provide suitable credit services and products for the market in which
it operates. Product innovation shall be a continuous process.

Proper staffing: A thorough review of a credit proposal requires a high degree of numerical
expertise, analytical prowess, and common sense. Proper staffing shall be made through the
placement of qualified officials having appropriate backgrounds, who have the right aptitude,
formal training in Credit Risk Analysis, Bank's credit procedures, as well as required
experience, in order to ensure effective understanding of the concept and thereby to make the
overall credit port-folio of the Bank healthy.

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 Chapter-4:
Credit Operation of Jamuna Bank
Limited, Jubilee Road Branch

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All commercial banks' primary assets are loans and advances. Banks work very hard to create
loan portfolios that maximize income while posing the least amount of risk. Jamuna Bank kept
extending its credit line by providing both businesses and individuals with a variety of tailored
loan options. The Jamuna Bank Limited's business practices are illustrated below:
4.1.Customer Information
The majority of personal bank loans are initiated by customers who go directly to a bank
employee and seek to fill out a loan application. Business loan requests frequently come
through interactions made by the bank's loan officers and sales staff as they recruit new
accounts from enterprises operating in the bank's market region. Loan employees will
sometimes phone the same firm for months before the consumer chooses to give the bank a
chance by filling out a loan application.
4.2.Customer Analysis
❖ Client's Interview
When a consumer decides to apply for a loan, an interview with a loan officer normally
follows, allowing the customer to clarify his or her credit needs. That interview is especially
significant since it allows the bank's loan officer to analyze the customer's character and
sincerity of purpose. If the client looks to be unconcerned about the importance of adhering to
the terms of a loan, this must be documented as a major factor leaning against loan approval.
❖ Client's Request with FIS
The borrower is supplied an instruction document to assist him or her in correctly preparing
the loan proposal. The information on the loan proposal should be provided on the stipulated
First Information Sheet (FIS) in triplicate, correctly typed on each page / set, and fully sealed
and signed by the applicant(s)/sponsor (s).
❖ Credit Information Bureau (CIB)
Credit department should collect the information from the CIB about the borrower. The CIB
provides the information of the previous transaction conducted in the other banks or financial
institutions by that individual borrower.
❖ Information Sheet
To avoid further reference/delay/rejection of the application, complete information should be
provided in respect of each item, accompanied by documented evidences where applicable. If
the application provided in the form is incomplete or not completely documented in all aspects,
the bank has the right to reject the application immediately. If necessary, information may be
supplied on extra pages of paper. However, be certain that all pages and annexes are signed
under official seal. Also, ensure that all facts/evidences, including feasibility reports/detailed
research reports on loan proposals, are correctly attached.

• The customer is required to deposit the project examination fee and the equity at the
following rate with the application, either by cheque, pay order, or demand draft drawn
in favor of Jamuna Bank Ltd. and payable in any scheduled bank within the country.

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 • Memorandum and Articles of Association, as well as the certificate of
registration/incorporation and initiation of activity of the company, shall be provided
and officially attested by an aged director of the company.
• Certificates from the surveyor determining the price of the project's land/price of
neighboring land sold in the recent three years must be presented. Site/Mozai map
submissions are also required.
• For both import and domestic machinery, a layout plan, pricing quotations from three
vendors, and illustrated brochures and literature should be supplied.
• If necessary, a consent letter from the Power Development Board, Rural Development
Board, Gas Authority, or Pollution Control Board should be presented.
• Report on Soil/Water Testing (if required).
• Nationality certificates, as well as confirmed passport-size pictures of the
directors/partners/proprietors, must be presented.
• Declaration of assets and liabilities of potential directors/partners/proprietors. Income
tax payment declarations must be provided.

4.3.Preparation of a Loan Proposal

❖ Justification of Facility Requested
When compared to other financial institutions' usual two-month average processing time for
its medium and large loan programs, the processing time for small industry loans remains well
below the above processing time due to its less detailed study as well as the bank's belief that
small entrepreneurs seek credit sources when they are in need.

• The processing/approval period for a small industrial loan is no more than two months
from the day the application is received in triplicate, fully filled in, and sealed and
signed by the sponsoring directors, together with their certified pictures suitably affixed
in the area allowed for.
• The proposed building's draft layout plan and projected construction cost are obtained.
• In the event that a project is to be placed in a BSCIC industrial estate, the BSCIC latter
of approval particulars of the site, as well as a copy of the lease deed, is obtained.
• Permission / no objection is acquired from the proper authorities for the establishment
of a small industry in other locations.
• A letter of approval from the utility agency to provide essential utility services to the
unit must be received. A full credit report of the sponsors/project is generated, implying
that the bank should conduct a thorough credit examination of the promoters.
• A preliminary list of machinery / work with comprehensive specifications and three
price quotations should be collected.
• Individual project assessment reports for small scale and cottage industries may be brief
and incomplete. It does, however, encompass the Jamuna Bank Ltd. project viability
region.
• The borrower is prepared for the informal sector after receiving a report from the bank.

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❖ Analysis of Customer & Preparing Loan Proposals
Jamuna Bank Ltd. was founded to provide term loans and other financial support, including all
types of banking facilities, to small businesses in order to speed their development. Short-term
working capital loans, medium- and long-term lending to feasible new-small scale industrial
(SSI) projects, and BMRE of SSI enterprises that meet the banks' viability and acceptance
standards are all part of the financial aid. The banking sector requires project appraisal/analysis
for the following reasons:

• To demonstrate the viability of an investment.

• To guarantee that bank financing is repaid.
• To attain corporate objectives.
Entrepreneurs of small industries/projects who want financial help from Jamuna Bank Ltd.
must meet the following criteria:

 5C’s Analysis of the customer

One of the primary duties of a commercial bank is to lend money. The selection of a borrower
is the most important and critical function for a banker during the loan procedure. Before a
consumer may receive credit, the application must meet the five Cs. The five Cs are:

• Character – Intention to pay back the loan

• Capacity –Borrower's will to repay the loan Borrower's competence in terms of
efficiently using the capital and generating revenue
• Capital –Financial resources to cover the risk
• Conditions –General commercial relationship between two parties
• Collateral –Additional securities are implied.
This department's tasks include handling the bank's financial records, ensuring that all entries
in the books adhere to standards, generating daily reports for Bangladesh Bank, revenue
appropriation and computations, determining internal pricing rates, and so on.

 Internal Credit Risk Rating System (ICRR)

The term "internal credit risk rating system" refers to a system for analyzing a borrower's
repayment ability based on information about a customer's financial condition, such as
liquidity, cash flow, profitability, debt profile, market indicators, industry and operational
background, management capabilities, and other indicators (Bank, 2019).
The system's summary indication will be known as Internal Credit Risk Rating (ICRR) - a
critical reference for credit risk assessment and decision making. The Internal Credit Risk
Rating System is a completely automated credit risk scoring system that calibrates the features
of many sectors and businesses in a single model.

 Functions of Internal Credit Risk Rating System

a) The Internal Credit Risk Rating System is a fully automated credit risk scoring system
that calibrates the characteristics of various sectors and industries in a single model;

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 b) To obtain the appropriate rating and score, the analyst must select the appropriate sector
or industry from the drop-down list on the top page of the template. If the incorrect
sector or industry is chosen, the rating will fail to represent the specific qualities of that
sector or business.
c) If the borrower has many lines of business, the sector should be utilized to analyze the
lines of business that provide the majority of the income and/or profit. If no specific
line of business can be identified, the ICRRS should be carried out using "other
industry" if manufacturing, or "other service" if service.

 Internal Credit Risk Rating Scores

The ICRR consists of 4-notched rating system covering the Quantitative and Qualitative
parameters. The ratings and scores are mentioned below:

Rating Scores Aggregate

Excellent ≥80%
Good ≥70% to <80%
Marginal ≥60% to <70%
Unacceptable <60%
Source: Bangladesh Bank
Table 01: Internal Credit Risk Rating Scores

 Definitions of Credit Risk Rating

The following are the characteristics of the various Credit Risk Rating categories:
a) Excellent
• ICRR aggregate score of 80 or above.
• The borrower has a solid repayment ability, as evidenced by high liquidity, low
leverage, robust earnings, and enough cash flow.
• Borrower has achieved a significant market share.
• Excellent managerial ability and competence.

b) Good
• A total score of 70 or above but less than 80.
• These borrowers are not as strong as "Excellent" borrowers, but they nonetheless
show steady earnings, substantial cash flow, and a decent track record.
• Borrower is well-established and has a significant market share.
• Excellent managerial ability and competence.

c) Marginal
• A total score of 60 or higher but less than 70, as well as a quantitative score of at least
30.
• This rating has potential flaws that require management's immediate attention. If these
flaws are not addressed, the borrower's repayment chances may deteriorate.

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 d) Unacceptable
• A total score of less than 60.
• Financial situation is poor, with little ability or desire to repay.
• There are severe management issues.
• If there is a continuous worsening in financial situation, facilities should be degraded
to this category (consecutive losses, negative net worth, excessive leverage).

 Management Action Triggers

a) Banks are permitted to lend to a borrower if the borrower's ICRR is "Excellent" or "Good".
However, in "Marginal" circumstances, the bank must use prudence while extending
facilities or lending fresh money to consumers. Banks must satisfy themselves on the future
prospects of the business, extra collateral coverage, and so on while evaluating credit bids.
Banks must take additional steps to manage these accounts, such as regular client visits,
monitoring of improvement plans, close monitoring of repayment performance, timely
assessment of the facilities, oversight of improvement areas, and so on.
b) b) No loan shall be sanctioned to borrowers with "Unacceptable" ICRRs unless the loan is
100% cash covered or completely guaranteed by the Government or Multilateral
Development Banks (MDBs), or the loan is for any state-owned organization or state-
owned project. If the borrower's credit facility is 100% cash covered or guaranteed by the
government or a bank, the borrower will receive a "Excellent" rating.
c) If the ICRR falls under "Marginal" or "Unacceptable" for any risk criteria (among 16
quantitative and 18 qualitative); whatever the aggregate score is, the relationship manager
shall evaluate what the impacts of such risk on loan repayment would be and justify how
those risks are mitigated; and in loan proposal, the approval authority should review that
justifications thoroughly and make necessary evaluations on it.
d) In determining ICRR, whatever score a borrower achieves in the qualitative component, if
the score in the quantitative part is less than 50%, the borrower's ICRR should be
"Unacceptable".
e) If the borrower's ICRR is "Unacceptable," the bank may extend and increase existing loans
a maximum of two (two) times.
f) Justifications for all criteria must be recorded when undertaking qualitative analysis.
g) The bank must keep a portfolio level data base for the asset base with the categories
"Excellent," "Good," "Marginal," and "Unacceptable," as well as a risk appetite/tolerance
level for the portfolio.
 Exceptions to Credit Risk Rating
a) a) For a newly founded firm that lacks relevant financial statements, the bank can apply a
rating based on forecasted financial statements, but the borrower's rating cannot be higher
than Marginal. However, the bank must run the rating module after the full year audited
financial statements representing the customer's full-fledged company activity are
available.
b) Rating substitution is permitted for firms under big business conglomerates based on the
rating of the Corporate Guarantor of the performing concern of the same group or holding
company. The guarantee must be legally enforceable, irreversible, and unconditional in
the case of rating substitution depending on the corporate guarantor. In this regard, a full-

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 fledged ICRRS on the guarantor must be performed to evaluate whether the guarantee has
the potential to assist the borrower in times of need. However, if the borrowing entity's
rating becomes suitable for acceptable grading, the rating substitution will no longer be
necessary. If the corporate guarantee is necessary to continue, the ICRRS of both the
performing concern and the borrowing firm will be completed.
c) Using obsolete financial statements to generate ratings is discouraged (i.e. available
audited financial statements are more than 18 months old). In unusual circumstances when
there is genuine justification for delay in audited financial publishing, out dated financial
statements can be acceptable only if up to date unaudited financial statement is supplied,
but the grade shall not be greater than "Marginal". In this scenario, the criteria stated in
paragraph 1.10(a) must be followed.
d) d) The rating will be reduced if any internal/external circumstances or facts that have not
been included in the rating/financial statements (due to post-balance-sheet occurrences)
have a major influence on the customer's company performance and loan repayment. In
the case of events such as the death of a key sponsor, a prolonged factory shutdown, a
deteriorating financial profile reported in interim financial statements, a change in tax
structure/duty, large expansions funded by debt, an excessive leverage ratio, a merger-
acquisition, and so on, a conservative and consistent approach should be used in
employing judgments.
e) For sole proprietorship and partnership businesses where audited financial statements are
not required, an unaudited financial statement can be used for rating generation; however,
due diligence should be performed on the accuracy of the financial statements, including
high-level checking of bank statements recording sales collection, stock/receivable
position, peer analysis, bank liabilities, and so on.
f) If the client has many lines of business, the most relevant sector/industry is the one that
generates the greatest share of overall income.
g) This guideline and enclosed model will serve as the minimal level of risk rating; banks
may choose a more sophisticated risk rating model based on the size and complexity of
their company.

4.4.Credit Risk Assessment and sanctioning the loan

Prior to the issuing of loans, and at least subsequently for all facilities, a complete credit risk
assessment should be performed. The findings of this evaluation should be reported in a Credit
Application initiated by the Relationship Manager (RM) and approved by the Branch Credit
Committee (BCC). The RM should own the client relationship and be held accountable for the
veracity of the complete credit application submitted for approval. RMs must be conversant
with the bank's Lending Guidelines and perform due diligence on new borrowers, principals,
and guarantors. Credit applications should summarize the results of the risk assessment
performed by the RM and contain, at a minimum, the following information:

 Amount and nature of requested loan(s).

 Loan Purpose,
 Loan Structure (Term, Covenants, Repayment Schedule, Interest)
 Security Arrangements

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4.5.Disbursement of Loan
The Loan Administration Department will only distribute loan amounts under loan facilities
if all security paperwork is in place. As needed, a clean CIB report is acquired. Strict security
measures are required for the storage of blank cards, the embossing of blank cards, and the
delivery of cards to holders. JBL has credit card evaluation, authorization, and monitoring
procedures that are at least as severe as those for traditional loans.
4.6.Monitoring the Business Transactions of Customer
A bank's loan portfolio should be monitored on a constant basis. This will be accomplished by
the regular compilation of over limit and overdue reports, which will highlight where facilities
are being exceeded as well as where payments of interest and principal are late. Formal
procedures and a system should be in place to identify possible credit losses, and corrective
steps should be done to avoid losses. Aside from that, processes should be in place to alert key
executives in credit/sales and branch marketing employees to the following exceptions:

 Late principle or interest payments are made; • Corrective action is implemented in a

timely manner to address the results of any internal, external, or regulator inspection/audit.
 All loan facilities are evaluated on a yearly basis.
 Computer systems are used to generate reports for central / head office and branch
evaluation.

4.7.Recovery of the problematic loan

When Jamuna Bank grants loans and advances to its customers, the payback schedule is
explicitly stated in the loan agreement. However, some credit holders do not pay their debts on
time. Commercial banks, both nationalized and private, must deal with similar issues. Jamuna
Bank is likewise in same condition. To address the issue of late loans, the bank has
implemented specific loan collection procedures.

 Recovery Programs taken by Jamuna Bank Limited:

• Creating a credit supervision and monitoring cell within the ban
• Restructuring the bank's loan sanctioning and distributing policy
• Sanctioning loans and advances against sufficient securities as best as possible
• Giving more powers to the branch manager in credit management decision making process
• Offering attic package of incentives to sound borrowers
• Emphasizing short term loans and advances
• Imposing restrictions on loans and advances for sick industries

 Recovery Patterns of Loan & Advances:

In general, Jamuna Bank grants loans and advances to all sectors of the economy. Before
delving into the specifics of recovery performance, we must first become acquainted with the
following terms:

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 • Recovery demand: Overdue at the end of the reporting period plus recovery during
the reporting period.
• Recovery: The highest outstanding amount at any point during the reporting period,
less the outstanding balance at the end of the recovery period.
• Outstanding: Figures in the ledger at the conclusion of the reporting period that are
outstanding.
• Overdue: Recovery demand minus recovery.

 Problems in Loan Recovery

Despite the fact that Jamuna Bank is performing better in terms of loan and advance
management, 12.39% of total loan and advance are categorized. There are several reasons why
the bank's loan recovery is still ineffective. Most difficulties arise as a result of loan sanctioning
processes, project investigation, loan investigation, and so on. That is, the issue with loan
recovery demonstrates the results of the default procedure in loan disbursement. The primary
causes of poor debt recovery are classified into four major categories, as follows:
A. Problems created by economic environment: The following issues develop as a result
of the economic environment:
1. Changing management patterns: Changing management patterns may cause the
maturity of a debt to be delayed
2. Changing industrial patterns: Banks occasionally lend to failing businesses in order
to strengthen the industry, but in most cases, they fail to make progress.
3. Open market economy operation: As a result of the emergence of the open market
economy, many industries in our nation have grown ill and have had to close their
doors. The cost of production is expensive, and the quality of items is below par. As a
result, they become losing businesses, and the volume of bad loans grows.
4. Rapid business expansion: There are several firms that are rapidly expanding.

B. Problems created by government: The government has created the following issues:
1. External pressure: Jamuna Bank has also encountered several difficulties in the debt
recovery procedure as a result of ongoing pressure from various interested parties.
2. Legal issues: Existing rules and regulations do not adequately handle the legal aspects
of debt recovery. As a result, defaulters can simply be exonerated of all allegations
against them.
3. Instability of government policy: Frequent changes in government policies on debt
recovery.

C. Problems created by the bank: The following issues are caused by banks:
1. Lack of analysis of business risk: Before lending, Jamuna Bank sometimes fails to
adequately examine the borrowers' business risks, and the bank cannot anticipate
whether the firm will succeed or fail. If it does not run smoothly, the loan is
categorized.

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 2. Inadequate valuation of security or mortgage property: In some circumstances, the
bank fails to properly value the security against the loan. As a result, if the loan is
categorized, the bank cannot collect its loan through mortgage sales.
D. Other general causes of poor loan recovery:
Apart from the particular factors causing difficulties in recouping loans, there are several
general causes that have a significant influence on causing the difficulties encountered by
Jamuna Bank in the loan recovery process. They are as follows:
1. Early loan sanction and payout to borrowers without sufficient project inspection by
the bank due to lobbying group pressure.
2. A lack of appraisal of the program's technical and economic viability.
3. Delay in credit disbursement.
4. Credit is not always granted to genuine enterprises.
5. Inadequate supervision.
6. Borrowers' illiteracy.
7. Borrowers' unwillingness to repay the debt.
8. Deterioration of the borrowers' value system.
9. Money borrowers utilize their loan money for purposes other than the authorized
project, i.e., if the loan is sanctioned for industrial purposes, they use the money for
house construction or land acquisition.
10. Borrowers' funds are sometimes invested outside of the nation. Many borrowers send
loan funds abroad to be deposited in their own accounts or used for other purposes.
11. Due to unforeseen circumstances, local borrowers are often pushed to provide them
loans without thorough research. Because these borrowers may obtain a loan by using
their influence, they can also avoid payback obligations.
12. Problems responsible for non-implementation and delayed execution of project for
which the entrepreneurs of the project cannot return the loan. Failure to identify the
economic availability of the projects; time gap between project approval and
sanctioning; import of machinery and raw materials, all of which are problems of a lack
of foreign exchange and licensing processes.
All of the causes mentioned above are general explanations for Jamuna Bank's loan recovery
issues. Aside from this, there are other unique causes for Jamuna Bank's ongoing loan recovery
issues. They are as follows:

• Loans are given under fictitious names and enterprises;

• Loans are given in some cases without sufficient securities;
• Loans are approved in excess of the branch manager's power;
• Improper monitoring and supervision of credit;
• Political misuse of loan programs;
• Lack of timely action against willful defaulters; and
• Loans are sometimes given for economically unsound projects.
Problems with loan recovery are the result of past defaults on loan disbursements.

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 Chapter 05:
Financial Analysis, Findings,
Recommendations & Conclusion

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5.1.Financial Analysis

5.1.1. Overall financial highlights of Jamuna Bank Ltd. Related to credit department

Amount in Million

Un-
Paid up Reserved Loans & Classified
Year Deposits Classified
Capital Funds Advances Loans
Loans
2017 6,141.19 4,697.57 167,571.33 142,252.94 142,068.76 184.18

2018 7,492.26 5,441.01 188,034.30 165,402.85 164,757.49 645.36

2019 7,492.26 7,492.26 202,509.52 177,278.78 170,719.32 6,559.46

2020 7,492.26 7,492.26 191,103.99 162,658.43 157,856.79 4,801.64

2021 7,492.26 7,492.26 212,052.50 174,824.78 169,630.84 5,193.95

Source: Annual Report of JBL

Table-02: Financial situation during 2017-2021

This table represents the financial performance of Jamuna Bank Ltd. During 2017-2021. This
table also shows the twelve selected financial information i.e. Paid up Capital, Reserved Funds,
Deposits, Loans & Advances, Un-Classified Loans, Classified Loans during 2017-2021. Here,
we can see that the Paid-up capital remain same during the year 2018 to 2021. JBL has the
increasing trend in Deposit and reserved fund.

Amount in Million

Total Fixed Total Total Income from

Year Investments
assets Assets Income Expenditure Investments
2017 26,061.92 197,058.54 2,509.81 8,779.95 4,444.54 2,615.20

2018 31,648.68 225,018.22 2,614.52 9,817.78 5,077.25 1,836.38

2019 39,200.61 242,928.46 3,217.47 11,439.53 5,597.68 2,322.40

2020 50,970.36 241,533.71 3,260.65 10,860.69 5,771.86 4,537.06

2021 67,674.40 264,321.51 3,272.11 10,971.05 5,791.35 5,649.90

Source: Annual Report of JBL

Table 03: Financial situation of credit department during 2017-2021

Here we can see that the Investment, Total assets, Fixed assets, Total income & Income from
investment is in increasing by the year 2017-2021.

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 Figure 01: Overview of Credit Department of JBL
5.1.2. Performance of Credit Department, Jubilee Road Branch

Loans & Import Export Operating

Year Deposit
Advance Business Business Profit
2017 1,599.398 373.868 612.731 1,349.867 31.752

2018 1,638.047 437.925 676.498 1,356.917 26.672

2019 1,789.762 474.832 819.743 1,246.881 18.952

2020 1,847.939 518.656 982.881 1,236.349 16.722

2021 1,911.196 569.276 1,240.952 1,494.971 24.742

2022 1,815.52 647.551 1,660.398 2,202.715 24.192

Source: Branch Report of JBL, Jubilee Road Branch

Table 04: Financial Highlights of Credit Department, Jubilee Road Branch

Here we can see that the Jubilee Road Branch has the increasing trend in Deposit, Loans &
Advances, Import- Export Business & Operating profit during the 2017-2021. In the 2022,
Deposits and operating profit are lower that the 2021 in the specific branch.

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5.1.3. Comparison between overall JBL performance & Jubilee Road Branch of JBL
❖ Comparison of Operating Profit

Amount in Million

Year JBL Jubilee Road Br. Percentage of Br.

2017 8,779.954 31.752 36.16%
2018 9,817.783 26.672 27.17%
2019 11,439.527 18.952 16.57%
2020 10,860.692 16.722 15.40%
2021 10,971.052 24.742 22.55%
2022 24.192
Table 05: Operating profit comparison 2017-2022
As the Islamic banking branch, Jubilee Road Branch shows the increasing trend in their
performance of operating profit. It has the better performance in 2017 which shows the 36.16%
portion of total operating profit of JBL. After the COVID-19 period, the portion of the branch
are increasing which shows 22.55% of the JBL in 2021.

Figure 02: Percentages shared by Jubilee Road Br., for Operating Profit

❖ Comparison of Deposits

Deposits (in Million)

Year Percentage shared by
JBL Jubilee Road Br.
Branch
2017 167,571.33 1,599.40 0.954%
2018 188,034.30 1,638.05 0.871%
2019 202,509.52 1,789.76 0.884%
2020 191,103.99 1,847.94 0.967%

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 2021 212,052.50 1,911.20 0.901%
2022 1,815.52
Table 06: Deposit comparison during 2017-2022
Here we can see that the comparison of the deposit, The Jubilee Road shares 0.954% in year
2017. During the COVID-19, though the deposit is decreased, but the branch had achieved
better performance in 2020, but in 2021, it again decreased. The trend of the percentages shared
by the Jubilee Road Branch during the 2017-2021 has shown below-

Figure 03: Percentages shared by Jubilee Road Br., for Deposit

❖ Comparison of Loans & Advance

Loans & Advance (in Million)

Year
JBL Jubilee Road Br. Percentage shared by Br
2017 142,252.94 373.868 0.263%
2018 165,402.85 437.925 0.265%
2019 177,278.78 474.832 0.268%
2020 162,658.43 518.656 0.319%
2021 174,824.78 569.276 0.326%
2022 647.551
Table 07: Comparison of Loan & Advances

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Similarly, the chart shows the increase of the transaction of loans & advances of Jubilee Road
Branch. It causes the increase of percentages shared by the branch to the overall JBL
performance during the year 2017-2021. The trend has shown below by the line chart-

Figure 04: Percentages shared by Jubilee Road Br., for Loans & Advances

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5.2. Findings
The internship was conducted to analyze credit operating system, credit policies, and loan
monitoring and recovery methods, particularly their categorized loans. And, after examining
their credit system, loan recovery method, and analyzing their loan and advance department
performance, including categorized loans, the study's conclusions are as follows:
1. Jamuna Bank, Jubilee Road Branch receives high marks from customers for two major
criteria i.e., branch location and offering Islmic Banking.
2. Branch managers are held entirely accountable for the selection of the bank's new
borrower.
3. It inhibits the branch manager from selecting the wrong new borrower.
4. Jamuna Bank Ltd. offers working capital solutions such as Cash Credit in exchange for
manufacturing items on hand. And constantly monitor to verify that adequate
inventories are available to support the funding.
5. Effective monitoring and persuasion are required in some circumstances, particularly
in inferior and dubious cases. The branch manager is adept at persuasion and
monitoring.
6. In some situations, the loans are classed as recommended by the head office. So, to
some extent, it is true that Head Office decisions might result in classified loans.
7. Employees are kind, well-educated, and helpful; if a subordinate makes a mistake,
higher authority motivates pleasantly rather than criticizing.
8. Employees in credit departments, which are so important, are extremely experienced
and can handle clients intelligently.
9. Important aspects include a solid market reputation, personal and business
relationships, and so forth.
10. The branch has a small workforce.
11. Because the cash limit is low, consumers are sometimes unable to receive adequate
service.
12. Branch managers, officers, and executives who have exceeded their targets in every
way may be awarded.
13. Political involvement in personnel selection must be avoided. Because clients are quite
sensitive when it comes to service marketing. If customers do not receive the
appropriate service at the right time and in the right place from the right person, they
will transfer to another bank.
14. Advertising and promotional efforts are extremely efficient in informing clients about
new and (financially) appealing services. As a result, the advertising effort should be
strengthened in order for the bank to develop quickly.
15. Consumers use marketing professionals to assist them establish successful service
strategies, different crucial decisions, and prepare various plans due to their lack of
understanding in Islami banking.

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5.3.Recommendations
In light of Jamuna Bank Ltd.'s viewpoint, I propose the following considerations:
1. In place of the default culture, a new credit culture must be formed. Efforts should be
made as quickly as possible to protect the interests of the banking industry.
2. Making regular trips to the customer's place of business rather than conducting all
meetings at the bank may provide real value to the firm.
3. To improve the recovery position and reduce massive overdue debts, the first step is to
get political support and press the government and political parties to take the required
actions to return defaulted loans within a time limit.
4. Legal action should be initiated against willful defaulters as soon as possible. This
measure should be implemented as soon as one installment is missed, rather than
waiting until the entire debt is missed.
5. Increase branch-specific promotional efforts.
6. Increase the availability of online banking services throughout the branches.
7. Attempt to improve service speed.
8. Increase the financial and environmental amenities for employees.
9. Jamuna Bank Ltd. needs hire more people for the branch.
10. The cash limit should be raised.

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5.4.Conclusion
Jamuna Bank Ltd. is a commercial bank that began operations in 2001. It has already earned
the trust of its customers by providing exceptional services through many divisions. This
achievement has stemmed from its management's dedication, commitment, and dynamic
leadership over the years. The working environment at Jamuna Bank Limited is quite
simulating. Despite its brief history, the bank has effectively established itself as a progressive
and innovative financial organization in the country.
Jamuna Bank Ltd. adheres to the credit policy and practices established by the bank's
management. And as a result, they are doing well in terms of lowering the high categorization
rate and meeting the bank's profit objective. Jamuna Bank Ltd has been found to sustain an
excellent trend of overall performance in the country. High staff efficiency, excellent
profitability, quick growth of deposits and advances, and high loan recovery demonstrate
Jamuna Bank Ltd's solid financial situation.
The current corporate world is experiencing an increase in the speed with which competition
is spreading. To maintain sustainability in this competitive environment, organizations are
developing new strategies and business plans with the highest levels of efficiency in all
industries.
To establish a strong foundation for the bank and to maintain the bank's image, determine that
the company or client is not an outsider on their business; rather, he or she is a part of the bank.
They should have reduced the knowledge gap, which is the difference between customer
expectations and management's assessment of consumer expectations. They should also close
the communication gap, and the bank should eventually align the customer's view with their
expectations.
JBL is a modernized bank, and its reputation is growing by the day. Because it provides a
decent possibility for work. It offers high-quality and high-expectation services to its
consumers. It adds to the country's economic progress. JBL offers a variety of services that
provide excellent opportunities for the general public and for saving. JBL's policies and tactics
are also of higher quality than those of other private banks. However, they must be more
cautious in order to maintain former customers and attract new ones in the current competitive
environment.

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