1.

1 Introduction
Bank is a financial intermediary whose prime function is to move scarce resource in the
form of credit from savers to those who borrow for consumption and investment. The
word "Credit" is derived from the Latin word "Credito", which means “To trust". The
fundamental nature of credit is that an element of trust exits between buyer and seller-
whether of goods or money. In a modern industrial society Banks are uniquely important
because of their ability to create money. Lending comprises a very large portion of a
Bank's total assets and forms the backbone of the Bank and interest on lending
constitutes the highest proportion of income of a Bank. As such credit quality remains the
prime indicator of its commercial success. Unsound credit reduces the ability of a Bank to
provide credit towards profitable borrowers and undermine liquidity and solvency.
Therefore credit is very important for the profitability and success of a Bank.
People interested in getting credit services from a bank can also be reviewed to
determine if they should be approved and at what terms. The bank credit analyst looks at
their information and supplemental materials gathered through research and makes a
recommendation. This can also include an evaluation of assets, particularly those that
might be used for collateral. Someone applying for a mortgage, for example, needs to be
able to show that the new home is valuable enough to cover the outstanding amount on
the loan.
In addition to evaluating customers, a bank credit analyst looks at portfolios and
investment opportunities. These reviews determine the level of risk involved in an
opportunity so a bank can decide if it wants to move forward. If it does, the bank credit
analyst monitors performance and may issue recommendations to get out of the
investment if it appears to be troubled. This allows banks to manage and balance risks
while generating profits through investment activity.
One of the most, if not the most, important activities in Bank is credit management. Credit
management is the process to ensure that customers will pay for the products delivered
or the services rendered. Credit management is of vital importance to your cash flow: you
can be profitable, but if you lack the cash to continue your business, you will either be
bankrupt or taken-over by someone who knows how to deal with cash.
Consumers are the steam engine of the economy, if credit dries up; consumers have main
difficulties in borrowing. In different consume less because they have less entreé e to
credit. For the reason that of this producers will sell less, and produce less. Fewer
employees are needed so more will get laid off. Less working people + less output = lower
GDP. This could create a unhelpful spiral.

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page1

Credit management is very important to saving money and ensuring that consumer are
not overpaying for matter that they want. Everybody is able of making responsible credit
decisions if they are alert and select their choices carefully. For all of the erroneous credit
decisions can be made, there are frequent good credit decisions can be made as well
which can help to ensure always having several options to choose from so it can select the
best credit management option for consumers needs.
Considering the above importance of Credit Management, It’s interested to anyone to
work in Credit Management.
As an Intern I was appointed to Rupali Bank Limited , Anderkilla Corporate Branch,
Chittagong for 2 months under Mr. Md. Golam Mortuza, DGM. This report mainly
highlights on Rupali Bank’s credit management and performance.

1.2 Objectives of the Study

The main objective of the study is to analyze the credit management of Rupali Bank Ltd.
To attain the main objective the specific objectives are as follows:
To examine various forms of credit offer by Rupali Bank Ltd.
To analyze the credit disbursement procedure of Rupali Bank Ltd.
To evaluate the credit performance of the sample Bank.
To identify problems and suggest necessary recommendations to overcome the
problems.

1.3 Methodology of the study

Methodology can be termed as underline principles & rules of organization or the

philosophical systems that work at the backdrop of any study. It clarifies the problems
involving the research in a very ordered and systematic fashion. Strategic are determined
at this stage for future implementation. In this report decisions and calculations have
been made basing on past experiences and the available data of past activities. These data
can be collected in anyone or more of the following ways. Approaches and the methods
that have been used to prepare the report are as follows:
A) Data collection procedure:
1) Primary sources:
 Personal Interview with some departmental officials especially those related to the
financial operations of “The Rupali Bank Limited”.

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page2

 Briefing sessions from Departmental heads or approved officials of the respective
departments.
 Relevant file study as provided by the “The Rupali Bank Limited.”

2) Secondary sources:
 Annual report of “The Rupali Bank Limited”.
 Periodicals & Circulars published by “Bangladesh Bank”.
B) Data analysis :
Collected information have been processed and compiled with the aid of MS Word, MS
Excel. Necessary tables have been prepared on the basis of collected data. Details
explanation & analysis have also been incorporated in this report.

1.4 Limitations of the Study:

During the study, I have faced the following limitations:
Two months time is not enough for such an extensive study. It is very difficult to
collect all the required information in such a short period.
Another limitation of this report is Bank’s policy of not disclosing some data and
information for obvious reason, which could be very much useful.
The bankers are very busy with their jobs, which lead a little time to consult with.
Due to some legal obligation and business secrecy banks are reluctant to provide
data. For this reason, the study limits only on the available published data and
certain degree of formal and informal interview.
In case of performance analysis secondary data are used.
This is my first experience on job, so there may arise some faults though I have tried
my level best.

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page3

2.1 Historical Background
Rupali Bank Ltd. was constituted with the merger of 3 (three) erstwhile commercial
banks i.e. Muslim Commercial Bank Ltd. Australasia Bank Ltd. and Standard Banks Ltd.
operated in the then Pakistan on March 26, 1972 under the Bangladesh Banks
(Nationalization) Order 1972 (P.O. No. 26 of 1972), with all their assets, benefits, rights,
powers, authorities, privileges, liabilities, borrowings and obligations. Rupali Bank
worked as a nationalized commercial bank till December 13, 1986.
Rupali Bank Ltd. emerged as the largest Public Limited Banking Company of the country
on December 14, 1986.

2.2 Vision
Rupali Bank Ltd. dreams poverty free Bangladesh, where sports & athletics, science and
education, health and hygiene, clean and pollution free environment and above all a
society based on morality make all our lives worth living.

2.3 Mission
 The Bank participates actively in socio-economic development of the country by
performing commercially viable and socially desirable banking functions.
 Develop Long-term relationships that help customers achieve financial success.
 Offer rewarding career opportunities and cultivate staff commitments.

2.4 Core Values

* Social Responsibility
* Performance
* Integrity
* Respect
* Innovation
* Teamwork

2.5 Guidelines & Principles of Rupali Bank Ltd.

 Transparency and accountability.
 Zero tolerance on corruption and inefficiency
 Flexibility in operation

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page4

 Constant review of clients’ performance
 Other guiding principles includes decentralization and devolution, defining roles
and responsibilities, use of state of art modern technologies, bottom-up approach in
planning, partnership etc.

2.6 Strategic Objectives

 Develop a customer oriented service culture with special emphasis on customer
care and convenience.
 Increase our market share by following a disciplined growth strategy.
 Achieve a significant share of deposit and credits from the existing and niche
markets.
 Leverage our technology platform and pen scalable systems to achieve cost-effective
operations, efficient MIS, improved delivery capability and high service standards.
 Develop innovative products and services that attract our targeted customers and
market segments.
 Maintain a high quality assets portfolio to achieve strong and Sustainable returns
and to continuously build shareholders' value.
 Strengthen the bank’s brand recognition.
 Explore new avenues for growth and profitability, particularly by diversifying loan
portfolio through structured finance and expansion of retail and SME financing.

2.7 Slogan of the Bank

Assured better service

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2.8 Corporate Profile
CORPORATE PROFILE
Name of the company : Rupali Bank Limited
Chairman : Ahmed Al-Kabir, PhD.
Managing Director : M. Farid Uddin
Company Secretary : Md. Shahjahan Khandaker
Legal Status : Public Limited Company
Rupali Bank Limited has been incorporated on
14 December 1986 under the Companies Act
1913 after taking over and acquiring as a going
concern the undertaking and businesses of
Rupali Bank with all of its assets, liabilities,
benefits, rights, powers, authorities, privileges,
Genesis : borrowings and obligations. Rupali Bank, which
initially emerged as a Nationalized Commercial
Bank (NCB) under the Bangladesh Banks
(Nationalization) Order, 1972 (President’s Order
No. 26 of 1972), has now become a state-owned
commercial bank (SCB) through a vendor’s
agreement dated 15 November 2007.
Date of Incorporation : 14 December 1986
34, Dilkusha Commercial Area, Dhaka-1000,
Registered Office :
Bangladesh
Authorized Capital : Tk. 700 Crore
Paid-up Capital : Tk. 165 Crore
Reserves & Retained
: Tk. 1374 Crore
Earnings
Long Term - A3
Credit Rating by
: Short Term-ST3
CRAB(2009)
National Support- AAA
Listing with DSE : 19-08-1987
Listing with CSE : 10-10-1995
Commencement of
Trading : 23-12-1986
with DSE & CSE
VAT Registration : 9011039307
TIN Certificate : 177-200-0021/LTU/Dhaka
Auditors : AHMAD & AKHTAR, Chartered Accountants,

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page6

 BCIC Bhaban (3rd Floor)
30-31 Dilkusha C/A, Dhaka-1000, Bangladesh.
&
G. KIBRIA & CO., Chartered Accountants,
Shadharan Bima Bhaban (6thFloor),
24-25 Dilkusha C/A, Dhaka-1000, Bangladesh.
S.M Atikur Rahman, Barister-at-Law,
Legal Advisor : Suite- D (1st Floor), 105/A Kakrail Road,
Dhaka, Bangladesh.
K.M HASAN & CO. Chartered Accountants,
Hometown Apartment (8th & 9th Floor),
Tax Consultant :
87, New Eskarton Road, Dhaka-1000,
Bangladesh.
Number of Employees : 4503
Number of Branches : 511

Number of Subsidiary
: 01 (Rupali Investment Limited)
Companies
+88-02-9551624-25, +88-02-9551525,
+88-02-9551840, +88-02-
Phone-PABX : 9552184,
+88-02-9552214, +88-02-9552746,
+88-02-955093-4
Fax : +88-02-9564148, +88-02-9552671
SWIFT BIC RUPBBDDH
Website www.rupalibank.org
E-mail [email protected], [email protected]

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page7

2.9 Organization Structure

Chairman
↓

Managing Director
↓

Additional Managing Director

↓

Assistant Managing Director

↓

General Manager
↓

Deputy General Manager

↓
↓
Assistant General Manager
↓

Senior Principle Principle Officer Officer

Officer

2.10 Divisions of Rupali Bank Limited

Rupali Bank Limited. has some major divisions comprising of various Departments, The
major divisions are as follows:
 Investment Division: This division has the authority to determine the party or the
client who will get the credit facility from the bank. The credit clients are selected
according to the criteria of credit policy.
 Financial Administration Division: This division can handle the credit proposal,
disbursement, monitoring and credit recovery position that is given by all branches.
 Audit and Inspection Division: This division can control all the financial position,
activities of overall organization. They provide the total budgetary limitation to
every department for the respective year.
 Marketing and Public Relation Division: This division mainly works for improving
the marketing network, Implementing the marketing strategies and the concept of
Trade Marketing.

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 Common Service Division: This division can handle all the genera activities except
the credit and financial sector. All the administration activities are designed and
implemented by this division.
 Human Resource Division (HRD): This division deals with the employees as the
core resources of the organization.
 Computer (IT) Division: This division can handle the IT activities. Each branch has
their own IT division and all branch-wise activities are reported to the head office IT
division.

2.11 Financial Analysis

Total Assets
Total asset of RBL stood at Tk 21527.73crore in 2013 from Tk 17299.31 Crore in 2012
registering a growth of 24% percent. The increase in asset of RBL was mainly driven by
growth of customer deposits. The growth of deposits was used for funding growth in
credit and holding of securities for SLR purpose. The economy witnessed a lower growth
scenario in credit and deposits mobilization.

Growth of Balance Sheet Items

Outstanding Tk in Crore Growth% of RBL
2013 2012
Assets 21527.73 17299.31 24.00%
Deposits 17795.00 13659.88 30.27%
Loans & Advances 10742.64 9064.16 18.52%

Cash and Balance with Bangladesh Bank

RBL's position increased from Tk 528.64 crore in 2012 to Tk 754.26 crore in 2013
showing a growth of 42.68 percent. The growth in deposits increased the Cash Reserve
Requirement of the Bank which is maintained with Bangladesh Bank and its agent. CRR
was maintained adequately throughout the year.
Balance with other Banks and Financial Institutions
RBL's position increased from Tk 206.97 Crore in 2012 to Tk 268.85 in 2013 registering a
growth of 61.88 Crore. Adequate funds were also maintained with correspondent banks
for payment against LC commitments.

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Money at Call & Short Notice
* This was the major area of operation of the RBL's Treasury Division. The total money at
call and short notice of RBL stood at Tk.320.00 crore in 2013 from Tk.370.00 crore in
2012.

Investment
RBL's investment increased during the year by Tk. 789.4crore and stood at 2361.12 crore
as at 31 December, 2013.

Loans and Advances/Investments

Loans and advances of RBL increased by Tk1678.48 crore showing a growth 18.52%
during 2013. Yi eld on loans and advances of RBL decreased to 01.11 percent due to
reduction of lending rates on corporate and medium scale financing as imposed by
Bangladesh Bank. Concentration of loans and advances was well managed and details of
credit are given at notes to accounts no 7.00. Ratio of non performing loan of RBL
decreased to 11.96 percent as against 19.48 percent of previous year.

Liabilities
The total liabilities (excluding equity) of RBL stood at Tk 12958.55 crore in 2013 from
Tk.9337.32 crore in 2012 registering a growth of 38.78 percent. The increase in liability
was mainly due to growth in deposits.

Borrowings from Financial Institutions and Agents

The borrowing represents, RBL's borrowing against refinance from Bangladesh Bank.
Refinance was taken for rural financing and against nostro accounts in abroad.

Deposits
The deposits of RBL grew by 30.27 percent in 2013 Customer deposits of the Bank grew
by 29.95 percent. The growth was supported by branch network and high standard
service provided to customers along with liability.

Deposit Mix
Campaign carries out by retail liability team for mobilization of no cost and low cost
deposits. No cost and low cost deposits comprised of 16 percent of the deposits as against
15 percent in the previous year indicated significant improvement of deposit mix.
However, fixed deposits remained the main component of deposits contributing about 26
percent of the total deposits. Interest cost of deposit decreased to 4.16 percent as against
4.52 percent of previous year. The clientele group of the Bank was individuals'
corporation, NGO, NBFI, government and private bodies etc.

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Types of Deposits Outstanding in Crore Taka Growth
2013 2012 Percentage (%)
Current & Contingent 1569.53 1026.24 52.93
Bills payable 352.23 156.36 125.33
Savings 7788.36 5564.84 39.96
Short term deposits 2450.31 3085.32 ( 20.58 )
FDR 3269.74 2485.37 31.56
Scheme Deposits 1400.90 856.96 63.47
Other deposits 963.93 484.79 98.83
Total Deposits 17795.00 13659.88 30.27

Source: Annual Report 2013

Shareholders' Fund
RBL's Shareholders' fund position is Tk 1,973.33 crore by during 2013. Paid-up capital of
RBL is Tk181.50crore during 2013. The Statutory reserve increased by Tk 28.51 crore
during the year and stood at Tk 153.54 crore. Distributable profit
stood at Tk 31.51 crore during the year. The strong growth in Shareholders' fund will
help the Bank to expand its business.

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Analysis of Income Statement of RBL
Taka in crore
SLNo Particulars 2011 2010
1 Interest income 938.23 555.26
2 Interest expenses 516.39 346.38
3 Net interest income 421.84 208.88
4 Non-interest income 307.36 270.10
5 Non-interest expenses 369.47 234.30
6 Net Non-interest income ( 61.48) 35.80
7 Profit before provision and tax 360.36 244.69
8 Provision for loans and others 110.50 102.11
9 Profit after provision before tax 249.86 142.57
10 Provision for tax 140.73 82.54
11 Profit after tax 109.13 60.03

Net Interest Income

RBL's net interest income grew by 101.95percent during 2011. Interest earned from loans
and advances and profit earned on investment remained the principal component of
interest income. However interest cost of deposits was the main component of interest
expenses. Net interest income was the highest contributor to total income,

Non-interest Income
The non-interest income of RBL is TK307.99 during the year 2011. Fees and exchange
based income of the Bank grew by 4.52 percent during the year. Other charges and
recoveries increased during the year

Taka in crore
Particulars 2013 2012
Commission 10.94 10.63
Exchange 44.05 41.99
Service Charge 23.82 11.63
Miscellaneous 13.56 7.68
Other operating income 1.45 0.29
93.82 72.22
Total

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Non -interest Income

Total Operating Expenses

Total operating expenses increased by 42.07 crore during the year mainly due to increase
in personnel and other operating expenses. To match with the growth of SME and retail
business and Branch expansion substantial number of manpower was recruited
especially in SME and retail segments will benefit the Bank in broad spectrum. RBL also
made donation amounting to Tk 2.54 crore to carry on various CSR activities. RBL also
focused on developing brand image and increased promotional and advertisement
expenses. This strategy added value to the business. The Bank's cost income ratio is 70.35
percent in 2013 from 82.96 percent in 2012. Considering these factors, the ratio indicates
the satisfactory operating efficiency of the Bank.
The productivity of the employee continued to grow which is evident from the following
ratio:
Taka in crore
Particulars 2013 2012
Income per employee 0.18 0.16
Profit before tax per employee 0.03 0.04
Asset per employee (excluding contingent) 2.73 1.94
Provision for Classified Loans
Total provision against classified loan was Tk 2240.16crore as against Tk 2636.55 crore
of previous year .General provision requirement on off-balance sheet outstanding had to
be provided Tk 81.70 crore as against Tk 31.54 crore of previous year. The bank has
provided Tk 8.83 crore as provision for diminution in value of investments. This is to be
noted that general provision is regarded as Tier-ii capital of the Bank and provides

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page13

safeguard against future default as well supports business growth by strengthening the
capital base.
2013 2012
NPL ratio 12.15% 19.48%
Industry Average of NPL 9.20% 10.80%
Provision 112.28% 189.93%
Industry average 102.30% 92.79%

Net Profit before Tax

After making above provisions, net profit before tax of RBL stood at Tk 249.86 crore.
Higher investment income especially from treasury increased the net profit before tax.

Provision for Income Tax

Provision against current year income tax of RBL was Tk 140.73 crore.

Net Profit after Tax

Net Profit after Tax stood at Tk 109.13 crore during the year 2011.The calculated Earning
per Share (EPS) is Tk 48.02 at December 31, 2011. Average ROA and ROI stood at 1.15
percent and 11.22 percent respectively.

Statutory Reserve
As per Bank Company Act 1991, 20 percent of operating profit before tax is required to be
transferred to Statutory Reserve. As such an amount of Tk 28.51 crore has been
transferred to Statutory Reserve.

Dividends
Thus fund available for distribution is Tk 31.51 crore from current year profit. In order to
maintain a satisfactory capital adequacy ratio of the Bank, the Board decided to
recommend 10 percent stock dividend for the year 2013. Satisfactory Capital Fund will
enable the Bank to increase business activities.

Shareholders' Value
RBL remains fully committed to delivery of higher shareholder value. The high
profitability track record underpins the value, the shareholders' derived from investing in
the shares of Rupali Bank Limited. The earning per share stood at Tk 48.02 on 2013.

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page14

2.12 Corporate Social Responsibility (CSR)
Rupali Bank Ltd. RBL has been rendering various services for attaining greater social
goals and objectives. In this process, we aim to the development of the society as a whole
and fulfillment of corporate social obligation in particular. To reinforce CSR activities, the
bank has undertaken fresh initiatives in line with Bangladesh Bank guidelines in the areas
of social service.Internship employment of poor, sports and culture, banking for the
disadvantaged group, disaster and relief and activities.
Corporate Social Responsibility (CSR)

2.13 Corporate Social Responsibility (CSR)

Since 2009, as many as 602 officers were imparted training by Rupali Bank Training
Institute through 24 courses/ workshops including 10 foundation courses to the newly
joined probationary officers throughout the month and the course relating to Fake Note
Detection, BACH program, Money Laundering Prevention Act, Core Risk, Foreign
Exchange and Computer. As many as 105 trainees have participated in 43 courses in
BIBM. In addition to this, 18 trainees took part in 12 courses conducted by Bangladesh
Bank and other institutions outside.

2.14 Computer Operation and Application of Information Technology

Extensive activities on computer technology and their implementation have been
undertaken by this bank during the year in question. Till 2009, the number of
computerized branches stood at 145. The work relating to change of old computers in
previously computerized 31 branches is in progress. Remittance and EFT System have
been modernized and arrangement for Money Transfer through Western Union in 71
branches has been made operative. On-line Banking with foreign Exchange Branches at
Dhaka and Agrabad Branch of Chittagong has been introduced. The vendor institution has
started preliminary activities to introduce On-Line banking operation on test basis in 10
more branches of the bank. The information of 25 Divisions of Head Office are being
publicized through Bank’s own website (www.rupalibank.org). In order to expedite the
flow of information 10 Internet of 64 kbps (shared line) and 10 Internet line of 256 kbps
(dedicated line) have been installed in Head Office. The supply and installation of
necessary hardware and software including communication link with Bangladesh Bank
have been made. SIT (System Integrity Test) with Bangladesh Bank is in completion and
prepared to operate in live at any time as per instruction of Bangladesh bank.

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2.15 Legal Activities
As regards the recovery of default loans, the number of the suits such as original suits
under trial, execution suits, appeal/ others and suits in Bankruptcy Court field by the
Bank stood at 4570 with an involvement of Tk. 1603.29 crore. The number of the suits in
which the certificates issued for possession and enjoyment of the mortgaged property by
the court is 501 involving Tk. 82.03 crore; the suits field against the bank were 156
involving Tk. 327.93 crore; the IRO suits 110; the suits disposed of 294 involving Tk.
222.28 crore. The suits newly filed 42 involving Tk. 89.18 crore and the recovery through
suits amounts to Tk. 222.28 crore. The number of lawyers conducting the suits in Dhaka
Metropolitan area is 110 and in other areas 236. Besides these, the number of writs
arising from Artha Rin Adalat Act, 2003 pending for disposal is 304 at the end of the year
in question.

2.16 Other Banking Activities

94 branches of our bank are engaged in works relating to the payment of portion of
salaries afforded by the government to the teachers and employees of registered non-
government educational institutions including teachers of non-government educational
institutional, 98 branches relating to the payment of scholarship and stipends to the girl
students at primary and secondary levels and 69 branches relating to the payment of
stipends to the girl students at primary and higher secondary level. In addition to those,
almost all the branches of Rupali Bank are engaged in work relating to the payment of
pension bill to the retired government, civil and military personnel and the receipt of
utility bills such as PDB, DESA, REB, WASA, GAS & Telephone etc. including other service-
related work of the government (such as receipt of Municipal Tax and Land Development
Tax, purchase and sale of Prize Bonds, receipt of Hajj money etc).

2.17 Products and Services

Deposits
 Current Deposit (CD)
 Call Deposit (CDR)
 Special Notice Deposit (SND)
 Savings Deposit (SB)
 Savings Deposits Earned from Foreign Remittance (SB)
 Fixed Deposit (FDR)
 3 months and above but less than 6 months
 6 months and above but less than 1 year
 1 year and above but less than 2 years
 2 years and above but not more than 3 years
Deposit Schemes:
 Rupali Deposit Pension Scheme (RDPS)
 Rupali Deposit Pension Scheme-2 (RDPS-2)

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 Rupali Deposit Scheme (RDS)
 Rupali Monthly Earning Scheme (RMES)
Loans and Advances
General Products
 Cash Credit(Hypothecation)
 Cash Credit (Pledge)
 Overdraft (OD)
 Loan against FDR
 Loan against Deposit Schemes
 Industrial Project Loan (Long and Mid Term)
 Short Term Loan
 SOE Loan
 Syndicate Loan
 Housing Loan— General and Commercial
 Personal Loan/ Professional Loan
 Household Loan
 Self Reliance and Special Program Loan
 Local Bank Guarantee
 Loan under Equity Entrepreneurship Fund (EEF)
 Student Loan
Small and Medium Enterprise Loan (SME)
> SHOHOJ > SHULOV > BUSINESS > MAJHARI
Small Enterprise Financing
Manufacturing
* Fixed Assets Financing
* Working Capital Financing
Trading and Services
* Fixed Assets Financing
* Working Capital Financing
Rural and Agro Credit
 Young Farmers' Loan
 Solar-Energy and Bio-Gas Plant Establishment Loan
 Fishery Loan
 Shrimp Cultivation Loan
 Goat/Sheep Rearing Loan
 Poultry Loan
 Dairy Loan
 Loan Against Crop Storage in Silos
 Small Loan
 Micro-Credit
 Micro-Credit for the Handicapped

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page17

 Loan for Tree Plantation
 Peas, Bean, Maze and Spices Loan
 Other
Other Loans
* Bank-NGO Linkage Credit
* Loan against Share/Debenture
* Loan against Brickfield/ Gold Ornaments
* Loan for Preservation of Potatoes in the Cold Storage
* Transport Loan/Car Loan
* Woman Entrepreneur Financing Program
* Consumer Credit/Travel Agency and Diagnostic Centre Business Loan
Foreign Exchange Business
All sorts of Foreign Exchange Transactions are made in Rupali Bank Limited following
'Guidelines for Foreign Exchange Transactions (GFET-2009) by Bangladesh Bank such as-
Foreign Currency Accounts
 Foreign Currency Account
 Resident Foreign Currency Deposit Account
 Non Resident Foreign Currency Deposit Account
 Exporters' Retention Quota Account
Import Finance
* Letters of Credit
* Loan against Imported Merchandise (LIM)
* Loan against Trust Receipt (LTR)
Export Finance
Pre-shipment Credit
 Cash Credit Against Hypothecation of Raw Materials/Exportable Goods
 Cash Credit Against Pledge of Raw Materials /Exportable Goods
 Packing Credit (PC)
 Back to Back L/C
 Back to Back L/C under Export Development Fund (EDF)
Post-shipment Credit
 Negotiation of Export Documents
 Collection of Export Documents
 Foreign Bills Purchased (FBP)
 Inland Bills Purchased (IBP)
Bond
 Wage Earners Development Bond
 Investment Bond
 Premium Bond
Guarantee
 Bid Bond

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 Performance Guarantee
 Warranty Guarantee
 Shipping Guarantee
 Guarantee Against Foreign Bank's Counter Guarantee
 Advance Payment Guarantee
 Customs and Excise Guarantee
Forex and Fund Management
 All sorts of Dealing Room Operation
Foreign Remittance
 Foreign Currency Endorsement
 Issuance and Encashment of Traveler's Cheque
 Foreign Currency Encashment
 Issuance and Encashment of Foreign Drafts
 Opening of Student File and remittance there against
Treasury
 Treasury Bills
 Treasury Bonds
 REPO
 Reverse REPO
 Money Market Operation
Fund Transfer
 Inter-Branch Money Transfer
 Telegraphic Transfer
Modern Banking Services
 SWIFT
 ATM Service
o Debit Card
Value Added Service
* Locker Service
New Products and Services
 Merchant Banking Services
 ELDORADO EFT System (will be introduced soon)
1. Local Remittance
2. Foreign Remittance

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3.1 Credit Management
Credit is a contractual agreement in which a borrower receives something of value now
and agrees to repay the lender at some later date. Credit is the confidence of the lender in
the ability and willingness of the borrower to repay the loan at a future date. It is
generally believed that confidence is the basis of all credit transaction.
“Credit management is the dynamic field where a certain standard of long-range
planning is needed to allocate the fund in diverse field and to minimize the risk and
maximizing the return on the invested fund. Continuous supervision, monitoring
and follow up is highly required for ensuring the timely repayment and minimizing
the default.”

3.2 Functions of Credit management

 The credit manager position is accountable for the entire
 Credit granting process
 Including the consistent application of a credit policy,
 Periodic credit reviews of existing customers, and
 The assessment of the creditworthiness of potential customers, with the goal of
optimizing the mix of company sales and bad dated losses.
 Recommend changes in the credit policy to senior management
 Create a credit scoring model
 Manage customer credit files
 Monitor the credit granting and updating process
 Accept or reject the staff’s credit recommendation
 Personally investigate the largest customer credit applications
 Personally visit the largest customers to establish relations
 Monitor periodic credit reviews
 Monitoring deductions being taken by customers
 Manage the application of late fees
 Manage the corporate financing program.

3.3 Rules & Regulations of Credit management

RBL established to provide term loan (including working capital loan) and other financial
assistance (including all kinds of banking facilities) to accelerate the pace of development
to small industry of Bangladesh. It is mandated in the memorandum & Articles of
Association of bank to advance a minimum of 50% of the loan able fund to the small
industry sector. As a board policy objective in respect of small industry financing the
Bank undertakes the following tasks:
 Extend financial to small industries in private sector.

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 Extend financial assistance to micro-enterprises and collaborate with other
institutions engaged in financial and developing such enterprises.
 Undertake project promotion to identify profitable area of investment.
 Cooperation and collaboration with institutions entrusted with the responsibilities of
promoting and aiding SSI sector.

3.3.1 Credit Analysis

Analysis of the eligibility for getting loan in the light of applications. At the time of credit
analysis, the loan officer should carefully examine logic and purpose of the credit.
Extending credit without analyzing the and the loan applied will be very risky. Credit
analysis covers the area of analyzing the character of the borrowers, capacity to use loan
amount, condition, capital, objectives of taking loan planning for uses, probable
repayment schedule and so on.

3.3.2 Eligibility in getting loans

 History of the first loan transaction data.
 Ability to use loan and the characteristics of the potential borrower,
 Ability to repay the applied loan amount,
 Amount of capital to support any contingencies,
 Influence on the repayment ability by the domestic and international economic
condition,
 The presence of any risk factors that may make him a defaulter by interfering his
cash flow stream.
Bank takes some necessary information from the borrower for recovery of loan &
advance and analysis of his financial condition. This is called credit analysis. There are
some factors which are needed for safety followed by the RBL is given below:

3.3.3 Factors needed for safety

Five C’s Five P’s Five M’s Five R’s
Character Person Man Reliability
Capacity Purpose Management Responsibility
Capital Product Money Resources
Condition Place Materials Respectability
Collateral security profit Market Returns

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3.3.4 Lending Principles
For sound lending the following points should be kept in view:

Sound Lending Principle of RBL

Judicious selection of Customers

Purpose

Safety

Security

Liquidity

Adequate return (Profitability)

Supervision
The above principals are discussed below:
Purpose: The purpose of lending is a crucial point to know for the bank. It helps the
National
banker to know the course of action/ofSocial Interest
the borrower as regards landing. So the banker
can have the idea whether the loan will be in productive purpose or not.
Liquidity:Credit
It meanscontrol Policy
the availability of Bangladesh
of fund bon short notice. Bank
The bank has to know
whether the bank can get back the loan amount in liquid from or not. Because majority of
bank liabilities are payable on demand or after short notice. So the loan must have fair
change of repayment according to repayment schedule.
Security: The security by the bank from borrowers in order to cover loaa if borrowers
became defaulted. It must be adequate, readily marketable, easy to handle and free from
any encumbrances.

Profitability: Banking is essentially a business, which aims at earning a good profit. The
bank will definitely invest it’s money if there is a strong possibility of fair return or profit.

Spread/diversification: In this connection, the principal ‘do not pull all the eggs in the
same basket; is followed. The advances should be as much broad based as possible and
must be in conformity with the deposit structure in order to minimizing the risk of
lending.

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National interest: A bank should keep in mind the national development plan to play a
significant role in the economic development in the country. It is to be always
remembered that the Bank is the custodian of public money and as such we must be
judicious, careful and selective while lending out the depositors’ money to ensure timely
recovery. The deciding factors for recovery of loans are selection of right type of
borrowers, end-use of credits and effective follow-up and proper supervision.

3.4 Procedure of giving advance

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1 The borrower has to apply to RBL for loan by filling up of a specific application form.
2 After receiving loan application form, RBL sends a letter to Bangladesh Bank for
obtaining a report. This report is called CIB (Credit Information Bureau) report.
Giving of this report is essential for any amount of loan. The purpose of this report is
to informed that whether the borrower has taken loan from any other bank; if ‘yes’,
then whether these loans are classified or regular.
3 After receiving CIB report, if the bank thinks that the prospective borrower will be a
good borrower, then the bank will scrutinize the documents. In this stage, the bank
will look whether the documents are properly filled up and signed.
4 Then comes processing stage. In this stage, the bank will prepare a proposal. A
proposal contains all relevant information (e.g. name of the client, type of the loan,
amount of the loan, period of giving loan, security, date of application, financial data,
etc.) Branch incumbent (Local Office) has the discretionary power to sanction loans
as per delegation of powers and authority. But in that case, the branch manager has
to give attention on the delegation of authority prescribed by Head office.
For the cases, which exceeds Branch delegation, the branch manager has to send a
proposal to the head office. Head office will prepare a minute and submit it before the
Competent decision-making committee. The minute has to be passed in the
committee under certain cases.
After passing the minute, it will be sent to the Bangladesh Bank for approval in the
following cases:
 If the proposal limit exceeds 15% of bank’s equity.
 If the proposal limit against cash collateral securities exceeds 25% of the bank’s
equity.
After getting the proposal it will again come to the head office.
1. After the processing stage, a sanction advice will be prepared in favor of the client.
2. After preparing the sanction advice, bank will collect necessary documents
3. After receiving all the documents, the bank will disburse the loan to the borrowers.
For withdrawing the loan amount, customer creates a current account and the loan
amount is transferred to this account.

3.5 Processing of Credit Proposals

1. A secured credit facility may be allowed to a customer only after getting a limit
sanctioned by the authorized officials.
2. The customer seeking a credit facility against acceptable security must make an
application in bank’s printed form “Request for Credit Limit” enclosing necessary
papers/documents to his nearest Branch of the Bank where he maintains his
operative account.

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3. Make a preliminary study of the affairs of the intending borrower by consulting the
followings:
 Borrowers application
 Reports in confidence collected through all feasible means regarding the state of the
business of the intending borrower.
 Borrower’s own mode of dealing
 Statement of accounts of the borrower with own and other Banks
 Statement of assets and liabilities
 Financial statements for the last 3(three) years
 Income Tax statement
 Trade and other reports
Arrange an interview with the intending borrower to know on the following points :
 Present and future prospect of the customer’s business
 Total investment required in the business
 Borrower’s stack in the business
 Amount of advance required
 Experience in the line of business.
 Purpose
 Period for which the advance is required
 Source of repayment
 Customer’s previous Banker, if any.
 Present liabilities, if any, with other Bank and conduct of the same
 Securities offered
 Proposed margin
 Type of charge to be created against the proposed security
 Terms of repayment
 Rate of interest
4. Before finally selecting the borrower, be satisfied that;
 The customer possess character, capacity and capital
 The account is remunerative one
 Dealing items and primary security of the customer possess the quality of easy
marketability, durability and storability
 Collateral security offered possesses the quality of easy marketability and is not
encumbered and its valuation is judiciously assessed so as to leave sufficient margin
after covering the advance and belongs preferably to the borrower.
 Repayment arrangement is satisfactory
 Means, standing and respectability of the applicant and the guarantor (if any) are
satisfactory.
 Credit worthiness of the applicant is reasonable
 Location of the business is good.

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5. If the proposed facility is beyond the delegated business power of the Branch Manager,
the proposal shall be submitted to Credit Division, Head Office duly recommended in
the specified Format.
6. Approval of Limit:
The sanctioning authority on receipt of the proposal shall scrutinize the same and
ensure that :
 The proposal contains all pertinent information relating to the proposed facility and
the borrower.
 All necessary papers and documents have been submitted.
 The proposal has been duly signed by the members of the Branch Credit Committee
including the Manager.
 The proposal has been duly recommended.
 The proposal does not fall within the existing credit restriction
 Minimum margin requirement against the credit facility has been proposed.
 The primary security has got easy marketability, durability and storability
 The value of the property offered as collateral security is judiciously assessed
 The proposal is viable and stands all credit tests
 The proposed borrower is not defaulter of any Bank/Financial Institution
 There is no request from other Bank/Financial institution for not allowing/stoppage
of facility to the prospective borrower
 The proposal meets all the provisions/requirement of Bank Companies Act/Rules of
Bangladesh Bank/Other Laws / Rules

7. Check list of action to be taken by the Branch Manager/Second Officer/Credit Officer

before disbursement of Credit facilities. –
 Acceptance of customers relating to the terms & conditions to be obtained on the
duplicate copy of sanction advice.
 They will thoroughly examine and ensure that the subject credit facility does not
contradict any law, rules and regulation of the country, Bangladesh Bank and Bank’s
credit policy.
 They will obtain NOC from Bank where the customer has existing liability.
 CIB Report on the borrower to be obtained through Head Office.

3.6 Collection of Credit Information

For assessing the creditworthiness of a borrower a banker has to collect the above-
mentioned information from a number of sources. Every bank maintains a Credit
investigation department at its head office and main offices in larger cities to collect
information regarding the financial position of its borrowers. At other centers, branch

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mangers perform credit investigation. The credit information is collected through the
following sources:

Borrower: Most of the information may be secured from the borrower directly. The
loan application form seeks basic information about the borrower and his business. The
banker may examines his accounts books and note his past dealings with other banks or
parties
Market Reports: Banks try to find out the creditworthiness of the party by making
enquiries from the brokers, traders and businessmen in the same trade or industry. Their
individual opinions may differ but a balanced opinion may be formed about the borrower
on the basis of the feelings expressed by a number of such persons.

Exchange of Credit Information amongst Banks: It is the practice and customary

usage amongst banks to exchange credit information relating to the constituents in their
mutual interest. But the credit reports exchanged by banks are brief and superficial. They
areAYK/ in general and guarded terms. Banks are reluctant to exchange meaningful credit
information because they apprehend that legal protection available to them will be lost if
more facts are divulged to the enquiring banks. A study Group appointed by the Reserve
Bank concluded “the existing legal protection is adequate to permit banks to exchange
meaningful credit information on their constituents.” The study Group, therefore,
suggested that:
i) There should be free and frank exchange of credit information amongst the banks; and
ii) There should be qualitative change in the contents of credit reports, which should
highlight the management practices of the customers, their behavioral pattern with their
buyers, sellers and with the bank instead of concentrating entirely on the worth of assets
and financial strength. Similarly, the customer’s ability, business acumen and integrity
and willingness to honor commitments should also be covered in the Credit Reports.
iii) A central agency, to be called ‘Credit Information Trust”, i.e., ‘CREDIT’ be established
for organized collection, collation, storage and exchange of credit information amongst
the banks.

3.7 Securities
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.
RBL 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.

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 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.
There are different modes of charging securities are exercised by the bank:
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: According to section (58) of the Transfer of Property Act,1882
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. The
banker exercises the equitable mortgage.
3.8 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.
Documents required for relevant advances

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1. Loan:
a. D P Note signed on revenue stamp
b. Letter of arrangement.
c. Letter of disbursement.
d. Letter of partnership (partnership firm) or Board of resolution (limited
companies).
e. Letter of hypothecation.
f. Letter of lien and ownership / share transfer form (in case of advance against
share).
g. Letter of lien for packing credit.
h. Letter of lien (in case of advance against F D R)
i. Letter of lien and transfer authority.(in case of advance against P S P, B S P)
j. Legal documents for mortgage of property (As draft by legal adviser)
k. Copy of sanction letter mentioning details of terms and condition duly
acknowledge by the borrower
l. Trust receipt.

2. Overdraft:
a. D P Note.
b. Letter of partnership.
c. Letter of arrangement.
d. Letter of continuity.
e. Letter of lien.
f. Letter of lien and ownership /share transfer form (in case of advance against share).
g. Letter of lien and transfer authority.
h. Legal documents for mortgage of property.
3. Cash Credit:
a. D P Note.
b. Letter of partnership.(in case of partnership farm) or Board of resolution (in case
of limited company)
c. Letter of arrangement.
d. Letter of continuity
e. Letter of hypothecation [In case of cash credit (Hypothecation)]
f. Legal documents for mortgage of property
4. Bills purchased:
a. D P Note.

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b. Letter of partnership.(in case of partnership farm) or Board of resolution( in case
of limited company)
c. Letter of arrangement.
d. Letter of acceptance, where it calls for acceptance by the drawee.
e. Letter of hypothecation of bill.

3.9 Credit Disbursement

A proper disbursement procedure is essential for implementing a project, small or big ,
within the estimated time and cost . however constant monitoring of the projects on the
one hand and timely monitoring the equity on the other hand can not be under estimated
for efficient implementation of the project. Having completely and accurately prepare
the necessary loan documents, the loan officer ready to disburse the loan to the
borrower’s loan account. After disbursement, the loan needs to be monitored to ensure
whether the terms and conditions of the loan fulfilled by both bank and client or not.

3.10 Credit monitoring, Follow-Up & Supervision

Credit monitoring implies that the checking of the pattern of use of the disbursed fund to
ensure whether it is used for the right purpose or not. It includes a reporting system and
communication arrangement between the borrower and the lending institution and
within department, appraisal, disbursement, recoveries, follow-up etc.
RBL Officer checks on the following points,
a) The borrower’s behavior of turnover
b) The information regarding the profitability, liquidity, cash flow situation and trend
in sales in maintaining various ratios.
The review and classification of credit facilities starts at Credit Department of the Branch
with the Branch Manager and finally with Credit Division- Head Office.

3.11 Lending Risk Analysis

Lending Risk analysis (LRA) is simply a loan processing manual and has done when the
amount of loan is above 1 core. By going through this manual the lending bankers can
assess the creditworthiness of their prospective borrowers.
Therefore, LRA is such an instrument which is definitely and directly related with lending
information to analyze the borrower’s financial, marketing, managerial and
organisational aspects subjectively and objectively. It also facilitates the analyst to know
the security risk of the credit.
Lending risk Analysis involves assessing the likelihood of repayment of loans to the bank
as per agreement on the basis of analysis of certain risks. To analyze these risks bankers
will need to fill-up a 16-page LRA form. The form leads to scoring various risk factors
involved in lending. LRA has divided the various risks into two groups namely, Business
Risk and Security Risk.

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1) Business Risk
Business Risk is concerned with whatever the borrowing company would fail to generate
sufficient cash out of business to repay the loan Business Risk, the main component of
lending risk, consists of the Industry Risk and the company Risk
a) Industry Risk
Due to some external reasons a business may fail and the risk which arrives from
external reasons of the business is called Industry Risk. It has two components:
-Supplies Risk
When the business fails due to disruption in the supply of inputs, the consequent risk
which would arise is known as Supply Risk
- Sales Risk
When the business fails for disruption in sales, this type of risk would generate.
b) Company Risk
Company Risk is shown for some internal reasons of the business. It has also two main
components and four sub-components
i) Company position Risk
Each and every company holds a position within an industry. This position is very much
competitive. Due to weakness in the company’s position in its industry, a company may
fail and the risk of failure is called Company Position Risk. It depends on-
a. Performance Risk
If a company fails to perform well enough to repay the loan because of its weakness
under given expected external conditions, the company is said to suffer from performance
risk.
b. Resilience Risk
When a company fails due to lack of its resilience to unexpected external conditions, the
resilience risk is generated.
ii) Management Risk
If the management of a company fails to exploit the company’s position effectively, the
company can fail and this risk of failure is called management Risk. It can be subdivided
further-

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 a. Management Competence Risk:
Management competence risk is the risk that the company fails because the management
is incomplete
b. Management Integrity Risk:
Management integrity risk is the risk that the company fails to repay its loan due to lack
of management integrity
2) Security Risk
Security risk is the risk that the realised value of the security does not cover the exposure
of loan. Exposure means principal plus outstanding interest. Security risk can be divided
into two parts:
a. Security Control Risk:
Security control Risk is the Risk that the bank fails to realise the security because of lack
of bank’s control over the security offered by the borrowers.
b. Security Cover Risk:
Security cover risk is the risk that the realised security value may not cover the full
exposure of loans.

3.12 Methods used for measuring credit on loans

For small loan generally focus on stock, cash flows, accounts payables, accounts
receivables, growth & expansion of business or project which is subject to loan.
NCCBL also focus on whether they are maintaining proper accounts or not.
For large loans previously NCCBL used Lending Risk Analysis (LRA).
But now in many commercial banks Credit Risk Analysis (CRA) is most commonly used
method.

3.13 Credit risk grading (CRG)

 The Credit Risk Grading (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.

3.14 Functions of Credit risk Grading

 Well-managed credit risk grading systems promote bank safety and soundness by
facilitating informed decision-making.
 Grading systems measure credit risk and differentiate individual credits and groups
of credits by the risk they pose.
 This allows bank management and examiners to monitor changes and trends in risk
levels.
 The process also allows bank management to manage risk to optimize returns.

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3.15 Use of credit risk grading
 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 or 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.
Risk grading would also be relevant for surveillance and monitoring, internal MIS
and assessing the aggregate risk profile of a Bank. It is also relevant for portfolio level
analysis.

3.16 Number & Short name of grades used in the CRG

The proposed CRG scale consists of 8 categories with Short names and Numbers &
Frequencies of the credit risk grading are provided as follows:
Review frequencies
GRADING SHORT NAME NUMBER (at least)
Superior SUP 1 Annually
Good GD 2 Annually
Acceptable ACCPT 3 Annually
Marginal/Watch list MG/WL 4 Half yearly
Special Mention SM 5 Quarterly
Sub standard SS 6 Quarterly
Doubtful DF 7 Quarterly
Bad & Loss BL 8 Quarterly
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 company 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

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 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 and 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 guarantee
 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 & early warning signals of emerging business credit
detected.
 The borrower incurs a loss
 Loan 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
prospects 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 or 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.

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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 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.
 This classification reflects that it is not practical or desirable to defer writing off this
basically valueless asset 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.

3.17 How to compute credit risk grading

The following step-wise activities outline the detail process for arriving at credit risk
grading.

Step I : Identify all the Principal Risk Components

Credit risk for counterparty arises from an aggregation of the following:

 Financial Risk
 Business/Industry Risk
 Management Risk
 Security Risk
 Relationship Risk
Each of the above mentioned key risk areas require to be evaluated and aggregated to
arrive at an overall risk grading measure.

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a) Evaluation of Financial Risk:
Risk that counterparties 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 & poor industry growth.

c) Evaluation of Management Risk:

Risk that counterparties may default as a result of poor managerial ability including
experience of the management, its succession plan and team work.
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. This may entail strength of security & collateral, location of collateral and
support.
e) Evaluation of Relationship Risk:
These risk areas cover evaluation of limits utilization, account performance,
conditions/covenants compliance by the borrower and deposit relationship.

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3.18 Table of CRG

Data Collection Check List

Documents / Items required for Credit Risk Grading Required ? Obtained ?

Company accounts for at least 3 years

Bank statements for prior 12 months from previous bank (for
new customer)
Set of accounts for at least two competitors (if published)
Industry average figures (if available)
Financial projection required for :
● Terms loans; forecasts should be for the duration of the term
loan.
● New overdraft should be for 12 months facilities-forecast.
● Working capital estimation for new / renewal/enhancement of
facility.
Financial spread sheet (FSS)
Customer Limit Utilization Form
Current CIB Report of the Obligor
Organization Chart
Bio data for -
● All directors-Other key executives
● Head of operations/Marketing
Copies of all reports on site visits made during the last 12
months.
Valuation of securities / Collateral offered
Memorandum / Articles odd association/Certificate of
Incorporation
Business plan/Project-Feasibility report( required for start up
compamy)
Receivables Aging
Claint's declaration of stock/Inventory and book debts for the last
12 months
Trade License
TIN Certificate

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 Pending Item Checklist
Item Responsibility Due Date Status

Relationship Manager Senior Relationship Manager (SRM)

(RM)

Credit Risk Grading Score Sheet

Reference No: Date:
Borrower
Group Name (If any): Aggregate Score :
Branch:
Industry/Sector:
Date of Financials: Risk Grading :
Completed by:
Approved by:

Number Grading Short Score

1 Superior SUP Fully cash secured, Secured by
Government/International bank
Guarantee
2 Good GD 85+
3 Acceptable ACCPT 75-85
4 Marginal/Watch list 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

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page38

 Criteria Weight Score Actual Score
Parameter
A. Financial Risk 50% Parameter Obtained
1. Leverage: (15%) ● Less than 0.25 x 15
● 0.26 x to 0.35x 14
Debt Equity Ratio (x) – Times ● 0.36 x to 0.50x 13
Total Liabilities to Tangible Net worth ● 0.51 x to 0.75x 12
● 0.76 x to 1.25x 11
All Calculations should be based on ● 1.26 x to 2.00x 10
annual financial statements of the ● 2.01 x to 2.50x 8
Borrower (audited preferred). ● 2.51 x to 2.75x 7
● More than 2.75 x 0
2. Liquidity: (15%) ● Greater than 2.74 x 15
● 2.50 x to 2.74 x 14
Current Ratio (x) – Times ● 2.00 x to 2.49 x 13
Current assets to Current Liabilities ● 1.50 x to 1.99 x 12
● 1.10 x to 1.49 x 11
● 0.90 x to 1.09 x 10
● 0.80 x to 0.89 x 8
● 0.70 x to 0.79 x 7
● Less than 0.70 x 0
3. Profitability: (15%) ● Greater than 25% 15
Operating Profit Margin (%) ● 20% to 24% 14
● 15% to 19% 13
Operating Profit ● 10% to 14% 12

X 100 ● 7% to 9% 10
Sales ● 4% to 6% 9
● 1% to 3% 7
● Less than 1% 0
4. Coverage: (5%) ● More than 2.00 x 5
● More than 1.51 x Less than 2.00
Interest Coverage Ratio (x) - Times x 4
● More than 1.25 x Less than 1.50
x 3
● More than 1.24 x Less than 1.00
Earnings Before Interest & Tax (EBIT) x 2
Interest on Debt ● Less than 1.00 x 0
Total Financial Risk 50

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page39

 Criteria Weight Score Actual Score
Parameter
B. Business / Industry Risk 18% Parameter Obtained
1. Size of Business (Sales in BDT Crore) ● > 60.00 5
● 30.00 - 59.99 4
The size of the borrower's business ● 10.00 - 29.99 3
measured by the most recent year's ● 5.00 - 9.99 2
total sales. Preferably based on audited ● 2.50 - 4.99 1
financial statements ● < 2.50 0
2. Age of Business ● > 10 years 3
● > 5 - 10 years 2
The number of years the borrower has ● 2 - 5 years 1
been engaged in the primary line of ● < 2 years 0
business.
3. Business Outlook ● Favorable 3
● Stable 2
A critical assessment of the medium ● Slightly uncertain 1
term prospects of the borrower, taking ● Cause for concern 0
into account the Industry, market share
and economic factors.
4. Industry Growth ● Strong (10%+) 3
● Good (> 5% - 10%) 2
● Moderate ( 1% - 5%) 1
● No Growth ( < 1% ) 0
5. Market competition ● Dominant Player 2
● Moderately Competitive 1
● Highly Competitive 0
6. Entry / Exit Barriers ● Difficult 2
● Average 1
● Easy 0
Total Score - Business / Industry Risk 18

Criteria Weight Score Actual Score

Parameter
C. Management Risk 12% Parameter Obtained

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 1. Experience ● More than 10 years in the related 5
(Management and Management Team) line of business.
● 5 -10 years in the related line of 3
The Quality of Management based on Business
the aggregate number of years that ● 1 -5 years in the related line of 2
the Senior Management Team has Business
been in the Industry. ● No experience 0
2. Second Line / Succession ● 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
● Moderate 2
● Poor 1
● Regular Conflict 0
Total Score - Management Risk 12

Criteria Weight Score Actual Score

Parameter
D. Security Risk 10% Parameter Obtained
1. Security Coverage (Primary) ● Fully pledged facilities/substantially 4
cash covered /Reg. Mortg, for HBL
● Registered Hypothecation 3
(1st charge/1st Pari passu charge)
● 2nd charge or inferior charge 2
● Simple Hypothecation/negative lien 1
on assets.
● No security. 0
2. Collateral Coverage (Primary) ● Registered Mortgage on Municipal 4
( Property Location) Corporation/Prime are property.
● Registered Mortgage on 3
Powrashava/Semi-Urban area
properly
● Equitable Mortgage or No property 2
but plant and machinery as collateral
● Negative Lien on Collateral 1
● No Collateral 0
3. Support ( Guarantee) ● Personal Guarantee with high net 2
worth or strong corporate guarantee
● Personal Guarantees or Corporate 1
Guarantee with average financial
Strength
● No support/Guarantee 0
Total Score - Security Risk 10

Criteria Weight Score Actual Score

Parameter
E. Relationship Risk 10% Parameter Obtained

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 1. Account conduct ● More than 3 years accounts 5
with faultless record
● Less than 3 years accounts 4
with faultless record
● Accounts having satisfactory 2
dealings with some late payments
● Frequent past dues and irregular 0
dealings in accounts
2. Utilization of Limit ● More than 60% 2
(Actual/Projection) ● 40% - 60% 1
● Less than 40% 0
3. Compliance of ● Full compliance 2
Covenants / Conditions ● Some non-compliance 1
● No compliance 0
4. Personal Deposits ● Personal accounts of the key 1
Business Sponsors/Principals are
The extent to which the bank maintained in the bank, with
Maintains a personal banking Significant deposits.
relationship with the key business ● No depository relationship 0
Sponsors / principals.
Total Score - Relationship Risk 10
Grand Total Score - All Risk 100

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3.19 Recovery
Loans and advance in whatever form granted by the bank to its clients are repayable
either on demand or at the expiry of the fixed period or as per repayment schedule
agreed upon while granting the facilities. If a loan is repayable on installment is not
repaid on due date. Overdraft and case credit are legally repayable on installment is not
repaid on due date. Overdraft and case credit is legally repayable in installments and
default causes in the payment of any installment; entire loan usually becomes
immediately recoverable of at the option of the bank.
Banks generally realize their advances under the following cases:
i. If death occurs either of the borrower or of the guarantor
ii. If the borrower is reported to have committed as act of insolvency or has filed an
application for his insolvency
iii. Dissolution the partnership
iv. Liquidation the borrowing company
v. Failure to renew documents sufficiently before the expire of the limitation
vi. If there is any serious deterioration in the security charged to the bank and want of
satisfactory turnover in the account
vii. There has been a deterioration in the financial position of the party
viii. If the borrower fails to maintain in the stipulated margin and does not restore the
shortfall inspire of repeated reminders
ix. Change in the bank’s policy of lending
x. The policy of selective credit control by Bangladesh Bank
xi. Detection of any other undesirable feature in the account
xii. There may also be other reasons for withdrawing the facility, i.e. the law and order
situation at a certain place is such that it may be risky to continue the advance.

3.20 Classification Procedure

After the date of expiry, if the borrowers do not adjust their loan, RBL at first gives a
notice to them. The period of giving notice depends on the nature of the loan. For
continuous loan, RBL gives notice for three months. For five-year term loan, RBL gives
notice for six months. And for more than five-year term loan, RBL gives notice for more
than 12 months.
After giving notice, if the borrower does not repay the loan, the loan will be considered as
classified. Pursuant to Bangladesh Bank’s Banking Regulation and policy Department's
Circular No. 16 (1998), loans and advances are classified both on aging and functional
criteria as follows:

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 ASSESMENT OF LOAN & ADVANCE

CLASSIFIED UNCLASSIFIED
(IRREGULAR) (REGULAR)

SUBSTANDARD

DOUBTFUL

BAD LOAN

3.20.1 Unclassified Loan: The repayment of advance which have regularity are called
unclassified advance .This is a clean loan that is these is no overdue installment or not the
expire due date.
4.2.2 Classified: The repayments of advance which have no regularity are classified are
classified. That means which are irregular in nature, overdue installment of payment, and
expire the due date. There are three standards of classification:
 Sub Standard
 Doubtful
 Bad Loan
Pursuant to Bangladesh Bank’s Banking Regulation and policy department’s circular no
16(1998), loan and advances are classified both on aging and functional criteria as
follows:
For Term loan up to 5 years
(CCS, HBL-commercial, etc)
Overdue period CL Status
(in months)
3 to less than 6 SM
6 to less than 12 SS
12 to less than 18 DF
18 to above BL
For Term loan of more than 5 years

(Project loan, Industrial term loan)

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 Overdue period CL Status
For Continues loan
(in months)
(CC, SOD) 3 to less than 12 SM
12 to less than 18 SS
18 to less than 24 DF

Overdue period CL Status

(in months)
3 to less than 6 SM
6 to less than 9 SS
9 to less than 12 DF
12 to above BL

3.21 Credit Recovery Procedure of RBL

The RBL follows below procedure to recover credit.
 At first the banker of RBL visit the borrower’s place of business and find out the
causes of non-payment of the bank’s dues. The banker may also request some
influential customers of the area to exert pressure on the borrower to clear bank’s
dues. If there is a guarantor, he is also called upon to adjust the account or have it
adjusted by the principal.
 If the procedure of exerting moral pressure fails the bank sends three letters to the
borrower to recover credit.
 If the borrower does not response those letters, then the RBL’s controlling officers
arrange meeting with the borrower to recover credit.
 In meeting, there is no solution to recover credit then the bank sends notice to the
borrower to recover credit.
 After receiving notice, the borrower prayer for waiver or rescheduling etc.
 For giving waiver or rescheduling to the borrower, the bank examines irregularity in
sanctioning and disbursement of the credit.
 Then the controlling officers of RBL take steps against debit balance such as goods
under pledge, stocks in hypothecation, stock exchange securities and life insurance
policies and immovable properties.
Goods under pledge:
In case the goods are under pledge and the pledger makes default in payment of the debt,
the RBL as a pledgee has two alternatives:

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If the securities are not saleable, if they are apprehended to bring little money by
disposal, the bank is to file suit against the borrower and the guarantor for realization of
the dues and keep the securities as collateral ones.
If the securities are sufficient to cover the dues then the goods are to be sold either in
public auction or calling some offers from prospective buyers.
Stock in hypothecation: If the stocks are under hypothecation the banker is likely to face
difficulties if he tries to dispose off the goods. In the deed of hypothecation there is a
clause that the bank can take possession of the goods any time it desires and to sell the
goods directly without the intervention of the court for the purpose of recovering the
dues.
Stock Exchange Securities:
Shares, debentures, Government securities etc. should not be locally sold by the rural
branches. These are to be sold in the recognized stock exchange through registered
brokers with the help of Head Office or Regional Office. Only such quality of the securities
is to be sold as will liquidate the debit balance in the account. Surplus securities are to be
delivered to the borrower or guarantor.
Life Insurance Policies:
If the debtor fails to redeem his indebtedness and the RBL holds as security a life policy
or life policies which have been assigned by the debtor, the RBL will have to consider the
action it should take in the circumstances; whether to pay the future premiums to the
debit of the borrower's account and maintain the policies in force until they mature or to
surrender them for settlement of claim.
Immovable Properties:
In case of mortgage of property, it may be a legal or an equitable mortgage. A legal
mortgage gives the mortgage gives the power to sell the assets mortgaged but in case of
equitable mortgage, a banker of RBL has no right to sell the property without the
permission of a competent court
 It is possible that the security, if any may not be sufficient to liquidate the entire
advance. In certain cases no security may be available. In such cases, attempts should
be made to secure the advance. If that is not possible and the party does not repay the
amount then the advance has become unsecured.
 If the advance is not is not fully secured and where there is a shortfall to adjust the
advance after disposal of securities, the decision has to be taken by the RBL whether
to keep the borrower in business or file a suit against him for recovery of bank's dues.
 After filing suit, the lawyer is prepared the plaint as RBL. The plaint consists of
following issues-

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1. That the plaint covers all parties the principal or his heir, successors or assigns and the
guarantors and if the borrower is a firm, all parties. The minor can be sued through his
guardian.
2. That the names and addresses of all borrowers and guarantors, their constitution,
business, etc. are given correctly and described properly.

3.That the details of borrowings, specifying the terms on which funds are lend to the
borrowers and irregularities which forced the RBL to take legal recourse are to be made.
4. That the securities are described correctly and exhaustively.
5. That the jurisdiction is a competent and proper jurisdiction. In the case of mortgage
securities, the suit has to be filed in the court in whose jurisdiction the property is
actually situated.
6. That the particulars of date of execution of documents by the parties,
acknowledgement or balance confirmation letters, rate of interest etc. are correctly listed.
7. That the statement of accounts bears a certificate in the proper from as required under
Banker's Book Evidence Act, 1891.
 The last credit recovery procedure of RBL is execution of decree.

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3.22 Flow Chart of Credit Recovery Procedure of RBL

Exerting Moral Pressure

Send Letters to the Borrower

Call Meeting

Send Notice

Prayer for Waiver,Recheduling

Procedure of Credit Recovery

Examine Irregularity in Sectioning and

Disbursement of the Credit

Confirmation Debit Balance

Unsecured Advances

Filling a Suit

Drafting of Plaint

Execution of Decree

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3.23 Performance of the credit management of RBL
Four key indicators were adopted in evaluating the credit performance of RBL which are–
1. The trend in the label of bank credit.
2. The ratio of bank credit to deposit.
3. The ratio of non performing credit to total credit.
4. Profit and asset utilization efficiencies as indicated by the return & equity and
return & the trend in this indicators are presented in table
TK in Crore (Except %)
Measures 2009 2010 2011 2012 2013
Total Credit 5,234.42 6,604.90 7,652.49 9,064.16 10,742.64
Total Deposit 7,380.34 9,112.38 10,723.40 13,659.88 17,795.00
Credit deposit ratio 70.92% 72.48% 71.36% 66.36% 60.37%
Non-performing loan to
1.00% 1.25% 1.90% 2.10% 2.50%
credit ratio
Return on asset 0.24% 0.48% 0.75% 1.00% 1.27%
Return on equity 3.12% 4.24% 7.14% 9.28% 11.50%

Table - 1 Performance indicators’ of RBL

Analysis: Total bank credit showed a positive trend. It improved from 5234.42 crore taka
in 2009 to 10,742.64 crore taka in 2013 the ratio of credit to deposit was 70.92% ,
72.48%, 71.36%, 66.36% & 60.37% respectively the year 2009,2010,2011,2012 & 2013
In the chart we see that, the ratio of credit to deposit has become low the year 2011 to
2013. Non-performing credits trend become high year by year. The table also indicates
the profit efficiency and asset utilization have been impressive.

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3.24 Disburse Performance of Loans & Advances Products
TK in Crore
Agriculture
YEAR Cash Credit SME General Others
Trust Receipt
1,890. 2 65 1,0
2009 75 10.13 0.66 37.15 1, 445.73
2,500. 2 86 1,420
2010 56 40.24 6.34 .53 1,577.23
3,495. 2 1,28 1,570
2011 42 74.52 0.73 .54 1,031.37
2,680. 5 1,62 1,890
2012 38 25.36 4.26 .10 2,344.06
4,800. 8 1,80 1,998
2013 45 30.64 0.34 .02 1,313.19

Source # Annual Report 2013 of Rupali Bank Ltd

Analysis: From the above comparative graph of the Loan & Advances products between
the year of 2012 & 2013, there was a significant growth in cash credit disbursement, it
increased 29.57% to 44.69%. There was also a little growth in SME disbursement from
5.80% to 7.73% than 2012 to 2013. For the remaining other Loans disburse like
Agriculture Trust Receipt, General & Others the growth rate is down trend than 2012 to
2013

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3.25 Growth Performance of Disbursed Loans & Advances Products

TK In Crore Except %
Year 2009 2010 2011 2012 2013
Cash Credit 1,890.75 2,500.56 3,495.43 2,680.38 4,800.35
Growth % - 32.25% 39.79% -23.32% 79.09%

(Figure in percentage shows Growth of Cash Credit)

Analysis: We know that Cash Credit loan customers are usually big clients of a bank. Also
these customers are the businessmen who run their business by receiving credit facility
from the bank. From the graph the maximum growth of cash credit in RBL took place in
2013 whereas minimum growth in 2012. Actually from the ending of 2011 projected to
the beginning of 2012 there are a number of reasons why cash credit disbursements fell
in 2012. Due to the high rise in share market and introduction of high interest MLM, main
stream businessmen have diverted their business to the Share Market and high interest
seeking MLM. Later due to the hazard in Share Market and dismissal of MLM
businessmen incurred a great loss and they couldn’t continue their original business. Also
recovery of Cash Credit in RBL in 2012 was high which resulted the total Cash Credit to
decline. On the other hand, RBL disbursed Cash Credit highest in 2013. Political
Intervention, Bad wills of some managers and high officials and for some other reasons
RBL invested high amount of Cash Credit in 2013. Also RBL selected one big borrower

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instead of smaller borrowers in disbursing Cash Credit. For this reason, when one loan
being classified, large amount of loan being blocked and recovery of such loan stopped.
Also due to augmenting classified loan in 2013, regular recovery of loan was stopped. The
reason why Cash Credit Disbursement of RBL was the highest in 2013.

TK In Crore Except %
Year 2009 2010 2011 2012 2013
SME 210.11 240.24 274.52 525.36 830.64
Growth % - 14.34% 14.27% 91.37% 58.11%

(Figure in percentage shows Growth of SME)

Analysis: SME is an important loan and advances product of RBL. From the graph the
maximum growth of SME in RBL took place in 2012 whereas minimum growth in 2011.In
2011 the growth rate SME was minimum because that year RBL increased mortgage
against SME. And in 2012 the growth of SME was maximum that year RBL decreased
mortgage against SME.

TK In Crore Except %
Year 2009 2010 2011 2012 2013
Agriculture Trust 650.66 866.34 1,280.73 1,624.26 1,800.34

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 Receipt
Growth % - 33.15% 47.83% 26.82% 10.84%

(Figure in percentage shows Growth of Agriculture Trust receipt)

Analysis: Agriculture Trust Receipt is also an important loan and advances product of
RBL. From the graph the maximum growth of ATR in RBL took place in 2011 whereas
minimum growth in 2013. In 2011 the growth rate of ATR was maximum because that
year the recovery of ATR was decreased for this reason classified loan and advances was
increased. And in 2013 the growth rate of ATR was maximum because that year the
recovery of ATR was increased for this reason classified loan and advances was
decreased.

TK In Crore Except %
Year 2009 2010 2011 2012 2013

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 General 1,037.15 1,420.53 1,570.54 1,890.10 1,998.02
Growth % - 36.96% 10.56% 20.35% 5.71%

(Figure in percentage shows Growth of General)

Analysis: General products are one of the most important part of loan and advances of
RBL. From the graph the maximum growth of general products in RBL took place in 2010
whereas minimum growth in 2013. RBL disbursed general products highest in 2010 due
to that year the recovery of general products was too little than other mentioned years.
On the other hand, RBL disbursed general products lowest in 2013 because that year RBL
took some preventive steps for recovering classified loan and advances of general
products.

TK In Crore Except %
Year 2009 2010 2011 2012 2013
Others 1,445.73 1,577.23 1,031.37 2,344.06 1,313.19

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 Growth % - 9.10% -34.61% 127.28% -43.98%

(Figure in percentage shows Growth of Others)

Analysis: Other loans consist of Bank NGO Linkage credit, Loans against Share or
Debenture & Loan against Brickfield or Gold Ornaments etc. From the graph the
maximum growth of other loans in RBL took place in 2012 whereas minimum growth in
2013. Due to decreased mortgage against other loans in 2012 the RBL disbursed in other
loans became higher. On the other hand RBL disbursed Other loans lowest in 2013
because that year the mortgage increased against other loans.

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3.26 Branch Credit Contribution to the total Credit of RBL

Here I present a review of branch credit contribution comparing total credit of RBL from
2009 to 2013.

TK in Crore (Except %)
Measures 2009 2010 2011 2012 2013
Total Credit of RBL 5,234.42 6,604.90 7,652.49 9,064.16 10,742.64
Branch Credit 0.08 0.10 0.15 0.20 0.25
Branch Credit %
Contribution 0.0015% 0.0015% 0.0020% 0.0022% 0.0023%
increas

Source – Annual Report 2013 of RBL

Here the credit of the Chandgaon crop. Branch of RBL was 0.0015%, 0.0015%, 0.0020%,
0.0022% &0.0023% respectively the year 2009 to 2013. In the graph we can see that the
branch credit % contribution has increased year by year. It happens due to fail for
recovering classified loans and advances, lack of mortgage against loans and advances,
political intervention and overall inefficiency of branch manager.

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3.27 Recovery Performance of Loans & Advances products
TK in Crore
Agriculture
Cash
YEAR SME Trust General Others
Credit
Receipt
2009 285.93 35.70 80.37 70.85 58.18
2010 70.95 20.45 60.44 65.34 55.54
2011 150.45 40.34 40.18 39.99 39.82
2012 310.28 68.08 103.32 108.93 88.75
2013 1,228.36 110.33 375.88 398.02 127.57

Source- Annual Report 2013 of RBL

Analysis: From the above comparative graph of the Loan & Advances products, we see
that the year 2009 to 2013 the recovery performance of cash credit is much better than
the other products the total recovery amount of Cash Credit is Taka 2045.97 Crore that
hold the first position. The total recovery amount of Loan General is Taka 673.13 Crore
that holds the second position. The Loan Agriculture Trust Receipt is in third position
which total recovery amount is Taka 660.19 Crore. The Loan Others is in fourth position
which total recovery amount is Taka 369.86 Crore and the total recovery amount of SME
is Taka 274.90 Crore that hold the fifth position.

3.28 Branch Recovery Contribution to the total Recovery Of RBL

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 TK in Crore (Except %)
Measures 2009 2010 2011 2012 2013
Total Recovery of RBL 531.01 272.72 310.78 679.36 2,240.16
Branch recovery 0.0100 0.0080 0.0090 0.0150 0.0200
Branch Recovery %
Contribution 0.0019% 0.0029% 0.0029% 0.0022% 0.0009%

Analysis: Here I present a review of recovery contribution of Chandgaon Crop. Branch to

the total recovery of RBL. Here the recovery of the Chandgaon Crop. Branch of RBL was
0.0019%, 0.0029%, 0.0029%, 0.0220% &0.0009% respectively the year 2009 to 2013.

3.29 Comparison between Disbursement and Loans & Advances Products

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 Total Disbursement Total Recovery Total Classified
YEAR
Loans & Advance Loans & Advance Loans & Advance
2009 5,234.42 531.01 4,703.41
2010 6,604.90 272.72 6,332.18
2011 7,652.49 310.78 7,341.71
2012 9,064.16 679.36 8,384.80
2013 10,742.64 2240.16 8,502.48

Analysis: From the above graph of the Loan & Advances products we see that the
comparison between the disbursement and recovery of Loan & Advances. In the year
2009 total disbursement amount was Taka 5234.42 Crore, recovery amount was Taka
531.01 Crore & Classified amount was Taka 4703.41crore. In the year 2010 the recovery
amount was Taka 272.72 Crore which is less than 2009 where the disbursed amount was
more than 2009 so the Classified amount was also more than 2009. In 2011& 2012 the
total disbursed amount of Taka 7652.49 Crore & Taka 9064.16 Crore respectively where
the recovery amount was Taka 310.78 Crore & Taka 679.36 Crore respectively, It’s seen
that, the recovery percentage of 2012 is more than 2011. But in 2013 the disbursed
amount was Taka 10742.64 & the recovery amount was Taka 2240.16 Crore which
percentage is 21% in comparison with disbursed amount which is the highest recovery
amount among the years mentioned/compared.

4.1 Result & Discussion

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page59

 Findings: Rupali Bank Ltd. is one of the most important state-owned commercial banks
in Bangladesh. It was constituted in 1972 by merging 3 banks after liberation aiming to
participate actively in socio-economic development of the country by performing
commercially viable and socially desirable banking functions. In this paper, the
disbursement, recovery and performance of credit was studied to have an overview of
current scenario of RBL.
I. It shows a positive trend in disbursing credits in last 5 years starting from 2009.
II. It results Credit-Deposit ratios to go down gradually. Cash-Credit played an
important role in health of Rupali Bank Ltd. The Total Cash-Credit of RBL was
1890.75 crore in 2009 whereas it reached to 4800.45 in 2013.
III. Other types of credit like SME, General Credit and Agricultural Credit also showed
a satisfactory disbursement.

On the other hand

I. Branch credit contribution to the total credit of RBL is too poor and not
satisfactory.
II. The recovery performance of RBL is not satisfactory.
III. Cash Credit, General Credit and Agricultural Credit showed a most satisfactory
positive trend whereas SME recovery performance is not satisfactory.
IV. Branch recovery contribution to the total recovery of RBL occupied a little
percentage of total recovery.
V. The most danger of RBL is that total classified loans and advances are getting
higher day by day. The total classified loans and advances was 4703.41 crore in
2009 whereas it reached to 8502.48 crore in 2013. That is classified loans became
double in last 5 years.
VI. One of the reasons for increasing classified loans is poor recovery of loans and
selection of bad borrower.
VII. RBL has taken many initiatives to lower total classified loans of the bank but failed
to succeed.

Finally we can say that, if increasing classified loans cannot be stopped immediately, the
bank will have to incur a great loss in the near future.

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page60

6.2 Recommendations

Recommendations: The above mentioned credit disbursement and recovery procedures

and after concluding results of the credit management system of RBL, we can draw
following suggestions for the betterment of the credit performance of the bank-

i. RBL has to refrain it from disbursing bad loan to the group of industries without
any mortgaged securities.
ii. The total non-performing loans should be decreased by making communications,
pursuing with guarantor and in-cases filing suits against the borrower.
iii. The total recovery system should be developed with sophisticated methods i.e,
creation of database of default and regular borrowers, caring regular borrowers
and make a regular communications with default borrowers etc.
iv. The most secured advances like loan against FDR, DPS, RDPS etc. should be
increased so that bank could maximize its annual profit and thereby strengthening
health of the bank.
v. In case of death of the borrower, bank has to trace the legal representative of the
deceased, communicate with the representative and finally take legal actions
lawfully.
vi. In the event of disbursing loans, bank has to select a number of borrowers in spite
of selecting single borrower.
vii. Credit recovery specialists should be appointed so that classified loans could be
lowered. Also experienced banker could be incorporated in RBL for the better
performance of Credit.
viii. Political Interventions must be removed from disbursing credit. It is one of the
causes for making the credit bad and doubtful.
ix. Appropriate and accurate legal registered mortgage must be accomplished prior to
disbursing credit to the individuals/groups.
x. RBL has to diversify its credit portfolio by size of investment, by sectors, by
economic purpose, by securities and geographical area including industrial,
commercial and agricultural. Also bank has to maintain MOU ( Memorandum of
Understanding) with Bangladesh Bank
xi. Finally Bank has to form expert and strict audit and inspection teams to monitor,
supervise and control credit disbursement and recovery. It could make a bank
healthy and secured.

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page61

Conclusion:

Proper financial system of country can contribute towards the development of the
country’s economy. In our country banks are leading in the financial system & playing
significant as well as imperative role and the development of our country. Certainly RBL is
mobilizing it’s all resources on this same track to achieve maximum possible contribution
to the nation.

Tina Biswas, BBA, Major in Marketing, Islamia Degree College. Page62