CHAPTER ONE: INTRODUCTION

1. INTRODUCTION:
In general sense we mean Bank as a financial institution that deals with money.
There are different types of banks like Central bank, Commercial bank, Saings bank,
Inestment bank, !erchant bank, Co"operatie bank etc. But when we use the term
bank it generally means #commercial bank$ that collects the deposit from surplus unit
of the society and then lends the deposits to the deficit units.
%ow"a day$s banking sector is moderni&ing and e'panding its hand in different
financial eents eery day. (t the same time the banking process is becoming faster,
easier and is becoming wider. In order to surie in the competitie field of the
banking sector all organi&ations are looking for better serice opportunities to proide
their fellow clients. So it has become essential for eery person to hae some idea on
the bank and banking procedure.
Internship program so called work attachment program is essential for eery BB(
student because it helps him or her to ac)uaint with the real life situation. (s bank is
one of the most important financial intermediaries* so I hae selected International
Finance & Investment Cororation !IFIC"# which is one of the most leading banks
in the new banking arena.
$. O%&ECTI'E( OF THE REPORT:
The ob+ectie of the internship program is to familiari&e myself with real market
situation and compare it with bookish concept. The main ob+ectie of this report is to
hae an assessment about ,erall Banking actiities of I-IC Bank .imited. In
addition the study seeks to achiee the following ob+ecties/
To familiari&ed with practical +ob enironment.
To hae an e'posure on the financial institution especially on banking
enironment of Bangladesh.
To present an oeriew of I-IC Bank .imited.
To identify the problems facing by I-IC Bank .imited and suggest
remedial measures.
). (COPE:
This report has been prepared through e'tensie discussion with bank employees and
with the clients. 0rospectus proided by the bank also time of preparing the report, I
had a great opportunity to hae an in depth knowledge of all the banking actiities
practiced by the I-IC Bank .imited.
1

*. +I,ITATION(:
Some restraint at the time of preparing the report are appended below/
The insufficiency of information is main constraint of the study. !oreoer
employees are not interested to proide all information due to security and
other corporate obligation.
The employees and clients are busy to proide me time for interiew.
Ine'perience and time limitation were the constraints of the study.
-. %AC./ROUND OF IFIC %AN. +I,ITED:
2uring 34
th
5anuary 1678 The 9astern Banking Corporation inaugurated its operation
in 9ast 0akistan as a commercial bank. (fter 7 months of its inauguration it has got
the status of Schedule Bank. It was the first Bengali ,wned commercial Bank. (fter
liberation the 9astern Banking Corporation was changed by name as I-IC Bank .td.
2uring 16:3 it was taken under national ownership. (t that time it$s paid up capital
was 76.1; crore and profit figure was <3 lakhs. 2uring September 164; it was
priati&ed under 0riati&ation (ct. (t that time this deposit was 3;1.=; crore and
profit figure was 8.=7 crore. >p to 3==3 its number of branch stands to 164 and it$s
paid up capital was 1== million. 68? of its shareholder is public and rest of share
holds by @oernment. The bank earned eer"highest operating profit during the year
3==3 among all priate banks of Bangladesh Ae'cept Islami Bank B2 .td.B The bank
earned an operating profit of Tk. 1;1.14 crore during the year 3==3.


3

0. OR/ANI1ATION HIERARCH2 OF IFIC %AN. +TD:
,ana3in3 Director
De4t5 ,ana3in3 Director
Assistant ,ana3in3 Director
/eneral ,ana3er
De4t5 /eneral ,ana3er
Assistant /eneral ,an3er
(enior Princial O66icer
Princial O66icer
(enior O66icer /ra7e89
O66icer /ra7e899
;

:. ORI/IN OF THE REPORT:
There e'ists huge deference between theoretical knowledge and practical knowledge.
This report is an outcome of practical study. Since it is mandatory for the BB(
program, -aculty of Business Studies, >niersity of 2eelopment (lternatie, to
make a proper blending of student$s theoretical knowledge with the practical e'posure
which they hae earned in their internship program.
This report is an integral part of eery student course curricula and the gaining of his
practical training. It ensures the practical knowledge on a specific matter, which is
assigned to the students by their respectie teachers.
;. O%&ECTI'E( OF THE (TUD2:
This report on credit management system of I-IC Bank .td. encompasses the
following ma+or ob+ecties/
i. To grasp the theoretical aspects of credit management.
ii. To describe the term Credit by the I-IC Bank .td.
iii. To identify arious credit scheme of I-IC Bank .td.
i. To introduce the credit structure of I-IC Bank .td.
. To identify beneficiaries of loans.
i. To show the disbursement procedure.
ii. To highlight the recoery the loan.
iii. To highlight the problems of recoery.
i'. To identify the oerall performance regarding granting loan.
<. ,ETHODO+O/2:
In order to conduct such a study the repost prepare must follows some specific
methods. This report is based on an empirical method, which is stated hereafter.
1=. OR/ANI1ATION CO'ERED:
This study mainly coers a particular organi&ation, the I-IC Bank .td. But the
releant data are collected from the head office of the I-IC Bank .td. training
institute and its -ederal Branch.
<

11. (OURCE( OF DATA:
(ll the releant data regarding this study are collected from two sources/
a" PRI,AR2 (OURCE(:
Interiewing with the bank officials, specially the principal officer of loan
and adance department of I-IC Bank .td -ederation Branch.
>" (ECONDAR2 (OURCE(:
(nnual report of I-IC Bank .td.
0ublished Booklet of I-IC Bank .td.
0ublished 5ournals of -aculty of Business Studies, >niersity of 2haka.
5ournals of BIB!.
Carious published documents.
8

CHAPTER T?O: /ENERA+ %AN.IN/
1. /ENERA+ %AN.IN/:
Internship is the means of haing some practical e'perience from an organi&ation
after getting the bachelor or master degree to do +ob in any organi&ation. I feel proud
to do my internship in this bank because its position is second among all the priate
banks in case of earning profit. (s I am an intern the following responsibilities hae
been carried out during my three A;B months internship period/
$. OPENIN/ OF ACCOUNT:
Dhen a person want to open an account in I-IC Bank .imited, -ederation Branch,
needs to communicate with responsible officer. -or opening an account an accountee
must fill up a bank account opening form and needs to present the following things/
a. Trade license. A-or businessmanB
b. Citi&enship certificate.
c. Two copies passport si&e photographs.
Ot@er ReA4irements:
a. Eeference of an account holder who has an account in this Branch.
b. !inimum deposit "incases of current accounts Tk. 1,=== and for saing
account Tk. 8, ==.
). ,AI+ TRAN(FER !,T":
!ail transfer means money transfer from one branch to another branch of the same
bank. It may occur between the two different banks. !T issues and receies is a
regular task of this branch. In case of !T issue a branch charges commission. This
commission depends on amount, which will be transferred.
-rom !T issue this branch earned about Tk. 3=,=== per month.
7

Process o6 ,T:
Dhen any body want to transfer money from this branch to another branch of I-IC
Bank .imited or other bank at first the client needs to communicate with responsible
principal officer !d. Famal >ddin and then heGshe collects a printed !T form. (fter
filling the form heGshe needs to deposit cash with commission to the cash counter and
takes a receipt. In case of !T four A<B copies of ouchers are prepared. ,riginal and
duplicate copy is send to the responding branch. Triplicate copy is send to the Head
,ffice with daily schedule. This branch preseres the )uart"duplicate copy.
*. TE+EPHONE TRAN(FER !TT":
Telephone Transfer ATTB means transfer of money from one branch to another branch
of the same bank through telephone message. Telephone transfer is )uicker process
than mail transfer. In case of TT issue this branch charges commission. This
commission depends on amount, which will be transferred. -rom telephone transfer
per moth income of -ederation Branch is about Tk. 38,===.
Process o6 TT:
Dhen anybody wants to transfer money through telephone message from this branch
to another branch of the same bank heGshe needs to communicate with responsible
officer. (t first the client collects a printed TT form and after filling the form heGshe
needs to communicate with Second ,fficer and then deposits cash with commission
to the cash counter and finally takes a receipt. In case of TT issues, this bank prepares
three A;B copies of ouchers. ,riginal copy is sending to the responding Branch and
the duplicate copy is sending to the Head ,ffice with schedule. This branch preseres
the triplicate copy.
-. DE,AND DEPO(ITE !DD":
2emand 2raft means money transfer from one branch to another branch of the same
bank. It may occur between the two different banks. 22 issues and receies is a
regular task of this branch. In case of 22 issue a branch charges commission. This
commission depends on amount, which will be transferred. -rom 22 issue this
branch earned about Tk. 3=,=== per month.

:

Process o6 DD:
Dhen any body want to transfer money from this branch to another branch of I-IC
Bank .imited or other bank at first the client needs to communicate with responsible
officer and then heGshe collects a printed 22 form. (fter filling this form heGshe
needs to deposit cash with commission to the cash counter and takes a receipt. In case
of 22 four A<B copies of ouchers are prepared. ,riginal and duplicate copy is send to
the responding branch. Triplicate copy is send to the Head ,ffice with daily schedule.
This branch preseres the )uart"duplicate copy.
0. PREPARATION OF (CHEDU+E:
I-IC Bank .imited, 2hanmondi Branch, needs to prepare daily schedule. 2aily
schedule is prepared for the purpose of measuring performance of this branch. This
schedule is prepared on the basis of ouchers Adebit I credit ouchersB. -or preparing
a daily performance report or schedule bank has two separate colored printed forms.
:. C+EARIN/ HOU(E:
9ery working day I-IC Bank .imited, -ederation Branch, receies about ;8"7=
che)ues that made on another bank. Dhen I-IC Bank .imited, -ederation Branch,
receies this type of che)ues then it sends these che)ues to the Clearinghouse of
Bangladesh Bank through the Head ,ffice. The Clearinghouse is formed with the
representatie of eery scheduled bank. I-IC Bank .imited representatie gies the
che)ue to the representatie of respected branch on which che)ue is made. (fter one
or two days the bank on which che)ue is made sends a message about the alidity of
the che)ue that means it proides information about account and deposited money on
this account.
;. CU(TO,ER HAND+IN/:
Receives c4stomer#s @one:
2ifferent type$s phone calls were receied from customers in different time
about I-IC Bank .imited serices.

4

Acco4nt oenin3 an7 closin3:
The customers who came to booth to open an account, necessary support serice were
proided them to fill up the opening form, account number and help them to do other
formalities. (lso help them to close the account.
Clearin3:
Sometimes a few of customers don$t understand how does he fill up the che)uebook,
this situation I try to help them as soon as possible.
6

CHAPTER THREE: +ITERATURE RE'IE?
1. +OAN PO+IC2:
The Board of 2irectors of a bank has the ultimate responsibility for all of the loans
made by their bank. Because the board delegates to others the task of making loans, it
uses a written loan policy to establish general guidelines and principles for the bank$s
lending actiities. It is important to understand that the policies are guidelines and
they are not infle'ible rules cared in granite.
Dritten policies ary widely from bank to bank. The policies of a small bank that
lends primarily to farmers are going to differ from that of large bank speciali&ing in
international lending. %eertheless, some of the items that are resent in many written
loan polices are presented here.
$. /ENERA+ PO+IC2:
The general policy outlines the bank$s lending ob+ecties in terms of profitability and
risk. -or e'ample, the policy may state that the bank is in the business of making
sound and profitable loans. (n important part of this goal is that all loans should hae
a plan of li)uidation at the time they are made. The general policy section may also
include statements concerning the organi&ational structure for superising lending
actiity.
RisB:
By definition, lending funds inoles some degree of risk, and we know that risk is
related to returns. The higher the risks, the higher the e'pected returns. The degree of
risk that a bank is willing to face could be e'pressed in the following way/
The bank is not an inestor and should limit its risk to that which is commensurate
with the return usually aailable to it as a lender. The yield on a customer$s total
relationship should meet the bank$s earning ob+ecties after allowing for the cost of
funds, risk factors, and the cost of administration.
+oan (4ervision:
The Board of 2irectors has policies regarding the lending authority of indiidual
loans officers and the approal process for particular types of loans of arious si&es.
Smaller banks hae fewer layers of management and a simpler approal process.
1=

/eo3ra@ic +imits:
( bank$s trade area depends on its si&e. Small banks generally hae all local trade
area* medium"si&ed banks may consider themseles regional banks* and large banks
may be national or international in scope. Thus, one bank$s policy may state that,
sound local loans are one of the most satisfactory and profitable means of employing
the bank$s funds. Therefore, it is the intent of the Board that with few e'ceptions the
bank$s loans are limited to the metropolitan area we sere. In contrast, another
bank$s policy is to concentrate our lending efforts in the 0acific Basin.
). CO++ATERA+:
Collateral an7 RisB:
Sound banking practices re)uire that certain types of loans be backed by collateral.
Collateral refers to an asset pledged against the performance of an obligation. If a
borrower defaults on a loan the bank takes the collateral and sells it. Collateral
reduces the bank$s risk when it makes a loan. Howeer, collateral does not reduce the
risk of the loan parse. The risk of the loan is determined by the borrower$s ability to
repay it.
Dhile collateral reduces the bank$s risk, it may increase cost. The higher costs are due
to the need for documentation and the costs of monitoring the collateral. %eertheless,
without collateral some borrowers could not obtain loans. Therefore, collateral
benefits both borrowers and lender in certain type of loans. In other types of loans
collateral is not used.
C@aracteristics o6 3oo7 Collateral:
(lmost anything that is lawful may be used as collateral. %eertheless, some things
are better than others. The fie factors listed ne't determine the suitability of items for
use as collateral. The suitability depends in arying degrees on standardi&ation,
durability, identification, marketability, and stability of alue.
1. (tan7ar7iCation:
The standardi&ation leaes no ambiguity between the borrower and the lender as
to the nature of the asset that is being sued as collateral.
$. D4ra>ilit5:
11

2urability refers to the ability of the assets to withstand or it can refer to its useful
life. 2urable goods make better collateral than non"durables. Stated otherwise,
crushed rocks make better collateral then fresh flowers.
). I7enti6ication:
Certain types of assets are readily identifiable because they hae definite
characteristics or serial numbers that cannot be remoed. Two e'amples are a
large office building and an automobile that can be identified by make, model, and
serial number.
*. ,arBeta>ilit5:
In order for collateral to be of alue to the bank, the collateral must be marketable.
That is, you must be able to sell it. Speciali&ed e)uipment that has limited use is
not as good as collaterals are dump trucks, which hae multiple uses.
-. (ta>ilit5 o6 'al4e:
Bankers prefer collateral whose market alues are not likely to decline
dramatically during the period of the loan. Common stocks, for e'ample, are not
as desirable as real estate for collateral because stock prices are more ariable than
real estate prices.
T5es o6 Collateral:
The most common types of collateral used in commercial lending are e'amined here/
1. Acco4nts Receiva>le:
(ccounts receiable can be used as collateral in three ways. They are pledging
factoring, and banker$s acceptances.
Ple73in3:
( borrower can pledge accounts receiable with his or her bank. In this case the
borrower retains ownership of the receiables* and there is usually no notification
made to the buyer of the goods for which the receiables hae been pledged.
Before accepting the receiables, the bankers ealuate the credit rating of the firms
owing the receiables. (ccounts receiable from firm with weak credit ratings or
those that are oerdue may not be acceptable as collateral.
The percentage of face alue of the accounts receiable that the banker is wiling to
adance depends on the si&e, number, and )uality of the receiables. !ost bankers
13

prefer to adance funds from receiables from a few well"established firms with good
credit ratings.
Factorin3:
-actoring is the sale of accounts receiable to a factor, which is usually a bank or
finance company. Dhen the receiables are sold, the buyer of the goods is usually
notified to make repayments to the factor like pledging, factors prefer receiables
from well"established firms.
%anBers Accetance:
( banker$s acceptance usually arises from foreign trade. The means of payment is a
time draft, which is similar to a predated che)ue.
$. Inventor5:
Inentory is widely used as collateral against commercial loans. The most common
ways in which inentory is used as collateral are e'plained ne't.
Floatin3 +ien:
Eaw material through the finished goods. The floating lien has two adantages from
the ( floating lien or continuous lien is used to coer a firm$s entire inentory the
borrower$s point of iew. It enables the entire inentory to be pledged. The borrower
can self"finished inentory in the ordinary course of business since the lien does not
follow each item. The ma+or disadantage is that banks may only want to lend a small
percentage of the alue of such inentory because of its undesirable characteristics.
Tr4st Receits:
Trust receipts, or floor planning as it is commonly called, are used to finance
automobiles, trucks, airplanes, and consumer durable goods such as teleision, the
title for the inentory is held by the lender and the borrower assumes the role of
trustee for the goods.
C@attel ,ort3a3e:
( chattel mortgage, or security agreement as it is sometimes called, gies the lender a
lien on tangible personal property.
1;

?are@o4se Receits:
Banks hae the greatest control and security when inentory that is used as collateral
is held in a bonded public warehouse, which is commonly called a terminal
warehouse. >nder this arrangement, the inentory is stored in a public warehouse and
the receipt is held by the lender. Inentory can only be releases when proper receipts
are presented at the warehouse. The receipts may be either negotiable or
nonnegotiable.
Or7er %ills o6 +an7in3:
-inally, there are some ways in which inentories are used that are uni)ue to
particular industries. Common carries, for e'ample, use order bills of lading, which
are a special kind of receipt, as collateral on commodities that are in transit.
+ivestocB an7 Cros:
.iestock is widely used as collateral, and credit is e'tended on it through all stages
of the production process. Credit is also e'tended for planting crops. Such loans are
normally payable when the crops are harested.
). ,arBeta>le (ec4rities:
!arketable securities, including corporate stocks and bonds, certificates of deposit
AC2sB, Treasury securities, and others, may be used as collateral for business loans.
The amount of credit e'tended on such securities aries widely one problem with
securities as collateral is that the market alue of publicly held stocks an bonds can
ary widely from day to day. Te alue of publicly traded securities is readily aailable
in the press.
*. Nat4ral Reso4rces:
%atural resources, such as oil and gas reseres are used as collateral. The alue of the
natural resources depends on estimates by )ualified engineering firms. The bank
should order the estimates, not by the borrower.
-. Real Proert5 an7 EA4iment:
Eeal property refers to real estate, which includes houses,
,ffices, buildings, shopping centers, factories, and so on. Such property is widely
used as collateral. In addition, e)uipment of arious sorts may be used.
1<

0. /4arantees:
Bankers can improe their security by haing a third party guarantee the payments.
The third party may be an indiidual, insurance company.
18

CHAPTER FOUR: PROCE(( OF /RANTIN/ CREDIT
1. ?A2( FOR %AN.( TO ,A.E +OAN(:
Banks intentionally make loans in si' ways. ,erdrafts, which are unintentional loans
to customers who oerdraw their transaction accounts, are not considered here. There
is no significance to the order in which the methods are presented.
1. %anBs (olicit +oans:
-irst, bank actiely solicits loans in local and distant markets. .oan officers isit
prospectie customers offering loans and other serices proided by their respectie
banks. This type of sales effort is typical of banks seeking new customers.
$. %45in3 +oans:
Secondly, bank buy parts of loans, called participations from other banks, suppose
that a large bank is making a J 1== million loan to an airline, but the originating bank
does not want to keep such a large loan in its loan portfolio. It may sell parts of that
loan to other banks. The sale of participations downstream to smaller banks allow
smaller bank to participate in loans that they could not originate. In addition, it is one
way for a bank with slack demand for loans to increase its loan portfolio. It also
allows all of the banks inoled to diersify their loan portfolios. 0articipations can
originate from small banks too. Suppose that a small bank wants to make a loan that
e'ceeds its lending limits. It can make the loan and sell participations upstream to
larger banks.
.
). Commitments:
Third, banks make loans under commitments. (s noted in the preious chapter,
commitments are agreements between banks and borrowers to make a loan under
certain conditions. -or purposes of this discussion, commitments include both letters
of credit and standby letters of credit.
*. Re6inancin3:
-ourth, banks refinance loans. Suppose that interest rates hae declined and that
borrowers with high fi'ed rate loans want to take adantage of the lower rates. The
17

can make a new loan at the lower ate and pay off the higher ate loan. The refinancing
is at the borrower$s option, and only occurs when it is to their adantage.
-. +oan %roBers:
-ifth, loan brokers sell loans to banks and other lenders. .oan brokers are indiiduals
or firms who act as agents or brokers between the borrower and the lender for
e'ample, a loan broker may contract with a real estate deeloper to find financing for
a particular pro+ect. The broker will seek lenders and arrange for the loan. ,nce the
loan is made and the fees are paid, the broker is out of the picture.
0. C4stomers ReA4est +oans:
The final method of originating a loan is the most common. Someone asks for a
commercial loan. >nfortunately, many potential borrowers are denied loans or do not
get what they need because they do not know what information the bank needs in
order to grant to loan re)uest. Some borrowers, for e'ample, do not know what type
of loan will meet their financial needs or what type of collateral is suitable for their
loans. @ood loan officers work with prospectie borrowers who do not know the
procedures by e'plaining to them what information they must proide to the bank.
$. RO+E OF INFOR,ATION FOR /RANTIN/ +OAN:
Information plays a crucial role throughout the lending process. Initially, there is
asymmetric information one party has substantially more information than the other.
The prospectie borrower knows more about his or her own financial condition and
prospects for the future than the bank knows. It may be in the borrower$s best interest
to reeal only the minimum amount of information necessary to get a loan. -or
e'ample, the borrower might not want to reeal that the book alue of certain assets is
oerstated or that pro+ected sales are inflated. In contrast, the bank wants to obtain as
much releant information as possible in order to A1B ealuate the loan re)uest and A3B
reduce the risk of loss if the loan is made.
Banks, wanting to minimi&e the risk of loss, must monitor information about the
borrower$s financial behaior throughout the term of the loan. If the information
suggests that a borrower is haing financial difficulties and may not be able to repay
1:

the loan, the bank must react )uickly to deal with the problem. 9arly detection of
potential problems may allow the bank to help the borrower resole the problem
before the loan defaults and it becomes a loss. Feep in mind the crucial role of
information as you read no only about commercial loans, but all loans.
). +OAN PROCE((:
The type of information that banks prefers to receie from customers re)uesting
commercials loan is illustrated by the following e'ample. !ost loan re)uests are not
as well organi&ed or as complete as the one presented here. It is a model loan
re)uest that proides the information needed by the bank in order to make a lending
decision.
1. +oan ReA4est:
The bank receied a letter from borrower, which is called as application for loan. The
letter contents a brief history of the firm and other pertinent information.
$. %4siness Plan:
( business plan seres tow purposes. -irst, it is a document used to raise money. It
describes a firm$s past and current operations. It also e'plains hoe the funds that are
being raised will be used to further the firm$s goals, the reward the firm$s inestors,
and to repay the loans. Second, a business plan is used internally to proide operating
guidelines to managers so they know what is e'pected of them. Some of key elements
of business plan follow/
The goals and ob+ecties of the business.
( description of the business including its history and comments on products,
serices, and markets. Included here is an analysis of the firm$s strengths,
weaknesses, opportunities, and threats.
Strategies that the firm will use to compete.
(n operating plans to carry out the goals and strategies.
( process to monitor the progress of the plan and to reise it if the need arises.
14

). Financial Data:
Borrower need to send the bank its balance sheet and income statements for the -ie
Kears of its e'istence. Some firms proide banks with pro forma financial statement
and cash budgets, which are pro+ections of inflows and outflows of cash. This is
especially useful to banks because loans are repaid out of cash. The cash aailable to
repay loans each month is not same as the net income. The usefulness of cash budgets
and pro forma statements depends on the accuracy of the pro+ections and the
assumptions that are made while constructing them. If the pro+ections and
assumptions are correct, the statement is a useful tool for both the firm and the bank.
,therwise, it usefulness depends on the degree to which it errs. The bank$s credit
analysis should make their own pro+ections and do a sensitiity analysis in order to
compare the results. ( sensitiity analysis allows the bank to change critical ariables,
such as sales, and determine the effect of those changes on earnings, cash flows, and
the ability to repay loans.
*. Initial IntervieD:
The initial interiew may be the only time the borrower and banker meet face to face.
Therefore, the bank must use this meeting to obtain additional information from the
customer necessary to make a loan decision. -or e'ample, the banker may want to
clarify some points in the customer$s business plan or pro forma statements.
Dhen a borrower$s business plan and financial statements are not aailable, the
banker will want to know/
Dhat is the amount of the loanL
Dhen the funds are needsL
How are the funds going to be usedL
Dhen is the loan going to be repaidL
How is the loan going to be repaidL
Dhat collateral will be pledgedL
(dditional information will be re)uired about the organi&ation of the business Asole
proprietorship, partnership or corporationB, its trade area other banking relationships,
and more.
16

*. E'A+UATIN/ A +OAN REEUE(T:
The bank must ealuate the loan re)uest and determine if a loan will be granted. The
ealuation inoles the 7C$s of credit as follows/
Character Apersonal characteristics of the borrower, honesty and attitudes
about willingness and commitment to pay debtsB.
Capacity Athe success of the businessB.
Capital Afinancial conditionB.
Collateral Apledged assetsB.
Conditions Aeconomic conditionsB.
Compliance Alaws and regulationsB.


3=

CHAPTER FI'E: T2PE( OF CREDIT
1. CO,,ERCIA+ AND INDU(TRIA+ +OAN:
Commercial and industrial loans ACII loansB are loans made to business concerns to
finance their day"to"day actiities Ae.g. inentories, receiablesB, to finance their
longer"term needs Ae.g. plant and e)uipmentsB and for other business purposes. The
maturity of these loans ranges from one day Acalled oernight loansB to 1= years or
longer.
2ifferent types of CII loans are used to finance different types of assts. The principal
types of CII .oans presented here/
a. +ine o6 Cre7it:
( line of credit is an agreement between a customer and the bank that the bank will
entertain re)uests from that customer for a loan up to a predetermined amount.
The line of credit is the ma'imum amount that can be borrowed under the terms of the
loan. They are fre)uently made for periods of one year or less, and are used to finance
seasonal increases in inentory, an accounts receiable. Then the inentory is sold,
receiables are collected, and the funds are used to reduce the loan. -re)uently,
lenders re)uire inentory or receiables as collateral. The loans are usually payable on
demand by the bank or within 6= days.
Sometimes short"term loans are renewed or rolled oer so often that both the firms
and the banks iew them as a form of long term financing. Dhen that occurs, both
parties should consider long"term financing.
>. Revolvin3 +oan:
Eeoling loans are similar to a line of credit because these two are used to finance
borrower$s temporary and seasonal needs. ,ne difference between a reoling loan
and line of credit is that the bank is obligated to make the loans up to the amount of
the commitment, if the borrower is in compliance with the terms of the agreement.
The borrower may repay the loans and then borrow again, up to the amount of the
commitment.
31

c. Term +oan:
( term loan is usually a single loan for a stated period of time or a series of loans for
specified dates. They are used for a specific purpose, such as ac)uitting machinery,
renoating a building refinancing debt, and so forth. They should not be used to
finance day"to"day operations.
Term loans can hae an original maturity of fie years or more. The maturity of the
loans should not e'ceed the economic life of the asset being financed if that asset is
being used as collateral for the loan.
The alue of the asset being financed should always e'ceed the amount of the loan.
The difference between the alue of asset and the amount being financed is the
borrower$s e)uity. The borrower$s e)uity represents the borrower$s inestment in the
asset being financed. The also proides the bank with a cushion in the eent of
default. The borrower will lose his or her funds before the bank e'periences a loss.
Borrowers not wanting to less their e)uity inestment hae an incentie to operate
their business so that the loan will be repaid.
7. %ri73e +oans:
Bridge loans are loans that bridge a gap in a borrower$s financing until some
specific eent occurs. -or e'ample, a firm wants to ac)uire a new warehouse facility
but needs funds to finance the transaction until the old warehouse can be sold. (
bridge loan can be used to fill the gap.
e. Asset8%ase7 +en7in3:
(sset"based lending is a form of commercial lending in which the assets of a
company are used to secure the company$s obligation to the lender. In the broadest
sense, all secured loans could be classified as asset"base lending. (sset"based loans
hae as their collateral base accounts receiable, inentory, machinery and
e)uipment, and real estate, single or packaged in arious combinations.
6. Over7ra6ts:
(n oerdraft occurs when a cheek is written on uncollected funds. If a bank pays on a
check written against uncollected balances, it is e'tending and unsecured loan. Some
33

oerdrafts are written with period permission of the bank, but most are not. In the
later case, the oerdraft represents a loan that the bank may not want make. It is
certainly a loan where the borrower did not make an application to the bank to re)uest
the funds in adance. The oerdraft loan can be for less than one day, such as when a
check is written or funds transferred wire in the morning and the deposit to coer that
check or wire transfer is not made until that afternoon, or for one or more days.
3. Cas@ Cre7it:
Cash credit refers to the issue of credits to respectable and trustworthy persons against
the guarantee of a third party or parties. The cash credit is a credit specially granted
by the banker in faor of a customer, but instead of the customer haing to take up
whole amount as a demand loan, he can either draw or repay, in whole or in part, the
amount adanced at anytime to suit his own conenience.
This #cash credit$ may either take the form of 0ledge$ or Hypothecation. In case of
Hypothecation possession of goods is not transferred to the banker and therefore,
such an adance is no better that a clean loan. Such an adance can, thus, only be
granted to a person in whose integrity the banker has full confidence, but in case of
pledge the possession of the goods an not the ownership passes to the creditor,
namely, the banker.
@. +oan Commitments:
( loan commitment is an agreement between a bank and a firm to lend funds under
terms that are agreed on in writing. (bout three"fourths of all commercial and
industrial loans are made under loan commitments.
$. REA+ E(TATE +ENDIN/:
Eeal estate loan is the largest olume of loans made by commercial banks. The term
mortgage is used in connection with real estate lending. (t common law, a mortgage
is a written coneyance of title to real property to proide security for the
performance of a duty or the payment of a debt. In some states, mortgage is regarded
as a lien, but not crating title or an estate. In general terms, it is an agreement that the
property will be sold if the debt is not paid as agreed. The proceeds of the sale of the
property are used to reimburse the lender. The mortgage gies the lender a security
3;

interest on the property, if the mortgage is properly recorded in the country
courthouse.
). CON(U,ER +ENDIN/:
Consumer lending is the heart of retail banking. Eetail banking refers to banking
serices proide to indiiduals and to small business concerns. Serices proided to
medium and large"si&e business concerns and goernment is called wholesale
banking. !ost banks do both retail and wholesale banking although some speciali&e
more than others. Small banks tend to speciali&e in retail banking because they do not
hae sufficient assets to do large"scale wholesale lending.
3<

CHAPTER (IF: TECHNIEUE( OF CREDIT ,ANA/E,ENT
1. INTRODUCTION:
!anagement of credit means the cycle that starts from the issuing of credit and ends
with its recoery. The good credit management means the recoery of credit with
interest. The bank$s credit management policy aries under the different credit
sanction procedures. The bank grants credit by taking securities in order to ensure the
recoery of loans. If the bank can manage those securities effectiely the management
of credit is ensured. This chapter deals with the management of credit under different
credit sanction procedure.
$. FACTOR( +I,ITIN/ THE +E'E+ OF A %AN.( CREDIT:
i. The si&e and maturity"wise pattern of deposits/ The primary source of funds is
the deposits made by the depositors. Their si&e and maturity"wise pattern has
an impact on the leel of a bank$s adances. Bank$s capacity to grant loans
adances increases with an increase in deposit resources moreoer, the
maturity"wise pattern of such deposits affects the pattern of adances. In case
of demand liabilities, the banker is under an obligation to repay the fund on
demand and hence he needs larger cash resere.
ii. Credit Control by Eesere Bank. The capacity of banks to proide loans and
adances depends on their cash resources Ai.e. cash in hand and balances with
the Eesere BankB. The cash resources increase through 1. Eise in deposits, or
3. By they$re borrowing from the Eesere Bank, or ;. By sale of their
inestments. The Eesere bank regulates the )uantum of cash resources of the
banks by e'ercising the power conferred upon it. If it feels the necessity of
e'pansion of credit, measures are adopted to increase bank$s cash resources
and ice"ersa.
iii. Seasonal ariations in Bank Credit. (n important feature of bank credit in an
agricultural country like ours is the seasonal ariations in the )uantum of
credit granted by banks.
i. The 2emand of credit. The e'pansion or contraction of credit largely depends
on the demand for bank credit by borrowers, which in turn depends upon.
38

1. The leel of production, both agricultural an industrial.
3. The leel of inentories held by business an industrial houses.
;. The price leel of goods and commodities in the country.
<. The procurement policy of -ood Corporation.
( banker should always keep in min the aboe limiting factors of issuing credit.
@ood credit management in case of issuing credit means granting credit by
considering the aboe limiting factor. The banker who can manage the aboe limiting
factors he is called an effectie credit manager.
). ,ANA/E,ENT OF CREDIT %2 TA.IN/ (ECURIT2:
In the employment of his funds a banker generally attaches great significance to the
consideration of security. .argely depending upon the borrowed funds, a banker
cannot afford to take undue risks. He, therefore, safeguards his interests by granting
loans an adance on the security of tangible assts, i.e. a large ariety of goods and
commodities, documents and immoable property. Secured adances account for a
ma+or option of the total bank adances. In case of secured adances, a charge is
created oer the assets of the borrower in faor of the banker. The banker may,
therefore recoer his dues from the customer out of the sale proceeds of the assets
charged to him.
/eneral Princiles o6 (ec4re7 A7vances:
Dhile granting adances on the basis of securities offered by customers, a banker
should obsere the following basic principles/
1. A7eA4ac5 o6 ,ar3in:
The word #margin$ has special meaning and significance in the banking
business. In banking terminology, #margin$ means the deference between the
market alue of the security and the amount of the adance granted against it.
-or e'ample, if banker sanctions an adance to Tk. := against the security of
goods worth Tk. 1==, the difference between the two is called the margin. (
banker always deeps an ade)uate margin because of the following reasons.
37

i. The market alue of securities is liable to fluctuations in future with
the result that the banker$s secured loans may turn into party secured
ones.
ii. The liability of the borrower towards the banker increases gradually as
interest accrues and other charges become payable by him.
Factors Determinin3 ,ar3in:
The )uantum of margin is not uniform in case of all commodities or in case of all
customers. The following factors determine the margin/
i. The amount of margin depends upon the likely fluctuations in the prices of the
arious commodities.
ii. In case of shares of industrial concerns the financial position and reputation of
the issuing undertaking is also taken into account. Shares of sound industrial
concerns are treated as good as goernment securities and lower margin is
re)uired.
iii. !argins are fi'ed keeping in iew the credit an reputation of the borrower"
concern.
i. The margin, determined at the time of sanctioning an adance, may be raised
or reduced subse)uently according to the ariation in the prices of the
securities.
. In case of commodities, which are sub+ect to selectie credit control of the
Central Bank, margins are usually prescribed by the Central Bank from time to
time. It is essential for the banks to deep such margins.
$. ,arBeta>ilit5 o6 (ec4rities:
Credits are usually granted for short periods by the commercial banks because their
deposit resources Ae'cept term depositsB are either repayable on demand or at short
notice. If the customer defaults in making payment, the banker has to li)uidate the
security. It is, therefore, essential that the security offered by a borrower may be
disposed of without loss of time and money. ( banker should be ery cautious in
accepting assets, which are not easily marketable.
It is proerbially said a banker lends his umbrella when the sky is clear an demands
it back as soon as it rains.
3:

). Doc4mentation:
2ocumentation means that necessary documents, e.g. (greement of pledge or
mortgage, etc, are prepared and signed by the borrower at the time of securing a loan
from the bank.
*. RealiCation o6 t@e Cre7it:
If the borrower defaults in making payment on the specified date, the banker may
reali&e his debt from the sale proceeds of the securities pledged to him.
*. ,ANA/E,ENT OF CREDIT A/AIN(T /OOD(:
Credit sanctioned may be secured by goods and commodities broadly diided into
four main heads as follows/
1. -ood articles.
3. Industrial raw materials.
;. 0lantation products, and
<. !anufactures and material.
These credits meet the needs of working capital of a large number of businesses and
industrial concerns. In fact, such credits are essential for all trading and commercial
actiities in the country.
-. PRECAUTION( TO %E TA.EN %2 A %AN.ER:
@oods and commodities are safe, sound and dependable securities for a banker but
they are not always free from certain risks. ( banker should, therefore, be ery careful
in accepting them as security and take the following precautions/
1. Though the goods and commodities are the best securities to a banker for
granting loans, the customer is also e)ually important. The customer must be
honest and trustworthy otherwise the risks of fraud or dishonest practices
always remain.
3. Before accepting any commodity as security the banker must be well
ac)uainted with the nature of its demand. He must en)uire whether the
34

commodity is an item of necessity, comfort or lu'ury and whether its demand
is elastic or otherwise, is constant through out the year or is seasonal in nature.
;. The banker must be well ac)uainted with the commodity market. He should
know well the commodities offered as security, the conditions and customer of
their trades and also the trend of their prices in the market. Such knowledge is
essential for him to regulate the margins to be maintained.
<. The market should take deliery of the goods before he grants a loan against it
to a customer.
8. The banker should estimate the alue of the goods ery carefully.
7. The banker should also take necessary care regarding the storage of the goods
pledged.
:. The goods should be duly and ade)uately insured against fire, theft, etc.
4. (s the borrower is allowed by the banker to repay the loan in parts also and to
get the commodities released, it is ery important for the banker to ensure that
goods released should be in proportion to the amount of the loan repaid by the
customer.
0. ,ANA/E,ENT OF CREDIT A/AIN(T DOCU,ENT OF
TIT+E OF /OOD(:
( document of title to goods is a document used in the ordinary course of business as
a proof of the possession or control of goods. It authori&es, either by endorsement or
by deliery, the processor of the document to transfer or receie the goods represented
by it.
There are two tests by which we may +udge the alidity of such a document/
aB The person who possesses such document is recogni&ed by law or by business
practice as possessing the actual goods/ and
bB The person who possesses such document can transfer the goods to any person
by endorsement or deliery or by both. Te transferee is thus entitled to take
deliery of the goods in his own right.
36

PRECAUTION TO %E TA.EN %2 THE %AN.ER:
1. In order to aoid risks of fraud or dishonesty, the banker should accept such
documents a security from honest, reliable and trusted parties only.
3. Special care should be taken to see that documents are genuine and not forged
ones.
;. It should be carefully noted that documents of title do not contain any onerous
or pre+udicial remark about packing of the goods. If the documents contain a
remark to this effect, such as 0acking defectie or @oods not properly
packed or The container is leaking, the banker should not grant any
adance against such receipt.
<. The goods must be insured for its full alue against the risks of fire, theft, etc.
8. To ensure that the goods packed in bags, etc. actually conform to the
description contained in the documents, it is described that a certificate from a
reliable firm of packers is obtained, especially in case of aluable goods.
7. The banker should also take memorandum of charge from the borrower
authori&ing the banker to sell the goods if the borrower defaults in making
payment.
:. It is also essential that the issuer of the document of title to goods, i.e.
transport, warehouseman, etc., is a reliable person of firm.
:. ,ANA/E,ENT OF PRO%+E, +OAN(:
0roblem loans usually means the borrower has missed one or more promised
payments or the collateral pledged behind a loan has declined significantly in alue.
;. (2,PTO,( OF PRO%+E, +OAN(:
Dhile each problem loan situation is somewhat different, seeral features common to
most such situation should warn a banker that troubles hae set in/
Irregular or delin)uent loan payments.
-re)uent alteration in loan terms.
0oor loan renewal record Awith little reduction of principal each time the loan
is renewedB.
;=

>nusual high loan rate Aperhaps an attempt to compensate the bank for a high
M risk loanB.
>nusual or une'pected build up of the borrowing customer$s accounts
receiable and Gor inentories.
Eising debt Mto"net"worth AleerageB ratio.
!issing documentation Aespecially missing customer financial statementsB.
0oor )uality collateral.
Eeliance on reappraisals of assets to increase the borrowing customer$s net
worth.
(bsence of cash flow statements or pro+ections.
Customer reliance on nonrecurring sources of funds to met loan payments
Ae.g., selling buildings or e)uipmentB.
-or business loan, any sudden change in methods used by the borrowing firm
to account for/
2epreciation
!ake pension plan contributions.
Calue inentories
(ccount for ta'es or
Eecogni&e income
Change in the customer$s credit ratings
(derse change in the price of borrowing customer$s stock.
%et earnings losses in one or more years, especially as measured by E,(, E,9
and 9BIT.
(derse changes in the borrowers capital structures.
2eiations of actual sales or flow form those pro+ected when the loan was
re)uested.
Sudden, une'pected and une'plained changes in deposit balances maintained by
the customer.
<. CAU(E( OF PRO%+E,( +OAN(:
9mpirical studies show that loans fall into problems owing to the following causes/
>nrealistically structured loan installment.
;1

>nusually high interest rate.
(derse change in the price of borrowing customer$s stick.
%et earnings losses in one or more years, especially as measured by E,(,
E,9 and 9BIT.
(derse changes in the borrowers capital structures.
Incompetent management.
2ishonesty and immorality of the client.
Sudden rise in corporate ta' rate.
-resh imposition of e'cise or sales ta' on client$s products.
.oss of market share of the client.
@eneral economic recession.
,bsolescence of the client$s product causing a fall in demand thereof.
Dindow dressing of financial accounts.
!a+or contract loss.
Significant rise business competition.
0rocrastination in pro+ect implementation.
9rroneous pro+ect feasibility analysis.
Borrower$s reluctance to pay off the loan.
.oop holes in the stipulated loan contract.
.ower e)uity of the borrower in the pledged collateral.
0olitical pressure.
Corrupted loan recoery officer.
1=. (TEP( TO HAND+E PRO%+E, +OAN(:
Dhat a banker should do when a loan is in trouble is of supreme importance for
today$s bank lending operations. 9'perts in loan workouts the process of recoering
the bank$s funds from a problem loan situation"suggest the following key steps/
1. (lways keeps the goal of loan workouts firmly in mind/ to ma'imi&e the
bank$s chances for the full recoery of its funds.
3. The rapid detection and reporting of any problems with a loan are essential.
2elay often worsened problem loan situation.
;. Feep the loan workout responsibility separate from the lending function of
aoid possible conflicts of interest for the loan officer.
;3

<. Bank workout specialists should confer with the troubled customer )uickly on
possible options, especially for cutting e'penses, increasing cash flow and
improing management control. 0recede this meting with a preliminary
analysis of the problem and its possible causes noting any"special workout
problems Aincluding the presence of competing creditorsB. 2eelop a
preliminary plan of action after determining the bank$s risk e'posure and the
sufficiency of loan documents especially any claims against the customer$s
collateral other that held by the bank.
8. 9stimate what resources are aailable to collect the trouble loan Aincluding the
estimated li)uidation alues of assets and depositsB.
7. .oan workout personal should conduct a ta' and litigation search to see if the
borrower has other unpaid obligations.
:. -or business borrowers, bank loan personnel must ealuate the )uality
competence and integrity of current management and isit the site to assess the
borrower$s property and operations.
4. Bank workout professional must consider all reasonable alternaties for
cleaning up the troubled loan including making a new temporary agreement if
loan problems appear to be short"term in nature or finding a way to help the
customer strengthen cash flow Asuch as reducing e'penses or entering
2hanmondiB or to infuse new capital into the business. ,ther possibilities
include finding additional collateral, securing endorsements or guarantees,
reorgani&ing, merging or li)uidating the firm or filing a bankruptcy petition.
,f course, the preferred option nearly always is to see a reised loan agreement that
gies both the bank and its customer the chance to restore normal operations.
11. RECO'ER2 OF +OAN:
The most important part of sound credit management is of disclosing the recoery of
loans and adances, problems thereon defaulter patterns, proisioning against bad and
doubtful loans an adances etc. usually bank$s credit management performance
represents the recoery perform of loans an adances as against the utili&ation of
funds. Besides, it has substantial impact on the bank$s ultimate profit performance.
;;

1$. PRO/RA,( FOR +OAN RECO'ER2:
It is the subse)uent step of programs for loan distribution. The detailed programs for
loan recoery are stated within the terms and conditions of loan distribution. (s a
result, it is not a new sub+ect in sound credit management. To ma'imi&e the loan
recoery performance the following programs should be taken/
i. To establish credit superision and monitoring cell in the bank.
ii. To re"structure the loan sanctioning and distributing policy of the bank.
iii. To sanction loans and adances against sufficient securities as best possible.
i. To gie more posers to the branch manger in credit management decisions
making process.
. To offer a package of incenties to the sound borrowers.
i. To gie more emphasis on short"term loans an adances.
ii. To impose restrictions on loans and adances for trading business.
To take legal actions )uickly against un"sound borrowers as best as possible within
the period specified by the .aw of .imitations.
;<

CHAPTER (E'EN: CREDIT ,ANA/E,ENT (2(TE, OF IFIC
%AN. +I,ITED G A PRACTICA+ EFPO(URE
1. CREDIT PO+IC2 OF IFIC %AN. +TD:
(s a continued process I-IC Bank .td followed the course of its own credit policy
within the framework and guidelines outlined by the @oernment and Bangladesh
Bank in respect of deployment of its loan able fund. The Bank continued to e'plore
and diersify the area of its operation to e'tend credit facilities throughout the year to
the arious productie sectors on priority basis.
$. C+A((IFICATION OF CREDIT OF IFIC %AN. +TD:
I-IC Bank .imited proides arious credit facilities to the borrows general credit
facilities and the interest rate are stated below.
Cre7it Interest Rate
a. ,erdraft i. (gainst -2E
;? I (boe
the rate allowed on
-2E.
ii. (gainst Share 1<.8=?
b. Cash Credit i. Hypothecation 18.8=?
ii. 0ledge 18.8=?
c. 2emand .oan i. Secured 18.8=?
ii. >nsecured 18.8=?
d. .oan (gainst trust Eeceipts 18.8=?
e. 0ayment (gainst 2ocument 18.8=?
f. .oan (gainst Import !erchandise 18.8=?
g. Inland Bill 0urchase 18.8=?
h. -oreign Bill 0urchase 18.8=?
). (PECIA+ CREDIT (CHE,E OF IFIC%AN. +I,ITED:
Besides general credit facilities I-IC Bank .imited also introduced some special
credit schemes named as >ttaran. This scheme encompasses the following credit
facilities.
;8

Cons4mer Cre7it (c@eme:
!ost of the people of Bangladesh are middle class and in the orbit of .imited income.
They are not able to buy necessary consumable goods by their own saings. -or this
reason I-IC Bank .imited introduced consumer credit scheme from ,ctober 1667.
.oan disbursed under this scheme stood at Tk. 83.=: corer up to 2ecember 3==3. The
rate of recoery of loan under this scheme also 1== percent.
Feat4res o6 t@is sc@ema are:
a. O>Hectives o6 t@e sc@eme:
i. Creating the habits of saings for limited income group
ii. Increasing standard of .iing
iii. To play an important role in deeloping the socio economic condition of
Bangladesh.
>. /oo7s 4n7er t@is sc@eme:
%ew and re"conditioned car, !otorcycle, Eefrigerator, Teleision, C.C.0, Eadio, Two
in one, (ir Conditioner, Dater Cooler, Dater 0ump, 0.C, >0S, 0rinter, Type Driter,
Dashing !achine, Iron I Dooden -urniture, Sewing !achine, Toaster, pressure
Cooker, 0hotocopier, Cellular 0hone, -a', arious kind of -an, 2ish (ntenna,
Bicycle, Baby Ta'i, Tempo, !icrobus etc.
c. Ceilin3 o6 +oan an7 DoDn Pa5ment:
>nder this scheme highest amount of loan is Tk. 8.== .ac. Borrower must pay down
payment at the following rate/
i. %ew !otor Car : ;8?
ii. Eecondition CarG!icrobus : <=?
iii. Baby Ta'iGTempo : <=?
i. !otor Cycle : ;8?
. Eefrigerator, 2eep -ridge, Dashing
!achine, (ir Conditioner, 0ersonal
Computer, 0hoto Copier, -a', !obile
0hone : 38?
i. ,thers : 3=?
;7

7. Interest Rate an7 ot@er C@ar3e:
i. Interest : 1<? at Simple Interest Eate.
ii. 2efault Interest : 3? at Simple Interest Eate.
iii. Serice Charge : >p to Tk. 8=,===/ Tk. 3==,
(boe Tk. 8=,===/ Tk. 8==.
i. Eisk -und : 3? of loans but at least Tk. 3==
A!ust pay before taking loanB.
e. +oan Rea5ment Perio7:
i. %ew !otorcar : < years A9)ual monthly InstallmentB
ii. Baby Ta'iGTempoG!icrobus : < years A9)ual monthly InstallmentB
0artial amount of Installment must be
paid eery week.
iii. ,thers : ; years A9)ual monthly InstallmentB
*. (,A++ %U(INE(( +OAN (CHE,E !(%+ (CHE,E":
SB. scheme has introduced for e'tending loans to the small business owners who are
dong business with their own capital, which is inade)uate to e'pand business and
hae no tangible security to offer as collaterals.
Feat4res o6 (%+ (c@eme are:
a. E4ali6ication o6 %orroDer:
Borrower must hae a current account in the branch from which he is willing to take
loan.
>. Ceilin3 o6 +oan:
>nder SB. scheme one can borrow an amount not more than Tk. 8 .ac. But it
depends on the monthly income of the borrower.
c. Interest an7 Ot@er C@ar3e:
Interest / 17.8? per annum.
(pplication -rom / Tk. 1==
7. +oan Rea5ment Proce74re:
.oan must be repaid within ; years at monthly installment.
;:

:.).) Ho4se Reairin3IRenovation (c@eme:
This scheme was introduced for e'tending loans to the people who own
houseGbuilding of their own or inherit from their ancestors, which may re)uire
renoationGrepairing but cannot afford to make such e'penditure at a time.
Feat4res o6 t@is (c@eme are:
a. Amo4nt o6 +oan:
>nder House repairingGrenoation scheme you can take loan up to Tk. 8 .ac. But the
actual account of loan will depend on your monthly income.
>. Interest an7 Ot@er C@ar3e:
Interest / 18?
.oan 0rocessing -ee / Tk. 8,=== A8=? of this amount are refundable if .
re+ectedB
(pplication -rom / Tk. 1==.
If the customer repay loan regularly and timely than 8? of interest will e'empt.
c. +oan Rea5ment Perio7:
.oan must repay within 8 years including interest at installment basis.
+ease Financin3 (c@eme:
( credit schema in the name of .ease -inancing Scheme has been functioning
effectiely from 5une 1666 to finance the prospectie and genuine customers for
ac)uisition of capital machinery e)uipment, medical instruments automobiles etc. The
balance of the loan under this scheme stood at Tk. <6=7= corore as on ;1
st
2ecember
3==<.
RECO'ER2 PRO/RA,
It is the subse)uent step of programs for loan distribution. The detailed programs for
loan recoery are state within the terms and conditions of loan distribution. (s a
result, it is not a new sub+ect in sound credit management. (s the recoery
;4

performance of the commercial banks Aboth public and priate in BangladeshB
gradually deteriorating oertime, goernment as well as the board of directors of the
respectie banks has taken some special programs in the area of loans recoery.
I-IC Bank .td. has taken the following programs to ensure ma'imum recoery/
i. It establishes credit superision and monitoring cell in the bank.
ii. It re"structures the loan sanctioning and distribution policy of the bank.
iii. It sanctions loans and adances against sufficient securities as best as possible.
i. It gies more powers t the branch manager in credit management decisions
making process.
. It offers a package of incenties to the sound borrowers.
i. It gies more emphasis on short"term loans adances.
ii. It imposes restrictions on loans and adances for trading business.
iii. Ti takes legal actions )uickly against un"sound borrowers as best as possible
with the period specified by the .aw of .imitations.
CHAPTER EI/HT: (TUD2 FINDIN/(
;6

1. (ECTOR8?I(E PO(ITION OF +OAN AND AD'ANCE A( ON
)181$8$==* I( /I'EN %E+O?:
(ectors o6 +oan & A7vances P4>licINationaliCe7
ATaka in CroreB
Private
ATaka in
CroreB
Total
ATaka in
CroreB
1. A3ric4lt4re:
aB 0rimary 0roducer
bB -ertili&er
"
"
1.7:
=.=:
1.7:
=.=:
$. In74strial Term +en7in3 18<.;= 18<.;=
). ?or7in3 Caital:
aB 5ute Industry
bB ,ther Dorking Capital
"
1<.=1
6=.:6
7<.63
6=.:6
:4.6;
*. EJort:
aB 5ute and 5ute @oods
bB ,ther @oodsGCommodities
"
"
6.3;
<:.;1
6.3;
<:.;1
-. Tra7e an7 Commercial +en7in3:
aB 5ute Trading
bB Commercial
"
"
3=.<=
1,1<7.<;
3=.<=
1,1<7.<;
0. (ecial Pro3ramme:
aB Small and Cottage Industry
ATerm .oanB
bB 0ersonal .oan Scheme
cB Consumer Credit Scheme
A>ttaranB
"
"
"
;.77
<.4<
<<.76
;.77
<.4<
<<.76
:. Ur>an Ho4sin3 84.<6 3<.44 4;.;:
;. O66icers an7 (ta66 Ho4se %4il7in3 " 13.=1 13.=1
<. Ot@ers 1<.:6 841.=: 868.47
Total ;:.$< $K$=0.-* $K$<).;)
<=

$. DEPO(IT( AND AD'ANCE( !CORE TA.A" PO(ITION FOR
FI'E 2EAR(:
Deosit & A7vance
<1
0
500
1000
1500
2000
2500
3000
1998 1999 2000 2001 2002
Deposit
Advance

). (ECTOR ?I(E +OAN( AND AD'ANCE( UNDER PIE
CHART:
(ector ?ise A7vance !L"
*. PRO%+E,( IN +OAN RECO'ER2 OF IFIC %AN. +TD:
Those who are the sound borrowers can easily to be identified but the status and the
number of unsound borrowers cannot be measured accurately as they are the ma+or
portions of total number of borrowers. This is the present status of credit management
in Bangladesh both in the public sector banking and the priate sector banking also.
0roblems in loan recoery are the outcome of the default in loan disbursement I-IC
Bank .td. usually faces the following problems in loan recoery/
<3
Commercial
Lending(51%)
Export(2%)
Agriculture (1%)
Industrial
Lending(7%)
Special
Programme(2%)
or!ing
Capital(7%)
"ousing(#%)
$t%ers (2&%)

I. Sometimes loans are gien without sufficient securities.
II. Sometimes loans are gien under fictitious names and enterprises.
III. (pproal of loans in e'cess of the branch manager$s powers.
IC. Sometimes oer"aluation of securities is a common phenomenon.
C. .oans are approed against defectie pro+ect appraisal report.
CI. Improper monitoring and superision of credit.
CII. .oans are sometimes disbursed for economically un"sound pro+ect.
CIII. 9mphasis on public sector inestment causes the high rate of non"recoery.
IN. .oans are approed for the parties by the authorities bearing in mind their
personal ob+ecties not the oerall ob+ecties of the bank and the economy.
N. .oans are approed for industries, which are only socially desirable.
NI. 0olitical misuse of loans programs.
<;

CHAPTER NINE: (U//E(TION AND CONC+U(ION
1. RECO,,ENDATION(:
In the light of the ariations of the problem the following measures if adopted, may go
a long way in improing the situation/
1. Selection of borrower shall be made as per rules and procedures of the
adances and after making proper assessment of business establishment,
respectability, creditability, actual re)uirement of fund repayment capacity etc.
(ppraisal of feasibility and iability of the pro+ects shall be dine in proper
manner e'amining all the factors by an efficient and )ualified appraiser so that
no difficulties are faced at any stage of the pro+ect from construction to
production stage.
3. The lack of proper superision, conduct and control of the loan shall be done
by the financiers to ensure purpose for which the loan is sanctioned, close
contact and persuasion shall also be borrowers to ensure recoery of loan
installment as and when due without allowing it to become arrear.
;. The bank should not always be ery much sensitie of recoery of loans and
will not bring necessary pressures for recoery proided the borrowers are
incorrigible and habitual defaulters. The lenders shall not resort to any hasty
decision and take legal action against the borrowers if there is any scope for
recoery of the dues on compromise terms een by allowing some concession
of interest and rescheduling the repayment program by allowing reasonable
time to the borrowers.
<. 0roblem of the borrower$s pro+ects or business, which hae turned sick
unaoidable circumstances of unforeseen eents, shall be looked into
sympathetically by the lending bank. If necessary, bank shall not hesitate to
allow further finance to reie the sick unit to ensure safe recoery of the loan
in future for which a suitable repayment schedule may be prepared in
consultation with borrowers.
8. The officials of the bank should be made well conersant with the methodical
and procedural components of credit management starting from the stage of
preparation of loan proposal and ending up to the follow up and recoery of
<<

the same. %one of the officials who hae sporadic knowledge in handling loan
cases should be assigned with the duty of operation of loans I adances.
7. The lenders shall take legal action against the incorrigible defaulting borrowes
who are aoiding payment on flimsy grounds without bonafide intention to
s)uare up their dues without wasting of time. !oney suits I criminal cases
filled against the bad borrower shall be closely followed up for early decision
of the court and immediate steps shall be taken for satisfaction of the decrees
against the +udgment debtors. 0roper igilance are re)uired to be kept oer
disposal of court cases I recoery of the decretal dues as per +udgment and in
default, to file e'ecution suit for attachment I sale of borrower$s properties
for satisfaction of the decree.
:. (lertness and education amongst the sub"conscious about their obligation to
return bank$s money in time and utili&ation of funds of funds only for
productie purpose of motiation and education field assistants of the lending
bank may play ital role.
4. The officials of the bank shall be honest, sincere and free ices in their deal
with borrowers for personal gain should be skillfully detected and e'emplary
punished to preent others from indulging such irregularities. Steps should
also be taken to arrest growing moral degradation amongst the officials by
improing their serice benefits, socio"economic condition and a standard of
liing where the officials shall hae no reasons to be allured by the borrowers.
6. The problem can be soled by rational strategy formulation.
1=. The lenders shall sanction and disburse loan to the borrowers in proper time
of inestment. They will see that no delay is caused in completing formalities
and processes which may create problem to the borrowers to diert funds
elsewhere or want of scope for inestment and thus the funds become stuck up
ultimately. So loans should always be sanctioned I disbursed in proper time
of inestment to ensure recoery of the loan in time from the borrowers.
<8

$. CONC+U(ION:
-or any B.B.( student who would like to build up hisGher career in the banking sector,
heGshe must need this type of internship training. (s a successful intern, I am really a
lucky person that I could perform my Internship in I-IC Bank .imited, -ederation
Branch, which is the second bank of Bangladesh in case of earning profit. I hope this
report prepared by me on the basis of my internship training will be beneficial for the
personnel who are already inoled in +ob in any reputed organi&ation and will also be
helpful for the future internees those who will carry out their internship training in
I-IC Bank .imited or in other banks.
I-IC Bank .td. has been able to continue its oer all progress for year to year,
specially in granting loan to right sector and its recoery. Since bank$s profit largely
depends on its interest income. I-IC Bank .td. was able to achiee 3
nd
highest profit
in year 3==3. Dhich shows that the loan position, interest and recoery are e'cellentL
This success has been making possible due to dynamic leadership of the bank
management, proper guidelines good counsel and deotion and sincerity of all
categories of officers an employees of the bank.
<7

%i>lio3ra@5:
1. Siddi)ui, (. @. MBankier$s (dances AEauf 0ublicationB.
3. 2r. (. E. Fhan "Bank !anagement, 0rogati 0rakashani, 3
nd
9dition.
;. Taylor, D.@. .ongworth MCredit System, 8
th
9dition.
Reorts an7 &o4rnals:
1. I-IC Bank .td. (nnual Eeport M 3==1,3==3,3==;,3==<.
3. Santi %arayan @hosh, 5agadish Chandra Sukladas and !ahbub (hmed
Choice of Banks Customers$ Serice I Credit 0olicy Bureau of
Business Eesearch, >niersity of 2haka.
;. Booklet of I-IC Bank .td.
<. The Bangladesh Bank ,rder 16:3.
8. ,ther 0ublished Information.
<:

<4