Letter of Transmittal

15 January 2018

To
Mr. Badruzzaman
Controller of Examinations
National University
Gazipur-1704

Sub: Submission of Internship Report

Dear Sir,
This is a great Pleasure for me to submit the internship report on “Credit Risk
Management of Sonali Bank Limited” which is partial requirement of my B.B.A
program. While preparing this report, I tried my best to follow the instruction that you
have given me. The entire report is on my practical experience in the bank. I have
furnished all the things what I have learnt during the internship program at SBL
Public Service Commission Branch.

I would like to thank you from the bottom of my heart for assigning this report, which
has helped me in so many ways to learn so many things about working. I shall be
highly encouraged if you are kind enough to receive this report.

Sincerely yours,

_______________
Md. Akramul Haque
NU Roll: 1302076
REG No. 2097595
BBA Major: Finance
Department of Business Administration
Dhaka City College

i
 Acknowledgment

We express our deep gratitude to the almighty Allah who gave us chance to complete
internship report. We also have to put our heartfelt respect and gratitude for the
kindness and cooperation that was provided to us to complete our internship assigned
report on the topic of “Credit Risk Management of Sonali Bank Limited” in
preparing our report, we have taken great assistance and support from some persons
of Sonali Bank Limited ,PSC Brunch. This report, with all the interpretation on
practical orientation in bank with the function a mechanism in the field of banking
activity, would not be possible without help and cooperation of the officers engaged
in the PSC Branch of SBL.Finally, sincere thanks again to our internship supervisor
Fatema Jannat Lina (Senior Officer), SBL for his appropriate suggestions, moral
support and invaluable co-operation from time to time in completing the internship
report.

I am very much grateful to Jb. Mr. Mahbubur Rahman (Manager) of Branch, PSC
Branch ,Mohammad Kamrul Hasan (PO) and MasrubaNewaj(PO) for his heartily co-
operation to learn about Credit Risk management, a study of SBL Public Service
Commission branch as well.I would like to thanks to help me in Public service
Commission Branch.

At last, I shall be grateful to those persons who will read this report and who shall get
benefit from this report at present and in future.

I thank you all from the core of my heart.

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 CERTIFICATE OF SUPERVISOR

This is to certify that, Md. Akramul Haque, National University Roll Number:
1302076, Registration Number: 2097595, Academic session: 2012 - 2013, Major in
Finance, is a regular student of 8th semester (Final Semester) of BBA Program,
Department of Business Administration, Dhaka City College, under National
University of Bangladesh. He has completed a three month internship program on
Credit Risk Management of Sonali Bank Limited under my supervision which is the
fulfillment of partial requirement for obtaining BBA degree.

I wish her success in allher future endeavors.

_________________

Md. Shahinur Sobhan

Associate Professor

Department of Business Administration

Dhaka City College

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 Executive Summery

This report has originated as a result of my internship which I have pursued as a

requirement of the BBA program, Dhaka City College under National University.
This report has been completed based on my three month internship program at Sonali
Bank Limited, Public Service Commission (PSC). Agargoan Dhaka.

The objective of this study is to analyze the credit performance, credit policies and
client’s perception and satisfaction toward the performance of Sonali Bank Limited
regarding credit.Sonali bank Limited follows the rules and regulation prescribed by the
Bangladesh bank. To manage credit risk, the Bank applies credit limits to its customers
and obtains adequate collaterals. Credit risk in the Sonali Bank Ltd.'s portfolio is
monitored, reviewed and analyzed by the Credit Risk Management (CRM). Sonali
Bank Limited has established Asset-Liability Management Committee (ALCO) to
determine the maximum risk exposure.

SBL is one of the leading public banks in Bangladesh. To serve the nation Sonali Bank
performs certain activities for their client such as general banking, giving loans and
advances, capital market operations etc. The bank collect deposits from the
public and provides it to other businesses or individuals as loans .The bank pays
interest to deposits to holders takes interest from borrowers. SBL measures all risk
components before sanctioning a loan. When all the formalities are completed, the
respective officer disburses the loan. After the loan disbursement, it is the duty of the
bank to recover the disbursed loan. This report is based on actual information and
working procedures practiced at SBL. The overall credit management of SBL has
been analyzed to give a clear idea about the policies of SBL the implementation of
those policies by various mechanism and procedures.

Sonali Bank Ltd. constantly monitors, reviews and analyzes its credit portfolio to
minimizing potential losses and ensuring efficient credit process. To manage the
Non-Performing Loans (NPL), Sonali Bank Ltd. has a comprehensive remedial
management policy, which includes a framework of controls to identify weak credits
and monitoring of these accounts constantly.

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A through credit risk assessment is done by analyzing borrower, industry,
demand/buyer, historical financial statements etc. Bank review documents like loan
applications, financial statements, market reputation, CRG, CIB report etc. to
investigate credit risk. Managers have to enquiry about loan applicant. Proper
documentation is required before sectioning loans. They must conduct necessary
KYC (Know Your Customer) part on the customer and Money Laundering Guidelines
must be followed. On the basis of investigation the branch manager will prepare a credit
report as per format provided by their head office

In conclusion, it can be said that honestly, reliability, thoroughness and willingness to be

open to new ideas and new ways of meeting customers’ needs are most
important factors for improvement and success of SBL.

v
 Table of Content

Serial NO Particular Page No

Letter of Transmittal i
1
Acknowledgement ii
2
3 Certificate of Supervisor iii

4 Executive Summary iv

5 List of Table x

6 List of Figure xi

7 List of Abbreviation xii

Chapter 01 Introduction (1-6)

1.1 Introduction 2

1.2 Origin of the report 2

1.3 Objectives of the report 3

1.4 Methodology of the study 4

1.5 Scope of the study 5

1.6 Limitation of the Study 6

Chapter 02 Overview of the Organization (7-22)

2.1 Status of the Bank 8

2.2 Corporate Profile of Sonali Bank 8

2.3 Branches 9

2.4 Core Business of Bank 9

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2.5 Vision, Mission & Values 10

2.6 Slogan of Sonali Bank Limited 11

2.7 Sonali Bank Ltd. at a glance 11

2.8 Corporate Social Responsibility 11

2.9 Objectives of Sonali Bank Limited 11

2.10 Organization Structure(Management) of Sonali Bank 14

Limited

2.11 Hierarchy Of Sonali Bank Limited 15

2.12 Principal Activities of Sonali Bank Limited 15

2.12.1 General Banking 15

2.12.2 Deposit Schemes 15

2.12.3 Credit Schemes 16

2.13 Product & Service of Sonali Bank Limited 16

2.14 Credit Rating Report 20

2.15 SWOT Analysis(Strengths , Weakness , Opportunities 21

& Threats)

2.15.1 Strengths of SBL 21

2.15.2 Weaknesses of SBL 21

2.15.3 Opportunities of SBL 22

2.15.4 Threats of SBL 22

Chapter 03 Analysis and Evaluation (23-67)

3.1 Concept of Credit 24

vii
3.2 Credit Risk 24

3.3 Credit Management 25

3.4 Credit Risk Management 25

3.5 Kinds of Credit 26

3.6 Credit Principles 29

3.7 Credit Facilities of SBL 30

3.8 Credit operating System 30

3.9 Loans & Advances 33

3.10 Common Types of Loans 35

3.11 Characteristics of Loans 36

3.12 Functions of Bank Loans 37

3.12.1 Accepting Deposits 37

3.12.2 Giving Loans 38

3.12.3 Over-Draft 39

3.12.4 Discounting of Bills of Exchange 39

3.12.5 Investment of funds 39

3.12.6 Agency Functions 39

3.12.7 Miscellaneous Function 40

3.13 Credit Budget 40

3.14 Credit Risk Assessment 41

3.14.1 Types of Credit Risk 43

3.14.2 Credit facilities Parameter 43

viii
3.15 Recovery Rate 46

3.15.1 Comparative Recovery rate of Loans 46

3.15.2 How SBL Recover their Loans 46

3.15.3 Recovery patterns of Loans & Advances 46

3.15.4 Problems in Loan Recovery 47

3.15.5 Types of Loan of SBL 49

3.15.6 Proper Staffing 53

3.16 Credit Risk Grading 54

3.16.1 Use of Credit Risk Grading 58

3.16.2 Computation of Credit Risk Grading 58

3.17 CRG Process 66

3.18 Credit Rules and Regulation 67

Chapter 04 Findings, Recommendation And Conclusion (68-71)

4.1 Findings 69

4.2 Recommendation 70

4.3 Conclusion 71

Appended Part

Bibliography 72

ix
 List of Table

Table
Topic Page No.
no.

1 Corporate Profile of Sonali Bank 8

2 Hierarchy of Sonali Bank Limited 15

3 Credit Report Rating 20

4 Common Types of Loans 36

5 Maximum Tenor 44

6 Credit exposure of SBL is as underline 45

7 Proper Staffing of SBL 54

8 Number & Short Name of Grading Used in the CRG 55

9 Allocate weights to Principle Risk Components 60

10 Establish the Key Parameters 61

11 Business/Industry Risk 62

12 Management Risk 63

13 Security Risk 64

14 Relationship Risk 65

x
 List of Figures

Figure Page
Topic
no. No.

1 Area of Branches 9

2 Credit Rating Report 20

3 Organization Structure(Management) of SBL 14

4 Kinds of Credit 27

5 Risk Components 60

6 Financial Risk 62

7 Business/Industrial Risk 62

8 Management Risk 63

9 Security Risk 64

10 Relationship Risk 65

11 CRG Process 66

xi
 List of Abbreviation

SBL Sonali Bank Limited

BB Bangladesh Bank

PSC Public Service Commission

BBA Bachelor of Business Administration

CRM Credit Risk Management

ECC Export Cash Credit

CRG Credit Risk Grading

FR Financial Risk

IR Industrial Risk

MR Management Risk

SR Security Risk

RR Relationship Risk

SWOT Strength Weak Opportunity Threat

RWA Risk Weighted Assets

PO Payment Order

A/C Accounts

NPL Non-performing Loan

CRR Cash Reserve Ratio

xii