A BRIEF PROFILE

OF
RECOVERY DEPARTMENT
CREDIT DIVISION, HEAD OFFICE, DHAKA

TABLE OF CONTENTS
1. INTRODUCTION 3
2. PRIMARY OBJECTIVE 3
3. MAJOR FUNCTIONS: 3
3.1 Preventive Measures 4
3.2 Corrective Measures 4
4. OTHER FUNCTIONS 6

A BRIEF PROFILE OF RECOVERY DEPARTMENT,

CREDIT DIVISION, HEAD OFFICE, DHAKA
1. INTRODUCTION:
As instructed by Bangladesh Bank in the Guidelines on Credit Risk Management, is
sued on October 2003, Credit Risk Management Policy was prepared for the Bank wh
ich was approved by the Board of Directors of the Bank in its 337th meeting held
on 21.11.2005.
Later, with a view to adopt the above policy, to build and maintain a good quali
ty and well-diversified credit portfolio and to optimize the risk-return trade-o
ff, Bank engaged Pricewaterhouse Coopers Pvt. Ltd., who provided us with the Sta
ndard Operating Procedures (SOPs) as guiding principles to support extension and
management of credit.
However, it is implicit that if any guideline of Pricewaterhouse Coopers Pvt. Lt
d. contradicts with that of Bangladesh Bank, Bank will choose the later.
2. PRIMARY OBJECTIVE:
As per the Credit Risk Management Policy of the Bank and SOPs provided by Pricew
aterhouse Coopers Pvt. Ltd., the primary objective of Recovery Department (RD),
Credit Division, Head Office is to maintain Bank's loan portfolio as 'Standard A
ssetâ or zero level of Non-performing Asset, NPA i.e. risk grade-4 (Early Warning),
grade-5 (Special Mention), grade-6 (Sub-standard), grade-7 (Doubtful), grade-8 (
Bad & Loss).
3. MAJOR FUNCTIONS:
With a view to achieve the said objective, RD takes (i) Preventive Measures in a
proactive manner for the NPAs with risk grade 4 & 5), and (ii) Corrective Measu
res in a reactive manner for the NPAs with risk grade 6,7 & 8).
As per the Credit Risk Management Policy, RD basically deals with the NPAs with
sustained deterioration (risk grade 6, 7 & 8). However, CRM and Corporate Divisi
on may, sometimes, transfer NPAs with risk grade 4 & 5 to RD or consult with the
m for their recommendation, rectification of legal action, classification on qua
litative judgment, negotiation, compromise, settlement, write-off, efficient EXI
T etc.
3.1 Preventive Measures:
These measures are taken to prevent the Standard Assets from slipping into the c
ategory of Sub-standard Assets (risk grade-6) by way of Early Warning System, EW
S (risk grade-4) and Special Mentioned Accounts System, SMAS (risk grade-5). The
se are being done in the following manner:-
a) Early recognition of NPAs from decreasing sales/market share, prices, pr
ofit margins etc.
b) Identifying and documenting the primary causes for decline in the busine
ss/financial position of the borrower and assessing realistically the borrower's
ability to rectify the position for restructuring/rehabilitation/ extension of
validity with the approval of the Management of the Bank.
c) Strengthening of security package by providing additional security, incl
uding personal guarantees or executing necessary/appropriate documents etc.
3.2 Corrective Measures:
Minimize the NPAs with sustained deterioration i.e. Risk Grade-6 to 8 as a perce
ntage of the Bank's total loan assets and maintain it within the target set by t
he Bank from year to year (for example, Classification Rate below 2%). This is b
eing done in the following manner:-
a) Acknowledgement of the NPAs, down-graded to Sub-standard (risk grade-6),
from Corporate Division (more specifically from the Relationship Managers) with
a Request for Action (RFA) and a Down Grade Checklist within 7 days of the acco
unt being downgraded.
b) Recognizing/documenting the primary reasons and associated risk for each
loan default.
c) Preparation of Classification Loan Review (CLR) Reports for the transfer
red/handed-over accounts containing documental deficiencies, Action Plan/Recover
y Strategy, adequacy of provisions etc. within 15 days of acknowledgement of the
accounts, which is reviewed/modified at the end of each quarter.
d) Determining the Accounts Action Plan/Recovery Strategy for loan up-grada
tion by meeting the customers and/or in collaboration with the branch and Corpor
ate Division, Head Office for negotiation/settlement (one go settlement is prefe
rred to deferred settlement)/compromise as Exit option with the approval of comp
etent authority of the Bank.
e) Recovery of stuck-up NPAs by way of debt rescheduling/extension of valid
ity/waiver with the approval of competent authority of the Bank, since recovery
without involving the court mitigates the litigation risk, reputation risk and l
egal burden.
f) Initiating appropriate legal action (such as, issuing legal notice, publ
ication of auction notice, filing suit under the provisions of Artha Rin Adalat
Ain 2003 for foreclosure of mortgaged/hypothecated/pledged properties, Negotiabl
e Instrument Act 1881 for dishonor of cheques or any other actions under applica
ble provisions of Law) against the customers/ proprietors/directors/partners/gua
rantors/mortgagors as last resort with the approval of the Management of the Ban
k when all other options have been exhausted and are not considered feasible.
g) Provisioning for the expected loss from default by the borrowers (agains
t both classified and unclassified loans and advances of the Bank) with the appr
oval of the Management of the Bank.
h) Writing-off the NPAs (risk grade-6 to 8), recovery prospect from which a
re remote to clean the accounts from the balance sheet and also to minimize the
classification rate of the Bank with the approval of the Board of Directors of t
he Bank and sometimes, Bangladesh Bank (to write-off an account before filing su
it).
i) Following-up the suits/cases/writs filed by and against the Bank regular
ly to take appropriate steps in time for early disposal of the same to protect B
ank's interest.
j) Documenting 'learning lessons' from the typical NPA case studies and cir
culating necessary guidelines for preventing their recurrence.
4. OTHER FUNCTIONS:
Besides above, Recovery Department also perform the following jobs:
a) Submission of statement of waiver of interest to Bangladesh Bank on mont
hly basis.
b) Ensuring accurate classification of loans and advances of the Bank in co
mpliance with the regulatory guidelines and submission of Classification Stateme
nt to the Bangladesh Bank, other concerned authorities and place classification
Memo before the Board on quarterly basis .
c) Submission of written-off statement to Bangladesh Bank on quarterly basi
s.
d) Submission of statement of SMA and interest suspense thereagainst to Ban
gladesh Bank on quarterly basis.
e) Submission of statement relating to the suits/cases filed by and against
the Bank in the Artha Rin Adalat and other courts and CIB related suits to Bang
ladesh Bank on half-yearly basis. Besides, a Memo informing the status of suits/
cases filed by and against the Bank is also placed before the Board of Directors
in every half-year.

...........................