Credit Management of Agrani Bank Limited

Chapter - 1Introduction

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1.1 INTRODUCTION

The report basically deals with “Credit Management of Agrani Bank Limited”. The credit

management policy of Agrani Bank Limited is prepared in line with the guidelines of

Bangladesh Bank in Credit Risk Management and for the guideline of the officers or

executives in handling affairs relating to credit in a disciplined way. Credit department

plays a very important role in bank as they evaluate the risk and take decision about

giving loan to the customers. In this report I have tried to study the literatures statements

about credit management and also the credit operation of Agrani Bank Limited.

1.2 BACKGROUND OF THE REPORT

This internship report is originated as a partial fulfillment of the BBA program of

Bangladesh University of Business & Technology. This report is a mandatory

requirement for BBA completion. I have worked in various Department of Agrani Bank

Limited, Mirpur Branch. In this report, I will try to make an overall analysis on all

activities of Agrani Bank Limited specially focuses on credit management.

1.3 SIGNIFICANCE OF THE REPORT

This internship report is an important partial requirement of four years BBA graduation

program. This is because knowledge and learning become perfect when it is associated

with theory and practice. By this internship program students can establish contacts and

networking. Contacts may help to get a job in practical life. That is, student can train and

prepare themselves for the job market. A poor country like Bangladesh has an

overwhelming number of unemployed educated graduates. As they have no internship

experience they have not been able to gain normal professional experience of establish

networking system, which is important in getting a job. Therefore, it is obvious that the

significance of internship is clearly justified as the crucial requirement of four years BBA

graduation.

1.4 SCOPE OF THE REPORT

The study would focus on the following areas of Agrani Bank Limited.

An overview of Agrani Bank Limited.

Credit approval Procedure of Agrani Bank Limited.

Credit Performance of Agrani Bank Limited.

1.5 OBJECTIVES OF THE REPORT

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1.5.1: Broad Objective

The Broad objective of this report is to analyze the Credit Management of Agrani

Bank Limited.

1.5.2: Specific Objectives

The study was conducted to achieve the following specific objectives:

To evaluate the credit approval process of Agrani Bank Limited.

To analyze year wise credit growth of Agrani Bank Limited.

To assess geographical location wise credit disbursement of Agrani Bank Ltd.

To analyze sector wise credit disbursement of Agrani Bank Ltd.

To analyze the status of classified & unclassified loan of the bank.

1.6 METHODOLOGY OF THE REPORT

The study requires a systematic procedure from selection of the topic to preparation of the

final report. The data sources of this study were to be identified and collected, to be

classified, analyzed, and interpreted and presented in a systematic manner and key points

were to be found out. The overall process of methodology is given in the following:

1.6.1 Research Design:

This report will focuses on the credit operation of Agrani Bank Limited. To prepare this

report all the necessary information are collected from both primary and secondary

sources of data. This study has been conducted by collecting data for the period of five

years from 2009-2013.

1.6.2 Sources of Data:

The study is mainly based on secondary data. Both primary and secondary data sources

will be used to generate this report.

Primary Sources of Data:

Observation while working in different desks

Face to face conversation with the officer

Secondary Sources of Data:

The annual report of Agrani Bank Limited

Credit Manual of Agrani Bank Limited

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Banking related text books, relevant books, research papers, newspapers,

journals and Manuals.

Desk report of related department

Web browsing

1.5.3 Instruments used for analysis

Trend Analysis: Trend analysis is an aspect of technical analysis that tries to

predict the future movement based on past data.

Ratio Analysis: Ratio analysis is a form of quantitative analysis of information

contained in a company’s financial statement.

1.7 LIMITATION OF THE REPORT

The Term paper is likely to have following limitations:

Due to shortage of time, the accuracy of information may not have been

completely perfect.

Confidentiality of data was another important barrier that was faced during the

conduct of this study. Every organization has their own secrecy that is not

revealed to others. While collecting data on Agrani Bank Limited, personnel did

not disclose enough information for the sake of confidentiality of the organization.

Unpublished data have not considered for the study.

The depth of the analysis has been limited to the extent of information collected

from different sources.

Last of all, this study has been conducted within a limited time. So, Observing and

analyzing the broad performance of the bank is not an easy task by this short

duration of time.

All the interpretation and conclusion about the result of study is based on the

analyst own perspective.

Data and information used in this study are mostly from secondary sources.

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Chapter - 2Overview of Agrani Bank Limited

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2.1 COMPANY PROFILE

Name of the company Agrani Bank Limited

Chairman: Dr. Zayed Bakht

Managing Director: Mr. Syed Abdul Hamid

Company Secretary: Badal Chandra Dey

Legal Status: Public Limited Company

Date of Incorporation: 1972

Registered Office: 9/D Dilkusha, Dhaka 1000, Bangladesh

Authorized Capital: Tk. 2,500.00 Crore

Paid up Capital: Tk. 2,072.29 Crore

Tax Identification No. 0022001223

Phone: +88-02-9566153-4, +88-02-9566160-9, +88-02-9566074-5

Fax: +88-02-9562346, +88-02-9563662, +88-02-9563658

E-mail: [email protected], [email protected]

Website: www.agranibank.org

(Source-Annual Report 2013)

Table 2.1: Company Profile of Agrani Bank Limited

2.2 HISTORICAL BACKGROUND OF AGRANI BANK LIMITED

Agrani Bank Limited, a leading commercial bank with 915 outlets strategically located in

almost all the commercial areas throughout Bangladesh, overseas Exchange Houses and

hundreds of overseas Correspondents, came into being as a Public Limited Company on

May 17, 2007 with a view to take over the business, assets, liabilities, rights and

obligations of the Agrani Bank which emerged as a nationalized commercial bank in

1972 immediately after the emergence of Bangladesh as an independent state.

Agrani Bank Limited is governed by a Board of Directors consisting of 13 (thirteen)

members headed by a Chairman. The Bank is headed by the Managing Director & Chief

Executive Officer; Managing Director is assisted by Deputy Managing Directors and

General Managers. The bank has 11 Circle offices, 29 Divisions in head office, 62 zonal

offices and 915 branches including 300 online branches. At the start of its operation in

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1972, Agrani Bank had 246 branches, of which 37 were temporarily closed. It had a total

deposit of Tk 581 million, advances of Tk 663.40 million and borrowing of Tk 294.80

million. Initially, it did not have any liquid asset to run its operations smoothly and to

undertake development activities. Investment amounting to Tk 110 million was in

unapproved securities. On 30 June 2000, the total deposit at the bank stood at Tk 92.96

billion, total loans and advances at Tk 74.92 billion, total investment at Tk 25.375 billion,

total assets at Tk 124.798 billion and reserve funds at Tk 319 million. Of the total

deposits, 8.03%, 35.41%, 19.21% and 37.35% were in current, savings, fixed and other

deposits respectively. 4.24% of the total amount of loans and advances were classified.

The bank's recovery rate in terms of total outstanding loans was 34% in 1999 and 32% in

2000. The cumulative balance of outstanding loans and advances on 30 June 2000 was Tk

74.97 billion. The amount of overdue loans on the same date was Tk 31.14 billion. The

ratio of total overdue to total outstanding loans was 41.54%. As of 30 June 2000, the total

and net income of the bank was Tk 4.151 billion and 40.1 million respectively.

2.3 MISSION OF AGRANI BANK LIMITED

To mobilize financial resources from within and abroad to contribute in Agriculture's,

Industry & Socio-economic development of the country and to play a catalytic role in the

formation of capital market by:

Anticipating business solutions required by all Agrani Bank Limited customers

everywhere and innovatively supplying them beyond expectation. Setting industry

benchmarks in delivering customer value through our comprehensive product range,

customer service and all our activities. Building and exciting team based working

environment that will attract, develop and retain employees of exceptional ability who

help celebrate the success of bank’s business of bank’s customers and of national

development. Maintaining the highest ethical standards and a community responsibility

worthy of a leading corporate citizen. Continuously improving productivity and

profitability and thereby enhancing shareholder value.

2.4 VISION OF AGRANI BANK LIMITED

Agrani Bank Limited dreams of better Bangladesh. Where arts and letters, sports and

athletics, music and entertainment, science and education, health and hygiene, clean and

population free environment and above all a society based on morality and ethics make all

our lives worth living. Agrani Bank’s essence and ethos rest on a cosmos of creativity and

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the marvel magic of a charmed life that abounds with spirit of life and adventures that

contributes towards human development.

2.5 OBJECTIVES OF AGRANI BANK LIMITED

Winning at least 7.00 percent share of deposits and 6.00 percent share of loans and

advances of Bangladeshi market.

Gaining competitive advantages by lowering overall cost compared to that of

competitors.

Overtaking competitors by providing quality customer service.

Achieving technological leadership among the peer group.

Strengthening the Bank’s brand recognition.

Contributing towards the economic well-being of the country by focusing

particularly on remittance, SME and agricultural sectors.

Strengthening research capability for innovative products.

2.6 CORE VALUES OF AGRANI BANK LIMITED

Integrity: Agrani Bank Limited protects and safeguards all customer

information.ABL treats everyone in an equitable and consistent manner. ABL

creates an environment, which earns and maintains customer trust.

Open Communication: Agrani Bank Limited builds customer relationships based

on integrity and respect. Agrani Bank Limited offers a full line of products and

excellent service. Agrani Bank Limited is committed to the prosperity of the

customers and shareholders.

Performance Drivers: In Agrani Bank Limited, customers and employees are

judged in terms of their performance.

Continuous Self Improvement: Continuous learning, self-challenge and strive

make ways for self improvement of workforce at Agrani Bank Limited.

Quality: Agrani Bank Limited offers hassle free better service quality. Agrani Bank

Limited builds-up quality assets in the portfolio.

Teamwork: Interaction, open communication, and maintaining a positive attitude

reflect Agrani Bank Limited’s commitment to a supportive environment based on

teamwork.

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2.7 CORE STRENGTHS OF AGRANI BANK LIMITED

Professionally strong Board of Directors Strong capital base Transparent and Quick Decision making Efficient team of performers Satisfied Customers Internal Control Skilled Risk Management Diversification Quality Customer service Unique Corporate Culture Sharp Bifurcation between Board and Management Strong Asset Base

2.8 CORE COMPETENCIES OF AGRANI BANK LIMITED

Knowledge

Experience & Expertise

Customer Orientation / Focus

Transparency

Determination

Zeal for Improvement

Pursuit of Disciplined growth Strategies

Reliability

2.9 FUNCTIONS OF AGRANI BANK LIMITED

To maintain all types of deposit A/Cs. To make investment. To Conduct Credit / loan facilities. To conduct foreign exchange business. To conduct other Banking services. Agricultural & Rural Credit. Export Development Fund. Green Banking. Financing Women Entrepreneurs. Loan Classification and Provisioning. Credit Monitoring, Early alert and management of non-performing loans.

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Recovery of classified and written off loans. International Trade operations. SWIFT operations. Treasury Operations and Fund Management. Information Technology (IT). Internet Banking Service. Perform Social welfare activities

2.10 STRATEGY OF AGRANI BANK LIMITED

To manage and operate the Bank in the most efficient manner to enhance financial performance and to control cost of fund.

To strive for customer satisfaction through quality control and delivery of timely services.

To identify customers credit and other banking needs and monitor their perception towards our performance in meeting those requirement.

To review and update policies, procedures and practices to enhance the ability to extend better services to customers.

To train and develop all employees and provide adequate resources so that customer needs can be responsibly addressed.

To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to all employees in a timely fashion.

To cultivate a working environment that fosters positive motivation for improved performance

To increase direct contract with customers in order to cultivate a closer relationship between the bank and its customers.

2.11 DEPARTMENTS OF AGRANI BANK LIMITED

Human Resources Division Personal banking Division Treasury Division Operations Division Computer and Information Technology Division Credit Division Finance & Accounts Division Financial Institution Division Audit & Risk Management Division

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2.12 MANAGEMENT STRUCTURE OF AGRANI BANK LIMITED

Figure 2.1: Management Hierarchy of Agrani Bank Limited

2.13 PRODUCTS AND SERVICES OF AGRANI BANK LIMITED

1. Deposit

a) Taka Account

• Current Deposit (CD)

• Savings Deposit (SB)

• Fixed Deposit (FDR)

• Special Notice Time Deposit (SNTD)

• Non-Resident Special Taka Account (NRTA)

• Non-Resident Investors Taka Account (NRIT)

• Agrani Bank Pension Scheme (APS)

• Agrani Bank Bishesh Shanchay Scheme (ABS)

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• Agrani Double Benefit Scheme (ADBS)

• Monthly Deposit Scheme (MDS)

• Monthly Income Scheme (MIS)

• Students Savings A/C (School Banking)

• Small Life Insurance Policy Holders A/C

• Farmers A/C

• Freedom Fighters A/C

• Other Beneficiaries A/C under Social Securities

b) Foreign Currency Account• Foreign Currency (FC) A/C

• Non-Resident Foreign Currency Deposit (NFCD) A/C

• Resident Foreign Currency Deposit (RFCD) A/C

• Exporters Retention Quota (ERQ) A/C

2. Loans & Advances

a) Continuous Loan

• Cash Credit (Hypo)

• Cash Credit (Pledge)

• Secured Overdraft (SOD)

b) Term Loan

• Inland Bill Purchase (IBP)

• Export Cash Credit

• Industrial Credit (IC)

• Housing Loan (General & Commercial)

• Consumer Credit

• Loan for Overseas Employment

• Weavers’ Credit

c) Rural & Agro Credit

• Crop Loan

• Fishery Loan

• Animal Husbandry Loan

• Agri Machinary Loan

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• Rural Transport Loan

• Swanirvar Loan

• Poverty Alleviation Loan

d) Small and Medium Enterprise Loan

• Service Sector Loan

• Trading Sector Loan

• Manufacturing Sector Loan

e) Import Finance

• Loan Against Imported Merchandise (LIM)

• Loan Against Trust Receipt (LTR)

• Payment Against Document (PAD)

f) Export Finance

• Export Cash Credit

• Packing Credit (PC)

• Local / Foreign Bills Purchased (FBP)

• Loan Against Export Development Fund (EDF)

• Advance Against Cash Incentive (Subsidy)

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2.14 FIVE YEARS PERFORMANCE AT A GLANCE

Source: Annual report of ABL 2009-2013

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Chapter - 3Theoretical Aspects

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3.1 DEFINITION OF CREDIT

Contractual agreements in which a borrower receives something of value now and agrees

o repay the lender at some date in the future, generally with interest. The term also refers

to the borrowing capacity of an individual or a company.

A bank loan is an extension of credit, to a consumer or business, in the form of borrowed

funds which has to be paid back with interest.

3.2 CREDIT MANAGEMENT & ITS OBJECTIVES

Credit management:

Credit management is the process of controlling and collecting payments from customers.

This is the function within a bank or company to control credit policies that will improve

revenues and reduce financial risks. A credit manager is a person employed by an

organization to manage the credit department and make decisions concerning credit

limits, acceptable levels of risk and terms of payment to their customers. In companies,

the role of Credit manager is variable in its scope.

Objectives of credit management:

The objective of the credit management is

To maximize the performing asset and the minimization of the non-performing

asset as well as ensuring the optimal point of loan and advance and their efficient

management.

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 are

highly required for ensuring the timely repayment and minimizing the default.

The overall success in credit management depends on the banks credit policy, portfolio of

credit, monitoring, supervision and follow-up of the loan and advance. Therefore, while

analyzing the credit management of Agrani Bank Limited, it is required to analyze its

credit policy, credit procedure, how they are managing credit and quality of credit

portfolio. To implement procedures which ensure the collection of debt, meeting of

service targets and the prevention of escalation in arrear debt. To facilitate financial

assistance and basic services for the community’s poor Customer Care, Credit Control,

Debt Collection and Indigent Policy and provide incentives for prompt payment as well

as ensuring limited risk levels by means of effective management tools.

3.3 CREDIT RISK MANAGEMENT

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Credit risk management encompasses identification, measurement, matching mitigations,

monitoring and control of the credit risk exposures to ensure that:

The individuals who take or manage risks clearly understand it

The organization’s Risk exposure is within the limits established by Board of

Directors with respect to sector, group and country’s prevailing situation

Risk taking Decisions are in line with the business strategy and objectives set by

Board of Directors

The expected payoffs compensate the risks taken

Risk taking decisions are explicit and clear

Sufficient capital as a buffer is available to take risk.

The Importance of Credit Risk Management for Banking:

Banks and other financial institutions are often faced with risks that are mostly of

financial nature. These institutions must balance risks as well as returns. For a bank to

have a large consumer base, it must offer loan products that are reasonable enough.

Banks are constantly faced with risks. There are certain risks in the process of granting

loans to certain clients. There can be more risks involved if the loan is extended t

unworthy debtors. Certain risks may also come when banks offer securities and other

forms of investments. The risks of losses that result in the default of payments of the

debtors are a kind of risks that must be expected. Because of the exposure of banks to

many risks, it is only reasonable for bank to keep substantial amount of capital to protect

its solvency and to maintain its economic stability. The second Basel Accords provides

statements of its rules regarding the regulations of bank’s capital allocation in connection

with the allocation in connection with the level of risks the bank is exposed to. The

greater the bank exposed is risks, the greater the amount of capital must be when it comes

to its reserves, so as to maintain its solvency and stability.

3.4 A SIMPLE GUIDELINE TO MANAGE CREDIT & CREDIT RISK

Bangladesh Bank has provided directional guidelines to the banking sector with a view to

improve the Credit Risk Management culture, establish minimum standards for

segregation of duties and responsibilities and assist in the ongoing improvement of the

banking sector in Bangladesh. These guidelines were prepared and endorsed by the senior

credit executives from private sector, foreign and nationalized commercial banks

operating in Bangladesh. Credit Risk Management is of utmost importance to Banks, and

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as such, policies and procedures should be endorsed and strictly enforced by the

MD/CEO and the Board of the Bank.

The guidelines of Bangladesh Bank related with Management of Credit Risks have been

organized into the following segments:

Figure 3.1: Guidelines of Bangladesh Bank on Management Credit Risks

3.5 CREDIT ASSESSMENT

Credit Applications should summaries the results of the RMs risk assessment and include,

as a minimum, the following details:

Amount and type of facility(s) proposed, Purpose of facilities, Facility Structure, Security

Arrangements, Government and Regulatory Policies, Economic Risks.

The following risk areas should be addressed:

Borrower Analysis & Industry Analysis Supplier/Buyer Analysis Historical Financial Analysis Projected Financial Performance Credit Background Account Conduct Adherence to Lending Guidelines Mitigating Factors

Facility Structure Purpose of Credit Project Implementation Foreign Currency Fluctuation Security Type of Control on Cash Flow Exit Option Name Lending

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3.6 RISK GRADING

Grading Short Name Number Score Need to Obtain In Scorecard

Superior SUP 1 100% cash covered Good GD 2 85+ Acceptable ACCPT 3 75-84 Marginal/Watch list MG/WL 4 65-74 Special Mention SM 5 55-64 Sub standard SS 6 45-64 Doubtful DF 7 35-44 Bad & Loss BL 8 <35

Figure 3.2: Risk Grading

Good Credit: A qualification of an individual's credit history that indicates that the

borrower is a safe credit risk. A high credit score is an indicator of good credit. An

individual's credit history is dependent on a number of factors, including the amount

borrowed, the amount of available credit remaining and the timeliness of payments.

Acceptable Credit: An acceptance credit is a type of letter of credit that is paid by a

time draft authorizing payment on or after a specific date, if the terms of the letter of

credit have been complied with.

Marginal credit: In exchange, particularly foreign exchange, the term marginal

credit refers to a commercial letter of credit which may be drawn against within the

margin of the letter, or in other words, up to the amount specified in the letter. Such a

credit is as a rule employed in a triangular operation.

Special mention: potentially weak loans or assets presenting an unwarranted credit

risk, but less risky than substandard assets. Bank loans are classified as special

mention assets when the lender fails to supervise a loan properly or maintain

sufficient documentation, or otherwise has deviated from acceptable and prudent

lending practices. Assets listed for special mention generally reflect weaknesses in

administration, servicing, or collection, as opposed to credit weaknesses, which are

noted in examination reports as adversely classified assets.

Sub-standard: if it is past due/overdue for 6 month or beyond but less than 9 month.

Doubtful: if it is past due/overdue for 9 month or beyond but less than 12 month.

Bad-loss: if it is past due/overdue for 12 month or beyond.

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Chapter - 4Credit Management of Agrani Bank Limited

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4.1 CREDIT POLICY OF AGRANI BANK LIMITED

In line with the Bangladesh Bank declared concretionary monetary policy that prevailed

in the year 2012, Agrani Bank Limited’s Credit policy was to expand credit within

prudent limit and to discourage credit in unproductive sectors. Simultaneously, Agrani

Bank Limited has maintained a deliberate pro growth directional bias in its credit policy

to ensure adequate Credit flows to farm and non-farm productive sectors of micro, small

& medium enterprises.

The Credit policy of Agrani Bank Limited has been devised in accordance with

Bangladesh Bank’s guidelines to ensure that effective credit risk management practices

are followed, which will contribute towards the achievement of the overall business

objectives of the bank while ensuring compliance with the regulatory framework set out

by the regulators.

Agrani Bank Limited’s annual credit plan determines overall limits based on various

client segments and products, economic sectors, geographical locations, currency and

maturity with a view to avoid undue concentration in any client segment, economic sector

or geographical location.

4.2 CREDIT PRINCIPLES OF AGRANI BANK LIMITED

In the feature, credit principles include the general guidelines of providing credit by

branch manager or credit officer. In Agrani Bank Limited they follow the following

guideline while giving loan and advance to the client.

Credit advancement shall focus on the development of customer relationship.

All credit extension must comply with the requirements of Bank’s Memorandum

and Article of Association, Banking Company’s Act, Bangladesh Bank’s

instructions, other rules and regulation as amended from time to time.

Loans and advances shall normally be financed from customer’s deposit and not

out of temporary funds or borrowing from other banks.

The bank shall provide suitable credit services for the markets.

It should be provided to those customers who can make best use of them.

The conduct and administration of the loan portfolio should contribute with in

defined risk limitation for achievement of profitable growth and superior return on

bank capital.

Interest rate of various lending categories will depend on the level of risk and

types of security offered.

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4.3 GENERAL PROCEDURE OF SANCTIONING LOAN:

The following procedures are applicable for giving advance to the customer. These are:

Party’s application

Collecting CIB report from Bangladesh Bank

Party’s financial statement

Complete balance sheet for 3 (Three) year.

Copernic income statement for 3 (three) year.

Collect Credit Risk Grading Sheet (CRGS)

Techniques of Project Appraisal.

Application for deceleration from applicant.

Proposal for filling by bank

Head office approval as sanction advice.

Branch approval as sanction advice augends log application.

Documentation

Disbursement

A. Party’s application:

At first borrower had to submit an application to the respective branch for loan, where

he/she has to clearly specify the reason for loan. After receiving the application from the

borrower Bank officer verifies all the information carefully. He also checks the account

maintains by the borrower with the Bank. If the official becomes satisfied then he gives

form (prescribed application form of Bank) to the prospective borrower.

B. Collecting CIB Report from Bangladesh Bank:

After receiving the application for advance, United Commercial sends a letter to

Bangladesh Bank for obtaining a report from there. This report is called CIB (Credit

Information Bureau) report. United Commercial generally seeks this report from the head

office for all kind of Investment. The purpose of this report is to inform that whether the

borrower has taken loan from any other Bank; if ‘yes’ then whether the party has any

overdue amount or not.

C. Party’s Financial Statement:

After receiving CIB report from Bangladesh Bank, then respective branch collect from

company’s financial statement minimum 3 year, this document help the future lone back

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possibility and this base Investment for approval of Head Office. Documents those are

necessary for sending Investment proposal are:

Necessary Documents

While advancing money, banks create a lot of document, which are required to be signed

by the borrowers before the disbursement of the loan. Of them some are technically called

charge documents. Amount the documents frequently used, some are:

a) Loan application form duly signed by the customer.

b) Acceptance of the term and conditions of sanction advice.

c) Trade license.

d) Letter of guarantee of third party.

e) Net- worth statement.

f) If is individual borrower

Letter of Guarantee of the spouse of the borrower

Personal net-worth statement of the borrower

g) In Case Of Partnership Firm

Trade license (Up to date)

Partnership Deed (registered)

Letter of Guarantee of the partners

Personal net-worth statement (PNS) of partner

Letter of partnership

Partnership Account Agreement

h) In Case Of Limited Company

Copy of memorandum and articles of association of the company including

certificate of incorporation duly certified by Registered Joint Stock Companies

(RJSC) and attested by the managing director and accompanied by an up-to-

date list of directors.

List/personal profile of director.

Certificate of Incorporation.

From 12 certified by RJSC

Board resolution in respect of availing loans & execution of document with

bank.

Letter of guarantee of the director.

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Personal net-worth statement of director.

Deed of mortgage & hypothecation for creation of charge on fixed & fluting

assets (existing & future)with RJSC

Modification of charge creation certificate from RJSC

Undertaking starting that the borrower shell not makes any amendment or

alteration in memorandum & article of association without prior approval of

bank.

Approval of the bank for any inclusion or exclusion of director in & from the

company.

Certificate of commencement (In case of public limited company)

Joint venture agreement (In case if Joint venture company)

BOI permission (In case if Joint venture company)

Required Doc’s for Retail (Individual)

Photograph- 2 Copies

Passport/National ID/Driving License

Visiting card/company ID

Tin

Trade license (For Businessman)

Utility Bill (Electricity/WASA/Gas)

Bank statement- last 6 months

Partnership Deed (for partnership firm)

Company memorandum (FPF)

Rental/Lease/Title Deed

Certificate of professional degree

Guarantor:

Spouse- photo with signature, Attested by applicant

Eligible photo with signature, Attested by the applicant, Visiting card, TIN

Sanction letter with Related Bank Statement (If Enjoying Any Loan)

Required Doc’s for SME

Total stock

Total sale for 1 year

Total creditors

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Total debtors

Guarantor

Net worth

Photograph

Visiting card

TIN

Trade license

Required Doc’s for Term lone

Term loan agreement

Letter of installment

Letter of undertaking

Amortization schedule

Required Doc’s for Home loan

Power of attorney for developing the property

Letter of installment

Letter of undertaking

Amortization schedule

Letter allotment of flat or floor space

Tripartite agreement among purchase, developer and bank (if under

construction)

Under taking of the borrower to the effect that he will mortgage the flat/floor

space the bank at the moment the same is registered in his name by the seller.

Agreement between land owner & developer.

Copy of approved plan of construction from concerned authority.

D. collect credit risk grading sheet (CRGS):

The branch collect credit risk grading sheet because this measure the credit risk. The

company or person which category of risk against (high, medium or low). This help of the

bank.

E. Techniques of Project Appraisal:

An appraisal is a systematic exercise to establish that the proposed project is a viable

preposition. Appraising officer checks the various information submitted by the promoter

in first information sheet, application for Investment and Investment proposal.

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United Commercial considers the following aspects in appraising a proposal.

Technical viability

Commercial viability

Financial viability

Economic viability

The Head Office (HO) mainly checks the technical, commercial and financial viability of

the project. For others HO is dependent on branch’s information. But when the

investment size is big, then the HO verifies the authenticity of information physically.

F. Application & declaration from applicant:

The application collects form applicant then the bank declaration from then lone amount.

This procedure applicant all of recoupment fill the bank than bank head-office send all

information for the sanction lone.

G. proposal from filling the bank:

The bank officer readies the proposal form. This form applicant all kind of information

and applicant why collect this lone and this use and return facility all information gather

this proposal. This proposal applicant all information known then this granted the head

office and necessary observation complete for applicant.

H. Head office approval as sanction advice:

When Head office receive appraisal from the branch then, Head Office again appraises

the project. If it seems to be a viable one, the HO sends it to the Board of Directors for the

approval of the Investment. The Board of Directors (BOD) considers the proposal and

takes decision whether to approve the Investment or not. If the BOD approves the

Investment, the HO sends the approval to the concerned branch.

The respective officer of Head Office appraises the project by preparing a summary

named “Top Sheet” or “Executive Summary” and then he sends it to the Head Office

Credit Division for the approval of the Loan. The Head Office Credit Division considers

the proposal and takes decision whether to approve the Investment or not. If the

committee approves the Investment; the HO sends the approval to the concerned branch.

The all kind of formalities maintain so head office necessary legal analysis like as

If project lone then see the project.

This project legal all information collects.

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If the personal lone so all personal information collects.

The observation of 6 C

This all confirm so head office approval as sanction advice from the branch than branch

sanction the lone.

I. Branch approval as sanction advice augend loan application:

After getting the approval of the HO the branch issues sanction letter to the borrower. A

sanction letter contains:

Name of borrower,

Facility allowed,

Limit

Purpose,

Rate of interest,

Period of the Investment and mode of adjustment,

Security and Other terms and condition.

J. Documentation:

Documentation is obtaining such agreement where all the terms and condition and

securities are written and signed by the borrower. Generally, the documents are taken in

the case of a secured advance by ABL:

Demand promissory note: Here the borrower promises to pay the loan as and

when demand by bank to repay the loan.

Letter of arrangement.

Letter of continuity.

Letter of hypothecation of goods and capital machinery

Stock report: This report is used for OD and CC. In this report, information about

the quality and quantity of goods hypothecated is furnished.

Memorandum of deposit of title deed of property duly signed by the owners of the

property with resolution of Board of Directors of the company owning the landed.

Personal guarantee of the owners of the property.

Guarantee of all the directors of the company.

Resolution of the board of directors to borrow fund to execute documents and

completes other formalities

Page | 27

Form no. XVII/XIX for filling charges with the register of joint stock companies

under relevant section.

Letter of Revival

K. Disbursement:

When the credit proposal are approved the credit officer must have to be ensured that the

disbursement of the credit facilities must comply with the directions written in the credit

policy and circular made by time to time along with checking all the following terms and

conditions:

The officer of Loan Administration must collect the acceptance of the customer’s

of the terms and conditions on the duplicate copy of the sanctioned advice.

They will thoroughly examine and ensure that the subject credit facility does not

contradict to any law, rules and regulation of the country, Bangladesh Bank. Deed

of the Mortgage and power of the Attorney to be drafted and executed under the

Supervision of the Bank’s Legal Advisor.

Lawyers certificate to the effect that all the legal formalities (Equitable/

Registered Mortgaged) has been properly created on the land and building in favor

of the bank & bank has acquired the effective title of the property.

Registered power of attorney has been collected from the borrower (contractor)

assigning the work order favoring the ABL and the power of attorney has been

registered with the work order given agency and they have agreed that they will

issue all the cheques favoring ABL.

The legal documents of the vehicle have been obtained.

Collection of the satisfaction certificate in respect of all the documents both legal

and banking from the lawyer.

Entry has been made in the Safe-in and Safe-out register and the documents are

preserved.

4.4 CREDIT APPRAISAL PROCESS OF AGRANI BANK LTD:

The function of commercial bank is to accept deposit from the common people and to

invest deposited money in different sectors for overall development of the economy of the

country. So the banks have to very much careful in credit appraisal. The person who is

held responsible for appraising a loan proposal in Agrani Bank Limited is called the

relationship manager. The customer request for credit limit and the relationship manager

Page | 28

must decide whether to accept or refuse proposal. Making this decision is the most

important credit activity; all other activities of the credit Department are supportive to this

decision. To ensure the proper and orderly conduct of the business of the bank, the Board

of Directors authorized the Managing Director and other top-level executive, that is,

DMD and GM to sanction the credit. It is mentionable that principal branch operates the

credit division under the supervision of DGM. The relationship manager of principal

branch furnishes the credit proposal with the required information and sends it to the final

authority, i.e. GM, DMD & MD, of head office for final approval.

The most important measure of appraising a loan proposal is safely of the project. Safety

is measured by the borrower and repaying capacity of him. The attitude of the borrower

is also an important consideration; liquidity means the inflow of cash into the project in

course of its operation. The profit is the blood for any commercial institution. Before

approval of any loan project the bank authority has to be sure that the proposed project

will be a profitable venture. Profitability is assessed from the projected profit and loss

statement. The security is the only tangible remains with the banker. Securing or

collateral it is accepting is easy to sell and sufficient to cover the loan amount. Bank

cannot sanction loan by only depending on collateral. The sources of repayment of the

project should be a feasible one. During sanctioning any loan bank has to be attentive

about diversification of risk. All money must not be disbursed amongst a small number

of people. In addition any project must be established for the national interest and growth.

Commercial bank and financial institutions intermediate between lenders and borrowers.

These financial intermediaries collect deposit and disburse it as loan and advance to the

individual people, business, commercial, industrial entity. The loan and advance should

be given to them who has the certain and predicted cash flow to repay the credit. If the

relationship manager fail to analyze the clients viability of repaying the loan and the

projects cash flow possibility of default may arise due to the fact. So the importance of

appraisal, in sanctioning the loan, is the key to identify the borrower’s ability, expertise,

efficiency, industry analysis, and business performance to ensure the recovery of the

credit along with the good supervision, monitoring and the relationship. In a word it can

be said that the purpose of appraisal is to be sure that the proposed advance will be safe,

liquid, and profitable and for acceptable purpose covered by adequate security. At the

time of credit proposal the bank has to come to an acceptable compromise between over

caution and under caution.

Page | 29

4.5 CREDIT ISSUE PROCEDURE FLOWCHART:

Figure 4.1: Credit Issue Procedure Flowchart

4.6 CREDIT ANALYSIS: WHAT MAKES A GOOD LOAN?

Credit analysis is the analysis of financial statement of business customers for the purpose

of lending. It is conducted to determine whether the customer is creditworthy and whether

the customer has sufficient cash flows and backup assets to repay the loan. The following

major issues should examine in credit analysis:

Is the borrower creditworthy?

Whether purpose of the loan is consistent with bank’s credit policy and

government regulations?

Whether customer/or his business have the ability to generate enough cash

repay the loan.

Whether sufficient security has been offered. So that in the event of default

bank’s fund can be recovered.

Fixing amount of loan, terms and conditions, documentations, etc. meet the

needs of the borrower and to protect the interest of the bank.

Page | 30

Application received from customer

Sales / branch scrutinizes the application

Application meets basic

criteria ?

Sales officer/Manager recommends the loan and sends

to creditApplication is received at

credit and assessed

Loan disbursed and application lodged

in safe custody

Application sent back to source

Credit Approved?Yes

Documents

in order?

Yes

Yes No

4.6.1. IS THE BORROWER CREDITWORTHY?

A. Character: To determine whether the borrower has a responsible attitude towards

borrowed funds and whether he will have every effort to repay what is owed.

Responsibility, truthfulness, serious purpose, and serious intention to repay loans

make up the characters of the borrower.

B. Capacity: Whether customer requesting loan has the authority to request loan and

have the legal standing to sign loan agreement and documents.

C. Capital: Whether borrower has sufficient assets to repay the loan.

D. Condition:

Other loans and liabilities of the borrower.

The creditors enough profit or asset he can pay the lone installment.

E. Credit history/Credit habit:

Whether loans borrowed by the customers previously and how those earlier loans

were handled.

Whether there is any loan default earlier.

Whether legal action has ever been taken against him for recovery of default loan.

4.6.2 PRINCIPLES OF SOUND LENDING

Liquidity: Liquidity means the availability of bank funds on short notice. The

liquidity of an advance means it repayment on demand on due date or after a short

notice.

Safety: Safety means the assurance of repayment of distributed loans. Bank is in

business to make money but safety should never be sacrificed for profitability, to

ensure the safety of loan, the borrower should be chosen carefully.

Profitability: Banking is a business aiming at earning a good profit. The difference

between the interest received on advances and the interest paid on deposit

constitutes a major portion of the bank income, besides, foreign exchange business

is also highly remunerative.

Intent: Banks sanction loans for productive purpose. No advances will be made by

bank for unproductive purposes though the borrower may be free from all risks.

Security: The security offered for an advance is an insurance to fall bank upon in

cases of need. Security serves as a safety value for an unexpected emergency. Since

risk factors are involved, security coverage has to be taken before a lending.

Page | 31

National interest: Banking industry has significant role to play in the economic

development of a country. The bank would lend if the purpose of the advances can

contribute more to the overall economic development of the country.

4.7 CREDIT MONITORING

The Credit Administration Division will oversee the credit and investment activities of

the Bank with a broader portfolio-based outlook (regional dispersal, industry and

customer-type segmentation, product performance, portfolio classification, etc.).

The Loan Administration unit of the division will establish and maintain a

comprehensive data base on all credit exposures, and monitor consolidated

movements as these are reported through copies of transaction sheets and

summaries. It will conduct portfolio analyses for the purpose of evaluating portfolio

performance and detecting any deterioration in the risk exposures. Summary reports

and recommendations will be submitted to the Credit Committee for appropriate

action or policy decisions.

The credit review unit of the division is responsible for reviewing the credit process

to ensure that approved policies and procedures are being effectively being

implemented throughout the Bank.

4.8 EARLY ALERT PROCESS

An Early Alert Account is one that has risks or potential weaknesses of a nature requiring

monitoring, supervision, or close attention by management. If these weaknesses are left

uncorrected, they may result in deterioration of the prospects for the asset or in the Bank’s

credit position at some future date with a likely prospect of being downgraded to CG 5 or

worse (Impaired status), within the next twelve months. Early identification, prompt

reporting and proactive management of Early Alert Accounts are prime credit

responsibilities of all Relationship Managers and must be undertaken on a continuous

basis. An Early Alert report is completed by the RM and sent to the approving authority

in CRM for any account that is showing signs of determination within seven days from

the identification of weaknesses. The Risk Grade is updated as soon as possible.

4.9 CREDIT RECOVERY

It is the duty of the Bank to recover the landed fund within the stipulated time and if the

borrower fails to repay the money within the pointed period Bank declare him/her as a

Page | 32

defaulter and recover the fund by selling the securities given by the borrower or by

freezing his/her account or make a suit against him/her. Recovery procedure is a lengthy

one that requires efforts of the bank, society and legal institutions. It also takes time and

money. Like other banks, Agrani Bank Limited follows four steps to recover the

outstanding amount. These four steps are described in detail below-

Reminder to the client is given through a formal communication channel. A letter is

written and properly signed on the bank’s papers. This letter is issued several times

to remind the honorable loaner to repay his/her outstanding portion.

If the loan amount is not yet repaid after sending a series of letters, then social

pressure is created on the client by persons referred while opening account in the

bank.

Legal notice is prepared and sent by Agrani Bank Limited when above two steps

fails to recover the amount. It is a threat to the borrower.

The last and final step of the recovery procedure is the help from the court. Agrani

Bank Limited sincerely tries to avoid this kind of situation for its honorable clients

but cannot help doing for its own sustainability.

Recovery procedure of Agrani Bank Limited is the ultimate combination of time, effort of

money. It follows four procedural steps to recover the lending amount, which is joint

effort of Bank, society and legal institutions, which are shown in Chart.

Figure 4.2: Credit Monitoring

Page | 33

1st Reminder by the Bank2nd Reminder by the Bank3rd or final Reminder by the BankProviding legal noticeExecutive of legal rules by the help of court

Chapter - 5Credit Performance of Agrani Bank Limited

Page | 34

5.1 Year wise Credit and Growth

Loan and advances are stated in the balance sheet on gross basis. Loan and advances are

on the basis of their maturity/repayment term.

Table 5.1: Year wise Credit & Growth (Tk. in Crores)

Year 2009 2010 2011 2012 2013

Total Loans & Advances 12,224 16,326 19,409 21,266 20,297

Growth of Loans & Advances 7.83% 33.56% 18.88% 9.57% - 4.56%Sources: Annual Report 2009-20103, ABL

Graphical Presentation:

2009 2010 2011 2012 20130

5000

10000

15000

20000

25000

1222416326 19409 21266 20297

Year wise Credit & Growth

Figure 5.1: Year wise Credit Disbursement

2009 2010 2011 2012 2013-10.00%

-5.00%0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%40.00%

7.83%

33.56%

18.88%

9.57%

-4.56%

Growth of Credit

Figure 5.2: Growth of Credit

Interpretation: The graph shows that, growth rate of loan and advance is decreasing over

the years. Amount of credit is increasing over the years but the growth of credit is

decreasing. From the above chart we can see that the lowest amount of credit was Tk.

12,224 Crore in 2009 and the highest amount was Tk. 21,266 Crores in 2012. But after

2010 the growth of credit was in decreasing trend. This is because of inappropriate

lending system.

Page | 35

5.2 Geographical location wise credit distribution

Agrani Bank Ltd. disburse loan on the basis of their credit policy.

Table 5.2.: Geographical location wise credit (TK. in crore)

2009 2010 2011 2012 2013

Urban 12765 14755 17687 19356 18165

Rural 1379 1570 1721 1909 2130Sources: Annual Report 2009-20103, ABL

Table 5.3: As a Percentage of Total Loan & Advances (%)

2009 2010 2011 2012 2013

Urban 96.98% 90.38% 91.13% 91.02% 89.50%

Rural 3.02% 9.62% 8.87% 8.98% 10.50%Sources: Annual Report 2009-20103, ABL


2009 2010 2011 2012 20130.00%

10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%90.00%

100.00% 96.98%90.38% 91.13% 91.02% 89.50%

3.02%9.62% 8.87% 8.98% 10.50%

Geographical Area wise Credit Distribution

Urban Rural

Figure 5.3: Geographical location wise credit

Interpretation: From the above graph it is seen that Agrani Bank Ltd disburse a large

portion of credit in urban area. In 2009 to 2013 the bank distribution in urban area was

near about 96.98%, 90.38%, 91.13%, 91.02%, 89.50%, where in rural area was 3.02%,

9.62%, 8.87%, and 8.98% 10.50%. that indicates which the Bank preffers Urban Area in

giving credit because of industrialization that favours credit disbursement more than the

rural area.

Page | 36

5.3 Sector wise distribution of loan in 2013

Table 5.4: Sector wise credit Disbursement (TK. in crore)

Sector 2009 2010 2011 2012 2013Agriculture and fishery 694 740 727 864 972Jute & jute goods 650 888 798 630 558Transport storage & communication 71 252 174 150 174Ship breakings 79 95 220 219 115Textile & readymade garments 1269 1694 3178 2675 1947Food & allied industry 509 680 985 863 550Construction & engineering 235 314 425 185 175Pharmaceuticals and chemicals 320 427 378 298 345Leather sector 464 534 371 364 380Power sector 7 195 746 1180 1119Professional and services 93 130 140 182 236Housing service 1370 1473 449 572 638Wholesale/retail trading 2011 2687 2254 2152 2833Personal (staff and other personal loan) 1293 1379 1490 1569 2128Others 3152 4829 7066 9358 7918 Sources: Annual Report 2009-20103, ABL


2009 2010 2011 2012 20130%

10%

20%

30%

40%50%

60%

70%80%

90%

100% Sector wise credit Disbursement

Agriculture and fishery Jute & jute goods Transport storage & communicationShip breakings Textile & readymade garments Food & allied industryConstruction & engineering Pharmaceuticals and chemicals Leather sectorPower sector Professional and services Housing serviceWholesale/retail trading Personal (staff and other personal loan) Others

Figure 5.4: Sector wise credit Disbursement

Interpretation: ABL provides the highest portion of the loans in Wholesale/retail

trading, Personal (staff and other personal loan) and lowest portion of the loans in

Transport, storage & communication and Ship breaking.

5.4 Unclassified Loan & Advances

Page | 37

Table 5.5.: Unclassified Loan & Advances (TK. in crore)

Year 2009 2010 2011 2012 2013

Unclassified loan 9,850 14,224 17,260 15,886 16,717

Total loan 12,224 16,326 19,409 21,266 20,297Percentage of Unclassified loan as total loan 80.58% 87.12% 88.93% 74.70% 82.07%

Sources: Annual Report 2009-20103, ABL

Graphical Presentation

2009 2010 2011 2012 201365.00%

70.00%

75.00%

80.00%

85.00%

90.00%

95.00%

80.58%

87.12%88.93%

74.70%

82.07%

Unclassified loan

Figure 5.5: Unclassified loan as a % of total loan

Interpretation: From the above graph it has been seen that, percentage of unclassified

loan fluctuated slowly from 2009-2013. From 2009 to 2011 the rate increased from

80.58% to 98.26%, but decreased in 2012 and increased in 2013.

Page | 38

5.5 Classified to Total Loans & Advances

Table 5.6: Classified loan as a percentage of total loan & advances (TK. in crore)

Year 2009 2010 2011 2012 2013

Classified loans & advances 2,374 2,102 2,149 5,380 3,580

Total loans & Advances 12,224 16,326 19,409 21,266 20,297Percentage of classified loanas total loan 19.42% 12.88% 11.07% 25.30% 17.93%



2009 2010 2011 2012 20130.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

19.42%

12.88%11.07%

25.30%

17.93%

Classified loan

Figure 5.6: Classified loan as percentage of total credit

Interpretation: The graph shows that, percentage of classified loan decreased from

2009-2011, increased in 2012 and decreased again in 2013. In 2009 the rate is 19.42%

which decrease to 11.07% in 2010. In 2013 the rate is 17.93%. Because the bank became

inefficient in managing recovering its classified loan. This alert banks and gives them a

reason to monitor a loan more closely.

Page | 39

5.6 Sub-Standard, Doubtful and Bad & loss Loans

Table 5.6: Sub-Standard, Doubtful and Bad & loss Loans (TK. in crore)

2009 2010 2011 2012 2013Sub-standard 149 231 209 711 380Doubtful 161 133 238 918 471Bad & loss 2064 1738 1702 3749 2728Total 2,374 2,102 2,149 5,380 3,580



2009 2010 2011 2012 20130

5001000150020002500300035004000

149 231 209711

380161 133 238918

471

20641738 1702

3749

2728

Sub-Standard, Doubtful and Bad & loss Loans (in amount)

Sub-standard Doubtful Bad & loss

Figure 5.7: Sub-Standard, Doubtful and Bad & loss Loans

2009 2010 2011 2012 20130.00%

20.00%

40.00%

60.00%

80.00%

100.00%

6.28% 10.99% 9.73% 13.22% 10.62%6.78% 6.33% 11.07% 17.07% 13.16%

86.94% 82.68% 79.20%69.71% 76.22%

Sub-Standard, Doubtful and Bad & loss Loans (in percentage)

Sub-standard Doubtful Bad & loss

Figure 5.8: Sub-Standard, Doubtful and Bad & loss Loans (in %)

Interpretation:In the classified loan the amount of “Bad & loss” loan ratio is very much high. “Bad &

Loss” was 69.71% in 2012, which was increased 76.22% in the year 2013. Doubtful loan

decreased 25.66% in 2012 to 13.16% in 2013. Sub-standard loan decrease from 13.23%

to 10.62% in 2012 to 2013.

5.7 Provision for Classified Loans

Page | 40

Table 5.7: Provision for Classified Loans (TK. in crore)

2009 2010 2011 2012 2013

Provision for Loan and Advances(Tk. in Crore) 1056 834 942 3212 1687



2009 2010 2011 2012 20130

500

1,000

1,500

2,000

2,500

3,000

3,500

1,056 834 942

3,212

1,687

Provision for Loan and Advances

Figure 5.9: Provision for Loan and Advances

Interpretation:

As we can see the Provision for Loan and Advances is fluctuating year by year. The

highest amount of provision was in 2012 (tk. 3212 crore) and the lowest amount of

provision was in 2010 (Tk. 834 crore).

Page | 41

5.8 Loan to Deposit Ratio

Table 5.8: Loan to Deposit Ratio (TK. in

crore)

Year 2009 2010 2011 2012 2013Total Loans & Advances 12,224 16,326 19,409 21,266 20,297Total Deposit 16,628 20,633 25,221 29,243 34,868Loan to deposit Ratio 58.21% 72.72% 76.95% 79.13% 73.51%



2009 2010 2011 2012 201350.00%

55.00%

60.00%

65.00%

70.00%

75.00%

80.00%

85.00%

58.21%

72.72%

76.95%79.13%

73.51%

Loan to Deposit Ratio

Figure 5.10: Loan to Deposit Ratio

Interpretation: The graph shows that, total deposit from 2009 to 2013 is increasing. It

indicates that the bank is developing & loyal to its clients and account holders. In 2009

the total deposit was 16,628 crore and in 2013 the total deposit was 34,868 crore. The

growth rate was fluctuating over the years from 2009-2013. This is because of the

lowering interest rate.

Page | 42

5.9 Capital Adequacy Ratio

The capital adequacy ratio determines the capacity of the bank in terms of the meeting the

liabilities and other risk such as credit risk, operational risk etc. Generally, 10% is

acceptable line for this ratio.

Capital Adequacy Ratio: (Total Eligible Capital / Total Risk Weighted Assets) * 100

Table 5.9: Capital Adequacy Ratio (TK. in crore)

Year 2009 2010 2011 2012 2013

Capital Adequacy Ratio 8.22% 9.20% 11.00% (6.15%) 10.04%Sources: Annual Report 2009-20103, ABL


2009 2010 2011 2012 2013

-8.00%-6.00%-4.00%-2.00%0.00%2.00%4.00%6.00%8.00%

10.00%12.00%

8.22%9.20%

11.00%

-6.15%

10.04%

Capital Adequacy Ratio

Figure 5.11: Capital Adequacy Ratio

Interpretation: Agrani bank is not good enough to maintain CAR requirement because

for last five years the ratio was below 10%. Bank’s capital adequacy was constrained

during the year 2012 due to (i) issuance of Bond by the Government against BPC, (ii)

non-payment of LTR liability, (iv) increase of interest cost on deposit of Tk. 794 crore,

(v) introduction of new classification rules of Bangladesh Bank taking into consideration

the international norms as per agreement with the IMF. Consequently, classified loans

and required provisions have increased to a large extent. It has reduced profitability which

adversely affected capital adequacy.

Page | 43

Chapter - 6Findings, Recommendations & Conclusion

Page | 44

6.1 Major Findings

The amount of loans and advances is increasing but the growth of credit is

decreasing over the years for Agrani Bank Limited.

Agrani Bank Limited distribute a large portion of credit in urban than rural areas.

Agrani Bank Limited provides the highest portion of loans in Wholesale/retail

trading and Personal sector and lowest portion of the loans in Transport, storage &

communication and Ship breakings. The trend of giving loans and advances by

Agrani Bank Limited in power sector is increasing over the years.

The portion of classified loans and advances in percentage of total loans & advances

is too high.

In the classified loan the amount of “Bad & loss” loan ratio is very high.

Loan to deposit Ratio for Agrani Bank Limited increased over the years but in 2013

it decreased to 73.51% from 79.13% in 2012.

Capital Adequacy Ratio for Agrani Bank Limited is below than the minimum

capital requirement of 10%. Even in the year 2012, the ratio is in negative value.

Page | 45

6.2 Recommendations

There is a decreasing trend of credit growth over the years. Agrani Bank Limited

should concentrate more on credit disbursement.

Agrani Bank Limited does not provide enough loans in ship breaking and

transport & communication credit sector. To generate growth, Agrani Bank

Limited should promote agro-financing in large scale with higher flexibility and

concentration. More concentration in transport & communication sector may bring

era of success in coming years.

Agrani Bank Limited should focus more on rural areas to provide loans and

advances.

Agrani Bank Limited should give more concentration to recover the classified

loan by continuous communication with the client and should properly check the

document of the applied client before the disbursement of the fund.

The bad and loss loan increased over the years. So, bank should take necessary

actions for reducing the percentage of bad & loss loan, such as carefully selecting

the borrower and credit sectors which may help to reduce the percentage of bad &

loss loan.

Bank should reduce risk weighted assets by providing loans & advancess to less

risky projects to maintain minimum capital adequacy ratio.

Page | 46

6.3 Conclusion

From the practical implementation of customer dealing procedure during the whole

period of my practical orientation in Agrani Bank Limited; I have reached a firm and

concrete conclusion in a very confident way. I believe that my realization will be in

harmony with most of the banking thinkers. It is quite evident that to build up an effective

and efficient banking system to the highest desire level computerized transaction is a

must. The work experience in Agrani Bank Limited, Mirpur branch for the period of three

months internship program was very interesting and enjoyable. Agrani Bank Limited is in

the midst of an intense competitive environment of financing industry. However non-

performing loan are a real challenge to the sound credit management. Default is

increasing for lack of monitoring. The bank is trying to increase its loan quality by

accelerating its recovery policy. The bank can concentrate on the loan sector where

default risk is low and its investments are profitable. The loan procedure has been made

more calculative, logical to keep the credit sound. As a concluding remark I want to say

that the bank is able to continue its banking activities successfully. But the bank must face

new challenges and I think the bank is able to face those challenges. All officers of this

branch were cooperative and friendly. Job environment in Mirpur branch of Agrani Bank

Limited is excellent. A positive attempt to be more outward looking in their goals and

aware of what is happening. I do hope that, my study will help the bank to give more

concentration on Credit section and to perform better in future. I learned a lot from this

internship program. I do believe that it will assist me in my future career.

Page | 47

Bibliography

1. C.R Kothari, “Research Methodology”, Second Edition, 2003-2004, wishwa

Prakashan, Calcutta, India.

2. Agrani Bank Limited, Annual Report 2009





7. http://www.agranibank.org/Annual-Report.php

8. http://www.dsebd.org/

9. http://www.bangladesh-bank.org/

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http://www.dsebd.org/

Appendix

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