EBL Internship Report

1.1 Background of the Report

Commercial Banks are one of the key contributors to the economy of Bangladesh. The

process of economic development requires the banking sector to operate efficiently and

allocate the capital resources to the proper development agencies. People and the

government itself are very much dependent on the services provided by these banks in the

financial market for the process of economic development to function properly.

Commercial banks act as financial intermediaries by performing the function of

mobilization the funds from one group and lending the same to another while making a

reasonable amount of profit after meeting the cost of funding. Lending is said to be the

primary function of a banker and through this function he earns income for the bank by

charging interest on the extended credit facility (in the form of loans and advances) to the

clients. There are various types of loans and advances through which the bank exercises

the function of lending.

Modern Banking system plays a vital role for a nation’s economic development. Over

the last few years the Banking world has been undergoing a lot of change due to

deregulation, technological innovations, globalization etc. These changes also made

revolutionary changes of a country’s economy. Present world is changing rapidly to face

the challenge of competitive free market economy.

It is well recognized that there is an urgent need for better-qualified management and

better-trained staff in the dynamic global financial market. Bangladesh is no excepting of

this trend. Banking sector in Bangladesh is facing challenges from different angles

though its prospect is bright in the future. Money and Banking is the center around which

all-economic science clusters. So this report is carried on to find out the problems faced

by Eastern Bank and recommend some measures to overcome these problems for

economic development of Bangladesh.

1

Introduction

About EBL:

Eastern Bank Limited (EBL) is one of the modern, fully online and technologically

superior private commercial Banks in Bangladesh. Eastern Bank markets a wide range of

depository, loan & card products. These products include different types of Savings &

Current Accounts, Personal Loans, Auto Loan, Debit Card, Pre-paid Cards, Internet

Banking, Treasury, Syndication, Corporate Banking and SME Banking services through

a network of branches & centers countrywide. Eastern Bank has its presence in major

cities/towns of the country including Dhaka, Chittagong, Sylhet, Khulna and Rajshahi.

Tracing its origin back to 1992, EBL is serving the individual and corporate clientele

alike with remarkable success offering innovative banking services since then.

1.2 Objectives of the Report:

There had been some objectives set forward in doing this report so that it can be

determined what task I have to perform in the bank. The objectives of the report are

divided into two parts-

Broad Objective:

To identify Consumer Loan classification, Provisioning Requirement & Recovery

Strategies of Eastern Bank Ltd.

Specific Objective:

To understand the gap between banking theory and practice.

To identify the consumer loan sanction process of EBL.

To evaluate how information technology in modern business help bankers to

manage their activities.

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1.3 Topic of the Report

To write a report is necessary to select a topic. A well defined topic reflects what is going

on to be discussed through out the report. The topic that has been assigned by supervisor

is “Consumer Loan classification, Provisioning Requirement & Recovery Strategies

of Eastern Bank Ltd”. The report has discussed how the bank operates their activities

with their regular customers

1.4 Methodology of the Report:

Source:

Information provided on this report is of two types. One is primary source and the next

one is secondary source. In fact, most of the information has collected from primary

sources.

Primary Sources:

1. Interview with the EBL employees.

2. Day-to-day conversation and discussion with the credit analysts.

3. MIS officers.

Moreover, I have maintained a close contact with the direct sales team members of

Eastern Bank Ltd. who regularly visit clients and consult with prospective customers.

3

Secondary Sources:

1. Eastern Bank Limited Annual Reports 2007

2. Product Program Guide [PPG]

3. Credit Assessment Guideline

4. Loan files of the client.

5. Websites and so on.

Data Collection Method:

The process of financial data collection is not hassle free for any outsiders. As I worked

there for three months, they have allowed me to collect data from MIS of CFC. Some

times, they have provided data verbally and I took note of that.

1.5 Scope of the Study:

This report has prepared to gain a clear view of the consumer loan management process.

It includes all my experience in CFC. I tried to show how EBL handles all the activities

necessary to disburse loans to its clients. But there are some policy issues like which loan

needs to be reviewed, what should be the interest rates, how many documents should be

made compulsory for security reasons, who will be liable for the default loan, how

responsibility will be delegated to officials and so on. These issues have not addressed in

this report – as my goal was to reveal how work is done not how it should be done.

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1.6 Limitations of the Study:

Actually, the truth is that, the limitations of this report are well concrete. They have stated

below –

Time:

It was one of the major limitations of this report. Nevertheless, according to

PARKINSON’S Law: “Works tend to expand to fill the time available’’. The subject

matter of this report was so vast that despite of the time given, I have not included all the

aspects of consumer loan as I expected earlier. However, I tried my best to present this

report before the submission deadline.

Inadequate Discussion:

As a newcomer to banking service, I have taken considerable time to understand this

business. To make a solid report I felt the urgency of communication with high-level

employees but there is no opportunity to make appointments with them. I think

inadequate discussion is one of the limitations of the report.

Restricted Disclosure:

The report will be very information worthy if I get the opportunity to make a comparative

analysis of consumer loan. Nevertheless, the fact is, most of the banks do not disclose

consumer loan data in a separate heading in the annual report. Moreover, trend analysis

of EBL consumer’s loan also lacks the historical data necessary to make a valid forecast.

Most of the loans have launched in recent times.

Lack of knowledge and experience :

Honestly, I agree that making a comprehensive study on consumer’s loan requires a great

deal of experience and current banking knowledge. As an M.B.A student, I do not

possess that kind of knowledge and experience.

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2.1 Consumer Loan:

EBL Consumer Loan has aimed at solving our personal financial needs. Its

flexible nature allow customer to improve their home, office, and life style. Their

Consumer loan Scheme will allow to avail credit up to 75% of the price of the

item they want to buy. As a loan customer, we get to use our online banking

services as well.

The maximum repayment period for EBL Consumer Loan is 3 years. Customers

can choose 12, 24, or 36 equated monthly installments (EMI) to repay the loan.

Their interest rates are competitive in the market.

Now a day, education is not just limited to books and classrooms. In today’s world,

education is to understand the real world and applying knowledge for the betterment of

the society as well as business. From the education, theoretical knowledge is obtained

from a course of study, which is only the half way of the subject matter. Practical

knowledge has no alternative. The perfect coordination between theory and practice is of

paramount importance in the context of the modern business world in order to resolve the

dichotomy between these two areas.

2.2 Loan for Professionals:

EBL Loan for Professionals is meant for the development of our professional life.

With a little financial help under EBL's Loan for Professionals Scheme, we can

add value to your profession.

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Literature Review

If anyone is a self-employed Doctor, Engineer, Architect, Lawyer, Computer

Professional or a Chartered Account, they can buy or import equipment, tools,

customized products for use in your chamber. The purchase of the item is

expected to directly contribute to the advancement of their professional/

business solution

They need to be a Bangladeshi national between the ages of 25-60 working in the above-

mentioned field for at least five years.

3.1 Organization Orientation

3.1.1 Formation:

In pursuance of the “Bank of Credit and Commerce International (Overseas) Limited in

Bangladesh (Reconstruction) Scheme, 1992”, framed by the Bangladesh Bank and

approved by the Government of Bangladesh, the Eastern Bank Limited was formed as a

public limited company incorporated in Bangladesh with primary objective to carry on all

kinds of banking business in and outside Bangladesh. Eastern Bank Limited had also

taken over the business, assets, and liabilities of erstwhile Bank of Credit and Commerce

International (Overseas) Limited branches in Bangladesh with effect from 16h August

1992.

Now EBL is a second-generation commercial bank with 25 online branches across

major cities in Bangladesh a 612 full time employees on year end 2006. It offers full

range of commercial banking products and services to the corporate, mid-market and

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Organizational Features:

retail segment. Besides main operation, EBL has an Offshore Banking Unit

(OBU) setup in 2004, which gives loans, and takes deposits only in freely

convertible foreign currency to and from resident son/institutions, foreign

owned EPZ companies etc.

Fig: 1 Loan Deposit

3.1.2 Banking Industry Scenario:

Loan Deposit Growth & NPL: As per BB statistics, commercial banks operating in

Bangladesh disbursed an accumulated amount of BDT 1,28.8 billions on year end 2006

against BDT 1,292.51 billion year end 2005(growth 18.26). Whereas non-performing

loans as on year end, 2006 stood at BDT 200.98 billion or 13.15 percent of total loans as

against BDT 175.09 billion or 13.55 per cent of total loans on year end 2005.this better

NPL scenario was mainly attributable to write off of around BDT 110 billion bad loans

till the end of September 2006 among which state owned enterprises wrote more than half

of bad debts off. Besides, in the first half of FY 07, overall domestic credit rises by 9.62

percent over same period of FY 06mainly due to increased borrowing by Govt in the

8

Back drop of shortfall in revenue collection. Private sector credit grew by

12.15 percent in first half Y 07 compared to same period FY 06. in response

to the rise in policy rates, the commercial banks ‘lending rates increased from

1.3percent to 12.4 percent and deposit rates from 5.9 percent to 7 percent

from December 2005 to September 2006. Deposit, on the other hand, stood at

BDT 1,76182billion as n December 31, 2006 registering around 20 percent

growth.

Calculation of Provision for Loans and Advances as per CL December 2006:

Nature Outstanding Interest Suspense

Eligible Security

Base for Provision

Required Capital

Standard 24392,209,377 N/A N/A 24,392,291,144 371,003,511

SMA 437,053,469 N/A N/A 407,371,915 20368,596

SS 240,093,692 14,330,705 20,424,000 205,338,987 41,067,797

DF 1,753,533 1,521,539 10,889,004 5,342,991 2,671,495

BL 727,913,998 83,076,909 33,819,566 305,017,524 305,017,524

Staff Loan 154,053,220 N/A N/A N/A N/A

Total 25,969,077,288 98,929152 371,132,570 25,315,362,561 740,128,923

Table: 1

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3.1.3 Vision of EBL:

“To become the bank of choice by transforming the way we do business and developing a

truly unique financial institution that delivers superior growth and financial performance

and be the most recognizable brand in the financial services in Bangladesh.’

EBL dreams to become the bank of choice of the public including both the consumer and

the corporate clients. It has adopted a new logo that looks very dynamic in its attractive

colors that reflect all the changes that are taking place in EBL.

3.1.4 Mission of EBL:

We will deliver service excellence to all our customers, both

internal and external.

We will constantly change our systems, procedures, and

training to maintain a cohesive and professional team in order

to achieve service excellence.

We will create an enabling environment and embrace a team-

based culture where people will excel.

We will ensure to maximize shareholder's value.

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2002 2003 2004 2005 2006

Authorized CapitalPaid-up Capital

ReserveDeposit & Other Accounts

Loans & AdvancesExportImport

Guarantee BusinessOperating Income

Operating ExpensesOperating Profit

Net Profit Before TaxTotal Assets (excluding

contingent)

1,000

720

2,448

13,661

10,891

4,358

12,642

1,183

1,986

1,255

731

631

18,445

1,000

828

2,560

11,952

11,288

3,533

16,256

354

1,985

1,226

759

638

18,716

1,000

828

2,733

15,649

14,973

8,303

24,414

947

2,241

1,349

892

851

23,048

3,300

828

3,132

19,396

17,758

13,239

29,692

555

2,957

1,901

1,056

967

27,400

3,300

828

3,146

25,734

26,008

24,286

39,347

651

4,272

2,913

1,358

1,134

35,971

(Above figures are in million BDT)

Table: 2 EBL at a Glance (2002 - 2006)

(Continued…)

2002 2003 2004 2005 2006

Book Value per share (Taka)

Market value per share (Taka)

Earning per share (Taka)

Dividend per share (Taka)

Return on Equity (Average)

Return on Assets (Average)

Classified loan as % of total

Loans

Capital Adequacy Ratio

Cost-Income Ratio

Net Interest Margin

RWA to Total Asset

Number of Branches

295.29

303

51.49

35

17.44%

2.04%

13.46%

22.32%

27.91%

3.49%

54.10%

22

484

281.87

382

43.21

20

15.33%

1.94%

13.61%

18.27%28.1

7%

2.47%

71.36%

22

495

317.73

780

58.38

43

18.44%

2.32%

7.191%

14.82%

30.93%

3.26%

81.70%

22

522

370.93

1,222.75

66.00

40

19.17%

2.17%

5.41%

18.76%

33.66%

2.81%

61.68%

22

536

400.38

792.50

61.98

45

16.07%

1.62%

3.79%

14.02%

35.67%

2.11%

71.50%

25

612

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Particulars

Particulars

Eastern Bank Limited

HIGHLIGHTS ON THE OVERALL ACTIVITIESFor The Year Ended 2006

Sl No Particulars 2006 2005

1 Paid up capital Taka 8,28,000,000 828,000,000

2 Total capital Taka 3,60522,984 3,170,316,847

3 Surplus/shortage capital

Taka 1,290,853,726 1,649,263,507

4 Total asset Taka 35,970,642,294 27,399,954,469

5 Total deposits Taka 25,734,345,791 17,980,705,948

6 Total loans and advances

Taka 26,007,863,928 17,757,598,566

7 Total contingent liabilities

Taka 15,328,682,087 13,400,989,908

8 Loans and deposits ratio

% 101.06 98.76

9 % of classified loans against total loans & advances

% 3.79 5.41

10 Profit after tax and provisions

Taka 513,197,847 546,496,236

11 Classified loans for the year

Taka 985,761,224 960,901,893

12 Provisions held against classified loans

Taka 785,590,886 657,471,853

13 Surplus of provision Taka 45,123,137 423,549

14 Cost of fund % 8.26 6.68

15 Interest bearing assets Taka 32,751,377,868 23,508,370,106

16 Non-interest bearing assets

Taka 3,219,264,425 3,891,584,363

17 Return on assets % 1.62 2.17

18 Income from investments

Taka 459,180,077 311,352,228

19 Earning per share Taka 61.98 66.00

20 Revenue per share Taka 254.92 192.19

21 Price earning ratio Times 12.79 18.53

Table: 3

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3.1.5 Management Hierarchy:

CHAIRMAN

BOARD OF DIRECTORS

MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER

DEPUTY MANAGING DIRECTOR & CHIEF OPEARATING OFFICER

SENIOR EXECUTIVE VICE PRESIDENT (SEVP)

EXECUTIVE VICE PRESIDENT (EVP)

SENIOR VICE PRESIDENT (SVP)

VICE PRESIDENT (VP)

SENIOR ASSISTANT VICE PRESIDENT (SAVP)

FIRST ASSISTANT VICE PRESIDENT (FAVP)

ASSISTANT VICE PRESIDENT (AVP)

SENIOR PRINCIPAL OFFICER (SPO)

PRINCIPAL OFFICER (PO)

SENIOR OFFICER (SO)

OFFICER

ASSISTAT OFFIER (AO)

TRINIG ASSISTANT OFFICER (TAO)

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3.1.6 Provision for Loans and Advances

(a) Specific provision against Loans & Advances

2006 2005Taka Taka

Opening balance 464,083,380 493,678,297Fully provided debt written off ring the year

(95,589,051) (62,783,756)

Recovery of amount previously written off

_ _

Specific provision for the year

25,385,627 33,188,839

(70,203,424) (29,594,917)Provision held a the end of the year

393,879,956 464,083,380

(b) General provision against unclassified Loans & Advance:

2006 2005Taka Taka

Opening balance 193,388,473 138,151,570Provision made during

the year197,983,631 55,236,903

391,372,104 193,388,473Total (a)+(b) 785,252,060 657,471,853

Table: 4

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Consumer Loans ofEASTERN BANK LIMITED

Unsecured Loans:

Secured Loans:

15

2UTSHAB

LOAN

3EXECUTIVE LOAN

4CAR

LOAN

5DEBIT

LINE

1JIBAN

DHARA LOAN

6FAST

LOAN

7FAST CASH

Findings

4.1 Description and features:

Purpose

EBL Jiban Dhara loan is an any purpose Lifestyle loan, Purpose might be considered as follows:

- House renovation- Interior Decoration - Marriages in the family- Advance rental payments- Hospitalization or other emergency medical needs - Trips abroad - Purchase of miscellaneous household appliances- Purchase of professional equipment like X-ray machine,

medical beds, ultra-sonogram machine, engineering/ mechanical tools

- Other legitimate purpose.

Purposes not allowed

This loan cannot be taken for solely business purposes like working capital and industrial machinery purchase. However, self-employed professionals, who have private practices can avail this loan to buy their office equipment, machines, and accessories or premise renovation.

Availability All EBL branches subject to CPV being in place

Target customers

Any credit worthy individuals like:- Salaried executives- Doctors, Architects, Engineers, Chartered Accountant,

Consultant and IT professionals- Businessperson

Non target customers

- Lawyer- Journalists of reasonably lower rank - Defense official below Lt. Colonel level

- Minimum TK. 50,000/-

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1JIBAN

DHARA LOAN

EBL Jiban Dhara loan is any purpose unsecured and terminating loan facility (EMI based) for any legitimate purpose. Bank would finance against gross monthly income of the any credit worthy individual. To meet lifestyle needs of the creditworthy individuals and to capitalize the vast market gap; Jiban Dhara Loan is suitable unsecured consumer loan product.

Loan Amount (minimum and maximum) for

A category customers

- Maximum TK. 10, 00,000/- or 12 times of gross monthly income, whichever is lower. In addition, DBR must be supportive with income and EMI as per our income assessment policy. Monthly Income = Gross monthly salary or Business income + 80% income of other proven sources like spouse salary, rent income and so on.

Interest Rate- 16% p.a. (Interest rates can be changed by Authority from time

to time based on market situation

Processing Fee - 1% of the loan amount.

Repayment Tenor

12 to 60 months (As per clients will, affordability and our credit assessment criteria)

Disbursement Credit to the customer’s deposit account with us.

Repayment - System will be auto debit installment from customer’s CASA account.

Advance /Partial pre payment

- Allowed after 6 month. At least minimum 30% of the loan

outstanding has to pay by customer while making advance/prepayments amount.

Early payment fee

- Early full and final settlement is flat 1% of the outstanding loan amount.

Installment failure charge

- Penal interest of 3% p.a. on dues amount.

Stamp charge - All relevant stamp charges will be on borrower’s account and will be debited from the account at the time of disbursement

Top-ups - Customer can avail more than 1 loan from EBL if income and DBR supports [Separate new loan account will be created in the case of top-up, i.e., will not be an additional draw down over existing loan account]

Personal Guarantee

- 1 Personal Guarantee will be required for EBL Jiban Dhara Loan.

- A guarantor can provide personal guarantee once only for any EBL consumer loan.

Eligibility of guarantor:- Any salaried executive deemed acceptable to EBL or- Professionals (Doctors, Chartered Accountants, and

Engineers etc) or- Reputed Businessman acceptable to EBL

Identification Document of guarantor:- TIN

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- Photograph or business card

Waiver of Guarantee for

Priority Organizations’

Employees

- No personal guarantee would be required for the

salaried executives of EBL priority organization list that will mainly comprise the MNCs, Banks, and large local corporate House.

Good Boy/Good Girl Note

Good Boy/Good Girl Note will be required for all EBL Jiban Dhara Loan.

Purpose

EBL Jiban Dhara loan is an any purpose Lifestyle loan, Purpose might be considered as follows:- House renovation- Interior Decoration - Marriages in the family- Advance rental payments- Hospitalization or other emergency medical needs - Trips abroad - Purchase of miscellaneous household appliances- Purchase of professional equipment like X-ray machine,

medical beds, ultra-sonogram machine, engineering/ mechanical tools

- Other legitimate purpose.


This loan cannot be taken for solely business purposes like working capital and industrial machinery purchase. However, self-employed professionals, who have private practices can avail this loan to buy their office equipment, machines, and accessories or premise renovation.


Target customers

Any credit worthy individuals like:- Salaried executives- Doctors, Architects, Engineers, Chartered Accountant,



- Lawyer- Journalists of reasonably lower rank - Defense official below Lt. Colonel level

Loan Amount (minimum and

maximum) for A category

customers

- Minimum TK. 50,000/-- Maximum TK. 10, 00,000/- or 12 times of gross monthly

income, whichever is lower. In addition, DBR must be supportive with income and EMI as per our income assessment policy. Monthly Income = Gross monthly salary or Business income + 80% income of other proven sources like spouse salary, rent income and so on.

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4.2 Description and Features:

Purpose

EBL Utsheb Loan is any purpose Lifestyle loan that will support customer Eid related financial needs. Purpose might be considered as follows:

- Eid Shopping- Purchase of miscellaneous household appliances like TV,

Fridge or Home Theater - Travel in abroad - Purchase of personal computers- Purchase of audio-video equipment- Purchase of furniture during Eid time


This loan cannot be taken for solely business purposes like working capital and industrial machinery purchase.


Target customers

Any credit worthy individuals like:- Salaried executives- Doctors, Architects, Engineers, Chartered Accountants,

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2UTSHAB

LOAN

EBL Utshab loan is any purpose unsecured and terminating loan facility (EMI based) for credit worthy individuals to meet the expenses on the Eve of Holy Eid, Christmas and other festivals. Bank would finance against gross monthly income of the any credit worthy individual. To meet life style needs of the credit worthy individuals and to capitalize the vast market gap, this loan is a suitable unsecured consumer loan product.



- Lawyer- Journalists of reasonably lower rank- Defense official below Lt. Colonel level


maximum)

- Minimum TK. 50,000/-- Maximum TK. 1,50,000/- or 10 times of gross monthly income,

whichever is lower. And DBR must be supportive with income and EMI as per our income assessment policy. Monthly Income = Gross monthly salary or Business income + 80% income of other proven sources like spouse salary, rent income and so on.

Interest Rate 15% p.a.

Processing Fee Nil

Repayment tenor

12,24 or 36 months

Loan Availability

From the time of launch in First week of September 2005.

Disbursement Credit to the customer’s deposit account with us.

Repayment - System will be auto debit installment from customer’s CASA account.


- Allowed after 6 month. At least minimum 30% of the loan outstanding to be paid by customer while making advance/prepayments amount. Fee: 1% of the partial payment amount.

Early payment fee

- Early full and final settlement is allowed. A charge for early full and final settlement is flat 1% of the outstanding loan amount.

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- Penal interest of 3% p.a. on the dues amount.


Top-ups- Customer can avail more than 1 loan from EBL if income and

DBR supports [Separate, new loan account will be created in the case of top-up, i.e., will not be an additional draw down over existing loan account]

Personal Guarantee - 1 Personal Guarantee will be required for EBL Utshab Loan for

general customers including businessmen and employees of the companies not included in the “EBL Priority Organization List’’

- A guarantor can provide personal guarantee once only for any EBL consumer loan.

Eligibility of guarantor:- Any salaried executive deemed acceptable to EBL or- Professionals (Doctors, Chartered Accountants, and

Engineers etc) or- Reputed Businessman acceptable to EBL

Identification Document of guarantor:- TIN- Photograph or business card

Waiver of Guarantee for

Priority Organizations’

Employees

- No personal guarantee would be required for the salaried executives of EBL “Priority Organization List’’ (POL) that will mainly comprise the MNCs, Banks and large local corporate House.

Good Boy/Good Girl

Note

A satisfactory Good Boy/Good Girl Note will be required for all EBL Utshab Loan.

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3EXECUTIVELOAN

Many Private Banks have introduced unsecured personal loan in the market with varying degree of success. Considering the market trend for consumers Loans, EBL has launched an unsecured personal loan products “EBL executive loan’’ targeting salari-ed executive only. It was the first consumer loan among the four other loans. EBL laun-ched this product in Aught, 2004. It is an “All Purpose’’ loan aimed to meet the short- term financial needs of an upper income groups of salaried executives.

There are three (3) categories:

Category A: Individuals, who maintain or will open a salary

account with EBL and will arrange for irrevocable letter.

Category B: Individuals, who will open a salary account with EBL

arranging an irrevocable letter from employer to deposit only their salary with the Bank.

Category C: Individuals who will avail the loan by depositing post-

dated cheque for each EMI amount.

4.3 Product Description and Features:

Availability - EBL all branches. -

Loan amount Minimum Taka 50,000/-Maximum Taka 3, 00,000/- or 3 times of Gross salary, which ever is lower.

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Interest rate Category A: 18% Category B: 19%Category B*: 20%

Processing Fee - 1% up to 1,00,000/-- 0.75% above 1,00,000/-


Tenor - 12,24,36 months-

Disbursement - Credit to the customers deposit account with EBL

Repayment EMI via standing order will be raised in the salary account, so that moment his/her salary is credited to the account, system will automatically debit the installment amount and credit it to the loan account.

Advance/Partial prepayment

Not allowed

Early payment Fee

Early full and final settlement is allowed. Penalty for early full and final settlement is TK. 1,000/- flat.


Penal interest of 3% p.a. on the dues amount.

Top-ups Not Allowed

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Purpose

Purchase value new and reconditioned Car, Jeep, Station Wagon, 4-Wheeler, Microbus for private use only:

- Brand new-any brand at purchaser’s choice- Reconditioned-Toyota brands preferred. Cars older than 4 years

will treat as an exception.- Purchase value refers to car price as quoted by the Vendor and

may include VAT and Registration cost. However, it does not include comprehensive insurance cost that is on purchaser’s account.



maximum)

- Minimum TK. 3,50,000/-- Maximum TK. 50, 00,000/- or 15 times of gross monthly income,

whichever is lower. (Maximum Loan allowable for purchase of very high value or premium vehicles was TK. 1, 00 crore, however Bangladesh Bank fixed loan ceiling of TK 20 lac recently. So, maximum amount will be TK 20 lac from the publication of this circular.)

Interest Rate(Interest rates

can be changed by ALCO from

time to time based

Loan cash coverage 100%



Unsecured

11.75% 12.00% 13.00% 14.00%

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4CAR

LOAN

EBL Car loan is a terminating loan facility (EMI based) of the purpose of brand new and reconditioned but unregistered automobiles for personal use only. (Unregistered means first time registration is yet have to done. Purchase of second hand vehicles are not allowed unless exception approval obtained jointly from MD and DMD. Please refer to section “Permissible Exceptions’’ at later part of this document.)

Processing Fee1.00% of the loan amount for all cases other than 100% cash secured. For 100% cash secured cases, it is 0.5% of the loan amount.

Loan vehicle

Piece Ratio

100% cash covered: 100% of quotation price75% cash covered: 100% of quotation price 50% cash covered: 100% of quotation price0% cash covered: New 75% Recondition 70% (Price includes car value + VAT + Registration)Customer will bear comprehensive insurance cost.

Tenor

Reconditioned Vehicles above 3 years old

Brand New and 3 years reconditioned Vehicles

12-48 month 12-60 months

Disbursement

-On loan being sanctioned, Vendor will register the car on behalf of Eastern Bank Ltd. Vendor also collects the copy of the comprehensive insurance (Insurance company from EBL approved list) and submits both the documents along with the delivery Challan for the car to EBL.

- CASA (in case of new customer, a current/savings account will be opened in customer’s name).-CFC will disburse Loan amount through CASA.On email confirmation from CFC, branch will issue P.O favoring vendor by debiting CASA. P.O will include only the loan amount portion of total quotation amount (i.e. excluding borrower’s equality)Branch to ensure PO commission and VAT will deduct from customer CASA. R.M will organize to send the P.O to the vendor.

Repayment- System will auto debit installment from customer’s CSAC

account.


- Allowed after 6 month. At least minimum 30% of the loan outstanding must be paid by the customer while making advance/pre-payments amount.

- Fee: 1% of the partial payment amount.

Early payment fee

- Early full and final settlement is allowed. A charge for early full and final settlement is flat 1% of the outstanding loan amount.


- Penal interest of 3% p.a. on the dues amount.

25

Stamp charge- All relevant stamp charges will be on borrower’s

account and will be debited from the account at the time of disbursement

Top-ups- Customer can avail more than 1 loan from EBL if income and

DBR supports [Separate, new loan account will be created in the case of top-up, i.e, will not be an additional draw down over existing loan account]

Personal Guarantee

- One [1] Personal Guarantee for salaried executive. - One [1] Personal Guarantee for businesspersons and self

employed.- A guarantor can provide personal guarantee once only for any

EBL consumer loan.- Eligibility of guarantor:

Individuals with ranges equivalent Senior Assistant Secretary or higher would qualify as grantor.Bank and NBFI officials (equivalent to AGM of NCBs, AVP/ Branch Manager, Department Head of Local and Foreign Banks and NBFIs),Professional (Doctors, Engineer, Chartered Accountants etc.) have to provide copy of their professional certificate.

26


Debit Line is an unsecured and revolving credit facility for any legitimate purpose.

PurposeDebit line is an any purpose unsecured OD facility to be drawn through charging debit Card.

Target CustomersAny credit worthy individuals like : Salaried Executives of priority organization & Corporate Organization (List enclosed) Self-employed Doctor, Engineer, and Architect.

A Category customer & Limit

Employees of POL (Priority Organization List), provided in the later section. Self Employees of COL (Corporate Organization List), provide in the later section. EBL Employees will also fall in A Category

Minimum Tk. 20,000/- Maximum Tk. 1, 00,000/- or 5 times of gross monthly income, whichever is lower.

27

5DEBIT

LINE

Debit card has substantial momentum across the world due to its customer-oriented features. Customers prefer debit card for cash withdrawal & shopping purpose. Offering small overdraft facility in debit card has become a popular product worldwide. Risk profile of the debit card is much lower than that of credit card due to small ticket size and due to allowing only to executives of selective corporate client & professionals as per enclosed list. Debit card is more of a transactional facility than credit card. However, EBL is planning to launch credit card, this debit line would not hinder sales prospect of credit card since initial credit card limit will be the maximum limit of debit line based on

B Category Customer & Limit

Employees of COL (Corporate Organization List), provided in the later section Self-EmployedProfessionals like Doctors, Engineers, and Architect. Govt. employees

Minimum Tk. 20,000/- Maximum Tk. 50,000/- or 3 times of gross monthly income, whichever is lower.

C Category & Limit

Executives of POL & COL and Professionals who are holding the credit card of SCB/PrimeBank/Lanka Bangla

Minimum Tk. 20,000/- Maximum Tk. 50,000/- or 80% of exiting limit (highest limit of all cards) of the existing credit card of SCB/Prime Bank/ Lanka Bangla, whichever is lower. Applicant having credit cards of other Banks may also apply for A & B Category meeting the criteria.


Businessmen Lawyer Individuals with political affinity Journalists of reasonably lower level Defense official below Lt. Colonel level

Availability All branches subject to CPV in place

Interest Rate 20%

Interest Rate for EBL Employees

15% p.a

Interest Accrual Interest would accrue on daily basis based on EOD balance and would be applied on monthly basis.

Processing Fee 1% of the approved limit or Tk. 1,000 whichever is higher. Processing free will be waived for EBL employees.

Available cash Withdrawal limit

Client would be able to withdraw full amount in cash through ATM as per ATM cash withdrawal policy.

Monthly Statement

Monthly statement covering the limit, minimum payment due, payment deadline, utilization and available room and transaction history etc. would be provided to the customer due the card Division within the first week of every month. The statement has to be generated by the system.

28

Validity

Revolving limit for 12 months, Initial limit expiry date to be set on quarter end only (nearest quarter of a year).(e.g. Limit loaded on January 25, 2006 will expired on December 31, 2006)(e.g. Limit loaded on February 18, 2006 will expired on December 31, 2006)(e.g. Limit loaded on April 25, 2006 will expired on March 31, 2007)

Grace Period No grace period for interest will be allowed.

Repayment

Client may reduce/repay outstanding through standing instruction option, sweep in option & through cheque/cash deposit. Clients need to repay every month 5% of month-end total outstanding by the 15th of each month. This will be the minimum payment due.

Penalty & Late Payment Fee

3% on outstanding on expired account. Minimum Payment failure charge is Flat Tk 200/= to be charged and appliedin the Debit Line account.

Facility call Up

If applicants fail to make available monthly repayment for consecutively 3 months or more over the tenor of the facility, entire outstanding will be called back by collection department. Bank reserves the right to call up the line at its discretion or in the event of default.

Renewal Fee Renewal Fee would be 1% of outstanding or Tk 1,000 whichever is higher Renewal fee for EBL employees will be waived.

Early payment Fee Early full and final settlement is allowed. No early payment charge is required

Personal Guarantee No Personal Guarantee will be required for Debit Line

Loan KYC Good Boy/ Good Girl Note or KYC will be required for all Debit Line Applications

Stamp Charges All relevant Stamp charges will be borne by the Borrower and will be debited from his/her account, at the time of disbursement.

Updated Cheque 1 EBL UDC covering full limit.

Cheque Book No cheque book will be issued against EBL Debit Line account

CIB No CIB is required

Nationality Bangladeshi

29

Age 22-66 years old

Length of Service/Practice

Salaried Executives: Minimum 1 year of permanent employment with present employer. Professionals: Minimum 1 year of practice in the profession

Income for Salaried Executives

Minimum BDT 15,000/- per month Minimum BDT 12,000/- per month (For Govt. Employees)

Income for Self Employed Professionals

Minimum BDT 20,000/- per month

30

6FAST

LOAN

7FAST

CASH

4.6Fast loan is a short-term loan facility from EBL. This loan is fully

secured against cash security (EBL FDR, Govt. Sanchaya Patra,

ICB Unit certificates etc.). EBL Fast Loan has convenient

repayment period ranging from 12/24/36 EMI's. EBL Fast Loan is

priced at competitive rates and loan is sanctioned within 24 hours

of application

4.7EBL Fast Cash is a revolving credit facility. Fast Cash allows the

customer to draw up to a predetermined amount of credit from their

Current Account. Customers will only be charged interest for the

amount they draw. The minimum limit for EBL Fast Cash is Tk.

50,000.00

4.8 Guidelines For 100% Cash Covered Loans:

1. Supporting identification documents will apply as part of KYC. But the

general attitude will be lenient in this regard too. Basic identification is all

that is required, and we will ask for nothing more than what is “basic.”

s

2. No UDC and no PDC will be required since it is free to credit risk. UDC and PDC are

for ensuring payment guarantee. For a 100% secured terminating loan, payment is

guaranteed anyway. Hence no UDC or PDC.

3. CIB thing will be based on the policy of CIB. If CIB policy gives any leeway on this

for 100% secured cases, we will take that leeway. If not, CIB to be obtained.

4. A LAP has to be properly filled up in any cases only thing we will keep in mind: it‘s a

100 secured loan, hence there may be some sort of relaxation n minor items. No

compromise on major items in the LAP though.

5. Income: for cases like these, income needs not be substantiated. Client will just declare

his income, which will be noted in the LAP. No supporting paper to prove income is

needed. Hence, no bank account statements etc are needed.

31

4.9 Interest Rates on Deposits:

The Asset Liability Committee (ALCO) of the Bank in its special meeting

held on May 07, 2007 as decided to introduce new interest rates on deposit,

which will be effective from May 07, 2007.

Types of Deposit (HPA/SB/STD)

Rates Effective From May 07, 2007

HPA less than 1M 6.00%HPA more than 1M 6.00%Saving up to 1M 7.00%Saving above 1M 7.00%

STD- less than 10 M 6.00%STD- 10M to< 30M 7.00%STD- 30M to< 100M 8.00%STD- 100M to< 150M 8.00%STD- 150M and above 8.00%STD- Bank Market RateSTD- Collect 8.25%STD- IPO Proceeds 8.00%

Types of Deposits (FDR)FDR-1 Month- Less than- 5M 8.25%FDR-1 Month- 5M to < 10M 8.25%FDR-1 Month- 10M to < 50M 8.25%FDR-1 Month- 50M to < 100M 8.40%FDR-1 Month- 100M to < 150M 8.40%FDR-1 Month- 150M and above 9.25%

Table: 5

32

Consumer loan of EBL are processed and approved through its Consumer Finance

Center. Before the establishment of CFC, branches had the authority to approve &

disburse loans though consultation with higher authority – Head of Consumer Banking,

Deputy Managing Director, and Managing Director.

As the process faces some crucial pitfalls, management of EBL decided to set up a central

unit CFC- that will be responsible for loan assessment, approval, disbursement, and

collection.

4.10 Consumer Finance Center:

CFC is located on the second floor of Jiban Bima Bhaban, Motijheal, Dhaka. CFC has set

up on March 15, 2004 for evaluating credit worthiness in consumer lending. It will

consist of a team of people to identify, analysis, measure and manage risk related

business.

4.11 Structure of CFC:

CFC handles all the retail loan applications coming from all the branches and Direct

Sales Teams (DST) across the country.

4.12 Management Structure:

The management hierarchy of CFC is very simple as total much of employees are only 16.

33

Loan Approval Process

Fig: 2 Management Structure

4.13 Responsibilities of the Department of CFC:

Head of CFC:

The head of CFC is primarily responsible to oversee the activities of CFC & to

collaborate with the 25 branches across the country.

Daily activities include – Consultation with prospective client where necessary,

_ To assist analyst group to measure credit risk,

_ To provide information and to keep contact with higher

authority– HOCNB, DMD, MD and

_To take measures to keep smooth operation.

Manager

Credit Analysis

Collection & Recovery

Security & Disbursement

Management Information System

Head of CFC

34

Manager of CFC:

Manager of CFC has the authority to approve or decline loan applications. If his

authority does not permit, then he consults with higher authority.

Credit Analysis is one of the core activities that can make a difference in retail banking.

If an eligible Client is refused then the revenue of the banks decreases and if an unworthy

client is included loan disbursement, bank may face loan defaults. CFC has five (5)

members dedicated to assess credit risk in consumer lending. They can also take help

from higher authority- manager of CFC, Head of CFC where necessary.

Security Checking & Disbursement:

Officer lading support & officer disbursement both cheek all the relevant documents and

give authorized signature where necessary. If discrepancies or any fraudulent is found,

they consult with manager CFC and if everything is okay then disburse the loan.

Management Information System (MIS):

Within the CFC, two people keep track of all the laps that CFC receives or CFC returned.

MIS officer provide a database that contains all true relevant information of each and any

lap irrespective of there status- approved, declined, disbursed, pending on process, place

for decision, sent to queries. It serves an important purpose of inform all related members

about retail loan. The branch managers may also benefit from this MIS as it updates

every two or three hours.

The next part describes how CFC handles loan application and gives decision, which means the actual loan sanction process of Consumer Finance Center.

(1) Jiban Dhara Loan.(2) Utshab Loan.(3) Executive Loan.(4) Car Loan.(5) Debit Line and

35

(6) Fast Cash(7) Fast Loan

4.14 LAP Work Flow for All Consumer Loans:

Fig: 3 LAP Work Flow

36

Lap filled & assessed by ARM/ RM and necessary Recommendations

taken

Final review by supervisor

Branch provides documents-

Sanction letter, UDC, DP note

CFC (MIS) status updated

Lap with major discrepancy will be returned to branch and lap

with minor discrepancy will be assessed and needs to rectified

CFC informs branch about approved laps, ask for necessary documents if needed, and wait

for CPV/CIB clearance

CFC (MIS) receives the lap, gives necessary input and hand over to

analyst group for assessment.

Approved laps will be review by Manager-CFC, HOCFC and where applicable by HOCNB, DMD, MD

CFC checks all documents & CIB/CPV if found ok then

disburse.

Client receives money on the same day by electronic fund transfer.

Necessary stamps will be attached, copy of sanction letter, return to

client.Send for storage in CFC

Branch Level CFC Level

4.15 The Lap flow chart described in details:

Loan Booking:

EBL consumer loan has two sources– (Direct sales team) DST & Branch. There are 25

branches & more than 250 DST in EBL. DST knocks prospective clients and collects

information about them. After preliminary screening, they invite client to EBL Branch. If

the client is a ‘walking customer’ then the ARM & RM stars talking with him/her. If

client expresses strong will to avail a JDL/UL, The employee in change wills request

her/him for the following documents –

Applicant’s photograph and visiting card (if available).

Copy of valid Passport/Voter ID/Driving License/Others.

Last 6 months bank statement (Personal/Company).

Copy of TIN certificate.

Bill copy of T&T/Mobile phone/ Contract copy of pre-paid phone.

Other loan’s sanction letter and last 6 months bank statement of that.

Letter of introduction by the organization.

One (1) personal guarantor, copy of guarantor’s TIN, visiting card, photograph

and sign verified by the applicant.

Copy of Trade License.

Memorandum and Article of Association certified by Joint Stock company.

Summary of Share Capital (Form X and XII)

Partnership Deed of Partnership firm.

If other income added than required supporting documents.

CIB report.

37

When client submit the above documents (not every document is essential but

it varies client to client) the ARM or RM performs the following tasks:

(1) In presence of ARM/RM, client fills the pre formatted lap –

A. Personal Information and contact details.

B. Joint Applicant (spouse only)

C. Employment details.

D. Financial information – Monthly income & expenses.

E. Bank A/C Defaults.

This bank A/C details will help managers to access client’s income. More over, for

loan purpose, client must open an EBL current A/C.

A. Facility Defaults.

B. Debit Authority.

C. When this part of lap is filled properly, client will give signature with date

on pre-formatted space and it must be verified by RM/SSM.

The next part of lap will be filled by branch; here branch will provide a

documentation cheek list– whatever the documents required by the bank.

(2)Branch fills the Loan KYC-

B. Good boy/ Good girl Assessment curd – It is also called KYC. Her branch

delineates clients Background, Education, Personal life, Lifestyle, Credit worthiness,

Loan behavior, Criminal record, Compliance, Appearance, and Willingness to repay.

38

These ratings are gives in each category.

High Rating – Excellent beyond any question or doubt’

Medium Rating- When performance or position of that client is in respective criteria

can’t be assessed with full certainty but however estimated or known to be okay.

Low Ratings – When position on performance is “Not known to Branch or doubt full.

Loan KYC-serves a key role in evaluating loan proposal as CFC employees never

met them physically, KYC help then visualize the client, his behavior, his family

status and so on.

Under the KYC table the officer in change produces – summary comments,

recordation and waiver (if sought) with signature of the respective authority.

At this point, the branch manager sends the lap to CFC.

On receiving Lap, MIS (CFC) inputs some basic information about the client and

assigned a Lap number. This number is used for further reference. Excel sheet of MIS

contains-

Serial no, Lap receive date, Credit officer, clients name, source- branch /DST,

Applied amount, Approved amount, CPV (out) – date no which CPV asked for, CPV

(in)- date on which CPV received, Status- Approved/Declined/On process/ Pending/

Cancelled/ Disbursed, Comments, Status date, Disbursed date.

39

Sample of MIS Excel Sheet:

40

41

MIS update data on a continuous basis, so whenever any action taken or any

loan status changed MIS inputs it. MIS is built in a way that with short notice

– MIS can produce

Daily status report

Approved loan amount report.

Status report sort by branch, approved amount, credit officer, date, week,

month and so on.

MIS officer distributes the laps received each day to the credit analysts for credit

assessment, recommendation & approval.

Retail Credit Assessment: (Same for All Loans)

6 persons are employed for credit analysis at CFC, EBL. Two are specialized in car loan

analysis and other analyst evaluates rest of the loans.

Credit Analysis:Credit Analyst will read the lap carefully before embarking on finding credit worthiness

that is income assessment. Loan KYC helps analyst to judge the client’s social status and

some other attributes. Then analyst focuses on key area – assessing financial capacity of

the borrower.

Credit approval authority:

Product Approval Authority

Manager CFC HO CFC HO CNB DMD/MD

Jibon Dhara Loan

Upto Tk. 3.0 lac Upto Tk. 5.0 lac Upto Tk. 7.0 lac Upto Tk. 10.0 lac

Utshab Loan Upto Tk.5 lac Upto Tk. 1.0 lac Upto Tk. 1.5 lac -

Executisive Loan

Upto Tk. 3.0 lac Upto Tk. 5.0 lac Upto Tk. 10.0 lac -

Car Loan Upto Tk. 5.0 lac Upto Tk. 10.0 lac Upto Tk. 15.0 lac Upto Tk. 20.0 lac

Debit Loan Upto Tk.5 lac Upto Tk. .7 lac Upto Tk. 1.0 lac -

Table: 6

42

Approval Sheet:

The credit analysts will recommend to approve or decline the loan based on his/her

judgment. If the loan is approved then, analyst will fill the lap’s approval sheet. On this

sheet, we will find the table that shows monthly income – claimed by applicant, and other

income assessed by branches use CFC. Only the CFC validated income will be

considered is computing debt benumb ratio and other important items.

To evaluate client’s capacity to pay the EMI analyst will find ant EMI as a percentage of

average balance & Debt burden ratio on CFC validated income.

Value based DBR will be considered as follows:

Monthly Income (Taka) DBR

10,000-29,999 35%

30,000-49,999 40%

50,000-99,999 50%

1,00,000+ 55%

Table: 7

If the DBR and percentage of average balance are consistence, with assessment guideline,

analysts will wait for CPV and CIB inhere required.

4.16 Verification Process:

4.16.1 CPV (contact point verification) Report:

Consumer LendingCPV/ Policy and Process Guideline

43

1. Introduction:

Verification is an integral part of credit appraisal, as it validates the

information that is being used for assessment.

At EBL, verification' is segregated and defined as below:

1. Contact point verification (CPV)

2. Bank Statement Authentication

3. Credit Report

4. Rent Verification

5. Guarantor's verification

6. Car value verification

Verification ensures that credit assessment was based on authenticated information. It

is vital that credit decisions are based on accurate and correct information.

Verification is within the purview of CFC but it is conducted by independent

agency(s). The third party agency ensures that adequate measures are in place to

eliminate any conflict-of-interest situations. With increase of volume as well as

number of customers, though presumably a simple task, verification has become

sizable both in numbers as well as from cost point of view.

This document intends to parameterize process of verification and outline a standard

Procedure.

2. Objective:

The objectives of this document are as below:

1. To outline procedures to parameterize verification process through third-party

agencies

2. To formulate procedures which will be used as yardsticks for performance

evaluation?

3. To reengineer existing process and improve turn around time (TAT).

44

4.16.2 Contact point verification (CPV)

Contact point verification (CPV) consists of the following items

Residence Address - where the applicant(s) resides

Office Address - workplace of applicant(s) i.e. primary source of income

Residence Telephone - fixed telephone, which is at residence (if any)

Office Telephone - fixed telephone at workplace along ext. (if any)

Mobile Telephone - Applicants own mobile phone, which is available with

him/ her

4.16.3 Bank Statement Verification:

Here bank statement verification indicates to other bank statements that are being

used for income assessment. In addition to that, other statements may be forwarded

for verification to be more certain.

There are few exceptions with regard to foreign banks, as their statements are difficult

to forge. In addition, it is easier to identify fabricated statements of foreign banks.

4.16.4 Credit Report:

Credit Report indicates to other bank opinions about present standing of the line of

credit(s) the applicant is enjoying. Credit report provides a brief picture of the present

condition of the facility that the applicant is enjoying. Credit report may be asked for

Cash Credit / overdraft facilities, Installment loans, or other credit facilities which are

relevant to assessment.

4.16.5 Rent Verification:

Rent verification is done to ensure the rents declared are accurate. In addition, it

allows us to know the present condition (leased or vacant) of the space. Most of the

cases, rents are being paid in cash. It is difficult to identify the cash flow from bank

statements alone. Verification provides a detail view of all these aspects.

45

4.16.6 Procedure:

CFC initiates verification process. After CPV assessment, bank statement

authentication, credit report and / rent verification (where applicable)

requests are forwarded to verification agency.

4.16.7 Time of receipt of request and submission of report:

Every working day except for Thursday verification agencies would collect all the

days' requests on or after 1800 hrs. Prior to collecting requests verification agency

will submit their last day's reports. The submission turn around time will be 24 hours,

but not exceeding 48 hours. Corresponding charges for verification will be guided by

agreements signed between the bank and the agency.

4.16.8 CIB (Credit information bureau) Report:

To be confirm about the loan status of the client, Bank requisites Bangladesh Bank to

issue a CIB Report. This is a confident ional report and Bank provides this only to

authorize institution.

The CIB Report shows the analyst about the loan status of the client- If the customer

avails no loan status will be nil. If client has any other loan, then CIB will provide details

of that loan- Loan amount, Banks nil, Current status (Classify or unclassified), payment

behavior and so on. If analyst fined the CIB okay, then he/she recommends for approval.

Credit analyst job is to make recommendation, not to get the loan approval. The higher

authority will review along with other recommendation by the analyst and then it will be

approval respect authority.

Higher authority has the power to cancel any loan approved without contacting analyst.

Therefore, a loan recommended by analyst, approve by manager CFC/HOCFC/HOCNB

can be declined by Managing Director /Deputy Managing Director.

46

Disbursement process includes making a find review of all the documents,

clearance fund formation, stamping, MIS update, and CIB input. All they

branch mangoes are informed by daily MIS status and they are commutated

by the Disbursement offices. In general, any approval loan is disbursed on

trust related documents are in place. Related documents include sanction letter

signature by applicant and UDC. In some case, grantor’ description with

signature, DP writes etc. Those loans that are approved office wait for the

required document. When documents arrive, they try to disburse the loan on

the same day.

5.1 EMI & UDC Value Calculation:

Disburse office has a programmed excel sheet that calculates UDC value automatically if

data is entered. The table looks like this.

Loan Amount 1,00,000 For Auto Loan JDL Executive

For category A & B (Executive)

Rate of Interest 15% EMI/Month 3,466.53 Full cheek Amount

1,24,795.18

Loan Tenor (In months)

36 3 EBL UDC each UDC for 3 EMI

10,399.60

Final EBL UDC

93,596.39

Table: 8

47

Disbursement

5.2 Loans Disbursement – CFC:

1. In the Teller ID go to the Application Header under the

Application Processing under the Workflow Transactions.

2. Press the New tab at the top and fill all the fields.

3. Click the Primary customer tab at the bottom, another screen will appear and

press OK tab at the bottom. After pressing OK, a new screen will come called

customer Addition. If loan applicant is a new customer to the Bank, fill all the

fields and then press oval customer and then press OK tab at the bottom.

4. Press the Loan Details tab at the bottom and a new screen will arrive. Fill all

the fields and press OK button at the bottom. System will get back to the first

screen and then press OK. System will arrive. You loan application number

and write down this number.

5. Press the Applicant Tab at the bottom and press OK tab when a new screen

appears. Then press close tab at the bottom.

6. Press the documents tab at the bottom and a screen will appear. Put the cursor

on the row one after one and press received tab at the middle when mandatory

state is Y in case of N state you can press waive tab and then Press OK tab at

bottom.

8. Select the Mark Data entry at the top of the screen and a new screen will

appear. Select the product code and the application number and press the Mark

Entry Complete Tab at the bottom. A new screen will appear and if there is no

48

message under the Fatal error part simply press OK tab at the bottom. Then go

out of the screen by pressing the close tab at the bottom.

9. Then go to the Recommend screen under the Application Processing

in the Workflow Transaction and press OK tab at the bottom.

10. Again through the Teller ID go to the Maintain Result screen under the Application

Processing in tile Workflow Transactions. Pick the Application number and product

from the pick list and press the Sanction tab. Fill the field and press OK. Then the

previous screen will come and press the Close tab.

11. In the Authorizer ID go t0 the Authorize Result screen under the Application

Processing in the Workflow Transaction and press OK tab.

12. Go to the Offer Letter Printing screen through the Teller ID under the

Application processing in the Workflow transactions and press The Get Tab.

Tick the box under the print column and press the Print tab.

13. Go to tile Customer Acceptance screen under the Application Processing in the

Workflow Transactions fill tile fields and press OK.

14. Go to the Loan Account opening under the Application Processing in the

Workflow Transactions and pick the Application Number and the Product

name from the list and press OK. System will generate the Loan cucumber.

15. Through the teller ID go to the Account Document under the Other Transaction

in the Loan Account Transaction and fill the fields and press the tab button.

A matrix will come on the screen and if you find Mandatory status is `Y' and

Status is `N', just click the N and a small dialogue box will appear. Change

the NO to Yes and press OK a: the bottom.

16. Need LOCAL AUTHORIZATION. System will say "Record Modified'. Then

CLOSE.

49

17. To the Set up Account Disbursement under the Other Transaction in

the Loan Account Transaction and fill the fields.

- Put loan A/C number

- First repayment date

- Payment mode: Savings transfer

- System will say: A/C belongs to a non-replicate customer

18. Need LOCAL AUTHORIZATION.

Finally do the Disbursement the way instruction is done. System says:

'DISBURSEMENT DONE'

PRESS OK -------- PRESS CLOSE

19. Go to the Pay Instruction screen under the Other Transaction of the Loan

Account Transaction and select Add option and fill all the fields and press

OK. Authorize it by the authorizer ID.

To disburse Loan from Loan Account to Savings Account go to :

Loan Account Transaction Transfer Disbursement by Transfer to savings.

50

6.1 Few General functions:

Loans system to generate a repayment schedule on the approved loan terms and

conditions.

Repayment schedule prepared at the time of sanction, unless rescheduled under very

rare circumstances, will remain in force throughout the life of the loan.

Monthly installments to be collected from the customer's account through direct debit

instructions authorized by the customer.

The complete loan data, record of accomplishment and history to be retained in the

system for future reference. New requests to be filtered against the historical data and

live data to check double financing.

OCR to maintain a logbook for recording details of all contacts, discussions, and

letters sent and visits via diary notes within 24 hours of each contact.

6.2 Delinquencies:

Delinquent accounts as identified by system will be categorized into buckets based on their

DPD (Day Past Due) status:

Days Past Due (DPD)

Rating Actions in Brief

1 - 30 DPD Delinquent 1 Reminders to Borrower through mail and telephone

31 - 60 DPD Delinquent 2 Physical visit made to office and residence

61 - 89 DPD Delinquent 3 Employer and Guarantor where applicable informed

90 - 180 DPD Substandard Account classified and written off.Table: 9

51

Collection & Recovery

The collection stages and the actions taken in each stage have been described

Below- Delinquent accounts as identified by systems to be categorized into

buckets on the basis of their 'DPD (Day past due)

Collection Stage 1: Front end (130 Days past Due)

DPD Activity /Effort

1-14 A grace periods of 7 days will be given to the customer to deposit due

installment.

15-30 7 Written requests for repayments to be sent out to the customer.

Officer Collection & Recovery (OCR) will make phone calls to the customer

requesting payments.

The sales staff IRM who booked the deal will be informed of the status and

will be asked to contact the customer as well.

Reasons for delinquency will be noted and payment commitment (not

exceeding 7 days) will be obtained.

Manager CFC will review the delinquent account and will follow up on

payment commitments.

Outstanding accounts will be divided between the front-end collectors and

their individual efforts will be monitored.

Customer will be allowed to make another commitment for repayment of the

outstanding amount.

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OCR will call (2"d call) the customer, reinforce payment

conditions and will request payment within next 7 days. OCR to be very

polite- our position reminder only on payment commitment and date.

Manager CFC assesses the need of field visit by the Officers.

During this time the department will also start following up for the

installment that is payable in the next month.

Collection Stage 2: Mid range (31 - 60 Days Past Due)

DPD Activity /Effort

31-39 A second reminder letter is sent to the customer notifying that the account

is delinquent and late payment charged.

Third phone call is made at the residential and office addresses for

collection.

40 -49 A third reminder letters is sent to the customer notifying that the account

is delinquent and late payment.

Fourth phone call made to borrower and OCR explains the problems the

customer might face if the account moves into delinquent status.

Maximum usage of the OCRs to be made by conducting visits at the

residential and office addresses.

Fifth telephone call to borrower and contact with family/

reference/guarantor is initiated to exert pressure on the defaulter.

50-59 In case of no success by the Officer, the Manager CFC will step in.

Manager CFC will contact the customer.

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Collection Stage 3: Hard core (61 - 180 Days past Due)

DPD Activity / Effort

60-89 the employer/ guarantor are sent letters informing them of the delinquency

of the borrower.

Account is moved into 'non accrual' status after encasing securities if there

are any (Any residual account balances, securities for any other products)

90 -120 a maximum of three legal notices (at fortnightly intervals) will be served to

the customer and the guarantor with copy to employer.

Record provisions for write off as per credit policy.

Loan is called up and the customer is informed through Registered Letter with

CC to employer / guarantor (as applicable).

The undated cheques for the entire loan amount is dated and placed for

collection.In case of Category C, Guarantee is called up and guarantor is

requested to settle the entire outstanding within 3 days from receipt of the

letter.Within 7 days of the return of the last cheque OCR will lodge FIR with

the nearest police station.

120-179 OCR will provide a weekly update of delinquency follow-up (phone calls

every week, until contact is made to all three as applicable) will be provided

to the Manager CFC.

Manager CFC will periodically update the Consumer Head regarding pending

cases.

180 write off

Maintain a logbook of customer, guarantor, and employer to ensure no new

loans are given.

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Other banks will be informed of the defaulter and Central Bank

for inclusion in CIB database if possible.

In future, we will look at the possibility of handling over delinquent, substandard, and

written-off cases to Collection Agency.

Format for the regret letters and collection letters have been attached as Appendix-III

Consumer Finance- MIS

The MIS for Consumer Finance Center should have the capacity of maintaining huge

amount of data and generate required reports, whenever necessary. Reports will help in

tracking, planning risk, management, setting goals for sales and marketing, identifying

trends and determining corrective actions if needed.

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During my internship at EBL, I got the opportunity to see how bankers attract customers,

assess credit risk, evaluate loan proposal, approve & disburse loans and enucleate dues.

The findings are as follows-

EBL handles all consumer loans through this consumer finance center except Fast Cash

and Fast Loan- two (2) 100% secured loans that are approved and disbursed by branches.

All the loan applications are sent to CFC for assessment with related documents.

Receiving the applications, CFC begins evaluation processes and contacts sales team

members or relationship manager. If preliminary screening allows the analyst to

recommend for approval, the applications are sent to appropriate authority. After

confirmation, CFC takes initiative for loan disbursement.

CFC current activities are satisfactory but with increasing workload and complexity, It

must revise its job responsibility in order to move ahead.

At present, CFC receives on average thirty-loan application. It has six analysts to access

credit risk. One disbursement officer (CHECKER) check document and communicates

with respective brunches if additional paper work needs to be done. Two disbursement

Officer (MAKER) disburse twenty loans per day approximately

.

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Conclusion

1. CFC has to revise its member’s job responsibility. If responsibilities are not

delegated properly, It will hamper the control process for head of consumer

finance center.

2. In some faces, brunches send documents with major faults. These are – DP notes

are not filled with approved amount, signature of the client and guarantor, is not

verified by the ARM/RM, visiting curds are not sent, loan KYC does not include

those information that are required, UDC contains wrong amount, and so on.

These problems need to be addressed and rectify as soon as possible.

3. Branch managers have the tendency to make prurient phone calls to disbursement

officer for getting the loan-disbursed earlier. These creates adverse problem as

officers in charge of loan disbursement fail to consent properly on their task. It

also increases the chance of error in their work. Therefore, practice of this type

much be discouraged.

4. “Flex cube’’- the computer software EBL uses for its Banking transaction has

problems in speed. It is not as fast as required. The speedy software will help

officer to disburse loan quickly.

5. Due to rise of provision rate on consumer lending, bank has raised lending rates.

It is expected to hinder the loan growth as interest rate has inverse relation ship

with demand for loans. In this condition, EBL must engage it self in vast

marketing campaign of consumer loans and to penetrate in target groups.

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Recommendation

6. EBL consumer loan has a consistent upward trend since its

inception. To deliver unique service and to respond to this surge,

CFC needs employees with high caliber. Existing work force is not

sufficient to take care of increasing number of Loan Application.

7. Poor coordination between CFC and branches has to be overcome. EBL

extensively use e-mail and phone in this respect. If mittens and seminar can be

arranged, then it may help solve this problem.

8. For collection department, a separate MIS is necessary. The new MIS should be

developed in a way that can trace all the information of customers who have

availed loans from EBL. There are only five members and if they have to find

LAP physically, then it will impossible for them to perform the task of collection.

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1.Modern money and Banking.Miller & Van Hoose.

2. Banking Law and Practice.P.N Varshnay & Shri H.C. Sarkar.

3. Foundations of Financial Market & Institution (3rd edition)Frank. J. Fabozzi, Frank J. Jones,Michael G. Ferri, Framco Modigliani

4. Bangladesh Banks Prudential GuidelineOn Consumer Lending-20045

5. Annual Report of Eastern Bank Ltd.For the year of 2005, 2006, 2007.

6. Different journal published by EBL .

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References

Documents

EBL Internship Report