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Evaluation of Credit Management System
of
Trust Bank Limited
Submitted by
WWW.ASSIGNMENTPOINT.COM
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Trust Bank Ltd.
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1.1Work Study:
I have work in Trust Bank Limited, Karwan Bazar Branch for three months as an internship student. I work in several departments. All sections were new to me. I was not familiar with them. At first I have joined in the Account Opening Department. I have tried to know about the responsibility of this department and the works perform by this department. In this way I work in Cash Department, Financial Control and Accounts Department (FCAD), Foreign Exchange Department, Credit Department, Clearing Department and Remittance department. In every department I have got new things. I have tried to learn and record all this things. I have also tried to match with my knowledge, which I have acquired throughout my academic period. Whenever I was facing any problem I asked them and they always helped me. In this way, I passed the internship period.
1.2Background of the study:
Now days, education is not just limited to books and classrooms. In today’s world, education is the tool to understand the real world and apply knowledge for the betterment of the society as well as business. From education the theoretical knowledge is obtained from courses 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. Therefore, an opportunity is offered by Department of Finance Asian University of Bangladesh, for its potential business graduates to get three months practical experience, which is known is as “Internship Program”. Internship Program brings a student closer to the real life situation and thereby helps to launch a career with some prior experience.
I have completed my BBA from Asian University of Bangladesh from the department of Finance. After completion of that it is mandatory for
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all students to make internship from a valuable organization. I have completed my internship from Trust Bank Limited (TBL). In these three months I have learned many things from there. Internship report is a part of BBA program.
1.3Objective of the Study:
The objective of the study is to fulfill the requirement of BBA program as well as to gain practical exposures about “Evaluation of Credit Management System of TBL”. In line with the broad objective, the detailed objectives of the study may be spelled out as follows:
To have a practical orientation of the job market;
To gather knowledge about the practical application of the
financial systems;
To examine the effectiveness of accounting as an information
system;
To present an over view of TBL;
To analyze the lending procedure maintained by TBL;
To observe principle lending activities of TBL;
To evaluate the lending performance of TBL;
To measure the actual position in classified loan and provision
maintained by TBL;
To appraise the actual recovery position of TBL;
To identify problems in credit operation of TBL;
And finally to recommends suggestions for the successful credit
operation of TBL.
1.4Coverage of the study:I mainly emphasized on the current account system of TBL. Therefore, I mainly concentrate on the credit department of this organization. This
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report tells about the responsibilities of different department and mainly the performance of Credit department. In addition this report has covered the institutional background of TBL and many other information of TBL.
1.5 Methodology of the Study: The study is performed based on the information extracted from different sources collected by using a specific methodology. I have two types of data in this report. These are primary data and secondary data.Primary Sources:
Face-to-Face conversation with the respective officers and staffs;
Interviewing officers and staffs;
Sharing practical knowledge of officials;
Relevant file study provided by the officers concerned;
In-depth study of selected cases.
Secondary Sources: Annual Report of TBL;
Audit Reports;
Website;
Relevant books, Research papers, Newspapers and Journals;
Internet and various study selected reports.
Justification of the Study:There are three types of schedule commercial banks are in operation in our economy. They are Nationalized Commercial Banks, Local Private Commercial Banks and Foreign Private Commercial Banks. TBL has discovered a new horizon in the field of banking area, which offers different General Banking, Investments and Foreign Exchange banking system. So I have decided to study on the topic Evaluation of Credit Management System of TBL. Because the Internship program of the university is an integral part of the BBA program. So it is obligatory to
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undertake such task by the students who desirous to complete and successfully end-up their BBA degree. This also provides an opportunity to the students to minimize the gap between theoretical and practical knowledge. During the internship program the teachers of the department are attached to actively and constantly guide the students. Students are required to work on a specific topic based on their theoretical and practical knowledge acquired during the period of the internship program and then submit it to the teacher. That is why I have prepared this report.
Limitation of the Study:
From the beginning to end, the study has been conducted with the intention of making it as a complete and truthful one. However, many problems appeared in the way of conducting the study. During the study, it was not possible to visit the whole area covered by the bank although the financial statements and other information regarding the study have been considered. For preparing this report, I have the following limitations:
All the branches of the sample bank were not physically visited;
All the concerned personnel of the bank have not been
interviewed because of the time constraints of the officials;
Lack of in-depth knowledge and analytical ability for writing such
report;
This is my first internship report. So I have some lack of
experience;
The time period for this study was short;
Inadequacy and lack of availability of required Current data;
Official secrecy of TBL.
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Trust Bank Ltd.
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2.1Institutional overview:
Trust Bank Limited is a scheduled commercial bank established under the Bank
Companies Act, 1991 and incorporated as Public Limited Company under the
Companies Act, 1994 in Bangladesh on 17 June 1999 with the primary objective to
carry on all kinds of banking businesses in and outside Bangladesh. The Bank has
Thirty five (35) branches operating in Bangladesh as 30th October 2008.
Initially bank has started its operation in the name of The Trust Bank Limited but
on 12 November 2006 it was renamed as “Trust Bank Limited” by the Registrar of
Joint Stock Companies. The new name of the bank was approved by Bangladesh
Bank on 03 December 2006. Composition of the Board of TBL consists of Ex-
officio Directors of in-service senior Army personnel, with the Chief of Army Staff
as its Chairman and the Adjutant General as its Vice-Chairman.
In addition to ensuring quality customer services related to general banking the bank
also deals in Foreign Exchange transactions. In the mean time the bank has extended
credit facilities to almost all the sectors of the country’s economy. The bank has
plans to invest extensively in the country’s industrial and agricultural sectors in the
coming days.
It has also plans to promote the agro-based industries of the country. The bank has
already participated in syndicated loan agreement with other banks to promote
textile sectors of the country. Such participation would continue in the future for
greater interest of the overall economy. Keeping in mind the client’s financial and
banking needs the bank is engaged in constantly improving its services to the clients
and launching new and innovative products to provide better services towards
fulfillment of growing demands of its customers. Recently the bank has changed its
logo. The bank believes the new logo is the symbol of dynamism automation and
trust.
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Previous Logo New Logo
2.2Corporate Information:
Banking License received on : 15 July 1999
Certificate of Incorporation received on : 17 June 1999
Certificate of Commencement of Business
received on
: 17 June 1999
First Branch License received On : 9 August 1999
Formal inauguration on : 29 November
1999
Sponsor Shareholders : Army Welfare
Trust
Listed with DSE September 25,
2007
Listed with CSE September 24,
2007
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Organization: Head office : Dhaka
Department : 8
Branches : 35(as on 20 October 2008)
Employees : 508 (as of 31 December 2007)
Capital Structure and Sources of Fund:Authorized Capital:
20,000,000 ordinary shares of Tk.100 each 2,000,000,000
Issued, Subscribed and Paid up Capital:
5,000,000 ordinary shares of Tk. 100 each 500,000,000
Other sources of Bank’s fund are the Bangladesh Bank, Commercial Banks, Local
and Overseas financial institutions and customer’s deposits.
2.3 Vision and Mission Statement of TBL
The efforts of TBL are focused on delivery of quality service in all areas of banking
activities with the aim to add increased value to shareholders’ investment and offer
highest possible benefits to the customers. There must have the vision as well
mission to what should back every effort of the bank as it is said, “A mission
without any vision is a daydream and a vision without any mission is a nightmare”.
Vision: We aim to provide financial services to meet customer expectations so that
customers feel we are always there when they need us, and refer us to their friends
with confidence. We want to be a preferred bank of choice with a distinctive
identity.
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Mission: Our mission is to make banking easy for our customers by implementing
one-stop service concept and provide innovative and attractive products and services
through our skilled and qualified human resources. We always look forward to
benefit the local community through supporting entrepreneurship, social
responsibility and economic development of our country.
2.4 Core Values of the Bank
In all types of banking activities Trust Bank Ltd. sticks to six core
values. In any way the bank does not compromise with any of these
values. The bank believes the values are the guidelines in its banking
operation. The core values of the bank are as follows:
Dependable
Professional
Dynamic
Reliable
Trustworthy and
Fair.
2.5Philosophy of the Bank:
At present, the bank has 35 branches across the country and it is
committed to become equal service providers compatible with the norms
of commercial schedule bank. It renders all types of personal,
commercial and corporate banking services to its customers within the
purview of the Bank Companies Act, 1991 and in line with the
directives and policy guidelines lay down by Bangladesh bank.
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2.6 Ownership:Army Welfare Trust and some defense personnel have retained the total number of
outstanding shares of this bank. Army Welfare Trust holds about 99.20% of total
number of shares. And eight defense personnel have retained the remaining 0.80%
shares equally. Particulars of the Sponsor Shareholders are as follows:
Name of the Sponsor Shareholders No. Of
Shares
Amount
1. Army Welfare Trust
2. Lt Gen Moeen U Ahmed, psc
3. Maj Gen Md. Matiur Rahman ndu, psc
4. Brig Gen Md. Zillur Rahman, MCPS,
MSC
5. Brig Gen S M Mahbubul Karim
6. Brig Gen Md. Rafiqul Islam, ndc, psc
7. Brig Gen Md. Shawkat Hossain, psc
8. Brig Gen Muhammad Anisur Rahman,
ndc, psc
9. Brig Gen Mohd. Mahbubul Hasan, ndc,
psc
4,999,920
10
10
10
10
10
10
10
10
499,992,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
Total 5,000,000 500,000,000
2.7 Managerial Hierarchy of TBL
The managerial hierarchy of Trust Bank Ltd. starts from Junior Officer
and ends to the Managing Director. The managing Director is the apex
body of the management of the bank
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Figure: Organ gram of TBL
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Deputy Managing Director
Senior Vice President
Senior Executive Vice President
Senior Officer
Vice President
Principal Officer
Assistant Vice President
Executive Officer
Senior Assistant Vice President
Officer
Senior Executive Officer
Managing Director
Junior Officer
2.8 Nature of the Bank’s Business
Trust Bank Ltd offers full range of banking services that include:
Deposit banking
Loans & advances
Export
Import
Financing inland
International remittance facilities
The bank offers a full scale commercial banking that includes:
Foreign Exchange transactions
Personal Credit
Consumer & Corporate Banking
2.9Management:Management of this bank has been lead by the Managing Director. The operational
head of each department represent in the management. Management of this bank
consists of the following members:
Managing Director (MD)
Deputy Managing Director (DMD)
Head of Credit represent by SVP
Head of Operation represent by SVP
Head of International Division represent by SVP
Head of Human Resources Division represent by SVP
Head of General Service Department represent by SAVP
Head of Retail Banking Unit represent by VP.
2.10 Audit Committee:An audit committee has been formed by the Board of Directors of the Bank in its
64th Board meeting held on 05 February 2003. In accordance with the BPRD circular
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letter no. 12 dated 23 December 2002, the committee constituted with a chairman,
two members and a members secretary.
At 31 December 2006, the Honorable Members of the committee were
as follows:
Name Position Status
With
committee
Educational
qualification
Brig Gen S.M. Mahbubul
Karim
Brig Gen Md. Shawkat
Hossain
Brig Gen Md. Shawkat
Hasan
Mr. Farhad Uddin
Director
Director
Director
Director
Chairman
Member
Member
Member
Secretary
B.Sc.(Eng)MBA
PSC
NDC, PSC
M.Com. ACMA
2.11 Online baking service:From 1st March 2007 this bank has introduced online banking service with the
motive to provide faster and modern facilities to its customers. The bank is
providing online services through FLORA BANK SOFWARE. With the
introduction of this system the bank got positive feedback from its clients. The bank
takes money from the clients as online service charge at the time of transaction.
2.12 SWOT Analysis of the TBL:SWOT Analysis is an important tool for evaluating the company’s Strengths,
Weaknesses, Opportunities and Threats. It helps the organization to identify hoe to
evaluate its performance and can scan the macro environment, which is turn would
help the organization to navigate in the Turbulence Ocean of competition. Following
is given the SWOT analysis of The Trust Bank:
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Strengths:1. Top Management:
The top management of the bank, the key strength for The Trust Bank has
contributed heavily towards the growth and development of the bank. The top
management officials are army’s highest position holder, so they have a good idea
about the current situation.
2. Company Reputation:
The Trust Bank has created a good reputation in the banking industry of the country.
Their main customers are army persons and other defense persons. The popularity of
this bank is increase day by day also in the general public area.
3. Sponsors:
The Trust Bank has founded by The Army Welfare Trust. The main sponsors for
this bank are Sena Kalyan Sangstha. The chairperson of this bank is Chief of Army
Staff and directors are also appointed by the Sangstha, that’s why the sponsor does
not have any problem for the fund.
4. Modern Facilities and Computer:
From the very beginning The Trust Bank tries to furnish their work surroundings
with modern equipment and facilities. For speedy service to the customer, The Trust
Bank had installed money-counting machine in the teller counter. The bank has
computerized banking operation under software called PC banking. More over
computer printed statements are available to internal use and occasionally for the
customers. The Trust Bank is equipped with telex and fax facilities.
5. Stirring Branches:
From the formative stage of The Trust Bank tried to furnish their branches by the
impressive style. Their well-decorated branches gets attention of the potential
customer, this is one kind of positioning strategy. The Sena Kalyan Bhaban Branch
is also impressive and is comparable of foreign banks.
6. Interactive Corporate Culture:
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The corporate culture of The Trust Bank is very much interactive compare to other
local organization. This interactive environment encourages the employee to work
attentively. Science the banking jobs is very much routine work oriented and lovely
environment boots up the work capability of the employees.
Weaknesses:1. Hierarchy Problem:
The hierarchy problem treated as a weakness for The Trust Bank, because the
employee will not stay for a long. So there will be a chance of brain drain from this
bank to other bank.
2. Advertisement Problem:
There is another weakness for The Trust Bank is advertisement. Their media
coverage is so much low that people do not know the bank thoroughly.
Opportunities:1. Diversification:
The Trust Bank can pursue diversification strategy in expanding its current line of
business. They do not serve not only the army but also the general people.
2. Business Banking:
The investment potential of Bangladesh is foreign investors. So TBL has
opportunity to expand in business banking.
3. Credit Card:
There is an opportunity to launch Credit Card in Bangladesh by TBL. Beside this,
TBL can acquire services for cards like VISA, MASTER CARD etc. So that they
can enhance the market based card service.
Threats:1. Contemporary Banks:
The contemporary banks of The Trust Bank like: Dhaka Bank, Dutch Bangla Bank,
National Bank, Mutual Trust Bank, Mercantile Bank are its major rivals. They are
carrying out aggressive campaign to attract lucrative clients as well as big time
depositors. The Trust Bank should remain vigilant about the steps taken by these
banks, as these will in turn affect The Trust Bank strategies.
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2. Multinational Bank:
The Rapid expansion of multinational bank poses a potential threat to new PCB’s.
Due to the booming energy sector, more foreign banks are expected to operate in
Bangladesh. Moreover, the existing foreign banks such as HSBC, AMEX, CITI
N.A, and Standard Chattered are now pursing an aggressive branch expansion
strategy. Since the foreign banks have tremendous financial strength, it will pose a
threat to local bank to a certain extant in terms of grabbing the lucrative clients.
3. Default Culture:
Default culture is very much familiar in our country. For a bank, it is very harmful.
As The Trust Bank is new, it has not faced it seriously yet. However as the bank
grows older it might become big problems.
2.13 Activities of TBL:
The main activities of TBL are as follows:
Deposit Banking
Issuing Credit
Supports in the industrialization
Foreign Remittance
Assistance in foreign transaction
Providing safe locker service to its customers
Supports to its clients.
2.14 Balance sheet of TBL:
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2.16 Major Deposit Schemes of TBL:Trust Bank Limited has introduced different type of deposit schemes to support
lower, middle and high income group pf people. Presently they are offering
Operational and Non-operational Account to their prospective customers.
Operational Account: Savings Account
Current Account
STD Account
Non-Operational Account: Fixed Deposit Receipt (FDR)
Trust Smart Savers Scheme (TSS)
Trust Money Double Scheme (TMDS)
Trust Money Making Scheme (TMMS)
Trust Educare Scheme (TES)
Monthly Benefit Deposit Scheme (MBDS)
Lakhopati Savings Scheme (LSS)
Interest First Fixed Deposit Scheme (IFFDS)
Foreign Currency Account (FC)
Non-Resident Foreign Currency deposit Account (NFCD)
Non-Resident Investors’ Taka Account (NITA)
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Trust Bank Ltd.
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3. Literature ReviewLoans or credits comprise the most important asset as well as the primary source of
earning for the banking institutions. On the other hand, loan/credit is also the major
source of risk for the bank management. A prudent bank management should always
try to make an appropriate balance between its return and risk involved with the loan
portfolio. Credit appraisal process is the tool, which helps the bank to predict the
risk and return on the proposed project for credit disbursement. Therefore, from the
above definition it is clear that credit appraisal is a very important factor for banks.
To get a clear idea about credit appraisal process we need to know the key factors of
credit appraisal procedures.
3.1 Credit
The word credit is derived from the Latin word “credo” which means “I believe”
and is usually defined as the ability to buy with a promise to pay. It consists of
actual transfer and delivery of goods and services in exchange for a promise to pay
in future. It is simply the opposite of debt. Diversification of banking service has
accelerated the use of credit in the expansion of business operation. It is a
fundamental precept of banking everywhere that advances are made to customers in
reliance on his promise to pay rather than the security held by the banker.
3.2 Principles of Credit
A prudent Banker should always adhere to the following general principles of
lending funds to his customers.
Background, Character and ability of the borrowers
Purpose of the facility,
Term of facility,
Safety,
Security,
Profitability,
Source of repayment,
Diversity.
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Bank should never put “All its eggs in one basket”. It should be noted that selection
of appropriate borrowers, proper follow-up and end-use supervision through
constant close contact with the borrowers, are the corner stones for timely recovery
of credit.
3.3 Factors of Credit Policy
Credit policy of all banks cannot be developed on same lines because of differences
in their operational needs and resource structures. In designing a credit policy,
considerations should be given to following:
1) Total deposit resources of the bank and rate of fluctuation of resources.
2) Deposit structure.
3) Trend of growth in deposit and economic growth rate of the country.
4) Capital fund and other reserves. Large bank’s capital fund and secondary
reserve in investment can permit its loan policy to be liberal in respect of its
limit of lending in high risk-high returns loans while a relatively new small
bank would stress more on liquid and highly secured loans at lower interest
in its policy.
5) Capability of loan administration shall have to be given due weight in the
credit policy. A large bank is able to hire numbers of highly skilled
specialists/experts in different areas to advise the bank in loan making but
smaller banks relying on usual credit managers cannot venture into sectors
that require expert appraisal of loan applications and also that requires
intensive post implementation monitoring of large and complex industrial
loans.
6) Investment size of the bank and its nature.
3.4 Loan Documentation
The minimum requirements for loan or other facility documentation of a Bank are:
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a) Copies of the relative sanction letter indicating that the transaction has been
approved by properly authorized officers of the Bank.
b) A copy of the letter of sanction addressed to the customer and his acceptance
thereof.
c) All necessary documentation required to meet the terms and conditions of the
facility in the manner in which it was approved.
d) Before disbursement, it should be satisfied that all legal formalities have been
completed.
e) Disbursement of all facilities shall be made on an Offering Sheet basis to ensure
that all additional requests are duly approved by two authorized Officers one of
which must be the Manager or Sub-Manager.
f) Securities offered should also be thoroughly verified / inspected once in a month
and stock report prepared.
g) Where the loan agreement calls for restrictive covenants and ongoing conditions,
the Manager must not only satisfy himself that these are adhered to at the outset of
the transaction (i.e. date of initial takedown) but assure himself, at regular intervals,
that these are not being violated.
h) Since the Manager together with the Credit Officer is fully responsible for
documentation, they will formally sign a check list. Under no circumstances may
anyone permit drawings under any facilities, until they have signed off the check
list.
I) The Manager/Sub-Manager should ensure that appropriate steps are being taken to
keep loan documentation current for all assets of the Bank. The loan documentation
check-list, should therefore, be reviewed at regular intervals.
J) Lines of credit should, as a rule, be confirmed in writing to the borrower. A
Specific expiration date for the line should be included. Moreover every letter of
sanction must contain the Bank's standard clauses.
K) The borrower must explicitly undertake that all information supplied by him to
Bank in connection with the approved lines of credit is correct.
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L) Any material or adverse change in business conditions will cause the amount due
to Bank from the client immediately repayable. The Bank reserves the right to call
back the facilities extended at any time without assigning any reason whatsoever.
3.5 Standard Procedure of CreditThe Standard Procedure of Credit of a Bank is completed through the following
Steps:
A) Any request for credit facilities must be made by the borrower in the Bank's prescribed standard form properly filled in and completed in all respect and duly signed by the prospective borrower.
B) Submission of past 3 Years financial statement: For all credit proposals, the borrowers and guarantors (if any) should, wherever possible submit past 3 years’ Profit & Loss A/C and Balance sheet duly audited by a recognized and competent Chartered Accountant containing unqualified opinions. Some borrowers may not have audited financial statements at all. In either case, the lending officer must interview the potential borrower or guarantor and obtain satisfactory, accurate and complete financial information supporting any prior financial statements either audited or not audited. In the case of an individual borrower or guarantor, the financial statements must be signed by competent authority and must contain legend to the signatory, all assets and liabilities both direct and contingent and all sources of income and items of expenses. For all un-audited statements provided by a company, financial officer of the company must execute such legend.
C) On all new credit arrangements and annual reviews emanating in Branches, an analysis of the credit worthiness of the borrower and guarantor (if any) should be prepared by the Credit Department at the Branch where credit monitoring responsibility lies and a copy thereof forwarded to the Head of Credit Division at 'Head Office for pre-factor or post-factor review as the case may be. In case such credit originates in the Head Office, it will be forwarded to the Branch Manager for record and action.
3.6 Credit Analysis
When a customer requests a loan, bank officers analyse all available information to
determine whether the loan meets the bank’s risk-return objectives. Credit analysis
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is essentially default risk analysis in which a loan officer attempts to evaluate a
borrower’s ability and willingness to repay. The banker has to identify three distinct
areas of commercial risk analysis related to the following questions:
1. What risks are inherent in the operations of the business?
2. What have managers done or failed to do in mitigating those risks?
3. How can a lender structure and control its own risks in supplying funds?
The first question forces the banker to generate a list of factors that indicate what
could harm a borrower’s ability to repay. The second recognizes that repayment is
largely a function of decision made by a borrower. Is management aware of the
important risks and has it responded? The last question forces the banker to specify
how risks can be controlled so that bank can structure an acceptable loan agreement.
Therefore, Bankers look into key risk factors or Qualitative analysis which has
been classified according to the five Cs of credit:
1. Character:
Character refers to the borrower’s honesty and trustworthiness. A banker must asses
the borrower’s integrity and subsequent intent to repay. If there are any serious
doubts, the loan should be rejected.
2. Capital:
Capital refers to the borrower’s wealth position measured by financial soundness
and market standing. It helps cushion loses and reduces the likelihood of
bankruptcy.
3. Capacity:
Capacity involves both borrower’s legal standing and management’s expertise in
maintaining operations so the firm or individual can repay its debt obligations.
Under capacity an individual must be able to generate income to repay the cash.
4. Condition:
A condition refers to the economic environment or industry specific supply,
production and distribution factors influencing a firm’s operations. Repayment
sources of cash often vary with the business cycle or consumer demand.
5. Collateral:
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Collateral is the lender’s secondary source of repayment or security in the case of
default. Having an asset that the bank can seize and liquidate when a borrower
defaults reduces loss, but does not justify lending proceeds when the credit decision
is originally made.
Under credit analysis Bank also does Quantitative analysis which refers to the
analysis of financial statement ratios to know the past performance of a company.
Some of the key ratios which serve as a tool for financial analysis are classified as
1) Financial Ratio
2) Turnover Ratio
3) Profitability Ratio
1) Financial Ratio
Financial ratios indicate about the financial position of the company. A company is
deemed to be financially sound if it is in a position to carry on its business smoothly
and meet its obligations-both long-term as well as short term-without strain. Some
of the important ratios which are calculated in order to judge the financial position
of the company are:
i) Fixed Asset Ratio =
ii) Current Ratio =
iii) Quick Ratio =
iv) Debt Equity Ratio =
2) Turnover Ratio
The turnover ratios indicate the efficiency with which the capital employed is
rotated. They are also known as Activity or efficiency ratio. The overall profitability
of the business depends on the turnover i.e. the speed at which the capital employed
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in the business rotates. Higher the rate of rotation, greater the profitability. In order
to find out which part of capital is efficiently employed and which part not, different
ratios are calculated. These are:
i) Fixed Asset Turnover Ratio =
ii) Working Capital Turnover Ratio =
3) Profitability Ratio
Profitability is an indication of the efficiency with which the operations of the
business are carried on. Poor operational performance may indicate poor sales and
hence poor profits. Bankers look at the profitability ratio as an indicator whether
or not the firm/company earns substantially more than it pays interest for the use
of borrowed funds and whether the ultimate repayment of their debt appears
reasonably certain. The important profitability ratios are:
i) Overall Profitability Ratio =
ii) Gross Profit Ratio =
iii) Net Profit Ratio =
3.7 Lending Risk Analysis
Lending Risk analysis (LRA) is simply a loan processing manual and has done when
the amount of loan is above 1 core. By going through this manual the lending
bankers can asses the creditworthiness of their prospective borrowers.
Therefore, LRA is such an instrument which is definitely and directly related with
lending information to analyze the borrower’s financial, marketing, managerial and
organisational aspects subjectively and objectively. It also facilitates the analyst to
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know the security risk of the credit. Lending risk Analysis involves assessing the
likelihood of repayment of loans to the bank as per agreement on the basis of
analysis of certain risks. To analyze these risks bankers will need to fill-up a 16-
page LRA form. The form leads to scoring various risk factors involved in lending.
LRA has divided the various risks into two groups namely, Business Risk and
Security Risk.
1. Business Risk:Business Risk is concerned with whatever the borrowing company would fail to
generate sufficient cash out of business to repay the loan Business Risk, the main
component of lending risk, consists of the Industry Risk and the company Risk
A. Industry Risk:
Due to some external reasons a business may fail and the risk which arrives from
external reasons of the business is called Industry Risk. It has two components:
i) Supplies Risk:
When the business fails due to disruption in the supply of inputs, the consequent risk
which would arise is known as Supply Risk
ii) Sales Risk:
When the business fails for disruption in sales, this type of risk would generate.
B. Company Risk:
Company Risk is shown for some internal reasons of the business. It has also two
main components and four sub-components
i) Company position Risk:
Each and every company holds a position within an industry. This position is very
much competitive. Due to weakness in the company’s position in its industry, a
company may fail and the risk of failure is called Company Position Risk. It
depends on-
(a) Performance Risk:
If a company fails to perform well enough to repay the loan because of its weakness
under given expected external conditions, the company is said to suffer from
performance risk.
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(b) Resilience Risk:
When a company fails due to lack of its resilience to unexpected external conditions,
the resilience risk is generated.
ii) Management Risk:
If the management of a company fails to exploit the company’s position effectively,
the company can fail and this risk of failure is called management Risk. It can be
subdivided further-
(a) Management Competence Risk:
Management competence risk is the risk that the company fails because the
management is incomplete
(b) Management Integrity Risk:
Management integrity risk is the risk that the company fails to repay its loan due to
lack of management integrity.
2. Security Risk:
Security risk is the risk that the realised value of the security does not cover the
exposure of loan. Exposure means principal plus outstanding interest. Security risk
can be divided into two parts:
(a) Security Control Risk:
Security control Risk is the Risk that the bank fails to realise the security because of
lack of bank’s control over the security offered by the borrowers.
(b) Security Cover Risk:
Security cover risk is the risk that the realised security value may not cover the full
exposure of loans.
3.8 Collateral
Collateral is the lender’s secondary source of repayment or security in the case of
default. Having an asset that the bank can seize and liquidate when a borrower
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defaults reduces loss, but does not justify lending proceeds when the credit decision
is originally made.
3.8.1 Characteristics of Good Collateral
The following five items determine the suitability of items for use as collateral. The
suitability depends in varying on standardisation, durability, identification,
marketability and stability of value.
1. Standardization:
The standardisation leaves no ambiguity between the borrower and the lender as to
the nature of the asset that is being used as collateral.
2. Durability:
Durability refers to the ability of the assets to withstand wear. Or it can refer to its
useful life. Durable goods make better collateral than non-durable. Stated otherwise
crushed rocks make better collateral than fresh flowers.
3. Identification:
Certain types of assets are readily identified because they have definite
characteristics or serial numbers that cannot be removed. Two examples are a large
office building and an automobile that can be identified y make, model and serial
number.
4. Marketability:
In order for collateral to be of value to the bank, the collateral must be marketable.
That is the borrower must be able to sell it. Specialised equipment is not as good as
collateral as are dump trucks, which have multiple uses.
5. Stability of value:
Bankers prefer collateral whose market values are not likely to decline dramatically
during the period of the loan such as common stock.
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3.8.2 Different Kinds of Collateral
Secured loans have a pledge of some of the borrower’s property behind them (such
as home or an automobile) as collateral that may have to be sold if the borrowers
have no other way to repay the bank. Some of the most popular collaterals are:
1. Account Receivable: The banks take a security in the form of a stated
percentage of the borrower’s balance sheet. When the borrowers credit
customers send in cash to retire their debts this cash payments are applied to
the balance of borrowers loans. The bank may agree to lend more money as
new receivable arise from the borrowers sells to its customers thus allowing
the loan to continue as long as the borrower has need for credit and
continuous to generate and adequate volume of sales .
2. Factoring: Bank can purchase a borrowers account receivable based upon
some percentage of the book value because the bank takes over the
ownership of the receivable, it will inform the borrowers customers that hey
should send their payments to the purchasing bank.
3. Inventory: A bank will lend only a percentage of the estimated market value
of a borrower’s inventory in order to leave a substantial cushion in case the
inventories value begins to decline. The inventory pledged may be controlled
completely by the borrower using a so-called floating line approach.
4. Real Property: A bank may take a security interest in land and / or
improvements on land own by the borrower and records its clime-a
mortgage-with a government agency in order to define against successful
claim by others.
5. Personal Property: Bank takes a security in jewellery, securities and other
forms of personal property owned by a borrower.
6. Personal Guarantees: A pledge of the stock deposits or other personal
assets held by the major stock holders or owners of a company may be
required as collateral to secure a business loan.
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Trust Bank Ltd.
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Loans and Advances of TBLThe following types of credit facilities are generally allowed by Trust Bank ltd. to
the individuals, partnership firms, Corporations and others, either on Demand, Time
or Self liquidating basis and are carried on the Bank's General Ledger. The credit
facilities provided by the bank are divided into two broad categories:
Funded Facilities
Non- Funded Facilities
4.1 Funded FacilitiesAny type of credit facility which involves direct outflow of Bank's fund on account
of borrower is termed as funded credit facility, the funded facilities of loans and
advances are:
1. Short Term Loans
2. Short Term Loans (Others)
3. Long Term Loans
4.1.1 Short Term Loans
a) Secured over draft
OD is some kind of advance. In this case, the customer can over draw from his/her
current account. There is a limit of overdraw, which is set by the bank. A customer
can with draw that much amount of money from their account. For this there is an
interest charge on the over draw amount. This facility does not provide for every
one, the bank will provide only those who will fulfill the requirement. It means that
only real customer can get this kind of facility. The practice of TBL is that it states
the Over draft as Secured Overdraft. This is a type of over draft facility given by
keeping sufficient collateral from the customer. This facility provides specific right
to a client to over draw within a pre fixed limit for a certain period of time. SOD is
normally granted against the security of tangible asset such Lien of FDR, Bonds,
Sanchay Patra etc. Interest charge on SOD is calculated on the basis of the security
liened.
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Incase of FDR with Trust Bank the interest rate is 2.5% above the FDR rate,
with other bank is 14%
Incase of Sanchay Patra purchased from Trust Bank the interest rate is 2.5%
above the rate Sanchay Patra, from other bank is 14%
The common thing is 2.5% spread is kept in charging interest. Interest is
calculated on outstanding amount at daily basis.
SOD (General)
Advance allowed to individual/firm against financial obligation (i.e. lien of
FDR/PS/BSP etc.) and against assignment of work order for execution of contract
works fall under this head. This advance is generally allowed for allowed for
definite period and specific purpose.
SOD (Imports)
Advances allowed for purchasing foreign currency for opening L/C for imports of
goods fall under this type of leading. This is also an advance for a temporary period,
which is known as preemptor finance and falls under the category ‘Commercial
Lending’.
b) Time Loan:
Cash Credit (Hypothecation):
It allows to individuals or firm for trading as well as whole-sale purpose or to
industries to meet up the working capital requirements against hypothecation of
goods as primary security fall under this type of lending. It is a continuous credit. It
allowed fewer than two categories:
Commercial Lending
Working Capital
Cash Credit (Pledge)
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Financial accommodation to individual/firm for trading as well as whole sale
purpose or to industries as working capital against pledge of goods primary security
falls under this head of advance. It also a continuous credit and like the above
allowed under the categories:
Commercial Lending
Working Capital
4.1.2 Short Term Loans (Others)
a. Micro Credit:
Loan has given only to the Army Person for the purpose of Repairing and
Reconstruction of dwelling Houses. It is usually given for a small amount, such as
20000, 30000, and 40000. The amount is given on the basis of salary range.
b. PAD (Payment against document):
Payment made by the bank against lodgment of shipping documents of goods
imported through L/C falls under this type head. It is an interim type of advance
connected with import and is generally liquidated shortly against payments usually
made by the party for retirements of documents for release of import goods from the
customer authority. It falls under the category ‘Commercial Lending’.
c. LTR (Loan against Trust Receipts):
Advances allowed for retirement of shipping documents and release of goods
imported through L/C without effective control over the goods delivered to the
customer fall under this head. The goods are handed over the importer under trust
with arrangement that sales proceed should be deposited to liquidate the advances
within a given period. This is also temporary advance connected with import that is
known post-import finance under category ‘Commercial lending’.
d. IDBP (Inland documentary bill purchase):
Payment made through purchase of inlands bill to meet urgent requirements of
customer fall under this type of credit facility. This temporary advance is adjusted
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from the proceeds of bills purchased for collection. It falls under the category
‘Commercial Lending’.
e. FDBP (Foreign documentary bill purchase):
Payment made to a party through purchase of foreign documentary bills fall under
this head. This temporary advance is adjustable from the proceeds of negotiable
shipping/export documents. It falls under category ‘Export Credit’.
4.1.3 Long Term Loans
a. HBL (House Building loan)
A credit facility is available for the Armed Forces officials. This loan is provided to
build and repair dwelling house. The highest limit of this loan is 25 lac.
b. Term Loans:
The term of loan is determined on the basis of gestation period of a project
generation of income by the use of the loan. Such loans are provided for Farm
Machinery, Dairy, Poultry, etc. It is categorized in the following segments:
Midterm – This loan facility is extended for more then 1 year but less the 3 year.
Trust Bank encourages midterm loan.
Long term – Tenure of long term loan is more then 5 years.
The long term loans / Project loans are provided in two ways by TBL:
Sole Financing
Syndicate Financing.
4.1.3.1 Sole Financing by TBL
Here Trust Bank Ltd. finances the whole project from its own fund. Self help is the
best help. TBL believes in this norm. for this it tries its best to fund the loan amount
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solely except very rare cases. The project appraisal in case of sole financing of TBL
covers five different aspects of a project which we shall discuss later in
4.1.3.2 Syndicate Financing by TBL
Trust Bank is a private commercial bank. The main focus of Trust Bank is to
provide short term & medium term loan facility. So it does not concern much about
Long term project finance & syndicated finance. Trust Bank acts simply as a
participatory bank rather than Lead bank. Its main concern is to collect the interest
& the loan installment and all the regulatory & legal functions are performed by the
Lead arranger.
The major syndicate loans provided by Trust Bank are Confidence Salt Ltd., Nasir
Glass Industries Ltd, and Popular Pharmaceuticals Ltd.
For the Syndicate loan Trust Bank analyses the project feasibility by analyzing the
projected data of the particular project. The project analysis practice of Trust Bank is
given later in case of Confidence Salt Ltd.
Syndicate Loan to Nasir Glass Industries Ltd
The features of this syndicated loan are as follows:
1. Name of the Project: Nasir Glass Industries Ltd.
2. Type of Project: Manufacturing Plant of Float glass sheet.
3. Project Location: Gazipur.
4. Estimated project cost: Tk. 199.54 Crore.
5. Capacity: To produce 135 Metric Tons finished float glass sheet per day.
6. Source of raw materials: Both import & local procurement.
7. Total facilities granted by banks: Total facility provided by all banks is
Tk. 100 crore where Trust Bank Ltd. provided 9 crore. Trust bank sanction
the loan on 25-03-2004 and the expiry date is 24-03-2010.
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8. Interest rate: @ 14% on the total amount of total facility provided, whereas
trust bank charges @14% on loan provided by it.
9. Trust bank’s position in this Syndicate loan: Trust bank acts as
participatory bank whereas Prime Bank Ltd. act as lead bank and all legal
responsibility upon the lead bank. Other participatory banks are:
Mutual Trust Bank Ltd.
Dhaka Bank Ltd.
Mercantile Bank Ltd.
Arab Bangladesh Bank Ltd.
United Commercial Bank Ltd.
State Bank of India.
Export Import Bank of Bangladesh Ltd.
Dutch Bangla Bank Ltd.
International leasing & Financial Services Ltd.
Premier Leasing International Ltd.
Uttara Finance & Investment Ltd.
Standard Bank Ltd.
Syndicate loan in case of Popular Pharmaceuticals Ltd.
The features of this syndicated loan are as follows:
1. Name of the Project: Popular Pharmaceuticals Ltd.
2. Type of Project: Manufacturing biological and non-biological drugs.
3. Estimated project cost: Tk. 91 Crore 56 lac..
4. Source of raw materials: Both import & local procurement.
5. Total facilities granted by banks: Total facility provided by all banks is
Tk. 39 crore where Trust Bank Ltd. provided 4 crore. Trust bank sanctions
the loan on 19-12-2004 and the expiry date is 19-06-2012.
6. Interest rate: @ 11% on the total amount of total facility provided, whereas
trust bank charges @14% on loan provided by them.
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7. Trust bank position in this Syndicated loan: Trust bank acts as
participatory bank whereas Prime Bank Ltd. acts as lead bank and all legal
responsibility upon the lead bank. Other participatory banks are:
United Commercial Bank Ltd.
State Bank of India.
Export Import Bank of Bangladesh Ltd.
Standard Bank Ltd.
Security documents maintained by Trust Bank Ltd. in this syndicate finance:
Facility agreement
Paripassu security agreement
Escrow account agreement
Memorandum of deposit of title deeds and copy of certificate of registration
of mortgage.
Deed of agreement.
Letter of hypothecation by way of fixed and floating charge.
Personal guarantee of Managing Director and witnesses.
4.2 Non Funded Facilities provided by Trust Bank LtdNon funded facilities are divided into the following categories:
Bank Guarantee.
Letter of credit.
4.2.1 Bank Guarantee
Trust Bank offers guarantee for its reliable and valuable customer as per
requirements. This is also a Credit facility in contingent liabilities from extended for
participation in development work like supply of goods and services. The features of
Bank Guarantee are as follows:
It is a written document on non-judicial stamp
Expiry date is mentioned specifically with other terms and conditions
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Trust Bank receives commission quarterly @ 0.50% of the guaranteed
amount.
Trust Bank offers two types of Bank Guarantee, which are as follows:
1. Tender or Bid Bond Guarantee
In time of tender bidding either cash or bank guarantee is required in case payment
of earnest money. The tender guarantee assures that the tenders shall uphold the
conditions of his tender during the period of the officer as binding and that he /she
will also sign the contract in the event of the order being granted. The steps in the
process of Bid bond Guarantee are:
Request letter from customer along with board resolution in case of Limited
company
Trade license in case of Proprietorship Company
Copy of tender form
Margin:
Incase of reliable client 10% to 20%
For a new client 100% margin is required
Bank guarantee is issued in 150 Tk. Stamp Pad
Note is initiated
Approval of Bank guarantee is given.
2. Performance Guarantee:
Trust Bank also gives guarantee on behalf of the customer on completion of the
delivery or performance after getting the tender. Beneficiary finds that as a
guarantee, the contract will be fulfilled in every respect and can retain the guarantee
as per provision for long time. Including a clause stating that the supplier can claim
under the guarantee, by presenting an acceptance certificate signed by the buyer, can
counteract this. Document required for performance guarantee are:
Tender schedule.
Guarantee letter.
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A guarantee can be converted into funded facility if it is en cashed. If the client is
unable to meet up banks demand a loan account is created like Over Draft as Bank is
liable to pay to the beneficiary of the guarantee. If Bank guarantee is not used then
the beneficiary or party to whom the guarantee was given on behalf of the client will
sign on the back of the Bank Guarantee stamp and write the word ‘Released’. Then
the facility will be expired as well as banks liability.
4.2.2 Letter of Credit
Through Letter of Credit Trust Bank Ltd. provides a credit line to an importer to
facilitate both foreign and inland transactions. This is a contingent liability which
can be converted to a funded facility incase bank makes the payment on behalf of
the importer. A letter of credit can be revocable or irrevocable, restricted or
negotiable so on.
As Letter of Credit is an issue to be discussed in the management of Foreign
Exchange Operation of the bank, we shall not proceed in discussing this issue.
4.3 The Rates of different types of loansThe revised lending rates as mentioned below effected from 30.04.2007 for all
existing and fresh sanction of credit facilities.
Particulars of Sectors Revised rate(s)% p.a
1. Agriculture/Agro-based industry:
a) Loan to primary producer 10.50
b) Loan to Agricultural in put Traders/Fertilizer
Dealers/Distributors 10.00
c) Agro processing industry/farms 10.00
2. Large & Medium scale industry (Term Loan) 15.00
3. Working Capital:
a) Jute 11.00
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b) Other than jute 15.00
4. Export Finance:
Jute & Jute Products
Other Exports
7.00
7.00
5. Commercial Lending:
Loans against Work order and Brick Manufacturing
Commercial Loan (Garments)
Commercial Loan (Others)
Small & Medium Scale Enterprises (SME’s)
15.00
14.00
15.00
16.00
6. Term Loan:
a) Small and Cottage industries 14.00
b) Urban Housing (residential) 15.00
c) Urban Housing (commercial) 15.50
d) Loan for dwelling house repair and reconstruction
(Bank’s Scheme loan for low income bracket)
12.00
e) Transport loan 16.00
f) House building scheme loan for serving Army
Officers
11.00
g) Consumer Durable Scheme 17.00
h) Car & Marriage Loan Scheme 12.00
7. Loan against FDR issued by Trust Bank Ltd. 2.50% above FDR rate
8. Loan against Savings Certificates & other allowable
Financial securities issued by TBL
13.00
9. Loan against Lien of FDR / Savings Certificates /
WEDB & other allowable instruments issued by other
Banks/ Financial institutions
14.00
It is mentioned that variation by 1.5% is allowable both at the upper and lower end
from the mid rate on case to case basis with the approval of head office.
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Trust Bank Ltd.
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Consumer Credit SchemeRetail banking is a modern concept of the age. Trust Bank Ltd. has also introduced
retail banking recently. The consumer product is not new for TBL. Before Retail
banking scheme TBL also provided some credit of retail banking. The new change is
that TBL has added few new credit lines and opened a new department named Retail
Banking. The credit lines of Consumer Credit are as follows:
Any Purpose Loan
Apon Nibash Loan
Car Loan
Household Durables Loan
Doctors Loan
Marriage Loan
CNG Conversion Loan
5.1 Any Purpose Loan"Any purpose" Loan is a terminating facility offered by the Retail Banking Unit of
the Bank to individual salaried persons living in the cities/towns where the Bank has
its own branches. It is a clean or unsecured loan in the sense that only security in this
type of loan product is:
Letter of introduction from employer
Two Personal Guarantees, acceptable to the Bank preferably earning person
from family member and an individual having minimum solvency/income
not less than that of the customer.
"Any Purpose" loan which means the applicant does not have to declare the purpose
for which he/she is taking the loan hence there will be no hypothecation over the
asset to be purchased but the loan is obviously not allowed for any unlawful
purpose.
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Market Segments for Any Purpose Loan
Employees of reputed MNCs .large local corporate, employees of mid-range local
companies, reputed Educational institute, Banks/Financial Institutions, Diagnostic
center, Hospital, Hotels, Restaurant, Telecommunication, Airlines, Real-Estate
Developers of repute, Insurance companies, NGOs, Aid agencies, UN Bodies, and
all other salaried employees including Government Employees etc.
5.2 House Finance (Apon Nibash Loan)Following are the features of Apon Nibash Loan:
Scope
For individual to build or purchase house/ apartment for own use or for let out purpose.
Purpose of the Loan
a) Purchasing apartment
b) Constructing new house(s)
c) Taking over of House Building Loans from other Banks/Non Banking Finance
Institutions.
Location
a) Any municipal area where there is branch of TBL.
b) Outside municipal area but within 1 km radius of Trust Bank Branch
Eligibility
Any Bangladeshi (Singly or jointly with other co-customers e.g. spouse / son / daughter).
To be more specific the following group of people will be eligible for Apon Nibash
Loan.
Salaried People
a) Employees of govt./Autonomous body.
b) Employees of financial institution.
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c) Employees of different Public Limited.
Company/Private Limited Company having Corporate Structure.
d) Teachers of any school/college/university.
Professional
(a) Doctor /Medical Professionals (b) Engineer
(c) Accountants (d) IT Professionals (e) Management
Consultant
Self-Employed
Businessman (in business at least for five years).
Loan Amount (Loan to value ratio)
a. Upto 60% of the total cost of construction of house
b. Upto 70% of purchase price of new apartment/house. However, total loan amount shall
not exceed Tk. 50 lac
Debt Burden Ratio
40% of gross income. However, the quantum of loan shall be such to ensure
monthly installment size would not exceed 40% of the gross income 80% of. the
residual income (after deducting all expenses except present rental expense) which
over is lower.
Equity participation
a. At least 40% of the total cost of the construction of house.
b. At least 30% of purchase price of new apartment/house and repairing cost, if any.
Age Limit
Maximum age at loan maturity should be considered up to 60 years.
Minimum Construction Standard
A one storied RCC building with at least 600 sft. area and having all utility.
An apartment not less than 600 sft. area with all utilities.
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Mode of disbursement
For purchasing apartment
Firstly, the customer shall pay the equity portion to the developer Later on, the
remaining amount will be provided by the Bank.
For construction of building:
The customer will have to invest the equity portion first for having disbursement
from the sanctioned loan. Bank's Civil Engineer will ascertain whether the
customer's equity is rightly invested or not.
Any cost overrun of the projected cost shall be borne by the customer.
Period of the lending
Particular Grace Period Loan repayment(months)
Construction of new house 1-12 Up to 1 5 years
Purchase of new apartment under construction 1-12 Up to 15 yearsPurchase of new ready apartment 3 Up to 15 years
Note: The grace period interest may be recovered before starting repayment of
installments or may be capitalized with the principal for repayment.
Rate of Interest
14.50% to 15.00% p.a. with quarterly compounded.
Processing fees (It may be waived by Head Office considering the merit of the
case)
1.00% on loan amount plus 15% vat on processing fees will be realized from the
customer before disbursement of the loan.
Mode of Repayment
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The repayment will be started from the subsequent month of disbursement or from the
following month at the end of grace period. The repayment will be made in amortized
monthly equal installment comprising of principal and interest
Penal Interest
If the customer fails to deposit any installment 1 % Penal Interest shall be recovered per
month on the defaulted loan amount.
Pre-payment penalty
No Pre-payment penalty will be levied, if the loan is adjusted by the customer from his
own sources. However, if the customer desires to switch to other Bank/Financial
institutions 1% penal interest shall be charged on the outstanding loan amount.
Primary Security
Under construction apartment
Under supervision of Bank's Penal Lawyer, a Tri-partite agreement will be signed among
the customer, the developer and the Bank to the effect that the developer will handover
property related documents directly to the Bank being the financer of the apartment.
Subsequently the apartment will be registered mortgaged in the name of Trust Bank
Ltd..
Collateral
On a case to case basis, if available
Mortgage (Registered / equitable) or any other property
Pledge of shares/securities and other encashable securities.
Lien on retirement benefits
Guarantee from a person acceptable to the Bank (if possible)
5.3 Car Loan
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Car Loan is a terminating loan facility for the middle class to upper class people of
the cities where the bank has its branches to buy a car for their personal usage.
Under this scheme, the vehicle is registered in the name of the Bank under Hire
Purchase mode only.
Product Communication Points
For Any New or Reconditioned Car, Microbus, Jeep, Minibus, Truck, Pick-up,
Covered van etc.
Loan Amount
For New car - Loan Limit upto Tk. 20 lac for maximum 5 years
For Reconditioned car - Loan Limit upto Tk. 20 lac for maximum 4 years
For Microbus - Loan Limit upto Tk. 15 lac for maximum 3 years.
For Minibus, Trucks, Pick-up, Covered van - Loan Limit upto Tk. 50 lac for
maximum 5 years
Minimum 20% down payment required.
5.4 Consumer Durable LoanConsumer Durable Loan is a loan which facilitates middle class people to purchase
different household items such as Television, Refrigerator, Air -Conditioners,
Washing Machine, Computers and other household furniture etc. for personal use.
Product Communication Points
Consumer Durables for personal use. Items like: Television, Refrigerator,
Air - Conditioners, Washing Machine, Computers and other household
furniture etc.
Financing 70% of the cost of the item is allowed.
Tenor for this loan is minimum 12 months and maximum 36 months.
Maximum loan will be allowed Tk. 5.00 lac
Market Segments
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Any Bangladeshi individual who has the means and capacity to repay bank loan. In
specific terms, these could be salaried person of multinational and middle to large
size local corporate, Government officials, Officials working in reputed NGOs (Non
Government Organizations), Banks/Financial Institutions, International Aid
Agencies & UN bodies, any Tax paying businessmen of reputation, any employed/
self-employed tax-paying individual having a reliable source of income.
5.5 Doctors' LoanDoctors' Loan is a loan for professional Doctor to support their small scale purchase
of different medical equipments, tools and small machineries for installation of their
chamber/hospital/clinic. This is partially secured product, security being the
commodity acceptable form of quasi cash securities available in the market.
Product Communication Points
Doctors' Loan for professional use. Items like medical equipments to setup
chamber/ hospital/clinic with necessary medical equipments.
Financing 80% of the cost of the item is allowed.
Tenor for this loan is minimum 12 months & maximum 48 months.
Loan amount maximum Tk. 5 lac for general practionear
Loan amount maximum Tk. 10 lac for specialized Doctors
5.6 Marriage LoanMarriage Loan is a loan facility offered by the Retail Banking Unit to provide
financial support for marriage purpose for Bangladeshi people. This loan is offered
to the persons who have stable monthly income. It is a clean or unsecured loan in the
sense that there is no cash security taken against the loan.
Product communication points
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This loan is applicable for first marriage only for applicant himself/herself
and may be applied by the guardian also.
Down payment 20% (minimum).
Tenor for this loan is minimum 12 months and maximum 36 months.
Maximum loan will be allowed Tk.3.00 lac.
5.7 CNG Conversion LoanCNG Conversion Loan is a loan to provide financial supports for converting the
vehicle from carbon based fuel system to CNG system. This is an unsecured loan
because no additional security is arranged against this loan.
This Product Program Guide (PPG) contains the details rules and regulations of
CNG Conversion Loan.
Product Communication Points
CNG Conversion Loan is to convert the vehicle from carbon based fuel
system to CNG system.
Financing 90% of the cost of conversion is allowed.
Tenor for this loan is maximum 18 months.
Market Segments
Any Bangladeshi Individual who has the means and capacity to repay Bank loan. In
specific terms, these could be confirmed Service Holders, Businessman,
Professionals (owner of the vehicle or valid user of the vehicle) & Corporate Clients
(for more than one car). Any other persons who have adequate cash flow to repay
the loan installment.
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Trust Bank Ltd.
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6.1 Lending Procedure of Trust BankThe lending procedure of Trust Bank Ltd. starts with building up relationship with
customer through account opening. Control of credit operations is done at branch
and Corporate Office Level. There are twelve steps in the lending procedure of TBL
which are as follow.
Step-One
A loan procedure starts with a loan application from a client who must have an
account with the Bank. At first it starts form the branch. Branch receives application
from client for a loan facility. In the application, client mentions what type of credit
facility he/she wants form the bank including his personal information and business
information. Branch Manager or regarding Officer in-charge of credit department
conducts the initial interview with the customer.
Step-Two
After receiving the loan application form, the bank sends a letter to Bangladesh
Bank for obtaining a credit inquiry report of the customer from there. This report is
called CIB (Credit information Bureau) report. This report is usually collected if the
loan amount exceeds Tk.50 thousand. The purpose of this report is to be informed
that whether the borrower has taken loan from any other bank or not, if ‘yes’ then
whether these loans are classified or not.
Step-Three
If Bangladesh Bank sends positive CIB report on that particular borrower and if the
Bank thinks that the prospective borrower will be a good one, the bank will inspect
the documents. Required documents in case of Corporate Client are Financial
documents of the company of last three to five years is required. If the company is
new then projected financial data are required.
In this stage, the Bank will look whether the documents are properly filled up and
signed. Credit in charge of the relevant branch is responsible to know about the ins
and outs of the client’s business through discussing with him.
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Step-Four
Bank officially inspects the project for which the loan is applied. Project’s existence,
distance from bank office, viability, monitoring cost and possibilities are examined.
Step-Five
Any loan proposal needs to be evaluated on the basis of financial information
provided by the applicant. Experienced personel of Credit department in Trust Bank
do an analysis through Credit Risk Grading Score. It is a ranking whose total score
are 100. Among this score, minimum score is 75 to grant any commercial loan. For
individual borrower this score is not required.
Step-Six
Obtain legal opinion on the collateral provided by the applicant, whether those are
properly submitted, regular and up to date or else those documents will be asked to
regularize by the client.
Step-Seven
Then comes the processing stage of loan. In this stage, the Bank will prepare a
Proposal. The proposal contains following relevant information.
Name of the Borrower/borrowers
Nature of Limit
Purpose of Limit
Extent of Limit
Collateral
Margin
Rate of Interest
Repayment
Validity
Step-Eight
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If the proposal meets Trust Bank’s lending criteria and is within the manager’s
discretionary powers, the credit line is approved. The manager and the sponsoring
officer sign the credit line proposal and issue a sanction letter to client.
If the value of the credit line is above the branch managers’ limit then it is sent to
head office or zonal office for final sanction with detailed information regarding
clients, business or purpose of the loan, security papers.
Step-Nine
Head office processes the credit proposal and afterwards puts up a memorandum to
credit committee. The credit committee reviews the credit proposal and accepts or
rejects the proposal.
Step-Ten
After approval by the Credit Committee, head office or zonal office gives an
approval letter to the branch and branch gives a sanction letter. The client should
accept sanction advice with seal, which will prove his agreement with the terms and
condition offered by the bank.
Step-Eleven
After the sanction advice, Bank will collect necessary charge documents. Charge
documents vary on the basis of types of facility, types of collateral.
Step-Twelve
Finally loan is disbursed and monitoring of the disbursed loan starts as well.
6.2 Credit Approval Authority in TBLDifferent amounts and different types of loans and advances are approved at
different Divisions by different authorities:
Branch manager can approve those loan proposals that are backed by 100%
security (SOD).
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Up to Tk 30. lac, Credit Department / Management Board in the head office
can approve.
Beyond Tk.30 lac to Tk. 1.00 crore, M.D/CEO can approve the Credit
proposal.
The Board of Directors can approve a credit proposal not exceeding
Tk.32.31 crore.
Credit proposals of above Tk. 32.31 crore can be approved by Bangladesh
Bank as large loan.
A monthly summary of all new facilities approved, renewed, enhanced, and a list of
proposals declined stating reasons thereof should be reported by CRM to the
CEO/MD.
6.3 Mechanism to the Appraisal of a Credit ProposalThere is no fixed or standardized approach to project appraisal. Numerous and
diverse elements enter into the process of appraisal. It is difficult to have a cut and
dried formula with the help of which a proposal for financial assistance can be
adjusted straightway as acceptable or unacceptable. While broadly the same set of
factors is taken into consideration in the scrutiny of individual proposals, the weight
given to the factors varies from project to project. However, Trust Bank Ltd.
considers five aspects of a credit proposal while appraisal.
6.3.1 Technical Appraisal
Technical appraisal report is prepared by an engineer of the appraisal section to see
whether the project is sound with regard to every engineering and technological
consideration, including product specification, product process, size, internal
balance, suitability and availability of physical facilities, designs and layouts of
equipment and building etc.
The basic aspects of technical appraisal are:
Cost of the project.
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Annual production capacity & manufacturing process.
Location, infrastructural facilities feature and estimated cost of the land.
Civil drawing(s) and cost of civil works.
Layout plan for Building and Machinery.
Estimated cost of machinery with installation.
Selection of product process involving the choice of alternatives, wastage,
by-product, disposal of waste and effluents etc.
Annual requirement of raw material(s) with source of availability.
All input output data of the project.
6.3.2 Marketing Appraisal
An industrial project is to bring in some goods or services for a community. But the
community does not need them infinitely. Their demand is of course finite and at
given prices. Marketing plan, as in the case of production and financial plan, should
have objective in the back drop; and the objective is what is wanted to be achieved.
While appraising industrial projects Trust Bank Ltd. analyses 3 factors and brings
out the objectives in quantitative terms:
Macro/ Micro demand/ supply situation for specific products in the market.
Existing and expected competition in local and foreign markets and
The market share.
6.3.3 Financial Appraisal
The next step is to prepare a detailed report on the financial viability of the project.
The main purpose of such appraisal is to assess the viability of the project in terms
of its operation in the future years and its financial soundness. It is concerned with
assessing the feasibility of a project from the point of view of its financial result.
The project’s direct costs and benefits are calculated in pecuniary terms at the
prevailing market prices. Trust Bank Ltd. satisfies itself not only about the current
solvency of the project but also about its continued solvency to ensure timely
payment of the principal and regular payment of interest. The revenant information
collected on technical economic and management aspects of the project have got
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direct bearing upon the financial appraisal. Such appraisal is directed to examine
mainly the following aspects:
1. Financial requirement to bring the project into existence and the probable
sources of finance;
2. Prospect of adequate revenue generation with particular emphasis on actual
cash generation (liquidity) and probable impact on the financial condition
(solvency).
The basic aspects of financial appraisal are: Ratio Analysis:
Break-even Analysis
Earning Forecast
Fund flow Statement
Internal Rate of Return (IRR)
Pay Back Period Method
Net present value (NPV) Method.
6.3.4 Economic Appraisal
Trust Bank Ltd. does economic analysis of a project to determine whether the
project is consistent with overall national objectives and whether the investment
proposed is the best means of achieving the intended objectives. It involves a
systematic evaluation of a range of options for achieving the intended objectives.
Economic appraisal of the project by TBL covers both quantifiable and non-
quantifiable benefits (where applicable).
Quantifiable Benefits
TBL considers the following quantifiable benefits of the economic appraisal:
Economic Rate of Return (ERR),
Bruno Ratio/Domestic Resource cost,
Contribution of Gross Domestic Product, and
Employment generation and cost per employment.
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Non-quantifiable/Intangible Benefits/Externalities
The non-quantifiable benefits that TBL considers while doing the economic
appraisal of any project are:
Developing a good relation with the client which will benefit the bank in
future.
Creating a good impression in the industry.
6.3.5 Management appraisal
TBL emphasizes on the appraisal of management as a very important part of project
appraisal. The successful implementation and running of the project depends on the
resourcefulness, competence and integrity of its management. There are no sets of
rules to find out if the borrowers’ are persons of integrity. The bank does it through
direct and indirect investigation.
The basic aspects of the management appraisal by TBL are:
Structure & Shares.
Memorandum of Articles and relevant (Joint Stock Company’s) registration
certificates.
Introduction to members of the proposed management, relevant experience
and net worth.
Comparison of equity proposed and net worth declared.
Source of working capital or working capital loan.
6.4 Credit Risk Grading Score
Trust Bank Ltd. makes another analysis of a credit proposal named Credit Risk
Grading Score. In this analysis TBL considers the following factors:
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Financial Risk
Business/ Industry Risk
Management Risk
Security Risk
Relationship Risk
To understand Financial Risk TBL considers the factors such as leverage, liquidity,
profitability and coverage of the credit. The weight of this section is 50%. After
calculating the financial risk the bank gives a score.
To analyze Business/ Industry Risk TBL considers the factors such as size of the
business, age of the business, business outlook, industry growth, market
competition, entry/exit barriers. The weight of this section is 18%. After calculating
the business risk the bank gives a score.
To analyze Management risk TBL considers the factors such as management
experience, success, team work, background etc. The weight of this section is 12%.
In the same way the bank calculate the management risk and gives a score.
To analyze Security Risk TBL considers the factors such as security coverage,
collateral coverage, support etc. The weight of this section is10%. After calculating
the security risk the bank gives a score.
To analyze Relationship Risk TBL considers the factors such as account conduct,
utilization limit, compliance of condition, personal deposit. The weight of this
section is10%. After calculating the relationship risk the bank gives a score.
After calculating the factors if the total score is at least 75%, then the bank
sanctions loan on the project.
6.5 Credit Portfolio as a Tool of Credit Risk Management
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The bank’s loans and advances grew steadily during 2007. The growth rate was
41.66% against previous year. The bank follows specific guidelines in extending
credit to reduce the credit risk at an optimum level and so it concentrates on specific
areas than others while providing loan and advances. Here we shall see the graphical
presentation of credit portfolio of the year 2007 based on different concentrations.
Category-wise Credit Portfolio
Category Amount in Tk. % of Total Loan
Loans Crore 1,363 73
Cash Credit 117 6
Over Draft 388 21
Category-w ise Credit Portfolio
Loans (73%)
Cash Credit (6%)
Over Draft (21%)
Industry-wise Credit Portfolio
Industry Amount in Tk. % of Total Loan
Agro-sector Crore 81 4
Automobiles 33 2
Energy & Power 27 1
Steel & Engineering 146 8
Chemical & Pharmaceuticals 38 2
Textiles & Garments 311 17
Others 1,232 66
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Industry-wise Credit portfolioAgro (4%)
Automobiles (2%)
Energy (1%)
Engineering (8%)
Pharma (2%)
Textiles (17%)
Others (66%)
Geographical Location-wise Credit Portfolio
Division Amount in Tk. % of Total Loan
Dhaka Crore 1,157 61
Chittagong 662 35
Sylhet 28 2
Rajshahi 12 1
Khulna 9 1
Barisal 0 0
Nature-wise Credit Portfolio
(In Crore)
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Geographical Location-wise Credit Dhaka (61%)
Chittagong(35%)
Sylhet (2%)
Rajshahi (1%)
Khulna (1%)
Barisal (0%)
Nature Amount in Tk. % of Total Loan
Continuous 1,037 55
Demand Loan 119 6
Term up to 5 Years 477 26
Term above 5 Years 224 12
Short term Agro & Micro Credit 0.5 0
Staff Loan 10 1
Nature-wise Credit PortfolioContinuous (55%)
Demand Loan (6%)
Term 5 Years (26)
Term >5 Years (12%)
Micro Credit (0%)
Staff Loan (1%)
So we find that Trust Bank Ltd. favors Loans (73%) over Cash Credit (6%) and
Over Draft (21%) in its credit portfolio. In case of industry-wise credit portfolio we
find that the bank prefers Textiles & Garments Industry (17%) as its borrowers and
its second preference here is Steel & Engineering (8%) though the major portion of
its credit (66%) is not in any specific sector. As most of the industries and
businesses are operated in Dhaka and Chittagong, the bank prefers these two areas
while granting credit (Dhaka-61% & Chittagong-26%). If we consider nature of the
loans, the bank prefers to provide the borrowers with Continuous Loan (55%) as it is
safer to extend loans and advances to any client who is already known to the bank.
Here Term Loan of 5 Years (26%) is its 2nd Preference. Thus through various
concentrations the bank has tried to make an optimum portfolio of its loans and
advances to reduce the credit risk.
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Trust Bank Ltd.
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Credit Provisions from BD Bank and Compliance by TBLAs Bangladesh Bank is the apex body of all commercial banks in Bangladesh, it has
set necessary rules, regulations and provisions for each of the departments of the
commercial banks. The banks must abide by those provisions. In this chapter we
shall see what the provisions are Bangladesh Bank has set for the credit divisions of
the commercial banks as a whole and how the credit division pf Trust Bank Ltd. is
complying with all those provisions.
7.1 Loan Classification as per Bangladesh BankThe classification of loans provided by different commercial banks in Bangladesh
can be shown through the following table as guided by Bangladesh Bank.
ClassificationTypes of Loans
Agricultur
al Short
Term
Continuous Demand Term (Up
to 5 years)
Term (>5
years)
Unclassified12 months
or below
Less than 6
months
Less than 6
months
Less than 6
months
Less than
12 months
Substandard
Overdue
more than
12 months
but less
than 36
months
Overdue
from 6
months to 9
months
Overdue
from 6
months to 9
months
If defaulted
amount of
installments
is equal to 6
months’
payable
If defaulted
amount of
installments
is equal to
12 months’
payable
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Doubtful
Overdue
more than
36 months
but less
than 60
months
Overdue
from 9
months to
12 months
Overdue
from 9
months to
12 months
If defaulted
amount of
installments
is equal to
12 months’
payable
18 months
or more
Bad loan
Overdue
more than
60 months
Overdue 12
months or
more
Overdue 12
months or
more
Overdue of
18 months’
payable
Overdue of
24 months’
payable
Source: BRPD Circular no. 09 dated May 14, 2001
7.1.1 Qualitative Judgment Criteria of the Classification
The criteria on the basis of which the classification of the loans has been made are as
follows.
Unclassified: Repayment is regular.
Substandard: Repayment is irregular but has reasonable prospect of
improvement.
Doubtful Debt: Unlikely to be repaid but special collection efforts may
result in partial recovery.
Bad Loan / Loss: When the chance of recovery is very little.
7.1.2 Percentage of Provisions under the Classification
Provision has to be made under the same circular which is as follows.
Types / Classification Provision
A. Agricultural Short Term Loans
Unclassified, Substandard, Doubtful
Bad / Loss
5%
100%
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B. All other Loans
Unclassified
Substandard
Doubtful
Bad / Loss
1%
20%
50%
100%
7.2 Other Loan Provisions from Bangladesh BankThe other provisions on loan and advances as circulated time to time to be complied
by the commercial banks of Bangladesh are as follows.
1. A policy on maintaining general provision at 5% on Special Mention Account
was circulated vide BRPD Circular No. 09 dated August20, 2005. Furthermore all
banks have been advised to maintain general provision at 2% on Small Enterprise
Financing and Consumer Financing.
2. As per existing interest rate policy, banks are empowered to determine interest
rate on lending themselves. In order to inform their clients, banks will announce
information relating to interest rates through brochures. It may be mentioned that
banks can differentiate an interest rate not more than 3% in the same sector
considering comparative risk among the borrowers.
3. In order to establish more transparency in determining interest rates and also to
make it easily understandable and clear to their clients, it has been decided that
henceforth banks will announce mid rate of interest rate band (if any) on respective
sector while declaring interest rate on lending. Banks may charge interest rate 1.5%
lower or higher than the declared rate considering comparative risk from client to
client.
4. According to the BRPD Circular 02, dated February 15, 2005, Bangladesh Bank
will time to time revise its prudential norms for loan classification and provisioning
to strengthen credit discipline. As part of the process, Bangladesh Bank has alredy
introduced Special Mention Account so that bank can raise early warning signals
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for accounts showing first signs of weakness. As a further move towards this end,
Bangladesh Bank feels that appropriate provisioning against such accounts is
necessary.
Accordingly the following amendments have been made to the above circular:
1. Banks will be required to make General Provision at 5% on the outstanding
amount of loans kept in the Special Mention Account (SMA) after netting
off the amount of Interest Suspense.
2. The status of the loan should be reported to the Credit Information Bureau
(CIB) of Bangladesh Bank based on five categories of loan classification
status including SMA in stead of the aforesaid classification (four) of
outstanding loans. However,
5. Banks have been instructed to conduct loan classification activities and also to
maintain provisions on quarterly basis vide BRPD Circular 16, dated December
1998.
6. Bank companies are advised to submit a Statement of Loans Extended to the
Directors of the Financial Institutions as per Annexure A to the Financial Institutions
Department of Bangladesh Bank at the end of each quarter within next 15 days of
the following month of the quarter to which the statement relates. The first statement
will be based on June 30, 2004. To this end, up to date list of the Directors of
financial institutions may be collected from the Financial Institutions Department of
Bangladesh Bank.
7. At a time a loan as funded facility to a single client will not exceed 15% of the
shareholders’ equity and a loan as non-funded facility will not exceed 25%. But if
the use of the loan accelerates the socio-economic development and serves a greater
interest of our country, Bangladesh Bank may allow a loan exceeding the aforesaid
percentage. In this case a prior approval of Bangladesh Bank is a must.
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7.3 Compliance with the Provisions by TBLTrust Bank Ltd. has divided its loans and advances into three broad classifications:
Unclassified
Special Mention Account and
Classified.
Classified loans are again divided into three categories. The amounts of loans and
advances under different categories are as follows:
Classification of Loans Amount in Tk.
Unclassified 17,885,238,957
Special Mention Account 290,276,290
Classified
Sub-standard
Doubtful
Bad/Loss
506,649,407
27,998,203
317,805,298
160,845,906
The provisions against the loans under this classification are as follows:
Status Base for Provision Rate (%) Amount in Tk.
Unclassified (Excluding SMA) 17,781,747,000 Various* 206,371,000
Special Mention Account 277,321,760 5% 13,866,000
Sub-standard 19,134,240 20% 3,827,000
Doubtful 249,327,000 50% 124,663,000
Bad / Loss 97,347,000 100% 97,347,000
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* General provision is kept @ 2% on Consumer Financing (House Financing & to
Professionals) and Small Enterprise Financing, 5% on Other Consumer Financing
and Short Term Agriculture & Micro credit and 1% on all other loans and advances.
So we find that Trust Bank Ltd. complies with the provision of loan classification as
Bangladesh Bank directed and provisions against different statuses have been kept
accordingly. The bank has classified its loans as Special Mention Account also and
kept a provision against this loan @ 5%. We also find that the bank complies with
the provision of keeping a provision @ 2% on small enterprise financing.
From the interest rates of the bank as stated earlier, we have found that the highest
difference among the interest rates in the same sector is 1.5% from the mid rate of
interest which does not exceed 3% as required by Bangladesh.
To comply with the provision of quarterly basis revision of loan classification Trust
Bank Ltd. revises the classification of loans and related necessary provision
quarterly and submit a report to Bangladesh Bank.
Besides, Trust Bank Ltd. complies with the provision of submitting the Statement of
Loans Extended to the Directors of Financial Institutions on quarterly basis within
the next 15 days of the following month of the quarter.
Again I have observed the approval of a Term Loan of Tk. 50 crore to BRAC by
Trust Bank Ltd. The amount of loan supersedes the limit of Tk. 32.31 crore
(Shareholders’ equity is Tk. 215.43 crore and the credit facility is funded, so the
limit = Tk. 215.43 crore * 15%) as set by Bangladesh Bank based on share holders’
equity. As a result before granting the loan to BRAC the bank had to take a special
approval from Bangladesh Bank. So TBL complies the provision regarding the limit
of loan based on share holders’ equity also.
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Trust Bank Ltd.
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Trend Analysis of Different Credit Lines of TBLBelow we shall see the performance analysis of different credit lines of Trust bank
Ltd from 2004 to 2007 through graphical presentation.
8.1 OverdraftFrom the table we find that the trend of Overdraft is increasing over time. It is quite
satisfactory. TBL has no risk on this credit, because Trust Bank provides Overdraft
by keeping 100% security. So interest income is certain in this credit.
8.2 Car LoanCar loan is increasing over time. Trust Bank has a good performance in this regard.
It is also a profitable credit line.
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Overdraft
YEAR 2007 2006 2005 2004Amount 12323004303 3747855568 2683519276 2031240321
05000000000
10000000000
15000000000
AMOUNT
2007 2006 2005 2004
YEAR
OVERDRAFT
Car Loan
YEAR 2007 2006 2005 2004Amount 30181894 28277050 26758040 16997368
8.3 Staff LoanTrust bank gives loans to its staffs at a flexible rate. The staff loan is increasing
because with the expansion of branches its staffs are also increasing. The motive of
this credit is not to earn profit rather than to provide facility to its officials.
8.4 Consumer Durable Loan Scheme
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010000000
20000000
30000000
40000000
AMOUNT
2007 2006 2005 2004
YEAR
CAR LOAN
Staff Loan
YEAR 2007 2006 2005 2004Amount 96701751 46158884 20943257 11225088
STAFF LOAN
0
50000000
100000000
150000000
2007 2006 2005 2004
YEAR
AM
OU
NT
It is a product of retail banking department. Consumer durable loan was highest in
2004 among last 4 years.
Consumer Durable Loan
YEAR 2007 2006 2005 2004Amount 32072590 25868706 25697584 33037145
8.5 Apon Nibas Loan
It is a term loan (usually mid term). House building loan has an increasing trend in
return. TBL’s performance is better in this regard.
House Building Loan
YEAR 2007 2006 2005 2004Amount 677554651 397726271 100226839 89164634
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010000000
20000000
30000000
40000000
AMOUNT
2007 2006 2005 2004
YEAR
CONSUMER DURABLE LOAN
8.6 Loan against Trust ReceiptIt is provided to the trustworthy clients. It is an import finance. Among last 4 years
the highest amount is provided in 2007.
8.7 Marriage Loan
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0200000000400000000600000000
800000000
AMOUNT
2007 2006 2005 2004
YEAR
HOUSE BUILDING LOAN
Loan against Trust Receipt
YEAR 2007 2006 2005 2004Amount 3177579488 1823806937 2044412443 987849930
LOAN AGAINST TRUST RECEIPTS
0
1000000000
2000000000
3000000000
4000000000
2007 2006 2005 2004
YEAR
AM
OU
NT
Marriage loan is reducing day by day. It is mainly provided to the Army officials
against their salary.
8.8 Term LoanIt is the main long term loan of TBL. The major source of interest income is term
loan. The graph shows that it is increasing with the expansion of Trust Bank.
Term Loan
YEAR 2007 2006 2005 2004Amount 3455665526 1774037159 834564116 284342327
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Marriage Loan
YEAR 2007 2006 2005 2004Amount 67212516 74034648 81896327 87350560
MARRIAGE LOAN SCHEME
0
20000000400000006000000080000000
100000000
2007 2006 2005 2004
YEAR
TK
8.9 Time LoanTime loan is another major short term loan. Among the last 4 year TBL provides the
highest loan in 2006. In 2007 the performance of this loan is not satisfactory.
TIME LOANS
YEAR 2007 2006 2005 2004Amount 378641271 477720151 365358941 328511506
0
100000000
200000000
300000000
400000000
500000000
TK
1 2 3 4
2007 2006 2005 2004 YEAR
TIME LOAN
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TERM LOANS
0
1000000000
2000000000
3000000000
4000000000
2007 2006 2005 2004
YEAR
AM
OU
NT
8.10 Payment against DocumentIt is an import financing provided for 21 days. In 2007 payment against document is
highest. So the performance of this loan is good.
Payment against Document
YEAR 2007 2006 2005 2004Amount 384910469 114475493 257493793 209007234
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PAYMENT AGAINST DOCUMENT
0100000000200000000300000000400000000500000000
2007 2006 2005 2004
YEAR
TK.
Trust Bank Ltd.
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9.1 Recommendations for the Credit Division of TBL
I think Trust Bank has still many measures to take in managing the Credit Division
more effectively and efficiently. Below I have made some recommendations. I think
these will be helpful to the Bank and it will be able to manage its credit operation
better than earlier.
The credit policy of Trust Bank is very restrictive and defensive. As a result,
its loan sanction procedure is somewhat complex. The loan policy and loan
sanction procedure should be made flexible and easy.
Trust Bank, usually, does not provide overdraft without full coverage of
security, i.e., TBL only provides Secured Overdraft. As a result, its overdraft
facility is not expanding.
Trust Bank has little attention about publicity and advertisement. As a result,
most of the consumers are unaware about the bank. So extensive publicity
and advertisement is required. Trust bank can set up bill board and it can
sponsor different social program to introduce TBL.
Trust bank holds huge reserves and fund that are not utilized. As a result,
huge opportunity cost is incurred by TBL. So TBL should provide more
loans to the profitable credit line.
Trust Bank has introduced retail banking in recent time. But the rules and
loan sanction requirement is so strict and conservative that retail banking
department is not in satisfactory position.
Trust Bank analyses the commercial loan feasibility by “Credit Risk Grading
Score Sheet”. I think this manual technique lacks some important factors
such as Audit Risk, Foreign Exchange Risk (in case of import finance), and
Inherent Risk of client. So these factors should be included in Credit Risk
Grading Score Sheet.
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Bank should use automated and electronic modern equipments like ATM,
debit card, credit card, and smart card extensively.
Trust bank’s training programs can encourage their trainees to seek
additional education including computer classes, accounting, MBA programs
and foreign language instruction. So the training should be full fledged.
The number of employees & Officers should increase for operating official
activities smoothly.
In the credit department, strict supervision is necessary to avoid loan
defaulters. The bank official should do regular visit to the project.
9.2 Conclusion
Trust Bank Limited is a 3rd generation bank in Bangladesh and has a strong position
in the today’s competitive market. It has some features which makes the bank quite
different in the private sector. The bank has a tremendous management side that is
still trying to make the bank more successful.
Trust Bank Ltd. has incorporated in 1999 but within this short period of time it has
achieved a good position and is continuously upgrading itself with a view to be
competitive and to attain the leading position of the banking industry. The bank
renders service accuracy, friendliness, new ways of meeting customer needs and
good quality of services.
The image created by the bank is very good and the total condition is almost within
their control. I am hopeful that Trust Bank Limited will be one of the topmost banks
and be capable of taking challenges of the present competitive arena. I am quite
satisfied with their overall performance so far and wish a good success and bright
future of Trust Bank Limited.
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