Credit Management of Agrani Bank Limited

Chapter - 1 Introduction

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1.1 INTRODUCTION The report basically deals with “Credit Management of Agrani Bank Limited”. The credit management policy of Agrani Bank Limited is prepared in line with the guidelines of Bangladesh Bank in Credit Risk Management and for the guideline of the officers or executives in handling affairs relating to credit in a disciplined way. Credit department plays a very important role in bank as they evaluate the risk and take decision about giving loan to the customers. In this report I have tried to study the literatures statements about credit management and also the credit operation of Agrani Bank Limited. 1.2 BACKGROUND OF THE REPORT This internship report is originated as a partial fulfillment of the BBA program of Bangladesh University of Business & Technology. This report is a mandatory requirement for BBA completion. I have worked in various Department of Agrani Bank Limited, Mirpur Branch. In this report, I will try to make an overall analysis on all activities of Agrani Bank Limited specially focuses on credit management. 1.3 SIGNIFICANCE OF THE REPORT This internship report is an important partial requirement of four years BBA graduation program. This is because knowledge and learning become perfect when it is associated with theory and practice. By this internship program students can establish contacts and networking. Contacts may help to get a job in practical life. That is, student can train and prepare themselves for the job market. A poor country like Bangladesh has an overwhelming number of unemployed educated graduates. As they have no internship experience they have not been able to gain normal professional experience of establish networking system, which is important in getting a job. Therefore, it is obvious that the significance of internship is clearly justified as the crucial requirement of four years BBA graduation. 1.4 SCOPE OF THE REPORT The study would focus on the following areas of Agrani Bank Limited. 

An overview of Agrani Bank Limited.



Credit approval Procedure of Agrani Bank Limited.



Credit Performance of Agrani Bank Limited.

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1.5 OBJECTIVES OF THE REPORT 1.5.1: Broad Objective The Broad objective of this report is to analyze the Credit Management of Agrani Bank Limited. 1.5.2: Specific Objectives The study was conducted to achieve the following specific objectives:  To evaluate the credit approval process of Agrani Bank Limited.  To analyze year wise credit growth of Agrani Bank Limited.  To assess geographical location wise credit disbursement of Agrani Bank Ltd.  To analyze sector wise credit disbursement of Agrani Bank Ltd.  To analyze the status of classified & unclassified loan of the bank. 1.6 METHODOLOGY OF THE REPORT The study requires a systematic procedure from selection of the topic to preparation of the final report. The data sources of this study were to be identified and collected, to be classified, analyzed, and interpreted and presented in a systematic manner and key points were to be found out. The overall process of methodology is given in the following: 1.6.1 Research Design: This report will focuses on the credit operation of Agrani Bank Limited. To prepare this report all the necessary information are collected from both primary and secondary sources of data. This study has been conducted by collecting data for the period of five years from 2009-2013. 1.6.2 Sources of Data: The study is mainly based on secondary data. Both primary and secondary data sources will be used to generate this report. Primary Sources of Data:  Observation while working in different desks  Face to face conversation with the officer Secondary Sources of Data:  The annual report of Agrani Bank Limited

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 Credit Manual of Agrani Bank Limited  Banking related text books, relevant books, research papers, newspapers, journals and Manuals.  Desk report of related department  Web browsing

1.5.3 Instruments used for analysis 

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



predict the future movement based on past data. Ratio Analysis: Ratio analysis is a form of quantitative analysis of information contained in a company’s financial statement.

1.7 LIMITATION OF THE REPORT The Term paper is likely to have following limitations: 

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



Confidentiality of data was another important barrier that was faced during the conduct of this study. Every organization has their own secrecy that is not revealed to others. While collecting data on Agrani Bank Limited, personnel did not disclose enough information for the sake of confidentiality of the organization.



Unpublished data have not considered for the study.



The depth of the analysis has been limited to the extent of information collected from different sources.



Last of all, this study has been conducted within a limited time. So, Observing and analyzing the broad performance of the bank is not an easy task by this short duration of time.



All the interpretation and conclusion about the result of study is based on the analyst own perspective.



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

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Chapter - 2 Overview of Agrani Bank Limited

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2.1 COMPANY PROFILE Name of the company

Agrani Bank Limited

Chairman:

Dr. Zayed Bakht

Managing Director:

Mr. Syed Abdul Hamid

Company Secretary:

Badal Chandra Dey

Legal Status:

Public Limited Company

Date of Incorporation:

1972

Registered Office:

9/D Dilkusha, Dhaka 1000, Bangladesh

Authorized Capital:

Tk. 2,500.00 Crore

Paid up Capital:

Tk. 2,072.29 Crore

Tax Identification No.

0022001223

Phone:

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

Fax:

+88-02-9562346, +88-02-9563662, +8802-9563658

E-mail:

[email protected], [email protected]

Website:

www.agranibank.org (Source-Annual Report 2013)

Table 2.1: Company Profile of Agrani Bank Limited

2.2 HISTORICAL BACKGROUND OF AGRANI BANK LIMITED Agrani Bank Limited, a leading commercial bank with 915 outlets strategically located in almost all the commercial areas throughout Bangladesh, overseas Exchange Houses and hundreds of overseas Correspondents, came into being as a Public Limited Company on May 17, 2007 with a view to take over the business, assets, liabilities, rights and obligations of the Agrani Bank which emerged as a nationalized commercial bank in 1972 immediately after the emergence of Bangladesh as an independent state. Agrani Bank Limited is governed by a Board of Directors consisting of 13 (thirteen) members headed by a Chairman. The Bank is headed by the Managing Director & Chief Executive Officer; Managing Director is assisted by Deputy Managing Directors and General Managers. The bank has 11 Circle offices, 29 Divisions in head office, 62 zonal Page | 6

offices and 915 branches including 300 online branches. At the start of its operation in 1972, Agrani Bank had 246 branches, of which 37 were temporarily closed. It had a total deposit of Tk 581 million, advances of Tk 663.40 million and borrowing of Tk 294.80 million. Initially, it did not have any liquid asset to run its operations smoothly and to undertake development activities. Investment amounting to Tk 110 million was in unapproved securities. On 30 June 2000, the total deposit at the bank stood at Tk 92.96 billion, total loans and advances at Tk 74.92 billion, total investment at Tk 25.375 billion, total assets at Tk 124.798 billion and reserve funds at Tk 319 million. Of the total deposits, 8.03%, 35.41%, 19.21% and 37.35% were in current, savings, fixed and other deposits respectively. 4.24% of the total amount of loans and advances were classified. The bank's recovery rate in terms of total outstanding loans was 34% in 1999 and 32% in 2000. The cumulative balance of outstanding loans and advances on 30 June 2000 was Tk 74.97 billion. The amount of overdue loans on the same date was Tk 31.14 billion. The ratio of total overdue to total outstanding loans was 41.54%. As of 30 June 2000, the total and net income of the bank was Tk 4.151 billion and 40.1 million respectively.

2.3 MISSION OF AGRANI BANK LIMITED To mobilize financial resources from within and abroad to contribute in Agriculture's, Industry & Socio-economic development of the country and to play a catalytic role in the formation of capital market by: Anticipating business solutions required by all Agrani Bank Limited customers everywhere and innovatively supplying them beyond expectation. Setting industry benchmarks in delivering customer value through our comprehensive product range, customer service and all our activities. Building and exciting team based working environment that will attract, develop and retain employees of exceptional ability who help celebrate the success of bank’s business of bank’s customers and of national development. Maintaining the highest ethical standards and a community responsibility worthy of a leading corporate citizen. Continuously improving productivity and profitability and thereby enhancing shareholder value.

2.4 VISION OF AGRANI BANK LIMITED

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Agrani Bank Limited dreams of better Bangladesh. Where arts and letters, sports and athletics, music and entertainment, science and education, health and hygiene, clean and population free environment and above all a society based on morality and ethics make all our lives worth living. Agrani Bank’s essence and ethos rest on a cosmos of creativity and the marvel magic of a charmed life that abounds with spirit of life and adventures that contributes towards human development.

2.5 OBJECTIVES OF AGRANI BANK LIMITED  Winning at least 7.00 percent share of deposits and 6.00 percent share of loans and advances of Bangladeshi market.  Gaining competitive advantages by lowering overall cost compared to that of competitors.  Overtaking competitors by providing quality customer service.  Achieving technological leadership among the peer group.  Strengthening the Bank’s brand recognition.  Contributing towards the economic well-being of the country by focusing particularly on remittance, SME and agricultural sectors.  Strengthening research capability for innovative products.

2.6 CORE VALUES OF AGRANI BANK LIMITED  Integrity: Agrani

Bank

Limited

protects

and

safeguards

all

customer

information.ABL treats everyone in an equitable and consistent manner. ABL creates an environment, which earns and maintains customer trust.  Open Communication: Agrani Bank Limited builds customer relationships based on integrity and respect. Agrani Bank Limited offers a full line of products and excellent service. Agrani Bank Limited is committed to the prosperity of the customers and shareholders.  Performance Drivers: In Agrani Bank Limited, customers and employees are judged in terms of their performance.  Continuous Self Improvement: Continuous learning, self-challenge and strive make ways for self improvement of workforce at Agrani Bank Limited.

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 Quality: Agrani Bank Limited offers hassle free better service quality. Agrani Bank Limited builds-up quality assets in the portfolio.  Teamwork: Interaction, open communication, and maintaining a positive attitude reflect Agrani Bank Limited’s commitment to a supportive environment based on teamwork.

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2.7 CORE STRENGTHS OF AGRANI BANK LIMITED 

Professionally strong Board of Directors



Strong capital base



Transparent and Quick Decision making



Efficient team of performers



Satisfied Customers



Internal Control



Skilled Risk Management



Diversification



Quality Customer service



Unique Corporate Culture



Sharp Bifurcation between Board and Management



Strong Asset Base

2.8 CORE COMPETENCIES OF AGRANI BANK LIMITED  Knowledge  Experience & Expertise  Customer Orientation / Focus  Transparency  Determination Page | 10

 Zeal for Improvement  Pursuit of Disciplined growth Strategies  Reliability

2.9 FUNCTIONS OF AGRANI BANK LIMITED  To maintain all types of deposit A/Cs.  To make investment.  To Conduct Credit / loan facilities.  To conduct foreign exchange business.  To conduct other Banking services.  Agricultural & Rural Credit.  Export Development Fund.  Green Banking.  Financing Women Entrepreneurs.  Loan Classification and Provisioning.  Credit Monitoring, Early alert and management of non-performing loans.  Recovery of classified and written off loans.  International Trade operations.  SWIFT operations.  Treasury Operations and Fund Management.  Information Technology (IT).  Internet Banking Service.  Perform Social welfare activities

2.10 STRATEGY OF AGRANI BANK LIMITED  To manage and operate the Bank in the most efficient manner to enhance financial performance and to control cost of fund.  To strive for customer satisfaction through quality control and delivery of timely services.

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 To identify customers credit and other banking needs and monitor their perception towards our performance in meeting those requirement.  To review and update policies, procedures and practices to enhance the ability to extend better services to customers.  To train and develop all employees and provide adequate resources so that customer needs can be responsibly addressed.  To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to all employees in a timely fashion.  To cultivate a working environment that fosters positive motivation for improved performance  To increase direct contract with customers in order to cultivate a closer relationship between the bank and its customers.

2.11 DEPARTMENTS OF AGRANI BANK LIMITED  Human Resources Division  Personal banking Division  Treasury Division  Operations Division  Computer and Information Technology Division  Credit Division  Finance & Accounts Division  Financial Institution Division  Audit & Risk Management Division

2.12 MANAGEMENT STRUCTURE OF AGRANI BANK LIMITED

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Figure 2.1: Management Hierarchy of Agrani Bank Limited

2.13 PRODUCTS AND SERVICES OF AGRANI BANK LIMITED 1. Deposit a) Taka Account •

Current Deposit (CD)

•

Savings Deposit (SB)

•

Fixed Deposit (FDR)

•

Special Notice Time Deposit (SNTD)

•

Non-Resident Special Taka Account (NRTA)

•

Non-Resident Investors Taka Account (NRIT)

•

Agrani Bank Pension Scheme (APS) Page | 13

•

Agrani Bank Bishesh Shanchay Scheme (ABS)

•

Agrani Double Benefit Scheme (ADBS)

•

Monthly Deposit Scheme (MDS)

•

Monthly Income Scheme (MIS)

•

Students Savings A/C (School Banking)

•

Small Life Insurance Policy Holders A/C

•

Farmers A/C

•

Freedom Fighters A/C

•

Other Beneficiaries A/C under Social Securities

b) Foreign Currency Account •

Foreign Currency (FC) A/C

•

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

•

Resident Foreign Currency Deposit (RFCD) A/C

•

Exporters Retention Quota (ERQ) A/C

2. Loans & Advances a) Continuous Loan • • •

Cash Credit (Hypo) Cash Credit (Pledge) Secured Overdraft (SOD)

b) Term Loan • • • • • • •

Inland Bill Purchase (IBP) Export Cash Credit Industrial Credit (IC) Housing Loan (General & Commercial) Consumer Credit Loan for Overseas Employment Weavers’ Credit

c) Rural & Agro Credit • • • • • • •

Crop Loan Fishery Loan Animal Husbandry Loan Agri Machinary Loan Rural Transport Loan Swanirvar Loan Poverty Alleviation Loan

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d) Small and Medium Enterprise Loan • • •

Service Sector Loan Trading Sector Loan Manufacturing Sector Loan

e) Import Finance • • •

Loan Against Imported Merchandise (LIM) Loan Against Trust Receipt (LTR) Payment Against Document (PAD)

f) Export Finance • • • • •

Export Cash Credit Packing Credit (PC) Local / Foreign Bills Purchased (FBP) Loan Against Export Development Fund (EDF) Advance Against Cash Incentive (Subsidy)

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2.14 FIVE YEARS PERFORMANCE AT A GLANCE

Source: Annual report of ABL 2009-2013

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Chapter - 3 Theoretical Aspects

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3.1 DEFINITION OF CREDIT Contractual agreements in which a borrower receives something of value now and agrees o repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or a company. A bank loan is an extension of credit, to a consumer or business, in the form of borrowed funds which has to be paid back with interest. 3.2 CREDIT MANAGEMENT & ITS OBJECTIVES Credit management: Credit management is the process of controlling and collecting payments from customers. This is the function within a bank or company to control credit policies that will improve revenues and reduce financial risks. A credit manager is a person employed by an organization to manage the credit department and make decisions concerning credit limits, acceptable levels of risk and terms of payment to their customers. In companies, the role of Credit manager is variable in its scope. Objectives of credit management: The objective of the credit management is 

To maximize the performing asset and the minimization of the non-performing asset as well as ensuring the optimal point of loan and advance and their efficient



management. To allocate the fund in diverse field and to minimize the risk and maximizing the return on the invested fund. Continuous supervision, monitoring and follow-up are highly required for ensuring the timely repayment and minimizing the default.

The overall success in credit management depends on the banks credit policy, portfolio of credit, monitoring, supervision and follow-up of the loan and advance. Therefore, while analyzing the credit management of Agrani Bank Limited, it is required to analyze its credit policy, credit procedure, how they are managing credit and quality of credit portfolio. To implement procedures which ensure the collection of debt, meeting of service targets and the prevention of escalation in arrear debt. To facilitate financial assistance and basic services for the community’s poor Customer Care, Credit Control, Debt Collection and Indigent Policy and provide incentives for prompt payment as well as ensuring limited risk levels by means of effective management tools. 3.3 CREDIT RISK MANAGEMENT Page | 18

Credit risk management encompasses identification, measurement, matching mitigations, monitoring and control of the credit risk exposures to ensure that: The individuals who take or manage risks clearly understand it The organization’s Risk exposure is within the limits established by Board of Directors with respect to sector, group and country’s prevailing situation Risk taking Decisions are in line with the business strategy and objectives set by Board of Directors The expected payoffs compensate the risks taken Risk taking decisions are explicit and clear Sufficient capital as a buffer is available to take risk. The Importance of Credit Risk Management for Banking: Banks and other financial institutions are often faced with risks that are mostly of financial nature. These institutions must balance risks as well as returns. For a bank to have a large consumer base, it must offer loan products that are reasonable enough. Banks are constantly faced with risks. There are certain risks in the process of granting loans to certain clients. There can be more risks involved if the loan is extended t unworthy debtors. Certain risks may also come when banks offer securities and other forms of investments. The risks of losses that result in the default of payments of the debtors are a kind of risks that must be expected. Because of the exposure of banks to many risks, it is only reasonable for bank to keep substantial amount of capital to protect its solvency and to maintain its economic stability. The second Basel Accords provides statements of its rules regarding the regulations of bank’s capital allocation in connection with the allocation in connection with the level of risks the bank is exposed to. The greater the bank exposed is risks, the greater the amount of capital must be when it comes to its reserves, so as to maintain its solvency and stability. 3.4 A SIMPLE GUIDELINE TO MANAGE CREDIT & CREDIT RISK Bangladesh Bank has provided directional guidelines to the banking sector with a view to improve the Credit Risk Management culture, establish minimum standards for segregation of duties and responsibilities and assist in the ongoing improvement of the banking sector in Bangladesh. These guidelines were prepared and endorsed by the senior credit executives from private sector, foreign and nationalized commercial banks operating in Bangladesh. Credit Risk Management is of utmost importance to Banks, and Page | 19

as such, policies and procedures should be endorsed and strictly enforced by the MD/CEO and the Board of the Bank. The guidelines of Bangladesh Bank related with Management of Credit Risks have been organized into the following segments:

Figure 3.1: Guidelines of Bangladesh Bank on Management Credit Risks 3.5 CREDIT ASSESSMENT Credit Applications should summaries the results of the RMs risk assessment and include, as a minimum, the following details: Amount and type of facility(s) proposed, Purpose of facilities, Facility Structure, Security Arrangements, Government and Regulatory Policies, Economic Risks. The following risk areas should be addressed: 

Borrower Analysis & Industry Analysis



Facility Structure



Purpose of Credit



Supplier/Buyer Analysis



Project Implementation



Historical Financial Analysis



Foreign



Projected Financial Performance



Credit Background



Security



Account Conduct



Type of Control on Cash



Adherence to Lending Guidelines



Mitigating Factors

Currency

Fluctuation

Flow 

Exit Option



Name Lending

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3.6 RISK GRADING Grading Superior Good Acceptable Marginal/Watch list Special Mention Sub standard Doubtful Bad & Loss 

Short Numbe Score Need to Obtain In Name r Scorecard SUP 1 100% cash covered GD 2 85+ ACCPT 3 75-84 MG/WL 4 65-74 SM 5 55-64 SS 6 45-64 DF 7 35-44 BL 8 <35 Figure 3.2: Risk Grading

Good Credit: A qualification of an individual's credit history that indicates that the borrower is a safe credit risk. A high credit score is an indicator of good credit. An individual's credit history is dependent on a number of factors, including the amount borrowed, the amount of available credit remaining and the timeliness of payments.



Acceptable Credit: An acceptance credit is a type of letter of credit that is paid by a time draft authorizing payment on or after a specific date, if the terms of the letter of credit have been complied with.



Marginal credit: In exchange, particularly foreign exchange, the term marginal credit refers to a commercial letter of credit which may be drawn against within the margin of the letter, or in other words, up to the amount specified in the letter. Such a credit is as a rule employed in a triangular operation.



Special mention: potentially weak loans or assets presenting an unwarranted credit risk, but less risky than substandard assets. Bank loans are classified as special mention assets when the lender fails to supervise a loan properly or maintain sufficient documentation, or otherwise has deviated from acceptable and prudent lending practices. Assets listed for special mention generally reflect weaknesses in administration, servicing, or collection, as opposed to credit weaknesses, which are noted in examination reports as adversely classified assets.



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



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



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

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Chapter - 4 Credit Management of Agrani Bank Limited

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4.1 CREDIT POLICY OF AGRANI BANK LIMITED In line with the Bangladesh Bank declared concretionary monetary policy that prevailed in the year 2012, Agrani Bank Limited’s Credit policy was to expand credit within prudent limit and to discourage credit in unproductive sectors. Simultaneously, Agrani Bank Limited has maintained a deliberate pro growth directional bias in its credit policy to ensure adequate Credit flows to farm and non-farm productive sectors of micro, small & medium enterprises. The Credit policy of Agrani Bank Limited has been devised in accordance with Bangladesh Bank’s guidelines to ensure that effective credit risk management practices are followed, which will contribute towards the achievement of the overall business objectives of the bank while ensuring compliance with the regulatory framework set out by the regulators. Agrani Bank Limited’s annual credit plan determines overall limits based on various client segments and products, economic sectors, geographical locations, currency and maturity with a view to avoid undue concentration in any client segment, economic sector or geographical location. 4.2 CREDIT PRINCIPLES OF AGRANI BANK LIMITED In the feature, credit principles include the general guidelines of providing credit by branch manager or credit officer. In Agrani Bank Limited they follow the following guideline while giving loan and advance to the client.  Credit advancement shall focus on the development of customer relationship.  All credit extension must comply with the requirements of Bank’s Memorandum and Article of Association, Banking Company’s Act, Bangladesh Bank’s instructions, other rules and regulation as amended from time to time.  Loans and advances shall normally be financed from customer’s deposit and not out of temporary funds or borrowing from other banks.  The bank shall provide suitable credit services for the markets.  It should be provided to those customers who can make best use of them.  The conduct and administration of the loan portfolio should contribute with in defined risk limitation for achievement of profitable growth and superior return on bank capital.

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 Interest rate of various lending categories will depend on the level of risk and types of security offered. 4.3 GENERAL PROCEDURE OF SANCTIONING LOAN: The following procedures are applicable for giving advance to the customer. These are:             

Party’s application Collecting CIB report from Bangladesh Bank Party’s financial statement Complete balance sheet for 3 (Three) year. Copernic income statement for 3 (three) year. Collect Credit Risk Grading Sheet (CRGS) Techniques of Project Appraisal. Application for deceleration from applicant. Proposal for filling by bank Head office approval as sanction advice. Branch approval as sanction advice augends log application. Documentation Disbursement

A. Party’s application: At first borrower had to submit an application to the respective branch for loan, where he/she has to clearly specify the reason for loan. After receiving the application from the borrower Bank officer verifies all the information carefully. He also checks the account maintains by the borrower with the Bank. If the official becomes satisfied then he gives form (prescribed application form of Bank) to the prospective borrower. B. Collecting CIB Report from Bangladesh Bank: After receiving the application for advance, United Commercial sends a letter to Bangladesh Bank for obtaining a report from there. This report is called CIB (Credit Information Bureau) report. United Commercial generally seeks this report from the head office for all kind of Investment. The purpose of this report is to inform that whether the borrower has taken loan from any other Bank; if ‘yes’ then whether the party has any overdue amount or not. C. Party’s Financial Statement: After receiving CIB report from Bangladesh Bank, then respective branch collect from company’s financial statement minimum 3 year, this document help the future lone back

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possibility and this base Investment for approval of Head Office. Documents those are necessary for sending Investment proposal are: Necessary Documents While advancing money, banks create a lot of document, which are required to be signed by the borrowers before the disbursement of the loan. Of them some are technically called charge documents. Amount the documents frequently used, some are: a) Loan application form duly signed by the customer. b) Acceptance of the term and conditions of sanction advice. c) Trade license. d) Letter of guarantee of third party. e) Net- worth statement. f) If is individual borrower  Letter of Guarantee of the spouse of the borrower  Personal net-worth statement of the borrower g) In Case Of Partnership Firm      

Trade license (Up to date) Partnership Deed (registered) Letter of Guarantee of the partners Personal net-worth statement (PNS) of partner Letter of partnership Partnership Account Agreement

h) In Case Of Limited Company 

Copy of memorandum and articles of association of the company including certificate of incorporation duly certified by Registered Joint Stock Companies (RJSC) and attested by the managing director and accompanied by an up-to-date list of directors.



List/personal profile of director.



Certificate of Incorporation.



From 12 certified by RJSC



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



Letter of guarantee of the director.



Personal net-worth statement of director.

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Deed of mortgage & hypothecation for creation of charge on



fixed & fluting assets (existing & future)with RJSC 

Modification of charge creation certificate from RJSC



Undertaking starting that the borrower shell not makes any amendment or alteration in memorandum & article of association without prior approval of bank. Approval of the bank for any inclusion or exclusion of director



in & from the company. Certificate of commencement (In case of public limited

 company) 

Joint venture agreement (In case if Joint venture company)



BOI permission (In case if Joint venture company)

Required Doc’s for Retail (Individual)               

Photograph- 2 Copies Passport/National ID/Driving License Visiting card/company ID Tin Trade license (For Businessman) Utility Bill (Electricity/WASA/Gas) Bank statement- last 6 months Partnership Deed (for partnership firm) Company memorandum (FPF) Rental/Lease/Title Deed Certificate of professional degree Guarantor: Spouse- photo with signature, Attested by applicant Eligible photo with signature, Attested by the applicant, Visiting card, TIN Sanction letter with Related Bank Statement (If Enjoying Any Loan)

Required Doc’s for SME  Total stock  Total sale for 1 year  Total creditors  Total debtors  Guarantor  Net worth  Photograph

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 Visiting card  TIN  Trade license Required Doc’s for Term lone  Term loan agreement  Letter of installment  Letter of undertaking  Amortization schedule Required Doc’s for Home loan  Power of attorney for developing the property  Letter of installment  Letter of undertaking  Amortization schedule  Letter allotment of flat or floor space  Tripartite agreement among purchase, developer and bank (if under construction)  Under taking of the borrower to the effect that he will mortgage the flat/floor space the bank at the moment the same is registered in his name by the seller.  Agreement between land owner & developer.  Copy of approved plan of construction from concerned authority. D. collect credit risk grading sheet (CRGS): The branch collect credit risk grading sheet because this measure the credit risk. The company or person which category of risk against (high, medium or low). This help of the bank. E. Techniques of Project Appraisal: An appraisal is a systematic exercise to establish that the proposed project is a viable preposition. Appraising officer checks the various information submitted by the promoter in first information sheet, application for Investment and Investment proposal. United Commercial considers the following aspects in appraising a proposal.  Technical viability  Commercial viability

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 Financial viability  Economic viability The Head Office (HO) mainly checks the technical, commercial and financial viability of the project. For others HO is dependent on branch’s information. But when the investment size is big, then the HO verifies the authenticity of information physically. F. Application & declaration from applicant: The application collects form applicant then the bank declaration from then lone amount. This procedure applicant all of recoupment fill the bank than bank head-office send all information for the sanction lone. G. proposal from filling the bank: The bank officer readies the proposal form. This form applicant all kind of information and applicant why collect this lone and this use and return facility all information gather this proposal. This proposal applicant all information known then this granted the head office and necessary observation complete for applicant. H. Head office approval as sanction advice: When Head office receive appraisal from the branch then, Head Office again appraises the project. If it seems to be a viable one, the HO sends it to the Board of Directors for the approval of the Investment. The Board of Directors (BOD) considers the proposal and takes decision whether to approve the Investment or not. If the BOD approves the Investment, the HO sends the approval to the concerned branch. The respective officer of Head Office appraises the project by preparing a summary named “Top Sheet” or “Executive Summary” and then he sends it to the Head Office Credit Division for the approval of the Loan. The Head Office Credit Division considers the proposal and takes decision whether to approve the Investment or not. If the committee approves the Investment; the HO sends the approval to the concerned branch. The all kind of formalities maintain so head office necessary legal analysis like as    

If project lone then see the project. This project legal all information collects. If the personal lone so all personal information collects. The observation of 6 C

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This all confirm so head office approval as sanction advice from the branch than branch sanction the lone. I. Branch approval as sanction advice augend loan application: After getting the approval of the HO the branch issues sanction letter to the borrower. A sanction letter contains: Name of borrower, Facility allowed, Limit Purpose, Rate of interest, Period of the Investment and mode of adjustment, Security and Other terms and condition. J. Documentation: Documentation is obtaining such agreement where all the terms and condition and securities are written and signed by the borrower. Generally, the documents are taken in the case of a secured advance by ABL:  Demand promissory note: Here the borrower promises to pay the loan as and when demand by bank to repay the loan.  Letter of arrangement.  Letter of continuity.  Letter of hypothecation of goods and capital machinery  Stock report: This report is used for OD and CC. In this report, information about the quality and quantity of goods hypothecated is furnished.  Memorandum of deposit of title deed of property duly signed by the owners of the property with resolution of Board of Directors of the company owning the landed.  Personal guarantee of the owners of the property.  Guarantee of all the directors of the company.  Resolution of the board of directors to borrow fund to execute documents and completes other formalities  Form no. XVII/XIX for filling charges with the register of joint stock companies under relevant section.

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 Letter of Revival K. Disbursement: When the credit proposal are approved the credit officer must have to be ensured that the disbursement of the credit facilities must comply with the directions written in the credit policy and circular made by time to time along with checking all the following terms and conditions:  The officer of Loan Administration must collect the acceptance of the customer’s of the terms and conditions on the duplicate copy of the sanctioned advice.  They will thoroughly examine and ensure that the subject credit facility does not contradict to any law, rules and regulation of the country, Bangladesh Bank. Deed of the Mortgage and power of the Attorney to be drafted and executed under the Supervision of the Bank’s Legal Advisor.  Lawyers certificate to the effect that all the legal formalities (Equitable/ Registered Mortgaged) has been properly created on the land and building in favor of the bank & bank has acquired the effective title of the property.  Registered power of attorney has been collected from the borrower (contractor) assigning the work order favoring the ABL and the power of attorney has been registered with the work order given agency and they have agreed that they will issue all the cheques favoring ABL.  The legal documents of the vehicle have been obtained.  Collection of the satisfaction certificate in respect of all the documents both legal and banking from the lawyer.  Entry has been made in the Safe-in and Safe-out register and the documents are preserved. 4.4 CREDIT APPRAISAL PROCESS OF AGRANI BANK LTD: The function of commercial bank is to accept deposit from the common people and to invest deposited money in different sectors for overall development of the economy of the country. So the banks have to very much careful in credit appraisal. The person who is held responsible for appraising a loan proposal in Agrani Bank Limited is called the relationship manager. The customer request for credit limit and the relationship manager must decide whether to accept or refuse proposal. Making this decision is the most

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important credit activity; all other activities of the credit Department are supportive to this decision. To ensure the proper and orderly conduct of the business of the bank, the Board of Directors authorized the Managing Director and other top-level executive, that is, DMD and GM to sanction the credit. It is mentionable that principal branch operates the credit division under the supervision of DGM. The relationship manager of principal branch furnishes the credit proposal with the required information and sends it to the final authority, i.e. GM, DMD & MD, of head office for final approval. The most important measure of appraising a loan proposal is safely of the project. Safety is measured by the borrower and repaying capacity of him. The attitude of the borrower is also an important consideration; liquidity means the inflow of cash into the project in course of its operation. The profit is the blood for any commercial institution. Before approval of any loan project the bank authority has to be sure that the proposed project will be a profitable venture. Profitability is assessed from the projected profit and loss statement. The security is the only tangible remains with the banker. Securing or collateral it is accepting is easy to sell and sufficient to cover the loan amount. Bank cannot sanction loan by only depending on collateral. The sources of repayment of the project should be a feasible one. During sanctioning any loan bank has to be attentive about diversification of risk. All money must not be disbursed amongst a small number of people. In addition any project must be established for the national interest and growth. Commercial bank and financial institutions intermediate between lenders and borrowers. These financial intermediaries collect deposit and disburse it as loan and advance to the individual people, business, commercial, industrial entity. The loan and advance should be given to them who has the certain and predicted cash flow to repay the credit. If the relationship manager fail to analyze the clients viability of repaying the loan and the projects cash flow possibility of default may arise due to the fact. So the importance of appraisal, in sanctioning the loan, is the key to identify the borrower’s ability, expertise, efficiency, industry analysis, and business performance to ensure the recovery of the credit along with the good supervision, monitoring and the relationship. In a word it can be said that the purpose of appraisal is to be sure that the proposed advance will be safe, liquid, and profitable and for acceptable purpose covered by adequate security. At the time of credit proposal the bank has to come to an acceptable compromise between over caution and under caution. 4.5 CREDIT ISSUE PROCEDURE FLOWCHART: Page | 31

Application received from Sales / branch customer scrutinizes the application

Y e s

Applic ation Sales officer/Manager meets the loan recommends basicto credit Application is and sends

Y eY Loan se s disbursed

and application lodged in safe custody

received at credit Credit and assessed

criteria Approved? ?Docu

ments

in order?

N o Application sent back to source

Figure 4.1: Credit Issue Procedure Flowchart 4.6 CREDIT ANALYSIS: WHAT MAKES A GOOD LOAN? Credit analysis is the analysis of financial statement of business customers for the purpose of lending. It is conducted to determine whether the customer is creditworthy and whether the customer has sufficient cash flows and backup assets to repay the loan. The following major issues should examine in credit analysis:  Is the borrower creditworthy?  Whether purpose of the loan is consistent with bank’s credit policy and government regulations?  Whether customer/or his business have the ability to generate enough cash repay the loan.  Whether sufficient security has been offered. So that in the event of default bank’s fund can be recovered.  Fixing amount of loan, terms and conditions, documentations, etc. meet the needs of the borrower and to protect the interest of the bank.

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4.6.1. IS THE BORROWER CREDITWORTHY? A. Character: To determine whether the borrower has a responsible attitude towards borrowed funds and whether he will have every effort to repay what is owed. Responsibility, truthfulness, serious purpose, and serious intention to repay loans make up the characters of the borrower. B. Capacity: Whether customer requesting loan has the authority to request loan and have the legal standing to sign loan agreement and documents. C. Capital: Whether borrower has sufficient assets to repay the loan. D. Condition: 

Other loans and liabilities of the borrower.



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

E. Credit history/Credit habit:  Whether loans borrowed by the customers previously and how those earlier loans were handled.  Whether there is any loan default earlier.  Whether legal action has ever been taken against him for recovery of default loan. 4.6.2 PRINCIPLES OF SOUND LENDING 

Liquidity: Liquidity means the availability of bank funds on short notice. The liquidity of an advance means it repayment on demand on due date or after a short notice.



Safety: Safety means the assurance of repayment of distributed loans. Bank is in business to make money but safety should never be sacrificed for profitability, to ensure the safety of loan, the borrower should be chosen carefully.



Profitability: Banking is a business aiming at earning a good profit. The difference between the interest received on advances and the interest paid on deposit constitutes a major portion of the bank income, besides, foreign exchange business is also highly remunerative.



Intent: Banks sanction loans for productive purpose. No advances will be made by bank for unproductive purposes though the borrower may be free from all risks.



Security: The security offered for an advance is an insurance to fall bank upon in cases of need. Security serves as a safety value for an unexpected emergency. Since risk factors are involved, security coverage has to be taken before a lending.

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

National interest: Banking industry has significant role to play in the economic development of a country. The bank would lend if the purpose of the advances can contribute more to the overall economic development of the country.

4.7 CREDIT MONITORING The Credit Administration Division will oversee the credit and investment activities of the Bank with a broader portfolio-based outlook (regional dispersal, industry and customertype segmentation, product performance, portfolio classification, etc.). 

The Loan Administration unit of the division will establish and maintain a comprehensive data base on all credit exposures, and monitor consolidated movements as these are reported through copies of transaction sheets and summaries. It will conduct portfolio analyses for the purpose of evaluating portfolio performance and detecting any deterioration in the risk exposures. Summary reports and recommendations will be submitted to the Credit Committee for appropriate



action or policy decisions. The credit review unit of the division is responsible for reviewing the credit process to ensure that approved policies and procedures are being effectively being implemented throughout the Bank.

4.8 EARLY ALERT PROCESS An Early Alert Account is one that has risks or potential weaknesses of a nature requiring monitoring, supervision, or close attention by management. If these weaknesses are left uncorrected, they may result in deterioration of the prospects for the asset or in the Bank’s credit position at some future date with a likely prospect of being downgraded to CG 5 or worse (Impaired status), within the next twelve months. Early identification, prompt reporting and proactive management of Early Alert Accounts are prime credit responsibilities of all Relationship Managers and must be undertaken on a continuous basis. An Early Alert report is completed by the RM and sent to the approving authority in CRM for any account that is showing signs of determination within seven days from the identification of weaknesses. The Risk Grade is updated as soon as possible. 4.9 CREDIT RECOVERY It is the duty of the Bank to recover the landed fund within the stipulated time and if the borrower fails to repay the money within the pointed period Bank declare him/her as a Page | 34

defaulter and recover the fund by selling the securities given by the borrower or by freezing his/her account or make a suit against him/her. Recovery procedure is a lengthy one that requires efforts of the bank, society and legal institutions. It also takes time and money. Like other banks, Agrani Bank Limited follows four steps to recover the outstanding amount. These four steps are described in detail below Reminder to the client is given through a formal communication channel. A letter is written and properly signed on the bank’s papers. This letter is issued several times to remind the honorable loaner to repay his/her outstanding portion.  If the loan amount is not yet repaid after sending a series of letters, then social pressure is created on the client by persons referred while opening account in the bank.  Legal notice is prepared and sent by Agrani Bank Limited when above two steps fails to recover the amount. It is a threat to the borrower.  The last and final step of the recovery procedure is the help from the court. Agrani Bank Limited sincerely tries to avoid this kind of situation for its honorable clients but cannot help doing for its own sustainability. Recovery procedure of Agrani Bank Limited is the ultimate combination of time, effort of money. It follows four procedural steps to recover the lending amount, which is joint effort of Bank, society and legal institutions, which are shown in Chart.

1 s t 2 n d 3 r P E r xo ev ci d u o t r i v e o f Rl e i eg n f m a ig nl i anr ul l e s b y R d l etee h grm e a b i l h yn e d l e p r o f t h e b y n o t i c c te o h u e r t B Ba n a k n k Figure 4.2: Credit Monitoring

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Chapter - 5 Credit Performance of Agrani Bank Limited

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5.1 Year wise Credit and Growth Loan and advances are stated in the balance sheet on gross basis. Loan and advances are on the basis of their maturity/repayment term. Table 5.1: Year wise Credit & Growth

(Tk. in Crores)

Year

2009

2010

2011

2012

2013

Total Loans & Advances

12,224

16,326

19,409

21,266

20,297

Growth of Loans & Advances

7.83%

33.56%

18.88%

9.57%

- 4.56%

Sources: Annual Report 2009-20103, ABL

Graphical Presentation: Year wise Credit & Growth 25000 20000 15000 10000 5000

12224

16326

19409

21266

20297

2011

2012

2013

0 2009

2010

Figure 5.1: Year wise Credit Disbursement

Growth of Credit 40.00% 30.00%

33.56%

20.00%

18.88%

10.00% 7.83% 0.00% 2009 -10.00%

9.57% 2010

2011

2012

-4.56% 2013

Figure 5.2: Growth of Credit

Interpretation: The graph shows that, growth rate of loan and advance is decreasing over the years. Amount of credit is increasing over the years but the growth of credit is decreasing. From the above chart we can see that the lowest amount of credit was Tk. 12,224 Crore in 2009 and the highest amount was Tk. 21,266 Crores in 2012. But after

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2010 the growth of credit was in decreasing trend. This is because of inappropriate lending system. 5.2 Geographical location wise credit distribution Agrani Bank Ltd. disburse loan on the basis of their credit policy.

Table 5.2.: Geographical location wise credit

(TK. in crore)

2009

2010

2011

2012

2013

Urban

12765

14755

17687

19356

18165

Rural

1379

1570

1721

1909

2130

Sources: Annual Report 2009-20103, ABL

Table 5.3: As a Percentage of Total Loan & Advances (%) 2009

2010

2011

2012

2013

Urban

96.98%

90.38%

91.13%

91.02%

89.50%

Rural

3.02%

9.62%

8.87%

8.98%

10.50%

Sources: Annual Report 2009-20103, ABL

Graphical Presentation: Geographical Area wise Credit Distribution 100.00% 96.98% 91.13% 91.02% 90.38% 89.50% 90.00% 80.00% 70.00% 60.00% Urban Rural 50.00% 40.00% 30.00% 20.00% 10.50% 9.62% 8.98% 8.87% 10.00% 3.02% 0.00% 2009 2010 2011 2012 2013

Figure 5.3: Geographical location wise credit

Interpretation: From the above graph it is seen that Agrani Bank Ltd disburse a large portion of credit in urban area. In 2009 to 2013 the bank distribution in urban area was near about 96.98%, 90.38%, 91.13%, 91.02%, 89.50%, where in rural area was 3.02%, 9.62%, 8.87%, and 8.98% 10.50%. that indicates which the Bank preffers Urban Area in

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giving credit because of industrialization that favours credit disbursement more than the rural area. 5.3 Sector wise distribution of loan in 2013 Table 5.4: Sector wise credit Disbursement Sector Agriculture and fishery Jute & jute goods Transport storage & communication Ship breakings Textile & readymade garments Food & allied industry Construction & engineering Pharmaceuticals and chemicals Leather sector Power sector Professional and services Housing service Wholesale/retail trading Personal (staff and other personal loan) Others

(TK. in crore) 2009 694 650 71 79 1269 509 235 320 464 7 93 1370 2011 1293 3152

2010 740 888 252 95 1694 680 314 427 534 195 130 1473 2687 1379 4829

2011 727 798 174 220 3178 985 425 378 371 746 140 449 2254 1490 7066

2012 864 630 150 219 2675 863 185 298 364 1180 182 572 2152 1569 9358

2013 972 558 174 115 1947 550 175 345 380 1119 236 638 2833 2128 7918

Sources: Annual Report 2009-20103, ABL

Graphical Presentation: Sector wise creditPersonal Disbursement (staff and other personal loan)

Others

100% W holesale/retail trading

Housing service

90%

80% Professional

and services

Pow er sector

70% Leather sector

Pharmaceuticals and chemicals

60% 50%

C onstruction & engineering

Food & allied industry

40% Textile 30%

& readymade garments

20%

Transport storage & communication

Ship breakings

Jute & jute goods

10% Agriculture 0%

and fishery

2009

2010

2011

2012

2013

Figure 5.4: Sector wise credit Disbursement

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Interpretation: ABL provides the highest portion of the loans in Wholesale/retail trading, Personal (staff and other personal loan) and lowest portion of the loans in Transport, storage & communication and Ship breaking. 5.4 Unclassified Loan & Advances Table 5.5.: Unclassified Loan & Advances

(TK. in crore)

Year

2009

2010

2011

2012

2013

Unclassified loan

9,850

14,224

17,260

15,886

16,717

Total loan Percentage of Unclassified loan as total loan

12,224

16,326

19,409

21,266

20,297

80.58%

87.12%

88.93%

74.70%

82.07%

Sources: Annual Report 2009-20103, ABL

Graphical Presentation Unclassified loan 95.00% 90.00% 85.00%

87.12%

88.93% 82.07%

80.00% 80.58% 75.00%

74.70%

70.00% 65.00% 2009

2010

2011

2012

2013

Figure 5.5: Unclassified loan as a % of total loan

Interpretation: From the above graph it has been seen that, percentage of unclassified loan fluctuated slowly from 2009-2013. From 2009 to 2011 the rate increased from 80.58% to 98.26%, but decreased in 2012 and increased in 2013.

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5.5 Classified to Total Loans & Advances Table 5.6: Classified loan as a percentage of total loan & advances Year

(TK. in crore)

2009

2010

2011

2012

2013

Classified loans & advances

2,374

2,102

2,149

5,380

3,580

Total loans & Advances

12,224

16,326

19,409

21,266

20,297

Percentage of classified loan as total loan

19.42%

12.88%

11.07%

25.30%

17.93%

Sources: Annual Report 2009-20103, ABL

Graphical Presentation: Classified loan 30.00% 25.30%

25.00% 20.00% 19.42% 15.00%

17.93% 12.88%

10.00%

11.07%

5.00% 0.00% 2009

2010

2011

2012

2013

Figure 5.6: Classified loan as percentage of total credit

Interpretation: The graph shows that, percentage of classified loan decreased from 2009-2011, increased in 2012 and decreased again in 2013. In 2009 the rate is 19.42% which decrease to 11.07% in 2010. In 2013 the rate is 17.93%. Because the bank became inefficient in managing recovering its classified loan. This alert banks and gives them a reason to monitor a loan more closely.

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5.6 Sub-Standard, Doubtful and Bad & loss Loans Table 5.6: Sub-Standard, Doubtful and Bad & loss Loans 2009 149 161 2064 2,374

Sub-standard Doubtful Bad & loss Total

2010 231 133 1738 2,102

(TK. in crore)

2011 209 238 1702 2,149

2012 711 918 3749 5,380

2013 380 471 2728 3,580

Sources: Annual Report 2009-20103, ABL

Graphical Presentation: Sub-Standard, Doubtful and Bad & loss Loans (in amount) 3749

4000

2728

3000 2064 2000

1738

1702

1000161 0149

133 231

238 209

711

471 380

2009

2010

2011

2012

2013

918

Sub-standard

Doubtful

Bad & loss

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

Sub-Standard, Doubtful and Bad & loss Loans (in perce ntage ) 86.94% 100.00% 80.00% 60.00% 40.00% 6.78% 20.00% 6.28% 0.00% 2009

82.68%

79.20%

6.33% 10.99% 2010 Sub-standard

69.71%

76.22%

11.07% 9.73%

17.07% 13.22%

13.16% 10.62%

2011

2012

2013

Doubtful

Bad & loss

Figure 5.8: Sub-Standard, Doubtful and Bad & loss Loans (in %) Interpretation: In the classified loan the amount of “Bad & loss” loan ratio is very much high. “Bad & Loss” was 69.71% in 2012, which was increased 76.22% in the year 2013. Doubtful loan decreased 25.66% in 2012 to 13.16% in 2013. Sub-standard loan decrease from 13.23% to 10.62% in 2012 to 2013. Page | 43

5.7 Provision for Classified Loans Table 5.7: Provision for Classified Loans

Provision for Loan and Advances (Tk. in Crore)

(TK. in crore) 2009

2010

2011

2012

2013

1056

834

942

3212

1687

Sources: Annual Report 2009-20103, ABL

Graphical Presentation: Provision for Loan and Advances 3,500 3,000 2,500 2,000 3,212

1,500 1,000 500

1,687 1,056

834

942

2010

2011

0 2009

2012

2013

Figure 5.9: Provision for Loan and Advances

Interpretation: As we can see the Provision for Loan and Advances is fluctuating year by year. The highest amount of provision was in 2012 (tk. 3212 crore) and the lowest amount of provision was in 2010 (Tk. 834 crore).

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5.8 Loan to Deposit Ratio Table 5.8: Loan to Deposit Ratio Year Total Loans & Advances Total Deposit Loan to deposit Ratio

(TK. in crore) 2009

2010

2011

2012

2013

12,224 16,628 58.21%

16,326 20,633 72.72%

19,409 25,221 76.95%

21,266 29,243 79.13%

20,297 34,868 73.51%

Sources: Annual Report 2009-20103, ABL

Graphical Presentation: Loan to Deposit Ratio 85.00% 80.00% 76.95%

75.00%

79.13% 73.51%

72.72% 70.00% 65.00% 60.00%

58.21%

55.00% 50.00% 2009

2010

2011

2012

2013

Figure 5.10: Loan to Deposit Ratio

Interpretation: The graph shows that, total deposit from 2009 to 2013 is increasing. It indicates that the bank is developing & loyal to its clients and account holders. In 2009 the total deposit was 16,628 crore and in 2013 the total deposit was 34,868 crore. The growth rate was fluctuating over the years from 2009-2013. This is because of the lowering interest rate.

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5.9 Capital Adequacy Ratio The capital adequacy ratio determines the capacity of the bank in terms of the meeting the liabilities and other risk such as credit risk, operational risk etc. Generally, 10% is acceptable line for this ratio. Capital Adequacy Ratio: (Total Eligible Capital / Total Risk Weighted Assets) * 100

Table 5.9: Capital Adequacy Ratio Year Capital Adequacy Ratio

(TK. in crore)

2009

2010

8.22%

9.20%

2011

2012

2013

11.00%

(6.15%)

10.04%

Sources: Annual Report 2009-20103, ABL

Graphical Presentation: Capital Adequacy Ratio 12.00%

11.00%

10.00% 8.00%

8.22%

10.04%

9.20%

6.00% 4.00% 2.00% 0.00% -2.00%2009

2010

-4.00%

2011

2012

2013

-6.15%

-6.00% -8.00%

Figure 5.11: Capital Adequacy Ratio

Interpretation: Agrani bank is not good enough to maintain CAR requirement because for last five years the ratio was below 10%. Bank’s capital adequacy was constrained during the year 2012 due to (i) issuance of Bond by the Government against BPC, (ii) non-payment of LTR liability, (iv) increase of interest cost on deposit of Tk. 794 crore, (v) introduction of new classification rules of Bangladesh Bank taking into consideration the international norms as per agreement with the IMF. Consequently, classified loans and required provisions have increased to a large extent. It has reduced profitability which adversely affected capital adequacy.

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Chapter - 6 Findings, Recommendations & Conclusion

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1

Major Findings  The amount of loans and advances is increasing but the growth of credit is decreasing over the years for Agrani Bank Limited.  Agrani Bank Limited distribute a large portion of credit in urban than rural areas.  Agrani Bank Limited provides the highest portion of loans in Wholesale/retail trading and Personal sector and lowest portion of the loans in Transport, storage & communication and Ship breakings. The trend of giving loans and advances by Agrani Bank Limited in power sector is increasing over the years.  The portion of classified loans and advances in percentage of total loans & advances is too high.  In the classified loan the amount of “Bad & loss” loan ratio is very high.  Loan to deposit Ratio for Agrani Bank Limited increased over the years but in 2013 it decreased to 73.51% from 79.13% in 2012.  Capital Adequacy Ratio for Agrani Bank Limited is below than the minimum capital requirement of 10%. Even in the year 2012, the ratio is in negative value.

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6.2 Recommendations  There is a decreasing trend of credit growth over the years. Agrani Bank Limited should concentrate more on credit disbursement.  Agrani Bank Limited does not provide enough loans in ship breaking and transport & communication credit sector. To generate growth, Agrani Bank Limited should promote agro-financing in large scale with higher flexibility and concentration. More concentration in transport & communication sector may bring era of success in coming years.  Agrani Bank Limited should focus more on rural areas to provide loans and advances.  Agrani Bank Limited should give more concentration to recover the classified loan by continuous communication with the client and should properly check the document of the applied client before the disbursement of the fund.  The bad and loss loan increased over the years. So, bank should take necessary actions for reducing the percentage of bad & loss loan, such as carefully selecting the borrower and credit sectors which may help to reduce the percentage of bad & loss loan.  Bank should reduce risk weighted assets by providing loans & advancess to less risky projects to maintain minimum capital adequacy ratio.

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6.3 Conclusion From the practical implementation of customer dealing procedure during the whole period of my practical orientation in Agrani Bank Limited; I have reached a firm and concrete conclusion in a very confident way. I believe that my realization will be in harmony with most of the banking thinkers. It is quite evident that to build up an effective and efficient banking system to the highest desire level computerized transaction is a must. The work experience in Agrani Bank Limited, Mirpur branch for the period of three months internship program was very interesting and enjoyable. Agrani Bank Limited is in the midst of an intense competitive environment of financing industry. However nonperforming loan are a real challenge to the sound credit management. Default is increasing for lack of monitoring. The bank is trying to increase its loan quality by accelerating its recovery policy. The bank can concentrate on the loan sector where default risk is low and its investments are profitable. The loan procedure has been made more calculative, logical to keep the credit sound. As a concluding remark I want to say that the bank is able to continue its banking activities successfully. But the bank must face new challenges and I think the bank is able to face those challenges. All officers of this branch were cooperative and friendly. Job environment in Mirpur branch of Agrani Bank Limited is excellent. A positive attempt to be more outward looking in their goals and aware of what is happening. I do hope that, my study will help the bank to give more concentration on Credit section and to perform better in future. I learned a lot from this internship program. I do believe that it will assist me in my future career.

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Bibliography 1

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

2 3 4 5 6 7 8 9

Prakashan, Calcutta, India. Agrani Bank Limited, Annual Report 2009 Agrani Bank Limited, Annual Report 2010 Agrani Bank Limited, Annual Report 2011 Agrani Bank Limited, Annual Report 2012 Agrani Bank Limited, Annual Report 2013 http://www.agranibank.org/Annual-Report.php http://www.dsebd.org/ http://www.bangladesh-bank.org/

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Appendix

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