Bangladesh

Janata Bank Limited

Chapter-1
INTRODUCTION

Janata Bank Limited

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Janata Bank Limited

1.1 Introduction
Financial institutions are very much essential for the overall development of a country. Especially banks play an important role in the field of promotion of capital, encouragement of entrepreneurship, generation of employment opportunities etc. Market economy or free economy is widely used concept about the present economy of !angladesh. "he country adopted the concept in the late seventies with the privati#ation of significant number of enterprises. "he practices of free market economy started from the eighties with the changing of the world economy. $ number of initiatives were taken from the nineties to increase the competition and efficiency in money market, rela%ation of unwanted rules and regulations, improvement of loan related law and other situations and improve the financial base of the banks of the country.

1.2 Statement of the Problem

&ommercial banks are in the risky business. 'n the process of providing financial services, they assume various kinds of financial risks. (ver the last decade our understanding of the place of commercial banks within the financial sector has improved substantially. "he very nature of the banking business is so sensitive because more than )*+ of their liability is deposits from depositors ,-aunders, &ornett, .//*0. !anks use these deposits to generate credit for their borrowers, which in fact is a revenue generating activity for most banks. "his credit creation process e%poses the banks to high default risk which might led to financial distress including bankruptcy. $ll the same, beside other services, banks must create credit for their clients to make some money, grow and survive stiff competition at the market place. "he principal concern of this report is to assess 1hat is the credit structure of 2anata !ank 3imited4 1hat tools or techni5ues they use to manage their credit risk4 1hat e%tent their performance can be affected by credit risk management policies and strategies4 1hat are the client6s perceptions towards the performance of the bank4 1hat are the processes followed by the bank to disburse credit4 1hat are the ma7or fields of credit4 1ho are borrowers of credit and what are their purposes4 1hat are the re5uirements needed to get credit facility4 1hat are the actions the bank normally takes in the case of loan recovery4 [.]

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1hat are the problems faced by the bank to credit risk management process4 8ow can the credit risk management process be improved4

1.3 Origin of the Report

"he report entitled 9&redit :isk Management ;rocess from the ;erspective of 2anata !ank 3imited< has been prepared as a partial fulfillment of !!$ ;rogram authori#ed by $dministrator of !!$ ;rogram, =epartment of Management -tudies, 2agannath >niversity, =haka.

1.4 Rationale of the Study

=ue to the increased competition of the increased number of commercial banks and the growing economy, the e%pectations of the customers have also increased than ever before. :eali#ing the present condition, banks, especially the commercial banks are trying to elevate their loan giving service as much as reachable to their customers. "he most serious difficulty facing the financial sector is the high level of interest rate and inflation rate. -o it is the duty of the top management of the commercial banks to work with the situation.

1.5 Objectives of the Report

"he ob7ectives of the report are to determine how credit policy applied in sanctioning and recovering loans and advances. &redit policy varies in terms of loan sector, status of the organi#ation, government policy, fiscal budget and guidelines etc. "here are mainly two ob7ectives behind the preparation of this report primary ob7ective and secondary ob7ectives. Primary Objecti e ? "o represent the 9&redit Management< of 2anata !ank 3imited. Secondary Objecti e! ? "o assess the credit structure of the bank in practice. ? "o measure the effectiveness of credit risk management process. ? "o identify the recovery performance of the bank. ? "o analy#e the credit management process followed by the bank. ? "o assess and highlight on the legal actions followed by the bank.

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? "o find out problems and suggesting recommendations for further improvement.

1.

Scope of the Study

2anata !ank 3td. is the second largest commercial !ank in !angladesh. 2anata !ank 3td. operates through ))A branches including B overseas branches at >nited $rab Emirates. 't is linked with 1./. foreign correspondents all over the world. "he researcher is assigned to learn practical knowledge from 2anata !ank 3td. $luba#ar branch. 'n this study ' would try to concentrate on the theoretical aspect of credit management, that is, the definition of credit management, policy of credit management, tools for managing credit etc. ' would analy#e the data on the bank and various programs for loan recovery, problems in loan in loan recovery, pattern of loan recovery and the performance of the bank under study in loan recovery, the information in respect to the classification of unsound credit and provision thereon and also concentrates on the performance of the bank. $nd finally ' would conclude with the critical evaluation of the credit management under the guidelines of the !ank &ompanies $ct 1AA1 and a discussion on the ma7or findings and recommendations.

1.! "ethodology of the Study

"he report is descriptive in nature. "o fulfill the ob7ectives of this report total methodology has divided into two ma7or partsC
"#

Data Collection Proced$re% 'n order to make the report more meaningful and presentable, two sources of data and information have been used widely.

The #$ri%ary Sources& are as follows: Face to face conversation with the official staff. ;ractical deskwork -imple depth interview techni5ue was used by asking a number of open ended 5uestions to collect the information. :elevant file study as provided by the officers concerned. The #Secondary Sources& are as follows: $nnual report of 2anata !ank 3td. [B]

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;eriodicals ;ublished by !angladesh !ank (ffice files and documents -tudy related books and 7ournals 1eb sites.

b# Data Proce!!in& ' "naly!i!% &ollected information have then processed D compiled with the aid of M- 1ord, E%cel D other related computer software. Eecessary tables have been prepared on the basis of collected data and various statistical techni5ues have been applied to analyses on the basis of classified information. =etail e%planation and analysis have also been incorporated in the report.

1.' (i%itations of the Study

"o prepare a report on the topic like this in a short duration is not easy task. 'n preparing this report some problems and limitations have encountered which are as followsC a0 "he main constraint of the study was insufficiency of information, which was re5uired for the study. "here are various information the bank employee cannot provide due to security and other corporate obligations. b0 $s the data, in most cases, are not in organi#ed way, the bank failed to provide all information. c0 =ue to time limitation, many of the aspects could not be discussed in the present report. d0 ;olitical unrest during the internship period. e0 -ince the bank personnel were very busy, they could not pay enough time. f0 3ack of opportunity to access to internal data. g0 "he researcher had to base on secondary data for preparing this report. h0 3egal action related information was not available.

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Chapter-2
AN OVERVIEW OF JANATA BANK LIMITED

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Janata Bank Limited

2.1 )istory of *anata +an, (td.

2anata !ank 3imited, one of the state owned commercial banks in !angladesh, has an authori#ed capital of "k. .//// million ,appro%. >-G .*/ million0, paid up capital of "k. 11///.// million, reserve of "k.1H.@B million. "he !ank has a total asset of "k. */)*FH million as on @1st =ecember ./1.. 'mmediately after the emergence of !angladesh in 1AH1, the erstwhile >nited !ank 3imited and >nion !ank 3imited were renamed as 2anata !ank. (n 1*th Eovember, .//H the bank has been corporati#ed and renamed as 2anata !ank 3imited. 2anata !ank 3imited operates through ))A branches including B overseas branches at >nited $rab Emirates. 't is linked with 1./. foreign correspondents all over the world. "he !ank has more than 1*,fifteen0 thousand employees.

2.2 -o%pany profile

Name of the com(any Re&i!tered addre!! Le&al !tat$! Date of incor(oration Paid $( ca(ital )eb!ite S*ift code +a, Overseas branches [H] Janata Bank Limited 2anata !haban, H/, Moti7heel &I$, =haka 1///.!angladesh. ;ublic limited .1 may, .//H. "k. 11///.// million httpCIIwww.7anatabank bd.com 2$E! != =8 ;ab% J A*F////

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Janata Bank Limited

$!> =8$!'

. -8$:2$8 @ =>!$' B $3 $'E

2.3 .overning +ody and "anage%ent

"he !oard of =irectors is composed of 1@ ,"hirteen0 members headed by a &hairman. "he =irectors are representatives from both public and private sectors. "he !ank is headed by the &hief E%ecutive (fficer D Managing =irector, who is a reputed banker. 0a%e DR.Abul Barkat Mr . Md. Enamul Haq Choudhur Dr. "amaluddin Ahmed# $CA Ms. %ar&een Mahmud# $CA Mr. 'a(ibul )slam Di*u Dr. R M Debnath + ed Ba,lul -arim# B.%.M. %rof. Mohammed Moinuddin Mr. Md. Abu 'aser Ms. +an(ita Ahmed Dr. 'itai Chandra 'a( Mr. +. M. Aminur Rahman 1esignation Chairman Dire!tor Dire!tor Dire!tor Dire!tor Dire!tor Dire!tor Dire!tor Dire!tor Dire!tor Dire!tor CE. / Mana(in( Dire!tor

2.4 /ision of *anata +an, (td.

"o become the effective largest commercial bank in !angladesh to support socio economic development of the county and to be a leading bank in -outh $sia.

/.0 "ission of *anata +an, (td.

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"he mission of the bank is to be an effective commercial bank by maintaining stable growth strategy, delivering high 5uality financial products, providing e%cellent customer service through an e%perienced management team and ensuring good corporate governance in every step of banking network.

2. Organi2ational Structure
1ierarchy of Janata Bank Ltd. 2ana&ement

Chairman
2ana&in& Director De($ty 2ana&in& Director 3eneral 2ana&er De($ty 3eneral 2ana&er "!!i!tant 3eneral 2ana&er +ir!t "!!i!tant 3eneral 2ana&er Senior 4,ec$ti e Officer 4,ec$ti e Officer "!!i!tant 4,ec$ti e Officer [A]

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Janata Bank Limited

Officer

"!!i!tant Officer

2.! 1epart%ents of *anata +an, (td.

$ccording to the 1st principle of management if the 7obs are not organi#ed considering their interrelationship and are not allocated in a particular department, it would be very difficult to control the system effectively. 'f the departmentali#ation is not fitted for the particular works there would be hapha#ard situation and the performance of a particular department would not be measured. 2anata !ank 3imited has done this work very well. -. &entral $ccounts =ivision ,&$=0 /. &redit =ivision 5. 'nternational =ivision 6. 'nformation D "echnology =ivision 0. 8uman :esources =ivision 7. $udit D 'nspection =ivision 8. Foreign :emittance Management =ivision 9. "reasury =epartment a0 Foreign &urrency Management =ivision b0 3ocal &urrency Management =ivision :. 3egal Matters =ivision -;. 8uman resources management division Be!ide! abo e di i!ion! there are al!o !ome di i!ion! like% $gro !ased Financing =ivision Establishment DEngineering =ivision Employee 1elfare D "ransport =isciplinary D $ppeal =ivision ;ro7ect Monitoring D :eview =ivision ;ublic :elation =ivision Kigilance D &ontrol =ivision [1/]

=ivision M'-D -tatistics =ivision

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Janata Bank Limited

&ommon =ivision Leneral $dvance =ivision Moderni#ation D :estructuring =ivision :econciliation =ivision

Marketing D=evelopment =ivision Micro &redit =ivision :ural &redit =ivision

Chapter-3
T14OR4TIC"L B"C<3ROUND O+ CR4DIT RIS< 2"N"3424NT

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Janata Bank Limited

Janata Bank Limited

3.1 3hat is -redit4

'n banking terminology, credit refers to the loans and advances made by the bank to its customers or borrowers. !ank credit is a credit by which a person who has given the re5uired security to a bank has liberty to draw to a certain e%tent agreed upon. 't is an arrangement for deferred payment of a loan or purchase. ,1ikipedia dictionary0 &redit means a provision of, or commitment to provide, funds or substitutes for funds, to a borrower, including off balance sheet transactions, customers6 lines of credit, overdrafts, bills purchased and discounted, and finance leases. ,Luideline on credit risk management, !ank of Mauritius0

3.2 3hat is -redit Ris,4

:isk means the e%posure to a chance of loss or damage. :isk is the element of uncertainty or possibility of loss that e%ist in any business transaction. &redit risk is the likelihood that a borrower or counter party will be unsuccessful to meet its obligation in accordance with agreed terms and conditions. &redit risk means the risk of credit loss that result from the failure of a borrower to honor the borrower6s credit obligation to the financial institution. &redit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms.

3.3 3hat is -redit Ris, "anage%ent4

&redit risk management is the lending institutionMs primary line of defense to protect itself against customers who fail to meet the terms of the loans or other credit that was e%tended to them. &redit risk management is an important aspect of a bankMs success and ensures a lending institution will not take on more risk than it can handle.

3.4 5unctions of -redit Ris, "anage%ent

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'dentification of risk, Measurement, $ggregation, ;lanning and management, Monitoring of the risks arising in a bankMs overall business.

3.4.1. Identification of Ris,

$ bankMs risks have to be identified before they can be measured and managed. "ypically banks distinguish the following risk categoriesC &redit risk Market risk (perational risk

3.4.2. "easure%ent
"he consistent assessment of the three types of risks is an essential prere5uisite for successful risk management. 1hile the development of concepts for the assessment of market risks has shown considerable progress, the methods to measure credit risks and operational risks are not as sophisticated yet due to the limited availability of historical data. &redit risk is calculated on the basis of possible losses from the credit portfolio. ;otential losses in the credit business can be divided into -. 4,(ected lo!!e!% E%pected losses are derived from the borrowerMs e%pected probability of default and the predicted e%posure at default less the recovery rate, i.e. all e%pected cash flows, especially from the reali#ation of collateral. "he e%pected losses should be accounted for in income planning and included as standard risk costs in the credit conditions. /. Une,(ected lo!!e!% >ne%pected losses result from deviations in losses from the e%pected loss. >ne%pected losses are taken into account only indirectly via e5uity cost in the course of income planning and setting of credit conditions. "hey have to be secured by the risk coverage.

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Janata Bank Limited

"wo main methods are used to measure une%pected losses todayC 1. -cenario analysis .. Kalue at :isk concept -. Scenario analy!i!% >nder a scenario analysis, the available historical market data andIor internal bank data are used to create scenarios concerning the possible development of default rates. 3ike in Ka: analysis, scenarios for the normal case, in which loss developments are assumed that have already occurred in a certain historical period under reviewJ and worst case scenarios assuming the incurrence of e%treme losses are assumed. "hese scenarios are used to determine the e%tent of the fluctuations, in the portfolio6s value for the occurrence of the event. Kalue fluctuations may, for e%ample, refer to the e%tent of losses from lending or changes in the value of the collateral. "he highest possible risk is calculated on the basis of the scenario analysis. "he scenario analysis is limited in its e%planatory power as it takes into account only a few changes in parameters. 'ts results will be of lower 5uality than those of the Ka: concept, as the scenarios applied are limited to a small number of historical events and the diversity of the parameters contained in the Ka: concept cannot be achieved. !anks that base their risk controlling on the results from scenario analysis usually have to accept less precise results than they would get using the Ka: approach. "herefore, it seems advantageous to shift to a value at risk process, but it is essential to determine what additional cost would be incurred in implementing the concept, and what additional benefit would be derived from more effective management that would result from the implementation. /. =al$e>at>Ri!k Conce(tC "he Ka: states the ma%imum loss that will not be e%ceeded with a certain probability ,confidence level0 at a given hori#on ,holding period0. "o determine the value at risk a confidence level is determined which reflects the probability that the calculated ma%imum loss will not be e%ceeded within the holding period. "he confidence level is usually between A*+ and AA.A*+, which means that higher losses are possible, but will only occur with a probability of between *+ and /./*+. "he holding period states the hori#on during which the losses can occur and is derived from the li5uidity of the assets observed. "o calculate the credit Ka:, it is necessary to determine the distribution of potential losses in the credit portfolio. For this purpose, assumptions are made in terms of the future development of the default rate and the e%posure at default ,credit amount outstanding at the time of default, minus proceeds from collateral and estate0.

3.4.3 6ggregation

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1hen aggregating risks, it is important to take into account correlation effects which cause a bankMs overall risk to differ from the sum of the individual risks. "his applies to risks both within a risk category as well as across different risk categories.

3.4.4. $lanning and "anage%ent

Furthermore, risk management has the function of planning the bankMs overall risk position and actively managing the risks based on these plans. "he most commonly used management tools includeC :isk ad7usted pricing of individual loan transactions -etting of risk limits for individual positions or portfolios >se of guarantees and credit insurance -ecuriti#ation of risks !uying and selling of assets

3.4.5. "onitoring
:isk monitoring is used to check whether the risks actually incurred lie within the prescribed limits, thus ensuring an institutionMs capacity to bear these risks. 'n addition, the effectiveness of the measures implemented in risk controlling is measured, and new impulses are generated if necessary. ,!asel &ommittee on !anking -upervision, .///0

3.5 Objectives of -redit Ris, "anage%ent

&redit risk management must satisfy other ob7ectives while retaining customers. &redit risk management is chiefly responsible for the protection of an organi#ationMs lending assets. 't must also provide internal communication to its credit representatives with policies and procedures that reduce ambiguity and allow them to best fulfill their duties. Ri!k Red$ction% &redit risk management satisfies it primary ob7ective of risk reduction through credit analysis and review. &redit analysis is the research and investigation re5uired to determine the risk involved with lending to a customer. "his is performed by using information from credit applications, public records and credit reports. &redit applications provide information like the applicantMs name, address, age, -ocial -ecurity number, driverMs license number and credit references. 'nformation from public records may include 7udgments, liens and business registrations. &redit reports provide financial information from credit bureaus like E%perian, E5uifa% and "rans >nion. "hey can reveal an applicantMs credit lines, payment history, legal information ,bankruptcies and 7udgments0 and credit score. !y researching and investigating an applicantMs financial background, [1*]

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credit risk management is able to gauge the risk involved in doing business with him. For established customers, a credit review process should be employed to stay familiar with the credit situation of clients. "his process allows for credit limit ad7ustments and other actions to reduce the companyMs credit risk. Internal Comm$nicationC &redit risk management must provide internal communication to its credit department and representatives. "his not only allows them to fulfill their obligations in risk reduction, but also allows them to operate more efficiently by providing clear instruction on how to perform or act. "hrough the use of credit policies and procedures, credit risk management is able to better satisfy this ob7ective. &redit policy defines the rules and guidelines regarding the performance of lending functions within an organi#ation. "his can include target customers, interest rates, loan amounts, collateral re5uirements and other risk analysis re5uirements. "o provide the credit department with specifics on how to achieve the companyMs credit policies, credit procedures are used. "hese procedures can include information re5uirements for the investigation and analysis of credit. "hey can also detail information about the credit approval process, account suspension notifications and circumstances re5uiring management approval or notification. &redit policies and procedures reduce ambiguity amongst the organi#ationMs credit representatives. "his facilitates an easier and more efficient approach to credit risk management. C$!tomer Ser ice!% ;roviding good service is necessary to retain customers. "he companyMs marketing and sales departments are directly responsible for sales by attracting new clients. &redit risk management, while not charged with making sales, are still indirectly responsible for them in how they treat clients ,customer service0. !eing polite and professional are rudimentary skills. !ut learning to work with customers, while satisfying a risk reduction role, takes training and development. 1ithout good customer service as a basic ob7ective, the organi#ation stands to lose customers. 8ard credit measures such as overly conservative credit limits, payments terms and collateral re5uirements can chase customers away. 1ithout customers there is no need for credit risk management, as the organi#ation will naturally cease to e%ist.

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De(artmental Coordination% $nother ob7ective of credit risk management involves coordinating with other departments. !y working with the collections department, credit risk management is better able to stay in touch with customer payment issues and possible financial problems. &oordinating with the accounting and finance departments can provide information regarding cash flow re5uirements and possible changes needed regarding financial risk. &ommunicating closely with the sales department can reduce internal and e%ternal conflicts regarding account decisions.

3. 7ools 8sed to "anage -redit Ris, in International 5inance9

1hen trading crosses international borders a whole new layer of comple%ity appears. "his comple%ity breeds risk factors particular to international finance. "he ma7or risks international finance has to deal with are changes in foreign e%change rates and shifts in economic and political climates. "he use of financial tools can help mitigate these and other risks. Ris,:Re;ard Ratio9 :isk :eward :atio compares the potential profit of an investment with the risk involved in the transaction. &alculate it by dividing the pro7ected profit of the trade by what you stand to lose if the trade goes wrong. 'n the Foreign E%change market ,Fore%0 the minimum acceptable risk reward ratio is 1C., although beginners should try and keep to ratios of 1C@ and above. +lac,:Schools 5or%ula9 !lack -chools formula is a mathematical tool widely used in the pricing of options. 't provides an appro%imation to the right long and short position in a stock. >se this formula with caution as it relies on unsubstantiated assumptions like the Nnormality assumption,N which ignores the possibility of an e%treme change in the market. 1iversification9 =iversification reduces the overall risk of an investment by spreading its components to a mi%ed variety of investments. >se it to reduce the overall effect on your portfolio of changes ,positive or negative0 in the value of a security.

3.! (i%its
"he definition of limits is necessary to curb the risks associated with bankMs activities. 't is intended to ensure that the risks can always be absorbed by the predefined coverage capital. 1hen the limits are e%ceeded, risks must be reduced by taking such steps as reducing e%posures or using financial instruments. [1H]

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3.!.1 (i%it Structure "he ma%imum risk limit is determined by the capital allocated to cover credit risks in the planning process. "he bankMs organi#ational structure has a significant impact on the way in which the limits are designed. (ne important success factor in the effective use of limits for risk controlling purposes is that a unit or an employee has the appropriate responsibility for an organi#ational unit which is assigned a limit. "his is the only way to ensure that compliance with the limits is monitored and suitable measures are taken. ,!ernanke, .//F0 3.!.2 (i%it "onitoring and $rocedures 8sed 3hen (i%its 6re <=ceeded "he stipulated limits can have a direct impact on the credit approval. 't needs to be determined if compliance with the limits should be e%amined before or after the credit decision is taken. 'n practice, this compliance is usually checked e% post, i.e. after the credit approval based on the portfolio under review, and is not a component of the individual loan decision. "he credit decision is taken based on the borrowerMs credit standing and any collateral, but independently of the portfolio risk. -uch e% post observation can result in a relatively high number of cases in which limits are e%ceeded, thus reducing the effectiveness of the limit stipulations. -ome banks check the compliance with the limits immediately during the credit approval process. ;rior to the credit decision, compliance with the relevant limits is checked in case the credit is approved. !ringing limit monitoring into play at this early stage is also referred to as e% ante monitoring. "his helps prevent the defined limits from being e%ceeded in the course of approving new loans. E% ante monitoring is 5uite comple%.

Lraph 1C :esponsibilities in case of e%cess over limit [1)]

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-ourceC ,&redit $pproval ;rocess and &redit :isk Management, .//*0 "he limit utili#ation has to be documented in the credit risk report. ;rocesses and responsibilities concerning measures to be taken when limits are e%ceeded have to be defined clearly. "he decision makers responsible have to be informed depending on the e%tent to which the limits are e%ceeded and the approach taken to remedy the situation.

3.' -redit Ris, "anage%ent $rocess

&redit risk management process should cover the entire credit cycle starting from the origination of the credit in a financial institution6s books to the point the credit is e%tinguished from the books ,Morton Llant#, .//.0. 't should provide for sound practices inC @.).1 &redit processingIappraisal @.).. &redit approvalIsanction @.).@ &redit documentation @.).B &redit administration @.).* =isbursement @.).F Monitoring and control of individual credits @.).H Monitoring the overall credit portfolio ,stress testing0 @.).) &redit classification and @.).A Managing problem creditsIrecovery 3.'.1 -redit $rocessing>6ppraisal &redit processing is the stage where all re5uired information on credit is gathered and applications are screened. &redit application forms should be sufficiently detailed to permit gathering of all information needed for credit assessment at the outset. 'n this connection, financial institutions should have a checklist to ensure that all re5uired information is, in fact, collected. Financial institutions should set out pre 5ualification screening criteria, which would act as a guide for their officers to determine the types of credit that are acceptable. For instance, the criteria may include re7ecting applications from blacklisted customers. "hese criteria would help institutions avoid processing and screening applications that would be later re7ected. Moreover, all credits should be for legitimate purposes and ade5uate processes should be established to ensure that financial institutions are not used for fraudulent activities or activities that are prohibited by law or are of such nature that if permitted would

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contravene the provisions of law. 'nstitutions must not e%pose themselves to reputational risk associated with granting credit to customers of 5uestionable repute and integrity. "he ne%t stage to credit screening is credit appraisal where the financial institution assesses the customer6s ability to meet his obligations. 'nstitutions should establish well designed credit appraisal criteria to ensure that facilities are granted only to creditworthy customers who can make repayments from reasonably determinable sources of cash flow on a timely basis ,Morton Llant#, .//.0. Financial institutions usually re5uire collateral or guarantees in support of a credit in order to mitigate risk. 't must be recogni#ed that collateral and guarantees are merely instruments of risk mitigation. "hey are, by no means, substitutes for a customer6s ability to generate sufficient cash flows to honor his contractual repayment obligations. &ollateral and guarantees cannot obviate or minimi#e the need for a comprehensive assessment of the customerMs ability to observe repayment schedule nor should they be allowed to compensate for insufficient information from the customer. &are should be taken that working capital financing is not based entirely on the e%istence of collateral or guarantees. -uch financing must be supported by a proper analysis of pro7ected levels of sales and cost of sales, prudential working capital ratio, past e%perience of working capital financing, and contributions to such capital by the borrower itself. Financial institutions must have a policy for valuing collateral, taking into account the re5uirements of the !angladesh !ank guidelines dealing with the matter. -uch a policy shall, among other things, provide for acceptability of various forms of collateral, their periodic valuation, process for ensuring their continuing legal enforceability and reali#ation value ,Morton Llant#, .//.0. 'n the case of loan syndication, a participating financial institution should have a policy to ensure that it does not place undue reliance on the credit risk analysis carried out by the lead underwriter. "he institution must carry out its own due diligence, including credit risk analysis, and an assessment of the terms and conditions of the syndication. $s a general rule, the appraisal criteria will focus onC amount and purpose of facilities and sources of repaymentJ integrity and reputation of the applicant as well as his legal capacity to assume the credit obligationJ risk profile of the borrower and the sensitivity of the applicable industry sector to economic fluctuationsJ

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performance of the borrower in any credit previously granted by the financial institution, and other institutions, in which case a credit report should be sought from themJ the borrower6s capacity to repay based on his business plan, if relevant, and pro7ected cash flows using different scenariosJ cumulative e%posure of the borrower to different institutionsJ physical inspection of the borrower6s business premises as well as the facility that is the sub7ect of the proposed financingJ borrower6s business e%pertiseJ ade5uacy and enforceability of collateral or guarantees, taking into account the e%istence of any previous charges of other institutions on the collateralJ current and forecast operating environment of the borrowerJ background information on shareholders, directors and beneficial owners for corporate customersJ and Management capacity of corporate customers ,3.:.&howdhury,.//B0. 3.'.2 -redit:approval>Sanction $ financial institution must have in place written guidelines on the credit approval process and the approval authorities of individuals or committees as well as the basis of those decisions. $pproval authorities should be sanctioned by the board of directors. $pproval authorities will cover new credit approvals, renewals of e%isting credits, and changes in terms and conditions of previously approved credits, particularly credit restructuring, all of which should be fully documented and recorded. ;rudent credit practice re5uires that persons empowered with the credit approval authority should not also have the customer relationship responsibility. $pproval authorities of individuals should be commensurate to their positions within management ranks as well as their e%pertise. =epending on the nature and si#e of credit, it would be prudent to re5uire approval of two officers on a credit application, in accordance with the !oard6s policy. "he approval process should be based on a system of checks and balances. -ome approval authorities will be reserved for the credit committee in view of the si#e and comple%ity of the credit transaction. =epending on the si#e of the financial institution, it should develop a corps of credit risk specialists who have high level e%pertise and e%perience and demonstrated 7udgment in assessing, approving and managing credit risk. $n accountability regime should be established for the decision making process, accompanied by a clear audit trail of decisions taken, with proper identification of individualsIcommittees involved. $ll this must be properly documented. [.1]

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Janata Bank Limited

Lraph .C &redit $pproval ;rocess -ourceC ,&redit $pproval ;rocess and &redit :isk Management, .//*0 3.'.3 -redit 1ocu%entation =ocumentation is an essential part of the credit process and is re5uired for each phase of the credit cycle, including credit application, credit analysis, credit approval, credit monitoring, and collateral valuation, and impairment recognition, foreclosure of impaired loan and reali#ation of security. "he format of credit files must be standardi#ed and files neatly maintained with an appropriate system of cross inde%ing to facilitate review and follow up. "he !angladesh !ank will pay particular attention to the 5uality of files and the systems in place for their maintenance. =ocumentation establishes the relationship between the financial institution and the borrower and forms the basis for any legal action in a court of law. 'nstitutions must ensure that contractual agreements with their borrowers are vetted by their legal advisers ,3.:.&howdhury, .//@0. &redit applications must be documented regardless of their approval or re7ection. $ll documentation should be available for e%amination by the !angladesh !ank. Financial institutions must establish policies on information to be documented at each stage of the credit cycle. "he depth and detail of information from a customer will depend on the nature of the facility and his prior performance with the institution. $ separate credit file should be maintained for each customer. 'f a subsidiary file is created, it should be properly cross inde%ed to the main credit file ,3.:.&howdhury, .//B0.

[..]

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Janata Bank Limited

For security reasons, financial institutions should consider keeping only the copies of critical documents ,i.e., those of legal value, facility letters, signed loan agreements0 in credit files while retaining the originals in more secure custody. &redit files should also be stored in fire proof cabinets and should not be removed from the institutionMs premises. Financial institutions should maintain a checklist that can show that all their policies and procedures ranging from receiving the credit application to the disbursement of funds have been complied with. "he checklist should also include the identity of individual,s0 andIor committee,s0 involved in the decision making process ,Morton Llant#, .//.0.

Lraph BC &redit =ocumentation -ourceC ,&redit $pproval ;rocess and &redit :isk Management, .//*0 3.'.4 -redit 6d%inistration Financial institutions must ensure that their credit portfolio is properly administered, that is, loan agreements are duly prepared, renewal notices are sent systematically and credit files are regularly updated. $n institution may allocate its credit administration function to a separate department or to designated individuals in credit operations, depending on the si#e and comple%ity of its credit portfolio ,&redit :isk ManagementC 'ndustry !est ;ractices.//*, !angladesh !ank0. $ financial institution6s credit administration function should, as a minimum, ensure thatC [.@]

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Janata Bank Limited

credit files are neatly organi#ed, cross inde%ed, and their removal from the premises is not permittedJ the borrower has registered the re5uired insurance policy in favor of the bank and is regularly paying the premiumsJ the borrower is making timely repayments of lease rents in respect of charged leasehold propertiesJ credit facilities are disbursed only after all the contractual terms and conditions have been met and all the re5uired documents have been receivedJ collateral value is regularly monitoredJ the borrower is making timely repayments on interest, principal and any agreed to fees and commissionsJ information provided to management is both accurate and timelyJ responsibilities within the financial institution are ade5uately segregatedJ funds disbursed under the credit agreement are, in fact, used for the purpose for which they were grantedJ 9back office< operations are properly controlledJ the established policies and procedures as well as relevant laws and regulations are complied withJ and (n site inspection visits of the borrower6s business are regularly conducted and assessments documented ,3.:.&howdhury,.//B0.

[.B]

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Janata Bank Limited

Lraph *C Functions of &redit $dministration =epartment -ourceC ,&redit :isk ManagementC 'ndustry !est ;ractices.//*, !angladesh !ank0 [.*]

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Janata Bank Limited

3.'.5 1isburse%ent (nce the credit is approved, the customer should be advised of the terms and conditions of the credit by way of a letter of offer. "he duplicate of this letter should be duly signed and returned to the institution by the customer. "he facility disbursement process should start only upon receipt of this letter and should involve, inter alia, the completion of formalities regarding documentation, the registration of collateral, insurance cover in the institution6s favor and the vetting of documents by a legal e%pert. >nder no circumstances shall funds be released prior to compliance with pre disbursement conditions and approval by the relevant authorities in the financial institution ,3.:.&howdhury, .//B0. 3.'. "onitoring and -ontrol of Individual -redits "o safeguard financial institutions against potential losses, problem facilities need to be identified early. $ proper credit monitoring system will provide the basis for taking prompt corrective actions when warning signs point to deterioration in the financial health of the borrower. E%amples of such warning signs include unauthori#ed drawings, arrears in capital and interest and deterioration in the borrower6s operating environment ,Morton Llant#, .//.0. Financial institutions must have a system in place to formally review the status of the credit and the financial health of the borrower at least once a year. More fre5uent reviews ,e.g at least 5uarterly0 should be carried out of large credits, problem credits or when the operating environment of the customer is undergoing significant changes. 'n broad terms, the monitoring activity of the institution will ensure thatC funds advanced are used only for the purpose stated in the customer6s credit applicationJ financial condition of a borrower is regularly tracked and management advised in a timely fashionJ borrowers are complying with contractual covenantsJ collateral coverage is regularly assessed and related to the borrower6s financial healthJ the institution6s internal risk ratings reflect the current condition of the customerJ contractual payment delin5uencies are identified and emerging problem credits are classified on a timely basisJ and ;roblem credits are promptly directed to management for remedial actions. More specifically, the above monitoring will include a review of up to date information on the borrower, encompassingC (pinions from other financial institutions with whom the customer dealsJ [.F]

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Janata Bank Limited

Findings of site visitsJ $udited financial statements and latest management accountsJ =etails of customersM business plansJ Financial budgets and cash flow pro7ectionsJ and $ny relevant board resolutions for corporate customers. "he borrower should be asked to e%plain any ma7or variances in pro7ections provided in support of his credit application and the actual performance, in particular variances respecting pro7ected cash flows and sales turnover ,&redit :isk ManagementC 'ndustry !est ;ractices.//*, !angladesh !ank0.

3.'.! "onitoring the Overall -redit $ortfolio ?Stress 7esting@ $n important element of sound credit risk management is analy#ing what could potentially go wrong with individual credits and the overall credit portfolio if conditionsIenvironment in which borrowers operate change significantly. "he results of this analysis should then be factored into the assessment of the ade5uacy of provisioning and capital of the institution. -uch stress analysis can reveal previously undetected areas of potential credit risk e%posure that could arise in times of crisis ,Morton Llant#, .//.0. ;ossible scenarios that financial institutions should consider in carrying out stress testing includeC -ignificant economic or industry sector downturnsJ $dverse market risk eventsJ and >nfavorable li5uidity conditions.

Lraph FC Early 1arning -ystems -ourceC ,&redit $pproval ;rocess and &redit :isk Management, .//*0 Financial institutions should have industry profiles in respect of all industries where they have significant e%posures. -uch profiles must be reviewed Iupdated every year. Each stress test should be followed by a contingency plan as regards recommended corrective [.H]

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Janata Bank Limited

actions. -enior management must regularly review the results of stress tests and contingency plans. "he results must serve as an important input into a review of credit risk management framework and setting limits and provisioning levels ,Morton Llant#, .//.0. 3.'.' -lassification of -redit 't is re5uired for the board of directors of a financial institution to 9establish credit risk management policy, and credit impairment recognition and measurement policy, the associated internal controls, documentation processes and information systemsJ< &redit classification process grades individual credits in terms of the e%pected degree of recoverability. Financial institutions must have in place the processes and controls to implement the board approved policies, which will, in turn, be in accord with the proposed guideline. "hey should have appropriate criteria for credit provisioning and write off. 'nternational $ccounting -tandard @A re5uires that financial institutions shall, in addition to individual credit provisioning, assess credit impairment and ensuing provisioning on a credit portfolio basis. Financial institutions must, therefore, establish appropriate systems and processes to identify credits with similar characteristics in order to assess the degree of their recoverability on a portfolio basis. Financial institutions should establish appropriate systems and controls to ensure that collateral continues to be legally valid and enforceable and its net reali#able value is properly determined. "his is particularly important for any delin5uent credits, before netting off the collateral6s value against the outstanding amount of the credit for determining provision. $s to any guarantees given in support of credits, financial institutions must establish procedures for verifying periodically the net worth of the guarantor. 3.'.A "anaging $roble% -redits>Recovery $ financial institution6s credit risk policy should clearly set out how problem credits are to be managed. "he positioning of this responsibility in the credit department of an institution may depend on the si#e and comple%ity of credit operations. "he monitoring unit will follow all aspects of the problem credit, including rehabilitation of the borrower, restructuring of credit, monitoring the value of applicable collateral, scrutiny of legal documents, and dealing with receiverImanager until the recovery matters are finali#ed. "he collection process for personal loans starts when the account holder has failed to meet one or more contractual payment ,'nstallment0. 't therefore becomes the duty of the &ollection =epartment to minimi#e the outstanding delin5uent receivable and credit [.)]

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Janata Bank Limited

losses. "his procedure has been designed to enable the collection staff to systematically recover the dues and identify I prevent potential losses, while maintaining a high standard of service and retaining good relations with the customers. 't is therefore essential and critical, that collection people are familiar with the computeri#ed system, procedures and maintain effective liaison with other departments within the bank ,;rudential regulations for consumer financing .//B, !angladesh !ank0. 3.'.A.1 -ollection Objectives "he collector6s responsibility will commence from the time an account becomes delin5uent until it is regulari#ed by means of payment or closed with full payment amount collected. "he goal of the collection process is to obtain payments promptly while minimi#ing collection e%pense and write off costs as well as maintaining the customer6s goodwill by a high standard of service. For this reason it is important that the collector should endeavor to resolve the account at the first time worked. &ollection also protects the assets of the bank. "his can be achieved by identifying early signals of delin5uency and thus minimi#ing losses. "he customers who do not respond to collection efforts represent a financial risk to the institution. "he &ollector6s role is to collect so that the institution can keep the loan on its books and does not have to write off I charge off. 3.'.A.2 Identification and 6llocation of 6ccounts 1hen a customer fails to pay the minimum amount due or installment by the payment due date, the account is considered in arrears or delin5uent. 1hen accounts are delin5uent, collection procedures are instituted to regulari#e the accounts without losing the customer6s goodwill whilst ensuring that the bank6s interests are protected. 3.'.A.3 -ollection Steps "o identify and manage arrears, the following aging classification is adoptedC For all products other than credit cards Day! Pa!t D$e ?DPD# 1 1B 1* .A @/ BB B* *A Collection "ction 3etter, Follow up D ;ersuasion over phone ,$nne%ure K0 1st :eminder letter D -l. Eo. 1 follows .nd reminder letter O -ingle visit @rd reminder letter ,$nne%ure K'0 Lroup visit by team member Follow up over phone [.A]

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Janata Bank Limited

F/ )A

A/ and above

3etters to Luarantor, Employer, :eference all above effort follows 1arning on legal action by ne%t 1* days &all up loan ,$nne%ure K''0 Final :eminder D -erve legal notice legal proceedings begin :epossession starts "elephone callsI3egal proceedings continue &ollection effort continues by officer D agent 3etter to different banksI$ssociation "able 1C &redit :ecovery -teps

-ourceC ,;rudential regulations for consumer financing .//B, !angladesh !ank0 5or credit cards: Day! Pa!t D$e ?DPD# Collection "ction P 3etter reminding payment past due -oft call re5uesting payment @/ *A !lock card with 9decline< response &all insisting payment 3etter advising account status ,blocked0 F/ )A !lock card with 9decline< response &all insisting payment 3etter advising aIc status ,blocked0 and threatening card cancellation if not regulari#ed A/ 11A &all insisting immediate payment 3etter advising cancellation D surrender of card 8ot list D circulate within the merchants Employ recovery agent where appropriate 1./ 1BA &all threatening litigation "hreatening letter to employer ,for salaried only0 ;ublish name D photograph in newspaper ;ersonal visitation by recovery agent -et off -&! $ccount,s0, if any -erve legal notice where appropriate 1*/O !ad debt allocation $ccount handed over to recovery agency -top interest accrual [@/]

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Janata Bank Limited

;ersonal visitation by recovery agent 3egal action "able .C &redit :ecovery -teps for &redit &ard -ourceC ,;rudential regulations for consumer financing .//B, !angladesh !ank0

Chapter-4
PRACTICAL EXPERIENCE

Janata Bank Limited

[@1]

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Janata Bank Limited

"his report is based on the internship program. 2anata !ank 3imited arranges internship program provide practical knowledge about banking activities for university students as universities conducted with different organi#ation after the completion of theoretical courses of program of !achelor of !usiness $dministration ,!!$0. $ group of interns must carry out a specific pro7ect, which is assigned by 2anata !ank. 'n this particular report, ' am an internee of the previously mentioned program and the concerned organi#ation is 2anata !ank 3imited which is a prominent !ank of !angladesh. 8ence ' was placed in $luba#ar !ranch, =haka of 2anata !ank 3imited from Eovember 11, ./1@ to 2anuary 11, ./1B. =uring these two months of internship program ' was assigned with many tasks, mainly with the credit disbursement process. 'n the process of credit management, ' learned Filling customer loan re5uest form, 1riting credit proposal, -tock valuation, :enewal of loan, 1riting sanction letter ;reparing profit and loss account or last @ years for clients Evaluation and description of collateral property ;reparing &redit 'nvestigation !ureau ,&'!0 report, Lathering charge documentation, Filling in5uiry form, 1riting "" ,"elegraphic "ransfer0, == ,=emand =raft0, M" ,Mail "ransfer0, pay order, pay slip etc.

!esides these, ' got valuable skills and e%perience, and benefit from close support and guidance from senior staff, that enabled me to work in the corporate sector and developed an edge that ' can take into my career after university.

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Chapter-5

CR4DIT RIS< 2"N"3424NT O+ J"N"T" B"N< LI2IT4D

Janata Bank Limited

[@@]

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Janata Bank Limited

-redit Ris, "anage%ent of *anata +an, (i%ited "he credit risk management process followed in 2anata !ank 3imited can be categori#ed in the following specific segmentsC *.1 &redit Mission -tatement of 2anata !ank 3imited *.. &redit ;olicy Luidelines *.@ &redit $ssessment *.B &redit :isk Lrading *.* &redit $pproval ;rocess *.F &redit :isk Management *.H &redit :ecovery 5.1. -redit "ission State%ent "o provide credit facilities to customers of 2anata !ank 3imited with care and competence and institute 2anata !ank 3td. as the ideal credit service provider in the country in terms of wide range of credit products, competitive price, adherence to credit norms, e%ercising due diligence and effective management of risk assets. 5.2. -redit $olicy .uidelines "he credit policy guidelines of 2anata !ank 3imited include the followingC B...1 &redit principles B.... &redit ;ortfolio mi% B...@ ;roducts and services of 2anata !ank 3td 5.2.1 -redit $rinciples in *anata +an, (i%ited "he credit division of 2anata !ank 3td is guided by 1/ specific credit principles. "hey are as followsC i0 Evaluate borrowerMs nature for reliability and keenness to pay. ii0 Evaluate borrowerMs loan settlement capability. iii0 =evelop action plans for the likelihood of non payment. iv0 E%tension of credit in satisfactorily controllable risk areas. v0 Luarantee self directed participation of the credit officials in the credit e%tension process. vi0 ;erform the credit process in an ethical manner. vii0 !e proactive in recogni#ing, administering and conveying credit risk viii0 2anata !ank 3td. re5uirements must be followed in ensuring the credit e%posures and operations. [@B]

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Janata Bank Limited

i%0 "ry to achieve an acceptable e5uilibrium between risk and reward. %0 &onstruct and sustain a diversified credit portfolio. i# 4 al$ate borro*er@! nat$re for reliability and keenne!! to (ay $ borrowerMs capacity and commitment to repay a loan are two important factors to a bank. 'n this respect, the bank has to e%amine the customerMs records and background in his former credit I loan related dealings. "he bank should not engage itself into any commitment where there is potential threat and in these cases the bank the bank should be prepared for some e%it plans. ii# 4 al$ate borro*er@! loan !ettlement ca(ability "he loan servicing capacity of the borrower is an essential factor that has to be assessed by the bank prior to the e%tension of any credit facilities. For this purpose, financial techni5ues and procedures can be used by the bank. "he bank should e%amine the customerMs reason for borrowing, ma7or modes of repayment, historical and pro7ected financial information, industry and competitive position, managerial skills, information source and systems, borrowerMs operational efficiency, cyclical fluctuations in operations, supply and distribution position. iii# De elo( action (lan! for the likelihood of non>(ayment $ny kind of loan carries the possibility of default and thus it is very important for the bank to assess the secondary and tertiary modes of repayment along with the primary source. For this purpose, the bank should consider the security value, value impairment conditions, should define and document the terms and conditions of loan and ensure effective assessment. i # 4,ten!ion of credit in !ati!factorily controllable ri!k area! "o avoid any potential adverse situation, the bank should engage itself only in those areas where it can effectively manage and handle the transaction risk as well as the entity or business risk. 'n this regard, the bank has the responsibility toward developing and maintaining a productive and efficient relationship with the borrower. # 3$arantee !elf>directed (artici(ation of the credit official! in the credit e,ten!ion (roce!! "he independent credit participation of the credit officials is desired since it can aid in achieving the benefits of synergy and accountability. "he credit personnel should utili#e his or her personal skill and ability in determining the credit worthiness of the borrower and should convey all positive and negative information in time of seeking credit approval. i# Perform the credit (roce!! in an ethical manner $ny kind of unethical and illegal behavior, speculation, conflict of interests is prohibited in 2anata !ank 3td. &ustomer related information should be kept confidential. ii# Be (roacti e in reco&niAin&B admini!terin& and con eyin& credit ri!k [@*]

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Janata Bank Limited

"he bank has to be proactive in identifying the state of the borrowerMs after disbursement performance. :egular monitoring of the accounts, prompt reporting of material deterioration, utili#ing Early 1arning -ystem ,E1-0, ad7usting of lending terms and conditions are also important factors to be confirmed. iii# Janata Bank Ltd. reC$irement! m$!t be follo*ed in en!$rin& the credit e,(o!$re! and o(eration! !ankMs guidelines, re5uirements and internal directives must be complied with. "he :elationship Manager must e%ercise his or her 7udgment in unforeseen circumstances. i,# Try to achie e an acce(table eC$ilibri$m bet*een ri!k and re*ard "he bank should be compensated for the risk it takes. "herefore, an appropriate as well as competitive pricing strategy has to be followed. &redit e%posure, loan period, security, credit structure etc. should be arranged in accordance with the bankMs policies and guidelines keeping the risk return priorities in view. ,# Con!tr$ct and !$!tain a di er!ified credit (ortfolio >ndiversified investment can e%pose the bank to industry specific risk. "herefore, 2anata !ank 3td. has to adhere to its policy about sectoral allocation of portfolio, maintain approved ceiling for single borrower, and accurately identify risk characteristics of each e%posure.

5.2.2 -redit portfolio %i=

"rade finance 'ndustry -hort term working capital :etail and -ME ;ro7ect Finance medium and long term (thers %% + %% + %% + %% + %% +

5.2.3 $roducts offered by *anata +an, (td

-ecured (verdraft ,-(=0 (verdraft ,(=0 "ime loan "erm loan Leneral purpose 1//+ cash covered 1. months period Leneral purpose 1. months period $gainst security or collateral "o finance inventory I receivables 1. months $gainst fi%ed assets (ver 1. months Ma%imum H years [@F]

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Janata Bank Limited

;acking &redit ;ayment against document ,;$=0 3oan against trust receipt ,3$":0 &ash credit ,8ypo0 3ocal documentary bill purchased ,3=!;0 Foreign documentary bill purchased ,F=!;0 -ight 3&

$gainst e%port 3& and e%port order 1)/ days $gainst sight 3& .1 days $gainst import 3& 1)/ days "o finance inventory 1. months "o purchase discount against local usence 3& 1)/ days "o purchase discounted e%port document B* I 1)/ days

For imports 1. months !ack to back 3& D For import of raw materials and accessories for subse5uent $cceptance e%port Ma%imum 1)/ days 3etter of Luarantee For contractual obligations -pecific period Table 5% Prod$ct! offered by J"N"T" B"N< LTD -ourceC 2$E$"$ !$EQ 3"= credit policy 5.3. -redit 6ssess%ent !efore e%tension of loans, a comprehensive credit risk appraisal is done and annual reviews are made. $ credit memorandum ,&M0 is prepared by the :elationship Manager ,:M0 which includes the findings of such assessment. "he :M used to be the owner of the customer relationship and he I she is held responsible for complying with all the policies and guidelines of !angladesh bank, bank laws, 2anata !ank 3td. policies and guidelines etc. "he credit assessment procedure can be segregated into three segmentsC *.@.1 &all report *.@.. &redit Memorandum 5.3.1 -all report $t the time inception of a relationship, the relationship manager tries to gather more and more information about the client. 8e I she sometimes visit the business premises to get an idea about the financial and operational condition of the prospective client. "he market [@H]

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Janata Bank Limited

reputation, competitive position etc. are also duly assessed. !ranch manager along with the relationship manager is also connected in this process. "hese initial visits or en5uiries are referred to as McallsM. !ased on the findings of such calls, :M and the branch manager send a call report to the 8ead of Marketing, 8ead of &redit and Managing =irector for initial review. "he call report contains some basic information about the client such asC a0 &lientMs background b0 !usiness c0 Market share d0 :eliability e0 &redit e%posure f0 E%isting banking relationships g0 &redit re5uirements h0 ;ricing of the proposed credit facility 5.3.2 -redit "e%orandu% ?-"@ 'f the 8ead (ffice conveys positive sign for a call report, then only the branch :M goes for preparing a &M. "he preparation of &M includes the in depth analysis of credit risk factors, critical assessment of the client in the light of credit policy guidelines of the bank. "hen it is sent to the 8ead of Marketing to enclose the necessary recommendations and to commence the credit approval process. "he &M has to be accompanied with all the re5uired legal documents and the financial information of the prospective client. "he &M generally contains the followingsC $ specific control number and base number for each client. "he credit risk grading score. "he authori#ation for the approval process. "he description of the proposed facility. :ationale behind the loan e%tension. Financial information of the client mainly the income statements for the past years, earnings forecasts in normal and adverse conditions. g0 Forecasted earnings from the relationship to be established. h0 3ending agreement. i0 &ompliance of the policies and guidelines of !angladesh !ank and 2anata !ank 3td. Most of the times &M also contains the followingsC a0 Facility ;lan b0 -ecurity -chedule [@)] a0 b0 c0 d0 e0 f0

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Janata Bank Limited

c0 d0 e0 f0 g0 h0

-ecurity $ssistance ;ayment 3ending &ovenants :isks and Mitigates Kisit and 'nspection :epayment

"he &M also contains the assessment of the following areasC a# Borro*er analy!i! "he ma7ority shareholders, management team and group or affiliate companies are assessed. $ny issues regarding lack of management depth, complicated ownership structures or intergroup transactions are addressed, and risks mitigated. b# Ind$!try "naly!i! "he key risk factors of the borrower6s industry are assessed. $ny issues regarding the borrower6s position in the industry, overall industry concerns or competitive forces are addressed and the strengths and weaknesses of the borrower relative to its competition are identified. c# S$((lierDB$yer "naly!i! $ny customer or supplier concentration is addressed, as these could have a significant impact on the future viability of the borrower. d# 1i!torical +inancial "naly!i! $n analysis of a minimum of @ years historical financial statements of the borrower is presented. 1here reliance is placed on a corporate guarantor, guarantor financial statements are also analy#ed. "he analysis addresses the 5uality and sustainability of earnings, cash flow and the strength of the borrower6s balance sheet. -pecifically, cash flow, leverage and profitability are analy#ed. e# Projected +inancial Performance 1here term facilities ,tenor R 1 year0 are being proposed, a pro7ection of the borrower6s future financial performance is provided, indicating an analysis of the sufficiency of cash flow to service debt repayments. 3oans are not granted if pro7ected cash flow is insufficient to repay debts. f# "cco$nt Cond$ct For e%isting borrowers, the historic performances in meeting repayment obligations ,trade payments, che5ues, interest and principal payments, etc0 are assessed. &# "dherence to Lendin& 3$ideline!

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&redit $pplications clearly state whether or not the proposed application is in compliance with the bank6s 3ending Luidelines. "he !ank6s 8ead of &redit or Managing =irectorI&E( approve &redit Memorandum that does not adhere to the bank6s 3ending Luidelines.

h# 2iti&atin& +actor! Mitigating factors for risks identified in the credit assessment are identified. ;ossible risks include, but are not limited toC margin sustainability andIor volatility, high debt load ,leverageIgearing0, overstocking or debtor issuesJ rapid growth, ac5uisition or e%pansionJ new business lineIproduct e%pansionJ management changes or succession issuesJ customer or supplier concentrationsJ and lack of transparency or industry issues. I# Loan Str$ct$re "he amounts and tenors of financing proposed are 7ustified based on the pro7ected repayment ability and loan purpose. E%cessive tenor or amount relative to business needs increases the risk of fund diversion and may adversely impact the borrower6s repayment ability. j# Sec$rity $ current valuation of collateral is obtained and the 5uality and priority of security being proposed are assessed. 3oans are not granted based solely on security. $de5uacy and the e%tent of the insurance coverage are also assessed. ,2anata !ank 3td. credit policy, .//*0 5.4. -redit Ris, .rading $ccording to !angladesh !ank guidelines, all !anks should adopt a credit risk grading system. "herefore, 2anata !ank 3td. has duly implemented a credit risk grading policy in its credit risk assessment program. "he system defines the risk profile of borrower6s to ensure that account management, structure and pricing are commensurate with the risk involved. ,Focus Lroup on &redit :isk Management, ,.//*0, &redit :isk ManagementC 'ndustry !est ;ractices, Managing &ore :isks of Financial 'nstitutions, !angladesh !ank0 :isk grading is a key measurement of a !ank6s asset 5uality. $ll facilities are assigned a risk grade. 1here deterioration in risk is noted, the :isk Lrade assigned to a borrower and its facilities are immediately changed. &redit Memorandum includes a clear statement of the borrowerMs risk grade. 2anata !ank 3td. applies the following credit risk grading matri% as provided by !angladesh !ank guidelines. [B/]

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Janata Bank Limited

Ri!k Ratin& -uperior S 3ow :isk Lood S -atisfactory :isk $cceptable S Fair :isk Marginal 1atch list -pecial Mention -ubstandard =oubtful and !ad ,non performing0 3oss ,non performing0

3rade 1 . @ B * F H )

-ourceC ,Focus Lroup on &redit :isk Management, ,.//*0, &redit :isk ManagementC 'ndustry !est ;ractices, Mana(in( Core Risks of $inan!ial )nstitutions, !angladesh !ank0 'f any facility is to be downgraded, the :M prepares "he Early $lert :eport and it is duly forwarded to the higher authority for approval. $fter approval, the report is forwarded to &redit $dministration, who is responsible to ensure the correct facilityIborrower :isk Lrades are updated on the system. 5.5. -redit 6pproval $rocess !efore commencing the credit approval process, a proper credit analysis is done through &redit Memorandum. Eo credit facility may be approved unless a satisfactory presentation package has been prepared. ;rior to securing the re5uisite approval, the authority ensures due diligence thatC a0 "he !ank is in possession of all credit information re5uired to properly evaluate the risk being undertaken. b0 $ detailed credit analysis has been completed, to include a written analysis of the financial condition of the borrower. c0 "he proposed e%tension of credit fully meets the standard of purpose, 5uality etc. d0 "he !oard of 'nvestment :egistration, permission for all regulatory bodies, clean &'! reports etc. are obtained. 'n the approval process, the bank segregates its relationship management from the approving authority. $ll the facilities offered by the branch must be approved from the 8erd of &redit &ommittee. 5.5.1 Sanction 6dvice [B1]

Bangladesh

Janata Bank Limited

$fter the facility has been approved, the credit officers of the branch prepare a sanction advice which is addressed to the client. 't is a kind of formal letter addressed to the client that provides information regarding the amount of the loan, its purpose, tenor, interest, security details, insurance coverage and other specific and general conditions applicable to the client. $ sanction advice contains the following informationC a0 $ddress of the client b0 -ub7ect c0 Facility type d0 :eview I repayment date e0 -ecurity details f0 'nsurance coverage g0 -pecific conditions h0 Leneral conditions i0 (ther conditions and covenants $ sanction advice is accompanied with the necessary legal documents. "hese documents may includeC a0 =emand promissory note b0 3etter of agreement c0 3etter of continuity d0 3etter of revival e0 3etter of disbursement f0 3etter of hypothecation with supplementary documents g0 :egistered deed of mortgage h0 3etter of guarantee i0 :egistered power of attorney etc. 5. . -redit Ris, "anage%ent "he credit risk management process of 2anata !ank 3td. has the function of consistent monitoring of the transactions within approved limits and recovering the bankMs dues in time. "he key responsibilities of the credit risk management process are as followsC a0 (versight of the bank6s credit policies, procedures and controls relating to all credit risks arising from corporateIcommercialIinstitutional banking, personal banking, D treasury operations. b0 (versight of the bank6s asset 5uality. c0 =irectly manage all -ubstandard, =oubtful D !ad and 3oss accounts to ma%imi#e recovery and ensure that appropriate and timely loan loss provisions have been made.

[B.]

Bangladesh

Janata Bank Limited

d0 "o approve ,or decline0, within delegated authority, &redit $pplications recommended by :M. 1here aggregate borrower e%posure is in e%cess of approval limits, to provide recommendation to M=I&E( for approval. e0 "o provide adviceIassistance regarding all credit matters to line managementI:Ms. f0 "o ensure that lending e%ecutives have ade5uate e%perience andIor training in order to carry out 7ob duties effectively. ,Focus Lroup on &redit :isk Management, ,.//*0, &redit :isk ManagementC 'ndustry !est ;ractices, Managing &ore :isks of Financial 'nstitutions, !angladesh !ank0 "he credit risk management process of 2anata !ank 3td. includes the following operationsC *.F.1 3oan $dministration *.F.. &redit Monitoring 5. .1 (oan 6d%inistration "he main responsibilities performed by the loan administration department are as followsC a0 "o ensure that all security documentation complies with the terms of approval and is enforceable. b0 "o monitor insurance coverage to ensure appropriate coverage is in place over assets pledged as collateral, and is properly assigned to the bank. c0 "o control loan disbursements only after all terms and conditions of approval have been met, and all security documentation is in place. d0 "o maintain control over all security documentation. e0 "o monitor borrower6s compliance with covenants and agreed terms and conditions, and general monitoring of account conductIperformance. ,Focus Lroup on &redit :isk Management, ,.//*0, &redit :isk ManagementC 'ndustry !est ;ractices, Managing &ore :isks of Financial 'nstitutions, !angladesh !ank0 5. .1.1 1ocu%entation &redit administration department ensures the following in connection with documentationC a0 $ll approvals and documents are in place. b0 =ocuments are prepared in accordance with the approved terms and conditions and are legally enforceable c0 Ketting of re5uired documents is done. [B@]

Bangladesh

Janata Bank Limited

d0 ;rotection of the bankMs security interest. e0 $ny e%ception from the standard loan facility is duly authori#ed from the 8ead of &redit. 5. .1.2 1isburse%ent "he loan administration department performs the following responsibilities in connection with the disbursement to ensure thatC a0 $ll standard security and charge documents are in place. b0 =ocumentation check list has been prepared. c0 &redit administration department has duly authori#ed the disbursement. d0 =isbursement authori#ation form is documented as an evidence of document. e0 $ proper back up of all the documents is maintained in the computer system. f0 'ncomplete documentation has received temporary waiver from the authority. g0 ;ricing of the facility is appropriate. h0 $ll disbursements I drawings are in the form of approved credit facility. i0 E%cess over limit are allowed under pre fact approval. 70 $ clean updated &'! report is obtained before disbursement. k0 "he lending cap of the bank is duly maintained. ,2anata !ank 3td credit policy0 5. .2 -redit "onitoring "o minimi#e credit losses, monitoring procedures and systems are in place that provides an early indication of the deteriorating financial health of a borrower. &redit monitoring process at 2anata !ank 3td tries to monitor the followingC ;ast due principal or interest payments, past due trade bills, account e%cesses, and breach of loan covenants 3oan terms and conditions are monitored, financial statements are received on a regular basis, and any covenant breaches or e%ceptions are referred to &:M and the :M team for timely follow up. "imely corrective action is taken to address findings of any internal, e%ternal or regulator inspectionIaudit. ,Focus Lroup on &redit :isk Management, ,.//*0, &redit :isk ManagementC 'ndustry !est ;ractices, Managing &ore :isks of Financial 'nstitutions, !angladesh !ank0 5. .2.1 +ranch "onitoring &redit monitoring activities in the branch performs the following responsibilityC a0 Monitor transactions in accounts to ensure turnover and utili#ation of limits. b0 "horoughly review all past dues, collateral short fall, covenant breach and other irregularities. c0 :ectify all audit ob7ections and follow their suggestions. [BB]

Bangladesh

Janata Bank Limited

d0 ;eriodic client calls and review by branch head. e0 Formal periodic review of all relationships. f0 Factory visit I stock inspection and progress of work against work I implementation of pro7ects are to be recorded and reviewed. g0 !orrower to be communicated about past dues, over due installments, e%piry of insurance, guarantee, limits etc. h0 Early alert reports are prepared within H days of identification of weakness in the business and financial weakness of the client and sent to 8ead (ffice 3oan $dministration. 5. .2.2 (oan Revie; -o%%ittee9 "he '" system of 2anata !ank 3td produces overdue positions on @ periods vi#. @/ days, F/ days and A/ days and above. 't also produces e%pired limits and e%cess over limits ,E(3s0. "he loan M'- are duly distributed to branches, 8(M, 8(&, 8((, 8(&$ and M=. $ designated loan admin officer follows up the position on a daily basis. !esides, the loan review committee of the bank formally follows up the overdue positions, e%pired limits and E(3 with the branches on a monthly basis which is minute for taking actions at the earliest, before the account further deteriorates. 5. .2.3 <arly 6lert $rocess9 $n Early $lert $ccount is one that has risks or potential weaknesses of a material nature re5uiring monitoring, supervision, or close attention by management. 'f these weaknesses are left uncorrected, they may result in deterioration of the repayment prospects for the asset or in the !ank6s credit position at some future date with a likely prospect of being downgraded to &L * or worse ,'mpaired status0, within the ne%t twelve months. Early identification, prompt reporting and proactive management of Early $lert $ccounts are prime credit responsibilities of all :elationship Managers and must be undertaken on a continuous basis. $n Early $lert report is completed by the :M and sent to the approving authority in &:M for any account that is showing signs of deterioration within seven days from the identification of weaknesses. "he :isk Lrade is updated as soon as possible. =espite a prudent credit approval process, loans may still become troubled. "herefore, it is essential that early identification and prompt reporting of deteriorating credit signs be done to ensure swift action to protect the !ank6s interest. 5.! -redit Recovery "he credit division performs the following recovery related functionsC [B*]

Bangladesh

Janata Bank Limited

a0 =irectly managing accounts with sustained deterioration ,a risk rating of sub standard or worse0 b0 =etermining work out plan I :ecovery strategy. c0 ;ursuing all avenues to ma%imi#e recovery, including placing customers into receivership or li5uidation as appropriate. d0 Ensuring ade5uate and timely loan loss provisions are made based on actual and e%pected losses. e0 Qeeping top management appraised of grade F or worse accounts.

Chapter-6

RECOMMENDATIONS AND CONCLUSIONS

[BF]

Bangladesh

Janata Bank Limited

Janata Bank Limited

.1 5indings
Every bank has its own credit procedure. !ank under study possesses a standard credit procedure. $s the ob7ective of my study is to make a comment on the &redit Management of 2anata !ank 3imited, ' try my best to collect data for the study and find out the reality. !ased on the data generated during my study period ' will sum up my findings here and ' think this will help me to achieve my ob7ectives. 'f we look at historical background of 2anata !ank 3td, we can see that, the ob7ective of 2! is to earn profit as well as to improve the economic welfare of the people as a whole. 2anata !ank 3imited has a significant role in long term pro7ect financing in both agriculture and industrial sectors. $gain 2anata !ank 3td has a deep concern for rural farmers. ;rivate sector usually concentrates in the urban areas where as public sector i.e. 2anata !ank 3td spread their banking network all over the world. 1ith a view to implementing government policies, 2anata !ank 3td has been maintaining its position in e%tending credit to government bodies, sector corporations and private enterprises. $ccording to the standard and bank6s credit procedure, credit operation is started from the customer application to the branch for the loan. !ut in most cases, many customers go directly to the directors of the bank and directors send them to the branch offices with hisIher reference. 'n these cases, proper appraisal is not possible as directors the most powerful persons and bank management must give priority towards the decision of the directors. "his phenomenon is very common in the bank which hampers the spontaneous procedure of credit appraisal. !angladesh !ank monitors all the policies of all the private and nationali#ed banks of the country. $ccording to the !angladesh !ank6s strategy, all banks [BH]

Bangladesh

Janata Bank Limited

must possess the standard policies which are designed by the central bank. 2anata !ank 3imited also possesses a standard credit proposal form. 'n that form all necessary information are re5uired to fill up. !ut in practice credit officers do not fill up the proposal form properly. Most of the cases, they use assumption rather than e%act figure. "his practice might end up with bad or classified one. $ standard policy starts from the customer6s direct application for the loan in the branch office. !ut it6s a common phenomenon that most of the customers directly contact with 8ead office and 8ead office choose the branch offices to disburse the loan. 't hampers the normal procedure. !ranches always stay under pressure when they get order for disbursement from 8ead office. 1hen branches get order from the head office, then appraisal system loses its formal track. -o 8ead office should not send any order to the branch office without prior appraisal. Every bank has its own budget and plan regarding loan portfolio. "his loan portfolio must be diversified so that bank could diversify its risk. $ proper and preplanned portfolio can eliminate the risk of huge classified loan or bad loans as this aspect is very much sensitive toward many e%ternal and internal factors. "he bank under study i.e. 2anata !ank 3imited does not have any proper guide line where to investJ moreover they do not do any future plan to maintain a well structured portfolio to decrease the possibility of classified loan. "his type of practice is working as an obstacle in smooth credit disbursement as well as in credit appraisal system. 2anata !ank 3td distributes loans without sufficient security in some cases. "his is violation of the !angladesh bank order. 'n many cases bank face this problem because bank6s credit officer fails to value collateral property. ;roper valuation means collateral will e%actly cover the risk of bad loan. (fficials must do it with due care. "he recovery performance of 2anata !ank 3td is not in a satisfactory level at all and the position of those in that respect deteriorated heavily during last two phases. "he recovery performance in agriculture is worse than in other sectors. (n the other hand, as private sector banks distribute more loans on short term basis and relatively better than public sector. !ut if we compare it from the efficiency point, then it is clear that they are not still efficient in credit management as they are unable to recover half of their distributed loan in different sectors. 2anata !ank 3td does not keep enough provisions against classified loans and advances. ;rivate sector banks are relatively efficient in processing and e%ecuting legal actions against defaulters for their nonpayment of loans and advances in due time that of public sector bank. [B)]

Bangladesh

Janata Bank Limited

"he &redit Management of 2anata !ank 3td is not fully conformity with the guidelines prescribed in the !ank &ompanies $ct 1AA1 and 'nternational $ccounting -tandard @/,'$- @/0.

7./ -onclusions
=uring the two months internship program at 2anata !ank 3imited, $luba#ar !ranch, almost all the desks have been observed more or less. "his internship program, at first, has been arranged for gaining knowledge of practical banking to compare this practical knowledge with theoretical knowledge. &omparing practical knowledge with theoretical involves identification of weakness identified. "hough all departments and sections are covered in this program, it is not possible to go to the depth of each activities of branch because of time limitation. 8owever, highest effort has been given to achieve the ob7ectives the internship program. ' have discussed so far about the different aspects of &redit Management ;rocess of 2anata !ank. For my report, ' have selected 2anata bank. 2! plays an important role in the banking sector as well as in our economy. "he success of a bank depends largely on the efficient credit management. $ successful credit management is not only need for a bank6s own performance but also it is needed for the smooth development of an economy. 'n any strategy of economic development, therefore, it is essential to emphasi#e the evaluation of a sound and well integrated credit management system from the view point of both resources mobili#ation and efficient allocation of funds. 2anata !ank 3td, $luba#ar !ranch is playing an important role in the banking system and in the payment system of !angladesh.

.3 Reco%%endations
&entral bank should take proper actions for ensuring e5uivalent distribution of loan and advances.. [BA]

Bangladesh

Janata Bank Limited

3ending policies in our country should be geared to growth potential rather than being determined by the pre e%isting collateral. &hanges in lending policies will not suffice the purposes unless it is followed by a change in the attitude and outlook of both the borrowers and the bankers. 'mprovement of credit management depends on the development of relevant, ade5uate, proper and reliable data base at the public sector banks as well as private sector banks in !angladesh. For developing a reliable credit management system for the commercial banks specially 2anata !ank, it should re5uire to introduce as improved information system within bank as well as among the borrowers. !ecause ultimately it is what a borrower does with money that should guide the credit plan, the borrowers also have to know e%actly where they are going, what their opportunities and how fast they can move. "he security must be valued properly by the independent values and constantly watched so that the value of mortgage property becomes sufficient to recover the default loan. ;ublishing the names of defaulter as well as good and regular payers in various dailies and granting various sorts of facilities to good borrowers will create a moral persuasion on the borrowers. "his may decrease the number of defaulters and the volume of large outstanding loan amounts as well. ;ressure from outsider and influence e%torted by borrowers are also a great impediment in the smooth functioning of loan recovery process. "he role of government in this case is the most important factor re5uired to solve these sorts of problem. More and more competent personnel must be recruited to reduce the weakness of credit management. &ompetent e%ecutives will ensure the reduction of wrong appraisal and evaluation of pro7ects. ;rompt legal actions be taken against willful loan defaulters "he new entrepreneurs should be encouraged in disturbing loans and those who have the records of regular payment, should be given preference. -teps should be taken so that guarantors cannot avoid their responsibility. 't is observed that the defaulters generally get various sorts of e%emptions as declared by the government from time to time. Lovernment must not show any kind of mercy to the defaulters in any way which may encourage the default culture. "his type of action may discourse the borrowers to become willful defaulters. "he e%isting huge amount of classified loans demand for special and corrective attention for e%ampleC [*/]

Bangladesh

Janata Bank Limited

o o o o

!y obtaining suitable reduction on amount. $dditional security. More complete financial data concerning the obligor6s condition or (ther such action as the specific circumstances may re5uire.

"he attempt to encourage banks to re5uire borrowers comply with banking laws and regulations and clear up industrial properties prior to granting a loan. 2anata !ank should follow some straight ward mechanical procedures in assessing the risk of a borrower. "he formulation of a sound credit policy in the possibility of default loans. "he formulation of a sound credit policy in the banking sector as a whole has to take into account all these factors and each bank has to attempt to work out for itself what it is capable of doing so as best as possible.

References
1. $nnual reports of 2anata !ank 3imited and !angladesh !ank. .. -everal booklets from 2anata !ank limited. @. -everal newsletters from 2anata !ank 3imited. B. 1ebsiteC www.7anatabank bd.comJ 1I1I1BJ )C//;M *. ;ractical participation of 2!3 F. =ifferent "ypes of Forms of 2!3 H. Managing &ore :isk in !ankingC &redit :isk Management, 2anata !ank, 8ead (ffice, =haka.

6ppendices:69 6bbreviations
"DC "32 "T2 BB "cco$nt "nn$al 3eneral 2eetin& "$tomated Teller 2achine Ban&lade!h Bank

[*1]

Bangladesh

Janata Bank Limited

B"B CC CIB DD 4EP +orm I2P +orm JBL LDC PO TIN TT C2 CR2

Ban&lade!h "!!ociation of Bank! Ca!h Credit Credit Information B$rea$ Demand Draft 4,(ort +orm Im(ort +orm Janata Bank Limited Letter of Credit Pay Order Ta, Identification N$mber Tele&ra(hic Tran!fer Credit 2emorand$m Credit Ri!k 2ana&ement

6ppendices:+9 Buestionnaires
=ear :espondents, "his is a 5uestionnaire designed to collect data on the credit risk management and its impact on bank performance which will be used as an input for a report in a partial fulfillment of !!$ degree in Management -tudies. Tour genuine response is solely used for academic purpose and the data will be treated utmost confidentiality. "herefore, your kindly cooperation is appreciated in advance. :esponses to this 5uestionnaire will be used to develop general findings and conclusions without specific reference to institutions, clients or credits, e%cept where information may be independently available in the public domain or where permission has been granted approval. ' assure you that your personal details will be held confidential. "hank youU Personal Information: Full EameC VVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVV [*.]

Bangladesh

Janata Bank Limited

EationalityC VVVVVVVVVVVVVVVVVVVVVVVVVVV;rofessionC VVVVVVVVVVVVVVVVVVVVVVVVV &ontact =etailsC (fficeC VVVVVVVVVVVVVVVV MobileC VVVVVVVVVVVVVVVVVVVVVVV

1hich best describes your position in the bank4 o !oard Member o -enior E%ecutive o Manager o 8ead of department o :isk (fficer o (thersVVVVVVVVVVVVVVVVVVVVVVV S(ecific F$e!tion!% 1. 8ow many years of e%perience do you have working with bank and ' the area risk management4 o 3ess than 1 year o 1 * years o * 1/ years o More than ten years .. 1hat is your e%pectation from effective credit risk management in your organi#ation4 ,Tou can use more than one answer0 o :educe financial loss o 'mprove communication with the stake holders o 'mprove decision making o 'mprove resource allocation o (ther ,please specify0

@. 1ho has the authority to establish credit risk management in policy or procedure your organi#ation4 o &hief e%ecutive officer,&F(0 o &hief financial officer,&F(0 o !oardI committee o E%ecutive management committee o 'nternal auditor o -taff o (ther,please specify0

[*@]

Bangladesh

Janata Bank Limited

B. =oes your organi#ation have a documented credit risk management guideline or policy4 o Tes o Eo *. =oes the guideline support the goals and ob7ectives of credit risk management4 o Tes o Eo F. =o you understand the credit risk management guideline or policy4 o Tes o Eo H. 8ow often does your organi#ation change its guidelines or policies to manage risks4 o (nce per year o (nce per two years o (nce in more than two years o Eever ). 'n the future, does your organi#ation have a policy to support the development of credit risk management4 o Tes o Eo A. =oes your organi#ation offer training for employees4 o Tes o Eo 1/. 8ow does your organi#ation effectively communicate to reduce credit risk4,you can choose more than one answer0 o &reating clear and trustworthy information o =eveloping understanding between management team and employee o Fast and sharp communication between management team and stakeholders o :egularly communicating among management and staff [*B]

Bangladesh

Janata Bank Limited

o &reating and maintaining a clear communication o (ther ,please specify0 11. 8ow often does your organi#ation provide credit risk management training courses4 o Eever o 1 times per year o . times per year o More than . times per year 1.. =oes your organi#ation have established procedures for keeping up to date and informed with changes in regulations4 o Tes o Eo 1@. =o the bank uses $ltman W score for credit evaluation4 o Tes o Eo 1B. =oes the bank have internal credit rating system4 o Tes o Eo 1*. 1hat challenges you face in credit risk management4

1F. 1hat are the ma7or kinds of method or process used by the bank in the management of credit risk4

[**]

Bangladesh

Janata Bank Limited

1H. 8ow it is suitable for your bank4

"hank you very much for your patientU

[*F]