PART-A

1.1 ORIGIN OF THE REPORT

After completion of 8 semesters in the BBA Program of IIUC, 12 weeks organizational
attachment is a must an the author complete his internship perio in !astern Bank "t
#!B"$, one of the repute Pri%ate Commercial Banks of the countr&' (uring this 12)week
perio, he has worke in the *+! epartment of the ,ank' -hile working in the
epartment he has gone through the stanar operating proceures carrie out ,& the
,ank an unerstoo them well' Also he was a,le to unerstan the regulator&
compliance issues propose ,& Banglaesh Bank #BB$ regaring creit management
practices'
1.2 OBJECTIVE OF THE REPORT
.he main o,/ecti%e of this internship report was to get a practical e0posure to creit
Pa&ment *&stem of !astern Bank "imite an the roles the commercial ,anks pla&ing in
this area' Besies, this repot will was meant to re%ol%e aroun some specific o,/ecti%es'
*uch as ))))
1 .o pro%ie a ,rief iea a,out the functions of the %arious epartments'
1 .o make a *-2. anal&sis of the ,anks o%erall performance on the ,asis of the
e0periences share uring the rotation perio an gi%e acclamations, if an&'
1 "earning the s&stem of creit pa&ment ,& !astern Bank "imite'
1 3actor influencing in creit ecision'
1 .o know a,out the function of creit risk management'
1 .o know the process of monitoring creit'
1 .o know a,out the Creit risk rating'
1.3 SCOPE OF THE STUDY
.he scope of the stu& is limite to *+!, Principal Branch onl&' .heir was no intention
whatsoe%er, to focus on how the loan an a%ances were markete to the customers,
how the relationships were ,uilt an how each customers were followe up or hanle
,& the 4elationship +angers' Purpose of the report woul ,e to focus on how the creit
management practice is ,eing carrie out ,& the respecti%e epartment like what is
mous operani, what are the e%aluation techni5ues followe ,& the officers uring
e%aluating a loan proposal an so on so forth' Also the report wont co%er %arious legal
issues regaring is,ursement an reco%er& proceures of a loan' An finall& entire risk
management issues in the report will re%ol%e aroun *+! loan proposals onl&'
1
1.4 LIMITATIONS
.he following limitations are apparent in the report6
.ime is the first limitation as the uration of the program was of 12 weeks onl&'
Another limitation of this report is Banks polic& of not isclosing some ata an
information for o,%ious reason, which coul ha%e ,een %er& much useful'
1.5 SOURCES OF DATA
1' Primar& sources of ata7 (irect con%ersation with the emplo&ees of !astern Bank
"imite'
2' *econar& *ources of ata7 Annual 4eports of the ,ank, ifferent reports,
operational manual for the emplo&ees, Banglaesh Bank Circulars, Bank
(ata,ase an %arious other pu,lications an we,sites'
1.6 METHODOLOGY
3or unerstaning the proceure of ,anking operations, the author ha o,ser%e
the operations an worke with the officers at the same time' 8e ha inter%iewe
the !B" 2fficials for getting more information'
3or the anal&sis part, ata ha%e ,een collecte from the loan proposals an other
ocumentation packages of the ,ank'
2
PART-B
2.0 Overview of the Bank
2.1 History and Background of astern Bank !i"ited
.he emergence of !astern Bank in the pri%ate sector is an important e%ent for the
,anking inustr& in Banglaesh' In 1991, when the Bank of Creit an Commerce
International #2%erseas$ BCCI ha collapse internationall&, the operation of this ,ank
ha ,een close own in Banglaesh' .aking into account, the welfare of the BCCI
emplo&ees an its epositors interest, the Banglaesh Bank, uner the 4econstruction
*cheme, then ga%e permission to form a ,ank name !astern Bank "imite, which
woul take o%er all the assets, cash an lia,ilities of BCCI in Banglaesh, with effect
from 1:
th
August 1992' .hus !astern Bank "imite starte functioning as a pu,lic limite
compan& on August 8, 1992 with the o,/ecti%e to carr& out ,anking ,usiness in an
outsie of Banglaesh
It starte its ,usiness as a scheule ,ank with onl& four ,ranches, which inclue
Principal Branch an +oti/heel Branch in (haka, Agra,a Branch in Chittagong an
another ,ranch in ;hulna'In <ul&199=, when the ,ank got its Authorize (ealership from
Banglaesh Bank, then it starte its e0pansion of ,ranches' *i0 an three new ,ranches
were opene in 199> an 199? respecti%el&' .he %er& ne0t &ear the& inaugurate two
more ,ranches' At present, it has twent&)two ,ranches, which are scattere, all o%er the
ma/or cities of the countr& in ma/or ,usiness areas'
It starte its operational acti%ities initiall& with an authorize capital of .; 1@@@ million,
i%ie into 1@ million shares of .; 1@@ each an pai up capital of .k' =1@ million'
At 2@@2, the pai up capital stoo at .; A2@ million ,ut the authorize capital remaine
unchange at .k 1@@@ million' .he general pu,lic hel 8='>2 B of its shares while
institutional in%estors hel the rest' At present !B" is one of the fastest growing
commercial ,anks in the countr& an the largest capital ,ase ,ank in Banglaesh' As
of (ecem,er 2@@? its pai up capital was .; 828 million'
.he initial shareholers were the Cational Commerical Banks, %arious go%ernment
agencies an some of the epositors who ha agree to accept shares in the new ,ank
in lieu of their eposits' .he first Boar of (irectors of !B" constitute uner go%ernment
super%ision, consiste of se%en irectors from %arious ,usiness an professions'
!astern Bank "imite was uner go%ernment control until the en of 2@@@ an therefore
there were alot of eficiencies in management' In 2@@1, the ,oar of irectors ,ought in
new professional management from %arious foreign ,anks who ha%e ,een tr&ing to
moernize the ,ank e%er since' At present +r' + Dhaziul 8a5ue an +r' ;' +ahmoo
*attar are heaing !astern Bank "imite as the Chairman an +anaging (irector
respecti%efull&
3
2.2 EBL V!!"#
!B" Eision is to ,ecome the Bank of Choice ,& transforming the wa& it oes ,usiness
an e%eloping a trul& uni5ue financial institution that eli%ers superior growth an
financial performance an ,e the most recogniza,le Bran in the financial ser%ices in
Banglaesh'
!B" reams to ,e the ,ank of choice of the general pu,lic, which inclues ,oth the
consumer an the corporate clients' .he& want to ,uil such an image that whene%er
people think of a ,ank, the& will think of !astern Bank' .he& ha%e introuce state of the
art ,anking technolog&, which has mae ,anking easier an hassle)fee for all' It has
aopte the tag line F*imple math, the philosoph& of eas& ,ankingG an has change its
logo to reflect the changes that are taking place in !B"'
In orer to achie%e superior growth an financial performance for its shareholers, !B"
is raicall& transforming the wa& it oes ,usiness' .he ,ank has alrea& restructure
from the traitional geographic matri0 #,ranch ,ase ,anking$ to ,usiness unit matri0'
.he ,ank is also centralizing most of the ,usiness functions in the hea office to ensure
greater control an efficienc&'
2.3 EBL $!!"#
In line with its %ision !B" has e%elope a mission statement, which reas as follows7
-e will eli%er ser%ice e0cellence to all our customers, ,oth internal an e0ternal
-e will constantl& challenge our s&stems, proceures an training to maintain a
cohesi%e an professional team in orer to achie%e ser%ice e0cellence
-e will create an ena,ling en%ironment an em,race a team ,ase culture
where people will e0cel
-e will ensure to ma0imize shareholers %alue
2.# Present Business Phi$oso%hy
.he philosoph& of the present management of !B" is to e%elop the ,ank into an ieal
an uni5ue ,anking institution' !B" wants to ,e ifferent from other pri%atel& owne
commercial ,anks operating in Banglaesh' .he& want to ,e a leaer in the inustr&
rather then ,eing a follower' .he& want to ,e a leaer in pro%iing 5ualit& ser%ice to
customers so that customers can get something aitional from their ser%ices'
.ill 2@@@, !B" operate in a Deographical +atri0, where the ,usiness of the ,ank was
concentrate on the twent&)two ,ranches i%ie into zones' But in 2@@1, the new
management le ,& the +anaging (irector, +r' +ahmoo *attar change the
geographic matri0 structure of !B" into Business +atri0 structure' .he ,ank has ,een
restructure into three main ,usinesses, which are responsi,le for earning the incomes
of the ,ank, .hese are7
Corporate Banking
Consumer Banking
.reasur& Banking
All other epartments of the ,ank act as support units for these three units an help
them in e%er& possi,le wa&' Uner this arrangement, the responsi,ilities an function of
the ,ranches ha%e ,een reuce ramaticall&' +an& of the acti%ities like creit
e%aluation an appro%al, monitoring of loans, trae ser%ices etc are now centralize in
the 8ea 2ffice' .he ,ranches of the ,ank are terme now as the F*ales an *er%ice
4
CentersG whose primar& focus is on eli%ering ser%ices to corporate an consumer
clients an ,uiling an maintaining relationship with them
2.5 O%&'()!*'
!B"s primar& o,/ecti%es are the following7
.o maintain a satisfactor& eposit mi0
.o grow its creit e0tension ser%ice to corporate as well as ini%iual customers
.o increase its i%ersification of loan portfolio an geographical co%erage
.o reuce present operating e0penses further so as to increase earnings ,efore
ta0
.o reuce the ,uren of non)performing assets'
2.& 'anage"ent As%ect
"ike e%er& other ,usiness organization, the top management makes all the ma/or
ecisions' .he ,oar of irectors ,eing at the highest le%el of organizational structure
pla&s an important role in polic& formulation, ,ut it is not irectl& concerne with the a&)
a& operations of the ,ank' .he& ha%e elegate this ut& to the management
committee' .he ,oar mainl& esta,lishes the o,/ecti%es an policies of the ,ank' .here
are three committees of the ,oar for ifferent purposes'
.he& are the following7
1' !0ecuti%e committee comprising of se%en mem,ers of the ,oar'
2' Committee of the ,oar for Aministrati%e purpose
= Committee to e0amine Ba "oan cases
.he Chief !0ecuti%e 2fficer #C!2$ who is assiste ,& three !0ecuti%e Eice)presients
#!EPs$ looks after the a&)to)a& affairs of the Bank' 8uman 4esources (epartment,
+anaging (irectors *ecretariat an Auit an Compliance (epartment are uner irect
control of the C!2' .he three !0ecuti%e Eice Presient are in charge of 2perations,
Creit an Corporate Banking respecti%el&' .he& control the affairs of these epartments
through the managers who are in charge of %arious epartments uner these i%isions'
+i an lower le%el emplo&ees get the irection an instruction from the top e0ecuti%es
a,out the uties an tasks the& ha%e to perform' .he chief e0ecuti%e pro%ies the
guieline an ,roa irection to the managers an emplo&ees, ,ut elegates
responsi,ilit& for etermining how tasks an goals are to ,e accomplishe'
5

F!+,-' 1. M/#/+'$'#) H!'-/-(01 "2 EBL
6
Board of Directors
Senior Assistant Vice President
Managing Director & Chief Executive Officer
Executive Vice President
Senior Vice President
Vice President
CHAIRMA
!irst Assistant Vice President
Senior Princi"a# Officer
Princi"a# Officer
Su"ervisor$ Officer
Officer
Assistant Vice President
Senior Officer
%unior Officer
2.( )ivision of B!
All polic& formulations an its e0ecution are carrie out at the hea office' .here are
ele%en ma/or i%isions in !B", which are the following7
a$ Corporate Banking (i%ision
,$ Creit 4isk +anagement an Aministration
c$ Consumer Banking (i%ision
$ Bran +anagement (i%ision
e$ .rae *er%ices (i%ision
f$ International (i%ision
g$ 8uman 4esources (i%ision
h$ Information .echnolog& (i%ision
i$ Auit an Compliance (i%ision
/$ 3inance an accounts (i%ision
k$ *pecial Asset +anagement (i%ision
l$ Aministration
.he structures an functions of each of these i%isions of !B" are escri,e ,elow7 )
7
8
Borrower
Request Letter to Bank
Borrower
Request Letter to Bank
SME Banking
Preparation of CM Package
SME Banking
Preparation of CM Package
Credit Risk Management
Checking & Analyzing
Credit Risk Management
Checking & Analyzing
HOCRM/DMD/MD/Board
Final Approval Authority
HOCRM/DMD/MD/Board
Final Approval Authority
Credit Risk Management
Advising of Loan is!urse"ent
Credit Risk Management
Advising of Loan is!urse"ent
Credit Administration
Prepare sanction letter for Client#s acceptance$
Co"pletion of entire loan docu"entation for"alities$
Loan docu"entation checklist duly signed !y RM & Credit
Ad"inistration %fficer$
Advise of li"its to respective operating depart"ents for
i"ple"entation through &anction Me"o$
Credit Administration
Prepare sanction letter for Client#s acceptance$
Co"pletion of entire loan docu"entation for"alities$
Loan docu"entation checklist duly signed !y RM & Credit
Ad"inistration %fficer$
Advise of li"its to respective operating depart"ents for
i"ple"entation through &anction Me"o$
Schematic Diagram of Loan Sanction/Disbursement Process
2.* +or%orate Banking )ivision
Corporate Banking (i%ision came into e0istence ,ecause of the restructuring of !B"s
,usiness processes' Pre%iousl& all the loan is,ursement an monitoring acti%ities were
carrie out ,& the officers of ini%iual ,ranches, which resulte in poor management
an control of the process' .o impro%e the poor management an control of the process,
!astern Bank ecie to centralize its loan is,ursement an monitoring acti%ities' A
separate Corporate (i%ision was create which starte operation on 1@
th
<anuar& 2@@2'
.his i%ision is responsi,le for ,ringing in profita,le new corporate clients an retaining
present clients ,& meeting their %arious nees' Corporate Banking pro%ies %arious
,anking ser%ice such as proucts, creit facilities an financial solutions which
aresses the i%erse financial nees of corporate customers, pu,lic an pri%ate limite
companies, CD2s an sole proprietorship concerns' It is also responsi,le for resol%ing
creit issue pro,lems an e%eloping relationship ,etween the customer an the ,ank'
.he whole corporate i%ision is i%ie into two areas' Area one comprises of (haka
an 2utstation Branches whereas Area two comprises Chitagong ,ranches' Area one
consists of si0 relationship units' 3i%e units in Area one are responsi,le for looking after
the ,anks assets an one unit is responsi,le for lia,ilities, while Area two has three
asset units an one lia,ilities unit' !%er& asset unit has a unit hea, who is in charge of
that unit' Denerall& one 4elationship +anager #4+$ an one Associate 4elationship
+anager #A4+$ work uner the Unit 8ea' All Units hea work uner the 8ea of
Corporate an the& report irectl& to him' .he management hierarch& of the Corporate
Banking (i%ision is gi%en ,elow7

3igure =7 +anagement 8ierarch& of Corporate Banking
S'-*!(' "2 C"-3"-/)' B/#4!#+:
a' *tructuring of 3acilities for Corporate customers'
,' Pro%iing 3inancial *olutions
c' A%isor& *er%ices
' Arrange "oan *&nications
e' (e%eloping 4elationship ,etween the Clients an the Bank
f' Processing creit an other appro%als for creit an other facilities' Pro%ies a one
stop ser%ice for Creit facilities'
g' 8anles pricing issues an -allet *izing !0ercises to ma0imizes the earnings of the
Bank as well as of the Client
h' Coorinating ser%ice eli%er& of all !B" istri,ution channels #*ales an *er%ice
centers, .rae *er%ices, .reasur&, Creit issues as re5uire for the customer'
9
Head of Corporate
Unit Head
Relationship Manager Assoiate Relationship Manager
i' !nsures corporate customerHs complaints are aresse'
/' 4elationship .eams of !B" are a%aila,le to ser%e &ou'
.he main functions of this i%ision are as follows7
1' .argeting corporate clients an ,uiling ,usiness relationships with them
2' (esigning customize ser%ice for the clients
=' !%aluating financial strength of the client
>' +aking possi,le recommenations for further e0pansion
2., +redit Risk 'anage"ent and Ad"inistration
.he main o,/ecti%e of this i%ision is to e%aluate the creit worthiness an e,t pa&ment
capa,ilit& of the present customers an loan applicants' .he respecti%e ,ranches sen
all loans an a%ances proposals from the prospecti%e ,orrowers to the 8ea 2ffice
Creit 4isk +anagement #82C4+$ for appro%al' If this epartment fins the loan
proposal attracti%e, it either appro%es it or sens it to the ,oar for appro%al' It is
responsi,le also for setting prices for creit facilities gi%en to clients an ensuring that it
is ,eing implemente in the ,ranches' .his epartment also monitors the %arious loan
accounts of the ,ranches an prepares %arious statements for Banglaesh Bank'
.he main responsi,ilities of the Creit 4isk +anagement functions are7
2%ersee the ,anks creit policies, proceures an controls relating to all creit
risks arising from corporateIcommercialIinstitutional ,anking, personal ,anking, J
treasur& operations
Appro%e risk transactions within their elegate authorit& an a%ise on creits
which e0cee such limits
!nsure implementation of creit facilities through an inepenent Creit
aministration function
Implement re%iew an control policies on all lening portfolios
+anage ini%iual pro,lem creits an monitor the istresse assets portfolio
within !B"s risk parameters
4ecommen pro%isions for loan losses compl&ing central ,anks rules an norms
4e%iew lening programs an pro%ie recommenations for appro%al'
.he Creit 4isk +anagement (epartment is assiste ,& the Creit Aministration
(epartment, who is primar& concerne with the post) appro%al functions of the i%ision'
Creit Aministration criticall& tracks an monitors the following7
Creit e0pir&
Past ues
!0cess o%er limit
(ocument eficienc&
4eporting
Creit Aministration is in%ol%e in ,asicall& two ,roa functions7
"oan +onitoring
(ocumentation
-. !oan "onitoring
.he most important aspects of this part are7
1!
3ollow appro%al terms
Proper loan is,ursement
+onitor interest pa&ment
+onitor Principal repa&ment
Balance with general leger
--")ocu"entation
.he important functions of this part are7
"ook at sanction terms
3ill up loan ocumentation checklist
!nsure Proper loan ocumentation
2,tain client sign off
3iling with the 4egistere <oint *tock Corporation #4<*C$
4egistere mortgage ee e0ecution
2.10 +onsu"er Banking )ivision
.he consumer ,anking i%ision eals with the financial nees of all the ini%iual
customers of the ,ank' .he consumer ,anking acti%ities are ,eing carrie out through
the twent&)two ,ranches of !astern Bank "imite operating countr&wie' Among these
,ranches ten ,ranches are locate in (haka, fi%e in Chittagong, three in *&lhet an one
each in ;hulna, <essore, Bogra an 4a/shahi' Pre%iousl& these ,ranches use to
conuct all kin of ,usiness acti%ities, incluing processing creit issue, conucting trae
ser%ice, consumer ser%ice etc' But after the restructing process, all the ,ranches are
now mainl& focusing onl& on eli%ering ser%ice to ini%iual customers' !B" ,efore i
not ha%e man& attracti%e consumer proucts' 8owe%er, !,l has ecie to gi%e more
focus on consumer ,anking an is e%eloping moern eli%er& channels like A.+s,
tele,anking, internet ,anking, creit cars etc an man& other new consumer proucts
an ser%ices to meet specific financial emans of the customer as well as to make their
life eas& an con%enient'
.he main functions of this i%ision are7
*ettlement of accounts
Builing strong relationship with ini%iual customers
Ientif&ing ini%iual nees of the customer an thus helping esign proucts
that will meet their nee
Pro%iing locker ser%ices
Pro%iing ancillar& ser%ices'
Pro%iing consumer loans
2.10.1 .' Banking
*mall an +eium !nterprises #*+!$ in Banglaesh contri,ute 2?B of gross omestic
prouct #D(P$ an 8@B of the inustrial /o,s of the countr& in 2@@>' Accoring to A(B,
the countr&Hs estimate : million *+!s an micro enterprises firms of less than 1@@
emplo&ees ha%e a significant role in generating growth an /o,s' .his is a sector that
has its own istinct nees an re5uires specialize focus' !astern Bank "t' #!B"$ has
launche *+! Banking in earl& 2@@? with this %iew in min'
At !B"7
11
K Pro%ie *+!s with eas& access to financing'
K (eli%er proucts that ensure superior returns to our customers'
K 2rient customers with inustr& trens, regulator& issues etc, for their success'
K Ealue long term relationship ,anking'
*+! Banking is an integrate specialize area of the Bank, which aresses the i%erse
financial nees of *mall an +eium !nterprises'
"ocal Business 8ouses #Pri%ate "imite Companies$, *ole Proprietorship Concerns,
Partnerships etc are consiere to ,e our *+! Customers' *er%ices pro%ie ,& *+!
Banking are as follows7
*tructuring of 3acilities for *+! Customers'
(e%elops unerstaning of customer ,usinesses an a%ises 3inancial *olutions
(e%eloping 4elationship ,etween the Clients an the Bank
Processing creit facilit& re5uirements an arranging appro%als for creit
facilities'
8anles pricing issues an -allet *izing !0ercises to ma0imizes the earnings of
the Bank as well as of the Client
!nsures *+! customersH complaints an *er%ice issues are promptl& aresse'
Coorinates acti%ities of support unit Creit Aministration unit which prepares
securit& ocumentation, securit& registration, an CIB relate issues'
.he *+! ,anking comprises two ifferent segments, *mall an +eium segments'
2.15.16/7 S$/88 S'+$'#).
.he small segment of *+! Banking hanles small loans i'e' from .aka 1@@,@@@ up to
?@, @@,@@@' .his segment has %arious proucts for their customers, ,ut currentl& onl&
two proucts are a%aila,le' .heir proucts are namel&7
1' A*8A
2' PUC<I
ASHA LOAN:
A*8A loan is a loan which is pro%ie to the customers without an& securities an for
the first time the client can a%ail this loan for a perio of one &ear' .he officers at first
carefull& /ustif& se%eral criteria uner which an A*8A loan can ,e fallen' .he ,usiness
has to ,e operate for at least 2 &ears an their turno%er of sales to ,e /ustifie for the
amount of loan applie for'
!ligi,ilit& for an A*8A loan7
An& sole proprietorship, partnership firms ha%ing minimum 2 &ears of successful
,usiness operation
+onthl& cash flow to support the propose loan installment
PUC<I "2AC7
12
3eatures7
1' An& ,usiness purpose loan from .k' 1,@@@,@@@ to .;' ?,@@@,@@@
2' .o ,e repai within ma0imum =: months# ne0t loan is repa&a,le within :@
months$
=' Collateral securit& re5uire along with charge on ,usiness assets
>' "oan repa&a,le in e5ual monthl& installment
!ligi,ilit&7
An& sole proprietorship, partnership firms or pri%ate limite companies ha%ing
minimum = &ears of successful ,usiness operation
+onthl& cash flow to support the propose loan installment
E9,/8 $"#)081 !#)/88$'#) /$38'.
F"- T4. 1 8/(7 in 12 month B(. 9,@A>
in 18 month B(. :,28:
in 2> month B(. >,89A
in =: month B(. =,?1:
2.15.16%7 M':!,$ S'+$'#).
.he meium segment of the *+! Banking epartment functions almost like the
corporate ,anking epartment of !B"' +i segment of *+! eals with %arious lening
proucts of the Bank such as7
*2(
2(
CC #Cash creit$
*"C
U"C
"D
".4
PA(
(eman loan
.erm loan
.ime loan
3(BP
"(BP
8ere are some proucts an ser%ices escri,e so far I coul unerstan on m&
practical work with the officers7
2.11 Brand 'anage"ent )ivision
13
Although !B" is in the ,anking ,usiness for 5uite sometime its ,ran image has not
grown strong an in orer to succee in the competiti%e ,ank en%ironment it nees to
enrich its ,ran e5uit&' *o far !B" has shunne an& sort of promotional tools e0cept for
a few inconspicuous ,ill,oar a%ertisements, sign,oars an newspaper recruitment
a%ertisement' 8owe%er a new epartment calle FBran +anagementG has ,een set up
in 2@@1 to gi%e a new an enhance ,ran ientit& to !B"' .his epartment super%ises
the planning of a%ertisement campaigns for !B"s proucts an anal&zing customer
fee,acks' -ith the ai of an a%ertising agenc& the logo an stationar& of !B" has
,een change an e&e)catching ,rochures, calenars an posters ha%e ,een prepare
which are ispla&e at the sales J ser%ice centers'
2.12 Trade service division
.rae ser%ices are a ma/or operational epartment of !B"' It eals with issues regaring
to e0port, import an guarantees' It performs the /o, of financing an facilitating foreign
trae' .here are separate units operating within the trae ser%ices epartment in !B"'
.hose are7
!0port
Import
Duarantee
.he ma/or functions of .rae *er%ices inclue the followings7
Issuance of "etter of Creit
A%ising of "etter of Creit
Cegotiating ocuments
Collection of Pa&ments
3acilitating trae ,& arranging loans to cater ifferent nees of the clients
2.1/ -nternationa$ division
International (i%ision is responsi,le for assisting the authorize ,ranches to eal in
foreign traes, that is import an e0port ,usiness on account of the customers of the
,ank ,& gi%ing appro%al for transactions an controlling them at %arious stages' It eals
with all corresponents of foreign ,anks ha%ing arrangement with the ,ank
.he functions performe ,& this i%ision are as follows7
Carr&ing out corresponent ,anking relationship
*uper%ising of foreign e0change transaction of other units
*uper%ising saleI purchase of foreign currencies
2.1# Hu"an Resources )ivision
.he emplo&ees are !astern Banks most %alua,le resource' 8a%ing competent an
professional emplo&ees is ,ecoming increasingl& important in toa&s competiti%e worl
an !B" has a significant competiti%e a%antage in this respect' +an& of its emplo&ees
ha%e worke here since the BCCI time an therefore ha%e %ast e0perience in their
respecti%e fiels' Cew emplo&ees are recruite with soun acaemic ,ackgroun an
14
where%er neee proper training is gi%en to the emplo&ees after recruitment to e5uip
them for their responsi,ilities'
.he +ission of 8uman 4esource i%ision #84$ is to make !B" the !mplo&er of Choice'
.he main functions of the i%ision are7
I. Builing !mplo&er Image7 .he 84 epartment has taken steps in ,uiling
relationship with recognize eucational institutes in orer to create positi%e awareness
a,out !B" as an emplo&er' .he& ha%e one this ,& e0tening internships to stuents,
sponsoring stuent e%ents an ,& participating in /o, fairs run ,& ifferent uni%ersities'
II. *taffing7 Another important task of the 84 i%ision is to prepare all formalities
regaring appointment an /oining of the successful caniates'
III. .raining7 84 epartment emphasizes on training an e%eloping their emplo&ees
through %arious training programmes hel at the Banks own .raining Center at
*hantinagar an %arious outsie locations, like Banglaesh Institute of Bank
+anagement to enhance the skills of their emplo&ees, to help them eal ,etter with their
/o, responsi,ilities
IV. Performance Appraisal of !mplo&ees7 .he emplo&ees of !B" are gi%en an
annual target performance ,ase on a iscussion ,etween the emplo&ee an his or her
super%isor' At &ear)en, a performance e%aluation calle Annual Classifie 4eport
#AC4$ is carrie out ,ase on the target' Increments, ,onuses an promotions are gi%en
to !B" emplo&ees ,ase on this performance e%aluation'
2.10 -nfor"ation Techno$ogy )ivision
Pre%iousl&, !astern Bank ha a %er& low le%el of automation' But in 2@@1, when the new
management took o%er, the& ga%e huge emphasis on computerizing the ,anks
operations' After two &ears, almost all the operations in the ,ank are now automate'
.he Bank is also shifting to a new I. platform, which aims at maintaining, operating an
strengthening the technolog& ,ase of the ,ank, to ena,le error free prouction of
information that ensures ongoing efficienc& an profita,ilit& of operation' A worl class
,anking software calle 3le0 Cu,e has ,een installe which will centralize operations
an pro%ie 2nline Banking, Internet Banking, Automate .eller +achine, .elephone
Banking an creit car facilit& etc'
-ith this implementation of state)of)the)art Information .echnolog&, the I. i%ision has
,ecome an important contri,utor to the ,anks o%erall efficienc& an profita,ilit&' At
present the I. epartment ser%es the following functions7
(e%elopment of software for ,anks operation accoring to nee, their
maintenance an purchase of new software
+aintenance of computer harwares an upgraing the PCs whene%er re5uire
.raining the staff so that the& can perform on the automate en%ironment
.rou,leshooting with the new software
2.1& Audit and +o"%$iance )ivision
15
.he main function of this i%ision is to pro%ie legal assistance to the ,ranches an to
ensure strict aherence of rules an policies ,& all concerne officials of the ,ank
through routine an surprise inspection an auit' .he functions of this i%ision are as
follows7
Implementing rescheuling process of stuck up loan to the ,ranches for o,taining
repa&ment scheule through strong persuasion an ser%e final notice as the
conition re5uire'
+onitoring the ini%iual cases with respect to their securities, %alue of securities
an finall& re%iew of possi,ilit& of reco%er& of ,anks stuck)up classifie loan
In%estigating suspicious or irregular matters ,eing irecte ,& higher
management an ,eing re5ueste ,& ,ranch in charges too
.ime to time follow up of stuck) up)a%ances of ,ranches an keeping the
,ranches uner constant pressure
Inspecting all ,ranches operations at least once in a &ear
Carr&ing out surprise auit as felt necessar&
2.1( 1inance and accounts division
.he finance an accounts i%ision is important for an& ,ank ,ecause its task is to
1' +aintain ail& li5uil& position, treasur& ,ills, call mone& etc
2' +onthl&)accrue interest calculation of all interest),earing accounts an
amortization of all fi0e an other assets
=' Preparation of statement of accounts an profit an loss account for the ,ank
an annual report of the ,ank
>' -eekl& eposit an a%ance anal&sis of the ,ank
?' Cost of fun anal&sis'
2.1* .%ecia$ Asset 'anage"ent )ivision
*pecial Asset +anagement #*A+($ eals with all the classifie accounts in the ,ank
loan portfolio, mainl& accounts which ha%e fallen into su,stanar, ou,tful an loss
categor&' .he responsi,ilities of the *pecial Asset +anagement (epartment are the
following7
+onitoring an controlling the classifie accounts through monthl& reporting an
5uarterl& re%iew
Acti%el& follow up with ,orrower for reco%er&
Cegotiating an restructuring e,ts where%er feasi,le on its own an in
association with the concerne relationship manager
Preparing a consoliate report of all ,a loans written off on a 5uarterl& ,asis
an su,mitting the report to the hea of creit risk management an +anaging
(irector an C!2'
2.1, Ad"inistration
.his epartment looks after the aministrati%e matters an suppl& of all tangi,le goos to
the ,ranches' *ome of the main functions of the i%ision are as follows7
16
+ake arrangement for ,ranch opening such as making lease agreement, internal
ecorations etc
Print all securit& papers an ,ank stationer&
Purchase stationer& items an istri,ute it to the ,ranches
A%ertise in the ifferent meia a,out tener notice, general meetings an pu,lic
interest
2.20 .trengths of the Bank
.he strengths of the ,ank are the following7
C0/#+': O-+/#!;/)!"#/8 S)-,(),-' 7 Up till 2@@@, !B" carrie out its operation
like e%er& other local ,ank' All of its ,ranches acte as single ,anks an i
e%er&thing from marketing to loan processing to relationship maintaining' In 2@@1
!B" change its traitional wa& of oing ,usiness' 4ather than operating as a
geographical matri0, !B" starte operating as a ,usiness matri0' .he functional
areas were separate an reefine as ,usiness units' .his has allowe
management to operate more efficientl&'
C'#)-/8!;': P-"('' 7 .he new organizational culture has resulte in
centralize processes' Before the ,ranches were empowere to o almost
e%er&thing within limits' .he& were responsi,le for marketing, loan processing,
account acti%it& monitoring an other transactions' .heir accounta,ilit& i not go
,e&on sening statements to the hea office annuall&' Uner the current s&stem
management has more control on the o%erall ,ank an its a&)to)a& operations'
As a result loan efaults ha%e ,een lower ,ecause the Corporate (i%ision an
the 4isk +anagement (i%ision, at 8ea 2ffice, scrutinize the loan proposals
along with the ,ranch managers
S,3'-!"- IT P8/)2"-$ 7 3rom 1? +arch 2@@=, !B" has starte using 3le0 cu,e) a
,anking software, which caters to all the nees of retailer, corporate, treasur&
an in%estment Banking' 3le0 cu,e ena,les !B" to remain associate ,etween
all its ,ranches an ,usiness units'
T0' 2,#()!"#/8 )-,(),-' of the Bank has mae the structure flat that has
facilitate ecentralization among the functional i%ision' As a result, the
ecision)making proceure has ,ecome 5uick' +oreo%er, the management has
greater control o%er the acti%ities of the Bank'
2.21 2eakness of the Bank
.he weaknesses of the ,ank are the following7
In the new structure, each functional i%ision is tall within the i%ision an
elegation of authorit& is also centralize' It has a significant effect o%er the
whole institution ,ecause mile an lower le%el emplo&ees are ,ecoming
more frustrate as the& are loosing their ecision making power'
As the organization is mo%ing towars semi)multinational culture, some
emplo&ees are resisting the change as the& are accustome with traitional
,anking s&stem an o not want to change'
17
Unimpressi%e Ph&sical "a&out7 .he ph&sical la&outs of se%eral of the !B"
,ranches are 5uite unappealing' *ome are locate at inconspicuous locations
with ull premises' .he interiors of Principal an 8ea 2ffice are not properl&
ecorate' .hese features of the Bank ma& create wrong impression in the
customers min, especiall& the ones who come for the first time'
2.22 Threats of the Bank
.he following are the threats of the ,ank7
.echnological 2,solence7 !B" has starte using a %er& moern an sophiscate
I. platform' .he ,ank plans to change its entire ,usiness philosoph& ,ase on
the uni5ueness of this prouct an ancillar& infrastructure' 8owe%er, like e%er&
other no%elt&, this s&stem has the risk of ,eing o,solete as technological
changes are coming %er& 5uickl& an continuousl&'
It faces constant threat from other local an multinational ,anks that are
continuousl& tr&ing to come up 5uickl& with more new inno%ati%e proucts that
appeals to customers first'
2.2/ O%%ortunities of the Bank
.he following are the opportunities for the ,ank7
(a& ,& a& man& ,anks are pro%iing e%ening ser%ice to their customers' !B"
can make necessar& arrangements to implement it'
Cow a a&s man& ,anks ha%e introuce Islamic ,anking' *tarting Islamic
,anking section can ,e an effecti%e tool to gra, the potential market segment'
2.2# 1inancia$ Ratio Ana$ysis of astern Bank !i"ited
Conucting the financial ratio anal&sis is important for an& ,ank, ,ecause it helps us to
measure its performance, that is how ae5uatel& a ,ank meets the o,/ecti%es of its
shareholers #owners$, emplo&ees, epositors an other creitors an other ,orrowing
customers' *o to get an o%erall picture of the performance of !astern Bank "imite, its
financial ratio anal&sis ha%e ,een carrie out in the following section'
2.2#.1 Return on Assets :
.he return on assets is an inicator of a ,anks managerial efficienc&' It inicates how
capa,le the management of the ,ank has ,een in con%erting the ,anks assets into net
earnings ie how much profit a compan& is a,le to generate for each ollar of asset
in%este'
Return on Assets # $et %no&e after 'a(es
18
)R*A+ 'otal Assets
200/ 200# 2000
$et %no&e After 'a(es 357,771,944 483,365,229 546,515,!28
.otal Assets 18,715,682,398 23,!47,667,9!8 27,399,954,469
ROA 1"91- 2"!9- 1"99-
1'8@B
1'8?B
1'9@B
1'9?B
2'@@B
2'@?B
2'1@B
2'1?B
2@@= 2@@> 2@@?
Y'/-
R
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-
#

"
#

A

'
)

42A
1ig 13 Trend of ROA of B! in fo$$owing years
3rom 3igure 1 it can ,e o,ser%e that from Lear 2@@= to Lear 2@@> the return on assets
ha increase for !astern Bank "imite' .his inicates that the managers were efficient
in con%erting the ,anks assets into net earnings' 3rom Lear 2@@> to 2@@? the 42A on
in%estment ecreases slightl&, ,ecause the rate of increase of net income after ta0es
from 2@@> to 2@@? is less then the rate of increase of net income after ta0 from 2@@= to
2@@>' .he net profit in 2@@>) 2@@? was slight& lower ,ecause the operating e0penses of
the ,ank went up, the salar& an emplo&ee allowances were increase, while at the
same time the ,ank spent a large amount of its mone& on ,usiness e%elopment,
awareness of ,ran ,uiling, in the mass market of !B"s prouct an ser%ices using
electronic an print meia' 2%erall from 2@@=) 2@@? the 42A has increase which
inicates that the compan& has ,een a,le to generate more profit for each ollar of asset
in%este'
2.2#.2 Return on 4uity :
.he return on e5uit& measures the rate of return flowing to the ,anks shareholer' It
measures the net ,enefit that the stockholers ha%e recei%e from in%esting their capital
in the financial firm'
19

Return on 4uity # $et %no&e after 'a(es
)R*.+ 'otal e/0it1 apital
200/ 200# 2000
5et -nco"e After Ta6es 357,771,944 483,365,229 546,515,!28
T")/8 '9,!)1 2,32!,898,168 2,63!,624,772 3,!71"336,91!
ROE 15"42- 18"37- 17"79-

1='@@B
1>'@@B
1?'@@B
1:'@@B
1A'@@B
18'@@B
19'@@B
2@@= 2@@> 2@@?
Y'/-
R
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-
#

"
#

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9
,
!
)
1
42!
1ig 23 Trend of RO of B! in fo$$owing years
3rom the a,o%e figure it can ,e seen that from Lear 2@@=)2@@> the 42! of !B"
increase' .his was ,ecause the rate of increase of net profit after ta0es was high from
2@@= to 2@@>' .he wages i not increase su,stantiall& from 2@@=) 2@@>, the a%ertising
costs i not increase so much, ,ecause aggressi%e a%ertising was not ,eing carrie
out an other e0penitures of the ,ank i not increase so significantl&, so net profit
increase rapil& from 2@@=)2@@>' But from 2@@>)2@@? the operating costs increase
significantl& ,ecause of increase in salaries an allowances, increase in a%ertising an
other e0penitures, causing the rate of increase of net profit after ta0 to increase slightl&'
2.2#./ 5et -nterest 'argin:
.he net interest margin measures how large a sprea ,etween interest re%enues an
interest cost management has ,een a,le to achie%e ,& close control o%er earning assets
2!
an the pursuit of the cheapest sources of funing' .he net interest margin is calculate
using the following formula7

5et -nterest 'argin# )%nterest ino&e2 %nterest .(pense+
'otal asset
2@@= 2@@> 2@@?
Interest income #a$ 1,:82,??1,:8= 1,89>,2?2,122 2,=A=,288,99?
Interest e0pense #,$ 928,>?@,:?? 9>9,2@=,@1= 1,=:?,>??,:>2
#Interest income M Interest
e0pense$ #c$ A?>,1@1,@28 9>?,@>9,1@9 1,@@A,8==,=?=
.otal asset #$ 18,A1?,:28,=98 2=,@>A,::A,9@8 2A,=99,9?>,>:9
CI+N cI >'@=B >'1@B =':8B
Cet Interest +argin
='>@B
=':@B
='8@B
>'@@B
>'2@B
2@@= 2@@> 2@@?
Cet Interest
+argin
1ig /. Trend in net interest "argin over the years.
3rom the a,o%e figure we can see that the net interest margin has increase slightl&
from 2@@=) 2@@>' It has increase from &ear 2@@=)2@@> ,ecause the rate of increase of
interest re%enue is higher relati%e to rate of increase of the interest e0penses uring the
&ear' 3rom 2@@>)2@@? ,oth interest re%enue an interest e0pense has increase, ,ut the
interest e0pense has increase proportionatel& more then interest re%enue, causing the
net margin to ip slightl& in %alue' 2%erall we can sa& that the management has ,een
efficient in controlling re%enue an e0pense cost since the net interest margin has not
fluctuate so much, with slight e%iation from one &ear to another
2.2#.# 5et 5on interest "argin3
.he net non interest margin measures the amount of noninterest re%enue stemming
from eposit ser%ice charges an other ser%ice charges the financial firm has ,een a,le
to collect #calle fee income$ relati%e to the amount of noninterest costs incurre
#incluing salaries an wages, repair an maintenance of facilities an loan loss
e0penses$' .he net non)interest re%enue is calculate using the following formula7
5et 5on interest "argin: )$oninterest re3en0es2 $oninterest e(penses+
21
'otal assets
2@@= 2@@> 2@@?
Coninterest re%enue #a$ =@2,2A1,2?: =>A,@?2,?A> ?8=,AA:,899
Coninterest e0pense #,$ 29A,:@@,==9 =99,:A@,A?9 ?=?,A9>,92>
.otal asset #c$ 18,A1?,:82,=98 2=,@>A,::A,9@8 2A,=99,9?>,>:9
Cet Con Interest +arginN #a),$Ic @'@2?B )@'22B @'18B
3rom the a,o%e ta,le it can ,e seen that in 2@@= net non)interest margin was positi%e' In
2@@> it ,ecame negati%e whereas it increase an ,ecame positi%e again in 2@@?' Cet)
non interest margin was positi%e in 2@@= ,ecause the non)interest re%enue e0ceee
the interest e0pense' In 2@@>, the rate of increase of non) interest re%enue was at a
much slower pace then the rate of increase of non)interest e0pense causing the non)
interest e0pense to e0cee the non)interest re%enue an e%entuall& the net non )interest
margin to ,e negati%e' Con
interest re%enue increase ,ecause the firms operating e0penses went up significantl&'
It implies that the ,ank was inefficient in controlling its noninterest e0penses' In 2@@? net
non interest margin showe signs of increasing ,ecause the ,ank focuse more on
increasing its fee ,ase income an ser%ice charges as a result its noninterest re%enue
e0ceee the noninterest e0pense causing the net non interest margin to ,e positi%e
an to ,e increasing'
2.2#.0 5et o%erating "argin 3
.he net operating margin measures how efficient the management has ,een in ensuring
that its re%enue grows faster then its rising costs' .he net operating margin is calculate
using the following formula7
5et o%erating "argin: )'otal operating re3en0e2 'otal operating e(pense+
)$*M+ 'otal assets
2@@= 2@@> 2@@?
.otal operating re%enue 1,@?:,=A2,28>
1,292,1@1,:8=
1,?91,:1@,2?2
.otal operating e0pense #,$ 29A,:@@,==9 =99,:A@,A?9 ?=?,A9>,92>
.otal asset #c$ 18,A1?,:82,=98 2=,@>A,::A,9@8 2A,=99,9?>,>:9
Cet operating marginN#a),$Ic >'@?B ='8AB ='8?B


='A@B
='8@B
='9@B
>'@@B
>'1@B
2@@= 2@@> 2@@?
Y'/-
N
'
)

O
3
'
-
/
)
!
#
+

M
/
-
+
!
#
C2+
1igure #3 Trends in net o%erating "argin of B!
22
!B" has a ecreasing tren in net operating margin from 2@@= to 2@@>, with negli,le
ecrease from 2@@>)2@@?' .his is ,ecause uring this perio although the net interest
margin increase, the net non interest margin ecrease an ,ecame negati%e causing
the net operating margin which is the com,ination of net interest margin an net non
interest to ecrease' In 2@@>)2@@?, although the net interest margin ecrease from
2@@> to 2@@?, ,ut the net non)interest margin increase from ,eing negati%e in 2@@> to
,e positi%e in 2@@?, causing the net operating margin to ecrease %er& slightl&'
2.2#.& Asset 7ti$i8ation Ratio :
.he asset utilization measures the efficienc& of the management in managing the
compan&s asset, so as to o,tain more operating re%enue for the compan&' .he asset
utilization ratio is calculate using the following formula7
Asset 7ti$i8ation Ratio# *perating re3en0e
Tota$ assets
2@@= 2@@> 2@@?
.otal operating re%enue#a$ 1,@?:,=A2,28> 1,292,1@1,:8= 1,?91,:1@,2?2
.otal asset #,$ 18,A1?,:82,=98 2=,@>A,::A,9@8 2A,=99,9?>,>:9
Asset utilization ratio ?':>B ?':@B ?'8@B

?'?@B
?':@B
?'A@B
?'8@B
?'9@B
2@@= 2@@> 2@@?
Y'/-
N
'
)

O
3
'
-
/
)
!
#
+

M
/
-
+
!
#
Asset
Utilization
4atio
1igure 03 Trends in Asset 7ti$i8ation Ratio in B!
3rom 2@@=)2@@? the asset utilization ratio in !,l has ,een ecreasing slightl& with
increase from 2@@>) 2@@?' .his suggests that management has starte to utilize its
assets ,etter to get higher &iel from those assets'
2.2#.( 4uity "u$ti%$ier :
.he e5uit& multiplier measures how man& ollars of assets can ,e supporte ,& each
ollar of e5uit& #owners capital$ an therefore how much of the firms assets must rel& on
e,ts' .he e5uit& mutiplier is calculate using the following ratio7
4uity "u$ti%$ier # 'otal assets
'otal e/0it1 apital
2@@= 2@@> 2@@?
23
.otal Assets #a$ 18,A1?,:82,=98 2=,@>=,>:8,>A9 2A,=9:,:@1,@?9
.otal e5uit& capital#,$ 2,=2@,898,1:8 2,:=@,:2>,AA2 =,@A@,91?,:@?
!5uit& multiplierN aI, 8'@:0 8'A?0 8'920
.he e5uit& multiplier of !B" has not increase so much from 2@@= to 2@@?' It implies
that the e5uit& financing of the ,ank has increase slightl& o%er the &ears an the ,ank
has relie more on e,t financing to finance its asset' .here is less e5uit& to finance the
assets as a result there is less chance of failure risk on the part of the ,ank' .he less the
risk, the less the potential for high returns to the stockholers'
2.2#.* arning s%read3
!arning sprea measures the effecti%eness of the ,anks intermeiate function in
,urrowing an lening mone& an also the intensit& of competition in the ,anks market
areas' !arning sprea is calculate using the following ratio7
arning s%read# 'otal %nterest %no&e 2 'otal %nterest .(penses
'otal .arning Asset 'otal %nterest 4earing 5ia6ilities
2@@= 2@@> 2@@?
Interest income #a$ 1,:82,??1,:8= 1,89>,2?2,12
2 2,=A=,288,99?
!arning asset #,$ 1>,899,=>1,=:A 19,=A2,1>A,>
@1
22,A::,>:?,@:
:
.otal interest e0pense #c$ 928,>?@,:?? 9>9,2@=,@1= 1,=:?,>??,:>2
.otal interest ,earing lia,ilities#$ 9,>A@,899,A9> 12,>A1,A=2,2
1:
1:,?A2,18>,=>
:
!arning spreaN#aI,$)#cI$ 1'>9B 2'1AB 2'19B

!arning *prea
@'@@B
@'?@B
1'@@B
1'?@B
2'@@B
2'?@B
2@@= 2@@> 2@@?
!arning *prea
1igure & Trends in earning s%read of B!
24
.he earning sprea of !B" is slightl& increasing although the ongoing competition in the
,anking sector, which is the emergence of new ,anks, ha%e ecrease the earning
sprea of man& ,anks' .he ,ank has ,een a,le to earn slightl& more income from its
loan an a%ances then the interest rate, it has pai on the eposit to its customers,
causing the earning sprea to increase slightl& from 2@@=)2@@> with ,eing more or less
,eing sta,le from 2@@>)2@@?' It implies that the ,ank costs of fun) the interest rate that
it has gi%en to its customers on its eposits is slightl& less then the re%enue it has ,een
a,le to generate from the loan an a%ances it has gi%en out'

2.2#., !i4uidity risk
.he li5uiit& risk is the pro,a,ilit& that an ini%iual or institution will ,e una,le to raise
cash precisel& when cash is neee at reasona,le cost an in the %olume re5uire'
"i5uiit& risk is calculate using the following formula7
!i4uidity risk9 +ash Ratio3 :Cash assets7 8o3ern&ent se0rities
'otal assets
2@@= 2@@> 2@@?
Cash Assets 2,:1:,8:9,8>: 1,8::,9=?,:?: 2,@A8,A8:,?8A
Do%ernment securities =,==1,=?>,1@@ >,@>1,@=?,>@@ >,::=,@@9,9@@
.otal assets 18,A1?,:82,=98 2=,@>A,::A,9@8 2A,=99,9?>,>:9
"i5uiit& risk =1'A8B 2?':=B 2>':1B

"i5uiit& risk
@'@@B
1@'@@B
2@'@@B
=@'@@B
>@'@@B
2@@= 2@@> 2@@?
Y'/-
"i5uiit& risk
1igure *3 !i4uidity risk indicator of astern Bank
It can ,e o,ser%e from the a,o%e iagram that !B"s li5uiit& risk is increasing slightl&
as the cash an marketa,le securit& has increase less in proportion to total assets'
1 Cash assets inclue %ault cash hel on the financial firms premises, eposits hel at
Banglaesh Bank an eposits hel with other epositor& institution'
25
2.20 'ain vents of astern Bank !i"ited
1' In 2@@2, !astern Bank introuce its 8igh Performance Account
2' .here was facilit& agreement signing ceremon& ,etween !B" an Pacific
Banglaesh .elecolm "t in 2@@2'
=' "oan agreement was signe ,etween !B" an .ranscom Be%erages "t in
2@@2'
>' .here was agreement)signing agreement ,etween !B" an I.C"' !B" /oine O)
Cash *hare A.+ Cetwork in 2@@='
?' In *eptem,er 2@@=, !B" launche its !B" *a%ings Insurance Accounts
:' .he state of the art I. platform of 3le0i,le, a worl class ,anking software was
,eing implemente in carr&ing out transactions in the ,ank in 2@@='
A' !B" Auto "oan scheme was launche in 2@@>'
8' .here was (e,enture "oan *igning Agreement ,etween !B" an Unite
"easing Compan& in 2@@>'
9' 2ffshore Banking Business was introuce in 2@@>'
1@' !B" *+! J Bengaline <oint Promotion was carrie out in 2@@?'
11' !B" signe a structure finance eal with *ingtel in 2@@?'
12' In 2@@: the Bank has introuce se%eral kiosks in ifferent locations in (haka'
2.26 B,!#' D'*'8"3$'#) A()!*!)!' "2 2555
As part of the ongoing ,usiness e%elopment program the Consumer an *+! ,anking
unit has signe /oint promotion programs with ma/or restaurants of (haka, !lectra
International, 4ahim Afroz, Banglalink etc' In 2@@? the ,ank has launche high &ieling
loans like Auto "oan, <i,an (hara "oan etc'
In 2@@? the ,ank felt the importance of creating its own remittance ,usiness to manage
the recent foreign e0change crisis an the foreign e0change price %olatilit& an as part of
the remittance ,usiness e%elopment program the ,ank signe agreement with some of
the renowne +one& !0change houses in the +ile !ast for instance Al +ona
!0change Compan& in (u,ai an Al)+ullah International !0change Compan& in ;uwait'
%n 2!!5 the ne9l1 for&ed orporate finane 0nit effeted 3ario0s s1ndiation and
ad3isor1 transations 9ith 0sto&ers li:e ;arooni ;nit Co&posite 5td );;C5+,
<h0n <hing =o9er 5i&ited and =aifi 4> 'eleol& 5td et" 'here is ontin0o0s
e&phasis 6eing gi3en on de3eloping the deposit 6ase"As part of the deposit
60ilding progra& the 6an: r0n 3ario0s pro&otion ati3ities to 60ild its High
=erfor&ane Ao0nt )H=A+ and <a3ings =ortfolio as 9ell as its ?i(ed >eposit
portfolio"
26
PART-C
3. P-":,() /#: S'-*!(' O22'-': %1 EBL
CA.!D24I!* 23 *!4EIC!* 23 !A*.!4C BAC; "I+I.!(7
!astern Bank "imite is capa,le of hanling all the ,anking nees of customers an is
alwa&s a%aila,le to pro%ie personalize one)stop ser%ices' .he ser%ices are
customize an confiential' .he ifferent categories of ser%ices that !B" offers are as
follows7
3.1 R')/!8 B/#4!#+
.he 4etail Banking (i%ision comprises the omestic ,ranch network with the specialize
customer creit, real estate finance' 4etail ,anking eals with the ,anking ser%ices to
the ini%iuals' !astern Banks retail ,anking strateg& is aime at keeping as closel& in
tune with their customers nees as possi,le an further impro%ing the 5ualit& of
a%isor& ser%ices' As a result, !B" offers ifferent prouct ranges to ifferent target
groups' It inclues the followingP
i' (eposits *er%ices7 Ini%iuals ma& open current, sa%ings,
*.(, fi0e eposit accounts'
ii" -age !arners *er%ices7 !B" offers a few inno%ati%e schemes
to Banglaeshi wage earners working o%erseas"
3.2 I#)!),)!"#/8 B/#4!#+
!astern Bank "imite offers %arious ser%ices to foreign mission, CD2s an %oluntar&
organization, consultants, airlines, shipping lines, contractors, schools, colleges,
uni%ersities, onor agencies an consultants'
.he ser%ices inclue the following7
(eposit ser%ices
Current accounts in ,oth .aka an ma/or foreign currencies'
Con%erti,le .aka accounts
27
"ocal an foreign currenc& remittances'
Earious t&pes of financing to cater to the ,anking re5uirements of multinational
clients'
3.3 C"-3"-/)' B/#4!#+
A professional account management team caters to the nees to corporate clientele an
pro%ies a comprehensi%e range of financial ser%ices to national an multinational
companies' Its ser%ices inclue7
Corporate eposit accounts
Pro/ects finance in%estment, constanc& an other finances'
*&nicate loans'
"ocal an international treasur& proucts'
Bons an guarantees'
*kille an responsi%e attention to %ar&ing lening nees'
3.4 C"$$'-(!/8 B/#4!#+
Being a commercial Bank !B" pro%ies comprehensi%e ,anking ser%ices to all t&pes of
commercial concerns' *ome of the ser%ices are7
i' .rae finance
ii' Issuing of import "ICs'
iii' A%ising an confirming e0port "ICs'
i%' Bons an guarantees'
%' In%estment a%ice'
%i' Pro/ect finance opportunities for import su,stitution an e0port
oriente pro/ect'
%ii' "easing7 It is a %er& fle0i,le arrangement, which is tailore to
suit most re5uirements of its clients' "ease financing ,&
!astern Bank is a uni5ue means of funing a firms nee for
capital e5uipment without actuall& lening to the firm'
3.5 C"--'3"#:'#) B/#4
*er%ices to corresponent ,anks inclue7
i' Current accounts ser%ices where settlement is necessar&'
ii' Issue ,ons an guarantees in support of their customer
,usiness'
iii' A%ise letter of creit an negotiation of ocuments'
i%' +arket intelligence an status report'
PRODUCTS AND SERVICES OFFERED BY EBL
!aster Bank "imite is a commercial ,ank, which has to operate uner the rules an
regulations of Banglaesh Bank for scheule commercial ,anks' It has highl& skille an
5ualifie professional staffs, which are capa,le of hanling all the ,anking nees' An
28
officer who is responsi,le for all acti%ities one in that epartment speciall& super%ises
each section' Its ser%ices are personalize an ,acke ,& a poor le%el of automation'
3.6 S'-*!(' O22'-': %1 )0' B/#4
.he ,usiness of ,ank is to pro%ie financial ser%ices to customers' .heir goowill an
trust alone ha%e mae the ,anking inustr& a pillar of strength in societ&' .he future
growth of the ,anking inustr& an its profita,ilit& epens on customer satisfaction' !B"
pro%ies %arious financial ser%ices' In aition, some special ser%ices are offere that
helps the ,ank to keep pace with competiti%e market'
3.< CREDIT PRODUCT.
!astern Bank aroun twent& four creit proucts, of which twent& are fune an four
non)fune' It is o,ser%e that onl& few proucts are markete with particular fascination
on o%erraft an cash creit which are suppose to ,e a %er& high)risk prouct an least
effecti%e from control point of %iew' !fforts shoul ,e mae to sell other proucts
keeping in min customerHs nee an in line with their cash flow c&cle an there,&
ensure effecti%e creit monitoring'
LIST OF CREDIT PRODUCTS
OF EASTERN BAN= LIMITE
CA+! (!*C4IP.I2C PU4P2*! 4I*; 3AC.24 .!C24I
EA"I(I.L
PA( Pa&ment Against
(ocument'
A%ance Against
*ight "IC
3orce "oan'
4ecourse on
.itle to Import
(ocument'
21(a&s per
Banglaesh
Bank'
CC
#8LP2$
1Cash Creit Against
8&pothecation of
In%entor& an Book
(e,ts'
.o 3inance
In%entor&'
2ther Business
2perations'
Deneral Purposes'
4ecourse on
*ales'
!%er Dreen'
12 +onth'
CC
#P"!(D!$
Cash Creit Against
Plege of In%entor&
an 8&pothecation of
In%entor'
.o 3inance Plege
In%entor&'
4ecourse on
Plege
In%entor&'
8igh +onitor&
12+onths'
29
4isk'
!%er Dreen
ACC!P.AC
C!
Acceptance Against
U"C'
.o 3inance Assets
throughu Bankers
Acceptance'
4ecourses on
*ales'
12+onths'
2AP
2wn Acceptance
Purchase'
.o 4efinance Banks
Acceptance'
3orce "oan'
Co 4ecourse
Clean 3inance'
!%er Dreen'
12+onths'
"BP( "ocal Bill
Purchase'
.o
PurchaseI(iscount
Against '"oan'
Upfront Interest to
,e 4ealize'
4ecourses on
Banks thru
Acceptance'
4esiual on
Client'
>?I18@(a&s'
"A3B(
"oan Against
3oreign Bill
(ocumentar&'
.o
PurchaseI(iscount
!0port (oc,
Against !0port
Contract *ightI
Usance'
Upfront Interest to
,e 4ealize #iff in 3Q
4ate$'
4ecourse on
e0port (oc'
Pa&ment risk
4esiual on
Client'
>?I18@(a&s'
*"C *ight "etter of
Creit'
3or Importation' 4ecourse on
.itle to Import
(ocument'
12+onths'
U"C Usance "etter of
Creit'
3or importation' 4ecourse on
*ales'
12+onths

"D
1"
etter of Duarantee'
3or Contractual
2,ligation'
1Performance
4isk'
1!%er Dreen'
1*pecific
Perio'
12pen !ne'
PC Packing Creit
Against !0port "ICJ
!0port 2rer'
.o 3inance !0port
"IC'
PreMshipment
3inance'
Performance
4isk'
"ien on
!0port "IC'
18@ (a&s'
*2( *ecure 2%erraft' Deneral Purposes' 1@@B Cash
Co%ere'
1Co Creit
4isk'
!%er Dreen'
12 +onths'
2( 2%erraft Against
2ther Collateral
Deneral purposes 8igh Creit
4isk
4ecourse on
*ales
!%er green
12 months
3!
Import "oan
#8&po$
Import "oan Against
8&pothecation
In%entor& an Book
(e,ts
.o 3inance Import
"IC or Against
Contract'
4ecourse on
*ales'
18@ (a&'
Import "oan
#Plege$
Import loan Against
Importe
+erchanise Plege
an 8&pothecation of
Book (e,ts'
.o 3inance Import
"IC +erchanise
uner Plege'
4ecourse on
Plege
In%entor&'
8igh +onitor&
4isk'
18@ (a&s'
(eman
"oan #8&po$
(eman "oan
Against
8&pothecation of
In%entor& an Book
(e,ts'
.o 3inance
In%entor& Procure
"ocall&'
.o 3inance
(ut&I.a0'
4ecourse on
*ales'
18@ (a&s'
(eman
"oan
#Plege$
(eman "oan
Against Plege
In%entor& Proceure
"ocall& an
8&pothecation of
Book (e,ts'
.o 3inance
In%entor& Procure
"ocall& uner Plege'
4ecourse on
Plege
In%entor&'
8igh +onitor&
4isk'
18@ (a&s'
.ime "oan
.ime "oan Against
2ther *ecurit&
.o 3inance 3i0e I
other Asset'
4ecourse on
*ales
Collateralize
,& 3i0e Iother
Assets'
12 +onths'
.ime "oan .ime "oan Against
3oreign Bill)Clean
.o 3inance !0port
Contract
Clean
3inance
Performance
4isk'
12@ (a&s
.erm "oan
.erm "oan Against
3i0e assets'
.o 3inance 3i0e
Assets'
4ecourse on
3i0e Assets
8igh 4isk'
2%er 12
+onths'
+a0 A Lears'
BCP
#3oreign$
Bankers Che5ue
Purchase #3oreign$
.o Purchase
I(iscount 3oreign
Currenc&'
''(raftsIPa&ment
2rer'
Upfront Interest to
,e 4ealize'
4ecourse on
Banks'
4esiual on
Client'
=@ (a&s'
BCP
#"ocal$
Bankers Che5ue
Purchase #"ocal$'
.o Purchase
I(iscount Bank
(raft IPa& 2rer'
Upfront Interest to
4ecourse on
Banks'
4esiual on
=@ (a&s'
31
,e 4ealize' Client'
3w 3Q 3orwar Contract' Co%er !0change
4isk Against "etters
of Creit'
Performance
4isk'
18@ (a&s'
3.<.1 .ecured Overdrafts ;.O)<3
It is a continuous a%ance facilit&' B& this agreement, the ,anker allows his customer to
o%erraft his current account up to his creit limits sanctione ,& the ,ank' .he interest
is charge on the amount, which he withraws, not on the sanctione amount' +B"
sanctions *2( against ifferent
.he processes of e0tening *2( are as follows M
a" .he part& must ha%e a current AIC with the ,ranch'
,' If the ownership of the firm is proprietorship, then a trae license must ,e
su,mitte an in case of a limite compan&, all the ocuments re5uire to open a
current AIc shoul ,e su,mitte' .he financial statements of the concerne firm shoul
also ,e su,mitte'
c' .he part& must maintain a goo transaction with the ,ranch an ha%e a
goo turno%er rate'
' .he part& will appl& to the officer in charge of creit epartment #*+!$ of
the ,ranch for *2( arrangement'
e' .he concerne officer will prepare a FCreit +emoranum #C+$G, where
he writes a,out the ,usiness concern, etails of proprietorsI irectors of the concern,
management structure, the e0isting creit facilities, the particulars a,out the facilities that
aske for)such as margin limit, ate of e0pir&, etails of securit&, an an& other rele%ant
information' .hen the proposal is sent to the 8ea 2ffice for appro%al'
f' .he creit risk management #C4+$ epartment anal&zes the proposal
an scrutinizes all the factors regaring this proposal' If the& are satisfie then the&
appro%es the proposal' .he proposal is ecline if this epartment thinks the applicant is
not worth& to get loans' .he& sometimes appro%e the proposal with some aitional
conitions'
g' .hen the hea office appro%al is sent to creit Aministration epartment
an this epartment is suppose to o the formalities regaring securit& ocumentation
which are to ,e kept uner ,anks custo&'
h' After all necessar& ocumentation, this epartment issues two copies of
sanction letter, one is gi%en to client an another is kept with the Creit Amin
epartment In ,oth the sanction letter the client signs after accepting all the terms an
conitions'
i' If the client accepts all the conitions of the sanction letter an likes to
a%ail the facilit&, then the amount sanctione is loae in a separate 2( account' Cow
the client can a%ail this o%erraft facilit& an&time from the ,ank'
3.<.2 Cash Credit (CC):
32
Cash Creit #CC$ is an arrangement ,& which a ,anker allows his customer to ,orrow
mone& up to a certain limit' It is operate like o%erraft account' (epening on the nees
of the ,usiness, the ,orrower can raw on his cash creit account at ifferent time an
when he gets mone& can a/ust the lia,ilit&' (epening on charging securit& there are 2
forms of cash creit)
Cash Creit
CC #8&pothecation$ CC #Plege$
3ig7 .&pes of Cash Creit #CC$
3.<.26/7C/0 C-':!) 6H13")0'(/)!"#7.
.he mortgage of mo%a,le propert& for securing loan is calle h&pothecation'
8&pothecation is a legal transaction where,& goos are mae a%aila,le to the lening
,anker as securit& for a e,t without transferring either the propert& in the goos or
either possession' .he ,anker has onl& e5uita,le charge on stocks, which practicall&
means noting' *ince the goos alwa&s remain in the ph&sical possession of the
,orrower, there is much risk to the ,ank' *o, it is grante to parties of unou,te means
with the highest integrit&"
3.<.26%7C/0 C-':!) 6P8':+'7.
Plege is the ,ailment of goos as securit& for pa&ment of a e,t or performance of a
promise' Bailer in this case of calle the FPawnorG an the ,ailee is calle the FPawneeG'
In a contract of plege, pawnor must eli%er the goos plege to the Pawnee either
actuall& or constructi%el&' .ransfer of possession in the /uicial sense, is essential in the
%ali plege' In case of plege, the ,ank ac5uire the possession of the goos or a right
to hol goos until the repa&ment of creit with a special right to sell after ue notice to
the ,orrower in the e%en of non)repa&ment' .he legal framework in this regar is the
FContract act)18A2G'
Processes of opening a CC AIC are shown in the following flow chart)
a' .he intereste part& must ha%e a current account an goo transaction
with the ,ranch'
,' Applies for cc h&pothecation or cc plege arrangement'
c' .he concerne officer prepares a FCreit ProposalG etailing all rele%ant
information'
After getting the cash creit arrangement, the ,anker will issue a che5ue),ook for
withrawing cash from account' -hene%er the CC account holer wants to withraw
cash from the account, the cash officer will scrutinize the amount of che5ue in orer to
make sure that the total rawing oes not e0cee the sanctione limit'
.he charge ocuments re5uire for opening a CC account are as follows)
(eman Promissor& Cote #(P Cote$
"etter of Agreement
4e%i%al "etter
"etter of Continuit&
33
"etter of 8&pothecationIPlege
"etter of Duarantee
+emoranum of (eposit of .itle (ee #in case of CC h&pothecation
arrangement$
*tock 4eport
"etter of (isclaimer
3.<.3 P,-(0/' > D!(",#) "2 B!88.
Purchase an (iscount of Bills is also a special form of a%ances, +B" normall&
purchase eman ,ills of e0change that are calle F(raftsG accompanie ,& ocuments
of title to goos such as Bill of "aing, 4ailwa& or .ruck 4eceipt' .he purchase of ,ills of
e0change rawn at an issuance, i'e', for a certain perio maturing on a future ate an
not pa&a,le on eman or sight is terme as iscounting a ,ill an the charge reco%ere
,& Bank for this is calle F(iscountG'
3.<.4 =7ARA5T3
.he ,ranch offers three t&pes of Duarantee that are as follows7)
1. T'#:'- "- B!: B"#: G,/-/#)''.
.he tener guarantee assures the teneree that teners shall uphol the
conitions of his tener uring the perio of the offer as ,ining an that he I she will
also sign the contract in the e%ent of the orer ,eing grante'
2. P'-2"-$/#(' G,/-/#)''.
A Performance guarantee e0pires on completion of the eli%er& or performance'
Beneficiar& fins that as a guarantee, the contract will ,e fulfille in e%er& respect an
can retain the guarantee as per pro%ision for loan time' .his can ,e counteracte ,&
incluing a clause stating that the supplier can claim uner the guarantee, ,& presenting
an acceptance certificate signe ,& the ,u&er'
3. P/1$'#) G,/-/#)''.
.his makes guarantee that the part& will make pa&ment after completion of the work
3.? LOAN PROGRAMS@ SCHEMES.
.he Bank pro%ies "oans an A%ance to Ini%iual, Business entities group, Inustries
etc' It pro%ies loan to ,oth .raing an +anufacturing concern on 8&pothecation an
Plege ,asis' Inustrial loan also e0tene ,& the ,ank on 8ire Purchase ,asis' "oan
also pro%ie ,& the ,ank for 3oreign trae against importe materials an Confirme
"IC' Bank has two t&pes of loan programs7
3.A L"/#.
LOAN. "oan in the form of re%ol%ing creit an fre5uent 4epa&ment an A/ustment'
34
ADVANCES. "oan in one shot is,ursement an at a time repa&ment' .he ,ank allows
a%ance on secure ,asis' *ecurit& an Collateral in the noe of cash, 5uasi)cash an
goos Ireal estates are taken ,& ,ank commonl&'
3.15 BASIC INFORMATION OF LOAN.
.&pe#s$ of "oan7 .rae 3inance, 3inance against work orer, Ini%iual loans against
securit&, Purchase of ,illsIBill iscounting, "etter of creit'
Amount of "oan7 Co minimum amount is fi0e up' Amount is fi0e on the ,asis of
re5uirement'
4ate of Interest #3loating rate$7 4ate range from 1>B to 1AB'
Cormal client M 1:B
*pecial or %alue client ) 1>B'
#Compute interest is charge on ail& prouct ,asis an interest realize 5uarterl&$'
.erm of "oan7 1)12 months, "oan can ,e a/uste earlier'
3.11 M":' "2 -'3/1$'#).
"oans7 4epa&ment is mae an& time in case of re%ol%ing creit'
A%ances7 .he entire recei%a,les incluing interest is repai an a/uste at the en of
term loan' Co e,it ,alance shoul ,e in the account'
*ecurit&ICollateral7 8&pothecation I Plege of raw materials, *tocks, 8&pothecation of
furniture, 3i0ture an machiner& an other goos, Builing an other immo%a,le
properties an (P note'
3.12 LOAN PROCESSING COST.
Application fees7 Co fee'
(ocumentation fee7 Actual ,asis' Appraisal fee7 ?B ) 1B of the total loan sanctione'
"egal fee7 !0amination an technical assistance fee #in case of pro/ect$'

3.13 LOAN PROCESSING TIME.
It %aries with the nature of loan ) .rae finance ) 1)2 weeks)"oan Proposals re5uire B2(
appro%al)= weeks)*ecure o%erraft #*2($ ) I3 a thir part& issue the financial
instrument than it ma& take more time' 2therwise, within a a& ,& the manager 'In
case of a ,ig amount of short term finance, if re5uires B2( appro%al an so, it ma& take
e%en a month to sanction'
3.14 PAPER@ DOCUMENTS REBUIRED.
35
*ecurit& ocumentation inclues Accepte sanction letter, "etter of continuit&, "etter of
4e%i%al, (eman promissor& note, Personal guarantee of the client, "etter of authorit&,
"etter of lien, .rae license, .a0 ientification num,er, Business plan, Cash flow
statement, 3un flow statement, Balance sheet, Income statement, etc'
3.15 =roed0res for gi3ing ad3anes
!B" usuall& follows these steps for sanctioning an& kin of a%ances as a%aila,le with
the ,ranch)
F!-) )'3.
.he prospecti%e ,orrower will su,mit a re5uest letter to the ,ranch for loan
S'("#: )'3.
After recei%ing the re5uest letter, !B" sens a letter to Banglaesh Bank for o,taining a
report from CIB #Creit Information Bureau$' .he purpose of the report is to ,eing
informe that whether the ,orrower has taken loan from an& other ,ank#s$P an if taken,
whether these loans are calcifie or not'
.hir step7
After recei%ing CIB report, if the ,ank thinks that the prospecti%e ,orrower will ,e a goo
,orrower, then the ,ank will scrutinize the ocument' In this stage, the Bank will look
whether the ocuments are properl& fille up an signe'
3ourth step7
.his is the processing stage' .he ,ranch will prepare a Proposal' .he proposal contains
following rele%ant information)
1' Borrowers name
2' Business Aress
=' 3actor& aress
>' Countr& of Incorporation7
?' *ector I Coe7
:' 2perating CA*A Acc Co7
A' Compan& !sta,lishe7
8' 4elationship *ince7
9' D42UP P2*I.I2C
1@' PU4P2*! 23 4!OU!*.7
11' PU4P2*! 23 3ACI"I.L
12' 4!PAL+!C. *2U4C!
1=' C2""A.!4A" I *!CU4I.LI *UPP24.
1>' .!4+* J C2C(I.I2C*7
15" (eclaration:
All proceures in respect of opening of Account ha%e ,een complie
with'
All necessar& ocuments esta,lishing the ,orrowerHs legal entit& ha%e
,een o,taine'
!0isting *ecurities I Banking ocumentations an collaterals with their
%aluation ha%e ,een checke an the& are in orer'
(ocuments esta,lishing that propose facilit& is within authorization
an ,orrowing powers of the applicant ha%e ,een o,taine'
36
All Assets offere as securit& I collateral ha%e ,een %erifie to ,e free
from all encum,rances'
*ecurit& ocuments as prescri,e ha%e ,een o,taine along with
complete set of ,orrowing ocuments'
.he ,orrower is a (irector I *hareholer of our Bank'
.he ,orrower is a (irector I *hareholer of other Bank' If &es, which
Bank'
.he ,orrower is a (irector of an& Con Bank 3inancial Institution
#CB3I$' If &es, which 3inancial Institution
CIB report ate RRIRRIRRRR from Banglaesh Bank is satisfactor&
an is in file'
1A' B2A4( 23 (I4!C.24*I PA4.C!4*I *2"! P42P4I!.247
18' +ACAD!+!C.7
19' "!DA" *.A.U* J C2+PACL BAC;D42UC( #Inclue the locations of the
Business, Pro/ect, 3actor&, +achiner& etails$7
2@' +ACAD!+!C. !EA"UA.I2C, 4I*; J +I.IDAC.*7
21' IC(U*.4L I "IC! 23 BU*IC!**7
22' +A<24 C2+P!.I.24*I C2+P!.I.IE! P2*I.I2C I 4I*; J +I.IDAC.*7
#+arket share, 4e%enue J margin comparison with the competitors to ,e
pro%ie$
2=' *.A.U* 23 .8! B2442-!4 -I.8 C2+P!.I.24 BAC;* CIA
2>' 4!"A.I2C*8IP 8I*.24L, P423I.ABI"I.L AC( ACC2UC. *.4A.!DL7 Cew
Account
2?' 3ICACCIA" !EA"UA.I2C7
2:' ACA"L*I* 23 *2U4C!* 23 4!PAL+!C. #3inancial, *ecurit&, Collateral etc$7
2A' B2442-!4I 2B"ID24 4I*; D4A(ICD7 CIA
28' I**U!*I !QC!P.I2C* 4!"A.ICD .2 (2CU+!C.*, *!CU4I.I!* AC(
.!4+*I C2C(I.I2C* J C2E!CAC.*7
29' <U*.I3ICA.I2C 23 "I+I., 3ACI"I.L *.4UC.U4! J 4!C2++!C(A.I2C7
.he ,ranch has to sen the proposal to the hea 2ffice' 8ea 2ffice will prepare a
minute an su,mit it ,efore the Creit committee'
1ifth ste%3
After recei%ing the sanction a%ice, the ,ranch will collect necessar& ocument' .hese
ocuments are7
i' <oint promissor& note
ii' *ingle promissor& note
iii' letter of unertaking
i%' "oan is,ursement letter
%' (e,it figure confirmation sheet
%i' "etter of continuit&
%ii' "etter of authorit&
%iii' "etter of re%i%al
i0' 4ight of recall the loan
37
0' "etter of guarantee
0i' "etter of inemnit&
0ii' .rust receipt
0iii' 8&pothecation of goos
0i%' 8&pothecation of %ehicles
0%' Counter guarantee
0%i' "etter of lien
0%ii' "etter of lien
0%iii' "etter of lien in case of a%ance against 3(4
0i0' "etter of lien an authorit& of a%ances to thir parties against
fi0e epositIcall epositIspecial eposit or margin or margin
eposit
00' "etter of authorit& to encash 3(4
00i' "etter of agreement for packing creit
00ii' "etter of guarantee for opening "IC
00iii' Charges o%er ,ons or certificates or shares etc' ,& thir part&
to secure specific an general lia,ilit&
00i%' +emoranum of eposit of title ees
((3" 8&pothecation of goos to secure a eman cash creit or
o%erraftIloan amount 80arantee 61 third part1"
.i6th ste%3
After %erif&ing all the ocuments the ,ranch is,urses the loan to the ,orrower' A F"oan
4epa&ment *cheuleG is also prepare ,& the ,ranch an is gi%en to ,orrower"
.eventh ste%3
After the is,ursement of the loan the ,ank follows the ,orrower in the following
manner2
Constant *uper%ision, +onitoring J 3ollow)up'
-orking Capital assessment'
*tock report'
Break !%en anal&sis
ighth ste%3
.he loans are repai in installments' .hese installments are accoring to ,ank
irecti%es' *ome loans are repai all at a time' If an& loan is not repai the notices
ser%e to the customer' *ometimes legal actions also taken for reco%er the loan'
3.16 +harging .ecurity
!B" charges the following two t&pes of securities)
38
1' Primar& securit&
2' Collateral securit&
.he moes of charging securities usuall& followe ,& the ,ranch are as follows6
a' Plege
,' 8&pothecation
c' "ien
' +ortgage
e' Assignment
f' *et)off
3.166/7 L!'#.
"ien is the right to retain possession an not right of ownership Banks lien is general
lien o%er its own financial o,ligation to clients' Propert& uner line cannot ,e realize I
sol an procees thereof cannot ,e appropriate without notice to the owner an
sometimes without courts orer'
3.166%7 H13")0'(/)!"#.
.his is mortgage of mo%a,les ,& an agreement an here neither possession nor
ownership is transferre' 8&pothecate goos cannot ,e sol outIispose of off without
notice an courts orer' 8owe%er, if a special power of attorne& is taken in that case it
can ,e ispose off without going to the court'
3.166(7 P8':+'.
Plege is the ,ailment of goos as securit& of pa&ment of e,t or performance or
promise' 8ere, title an ownership are not transferre' Plege goos ma& ,e sol out
an procees thereof ma& ,e appropriate towars a/ustment of "ia,ilit& in case of
failure of the ,orrower to repa& of fulfill the terms an conitions' +B" has no charge of
this t&pe'
3.166:7 M"-)+/+'.
+ortgage is the transfer of interest of immo%a,le propert& to secure the repa&ment of
mone& a%ance' 2wnership remains with the mortgagor' In case of e5uita,le
mortgage, courts orer is necessar& an in case of registere mortgage courts orer is
not necessar& for saleIisposal of the mortgage propert& for a/ustment of a%ance' the
legal framework in this regar is the F.ransfer of Propert& Act)1982G'
3.166'7 A!+#$'#).
Assignment means the transfer of an& e0isting or future right, properl& or e,t ,& one
person to another' .he person who assigns the propert& is calle the assignor an the
person to whom it is transferre is calle the assignee' .his charge is applica,le to Book
(e,ts, Insurance Polit& etc'
39
3.16627 S')-O22.
*et)off means the total or partial merging of a claim of one person against another in a
counter claim ,& the latter against the former' *et)off arises when a e,tor or his creitor
wishes to arri%e at the figure owing ,etween them when separate accounts or e,t are
in%ol%e'
PART-)3
!oan +$assification> Provisioning Po$icies> Risk 'anage"ent 1ra"ework ?
Recovery .trategies of astern Bank
#.1 !oan c$assification3
-hen the ,orrower fail to pa& installments timel&, ,anks ranks the client in three classes
accoring to the risk associate with the client' An& "oan if not repaiIrenewe within the
fi0e e0pir& ate for repa&ment will ,e treate as irregular /ust from the following a& of
the e0pir& ate' .his loan will ,e classifie as
*u,)stanar7 if it is kept irregular for : months or ,e&on ,ut less than 9
months'
(ou,tful7 if for 9 months or ,e&on ,ut less than 12 months an
Ba (e,t7 if for 12months or ,e&on'

4.2 P"8!(1 "# 8"/# (8/!2!(/)!"# "2 EBL.
.he process of grauall& upgraing the policies on loan classification an pro%isioning to
the international le%el is going on' +easures ha%e ,een taken to strengthen the creit
iscipline an the process of classification has ,een simplifie' .he following re%ise
policies on loan classification an pro%isioning has ,een issue'
Categories of "oans7 All loans an a%ances will ,e groupe into =#.hree$ categories for
the purpose of classification, namel&
Continuous "oan
(eman "oan
3i0e .erm "oan an
4!
C"#)!#,", L"/#7 ) .he loan Accounts in which transactions ma& ,e mae within
certain limit an ha%e an e0pir& ate for full a/ustment will ,e treate as Continuous
"oans' !0amples are7 CC, 2( etc'
D'$/#: L"/#. .he loans that ,ecome repa&a,le on eman ,& the ,ank will ,e treate
as (eman "oans' If an& contingent or an& other lia,ilities are turne to force loans
#i'e' without an& prior appro%al as regular loan$ those too will ,e treate as (eman
"oans' *uch as7 3orce "I+, PA(, 3BP, an IBP etc'
F!C': T'-$ L"/#7 .he loans, which are repa&a,le within a specific time perio uner a
specific repa&ment scheule, will ,e treate as 3i0e .erm "oans"
4.3 B/! 2"- L"/# C8/!2!(/)!"# "2 EBL.
4.3.1 O%&'()!*' C-!)'-!/.
#a$ An& Continuous "oan if not repaiIrenewe within the fi0e e0pir& ate for repa&ment
will ,e treate as irregular /ust from the following a& of the e0pir& ate' .his loan will ,e
classifie as *u,)stanar if it is kept irregular for : months or ,e&on ,ut less than 9
months, as S(ou,tfulH if for 9 months or ,e&on ,ut less than 12 months an as SBa)
(e,tH if for 12months or ,e&on'
#,$ An& (eman "oan will ,e consiere as *u,)stanar if it remains unpai for :
months or ,e&on ,ut not o%er 9 months from the ate of claim ,& the ,ank or from the
ate of force creation of the loanP likewise the loan will ,e consiere as (ou,tfulH an
BaIloss if remains unpai for 9 months or ,e&on ,ut not o%er 12 months an for 12
months an ,e&on respecti%el&'
#c$ In case an& installment#s$ or part of installment#s$ of a 3i0e .erm "oan is not repai
within the ue ate, the amount of unpai installment#s$ will ,e terme as Sefaulte
installmentH'
#i$ In case of 3i0e .erm "oans, which are repa&a,le within ma0imum fi%e &ears of time7
)
If the amount of Tefaulte installment is e5ual to or more than the Famount of
installmentsG ue within : months, the entire loan will ,e classifie as F*u,)stanarHH'
If the amount of Tefaulte installment is e5ual to or more than the amount of
installments ue within 12 months, the entire loan will ,e classifie as HH(ou,tfulG'
If the amount of Hefaulte installment is e5ual to or more than the Tamount of
installments ue within 18 months, the entire loan will ,e classifie as HHBa J "oss'HH
#ii$ In case of 3i0e .erm "oans, which are repa&a,le in more than fi%e &ears of time7 )
If the amount of Sefaulte installmentH is e5ual to or more than the amount of
installments ue within 12 months, the entire loan will ,e classifie as H*u,)stanar'H
If the amount of Sefaulte installment H is e5ual to or more than the amount of
installments ue within 18 months, the entire loan will ,e classifie as H(ou,tfulH'
If the amount of Hefaulte installments His e5ual to or more than the amount of
installments ue within 2> months, the entire loan will ,e classifie as HBa)(e,tH'
41
!0planation7 If an& 3i0e .erm "oan is repa&a,le at monthl& installment, the amount of
installments ue within : months will ,e e5ual to the amount of summation of : monthl&
installments' *imilarl&, if repa&a,le at 5uarterl& installment, the amount of installment#s$
ue within : months will ,e e5ual to the amount of summation of 2 5uarterl&
installments'
4.3.2 B,/8!)/)!*' J,:+$'#).
If an& uncertaint& or ou,t arises in respect of reco%er& of an& Continuous "oan,
(eman "oan or 3i0e .erm "oan, the same will ha%e to ,e classifie on the ,asis of
5ualitati%e /ugment ,e it classifia,le or not on the ,asis of o,/ecti%e criteria'
If an& situational changes occur in the stipulations in terms of which the loan was
e0tene or if the capital of the ,orrower is impaire ue to a%erse conitions or if the
%alue of the securities ecreases or if the reco%er& of the loan ,ecomes uncertain ue to
an& other unfa%ora,le situation, the loan will ha%e to ,e classifie on the ,asis of
5ualitati%e /ugment'
Besies, if an& loan is illogicall& or repeatel& re)scheule or the norms of re)
scheuling are %iolate or instances of #propensit& to$ fre5uentl& e0ceeing the loan)limit
are notice or legal action is loge for reco%er& of the loan or the loan is e0tene
without the appro%al of the proper authorit&, it will ha%e to ,e classifie on the ,asis of
5ualitati%e /ugment'
(espite the pro,a,ilit& of an& loanHs ,eing affecte ue to the reasons state a,o%e or
for an& other reasons, if there e0ists an& hope for change of the e0isting conition ,&
resorting to proper steps, the loan, on the ,asis of 5ualitati%e /ugment, will ,e classifie
as H*u,)stanar H' But e%en if after resorting to proper steps, there e0ists no certaint& of
total reco%er& of the loan, it will ,e classifie as H (ou,tful H an e%en after e0erting the
all)out effort, there e0ists no chance of reco%er&, it will ,e classifie as H Ba)(e,t H on
the ,asis of 5ualitati%e /ugment'
.he concerne ,ank will classif& on the ,asis of 5ualitati%e /ugment an can eclassif&
the loans if 5ualitati%e impro%ement oes occur'
But if an& loan is classifie ,& the Inspection .eam of Banglaesh Bank, the same can
,e eclassifie with the appro%al of the Boar of (irectors of the ,ank' 8owe%er, ,efore
placing such case to the Boar, the C!2 an concerne ,ranch manager shall ha%e to
certif& that the conitions for eclassification ha%e ,een fulfille'

4.4 A((",#)!#+ "2 )0' !#)'-') "2 (8/!2!': 8"/# "2 EBL.
If an& loan or a%ance is classifie as H*u,)stanarH an H(ou,tfulH, interest can ,e
charge in the loan accountP ,ut the interest thus charge cannot ,e transferre to
Income account' .he total interest charge in the H*u,)stanarH an H(ou,tfulH loan
accounts will ha%e to ,e preser%e in the HInterest *uspenseH account'
As soon as an& loan or a%ance is classifie as HBa (e,tH, charging of interest in the
same account will cease' In case of filing a law)suit for reco%er& of such loan, interest for
the perio till filing of the suit can ,e charge in the loan account in orer to file the same
for the amount of principal plus interest' But interest thus charge in the loan account
42
has to ,e preser%e in the HInterest *uspense H account' If an& interest is charge in an&
HBa)(e,tH account for an& other special reason, the same will ,e preser%e in the
HInterest *uspenseH account'
If classifie loan or part of it is reco%ere i'e', real eposit is affecte in the loan account,
first the interest charge an not charge is to ,e reco%ere from the sai eposit an
the principal to ,e a/uste afterwars'
A Continuous creit, (eman loan or a .erm loan which will remain o%erue for a perio
of 9@ a&s or more, will ,e put into the K*pecial +ention AccountK an interest accrue
on such loan will ,e creite to Interest *uspense Account, instea of creiting the same
to Income Account'
4.5 C8/!2!': L"/# /#: /:*/#(' "2 EBL.
As per Banglaesh Banks circulars the amount of three t&pes of classifie loans of !B"
are shown ,& the following ta,le
#Amount in takeS@@@$
Lear *u, stanar (ou,tful BaI"oss .otal
2@@1 1,9:,8:1 8?,=>: 1?,?:,1?A 1,8=8,=:>
2@@2 2=,9A2 2:,8A? 1,>1?,@21 1,>:?,8:8
2@@= 18=,8>1 9@,A82 1,2:1,>2? 1,?=:,@>8
2@@> 2@,:1A >,1>@ 1@,?2,?2A 1@,AA,28>
2@@? 8,?A@ =,18> 9,>9,1>: 9,:@,9@@
.a,le7 Classifie "oans an a%ances of !B"
If the ata of the a,o%e ta,le are plotte in the graph sheet, the following graph can ,e
rawn for the classifie loans of !B"'
.he following graph shows the su,stanar loans an a%ances of last fi%e &ears of
!B"' 3rom the graph we can see that the amounts of su, stanar loans in the first =
&ears are much higher' But in the last 2 &ears the ,ank was a,le to reuce a ,ulk
amount ,ecause of its pro%isionar& an reco%er& strategies an the ,ank is e0pecting
that the reucing tren will continue for the following &ears'
43
@
?@@,@@@
1,@@@,@@@
1,?@@,@@@
2,@@@,@@@
A$",#)
2@@1 2@@= 2@@?
Y'/-
T")/8 C8/!2!': L"/# "2 EBL
.he following graph shows the ou,tful loans an a%ances of last fi%e &ears of !B"'
3rom the graph we can see that the amounts of su, ou,tful loans in the first = &ears
are fluctuating' But in the last 2 &ears the ,ank was a,le to reuce a ,ulk amount
,ecause of its pro%isionar& an reco%er& strategies' But in comparison to &ear 2@@>, the
amount of ou,tful loans in &ear 2@@? is increase an the ,ank is 5uite aware to
reuce the amount in the ne0t coming &ear'
.he following graph shows the ,aIloss loans an a%ances of last fi%e &ears of !B"'
3rom the graph we can see a reucing tren of the amount of ,aIloss loans in the last ?
&ears an the ,ank is 5uite aware to hol the reucing tren in the ne0t coming &ear'
44
@
?@,@@@
1@@,@@@
1?@,@@@
2@@,@@@
A$",#)
2@@1 2@@= 2@@?
Y'/-
S,% S)/#:/-: L"/# "2 EBL
2@@1
2@@2
2@@=
2@@>
2@@?
@
2@,@@@
>@,@@@
:@,@@@
8@,@@@
1@@,@@@
A$",#)
2@@1 2@@2 2@@= 2@@> 2@@?
Y'/-
D",%)2,8 L"/# "2 EBL
2@@1
2@@2
2@@=
2@@>
2@@?
@
2@@,@@@
>@@,@@@
:@@,@@@
8@@,@@@
1,@@@,@@@
1,2@@,@@@
1,>@@,@@@
1,:@@,@@@
A$",#)
2@@1 2@@2 2@@= 2@@> 2@@?
Y'/-
B/:@L" "2 EBL
.he following graph shows total classifie loans an a%ances of last fi%e &ears of !B"'
3rom the graph we can fin a ecreasing tren among the last ? &ears' It is possi,le
,ecause of the pro%isionar& an reco%er& strategies of the ,ank' .he ,ank is 5uite
aware to hol the ecreasing tren in the ne0t coming &ear'
4.6 R/)!" "2 C8/!2!': 8"/# "2 EBL7
#Amount in takeS@@@$
Lear .otal outstaning loan Amount of Classifie loans 4atio #B$
2@@1 1=>,:?9,:2A 18,=8,=:> @'A8=>
2@@2 189,1==,?>: 1,>9?,8>> @'?9>=
2@@= 21:,>?:,28> 1?,=:,@>8 @'>8?>
2@@> 2>:,8:>,?:? 1@,AA,28> @'=1@:
2@@? 29>,:=>,::1 9:@,9@@ @'2=99
3rom the graph we fin a ecreasing tren in the ratio of classifie loans, which mean
the amount of classifie loans of !B" are ecreasing o%er the &ears' It is possi,le
,ecause of the pro%isionar& an reco%er& strategies of the ,ank' .he ,ank is 5uite
aware to hol the ecreasing tren in the ne0t coming &ear'
45
R/)!" "2 C8/!2!': L"/# "2 EBL
@
@'1
@'2
@'=
@'>
@'?
@':
@'A
@'8
@'9
2@@1 2@@2 2@@= 2@@> 2@@?
Y'/-
R/)!"
Part-E
5. Risk management framewrk f E!L
5.1 INTRODUCTION TO RIS= MANAGEMENT FRAMEDOR=.
Comprehensi%e risk management is a core competence of !astern Bank "t' -e take
a pruent an conser%ati%e approach to risk that is full& aligne with our long)term
strateg&' .he risk framework com,ines centralize polic& setting with ,roa o%ersight
supporte ,& risk e0ecution an monitoring' It pro%ies management with the a,ilit&
to o%ersee the ,ankHs large an highl& i%ersifie portfolio effecti%el& an efficientl&'
!B"Hs risk management s&stems are esigne to ientif& an anal&ze risks at an earl&
stage, to set an monitor pruent limits, an to learn an e%ol%e continuousl& to help
us to face a %olatile an rapil&)changing risk en%ironment' In this wa&, !B"Hs risk
management as %alue for the compan&Hs shareholers'
5.2 RIS= GOVERNANCE
.he Boar of (irectors esta,lishes the strategic risk philosoph& an policies for !astern
Bank "t' .he& etermine the risk policies, proceures an methoologies for
measuring an monitoring risk as well as reputation risk issues' .he Boar of (irectors)
*et elegate authorities for management le%els'
Appro%e creit, market, an operational risk parameters associate with new
Proucts'
Appro%e risk on transactions whose %alue e0cees the amount of the authorit&
elegate to management le%els'
Appro%e structure finance an comple0 transactions'
2%ersee the ,ankHs o%erall creit portfolio an re%iew ae5uac& of pro%ision'
5.3CREDIT RIS= MANAGEMENT
.he main responsi,ilities of Creit 4isk +anagement functions are7
2%ersee all creit, market an regulator& matters an ensure compliance with
local laws'
Appro%e risk transactions within their elegate authorit& an a%ise on creits
which e0cee such limits'
!nsure implementation of creit facilities through an inepenent Creit
Aministration 3unction'
46
*upport the ,ankHs traing operations ,& monitoring an ensuring effecti%e
market risk e0posure management'
Implement re%iew an control policies on all lening portfolios'
+anage ini%iual pro,lem creits an monitor the istresse assets portfolio
within !B"Hs risk parameters'
4ecommen pro%isions for loan losses compl&ing central ,anks rules an norms'
4e%iew lening programs an pro%ie recommenations for appro%al'
!nsure compliance with !B"Hs Corporate Ealues an Business Principles'
5.4 ASSET AND LIABILITY RIS= MANAGEMENT
A"C2 is responsi,le for protecting the ,ankHs earnings an capital position against
a%erse interest rate an currenc& mo%ements in its traing portfolios, as well as
managing the ,ankHs longer)term li5uiit& profile' +em,ers of the A"C2 are rawn
from the Business, 3inance an 4isk'
A"C2 particularl& focus on Interest rate risk, Currenc& risk J "i5uiit& risk'
.he& work on managing the compan&Hs capital structure i'e' the ,alance sheet
risk'
.he& set stanars an policies for transfer pricing for inter Business Unit
transactions, manages the corporate in%estment portfolio of the ,ank an are
responsi,le for setting o%erall Ealue)at)4isk #Ea4$ limits'
5.5 OPERATIONAL RIS= MANAGEMENT
2perational risk is the risk of losses resulting from inae5uate or faile internal
processes, human ,eha%ior an s&stems or from e0ternal e%ents' .his risk inclues
operational risk e%ents such as I. pro,lems, shortcomings in the organizational
structure, an lapses in internal controls, human errors, frau, an e0ternal threats'
!B" has institute an 2perational 4isk Polic& an 3ramework, which together outline
tasks an responsi,ilities at each organizational le%el'
1' .he Chief 2perating 2fficer is responsi,le for esta,lishing policies an stanars
on operational risk an o%ersees the 24+ acti%ities throughout !B"'
2' 3inance takes responsi,ilit& for the relia,ilit& an accurac& of the financial an
accounting ata an monitor compliance to ,uget an fiscal aspects of
transactions'
=' Internal Control ensures that all staff of !B" aheres to the regulations applica,le
to the ,usiness an re%iews an inspects epartments for internal controls'
5.6 MANAGEMENT OF PROGRAMMED LENDING
Program lening refers to creit that is appro%e uner a Prouct Program Duieline
#PPD$ an manage on a portfolio ,asis' -hen pro%iing creit to consumers an
certain small an meium)size enterprises, !B" relies on the Prouct Program process
for creit appro%al an risk management'
.he Business Unit prepares a Prouct Program Duieline to appl& for appro%al to offer
a certain creit prouct' .he PPD must specif& the target customers or customer
47
segment an shoul contain stanar risk acceptance criteria for e%aluating an
appro%ing ini%iual transactions'
.he Boar of (irectors appro%es Prouct Program after getting %ette an
recommene ,& +anagement committee' Uner an appro%e PPD, the authorit&
le%el to appro%e ini%iual creit transactions is elegate to authorize ini%iuals'
Creit initiation, account maintenance an collection ecisions ma& ,e ,ase on the
o,/ecti%e application of eligi,ilit& criteria together with other guielines escri,e in
4isk management guieline of the appro%e Prouct Program or on creit scoring' .he
portfolio performance ata,ases are maintaine ,& the ,usinesses to help in portfolio
control'
0.( !OA5 PORT1O!-O3

!B"Hs loan portfolio, its composition an growth in 2@@? was constraine ,&
competiti%e market conitions' Clients ha%e ,een conser%ati%e in their financial
strategies an restraine in their ,orrowing, resulting in a relati%el& lower utilization of
creit facilities' Aitionall&, the strengthening of the U*( has limiting impact on
growth in B(. portfolios'
!B"Hs "oan portfolio is highl& i%ersifie an e%enl& istri,ute o%er 1> ifferent
inustr& segments'
In 2@@?, Corporate Clients continue to ,e the largest among BUs holing
appro0imatel& 88'8B of total loans outstaning while consumer was secon with
9':B, an staning of *+! was =':B'
5.? PROVISIONING POLICIES
!astern Banks "oan pro%isioning polic& is guie ,& the central ,anks rules an policies
as propose time to time' .he pro%isioning policies applica,le as at =1 (ec 2@@? were
as follows7
Business
Unit
UC *+ ** (3 B"
Pro%
B
2%eru
e
.erm
Pro%
B
2%eru
e
.erm
Pro%
B
2%eru
e
.erm
Pro%
B
2%eru
e
.erm
Pro%
B
Consume
r
2 9@ (a&s ? 18@( 2@ 2A@( ?@ =:?( 1@@
*mall J
+eium
2 9@ (a&s ? 18@( 2@ 2A@( ?@ =:?( 1@@
All other 1 9@ (a&s ? 18@( 2@ 2A@( ?@ =:?( 1@@
Deneral Pro%isioning for these proucts are carrie out on a portfolio ,asis' 8owe%er
specific pro%ision is etermine ,& the ,ankHs loss e0perience of a particular client'
.he Central Banks "oan "oss Pro%ision Duielines recommens in general, when
interest or principal on a consumer loan is o%erue for 9@ a&s or more, an& further
48
accrual of interest is suspene an such loans are then classifie as non accrual'
(ou,tful an non)performing loans are classifie as ou,tful as soon as there is
e%ience a,out the ,orrowerHs lack of a,ilit& to meet its pa&ment o,ligations to the
,ank in accorance with the original contractual terms' -here eeme necessar&, an
allowance for loan losses is etermine on a per item ,asis, taking into account the
%alue of the collateral'
.hese policies are kept uner constant re%iew an are a/uste to reflect #among other
things$ the ,ankHs actual loss e0perience an changes in legislation' BankHs eicate
creit committees or its authorize ini%iuals re%iew the status of its corporate an
commercial clients, at least once in a &ear, to whom it grants creits'
Aitionall&, the ,ankHs creit officers continuall& monitor the 5ualit& of loans' *houl
the 5ualit& of a loan or the ,orrowerHs financial strength eteriorate to the e0tent that
ou,ts arise o%er the ,orrowerHs a,ilit& to repa& the loan, management of the
relationship is transferre to *pecial Asset +anagement Unit #*A+U$' After making an
assessment of the specific pro%ision that shoul ,e mae taking into account the %alue
of collateral, C4+ re%iews specific pro%isions on the portfolio at the close of each
5uarterl& reporting perio, to ensure their ae5uac&'
5.A NON-PERFORMING LOANS STATUS.
Con)performing loans are ou,tful loans that are place on a non)accrual ,asis' .his
means that the contractual interest is no longer recognize as income' An& asset or
e0posure in the loans an a%ances portfolio that ,ears an impairment loss on
principal or interest is efine as non)performing'
.he %olume of non)performing loans ecrease to .aka 9:@'9 million from .aka
1@AA'= million in 2@@> reflecting the impro%e 5ualit& of the creit portfolio' .he ratio
of non)performing loans stoo at ?'>1B as at =1I12I2@@? compare to A'19B in
2@@>'
2@@? 2@@> 2@@= 2@@2
** 8,?A@,8?? 2@,:1A,1>8 18=,8>1,@>@ 2=,9A2,@@@
(3 =,18>,2>A >,1>@,129 9@,A82,19> 2:,8A?,@@@
B" 9>9,1>:,A91 1,@?2,?2A,>28 1,2:1,>2?,2=> 1,>1?,@21,@@@
49
P/-)-F
6. R'("*'-1 S)-/)'+1
6.1 ' S!+# 2"- C8/!2!(/)!"#.
3irst an foremost re5uirement for an& creit managers is to ientif& a pro,lem creit in
its earliest stages ,& recognizing the sings of eterioration' *uch sings inclue ,ut not
limite to the following7
1' Con)pa&ment of interest or principal or ,oth on ue ates or past ues ,e&on a
reasona,le perio or recurring past ues'
2' In case of 2%erraft no mo%ement in the account ,e&on a reasona,le perio'
=' (eterioration in financial conition of the client, as gathere from clients latest
financial statement'
>' A shortfall in collateral co%erage, particularl& if the collateral was a ke& factor in
the ecision)making'
?' (eath or withrawal of ke& owner#s$ or management personnel'
:' Compan& filing for ,ankruptc& or %oluntar& issolution'
A' A%erse market report a,out the compan& itself or its principal owners'
6.2 S)'3 )" 2"88"E 2"- C8/!2!(/)!"#.
*teps to follow in such situations woul ,e7
1' 4echeck the account, for all outstaning, incluing an& outstaning in allie or
sister compan& or in owners or partners or irectors personal names'
2' .horoughl& re%iew loan ocumentation to confirm, F-e ha%e what we neeG,
ocuments are in proper from, properl& e0ecute an current #i'e' not time
,arre$'
=' If possi,le take current market %alue of the securities accoring to li5uiation
,asis' An take a close look at the assets an lia,ilities to etermine who has the
prior right on those assets'
>' If Drantors are in%ol%e, look closel& at the net worth statement an sen
eman notice'
?' 2nce the account is classifie *u,)*tanar, creit lines must ,e frozen'
5!
6.3 C8/!2!(/)!"# P-"('.
3or the purpose of etermining the FClassifieG status of an account, following guielines
are to ,e o,ser%e
1" .he process of classification of an account will start with strict application of
the risk rating assessment that is
*u,)stanar
(ou,tful
Ba or "oss
2' 8owe%er unpai interest or Principal or !0pire "imit for a perio of 18@ a&s
or more or recurring past ues will remain the most significant rules for classification'
6.4 U3-D"E# G-/:!#+ C8/!2!(/)!"#.
After classification the client has onl& two options in han M either pa&off the whole or
partial lia,ilities an erase or own grae the name from the classifie list' 2r the client
can refuse to pa& an up grae their position in the classification list'
6.5 S3'(!/8 A') M/#/+'$'#) D'3/-)$'#) FSAMDG.
!B" has a special epartment calle *A+( who are responsi,le for all accounts
classifie in the ,anks portfolio' Actuall& the& ha%e work like CI( officers' 8owe%er
*A+(s responsi,ilit& will co%er the areas of
+onitoring an controlling the classifie accounts through monthl& reporting an
5uarterl& re%iew'
Acti%el& follow the ,orrowers for reco%er&'
Cegotiate an rescheule the e,ts'
If the client ont utilize the new offer than it is the *A+(s responsi,ilit& to file
suit against the client'
*A+( will also prepare a Consoliate 4eport of all ,a loans written)off on a
5uarterl& ,asis'
6.6 R'("*'-1 P-"%/%!8!)1 C/)'+"-!' )" %' /!+#': T" A88 C8/!2!': L"/#.
C/)'+"-1
1. "oans etermine to ha%e high pro,a,ilit& of reco%er& within : monthsP reco%er&
efforts to continue on an on)going ,asis'
2. "oans etermine to ha%e moerate pro,a,ilit& of reco%er& within 1 &earP re%iew
reco%er& efforts on a = months ,asis'
3. "oans etermine to ha%e low an remote pro,a,ilit& of reco%er&P re%iew case on
a : months ,asis'
4. "oans etermine to ha%e %irtuall& no chance of reco%er&7 charge)off the ,ooks'
8owe%er in these situation proper appro%al from the appropriate appro%ing
authorities shoul ,e o,taine an also shall ,e guie ,& Banglaesh Bank
instructions an su,/ect to complete anal&sis of7
Banking practice'
"egal an ta0 implication an
51
*tatus of each ini%iual creit'
Cotes for assessment of categor&
!stimate the cost of continue collection efforts against an& mone&, which can ,e
reasona,l& e0pecte to ,e reco%ere' Inclue in the cost #i$ emplo&ee man)hour, #ii$
legal e0penses, #iii$ charge of an& e0ternal collection agenc& if use'

6.< D0/) /-' )0' $/!# -'/"# %'0!#: (8/!2!(/)!"#H
Cew Banker or lacking of e0perience'
+ost of the time ,ankers ha%e to rel& on the ocuments pro%ie on the client'
But what is the purit& of these ata' Although the CA firm certifies the ates ,ut
financial /ugulating is practicing aroun the worl'
Clients o%er confience a,out the pro/ect'
Change in Cational an International Political scener&'
*ometimes ,orrower talks a,out some other repa&ment source out of the
propose pro/ect ,ut the& ont keep the source as securit& to the ,ank'
*ometimes other than lan or ,uiling ,anks also keep furniture an machiner&
as securit&' "ater on when ,ank come to sell those, the& foun that the market %alue
of those assets is much lesser than the ,ook %alue'
*ometimes ,ankers ont go through the financial figures properl&'
+ost of the cases clients ha%e one some financial /ugulating on their ata'
*ometimes Clint caught ,& some una%oia,le circumstances like) ship sink'
*ometimes ,ank ont take appropriate securit& from the client or granter'
*ometimes ,ank ont put concentration a,out the insurance'
+ost of the cases the ,ankers fail to forecast the future ,usiness conition of the
clients'

6.? D0/) E-"#+ E!)0 P-"*!!"#H
Although pro%isioning is associate with classifie loans ,ut it has a positi%e effect on
the ,anks' .he Income *tatement shows net profit after euction of pro%isioning fun'
As a result ta0 goes own' But the most important thing is, it oesnt affect the i%ien'
Although naturall& ,anks pa& i%iens from net profit ,ut some times the& pa&
i%iens from pre%ious retaine earnings' +oreo%er ,anks ont keep mone& as ile
fun for pro%isioning' +one& circulates among the operations' .he& /ust show this fun
to co%er actual loss' *o the ,ottom line is nothing is wrong to pro%ision though it is
associate with classifie loans'

6.A EBL ! :!22'-'#) !# R'("*'-1.
!B" has a epartment calle *pecial Asset +anagement (epartment' .he task of this
epartment is to collect mone& from the classifie clients' But in the other ,anks the
Branch +anager oes this /o,' 2ther than that the reco%er& criteria are more or less
same for the ,anks' At the %er& ,eginning the& sen reminer letter' .hen the& sen
letter to inform them that the& #,ank$ are going to sue against the client' 3inall& the
,anks sue against the client'
52
6.15 D01 R'("*'-1 )/4' " $,(0 )!$'.
2nl& ,ecause of e0isting rules an regulation reco%er& is a time consuming proceure' I
think an e0ample will make this thing clear' "et, +r' Q took loan from L ,ank ,& gi%ing a
lan as registere mortgage an ,ecome ,a' Cow ,ank cannot sell the lan without the
permission court though the lan was as registere mortgage to ,ank' *o ,ank has to
sue against +r' Q an court sen notice to +r' Q' But +r' Q can ela& his coming ,&
sa&ing he is sick an asking for more time' Court gi%es new ate to settle the matter'
.hen on new ate a person come to the court sa&ing that he is the ,rother of the client
an the lan is their fathers propert&' An most importantl&, client int notif& him
,efore gi%e the lan to the ,ank' *o court asks him to pro%e his claim' 3inall&, if court
gi%es in/unction in fa%or of ,ank, the& face pro,lem to sell the lan' Because client put
mussel)men protect the lan from ,ank' +oreo%er people are not intereste ,u& lan on
occasion from court' 3inall& the interesting thing is most of the time the same client ,ut
the lan in anther name in lower price'

P/-)-G
53
<.1 R'("$$'#:/)!"# .
!B" is presentl& concentrating on F Blue ChipG status of Banglaesh to reuce
the risk in creit a%ance' I feel this attitue of !B" is contrar& to the mission of
entrepreneurial e%elopment re5uire ,& Banglaesh' *o, the& shoul
concentrate more on new entrepreneurs than onl& on F ,lue chip statusG
.o reuce the creit risk of relati%el& large creits, the !B" shoul ispute or post
a well traine e0ecuti%e to each organization
Islamic ,anking is a process of profitIloss sharing' *o, I feel that !B" shoul
think of opening a Islamic ,anking (i%ision to mitigate the full ,uren of creit
risk'
.o make their prouct highl& %isi,le an attract genuine entrepreneurs, the !B"
shoul put more effort on %arious moe of a%ertisement
4estructuring has resulte in reuction of classifie loans' *o, the& shoul further
stu& to fin out if there is an& further scope of moification of structures an
strategies in loan e%aluation an appro%al'
Before sanctioning creit facilit& ,ank shoul check a,out ocuments Fwhether
.he& ha%e what the& neeG'
Creit officer shoul go through the feasi,ilit& stu& properl& a,out the pro/ect'
.he& shoul not rela& on the ata pro%ie ,& the client' .he& shoul /uge the
%aliit& of those figurers ,& checking clients account ,ooks'
+anagement shoul gi%e more authorit& to the creit officers to make them
responsi,le'
Bank shoul gi%e priorit& to the limite companies rather than proprietorship
,usiness ,ecause after the eath of an& proprietor, ,ank cannot sue for the asset
of the proprietor' .he assets istri,ute among the famil& mem,ers' It oes not
matter whether the assets was keep as securit& to the ,ank or not'
<.2 C"#(8,!"#.
.he lening function of a ,ank nees to a %alue to the ,ank' .he lening function
comprises organizations, funing, monitoring an ser%icing of loan' .his process is an
ongoing one that ,eings when a loan application is mae an screene an continues
54
until the loan is repai' Cow unpai loans are incomplete transactions for leners' .hese
incomplete transactions will not a rather estro& %alue' .he primar& anger in granting
loan or creit is the possi,ilit& that the transaction ma& remain incomplete or in other
wors, the ,orrower ma& not repa& the loan on a timel& ,asis, which is properl& known
as creit risk or efault the loan on a timel& ,asis, which is properl& known as creit risk
or efault risk' Proper an pruent management of efault risk is the wa& to create %alue
in the lening function' !0cessi%e creit risk manifests itself in the form of e0cessi%e
non)performing loans an loan loss pro%isions, which estro& ,ank %alue' .herefore, the
%alue creation o,/ecti%e on the part of ,anks can ,e achie%e ,& emphasizing the
pre%ention of potential non)performing loans an ientification an resolution of e0isting
pro,lem loans'
.he 5uestion of loan efault is relate with #non$ reco%er& I repa&ment of loans' -hen a
,orrower cannot repa& interest anIor installment on a loan after it has ,ecome ue,
then it is 5ualifie as efault loan or non)performing loan' It is known as non)performing,
,ecause the loan cases to perform or generate income for the ,ank' .he efaultInon)
performing loan is not a Funi)classG, rather a Fmulti)classG concept' It implies that the
efaultInon)performing loans can ,e classifie into ifferent groups usuall& ,ase on the
Flength of o%erueG of the sai loans' .he international stanar classification
terminologies are su,)stanar, ou,tful an ,aIloss loans' *ince 198@s, the central
,anks of the e%eloping worl followe the practices of the e%elope countries, ha%e
aopte the Fpruential norms for asset classificationG with a %iew to ensure
transparenc& an F5ualit&G of the loan portfolio of the ,anks'
.he pruential guielines also call for making ae5uate Fpro%isionsG against classifie
loans in orer to protect the financial health of the ,anks' .he economic implications of
the non)performing I efault loans are not onl& stoppage of creating new loans ,ut also
the erosion of ,anks profita,ilit&, li5uiit& an sol%enc&, which might sometimes lea
towars collapse of the ,anking financial s&stem' It has, therefore ,ecome essential for
polic& makers to stu& the loan efault scenario of the ,anking sector on a routine ,asis
for estimating classifie loan, making appropriate pro%isioning, aopting effecti%e
reco%er& strateg& an thus ensuring sounness an efficienc& of the ,anking sector'
P/-)-H
55
?.5 B!%8!"+-/301.
Annual 4eport of !B"
Instruction circular of !B" no' AA+IA4I)=2I2@@:
Instruction circular of !B" no AA+IA4I)==I2@@:
"oan Classification +anual U1991V Banglaesh'
B4P( circulars'
-e,site aress7 http7IIwww'e,l),'com
Intranet of !B"7 e,lhome
?.1 LIST "2 /(-"#1$.
4+ N 4elationship +anager'
!B" N !astern Bank "imite'
BCCI N Bank of Creit J Commerce International'
PA( N Pa&ment Against (eposit'
".4 N "oan against .rust 4eceipt'
"A2* N "oan Against 2ther *ecurities'
*2( N *ecure 2%er (raft'
2AP N 2wn Acceptance Purchase
2I* N 2utstaning
CCB N Cational Commercial Bank'
PCB N Pri%ate Commercial Bank'
3CB N 3oreign Commercial Bank'
DA.. N Deneral Agreement on .rae J .ariffs'
CA N Chartere Accountant'
B4P( N Banking 4ules J Polic& (epartment, Banglaesh Bank'
56