1

CHAPTER I
1.1 Background of the Study
Internship program is a career-related work experience conducted as an integral part of the
academic program. It is very essential to get exposure to "real" business projects and
problems, development of managerial skills and increased insights regarding organizational
work environments thereby enhancing communication skills as the foundation of professional
correspondences and understanding the general structure of most business situations by
acquiring the new information and ideas so as to apply them for the benefits of the
organization as well as the ones own career development.
The term Bank was derived from an Italian word Banca. Banks perform various
specialized functions. Banks may be defined in terms of the various functions it performs. So
it is quite impossible to define bank in just one word. However, bank can be described as
such a financial institution that takes in funds as deposits repayable on demand or at short
notice.
According to the Shorter Oxford English Dictionary, Bank is an establishment for the
custody of money received from or on behalf of its customers. Its essential duty is to pay their
drafts on it, its profit arise from the use of the money left unemployed by them.
Types of Bank
There are many types of bank among them the main types of bank can be categorized as
follows:
a) Commercial Bank
b) Development Bank
b) Central Bank

1.2 Brief Introduction about Commercial Bank

A commercial bank is a financial intermediary which collects credit from lenders in the form
of deposits and lends in the form of loans. Encyclopedia Says: Commercial banking activities

are different than those of investment banking, which include underwriting, acting as an
intermediary between an issuer of securities and the investing public, facilitating mergers and
other corporate reorganizations, and also acting as a broker for institutional clients.
Commercial Bank means a bank which conducts currency exchange transactions, accepts
deposits, supplies credit and performs commercial dealings other than those banks which
have been prescribed as with co-operative, agricultural, industrial or any other specific
objective.
Although commercial banks are privately owned enterprises they have been given the extra
ordinary power to create money in form of demand deposits as well as to extinguish money
so created. They borrow from those who are not immediately spending all their current
receipts and they lend to those who have intentions of immediately spending on goods
beyond the range of their own current receipts. They accept deposits and pool those funds to
provide credit either directly by lending, or indirectly by investing through the capital
markets. Within the global financial markets, these institutions connect market participants
with capital deficits (borrowers) to market participants with capital surpluses (investors and
lenders) by transferring funds from those parties who have surplus funds to invest (financial
assets) to those parties who borrow funds to invest in real assets.
1.3 Banking in Nepal
Banking services are the integral part of the people and without the facilities, it has become
very difficult to conduct the daily personal and business activites. The overall of the financial
services is however more concentrated in urban areas and still a large population dont have
access to these services.
In 1957 AD Industrial Development Bank was established to promote the industrialization in
Nepal, which was later converted into Nepal Industrial Development Corporation (NIDC).
Rastria Banijya Bank was established in 1965 AD as second commercial bank of Nepal. The
financial shapes of these two commercial banks have a tremendous impact on the economy.
As the agriculture is the basic occupation of major Nepalese, the development of these
sectors plays the prime role in the economy so, separate Agriculture Development Bank was
established in 1968 AD. After declaring free economy and privatization policy, government

encouraged the foreign bank for joint venture in Nepal. Then a lot of commercial banks were
established in the country.
In Nepal, financial institution refers to Commercial Banks, Development Bank, Finance
Companies and Microfinance Institution. NRB is the regulatory and supervisory authority of
all financial institutions operating within the boundaries of Nepal. In simple language, we can
say, banks are the financial intermediaries that are involved in monetary transaction of
depositors and borrowers that fulfill both needs. Within the last few years, Nepalese financial
system has grown in terms of volume and size of business and market respectively. In Nepal,
there are 31 Commercial Banks, 87 Development Banks, 79 Finance Companies and 21
Microfinance and 16 Co-operatives and 38 NGOs Institutions as on January 2011.

S. No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31

Table I: List of Commercial Banks in Nepal as of January 2012

Operation
Paid up capital(in
Names
date(A.D)
millions)
Nepal Bank Ltd.
1937/11/15
308.4
Rastriya Banijya Bank
1966/01/15
1,172.3
Agriculture Development Bank Ltd. 1968/01/02
9,437.5
NABIL Bank Ltd.
1984/07/16
2,029.8
Nepal Investment Bank Ltd.
1986/02/27
2,409.1
Standard Chartered Bank Nepal Ltd. 1987/01/30
1,398.5
Himalayan Bank Ltd.
1993/01/18
1,600.0
Nepal SBI Bank Ltd.
1993/07/07
1,653.6
Nepal Bangladesh Bank Ltd.
1994/06/05
1,860.3
Everest bank Ltd.
1994/10/18
1,079.6
Bank of Kathmandu Ltd.
1995/03/12
1,359.5
Nepal Credit and Commerce Bank 1996/10/14
1,399.6
Ltd.
Lumbini Bank Ltd.
1998/07/17
1,294.5
Nepal Industrial & Commerce Bank 1998/07/21
1,311.5
Machhapuchhre Bank Ltd.
2000/10/03
1,627.2
Kumari Bank Ltd.
2001/04/03
1,306.0
Laxmi Bank Ltd.
2002/04/03
1,613.5
Siddhartha Bank Ltd.
2002/12/24
1,561.0
Global Bank Ltd.
2007/01/02
1,473.4
Citizens Bank International Ltd.
2007/06/21
1,207.0
Prime Commercial Bank Ltd.
2007/09/24
1,210.0
Sunrise Bank Ltd.
2007/10/12
1,625.0
Bank of Asia Nepal Ltd.
2007/10/12
1,500.0
DCBL Bank Ltd.
2008/05/25
1,920.9
NMB Bank Ltd.
2008/06/05
1,651.6
Kist Bank Ltd.
2009/05/07
2,000.0
Janta Bank Nepal Ltd.
2010/04/05
1,400.0
Mega Bank Nepal Ltd.
2010/07/23
1,631.0
Commerz & Trust Bank Nepal Ltd. 2010/09/20
1,400.0
Civil Bank Ltd.
2010/11/26
1,200.0
Century Commercial Bank Ltd.
2011/01/23
2,000.0

1.4 Objective of the study

The general objective of the internship program is for the partial fulfillment of the
requirement for the degree of Bachelors of Business Administration- Banking and
Insurance.
The specific objectives of this study are:
To understand the organizational environment and culture.
To acquire different aspect of knowledge regarding the staffs and individuals
working in an organization.
To evaluate the financial strengths and weakness of the firm.
To measure the ability of a firm to meet its short terms obligation and reflect the

financial solving of firm.

To develop skills in the appliance of theory to practical work situations.

To get exposed to the practical work place and understand its function, structure
and other operation activities.

To understand the core concept of credit risk management and credit

administration.

1.5 Limitations of the Study

This report is based on short period study. The entire course of internship was
two months. Hence, the conclusion drawn consists only the above period.

The analysis covers small area because of limited time and constraints of the
bank.

The analysis fails to find the overall facts relating to MBNL.

1.6 Research Methodology

Research methodology refers to the various sequential steps to adopt by a researcher in
studying a problem with certain objectives in view.
The research design of the study is descriptive, exploratory, and analytical. Descriptive
design is concerned with describing the events, policies, programs, and strategies which are
already planned and rigid, by the government, and firms. Exploratory research studies main
purpose is to formulate a problem finding and this type of research is essential for the areas
not much is known. So, this study follows the exploratory designs. However, the plans,
policies and strategies regarding banking can be obtained through secondary sources. So, the
report follows descriptive design.

1.7 Data collection procedures

i) Primary Data
Primary data are original data gathered by for the research project at hand. Thus, these
data are collected for meeting the specific objectives of the study. Primary data can be
collected through interviews, observations or experiments.
During the internship, primary data were collected by informal interview with the
supervisors.
ii) Secondary Data
Secondary data are often in published form, however the unpublished data such as the
records, reports or statistics gathered or compiled by others prior to our study are also
secondary data. A source of such data includes sales information, accounting data,
documents, payments, bulletins, books and periodicals published reports etc. Much
information in this report is based on the secondary data gathering.

CHAPTER II
ORGANIZATIONAL BACKGROUND
2.1 Introduction to Mega Bank Nepal Limited
Recognizing that banking activity has been limited to the urban and semi-urban areas of
Nepal, Mega bank has been set up not only to provide better products and services that are
currently on offer in the financial sector but also to penetrate and tap the virgin rural market.
The promoters shared a vision to make Mega Bank a catalyst for the promotion of financial
inclusion in Nepal.
The initial concept of establishing a truly inclusive MEGA bank was envisioned by a group
of individuals from a diverse range of backgrounds two years to the formal inauguration of
the Bank. These individuals who initially conceptualized the establishment of this institution
were propelled by their vision to establish a national level banking institution that would
provide the highest levels of professional banking service with a personal touch, throughout
the nation, to all Nepalese.
It is the realization of this aspiration that lead to the incorporation of Mega Bank Nepal
Limited as Nepal's largest A class commercial bank with an authorized capital of Rs.4
billion and an issued capital of Rs.2.33 billion.
The Bank has been promoted by 1219 promoters spread across 63 of Nepal's 75 districts. The
promoters are divided into 6 clusters, with each cluster being represented by one seat on the
Bank's Board; Professor Dr. Madan Kumar Dahal is the Chairman of Mega Bank Nepal
Limited's Board. A senior economist of Nepal holding a Doctorate Degree in Economics, Dr.
Dahal is a respected personality in the South Asian region for his insightful contributions and
analytical papers on national, regional and international economic issues. The promoters are
represented in the Board of Directors, comprising of accomplished personalities from the
field of tourism, development, academicians, economists and businessmen.

2.2 Objectives of MBNL

Vision

The seed planted by the Bank's Promoters in their initial deliberations is today the core of
Mega Bank's Vision - to be the banker to every Nepali, delivering five star quality services to
all its customers. Our Vision is who we want to be, and everything we have done to date, and
everything we will do as we build the Bank going forward will be centered around ensuring
Mega Bank works towards becoming the 'Banker of every Nepali from Plough to Power Halo to Hydro'.

Mission

In order to move towards the realization of our Vision, which enlightens us on 'Who we want
to be', we have articulated a statement of Mission to clearly state 'Where we want to be'. Our
Mega Mission is to consistently deliver 'Service Excellence to Create Mutually Beneficial
Relationships' with all our stakeholders.

Values

Each and every member of the Mega Team is committed to delivering service excellence and
working towards providing five star quality banking to Customers, Shareholders, Regulators,
Community, and Staff, creating, building and strengthening relationships of mutual benefit. In
order to achieve our Mission all of us are committed to our Mega Values of being Service
Centric, Transformational, Action Oriented, Result Focused, Synergistic, everyday in
everything we do. The acronym of our Values is S.T.A.R.S. reflecting our commitment to the
Mega Service culture.

2.3 Organization Structure of MBNL

There are nine Board of Directors in MBNL. The Chief Executive Officer of MBNL is Mr.
Anil Keshari Shah. Ms. Anupama Khunjeli is the Chief Operating Officer while Mr. Govinda
Gurung and Ms. Raveena Desraj Shrestha are the Chief of Corporate Banking and Chief of
Consumer Banking & Corporate Affairs respectively. And under them there are different
department who have to report to them such as Human Resource, Credit Department, IT
department, Marketing and so on.

Fig. 1 Organizational Structure of MBNL

BOD
CEO
Corporate Banking
(DGM)

Consumer Banking
(DGM)

Consumer Lending
Department (M2)

Mega Corporate
Affairs (M1)
Mega Marketing
Centre (M2)

Mega Card
Centre

Mega
Remittance
Centre

2.11
2.12
2.13
2.14

Global
Markets &
Trade Finance
(M2)

Operations &
Shared
Distribution
(M2)

Treasury Front
Office

2.8
2.9
2.10

Internal
Audit

Legal &
Shares (M3)

Mega Micro
Banking (M1)

Trade
Finance

Risk,
Compliance &
Support (M4)

Mega SME
Banking (M3)

Media Corporate
Credit (M3)
Deposit
Marketing
Remittance &
Cards Centre
(M4)

Global Markets
&
Company
Operations (DGM)
Secretary

Human
Resources
(M2)

Credit
Administration
Administration
Branch Manager
&
(M2)
MB
Network
(ATM Cell
Expansion
(M2)(M2)

IT &
SWIFT (M1)

Operations Risk &

Compliance
Development

Finance &
Planning (M1)

Treasury
NPA Risk
Back
Credit
Management
Office

Reconciliation
Development

2.15
2.16

2.4 Current Capital Structure

2.17

Table II: Current Capital Structure

2.18

Authorized capital

2.19

4 Billion

2.20

Issued Capital

2.21

2.33 Billion

2.22

Paid up Capital Shareholding

2.23

1.63 Billion

2.24

Head Office

2.25

Kantipath

2.26

Branch Office

2.27 Kantipath (Ktm), Syaffrubeshi

(Rasuwa), Kapan (Ktm), Sandhikharka
(Argakhanchi), Baneshwor (Ktm), Pokhara
(Kaski), Jawalakhel (Lalitpur), Biratnagar
(Koshi), Birgunj (Parsa), Newroad (Ktm),
Butwal (Rupandehi), Hariwan (Sarlahi),
Chautara (Sindhupalchowk)

2.28

Number of Employees

2.29

236

2.30

Computerized Branches

2.31

All

2.32

District Covered

2.33

All

2.34
2.35

2.5 Composition of Board of Directors

2.36

Table III: Board of Directors of MBNL

2.37
2.38
2.39
2.40
2.41
2.42
2.43
2.44
2.45

2.8 Names
2.10

2.9 Designation

Dr. Madan Kumar Dahal

2.11

Chairman

2.12

Dr. Duman Thapa

2.13

Director

2.14

Dr. Govinda Nepal

2.15

Director

2.16

Mr. Bhoj Bahadur Shah

2.17

Director

2.18

Mr. Mukti Ram Pandey

2.19

Director

Mr. Gopal Khanal

2.21

Director

Mr. Rameswor Sapkota

2.23

Director

2.24

Mr. Indra Bahadur Malla

2.25

2.26

Mr. Bijaya Sambahaphe

2.20
2.22

Director
2.27 Director
2.28

2.46
2.47
2.48
2.49
2.50
2.51

2.6 Network Overview

2.52

2.53

Branches of Mega Bank Nepal Limited

2.54

1. Corporate office
2. Branch
3. Branch
4. Branch
5. Branch
6. Branch
7. Branch
8. Branch
9. Branch
10. Branch
11. Branch
12. Branch
13. Branch
14. Branch
2.55

Kantipath branch
Jawalakhel
Pokhara
Biratnagar
Hariwan
New Baneshwor
Chautara
Kapan
Birgunj
Butwal
Kantipath
Syafru Besi
Arghakhachi
Teku

2.7 Description of the products and services of MBNL

1. Consumer Banking
2.56

The personnel at Consumer Banking are equipped to provide a 5 Star banking

experience each time one makes a visit to the Bank. Ones entire personal financial needs are
duly taken care of in order to be able to match his/her expectations. The various products at
Consumer Banking are:
2.57

a) Account and Deposit

2.58
2.59
Account
2.60

LCY Denominated

2.62

2.63
Mega Lokapriya
Bachat Khata
2.64

Mega Current Deposit Account

2.65
Khata

2.61
FCY
Denominated Account

Mega Byapar Bachat

2.71

Special Current Account

2.72

FX Current Account

2.73
2.74

FCY Call Account

FCY Current Convertible

2.66
Mega Fixed Deposit
Account
2.67 Mega Dhamaka Mudhati
Khata
2.68
Khata

Mega Swabhiman Bachat

Account
2.75

Saving Account

2.76
2.77

FCY Fixed Deposit Account

2.69
Mega Nari Special
Account
2.70

2.78
2.79

b) Consumer Lending

2.80

c) Remittance
Mega Remit

2.81
2.82
2.83
2.84

Mega Auto Loan

Mega Home Loan
Mega Mortgage Loan
Mega Mortgage Overdraft
Mega Personal Loan
Mega Education Loan
Mega Margin Lending
Mega Loan Against Fixed Deposit
Mega Loan Against Govt. Securities

d) Card

2) Corporate Banking
Corporate Banking reflects Mega Bank's strengths in providing its corporate clients

2.85

in Nepal, a wide array of commercial, transactional and electronic banking products. It

achieves this through innovative product development and a well-integrated approach to
relationship management. The products which Mega Bank Nepal Limited has introduced are:

Corporate Lending

Trade Finance
o Letter of Credit and Bank Guarantee

2.86
2.87

3) SME Banking

2.88

SME is an abbreviated form of Small and Medium Enterprises which refers to a certain

class/segment of customer/clients based on their size of company/business or size of their

balance sheet and turnover. To note, SME banking doesn't mean SME financing only.
2.89

Hence, "SME Banking" is a business relationship with small and medium scale

enterprises by segmenting them into a special category and offering them a complete package
of banking products and services in holistic approach.
2.90
2.91

4) Micro Banking

Mega Micro Banking is an initiative for catering '5 Star' banking services to the poor and
economically marginalized people of the nation. It is characterized by small size of loan and
small saving mobilization among the small entrepreneurs and low income groups.
Account and Deposit

o Mega Micro Compulsory Saving

2.92
2.93

2.94

Micro Lending

5) Direct Banking

2.95 CHAPTER III

2.96
2.97

ANALYSIS AND PRESENTATION

2.98
2.99

3.1 Credit Risk Management

2.100
2.101 The word Credit is basically reliance on the truth of something said or done. It is the
ground of confidence or belief. It is the trust which allows one party to provide resources to
another party where that second party does not reimburse the first party immediately (thereby
generating a debt), but instead arranges either to repay or return those resources (other
materials of equal value) at a later date. Credit risk is an investor's risk of loss arising from a
borrower who does not make payments as promised. Such an event is called a default. Other
terms for credit risk are default risk and counterparty risk. It refers the risk of negative effects
on the financial result and capital of the bank caused by borrowers default on its obligations
to the bank. It is the major risk that banks are exposed during the normal course of lending
and credit underwriting. Credit risk arises from non-performance by a borrower.
2.102 MBNLs branch offices deals with consumer loans like auto loan, personal loan,
mortgage loan etc. and SME loans head office is responsible for the corporate loans. Credit
proposals are then prepared by the credit relationship managers assigned in different
branches and then sent to CRD for proper evaluation.
2.103
2.104 It is compulsory to check the probability of event of default by making a
comprehensive evaluation of all the proposals such that credit is provided to the reliable and
trustworthy person and organization and there occurs no default. Credit risk analysis is
principal function in credit processing to visualize and measure the probability of default
causing loss in particular credit proposal and thus is very crucial for a credit decision. It is
with the help of the collected information and documents like site visit report, financial
records, CICL report etc. that are provided by the RM, credit risk officers evaluate the
proposals. The financial highlights are the most crucial information as with the help of ratio
analysis the current state of the client is correctly interpreted. The analysis is done as per
Five Pillar analysis and PEST analysis that is applicable in overall industry analysis. After

proper evaluation of the proposals, suggestions for approvals or reasons for disapproval of
the loan to the client are mentioned with valid reasons and justification. With the suggestions
that are provided by the credit risk officers, the proposal is forwarded for further approval
from respective heads. If the loan is approved by the respective heads, the proposal is sent to
CAD to make necessary loan agreement with the client.
2.105
2.106 In general, Risk management process involves Identification, Measurement, Monitoring
and Controlling. CRM should by and large evaluate the following risks in a credit proposal and
give their opinion/remarks as appropriate so as to enable the decision making process.
2.107
2.108
i)
Credit risk:
2.109 Credit risk refers to the probability of default due to uncertainty of counter partys ability
to pay its obligations towards the bank. CRM should primarily foresee measure and evaluate 3
types of risk parameter under Credit risk such as:
Probability of default due to counter partys inability to pay its loan principal and interest.
In case of event of default, how much is the amount (principal and interest) at risk.
How much is the likely realizable value.
2.110
ii)
Financial risk:
2.111 CRM should review and analyze all the financial statement, indicators, ratios (mainly
probability, leverage and turnover), cash flow and other financial parameters and make sure that
all of them are within the acceptable norms.
2.112
iii)
Product risk:
2.113
Nature of product, style, brand value, life, diversification, factor of obsolescence,
availability of substitutes, quality, product life cycle etc. are some of the attributes to be analyzed
under Product Risk Evaluation.
2.114
iv)
Production/Operational risk:
2.115 Human resource/Labor availability, their skill, HR/Labor relations with management,
plant and equipment, cost of operation, obsolescence factor, technological advancement,
insurability, availability and cost of energy and other utilities, regularity in supply of raw material
etc are to be checked under the production/operation risk.
2.116
v)
Market risk:

2.117 Demand/Supply situation, seasonality of the product, competition factor, brand value,
product acceptability, price fluctuation, entry/exit barriers, company sales strategy, distribution
system, relation with buyer/suppliers, market share, advertising and promotional activities etc.
need to be reviewed and analyzed under the Market Risk Evaluation. Also, government regulation
and economic condition should be taken in consideration while evaluating the industry/market
risk.
2.118
vi)
Technological risk:
2.119 Availability or compatibility of technology, replacement/cost, chances of being obsolete,
availability of technological resources, repair or maintenance, spare parts etc are the major
consideration for the technology risk assessment.
2.120
vii)
Management risk:
2.121 Management risk includes integrity, competence, experience/expertise, nature of alliances
of promoter or management team, succession plan etc. are to be analyzed under management risk.
2.122
viii) Sovereign risk:
2.123 Sovereign risk is crucial when the credit is advanced against the security of government
securities and/or if loan is given to Government institution. Hence, in such case, sovereign risk
should be analyzed.
2.124
ix)
Security/Collateral risk:
2.125 Authenticity of title/ownership, sufficiency, quality potential deterioration, potential
realizable value in case of event of default, control over the security/collateral, execution/strength
of security documents etc needs to be evaluated and checked under the security risk.
2.126
2.127
2.128
x)
Other risk:
2.129 Besides above, CRM has to thoroughly evaluate the risk such as interest rate risk, portfolio
concentration risk, exchange risk, liquidity risk, capital flight risk, fund siphoning risk, inflation
risk etc needs to be evaluated. Since, rather than these risks all other risk is also to be
analyzed/evaluated depending upon the type of project/business.
2.130
3.2 Procedure of the Assignment

1.

Firstly the credit proposals are received that are prepared by the RM. CRM obtains
credit proposal for various loans like demand/short term loan, trust receipt loan, mortgage
loan, auto loan, overdraft, term loan, letter of credit, bank guarantee, etc.

2.131
2. It should then be checked if all the required documents are available or not. The
requirement of the document can vary according to the credit proposals. The general
documents required are:
o Complete and signed loan form of the costumer.
o Citizenship and/or valid permanent ID of the borrower/authorized persons along
with the photographs.
o Business registration certificate with respective department.
o Copy of PAN/VAT registration with tax payment receipt.
o Copy of partnership deed in case of partnership firm.
o Extract of resolution of Board meeting in case of partnership and/or limited
liability Company along with the proposed loan limits, security offered,
authorized persons for needful proceedings and legal/security documentation for
availing loans and other relevant matters certified by the Chairman and/or
Company Secretary.
o Extract of minute of the special general meeting in case of loans more than core
capital (equity and free reserves) of the company.
o Authenticated copy documents relating to security offered.
o The details of other projects promoted by them and the status of those projects.
o Audited financial statements of last two years for the running company and
projected financial statement for the new company for the next five years or for
total payback period whichever is lower.

o Latest stock report, receivables report, payables report and other banks
outstanding report.
o Net worth statement of the client and the personal guarantee.
o CICL report of the client.
o Any other documents prescribed by the competent authority from time to time and
case by case.
2.132 It should be noted that all the photocopied documents are verified with the
original and signed by the RM otherwise, the documents cannot be taken as reliable
document.
2.133
2.134
3. After the documents and the proposal is thoroughly checked by the credit risk officers, if any
points are confusing or if any documents are pending, such can be communicated to the
respective RM. Credit risk officers are not allowed to have any direct communication with
the prospective client as there might be a situation for biasness or favoritism.
2.135

4. After the document has been scrutinized, summary of credit proposal is prepared
wherein, personal information of the client, the type of loan proposed, pricing, tenor and
5 Cs analysis i.e. capacity, character/creditworthiness, capital, collateral a condition is
mentioned along with the key risk associated i.e. business/industry risk, financial risk,
management risk, collateral risk and repayment source and its mitigations are mentioned
accordingly. Further any other recommendations are also pointed out if any.
2.136

5. The proposal is likely to get positive feedback under following circumstances:

2.137

The integrity of promoters and management is exceptionally good and show total

commitment and confidence with relevant experience, expertise and technical know-how.
All the financial indicators exhibited in the proposals financial statements and/or

projected financials are authentic/ reliable and are within the acceptable norms.
The project has some priority according to governments policy.

The national/international industry/trade environment is favorable.

The technology to be adopted is well proven.
The product has a distinct market potential/ feasibility.
The project cost is reasonable and is comparable with similar projects.
The quality is security/ collateral offered is good and salable having reasonably good
realizable value.

2.138 However, the proposal is likely to be rejected if some of the following features are
observed:
2.139

CICL about the promoter is not satisfactory.

Overall supply chain management is not satisfactory.

Product does not have adequate market potential.

Overall industry/trade environment is not favorable.

The product belongs to a low priority sector.

Setting up of the unit would adversely affect the existing units.

Promoters/ Management integrity and credibility have not been found to be good in the
past.

Promoters are defaulters and/or financial/ economic offenders.

Net worth of the directors/promoters is not satisfactory.

Financial position and/or indicators including that of leveraging position (Debt/Equity) of

the company are not satisfactory.

Cost of the project is unduly escalated/ excessive.

Financial indicators derived from the existing or projected financial statements are
unfavorable.

Issues regarding the collateral to be mortgaged are aroused.

The clients 3 generation family or the personal guarantor falls in black list issued by
Credit bureau.

The transactions in the account are not found to be satisfactory.

Any other issues which are not compatible to NRB directives, Banks policy, law of land
and prudent banking norms.
2.140

6. After the comprehensive evaluation is conducted, the proposal and the summary just
prepared are sent to the head for further approval.
2.141
2.142

2.143

CHAPTER IV

2.144

SUMMARY AND CONCLUSION

2.145

4.1 Summary

2.146

The objective of the internship is to gain practical knowledge about the banking

operation at MBNL. The specific objective is to understand the function of the credit risk
department and the risk associated with the lending function of the bank.
2.147

Various risk are connected with the credit proposals like business risk, financial

risk, collateral risk etc. These risks should be effectively evaluated by the credit risk officers such
that defaults in loan are not aroused. The credit risk officers should think with the possible risk
that might occur and have sharp eyes to catch the misleading information that are provided by the
clients. Its the general function of the Credit Risk Officer to know where the banks money is
being played. The main objective of the Credit Risk Department is not only to approve/ reject
credit proposals but to make sure the credit is returned to the bank as well. Even though high
lending means high earning to the banks, these phenomena should be properly evaluated such that
fraud costumers are rejected.
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The rules and regulations which are forwarded by Nepal Rastra Bank are strictly

followed by the banks product papers. All the necessary analysis and conditions are to be
according to the norms and regulations of NRB. Credit proposal associated with loans that are
against the NRBs directives like loan against highly perishable goods, arms and ammunition, non
addictive medical drugs etc. are rejected at once.
2.149

4.2 Experiences as an Intern

2.150

Overall, my internship period was very fruitful, productive, creative and

rewarding. I am privileged to have been supported by such helpful people who taught me from the
basics and helped me gain practical knowledge. The organizational culture, sharing and caring
attitude of the employees are what I adore and respect in MBNL. My involvement in MBNL has
helped my confidence grow with adequate exposure.
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4.3 Conclusion

2.153 Credit Risk Department is an integral part of any financial institution and it is compulsory
to have a risk department according to the recent directives of NRB.. Not being an exception,
MBNL also have a very strong team of managers to deal with risk associated with credit
proposals. The lending portfolio of every bank determines their growth and progress in the
market. Banks are always concentrated upon collecting and lending of cash to various
parties. Either it be with tempting schemes or with lucrative interest rate, banks are always
concentrated upon their growth and progress in regards to providing lending services to its
valued customers.
2.154 The information about risk associated with credit proposals of MBNL shows that there
are various types of risk associated with the credit proposals. The risks are analyzed either to
outlay the character of the client or to determine the ability of the client to payback the
loaned amount with the pre-specified interest on right time or to check the organizations
background and credit worthiness. The CRD is considered as the foundation of the earnings
for the banks. The maintenance of the status of the company like in terms of liquidity and
leverage depends upon the proper functioning of this department. It is one of the important
departments which is associated directly with the growth and progress of ay bank. As it has
its function associated with risk related with credit proposal it proves to be the governing
body to rest public money in the safe hands of the customers.
2.155

As a whole, the internship period for me was very productive. In the initial few days of

my internship period I was assigned to the read the product papers to evaluate the credit files.
With this I got the idea about various loans products and the criteria or condition under which
the proposal can be approved. Further I was given the opportunity to read the proposal and
make the comprehensive evaluation of the proposal. Starting with the personal loan proposal
like auto loan I gained more confidence regularly to evaluate other corporate proposals too.
2.156 Working as an intern, I was satisfied and had wonderful opportunity of getting a real life
working experience which would add value in learning of MBA. Its through this opportunity
I believed that having a compulsory internship as a requirement of the MBA degree is a very
good decision. This helped me have a practical experience along with our theoretical

knowledge. It help build me confidence and changed my approach toward working in

corporate world is hard.
2.157 4.4 Recommendations
2.158 After the completion of my internship, I gained a lot of experience and have developed a
confidence that I can stand in the outer world. During my internship, I felt that works that I
was assigned were highly appreciable that helped me to develop my inner strength. However,
I would like to give some recommendation to the management of bank regarding some of the
work related issues that I have experienced during my internship which are as follows:

There should be clear descriptions on what interns are suppose to do rather than just
waiting for the supervisor to give the general operation tasks.

Rotation policy for the interns in the bank will help them gain an exposure in various

departments.
Proper division of number of interns in a certain department.
Even though the software cannot be used by interns, dummy software can be maintained
for teaching purpose only for interns.

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2.160
2.161

Program workplace relationship

2.162 The internship program can be improved further if following steps can be implemented
by the colleges and the university:

The major software that are used in the bank and financial institutions like OracleFlexcube, Newton, Finnacle etc. can be taught in general in colleges so that it could be
easy for the interns to understand the transactions that are done in the institutions even
though they are not allowed to use it.

The college can help the students by giving general ideas about the current position and
practices of the different organizations so that the students can understand and choose the
correct place according to their personal ability and career path.

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2.168
2.169

2.170
2.172
2.173 Types of loan
2.176 Overdraft

APPENDIX

2.171 Product Feature

Table V: Interest on loans and Advances
2.174 Prime rate p.a.
2.177 15.00%

2.175 Other p.a.

2.178 16.00% 17.00%
2.179 Term Loan
2.180 15.50%
2.181 15.00% 16.00%
2.182 Demand Loan
2.183 14.50%
2.184 15.00% 16.00%
2.185 Cash Credit Loan
2.186 14.00%
2.187 14.00% 15.00%
2.188 Import Finance
2.189 13.00% - 14.00%
2.190 14.00% 16.00%
2.191 Short Term Loan
2.192 14.00% - 15.00%
2.193 15.00% 16.00%
2.194 Pledge Loan
2.195 15.00% - 18.00%
2.196 Export Finance
2.197 13.00% - 14.00%
2.198 14.00% 16.00%
2.199 SME Loan
2.200 12.99% - 16.99%
2.201 Deprived Sector Loan
2.202 Individuals: 20.00% - 21.00%
Institutions: 11.00% - 14.00%
2.203
2.204 Mortgage Overdraft
2.205 16.00%
2.206 17.00% 18.00%
2.207 Mortgage Loan: Up to 5 years 2.210
14.00% 2.213
15.00%
2.208
Up to 8 years
2.211 15.00%
2.214 16.00%
2.209
Up to 15 years
2.212 16.00%
2.215 17.00%
2.216 Housing Loan:
Up to 5 years 2.220
13.00% 2.224
14.00%
2.217
Up to 10 years
2.221 14.00%
2.225 15.00%
2.218
Up to 15 years
2.222 15.00%
2.226 16.00%
2.219
Up to 20 years
2.223 16.00%
2.227 17.00%
2.228 Auto Loan: Private
2.230
13.00% 2.232
14.00%
2.229 Commercial
2.231 15.50%
2.233 16.50%
2.234 Margin Lending
2.235 16.00%
2.236 17.00% 18.00%
2.237 Loan against FDR
2.238 Own Bank: +2.00% or minimum 13.00%
2.239 Other Bank: +3.00% or minimum 14.00%
2.240 Loan against Govt. Securities
2.241 +2.00% or minimum 14.00%
2.242 LCY Loan against FCY Deposit
2.243 12.00% - 14.00%
2.244 Other Loans
2.245 18.00% - 21.00%

2.246
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2.249
2.250
2.251

2.252

BIBLIOGRAPHY
2.253

1.
2.
3.
4.

www.megabanknepal.com
www.nrb.org.np
Wikipedia and Encyclopedia (www.google.com)
Financial Institutions and Markets; by Kiran Thapa and Bharat Parajuli, Januka

Publication, Kathmandu
5. Financial Institutions and Market; Meir Kohn, Second Edition, Oxford University Press,
2.254
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