CHAPTER 1

INTRODUCTION

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1.1 Introduction
Bangladesh commercial Bank was the origin of the former Bangladesh commerce and
investment Limited. Who was set up on 27 January 1986. In April 1992 its activities were
suspended by Bangladesh Bank due to liquidity crisis. Which was changed into a bank by
Bangladesh Bank to protect the banking sector the employees and customers of the farm. It was
incorporated on 1 June 1998.
this bank is a private non-government banking industry. Founded in Dhaka Bangladesh. And its
headquarter is situated at Dilkusha, Dhaka, Bangladesh, the main commercial center of the
capital.
The services of this Bank:

Banking service
Consumer banking
Corporate banking
Investment banking

Bangladesh commerce Bank Limited is governed by a board of directors consisting of 10

members headed by chairman “Dr. Engr. Rashed Ahmed Choudhury”. who has unique blend of
academic and industry work experience to his role as chairman of Bangladesh commerce bank
Limited.

Bangladesh commerce Bank Limited extends all the major personal banking facilities and
services to its customers with his skilled manpower the network of 51 branches covering 18
districts in Bangladesh.

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1.2 background of the study

Practical application of the knowledge acquired from any Academy course of the study is very
important. Theoretical knowledge will become useless if it is not applied in the practical life. So
I need proper application of my knowledge to get some benefit from my theoretical knowledge
to make it more fruitful. Such an application can be possible for internship.
As part of the internship program of BBA course requirement, I was a sin for doing my
internship in Bangladesh commerce Bank Limited (BCBL) for the period of 2 months starting
from November 22, 2018 to January 22, 2019. During my intern period in Bangladesh commerce
Bank Limited, Mirpur 1 branch, I worked under all departments of the bank.
My report was “Analysis of loans & advances of Bangladesh Commerce Bank Limited”,
which was assigned by my Internship supervisor Mrs. Tahmina Rita, Assistant Professor,
Department of Management, Jagannath University. I had chosen this topic because a banking
firm’s loan disbursement is the most important sector to earn revenue. So it is important to
analyze how they recover their loan to earn expected profit.

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1.3 Scope of the Study

After completing 126 credits in Jagannath University there were an opportunity to get
appointment in one of the renowned Bangladesh Commerce Bank limited which explored a vast
scope for the study. Scopes for the study depicted as follows:

1) Loan and advance procedure followed by the Bangladesh Commerce Bank

limited.
2) Background and prospective of Bangladesh Commerce Bank limited.

1.4 Objectives of the Study

 General Objective
a) To satisfy the requirements of our BBA program
b) The main objective of the study is to analyse the Loans and Advances of Bangladesh
Commerce Bank limited, Mirpur Branch.

 Secondary/Specific Objectives:
a) To discuss credit services offered by Bangladesh Commerce Bank Ltd.
b) To describe loan sanctioning process of Bangladesh Commerce Bank Ltd.
c) To analyse loan operations system of the Bangladesh Commerce Bank Ltd.
d) To identify the problems related to loans and advances operations of
Bangladesh Commerce Bank Ltd.
e) To make some recommendations to solve the problems.

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1.5 Methodology of the Study

In order to make the report more meaningful and presentable, two sources of data and
information have been used widely.

Primary data

The primary data has been collected from original sources by an investigation. The primary data
are those which are collected a fresh and for the first time and are original in character. The data
was collected following an interview schedule for the employees of the bank.

Primary Data Sources

i) Data collection through working with employees of the bank at the time of field
operations.

ii) Work experience gathered through working during internship period.

iii) Discussion with employees, managers

iv) Observation during others works.

To collect primary data most popular and convenient questionnaire method was used.
Two set of questionnaire has been designed on the basis of multiple choice questions and
a few question got the dichotomous format.

Target Population

The target population of this report is the managers and loan department staffs of the bank.

Secondary Data

On the other hand, the secondary data are those which have already been collected by someone
else which have been collected through the statistical process. Secondary sources of data consist
of all published and reported materials including books, journals, articles etc.

Secondary Data sources are

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 (i) Collection of secondary from Annual report
(ii) Secondary data also have been collected from the different publications of the Bank.
(iii) Other information was obtained from various corresponding files of the Bank.
(iv) Internet was one of the important sources for secondary data collection.

1.6 Limitations of the Study

The study is conducted with an objective to make a thorough study of loans & advances
procedures that have been availed many facilities and faced some obstacles during my study.
These obstacles may be termed as limitation of the study. These limitations are as follows:

Limitation of time during internship period.

Unavailability of adequate composed reports as required making an extensive report.

The information acquired for the study was not adequate.

 In many cases, up to date information is not published

 Confidential documents or objects to the firm were not available to access.

 As the internship is the first practical experience, it is not possible to know everything about
the bank.

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 CHAPTER 2

Overview of Bangladesh
Commerce Bank Limited

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2.1 Profile of Organization

Name: Bangladesh Commerce Bank Limited

(BCBL)

Essence: Service With Trust

Date of Incorporation: June-1, 1998

Nature of Business: Banking service and profit oriented

Registered Office: Eunoos Trade Center (Level-22), 52-53

Dilkusha, C/A. Dhaka – 1000
Number of Branches: 51

Authorized Capital: BDT 10,000 Million

Paid up Capital: BDT 1,989 Million

Face Value per Share: BDT 100 per share

Company Registration Number: C-35510(2286)/98

Bangladesh Bank License Number: BRPD(P)744(KHA)/99-2842

Managing Director(MD) & CEO: Abu Sadek Md. Sohel

Additional Managing Director(AMD): Md. Saifur Rahman Patwary

Deputy Managing Director(DMD): Kazi Md. Rezaul Karim

Phone: +88 02 9568218

Fax: 9559831, 9571581

Website: www.bcbl.com

2.2 Historical Background of Bangladesh Commerce Bank

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Bangladesh Commerce Bank Ltd.(BCBL) was established by reorganizing former Bangladesh
Commerce and Investment Ltd.(BCIL). BCIL was set up on 27 th January 1986 as a non-banking
financial institution with an authorized and paid up capital of TK. 300.00 million and TK. 50.00
million respectively.
Bangladesh Commerce Bank Ltd. (BCBL) incorporated in Bangladesh on 1st June, 1998 as a
banking organization. It started banking operations on 16th September, 1999 with an authorized
and paid up capital of TK 2,000 million and TK. 920 million respectively. The 52% share of
Bangladesh government in the bank’s paid up capital is TK. 300 million while depositors of the
former BCIL contributed TK 520 million. The balance of TK 100 million is to be subscribed by
banks and financial institutions under guidance and supervision by Bangladesh bank. The former
BCIL was set up on 27th January, 1986. It continued its business till April 1992. Consequent
upon its liquidity crisis, Bangladesh Bank suspended its operation in April 1992. As a result, the
investors of the company suffered a lot and its employees became jobless. Both the depositors
and jobless employees launched a movement for reopening the company in some form or other
and demanded return of their money and dues. With a view to safeguarding the interest of the
depositors, employees and general public, and to protecting the system itself from contagious
effects of bank failures, the Government of Bangladesh established the Bangladesh Commerce
Bank Ltd.(BCBL) on the ashes of collapsed BCIL. Subsequently, the Government on 8 th
February, 1998 constituted a 10-member Board of Directors to organize and transform BCIL into
BCBL and to admin the affairs of the bank. The 24 branches of BCBL were reopened as full-
fledged branches of BCBL.
The first priority of the bank in 1999 and 2000 was to recover the past loans of BCIL. The bank
also suffered losses in the year 1999 and 2000 and was not able to maintain necessary provisions
for classified loans. Investment of the bank has increased from TK 20 million in 1999 to TK. 95
million in 2000, mainly in Government Treasury bills. During the short period of its existence in
the new set up, the bank is managed by a 9-member Board of Directors appointed by the
government again.

Today Bangladesh Commerce Bank Limited has 51 branches across the whole Bangladesh. It is
performing well and improving its position day by day.
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3.3 Mission of BCBL

Bangladesh Commerce Bank Ltd. is committed to fulfill its customer needs and become their
first choice in banking so that a sustainable growth, reasonable return and contribution to the
development of the country can be ensured with a   motivated and professional work force.

2.4 Vision of BCBL

To become a Bank of first choice by the customers with meaningful contributions to the society.

2.5 Objectives of BCBL

The objectives of Bangladesh Commerce Bank Ltd. are__

 To ensure growth and development of the bank.

 To extend banking services to all classes of people
 To be a trend-setter in the socio-economic development of the country
 To maintain an incremental deposit & reduce the non-performing assets
 To provide high quality products and services.
 To use the resources of the bank efficiently.
 To work for business innovation and improvements.
 To have a strong customer focus and build strong relationship with customers.
 To help to solve the unemployment problem

2.6 Board of Directors

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Chairman: Dr. Engr. Rashid Ahmed Chowdhury

Directors:

Mr. Md. Farhad Uddin

Dr. Md. Jafar Uddin
Mr. Humayun Bokhteyar FCA
Mr. A A M Zakaria
Mr. Md. Shafiqul Islam FCA
Mr. Mohammad Hanif Chowdhury
Mr. Mohammed Arshed
Mr. Md. Moshiur Ali

Managing Director & CEO: Mr. R Q M Forkan

2.7 Executive Committee

The executive committee consists of six members.

Mr. Humayun Bokhteyar, FCA, Chairman.
Mr. A.T.M. Murtozaa Reza Chowdhury, Director.
Mr. Md. Farhad Uddin, Director.
Mr. Mohammad Hanif Chowdhury, Director.
Mr. Md. Arshed, Director.
Mr. A A M Zakaria, Director.

2.8 Hierarchy of position in BCBL

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 1. Chairman

2. Managing Director (MD)

3. Senior Executive Vice President (SEVP)

4. Executive Vice President (EVP)

5. Senior Vice President (SVP)

6. Vice President (VP)

7. Senior Asst. Vice President (SAVP)

8. Asst. Vice President (AVP)

9. Senior Executive Officer (EO)

10. Executive Officer (EO)

11. First Executive Officer (FEO)

12. Officer

13. Senior Asst. Officer

14. Asst. Officer

Figure: 2.8 Hierarchy of the management of this Bank

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2.9 Products & Services of BCBL

The products & services of Bangladesh Commerce Bank Ltd. are –

Deposit Products:
 Savings Bank Deposit(SB)
 BCB Srijoni (A Savings account for Working Women)
 BCB Nondita (A Savings Account only for Housewives)
 Current Deposit Account(CD)
 Special Notice Deposit (SND)
 BCB Students’ Savings Account
 BCB Double & Triple Deposit Scheme
 BCB Monthly Profit Scheme
 BCB Monthly Savings Scheme(MSS)
 BCB Lakhpoti Scheme(LDS)
 BCB Millionaire Scheme(MDS)
 BCB Kotipoti Scheme(KDS)
 BCB Marriage Savings Scheme
 Education Savings Scheme
 Fixed Deposit Account(FDR)

Loan Products:

 BCB Teachers’ Loan

 BCB Special Loan (For Service Holders)
 BCB Consumer Credit Scheme
 BCB Credit Scheme For women entrepreneurs
 Personal Loan
 House Building Loan(HBL)
 BCB Car Loan

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  Marriage Loan
 Salary Loan
 Small Business Loan
 Import Loan
 Farmer Loan

Foreign Exchange Service

 Export Finance
 Import Finance
 Letter of Credit
 Traveler’s Cheque
 Western Union
 International Money Express(IME)
 Transfast
 Express Money
 Money Gram

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 CHAPTER 3

Loans and Advances

Department

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The word credit come from this latin word ”Credo”. Which means lender trust in people/ firm/
company’s ability and intention and repay. In other words credit Is the ability to command goods
and services of another return or promise to pay such goods or services at some specified time in
the future. This is the main source of profit for a bank, on the other hand it could bring disaster in
the bank and whole economy of a country if it is wrongly used.

The objective of the credit management is to maximize the performing asset and the
minimization of the non-performing asset as well as ensuring the optimal point of loan and
advance and their efficient management. Credit management is a dynamic field where a certain
standard of long range planning is needed to allocate the fund in the diverse field and to
minimize the risk and to maximize the return on the invested fund. Continuous supervision,
monitoring and follow-up are highly required for ensuring the timely repayment and minimizing
the default. Actually the credit portfolio is not only constituted the bank assets structure but also
a vital factor of the bank’s success. The overall success in credit management depends on the
bank’s credit policy, portfolio of credit, monitoring and proper follow-up of the loans and
advances.

3.1 Types of Loan and Advances

Commercial loan
CC (hyp o)
SOD LTR

Term Loan
Project finance

Agricultural loan
Small Agricultural loan
Loan to agro based industries

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 Staff Loan
Car loan
House building loan
Loan against provident fund

Working Capital
SME
Corporate bodies and large industries

Others
Transport loan
Export loan
Loan against financial obligation

3.2 Classification of Loans

Loan classification attempts to categorize the debt information in a systematic manner. Loan
classification is defined in terms of degree of risk associated with loans. Loans are generally
classified into two (4) types:

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 Unclassified

Criticized
Loan
Substandard
Scheduled
(SS)

Adversly
Doubtful (DB)
Classified

Bad or loss (BL)

Unclassified Loan: Unclassified loans are those which repay regularly and fully secured in
terms of safety, liquidity and marketability etc.

Criticized loan: Loans that are performing well but have minor weakness because the bank has
not followed its own loan policy or failed to get full documentation from the borrower are called
criticized loans.

Scheduled loan: Loans that appear to contain significant weakness or that represent what the
examiner regards as a dangerous concentration of credit in one borrower or in the industry are
called scheduled loans.

Adversely classified Loan: When an examiner finds some loans that carry an immediate risk of
not paying out as planned, these credit are called adversely classified loans.

Substandard: When the banks margin of protection is inadequate due to weakness

in collateral or in the borrower’s repayment abilities hen it is called substandard loan.

Doubtful: A loan is doubtful when it carries a strong probability of an uncollectible

loss to the bank.

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 Bad/Loss: A loan is considered as bad when it is regarded as uncollectible and not
suitable to be called as bankable assets

3.3 Basis of Loans and advances

i) Lien

ii) Mortgage

1. LIEN

Lien is permitted against the Following

 DPS= Deposit Pension Scheme

 FDR= Fixed Deposit Receipt
 PSE= Protirakkha Sanchoy Patra

Lien (VALUE) must be higher than the value of Loans. 80% of Lien documents (VALUE) is
permitted for the Loans & Advances. The position of Lien Documents must be under the hand of
Bank. Here, Interest Rate of Loans: 14%

2. Mortgage

 Land
 Building
 Shop

Mortgage value must be higher than the value of Loans. 50% of Mortgage Documents (value) is
permitted for the Loans & Advances. The position of Mortgage Documents need not to be under
the hand of Bank only legal papers are necessary to be under the hand of

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3.4 Loan Approval process of BCBL

Bangladesh Commerce Bank, being one of the largest private commercial bank of the country,
has some prejudice to finance directly on priority basis to agriculture, commerce and industry
sector for strengthening the economy base of the country. Hence, it is very clear that, BCBL
plays an important role to move the economic wheel of the country. And the department of loans
and advances are responsible for performing this important task.

Routine approval of loans or credit is handled in the following manner:

 Application forwarded to zonal office/head office for review by the ZCRO/HCRO.

 ZCRO/HCRO advises the review to recommending branches.
 ZCRO/HCRO supports and forwarded to Head of Business Units within delegated
authority and to Head of Credit Risk for onward recommendation.
 HOCR advises the review to ZCRO.
 HOCR & HOBU supports and forwarded to credit committee.
 Credit committee advises the decision as per delegated authority to HOCR & HOBU.
 Credit committee forwards the proposal to EC/ Board for their approval within their
respective authority.
 EC/Board advises the decision to HOCR & HOBU.
 Bank. Here, Interest Rate of Loans: 13%.

3.5 Approaches to the Bank for loans

When a borrower approaches to BCBL for a loan, he or she is required to fulfil the following
criteria:

a. He or she has to be a client of the bank.

b. He or she needs to apply properly describing the purpose of the loan amount needed

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 & his/her capacity of repayment

3.6 Steps of credit granting

C r e d it A n a ly s is

A p p ro v a l

D is b u r s e m e n t

S u p e r v is io n

R eco v ery

Figure -5; Steps of credit granting

3.7 Process of Handling Loans

Step 1: Getting Loan Proposal

The prospective borrower has to apply to the branch by filling up a specific credit line
application form along with the following documents required for processing the loan proposal:

 Request for credit limit of customer

 Project profile of profile of business
 Copy of trade license duty attested

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  Copy of TIN (Tax Identification Number) certificate
 Certificate copy of Memorandum and Articles of Association, certificate of
incorporation, certificate of commencement of business, resolution of the board,
partnership deed (where applicable)
 Personal net worth statement of owner, directors, partners etc.
 Valuation certificate of the collateral security in bank’s form with photograph of
security
 CIB (Credit information Bureau) inquiry form duly filled in
 Stock report duly verified (where applicable)
 Indent / Pro forma invoice / Quotation
 Price verification report
 Statement of accounts
 Declaration of the name of the sister concern and their liability

Step 2: Collecting Information

At this stage, after receiving the loan application form, branch sends a letter to Bangladesh Bank
for obtaining a report from there regarding the prospective borrower. This report is called CIB
(Credit Information Bureau) Report, The purpose of this report is to being informed that whether
the borrower has taken loan from any other bank or not, if ‘yes’ then whether these loans are
classified or not.

Step 3 and 4: Evaluating Project/Client and Primary Security & Collateral

At this stage, after receiving the CIB (Credit Information Bureau) Report, if the Bank thinks that
the prospective borrower will be a good choice then the bank will scrutinize the documents
submitted by the borrower. In this stage, the branch will look to check whether the documents
are properly filled up and signed for verification. The bank also scrutinizes the security or
collateral for the safety of the loan.

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Step 5: Branch level evaluation

In this stage, the respective branch will prepare a credit proposal containing relevant information,
regarding the sanctioning of the loan which the prospective borrower has applied for

Step 6: Decision

Now, the Branch has to send the proposal to the Head Office. Head Office will prepare a minute
and submit it before the Executive Committee of the comprising members from the Board of
Directors and top management officials. The minute for the proposed loan has to be passed by
the Executive Committee.

Step 7: Sanctioning & Documentation of Loan

After getting the approval of Head Office through an official sanction letter, the Branch will
provide the borrower a sanction advice containing particulars of the loan and detailed terms and
conditions of the Bank regarding the loan. The borrower has to acknowledge receipt of this
sanction letter as a token of his acceptance before availing the loan. At this stage documentation
which is an important aspect of loans and advances is carried out for collecting necessary Charge
Documents from the borrower. Charge Documents are a set of printed and prescribed forms,
which are executed by the borrower to protect the bank’s interest while bank is providing
loans/advances.

Step 8: Disbursing Loan

After verifying all the documents, the branch disburses the loan to the borrower’s loan account in
this stage known as the disbursement stage. At this stage for withdrawing the sanctioned loan
amount, the borrower creates a deposit account and the loan is transferred to it by passing
vouchers. Afterwards, the customer can withdraw the money of his desired loan amount. A loan
repayment schedule along with mode of repayment is also prepared by the branch and is

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provided to the borrower.

Step 9: Supervision of the Loan

At this stage known as the post-disbursement stage, the bank observes and follows the borrower
in the following manner after the disbursement of the loan:

 Constant supervision.
 Working Capital assessment.
 Stock report.
 Break even Analysis.
 Rescheduling of repayment.

Step 10: Recovery of the Loan

At this stage, loans are repaid in instalment or through lump sum amount to be adjusted within
the validity period, according to the Bank’s directives provided as per the sanction terms of the
loan. If any loan is not repaid then notices are served to the borrower. Sometimes legal actions
are also taken for recovery of the loan.

4.8 Credit Policy of BCBL

One of the most important ways, a bank can make sure that its loan met organizational and
regulatory standards and they are profitable is to establish a loan policy. Such a policy gives loan
management a specific guideline in making individual loans decisions and in shaping the bank’s
overall loan portfolio. Bangladesh Commerce Bank Limited there is perhaps a credit policy but
there is no credit written policy. In the feature, credit principles include the general guidelines of
providing credit by branch manager or credit officer. In BCBL they follow the following
guideline while giving loan and advance to the client. Credit advancement shall focus on the
development and enhancement of customer relationship. All credit extension must comply with

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the requirements of:

 Bank’s Memorandum and Article of Association

 Banking Company’s Act
 Bangladesh Bank’s instructions, other rules and regulation as amended from time to time

The bank shall provide suitable credit services for the markets in which it operates. It should be
provided to those customers who can make best use of them. Interest rate of various lending
categories will depend on the level of risk and types of security offered.

3.9 Credit Principles

In the feature, credit principles include guidelines of providing credit by Branch manager (AGM)
or credit officer (Loans in charge). In the Bangladesh commerce bank’s local branch offices, the
following procedures are followed while sanctioning loans and advances to the client.

 Quality of credit is more important than exploiting new opportunities.

 The principal management and/or shareholders must be free of any doubt about their
integrity.
 If the bank does not understand the business, it shall not lend to that business.
 The purpose of the loan should contain the basis of its repayment.
 Credit decision should not be made until receipt of all the relevant facts.
 Assessing a company’s management quality is vital.
 The economic cycle is inevitable. It is wise to be conscious in evaluating risks likely to
arise when economic conditions change in the future. “Bad loans are usually made in
good times”.
 Collateral security should not be a substitute for repayment.
 Lending to smaller borrowers is riskier than lending to larger borrowers. Smaller firms
are more vulnerable to economic downturns.
 Bank should not let poor attention to detail of credit administration, which may spoil a
sound facility.

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 If any borrower wants a quick answer, it is “NO”. The word ‘quick’ means lack of
sufficient time for due diligence on any credit request.
 Bank should monitor where the bank’s money is going to be spent.
 Think first for the Bank.

3.10 Lending Principles followed by BCBL

The principle of lending is a collection of certain accepted time tested standards, which
ensure the proper use of loan fund in a profitable way and its timely recovery. BCBL follows
the following seven principles in its lending activity:

Safety: Safety should get the prior importance in the time of sanctioning the loan. At the
time of maturity, the borrower may not or may be unable to pay the loan amount. Therefore,
in the time of sanctioning the loan adequate securities should be taken from the borrowers to
recover the loan. Banker should not sacrifice safety for profitability. Safety depends mainly
on integrity, business behaviour, reputation, past experience in the particular line of business,
financial solvency, quantum of own equity in business, capability to run business efficiently,
capacity and willingness to repay the loan etc.

Liquidity: Banker should consider the liquidity of the loan in time of sanctioning it.
Liquidity is necessary to meet the consumer need. The borrower should have liquid assets so
that he can adjust liability on demand and as much as possible loan itself should be quasi
liquid so that it can be realized on demand in case of need for which call/short term loans are
preferable so far this aspect is concerned.

Security: Banker should be careful in the selection of security to maintain the safety of
the loan. Banker should properly evaluate the proper value of the security. If the esteemed
value is greater than or equal to loan amount, the loan may be given. The more the cash near
item the better the security. In time of valuing the security, the banker should be more
conservative. The securities must possess required basic qualities. It must be ensured that

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 repayment of the loan is secured and for this purpose concerned officials must retain security
against loan to fall back upon inn case of borrower’s default.

Profitability: As a commercial and financial organization, banker should consider the

profitability. So baker should consider the interest rate when going for lending. Bankers
should always fix such an interest rate for its lending which is higher than its savings deposits
interest rate.

Diversity: Bank should made advance in different sector and regions and instead of
sanctioning loan of bigger amount to some party, should spread too many in smaller amount.
Banker should minimize the portfolio risk by putting its fund in the different fields or sectors.
If bank puts its entire loan able fund in one sector, it will increase the risk. Banker should
distribute its loan able fund in different sectors. So if it faces any problem in any sector, it
can be covered by the profit gained by lending to another sector.

Productive Purpose: Bangladesh Commerce Bank Ltd. exercises its lending function
only on productive purpose. Purpose of loan should be production, development and
economic benefit oriented.

National or Social Interest: BCBL also considers national aspect of any project while
financing. They take utmost care so that the project cannot be detrimental to the society as
well as to the nation. Nothing can be done legally if it jeopardizes national interest in any
way.

3.11 Credit risk and commercial bank

Risk is inherent in all aspects of a commercial operation; however for Banks and financial
institutions, credit risk is an essential factor that needs to be managed. Credit risk is the
possibility that a borrower or counter party will fail to meet its obligations in accordance with
agreed terms. Credit risk, therefore, arises from the bank’s dealings with or lending to corporate,
individuals, and other banks or financial institutions.

Credit risk management needs to be a robust process that enables banks to proactively manage
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loan portfolios in order to minimize losses and earn an acceptable level of return for
shareholders. Given the fast changing, dynamic global economy and the increasing pressure of
globalization, liberalization, consolidation and disintermediation, it is essential that banks have
robust credit risk management policies and procedures that are sensitive and responsive to these
changes.

3.12 Credit risk management and Bangladesh Commerce Bank Limited (BCBL):

The most sophisticated area of a bank is credit department. Credit can be termed as the gainful
employment of deposits received. In banking, a bank receives various types of deposits that it
has to employ somewhere for further benefit. That is why a bank lends that fund to people or
organization under certain terms & conditions for repayment with an additional amount or
benefit. As we know that a bank lends money that it has borrowed, we can assume that creation
of credits is a very important task of a bank and a major source of its income.

Apart from the robust credit risk management process, BCBL has a Credit Risk Management
policy documents which address the following issues.

a) Establishing a credit risk free environment

b) Setting sound credit approval process
c) Maintaining an appropriate credit administration and monitoring process

The bank use comprehensive risk analysis procedures these are given below:

a) Lending risk analysis

b) Risk grading
c) Assigning risk grading score

The bank maintains authority to sanction/approve loans is clearly delegated. Credit Risk
Management has segregated into four broad functions:

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 a) Credit Marketing /Relationship
b) Credit Approval/Credit Risk Management
c) Credit Administration
d) Credit Recovery

3.13 Root causes of problem credit in commercial banks like BCBL:

a) Compromise or violation of credit principles, that is granting credit carrying undue risks
or unsatisfactory terms.
b) Extension of credit on an unsound basis to directors or large shareholders
c) Incomplete credit information.
d) Lending without a clear agreement governing repayment
e) Being influenced by salary, incentives and bonuses based on loan portfolio growth.
f) Failure to obtain or enforce repayment agreements
g) Lack of adequate supervision of old and familiar borrowers
h) Ignoring warning signs pertaining to the borrower, economy, region, industry or other
related factors.
i) Timidity of dealing with individuals having dominating personalities or influential
connections or friendships or personal conflicts of interest involved.
j) Poor selection of risks
k) Loan for the speculative purchase of securities or goods
l) Dependence on oral information furnished by borrowers in lieu of reliable financial data
m) Technical in competences

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 CHAPTER 4

Analysis of Loan and

Advances

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4.1 Total deposit and loan of BCBL (2013-2017)
(In Million Taka)

Year FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Loans 13,064 15,742 16,059 16,634 19,284

Deposit 19,736 23,020 24,208 25,223 30,009

Graph no-1; Title: Total Deposit and Loan of BCBL (2013-2017)

Total Deposit and Loan (In million taka)

35,000
30,009
30,000 25,223
24,208 19,284
23,020
25,000 16,059 16,634
19,736 15,742
13,064
20,000

15,000

10,000
Loan
5,000
Deposit
0
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Deposit Loan

Interpretation: The amount of total deposits and loans and advances has increased constantly
over the year. In the year 2017 it reached its highest point.

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4.2 Growth of Loan and Advances of BCBL (2013-2017)

(In Million Taka)

Year FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Loan and Advances 13,064 15,742 16,059 16,634 19,284

Graph no-2; Title: Growth of Loan and Advances of BCBL (2013-2017)

Growth
0.5 47.61%
0.45
0.4
0.35
0.3 27.33%
0.25 22.93%
20.50%
0.2
0.15
0.1
0.05
0.00%
0
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Growth

Interpretation: The growth of Loan and advances remains increasing in consistent manner. No
falling of growth in Loan and Advances noticed here.

4.3 Total Loan and Advances of BCBL (2013-2017)

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 Year FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Loan and Advances 13,064 15,742 16,059 16,634 19,284

Graph no-3; Title: Total Loan and Advances of BCBL (2013-2017)

Total Loan and Advances (In million Taka)

FY 2017 19,284

FY 2016 16,634

FY 2015 16,059

FY 2014 15,742

FY 2013 13,064

0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000

Interpretation: Growth of total loan and advances occurred in a consistence manner. It is

noticed that in FY 2013 the amount of total loan and advances was tk. 13,064 million. With a
regular growth in each year the amount of total loan and advances came to the amount of tk.
19,284 million.

4.4 Credit to deposit ratio (Gross) of BCBL (2013-2017)

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 Year FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Credit to Deposit Ratio 66.19% 68.38% 66.34% 65.95% 64.36%

Graph no-4; Credit to deposit ratio (Gross) of BCBL (2013-2017)

Credit to deposit ratio

0.69
68.38%
0.68

0.67
66.19% 66.34%
65.95%
0.66

0.65
64.26%
0.64

0.63

0.62
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Interpretation: Bangladesh Commerce Bank holds its credit to deposit ratio within the quotas of
65% to 70%. In the FY 2014 the credit to deposit ratio touched the pick point with a percentage
of 68.38%. But after than it started to fall down in each year. And in FY 2017 it was 64.26%.

4.5 Net Interest Income of BCBL (2013-2017)

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 Year FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Net Interest Income 334 630 453 611 728

4.5 Graph no-5; Title: Net Interest Income of BCBL (2013-2017)

Net Interest Income (In million Taka)

800 728

700 630 611

600
453
500

400 334

300

200

100

0
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Interpretation: In the FY 2013 net interest income was the lowest within the nest 5 years. Then
in the FY 2014 this was increased and tk. 630 million. But in FY 2015 it has fallen. But after this
net interest income growth was high. In FY 2016 an 2017 it was tk. 611 million and tk. 728
million.

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 CHAPTER 5

Findings,
Recommendation and
Conclusion

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5.1 Findings:

1) From the aforesaid study a number of findings can be disclosed. Here major findings are
being stated and in the immediate next topic all the possible solutions of negative findings
will be recommended.
2) Loan disbursement procedure takes longer time than other banks that may cause losing
clients.
3) Internal environment of branches are very chaotic which may lead to customer
dissatisfaction.
4) Limited authority of branch manager in case of sanctioning loans.
5) Loans and advances are not widely disbursed.
6) Lower number of branches means lower number of customers.
7) Credit to deposit ratio are decreasing from 2014
8) Paper-based works are still existed in branch that takes longer times in case of processing
loan application.
9) Decrease in loan disbursement may lower the income of the bank.

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5.2 Recommendations:

 In order to get competitive advantage and to deliver quality service, top management should
try to modify these services.
 The credit proposal evaluation process and time should be shortened.
 Bangladesh Commerce Bank Ltd. should increase its loan products to compete in the market.
 Bangladesh Commerce Bank Ltd. should always monitor the performance of its competitors
in the field of loan and advances.
 Bangladesh Commerce Bank should increase the number of Branches.
 Internal environment of branches should be more customer friendly to attract more customer.
 For customer’s convenience in Bangladesh Commerce Bank Ltd. should provide more credit
officer to investigate the client financial position.
 Bangladesh Commerce Bank Ltd. should continuously strive to monitor the loan sanctioning
procedure to improve the current position.
 Bangladesh Commerce Bank Ltd. should increase its finance on diversified projects to
achieve more clients.
 Bangladesh Commerce Bank Ltd. must develop electronic banking system to moderate the
service.
 Time consumed at service level should be minimized at optimum level.

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5.3 Conclusions:

As Bangladesh Commerce Bank Limited has so many flaws to fix for the betterment of the
organization. The Bank is strongly positioned in the market and growing gradually in a
consistent manner. It’s core strengths are very powerful to meet the shareholder’s expectations.
Thus, it has to take initiative so that it can fulfil the desire of the customers. It will enhance more
public services and build up new working teams to provide the best services to its valuable
customers. It must be run in organized way and discipline must be ensured in all sphere of its
performance. Efficient export team, import team and remittance team must be formed and
perform duties properly. More training, computerization, data collection, market analysis and
swiftness in servicing are essentially required as well as more new branches. Orderly
environment is also necessary to increase more customer satisfaction.

To do these the recommended suggestions can be used. Although it is theoretical suggestions, it

is not valueless. It has great impact on the banking business and other sectors of the economy.
For this, well organized decisions are essential.

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 References

Books:
Bangladesh Bank guidelines on Credit Risk Management (CRM) for Banks (2016)

Annual Reports:
Annual Report of BCBL 2015-16
Annual Report of BCBL 2016-17

Articles:

Bangladesh Bank’s Monthly major Economic Trends, Statistics table

Loan and advances Manual, Bangladesh Commerce Bank Limited.

Web Sites:
Bangladesh BANK Official Website -
https://www.bb.org.bd/aboutus/regulationguideline/guidelist.php

Bangladesh Commerce Bank Official Website- https://www.bcbl.com.bd/

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