A Book on

Credit Policy
&
Lending Guidelines

Revised Edition –2009

Uttara Bank Limited

Head Office
Dhaka
First Approval:

Name : A Book on Lending Guidelines and Credit Risk Management

Approval : Board of Directors of the Bank

Authority
Meeting date : Meeting dt:27-06-04 (Board Memo:151 Dt:24-06-04)

First Revised Edition:

Name : A Book on Credit Policy & Lending Guidelines

Approval : Board of Directors of the Bank

Authority
Meeting date : Meeting dt:26-12-06 (Board Memo:313 Dt:24-12-06)

Second Revised Edition:

Name : A Book on Credit Policy & Lending Guidelines

Approval : Board of Directors of the Bank

Authority
Meeting date : Meeting dt: 28.04.2009 (Board Memo:139 Dt: 26.04.2009)
 PREFACE

This Credit Policy & Lending Guidelines of the Bank was firstly prepared in line with the
Guidelines of Bangladesh Bank on Credit Risk Management in the year 2004 and subsequently it
was revised in the year 2007 and lastly it is revised in line with the Guidelines given by
Bangladesh Bank on Credit Risk Management. This policy will apply to all Branches of Uttara
Bank Limited for the guidance of the Officers/Executives in handling affairs relating to credit in a
disciplined way and replace the earlier “Credit Policy and Lending Guidelines-Revised
Edition2007” of the Bank which was approved by the Board of Directors in its meeting held on
26-12-2006.

It is very likely that this policy may have shortcomings and inadequacies which will be rectified/
removed in due course. Moreover, it will be revised and updated from time to time to meet up our
banks future requirement as well as on the direction of the regulatory body. As such, suggestions
from Bank’s Executives and Officers for making further improvement are welcome.

The main purpose of this policy is to make the executives and officers of the bank conversant
with the policy and strategy of the Bank regarding credit operation and enable them to discharge
duties and responsibilities with confidence and constructive initiative on right direction.

The concerned Executives and Officers must keep themselves fully conversant with its contents
which are strictly Private and Confidential and must not in any way be divulged to any person
not in the service of the Bank.

In addition to the instructions contained in this policy, the Branch In-charge/Manager and Officers
will also be guided by circulars issued by Head Office from time to time.

UTTAR BANK LIMITED SHAMSUDDIN AHMED

HEAD OFFICE, DHAKA MANAGING DIRECTOR
 Purpose of the Book

• To know the Lending Standards (LS) of UBL for assessing the credit worthiness of the
customer.

• To assist the bank’s officers to know about the loan products of the Bank & offer them to the
right customers.

• To be aware of the duties and responsibilities of concerned Departments/ persons related to

the lending procedures.

• To mitigate the risk in lending

• To know the booming and discouraged sectors of the bank.

• To develop the risk taking appetite, risk managing skills and wisdom.

• To know the criteria / covenants which the borrower shall or shall not abide by.

• To know the process of a thorough credit assessment which is to be conducted before granting
and approving of loans.

• To learn about the Credit Risk Grading Manuals, a vital decision making tools of lending
given by Bangladesh Bank.

• To learn about the approval process of Credit pre-conditions of disbursement & custodian
duty.

• To know the effective credit monitoring process along with Early Alert Reporting.

• To learn the credit recovery process & management.

• To know the loan pricing strategy of the bank.

• To know the approving authority of Loans and Advances.

• To know the organizational structure of credit at Head office, Zonal Office and Branch Level.
 Contents
Part- A Page No.
i Introduction 2
ii Lending Standard of UBL 3-13
Part- B Page No.
Chapter-1: General Guidelines 14-15

1.1 Products and Services………………………………….................……………… 14

1.2 Loan- Deposit Ratio…………………………..…………………..................…… 14
1.3 Compliance…………………………………….....................................………… 14
1.4 Discouraging Borrower Type……………………………….....................……… 14
1.5 Credit Risk Grade (CRG)………………………………...................…………… 14
1.6 Diversification……………………………………………................................… 14
1.7 Review/Update of the policy annually…………………............ 14
…………………
1.8 Approval from Board……………………………………..........………………… 14
1.9 Deviation from Policy…………………………………………...........…………. 15
1.10 Small Enterprise Financing…………………………………............……………. 15
1.11 Consumer Financing…………………………………………………...........….. 15
1.12 Lease Financing…………………………………………………….............…… 15
1.13 Syndicated financing…………………………………………............…………. 15
1.14 Single Borrower Exposure Limit……………………………..........……………. 15
1.15 Large Loan……………………………………………………...........………….. 15

Chapter-2: Credit Products 16-27

2.0 Introduction…….......... …………………………………………………..……… 16
2.1 Lending Categories…………………………………………………………………. 16-17
2.1.1 Agriculture……………………………………………………………… 16
2.1.2 Term Loan to Large & Medium Scale Industry………………..........…. 17
2.1.3 Term Loan to Small & Cottage Industry………………………........….. 17
2.1.4 Working Capital…………………………………………………....…… 17
2.1.5 Export Credit………………………………………………….………… 17
2.1.6 Commercial Lending…………………………………………....……… 17
2.1.7 Others…………………………………………………………………… 17
2.2 Types of Credit Facilities………………………………………………...........…… 18-25
2.2.1 OD (FO)…………………………………………………........………… 18
2.2.2 OD (Work Order)………………………………...............…………… 18
2.2.3 OD (Others)…………………………………………………………… 18
2.2.4 Cash Credit (Hypo)………………………………….............……….. 18
2.2.5 Cash Credit (Pledge)………………………………….………………… 18
2.2.6 PAD…………………………………………………..................……… 18
2.2.7 LIM……………………………………………………....................…. 19
2.2.8 LTR……………………………………………………….......………… 19
2.2.9 OD(Export)……………………………………….………............…….. 19
2.2.10 IBP……………………………………………………………………… 19
2.2.11 FBP…………………………………………………………......………. 19
2.2.12 DDP………………………………………………………………..…… 19
2.2.13 FDP…………………………………………………………………….. 19
2.2.14 Lease Finance …………………………………………………......…… 19
2.2.15 Uttaran Small Business Loan (USBL)………………………....………. 21
2.2.16 Nari Sawnirvor Rin Prokolpo (NSRP)…………………………………. 21
2.2.17 Syndicated Financing…………………………………..................……. 21
2.2.18 NBFI Financing…………………………………….............………….. 21
2.2.19 TL to Enterprise……………………………………….............……….. 22
 2.2.20 Housing Loan (General)…………………………..................………… 22
2.2.21 House Building Loan (Staff)………………………............…………… 22
2.2.22 Demand Loan…………………………………….....................……….. 22
2.2.23 Consumer Financing…………………………………...............……….. 22
2.2.24 Agriculture Financing………………………………………......………. 22
2.2.25 LC…………………………………………………………..............….. 23
2.2.26 Back to Back LC…………………………………………......…………. 23
2.2.27 IFBC……………………………………………………………..……… 23
2.2.28 BG………………………………………………………………………. 23
2.3 Loans & Advances (at a Glance)…………………………………………………… 24
2.4 Product Parameter…………………………………………………………......…… 25
2.4.1 Maximum Size…………………………………………………..……… 25
2.4.2 Maximum Tenor………………………………………………..……… 25
2.4.3 Security………………………………………………………………… 25
2.2.4 Debt Equity Ratio…………………………………………….....…….. 26
2.4.5 General Covenants……………………………………………...……… 26
Chapter-3: Loan Pricing Strategy 28-28

3.1 Loan Pricing………………………………………………………………………. 28

3.2 Basis of Pricing…………………………………………………………….……… 28
3.3 Types of Rate……………………………………………………………………… 28
3.4 Revision of Rates…………………………………………………………………… 28
3.5 Interest Rate……………………………………………………………............….. 28

Chapter-4: Lending Sector & Cap 29-30

4.1 Introduction ............................................................................................................. 29

4.2 Industry & Business Segment.................................................................................. 29
4.3 Lending Cap.............................................................................................................. 29
4.4 Discourage Business type......................................................................................... 30

Chapter-5: Credit Assessment 31-34

5.1 Assessment Frequency…………………………………..............……………….. 31

5.2 Assessment Process………………………………………………………………. 31
5.3 KYC Policy & Money Laundering ………………............………………………. 31
5.4 Pre-sanction Inspection Report…………………….....................………………… 31
5.5 Preparation of Credit Proposal…………………………………………………… 31
5.6 Notification of deviation of credit policy…….....................................................… 31
5.7 Assessment criteria for Long Term Financing /Syndication……………………… 32
5.8 Risk Assessment…………………………………………………………………… 32-33
5.8.1 Borrower Analysis................................................................................... 32
5.8.2 Industry Analysis..................................................................................... 32
5.8.3 Supplier/ Buyer analysis.......................................................................... 32
5.8.4 Historical Financial analysis..................................................................... 32
5.8.5 Projected Financial Performance.............................................................. 33
5.8.6 Account Conduct...................................................................................... 33
5.8.7 Mitigation Factors..................................................................................... 33
5.8.8 Cross border Risk..................................................................................... 33
5.8.9 Loan Structure......................................................................................... 33
5.8.10 Security.................................................................................................... 33
5.9 Insurance coverage..................................................................................................... 34
5.10 Name lending............................................................................................................. 34
5.11 Adherence to lending Guidelines.............................................................................. 34

Chapter-6: Credit Risk Grading 35-42

6.1 Introduction………………………………………………………………...………. 35
 6.2 Credit Risk Grading Framework……………………………………………...……. 36
6.3 Credit Risk Grading Manual- Commercial………………………………………… 36-42
6.3.1 Risk Grading Matrix………………………………................…………. 36
6.3.2 Risk Grading Profile…………………………………………………… 36
6.3.3 Principal risk Component……………………………………………… 38
6.3.4 Risk Grading Process………………………………………....………… 39
6.3.5 Subjective Grading…………………………………………..........……. 40
6.3.6 Regulatory Definition on Grading of Classified Accounts...................... 40
6.3.7 Exception to Credit Risk Grading............................................................ 40
6.3.8 Credit Risk Grading Review.................................................................... 41
6.3.9 MIS on Risk Grading................................................................................ 41
6.3.10 Downgrading............................................................................................ 41
6.3.11 External Rating........................................................................................ 42
6.4 Credit risk Grading Manual - Bank……………………………………………........ 42
6.5 Credit risk Grading Manual - NBFI …………………………………………......... 42

Chapter-7: Credit Approval Authority 43-45

7.1 Delegation of Approval Authority……………………………………………….... 43

7.2 Process of Delegating Approval Authority……………………………………….. 43
7.3 Reporting of Approval by Zonal Head…………………………………………….. 44
7.4 Criteria for Approval Authority…………………………………………………… 44
7.5 The Board of Directors……………………………………………………………... 45
7.6 The Executive Committee of the Board 45
7.7 The Management 45

Chapter-8: Organizational Structure & Responsibilities 46-55

8.1 Organizational Structure…………………………………………………………… 46

8.2 Organizational Structure of Credit ………………………………………………… 46
8.3 Detail Organogram of Credit………………………..……………………………… 46
8.4 Organizational Set-up of Credit at Zonal Office…………………………………… 47
8.5 Organizational Set-up of Credit at Branch………………………………………… 47
8.6 Segregation of Duties & Responsibilities………………………………………… 47
8.7 Credit Marketing Division………………………………………………………… 48-51
8.7.1 Major Functions………………………………………………………… 48
8.7.2 Duties and Responsibilities…………………………………………… 48
8.7.3 Job title: Head of Credit Marketing……………………………………. 49
8.7.4 Job title: Relationship Manager/Credit manager………………......….. 50
8.7.5 Functions of Officer of Credit Marketing Division at Head Office…… 50
8.8 Credit Risk Management Division……………………………………………. 51-52
8.8.1 Duties and Responsibilities ………………………..............…………… 51
8.8.2 Major functions………………………………....................................… 51
8.8.3 Job Title: Head of CRM (HOC)………………………………………. 51
8.9 Credit Administration Division…………………………………............………….. 52-54
8.9.1 Objectives………………………………………………………….....… 52
8.9.2 Duties and Responsibilities…………………………………………...... 52
8.9.3 Job Title: Head of Credit Administration Division………………......… 53
8.9.4 Credit Administration Flow Chart…………………………........……… 54
8.10 Credit Recovery Division…………..……………………………………………… 55-55
8.10.1 Objectives……………………………………………………………… 55
8.10.2 Major Functions……………………………………………………….. 55

Chapter-9: Procedural Guidelines 56-68

9.1 Credit Approval Process…………………………………………………………… 56

9.2 Delegated approval Authority……………………………………..............……….. 57
9.3 Appeal Process………………………………………………………………...…… 58
 9.4 Review/ Renewal Process………………………………………………………… 58
9.5 Documentation…………………………………………………………………….. 58
9.6 Disbursement………………………………………………………………………. 59
9.7 Custodian Duty……………………………………………………….............……. 59
9.8 Compliance of Regulation………………………………………………………… 60
9.9 Credit Monitoring…………………………………………………...................…. 60
9.10 Early alert Report....................................................................................................... 61
9.11 Credit Recovery Unit.................................................................................................. 62
9.12 NPL Account management......................................................................................... 62
9.13 Account Transfer procedures..................................................................................... 63
9.14 NPL Monitoring......................................................................................................... 64
9.15 NPL Provisioning and Write Off................................................................................ 64
9.16 Incentive scheme........................................................................................................ 65
9.17 MIS Reporting............................................................................................................ 65

Chapter-10: Miscellaneous 66-68

10.1 Proposal Origination………………………………….......……………………… 66

10.2 Identification Number…………………………………............…………………. 66
10.3 Time Frame for decision………………………………….................…………… 66
10.4 Reporting Approvals…………………………………………………...........…… 66
10.5 Review of Approval………………………………………............……………… 66
10.6 Revision of Credit Decision………………..................................................……. 66
10.7 Compliance to Regulation...................................................................................... 66
10.8 Release of Collateral/Debt Obligation………………………………………….. 67
10.9 Maintenance of Diary of circulars........................................................................ 67
10.10 Incomplete Documentation.................................................................................... 67
10.11 Non-Payment & Late Payment………………………...........…………………… 67
10.12 Renewal Frequency…………………………………................………………… 67
10.13 Control of Cash Collateral…………………………..........……………………… 67
10.14 Disbursement Record............................................................................................. 67
10.15 Vacant Land & third party property as security..................................................... 67
10.16 Third Party Service Provider…………………………………......……………… 67
10.17 Internal audit………………………………………………….....................…….. 68
Conclusion............................................................................................................. 69
Appendix.............................................................................................................. 70-91
Abbreviations:
Accpt Acceptable
BB Bangladesh Bank
CDA Chittagong Development Authority
CIB Credit Information Bureau
CLR Classified Loan Review
CM Credit Manager
CRM Credit Risk Management
CRGM Credit Risk Grading Manual
DF Doubtful
DSCR Debt Service Coverage Ratio
EC Executive Committee
FDR Fixed Deposit Receipt
FX Foreign Exchange
FSV Forced Sale Value
GD Good
HOC Head of Credit
HOM Head of Marketing
KDA Khulna Development Authority
KYC Know Your Client
LS Lending Standard
MD Managing Director
MIS Management Information System
MG Marginal
ND Non Delivery
NOC No Objection Certificate
NPL Non Performing Loan
PWD Public Works Department
RM Relationship Manager
RDA Rajshahi Development Authority
RU Recovery Unit
RD Recovery Division
SME Small & Medium Enterprise
SUP Superior
SMA Special Mention Account
SS Sub-Standard
UBL Uttara Bank Limited
USBL Uttaran Small Business Loan
UHRL Uttaran House Repairing & Renovation Loan
WL Watch list
ZH Zonal Head