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Debt Recovery Techniques
Issues, Problems & Prospects of
BASIC Bank LTD (Shantinagar
Branch)
Debt Recovery Techniques Issues,
Problems & Prospects of
BASIC Bank LTD (Shantinagar Branch)
Supervised by
Md. Abdullah Al...
EXECUTIVE SUMMARY
Bank customers expect their bankers to provide them with loan and
advances to make up the short fall in ...
Executive Summary (Continue…)
 After theoretical discussion next chapter dealt on data collection which
includes question...
Objectives of the Study
General Objective:
The major objective of this study is to determine
the major causes of bad and ...
Scope of the
Study
 Different kinds of credit
facilities extended by BASIC
Bank Limited
 General procedures for
getting...
METHODOLOGY
 Data Source
 Primary Data:
Structured
questionnaires,
Open-ended and
closed ended
questions.
 Secondary Da...
BASIC Bank at a glance
Particulars Detail
Name BASIC Bank Limited
Date of Incorporation August 2,1988
Date of Inauguration...
ANALYSIS
Demographic Data
(Staffs)
 Name
 Gender
 Age
 Educational Status
 Number of years in Credit
Department
 Th...
FACTORS OF BAD DEBT (STAFF)
Lack of well trained lending personnel
Positive relationship between high interest rate and ...
FACTORS OF BAD DEBT (CLIENT)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
New
businesses
experience
Simultaneous
operation of
too many
ki...
Level of Success
Bank Staff
 Reduction of Interest
 Projects for
management of
problem loans, or
intensive care units an...
Hypothesis t-test
 Lax Procedures used for credit
risk assessment
 Lack of aggressive credit
collection methods
 Speedy...
FINDINGS
 The national economic downturn which leading to
depression for business in general; reduced buying
ability of c...
RECOMMENDATION
 To manipulate its strengths like low-cost leadership,
skilled human resource, low rate of classified loan...
Debt recovery techniques
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Debt recovery techniques

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Reasons for bad debt & how to minimise bad debt

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Debt recovery techniques

  1. 1. Debt Recovery Techniques Issues, Problems & Prospects of BASIC Bank LTD (Shantinagar Branch)
  2. 2. Debt Recovery Techniques Issues, Problems & Prospects of BASIC Bank LTD (Shantinagar Branch) Supervised by Md. Abdullah Al Mahmud Senior Lecturer Presented By: Humayra Sahrin Trina ID# 1129BBA01681 Major: Finance & Banking Manarat International University
  3. 3. EXECUTIVE SUMMARY Bank customers expect their bankers to provide them with loan and advances to make up the short fall in their required find. The ability of the bank to maintain profitability depends largely on the extent to which the credit policy and debt recovery techniques are maintained. The purpose of this research was to investigate the causes of non- performing loans in BASIC Bank LTD (Shantinagar Br.). The research questions used to guide the research included:  What are the causes of non- performing loans in BASIC Bank LTD (Shantinagar Br.)?  What specific steps have bank managers taken to deal with the problem of nonperforming loans’?  What is the level of success of the actions taken? This is an explanatory research that adopted the survey research design. Data was collected with the help of a questionnaire sent to 10 bank officers & 5 bank clients. Secondary sources information include the use of existing literary coupled with use of some journals and other unpublished manuals were seen to be useful for this work.  Chapter one highlights one the statement of the researches problem, definition of some important terms used for the study, scope, limitation.  Chapter two dealt with relate iterative.  In the later part it focuses on conceptual and theorelocal bed rock upon which bank recovery techniques is built .
  4. 4. Executive Summary (Continue…)  After theoretical discussion next chapter dealt on data collection which includes questionnaire analysis, personal interview, analysis as well as testing hypothesis based on response to the questionnaire & also the findings.  Last chapter is conclusion and recommendation of the researcher.  Recommendations of this study are that loan officials must grant loans basing their appraisal on loan analysis principles, using their discernment as well as experience to verify debtor credibility i.e., debt repayment ability, capital management and collateral suitability. More importantly, loan officials should strictly monitor and control how the loan is used in order to be able to promptly handle arising problems. The study found that the actions had proved useful in minimizing bad loans in the bank surveyed as reported by the credit managers. In addition, banks should continue to invest in the training of loans officials since most of the respondents confirmed that it was a new trend.  The findings of this study will help the management in BASIC Bank LTD (Shantinagar Br.) to improve their management of non-performing loans.
  5. 5. Objectives of the Study General Objective: The major objective of this study is to determine the major causes of bad and doubtful debts of BASIC Bank.  Specific objectives: i . To investigate the causes of bad and doubtful debts in BASIC Bank LTD. ii. To examine the effects of bad and doubtful debts in banks profitability, investors, the public and the economy
  6. 6. Scope of the Study  Different kinds of credit facilities extended by BASIC Bank Limited  General procedures for getting those credit facilities  What kinds of standard documents are required for getting those credit facilities?  How different kinds of projects are appraised and financed at BASIC Bank Limited  Present scenario of recovery rate and classified loan of BASIC Bank Limited. Limitations:  Sufficient records, publications were not available as per my requirement.  Time constraint.  Lack of opportunity to work in all the departments for a longer time.  Up to date data are not available.  Lack of opportunity to visit more than one branch.  Lack of opportunity to survey on wide number of clients.
  7. 7. METHODOLOGY  Data Source  Primary Data: Structured questionnaires, Open-ended and closed ended questions.  Secondary Data Reports, Journals, Credit procedure manuals, Offer letters, Financial statements of BASIC Bank Ltd.  Data Collection Instruments • Questionnaire • Face to face conversation • Observing  Data Analysis • Mean • Hypothesis • Bar Chart • Pie chart • Frequency Table • Independent sample t test
  8. 8. BASIC Bank at a glance Particulars Detail Name BASIC Bank Limited Date of Incorporation August 2,1988 Date of Inauguration of Operation January 21,1989 Head Office Sena Kalyan Bhaban 195 Motijheel C/A Dhaka-1000 Name of Chairman Mr. Alauddin A. Majid Name of Managing Director Mr. Khandakar Md. Iqbal Number of Branches 45 Paid up Capital 2946.98 million Reserve & Surplus 3092.20 million Ownership Government of Bangladesh Service Provided Deposit Scheme, Credit Facility, Foreign Exchange Services
  9. 9. ANALYSIS Demographic Data (Staffs)  Name  Gender  Age  Educational Status  Number of years in Credit Department  The bank’s interest rate  Time duration to access credit  Types of loan(secured & Unsecured)  Distance of mortgage  Percentage of loan of the value of the property  Use the other means to recover the loan Demographic Data (Clients) • Name • Gender • Age • Educational Status • Bank often monitors the loan • Customers prefer to repay their loan • Reports are generated to monitor the loan performance • Credit customer often services their loan regularly
  10. 10. FACTORS OF BAD DEBT (STAFF) Lack of well trained lending personnel Positive relationship between high interest rate and bad debt 0 1 2 3 4 5 6 7 8 9 10 Lax Procedures used for credit risk Lack of aggressive credit collection methods The speedy consideration in granting process Insider Lending & Owner Concentration Factors of Bad Debt SA Ag N DA SDA
  11. 11. FACTORS OF BAD DEBT (CLIENT) 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 New businesses experience Simultaneous operation of too many kinds of business Inappropriate use of the loan Debtors conceal some of the true data The provision of poorly valued collateral Factors of Bad Debt Strongly Agree Agree Neutral Disagree Strongly Disagree
  12. 12. Level of Success Bank Staff  Reduction of Interest  Projects for management of problem loans, or intensive care units and detailing scope, skill, resources and efficiency.  The contents of loan files, the use of its information to mentor the quality of loan is clear Clients  Increased use of information sharing  Effort to develop a teamwork relationship with your unit  Specific lending procedures and techniques  Overall performance of the credit department  Standard loan process form the client’s initial enquiry efforts to the final lending decision
  13. 13. Hypothesis t-test  Lax Procedures used for credit risk assessment  Lack of aggressive credit collection methods  Speedy consideration in granting process  Insider Lending & Owner Concentration  Lack of well trained lending personnel  positive relationship between high interest rate and  Reduction of Interest  Projects for management of problem loans  Use of its information to mentor the quality of loan is clear.  New business experience  Simultaneous operation of too many kinds of business  Inappropriate use of the loan  Debtors conceal some of the true data  Provision of poorly valued collateral  Develop a teamwork relationship with your unit  Standard loan process  Specific lending procedures and techniques  Overall performance of the credit department  Increased use of information sharing
  14. 14. FINDINGS  The national economic downturn which leading to depression for business in general; reduced buying ability of consumers;  Insider lending and owner concentration;  New business experience  Simultaneous operation of too many kinds of business  Inadequate procedures for credit risk assessment and credit management;  Misuse of the loan;  Legal delays.
  15. 15. RECOMMENDATION  To manipulate its strengths like low-cost leadership, skilled human resource, low rate of classified loan and unique products by minimizing and addressing its weaknesses like traditional products and services and weak IT infrastructure.  Loan officials must carefully grant loans by basing their consideration on loan analysis principles, using their discernment as well as experience to verify debtor credibility;.  More importantly, loan officials should strictly and regularly monitor how the loan is used in order to be able to promptly handle arising problems. This will ensure that loan losses are kept at a minimum via a programmed which permits constant supervision on the projects being financed, easy identification of delinquent loans and instituting effective corrective measures.

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