Internal Credit Risk Rating System refers to the system to analyze a borrower's repayment ability based on information about a customer's financial condition including its liquidity, cash flow, profitability, debt profile, market indicators, industry and operational background, management capabilities, and other indicators. The summary indicator derived from the system will be called Internal Credit Risk Rating (ICRR).

1. ASSESSMENT OF CREDIT
WORTHINESS:
CRG & ICRRS
Presented By
Md. Saiful Islam
Banker
saifulbau@gmail.com

2. Guidelines
 “Lending Risk Analysis”
 BCD Letter No. BCD(P)661/13 dated 17 July, 1994
 “Guidelines on Managing Core Risks in Banking”
 BRPD Circular No. 17 dated 07 October, 2003
 “Credit Risk Grading Manual”
 BRPD Circular No. 18 dated 11 December, 2005
 “Guidelines on ICRRS for Banks”
 BRPD Circular No. 16 dated 30 October, 2018
2

3. RISK
 Risk is the uncertainties resulting in
adverse outcome, adverse in relation to
planned objectives.
 It is the chance of unexpected
happenings.
3

4. Risk is unavoidable
But it is-
Measurable & manageable
4

5. CORE RISKS
1. Credit Risk
2. Asset and Liability Risk
3. Internal Control and Compliance risk
4. Money Laundering Risk
5. Foreign Exchange Risk
6. ICT Risk
7. Environmental & Climate Change Risks
5

6. CREDIT RISK
 Credit Risk is the possibility that a borrower or
counter party will fail to meet its obligations in
accordance with agreed terms .
 Credit risk is the primary financial risk in the banking
system.
 Identifying and assessing credit risk is essentially a first step
in managing it effectively.
 SOURCES OF CREDIT RISK
 Bad Selection
 Over/ Under Finance
 Over Valuation
 Weak Collateral
 Absence Of Monitoring
6

7. Classification of Loans (CL) & Provision
Category
Un-Classified Classified
Irregular (Overdue) Loan Defaulter
Standard SMA SS DF BL
Continuous Credit < 2M, 1% 2M < 3M, 1% 3M < 9M, 20% 9M <12M, 50% ≥ 12M, 100%
Demand Loan < 2M, 1% 2M < 3M, 1% 3M < 9M, 20% 9M <12M, 50% ≥ 12M, 100%
Term Loan < 2M, 5% 2M < 3M, 5% 3M < 9M, 20% 9M <12M, 50% ≥ 12M, 100%
STAC & MC < 12M, 1% N/A, N/A 12M < 36M, 5% 36M < 60M, 5% ≥ 60M, 100%
CMSME < 2M, 0.25% 2M < 3M, 0.25% 6M < 18M, 20% 18M <30M, 50% ≥ 30M, 100%
7

8. Sonali Bank PLC Highlights, 2022
(Amount in Crore Taka)
 Total Deposits = 1,42,036
 Total Loans & Advances = 84,643
 Classified Loans = 12,553
 SS = 519 DF = 165 BL = 11,868
 Required Provision = 10979, Actual Provision = 7567
 Provision Shortfall = -2453
 Write Off = 6,678
 ADR = 59.59% CL = 14.83% COD = 2.95% COF = 4.87%
 Net Profit (371) = Operating Profit (2382) – Provision (1645) – Tax (367)
[Provision for Loans & Advance = 923]
 Retained Surplus (215) = Net Profit (371) – Statutory
Reserve (147) – Other Reserve (9)
 Capital/Equity (8119) = Paid-up Capital (4530)
+ Statutory Reserve (1602)
+ Other Reserve (18)
+ Revaluation Reserve (2490)
+ Retained Surplus (-521)
8

9. Financial Statements (F/S)
 Financial statements are the means of
reporting economic activities of an
enterprise to the stakeholders.
 Financial statement is a source of
reliable financial information needed for
taking economic decisions.
 The formats of financial statements are
required to facilitate comparison of
financial statements of different entities.
9

10. Financial Statements as per IAS
 Balance Sheet
 Income Statements
 Statement of Changes in Equity
 Cash Flow Statement
 Accounting Policies and Explanatory Notes.
10

11. Financial Statements as per IAS
 Balance Sheet (B/S): B/S is a statement of assets,
liabilities, and owners‘ equity. This is prepared to know
the financial position (financial health) of a business
entity at a particular point of time.
 Income Statement (I/S): I/S is a statement of revenues
and expenses in which periodic expenses are
deducted from the periodic revenues. This statement
is prepared to know the operating result (income or
loss) of a business entity during a period of time.
 Cash Flow Statement: It shows the inflows and outflows
of cash of a business entity during a particular period
of time and finally the balance of cash at the end of a
period. This is a vital statement to a banker.
11

12. Financial Statements Analysis
 Financial statement analysis consists of applying
analytical tools and techniques to financial
statements and other relevant data to obtain
useful information.
 This information reveals significant relationships
between data and trends in those data that
assess the company‘s past performance and
current financial position.
12

13. Ratio Analysis
 Ratio Analysis is the most widely used tool of
financial analysis.
 A ratio expresses the mathematical relationship
between two figures.
 Ratios are used to evaluate operating and financial
performance of a firm.
 Financial ratios are designed to help one to
evaluate financial performance of a firm.
 Mode of Expression:
 Times
 Proportion
 percentage
13

14. Financial Spread Sheet Ratios
 Leverage Ratio: Ratios, which measures the extent to
which a firm has been financed by debt. It is also
known as debt management ratios.
 Liquidity Ratio: The liquidity or short-term solvency of
an organization can be measured with the help of
current ratio and quick ratio. Liquidity implies to the
ability of an organization to pay off its short-term
obligations with the current assets.
 Profitability Ratio: Profitability indicates the efficiency
of the unit in generating surplus.
14

15. Financial Spread Sheet Ratios
 Coverage Ratio: These ratios measure the ability of a
company to generate cash to pay interest and
principal repayments e.g., interest coverage ratio.
 Growth Ratio: Growth ratios measure the company‘s
potentiality, performance. It also measures whether
the company will survive.
 Activity Ratio: It has been widely accepted that the
profitability of an enterprise to a large extent depends
on its efficient asset utilization or activity performed.
15

16. CREDIT RISK GRADING (CRG)
16

17. GRADES IN CRG
17
• CRG scale consists of 8 categories with Short names and
Numbers are as follows:

18. Risk Components
18

19. CRG & ICRRS Analysis
CRG Rating Score ICRRS Rating Score
Superior
Fully cash
secured
Excellent ≥ 75%
Good 85+ Good ≥ 65% to < 75%
Acceptable 75-84 Marginal ≥ 50% to < 65%
Marginal/ Watch
list
65-74 Unacceptable < 50%
Special Mention 55-64
Substandard 45-54
Doubtful 35-44
Bad/Loss <35
19

20. Credit Risk Grading (CRG) Indicators
A. Financial Risk:
 1. Leverage Ratio
 2. Liquidity Ratio
 3. Profitability Ratio
 4. Interest Coverage Ratio
Other Risks:
 B. Business/Industry Risk
 C. Management Risk
 D. Security Risk
 E. Relationship Risk
20

21. COMPUTATION OF CRG
 Principal Risk Components
A. Financial Risk
B. Business/Industry Risk
C. Management Risk
D. Security Risk
E. Relationship Risk
21

22. XYZ Company Ltd
53, Motijheel C/A, Dhaka
A FINANCIAL RISK WEIGHT 50% Amount
(in Crore)
1 Leverage Total Liabilities
Net Worth
5.69
15.88
2 Liquidity Current Assets
Current Liabilities
2.25
1.80
3 Profitability Operating Profit
Sales
15.30
56.52
4 Coverage EBIT
Interest on Debt
13.35
1.95
22
WORKSHEET OF CRG

23. XYZ Company Ltd
53, Motijheel C/A, Dhaka
B BUSINESS/ INDUSTRY RISK WEIGHT 18%
1 Size of Business Sales revenue
Tk. 56.52 Crore
2 Age of Business Started in the year
1990
3 Business Outlook Stable
4 Industry Growth Good
5 Market Competition Moderately
Competitive
6 Entry Barrier Average
23
WORKSHEET OF CRG

24. XYZ Company Ltd
53, Motijheel C/A, Dhaka
C MANAGEMENT RISK WEIGHT 12%
1 Experience 15 Years
2 Second Line/ Succession Ready Succession
3 Team Work Very Good
24
WORKSHEET OF CRG

25. XYZ Company Ltd
53, Motijheel C/A, Dhaka
D SECURITY RISK WEIGHT 10%
1 Primary Security
Coverage
Hypothecation & Pledge
Combined Charge Created
2 Collateral Security
Coverage
Registered Mortgage on
Municipal area
3 Support (Personal
Guarantee)
Personal Guarantee of
Support
25
WORKSHEET OF CRG

26. XYZ Company Ltd
53, Motijheel C/A, Dhaka
E RELATIONSHIP RISK WEIGHT 10%
1 Account Conduct Less than 3 years with
faultless record
2 Utilization of limit More than 60%
3 Compliance of
Covenents
Full Compliance
4 Personal Deposit Significant depository
Relationship
26
WORKSHEET OF CRG

27. 1. Financial Risk (50%)
4 Risk Parameters
 1. Leverage (Times)
= Total Liabilities (5.69) ÷ Tangible Net Worth (15.88)
= 0.35
 Score Obtained 14
27
Parameter Range Score
Less than 0.25 15
0.26 to 0.35 14
0.36 to 0.50 13
0.51 to 0.75 12
0.76 to 1.25 11
1.26× t 2.00 10
2.01 to 2.50 08
2.51 to 2.75 07
More than 2.75 00

28. 1. Financial Risk (50%)
4 Risk Parameters
 2. Liquidity (Times)
= Current Assets (2.25) ÷ Tangible Net Worth (1.80)
= 1.25
 Score Obtained 11
28
Parameter Range Score
Greater than 2.74 15
2.50 to 2.74 14
2.00 to 2.49 13
1.50 to 1.99 12
1.10 to 1.49 11
0.90 to 1.09 10
0.80 to 0.89 08
0.70 to 0.79 07
Less than 0.70 00

29. 1. Financial Risk (50%)
4 Risk Parameters
 3. Profitability (%)
= [Operating Profit (15.30) ÷ Sales (56.52)] x 100
= 27%
 Score Obtained 15
29
Parameter Range Score
Greater than 25% 15
15% to 19% 13
10% to 14% 12
7% to 9% 10
4% to 6% 09
1% to 3% 07
Less than 1% 00

30. 1. Financial Risk (50%)
4 Risk Parameters
 4. Coverage (Times)
= EBIT (13.35) ÷ Interest on debt (1.95)
= 6.84
 Score Obtained 5
30
Parameter Range Score
More than 02.00 05
More than 01.51 to less than 2.00 04
More than 01.25 to less than 1.50 03
More than 01.00 to less than 1.24 02
Less than 1.00 00
 Weight of Financial Risk = 50%
 Total Score of Financial Risk = 45 (14+11+15+5)

31. A. FINANCIAL RISK (50%)
 4 Risk Parameters Weight Score Obtained
 1. Leverage (Times) (15%) 14
 2. Liquidity (Times) (15%) 11
 3. Profitability (%) (3%) 15
 4. Coverage (Times) (3%) 5
 Total Score of Business/Industry Risk = 45
 Weight of Business/Industry Risk = 50%
31

32. B. BUSINESS/INDUSTRY RISK (18%)
 4 Risk Parameters Weight Score Obtained
 1. Size of Business (5%) 4
 2. Age of Business (3%) 3
 3. Business outlook (3%) 2
 4. Industry Growth (3%) 2
 5. Market Competition (2%) 1
 6. Entry/Exit Barrier (2%) 1
 Total Score of Business/Industry Risk = 13
 Weight of Business/Industry Risk = 18%
32

33. C. MANAGEMENT RISK (12%)
 3 Risk Parameters Weight Score Obtained
 1. Experience (5%) 5
 2. Second Line/Successor (4%) 4
 3. Team Work (3%) 3
 Total Score of Business/Industry Risk = 12
 Weight of Business/Industry Risk = 12%
33

34. D. SECURITY RISK (10%)
 3 Risk Parameters Weight Score Obtained
 1. Primary Security Coverage (4%) 4
 2. Collateral Coverage (4%) 4
 3. Support (Personal Guarantee) (2%) 2
 Total Score of Business/Industry Risk = 10
 Weight of Business/Industry Risk = 10%
34

35. E. RELATIONSHIP RISK (10%)
 4 Risk Parameters Weight Score Obtained
 1. Account Conduct (5%) 4
 2. Utilization of Limit (2%) 2
 3. Compliance of Covenants (2%) 2
 4. Personal Deposit (1%) 1
 Total Score of Business/Industry Risk = 9
 Weight of Business/Industry Risk = 10%
35

36. BREAK DOWN OF CRG
 5 Criteria/Components Score Score Obtained
 A. Financial Risk 50 45
 B. Business/Industry Risk 18 13
 C. Management Risk 12 12
 D. Security Risk 10 10
 E. Relationship Risk 10 09
 Total = 100 89
 Risk Grading Good
36

37. INTERNAL CREDIT RISK RATING
SYSTEM (ICRRS)
37

38. RISK WEIGHTED ASSETS (RWA)
 RWA for Balance Sheet Exposure:
Banks shall use ratings of ECAIs for capital
adequacy purposes.
 ECAIs’ rating category are mapped with BB
rating grade expressed in numerals 1 to 6.
38

39. 39 BB Rating Grade with Equivalent Rating of ECAIs

40. 40 ECAIs Credit Rating of Scheduled Banks for 2021-2022

41. CREDIT RISK RATING SYSTEM
 Credit Risk Rating involves categorizing
the risk associated with a loan using
credit analysis by considering market
conditions, industry data and other
factors to assess a borrowers credit
quality .
 It is a quantified assessment of the credit
worthiness of a borrower with respect to
a particular debt .
41

42. Background of ICRRS
 Lending Risk Analysis (LRA)- 1993
 Credit Risk Grading (CRG) 2005
 Internal Credit Risk Rating System 2018
42

43. Background of ICRRS
 Prepared for 20 Different Sectors .
 Ideal Assessment Parameters Fixed on Data of
220 Audited Financial Statements Collected of 22
Scheduled Banks .
 Data also collected from 54 Listed Companies of
Dhaka Stock Exchange
43

44. Definition: ICRRS
 Internal Credit Risk Rating System refers to the system
to analyze a borrower's repayment ability based on
information about a customer's financial condition
including -
 their liquidity,
 cash flow,
 profitability,
 debt profile,
 market indicators, industry and operational background,
management capabilities, and other indicators.
44

45. Use of ICRR
 To provide a granular, objective , transparent, and
consistent framework
 To facilitate the portfolio management activities.
 To assess the quality of individual borrower
 Used for individual credit selection, credit pricing, and
setting credit limit and terms and conditions.
45

46. General Instructions:
 Use ICRR without making any changes, extensions,
modification or deletion.
 ICRR for all exposures except consumer loans, small
enterprises having total loans exposure less than BDT
50 lac, short term agri, micro-credit and loan to bank,
NBFI and Insurance.
 Quantitative part completed by an Credit Officer &
Qualitative part completed by Relationship
Manager/Branch Manager.
46

47. General Instructions:
 ICCR is an integral part of the credit approval
process.
 Independent credit risk function responsible for
the accuracy and integrity of the rating.
 Executive summary report is approved and
signed by the Chief Risk Officer (CRO)
 Loans approved by GMO, PO or Branch office
executive summary report is approved and
signed by the final approval authority
47

48. General Instructions:
 Use latest audited financial statements
 All credit proposals as new, renewal or
enhancement apply ICRR process .
 ICRR report maintain in the credit file.
 Conduct internal audit to check ICRRS.
48

49. Frequency of Credit Risk Scoring
 ICRR for all credit proposals including
renewal or enhancement
 ICRR shall be reviewed at least annually
49

50. Selected Sectors
A. Industry (14 Sectors)
1. Ready Made Garments
(RMG),
2. Textile (including spinning,
knitting, weaving),
3. Food and Allied Industries,
4. Pharmaceutical,
5. Chemical,
6. Fertilizer,
7. Cement,
8. Ceramic,
9. Ship building,
10. Ship breaking,
11. Jute Mills,
12. Steel Engineering,
13. Power and Gas,
14. Other industry
50

51. Selected Sectors
B. Trade and Commerce
C. Agro Based and Agro Processing
D. Service (4 Sectors )
1. Housing and Construction,
2. Hospitals and Clinics,
3. Telecommunication and
4. Other Service.
51

52. ICRR Scores:
Rating Scores Aggregate
(Up to Dec, 2023)
Scores Aggregate
(From Jan, 2024)
Excellent ≥ 75% ≥ 75%
Good ≥ 65% to < 75% ≥ 65% to < 75%
Marginal ≥ 50% to < 65% ≥ 55% to < 65%
Unacceptable < 50% < 55%
52
The ICRR consists of 4-notched rating system covering the
Quantitative and Qualitative parameters.

53. CRG & ICRRS Analysis
CRG Rating Score
ICRRS
Rating
Score
Superior
Fully cash
secured
Excellent ≥ 75%
Good 85+ Good ≥ 65% to < 75%
Acceptable 75-84 Marginal ≥ 50% to < 65%
Marginal/ Watch
list
65-74
Unacceptabl
e
< 50%
Special Mention 55-64
Substandard 45-54
Doubtful 35-44
Bad/Loss <35
53

54. Credit Risk Grading (CRG) Indicators
A. Financial Risk:
 1. Leverage Ratio
 2. Liquidity Ratio
 3. Profitability Ratio
 4. Interest Coverage Ratio
Other Risks:
 B. Business/Industry Risk
 C. Management Risk
 D. Security Risk
 E. Relationship Risk
54

55. ICRRS Risk Indicators
Quantitative Indicators:
 1. Leverage
 2. Liquidity
 3. Profitability
 4. Coverage
 5. Operational
Efficiency
 6. Earning Quality
Qualitative Indicators:
 1. Performance Behavior
 2. Business & Industry Risk
 3. Management Risk
 4. Security Risk
 5. Relationship Risk
 6. Compliance Risk
55

56. ICRRS Risk Indicators:
Quantitative Risk Weight Qualitative Risk Weight
1. Leverage 10%
1. Performance
Behavior
10%
2. Liquidity 10%
2. Business &
Industry Risk
7%
3. Profitability 10%
3. Management
Risk
7%
4. Coverage 15% 4. Security Risk 11%
5. Operational
Efficiency
10%
5. Relationship
Risk
3%
6. Earning
Quality
5%
6. Compliance
Risk
2%
Total: 60% 40%
56

57. Credit Risk Rating
1. Excellent
2. Good
3. Marginal
4. Unacceptable
57

58. Management Action Triggers
 “Excellent" or "Good" Banks are allowed
lending
 "Marginal” renew loan facilities or caution in
new loans
 "Unacceptable” not allowed for loan
facilities
 Quantitative part is less than 40%, the borrower’s
ICRR shall be "Unacceptable".
 Renew and enhancement of existing loans
for maximum 2 (two) times if
"Unacceptable".
58

59. ICRRS for Banks
serial Contents
1 Index
2 Top Page
3 Input Balance Sheet
4 Input Profit & Loss Statement
5 Input Cashflow Statement
6 Output Balance Sheet
7 Output Profit and Loss Statement
8 Output Cashflow Statement
9 Quantitative Analysis
10 Qualitative Analysis
11 Detail Management Report
12 Executive Summary
59

60. Quantitative Indicators and Associated Weights ( Six
Broad Categories)
Quantitative Indicators Weight Definition
1.Leverage
(10%)
a) Debt to Tangible
Net Worth (DTN)
7 Total Interest-bearing liabilities or
Financial Debt/ Total Tangible Net
Worth
b) Debt to Total
Assets (DTA)
3 Total Interest-Bearing Liabilities or
Financial Debt/ Average Total
Assets
2.Liquidity
(10%)
a) Current Ratio
(CR)
7 Current Assets/ Current Liabilities
b) Cash Ratio (Cash) 3 Cash and easily marketable
securities/ Current Liabilities
3.Profitability
(10%)
a) Net Profit Margin
(NPM)
5 Net profit after tax/ Net Sales
b) Return on Assets
(ROA)
3 Net profit after tax/ Average Total
Assets
c) Operating Profit
to Operating Assets
(OPOA)
2 Operating Profit/ Average
Operating Assets
60

61. 61 Quantitative Indicators and Associated Weights
Quantitative Indicators Weight Definition
4.Coverage
(15%)
a)Interest Coverage (IC) 3 Earnings Before Interest and
Tax/Interest Expense
b)Debt Service Coverage
Ratio (DSCR)
5 Earnings Before Interest Tax
Depreciation Amortization/ Debts to
be Serviced
c) Financial Debt to
Operating Cash Flow (FDCF)
4 Financial Debt / Operating Cash Flow
d) Cash flow Coverage Ratio
(CCR)
3 Cash flow from operation / Debts to be
Serviced
5.Operational
Efficiency
(10%)
a) Stock Turnover Days (STD) 4 (Total Inventory/COGS)*360
b) Trade Debtor Collection
Days (TDCD)
3 (Total Accounts Receivable/
Sales)*360
c) Asset Turnover (AT) 3 Sales /Average Total Assets
6.Earning
Quality (5%)
a) Operating Cash Flow to
Sales (CFS)
3 Operating Cash flow / Sales
b) Cash flow based accrual
ratio (CAR)
2 =NI-(CFO+CFI) /Average Net
Operating Assets

62. Qualitative Indicators and
Associated Weights
62
Indicators Weights
1. Performance Behavior 10
Performance Behavior With Banks Borrowings 9
Performance Behavior With Suppliers/ Creditors 1
2. Business and Industry Risk 7
Sales Growth 2
Age Of Business 2
Industry Prospects 1
Long-Term External Credit Rating Of The Borrower 2
3. Management Risk 7
Experience Of The Management 2
Existence Of Succession Plan 2
Auditing Firms 2
Change In Auditors In Last 4 Years 1
Total

63. 63
Qualitative Indicators and
Associated Weights… (Cont.)
4. Security Risk 11
Primary Security 2
Collateral 2
Collateral/ Security Coverage 5
Type Of Guarantee 2
5. Relationship Risk 3
Account Conduct 3
6. Compliance Risk 2
Compliance With Environmental Rules, Regulations
And Covenants 1
Corporate Governance 1
Total 40

64. Qualitative Analysis
G Performance Behavior 10
G.1 Performance behavior with banks borrowings
G.1.1
How many times the borrower got adversely classified in last 5
years
[ Aversely classified means the borrower's loans classified as
per BB loan classifications policy i.e SS, DF, BL]
0 time 5
1 time 4
2 times 3
3 times 1
>3 times 0
G1.2
How many times the borrower's loans got rescheduled/
restructured in last 5 years
0 time 4
1 time 3
2 times 2
3 times 1
>3 times 0
G.2 Performance behavior with suppliers/ Creditors
Did the borrower pay its Suppliers/ Creditors regularly in last 1
year
Yes 1
No 0
64

65. H Business and Industry Risk 7
H.1 Sales Growth
* Sales growth means the growth of sales from previous year sales >10% 2
The formula for calculating sales growth is [(current year sales - previous year sales)/ previous
year sales]*100
5%-10% 1
Less than
5%
0
H.2 Age of Business
The number of years the borrower >10 years 2
engaged in the primary line of business
7 to 10
years
1.5
5 to 7 years 1
4 to 5 years 0.5
<4 years 0
H.3 Industry Prospects
Critical assessment of 5 (five) years prospect of industry and borrower's sales volatility
Growing
and Low
volatility
1
* Volatility denotes sales volatility
Stable 0.75
Growing
but High
Volatility
0.5
Declining 0
H.4 Long-Term External Credit Rating of the Borrower
1 2
Rating Grade should be assigned in line with BB Rating Mapping as per BRPD circular 14/2018
on Risk-Based Capital Adequacy in line with Basel III.
2&3 1.5
>3 0.5
Unrated 0
65
Qualitative Analysis

66. I Management Risk 7
I.1 Experience of the Management
Quality of the management based on
total number of years of experience of
the senior management in the Industry.
More than 10 years in the related
line of business
2
* Senior Management means MD and
next two tiers
5–10 years in the related line of
business
1
Less than 5 years 0
I.2 Existence of Succession Plan
Yes, with good capability of
successor
2
Yes, but questionable capacity of
successor
1
No successor 0
I.3 Auditing Firms
BSEC listed auditors are considered as
recognized
Recognized Auditors 2
Other Auditors 1
Un audited 0
I.4 Change in Auditors in last 4 years
Yes 1
No 0
66
Qualitative Analysis

67. J Security Risk 11
J.1 Primary Security
Fully Pledged Facilities 2
Registered Hypothecation (1st Charge/1st Pari passu
Charge)
1.5
2nd charge/Inferior charge 1
No security 0
J.2 Collateral
Registered Mortgage on Municipal corporation/Prime
Area property
2
Registered Mortgage on Pourashava/Semi-Urban/ Union
parishad area property
1.5
Equitable Mortgage or No property but Plant and
Machinery as collateral
1
No collateral 0
J.3 Collateral Coverage
The formula of collateral coverage is [forced sale value of
collateral/ total loans]
>100% 5
80% to 100% 4
* Forced sale value should be determined as per policies
of BB. If there is no policy bank should determine their own
policy.
70% to 80% 3
50% to 70% 2
<50% 0
J.4 Type of guarantee
Bank Guarantee 2
Strong Corporate Guarantee means the credit rating of
the guarantor should be at least 1 or 2 as per BB rating
mapping mentioned in BRPD circular 18/2014 on Risk
Based Capital Adequacy in line with Basel III.
Strong Corporate Guarantee 1.5
Personal Guarantees or Corporate Guarantee without
Strong Financial Strength
1
No support/guarantee 0
67
Qualitative Analysis

68. K
Relationship
Risk
3
K.1
Account
Conduct
More than 3 years Accounts with Faultless
Record
3
Less than 3 years Accounts with faultless
record
2
Accounts having satisfactory dealings with
some late payments.
1
Frequent Past dues & Irregular dealings in
account
0
68
Qualitative Analysis

69. L Compliance Risk 2
L.1
Compliance with environmental
rules, regulations and covenants
Yes 1
No 0
L.2 Corporate Governance
Independence of Management
Good Corporate
Governance
1
Questionable Corporate
Governance
0
Total 40
69 Qualitative Analysis

70. Practice with ICRRS Excel Model
70

71. Thank You
71