This presentation summarizes the credit management process of United Commercial Bank Limited (UCBL) in Bangladesh. It outlines UCBL's credit objectives of extending credit to income-generating activities. It then describes the general guidelines UCBL follows in approving different types of loans. The main body of the presentation details UCBL's 8-step credit approval process, from a customer submitting a credit application to disbursement of approved loans. It explains each step, including risk assessment, credit committee review, sanctioning and documentation. Finally, it briefly outlines UCBL's credit monitoring process after loan disbursement through reporting, reminders and potential legal actions.

1. Welcome
to
Our Presentation

2. Presentation of Credit Management
Presented to
Mohammed Zahed Hossain
Senior Lecturer
Dept. of Business Administration
Leading University, Sylhet

3. Credit Operation process of
United Commercial Bank Limited
(UCBL)

4. Credit Objectives of UCBL
 Extends credit facilities at competitive price with prudence and efficiency
 Encourage loans and advances to income generating activities and thereby
creates employment opportunity and help to improve standard of living.
 Prioritizes welfare oriented banking service
 Attaches importance to consumer credit, loans to small businessmen,
festival loan, personal loan for salaried persons and any purpose loan.

5. General Guidelines of UCBL
 The Bank will prefer trade financing in the short term (up to 12 months)
self liquidating cash flow supported and collateralized trade transactions.
 The Bank will consider lending short-term working capital finance to well
establish entities
 The Bank will selectively, on a case-by-case basis, carefully approve term
loans
 The Bank will, on a case-to-case basis, approve disclosed
participations in syndications.
 The Bank will consider financing construction contractors.

6. Types of Credit of UCBL
Loan & Advance
Term Loan Continuous Loan Demand Loan
Continuous Loan
Over Draft
(OD)
Secured
OD
Temporary
OD
Cash Credit
(CC)
CC
Hypothecati
on
CC
pledge

7. Credit Approval Process of UCBL
Guided by some basic principles:
Prepared a concise and objective assessment of risks regarding lending
money to the potential borrower by the Relationship Management Team or
Corporate Division, Head Office.
A credit proposal may be defined as:
• Initial Credit Proposal
• Annual Credit Proposal
• Interim Credit Proposal
 Credit Proposal
 Identification Number
Each borrower would have a unique Loan Identification Number
The identification number will consist of three parts:
• Three digit Branch Code,
•Four digit Unique Serial Number and
•Four digit Year

8. Credit Approval Process of UCBL (Contd.)
 Time Frame for Decision
Further information regarding a particular credit proposal shall have to be
communicated in writing to the customer within 5 days from the date of
submission .
Decision of declining a credit application shall have to be communicated to
the customer by the Relationship Team within 15 days from the date of
receiving all information from the customer.
 Reporting Approvals
Credit Executives at Branch level should report all credit facilities sanctioned
by him/her during the month in the prescribed form
 Review of Approval
The Head of CRMD will review at least 10% of total approval of an individual
executive

9.  Revision of Credit Decision
Any credit proposal declined by Credit Risk Management Division may be
placed before next higher authority for reassessment/review
 Compliance to Regulation
Any credit approval/sanction shall be subject to the compliance of Bank’s
Credit Policy as well as banking regulations
 Credit Committee
Corporate Banking Division place Credit proposals after preliminary
evaluation and making necessary adjustment before the Credit Committee
Credit Risk Review Department of CRMD will place their observation before
the Credit Committee concerning risk assessment on different aspects of the
proposal
Form Branch Credit Committee to review the Credit proposal which fall
under the delegated power of Branch incumbent
Credit Approval Process of UCBL (Contd.)

10. Steps in Credit Approval Process
 Step 1
 Collect & fill Credit Application form by the customer
 Submits the filled in credit form along with required papers to the
relationship officer of Branch/Corporate Division, Head Office/website
 Step 2
 Relationship Officer scrutinizes the credit application form
 Make a preliminary assessment on creditworthiness of the potential
borrower
 A refusal letter to be sent if found not credit worthy
Relationship Officer will forward the application to the concerned RM if
proposal is found acceptable

11.  Step 3
 RM along with RO visits potential clients’ business premise physically
 RM negotiates about the structure of the proposed credit
 RM assess the value of the security to be offered and prepared valuation
report
 RM summarizes all these information in the pre-sanction inspection
Report/Call Report/Visit Report & send to Corporate Division, Head Office
 RO collects ‘CIM Inquiry Form’ from the customer & send it to CAD of
Head office
 Step 4
 Head of Corporate Division or assigned executives assess credit proposal
and may contact with RM or directly to the customer for any query
Head of Corporate Division communicates their decision to the RM in
fine.
Steps in Credit Approval Process (Contd.)

12.  Step 5
 CAD on receipt of the request letter from the branch will send CIM
Inquiry Form to BB
 CAD will also send CIB report immediately by email/courier service to
the concerned RO
 Everything may be closed if adverse CIB report is received & thus a letter
of regrets would be sent to the customer
 Step 6
 If clean CIB report is received, RO originates a formal credit proposal in
prescribed format with recommendations of the RM
 The proposal is to be sent to the Corporate Banking Division, Head Office
& a copy to the Credit Risk Review Department of CRMD.
Steps in Credit Approval Process (Contd.)

13.  Step 7
 Corporate Banking Division, Head Office after modifying place the
proposal with recommendation of Head before Credit Committee.
 Head of Credit Risk Review Department of CRMD or his delegated
authority may report his observation in writing/verbally before credit
committee
 Credit Committee will analyze the proposal & if found viable recommend
for approval to the appropriate authority.
 Corporate Banking Division will prepare Memo mitigating the
weakness/risk factors and incorporating suggestion of the Credit Risk
Review Department as well as Credit Committee.
 On receipt of memo Head of Credit Risk Review Department will
distribute to credit officer to review, scrutinize and analyze and back to
Head.
 Step 8
Steps in Credit Approval Process (Contd.)

14.  If the final memo is acceptable, among other things consideration it will
be recommended by CRMD for approval
 if the proposal exceeds Managing Director’s delegated authority, s/he
recommends it to the Executive Committee of Board of Directors/full BoD.
 if the facility is approved by the appropriate approval authority,
Corporate Banking Division will send the copy of approval memo to CRMD
 Credit Risk Review Department issues Sanction advice to the Branch
along with a documentation checklist spells out indicators before
disbursement
 Step 9
Steps in Credit Approval Process (Contd.)

15.  Sanction Letter to the customer to be issued under dual signatures from
the originating Branch.
 Step 10
 Preferably, Relationship Manager and Credit Administration Officer of
the Branch should sign on the Sanction Letter.
Steps in Credit Approval Process (Contd.)

16. Disbursement Process
 To minimize the risk Relationship Department and Disbursement
Authority shall be separate from each other.
 Separation of Authority
 each type of advances requires a different set of documents
 all the terms and condition and securities are written and signed
by the borrower
 specifies rights and liabilities of both the banker and the borrower
 Separation of Authority
 Signing Documentation Check List
 Deferral of Documentation
 Disbursement Authority

17. Credit Monitoring Process
Following are sequential steps for controlling and monitoring of the loan
pursued by the credit department of UCBL
Controlling &
Monitoring
Reporting &
Communication
Reminder
Formal Letters Telephone Meet with
Client
Social Pressure
Legal Notice
Legal Actions

19. THANK YOU!