The document discusses credit monitoring techniques used by banks. It explains that credit monitoring involves pre-disbursement and post-disbursement techniques to control loans and ensure repayment. Some key pre-disbursement techniques mentioned include checking credit history, conducting a 5C credit analysis, verifying property documents, and getting personal guarantees. Post-disbursement techniques include making site visits, requiring quarterly financial reports, verifying installment payments, and taking corrective action if needed. The purpose of these various techniques is to manage risk and secure repayment of loans.

2. Presented to;
Ma’am Aysha Ateeq
Presented by;
Fahad Ali 8266
Adnan Manzoor 8232
Muhammad Iltaf 8256
Government College University Faisalabad

3. Credit Monitoring
FINANCIAL RISK MANAGEMENT

4. INTRODUCTION OF SUBJECT
• Risk:
• Any situation in which there is an uncertainty about
future or outcome or risk is the chances of losses.
• Financial Risk:
• In financial words risk can be defined as any event or
possibility of an event which can impair corporate
earnings.
• What is Financial Risk Management?
• The process of evaluating and managing current
possible financial risk of a firm as a method of
decreasing the firm’s exposures in the risk.

5. PURPOSE OF STUDY
• Our purpose of choosing the topic of “CREDIT
MONITORING’’ is to learn about its procedures,
techniques, methods and the use of whole
documentation that are required in credit monitoring
by banks. Our major concern is to know the techniques
which specifically used for having good control on
performance of loans. After doing this project we are
able to know that how in reality banks make it selves
secure by taking care and having a very good control
on their loans.

6. INTRODUCTION OF HBL
• It is the prime Bank in country established in 1941
having a registered head office in Karachi.
• It was nationalized in 1974, but recently on 26th
February 2004 it has been privatized by Government of
Pakistan and is taken over by Aga Khan Fund for
Economic Development (AKFED). They acquired 51
percent of shares of HBL.
• It is one of the largest Banks of Pakistan with 1439
branches and having total assets of Rs.
434,931,930,000.

7. HISTORY OF HBL
• The first branch of HBL started functioning on 30th
August, 1941 at Muhammad Ali Road Bombay,
• where Quaid-e-Azam Muhammad Ali Jinnah first of all
opened his personal account.
• In 1942, on the desire of Quaid-e-Azam, Habib family
migrated to Pakistan and later on shifted the Bank's
Head Office from Bombay to Karachi on 7th August,
1947 just one week prior to independence, to play its
pivotal role in the development of this newly born
country.

8. OBJECTIVES OF HBL
• Following are some of the main objectives of HBL.
• To earn profit for the Bank itself and for its
shareholders.
• To promote and boost up business sector inside
the country.
• To provide employment opportunities to people.
• To help in development and industrialization of
the country.
• To provide loan and advances to help out in self-
employment schemes.

9. SERVICES OFFERED BY HBL
• Habib Bank offers the following services to the
customers:
• Commercial Banking
• Corporate Banking
• Investment Banking
• Global Treasury
• Islamic Banking (referred to Modaraba)
• Cash Management
• Asset Management
• Zarai Banking

10. CREDIT MONITORING

11. WHAT IS CREDIT MONITORING?
• Credit Monitoring are those techniques or rules and
regulations which are used by the banker’s to have a
good control on credit after lending to the customer. It
is also known as pre-disbursement and post-
disbursement techniques. These techniques are
necessary for banks to make sure the repayment of
loans.

12. WHY BANKS DO CREDIT MONITORING?
• Mostly customers take loan for specific purpose but do
not use for the same due to this reason they are not in a
condition to repay the loan installments.
• Basically there are two major reason of non-repayment of
loan that is cost overrun and time overrun. The ultimate
purpose of using different techniques by banks is to
secure repayment of loan timely it enables borrower to
use loan very effectively.
• Sometimes loan is granted to customers and officers
know about the ineffective use of loan but they do not
report to their seniors or controlling officers and officers
also do not want to listen an unpleasant news.
• So loan recovery becomes difficult, securities become
depleted and loan becomes loss or non-performing loan.
So that is why there is a need of having a good control on
loans.

13. EFFECTIVE CREDIT MONITORING SYSTEM:
• Taking Feedback Reports:(after disbursement)
• In this report meaningful information is taken from the
borrowers in which operational performance, financial
performance, risk rating and compliance of terms and
conditions are mentioned. Projections about
customers loan is taken as well.
• Analysis of Data and Information:
• After taking the data and information from the
customer bank analyze either this business has a
potential in market or not. In case of any deterioration
banker makes a personal visit and get the first hand
information.
• Taking Remedial Action:
• After taking the information from the customer and
conducting the analysis on that banker if feels that
loan is not being used for productive purpose so then
he will take prompt action to recover loan amount.

14. PRE-DISBURSEMENT TECHNIQUES
• Borrower’s credit history is checked through taking report from
International Credit Information Limited and Bank Credit
Information Limited (BCIL & ICIL) this report consist of
complete market information of the borrower’s business.
• Bank conduct credit analysis which is done through 5C’s.
• Character of borrower is known that he is willing to pay or not.
• Capacity means ability to repay of borrower his assets and
liabilities and income and revenue are analyzed.
• Capital means his business is debt based or equity based if
debt is more than it is risky and equity is more that is favorable
for loan granting.
• Collateral means his property that will be used as a security for
lending. It is of three categories such as mortgage, pledge and
hypothecation.
• Condition means market conditions and demand of product
which he is manufacturing.

15. PRE-DISBURSEMENT TECHNIQUES
• Physical verification will be conducted by the credit officer to know the first
hand information. A visit report is designed in which complete information of
business is included such as its name, type, paid up capital, directors, shares
allotted and its articles of association, memorandum of association and form
29 etc.
• Electronic credit information bureau report is taken from bank’s database in
which borrower’s status is checked.
• Property documents are verified through bank legal adviser i.e. mutation and
Fard.
• Trade certificate of business which he is going to do is checked either it is
allowed or not in Pakistan.
• In case of individual or consumer loan personal guarantee is taken of well
known personal.
• In case of mortgage charge is created by the bank that this property can’t be
sold until amount of loan is not recovered.
• Non encumbrance certificate is taken on customer’s property that this
property is free from charge.
• It is confirmed that the stock and building that is given as a security of loan
is insured or not, it must be insured.
• Borrower’s basic fact sheet is taken from customer in which detail of purpose
of loan and category of loan and some other information is taken.

16. POST-DISBURSEMENT TECHNIQUES
• Deferred offer letter is taken from the customer in which borrower’s
consent is taken that if you cannot repay the loan amount then bank
will have a right to sell the specific property or security.
• Credit officer makes the personal visits to check that the purpose
for which loan is being taken either they are using exactly for that
purpose or they are cheating with the bank by using that loan in
different way.
• In case of pledge or hypothecation the stock is counted and
evaluated that the value of stock exceeds the loan amount or less if
that is less then bank take strict action to keep appropriate amount
of stock according to amount.
• Quarterly reports of financials are required to know that those
terms and conditions which are decided at the time of taking loan
amount are being achieved or not.
• Borrower’s previous mark up and principal installment is verified
either they have paid or not. If they do not repay the loan amount of
first installment then next installment is not disbursed to borrower.
• Current situation will be checked that is it fulfilling the projected
goals and objectives or not if not then bank will make credit policy
more tough.

17. POST-DISBURSEMENT TECHNIQUES
• The bank has right to hire consultant for the
evaluating the operating performance of company
and fee for this act will be borne by company.
• Management of advance shall be closely monitored
by our branch and all terms and conditions as
required by bank standard must be fulfilled.

18. CONCLUSION
• Finally we have concluded that through this project
we actually get the practical knowledge that a lot
of risk is involved at the time of lending but bank
have to secure itself through taking proper security
and using above mentioned techniques instead of
facing this risk. For the purpose of declining the
risk factor bank uses these techniques. Habib bank
limited is using the best techniques in which it
make itself secure so that its business operation
cannot be stopped. But the policies which it adopts
it must keep relax for loyal customer. It will be very
helpful for banks if all the information relating an
individual exists in a single smart card then just by
entering the CNIC no banker will be able to get all
information as well.

19. ANY QUESTION?????