This document discusses loan classification, rescheduling, and provisioning policies for non-performing loans in Bangladesh. It covers the key circulars that provide guidelines on classification, rescheduling, interest waiver, and write-offs. It defines categories of loans and the criteria for classifying loans as regular, special mention account, substandard, doubtful, and bad/loss. The steps and timelines for classification of different loan types are explained. It also discusses accounting treatments, calculation of provisions, and key conditions for rescheduling loans.
This document discusses various policies and guidelines related to loan management for banks in Bangladesh. It covers topics such as loan classification and provisioning, loan rescheduling, write offs, loan categories, and stimulus funds. Key points include:
- Loans are classified based on their status (unclassified, SME, substandard, doubtful, bad) using objective criteria like number of months past due. Higher risk loans require higher loan loss provisions.
- Rescheduling allows extending repayment terms for non-performing loans if the borrower meets certain conditions. Maximum rescheduling periods depend on loan type and classification.
- Stimulus funds provide subsidized loans to borrowers affected by COVID-19, with
This document discusses classification of investments, provisioning, and rescheduling procedures. It covers:
- Five categories of investment classification: standard, SMA, substandard, doubtful, bad/loss.
- Reasons for investment classification including assessing quality, risk level, and specific provision calculations.
- Basis for classification as continuous, demand, term or short term agri/micro investments.
- Rules for classification based on past due dates and investment type and size.
- Requirements for rescheduling defaulted investments including cash down payment, repayment assessment, and justification in writing.
The document discusses credit appraisal processes in the banking sector. It defines credit appraisal as an investigation done by banks to assess the commercial, financial, and technical viability of loans and projects. The credit appraisal process involves evaluating a customer's financial condition, repayment capacity, collateral, and other factors. Banks consider the 3Cs of credit - character, capacity, and collateral. The document then provides details about specific credit appraisal methods, ratios, and processes used by State Bank of India.
This document provides an overview of bank guarantees. It defines what a bank guarantee is, noting that it is a written contract issued by a bank on behalf of a customer to take responsibility for payment if the customer does not pay. It discusses the key parties involved, types of bank guarantees, advantages and disadvantages, procedures for applying, and audit and disclosure requirements. The document aims to cover these topics at a high level for providing an overview of bank guarantees.
Integrated treasury management in banksSahas Patil
This document discusses integrated treasury management in banks. It describes the functions of a bank's treasury, including reserve management, liquidity management, risk management, and derivatives trading. It outlines the structure of an integrated treasury with front, middle, and back offices. It discusses various money market instruments in India like treasury bills, commercial papers, certificates of deposit, repos, and the Liquidity Adjustment Facility operated by the RBI. Maintaining an integrated treasury allows banks to improve profitability, manage risk, and utilize funds more efficiently.
This document provides a summary of a research project on the home loan market from a consumer perspective. It includes an introduction, literature review, research methodology, data analysis, findings, and conclusion sections. The introduction provides background on home loans and their advantages and disadvantages. The literature review summarizes several past studies on topics like housing finance companies, home loan growth rates, and housing credit situations. The research methodology describes the study's objectives, design, data sources, sampling, and data analysis tools. The findings and conclusion sections analyze and summarize the results of the study.
This document discusses factoring, which is a financial transaction where a business sells its accounts receivable to a third party called a factor in exchange for immediate cash. There are several types of factoring described, including domestic, international, recourse, non-recourse, maturity, and invoice factoring. The key differences between factoring and a bank loan are also outlined. A case study is then provided showing how a company used export factoring and purchase order financing to fulfill several contracts requiring upfront capital.
This document discusses liquidity risk and how banks must ensure they have sufficient liquid assets to meet obligations. It outlines various sources of liquidity risk including strategic decisions, reputation issues, market trends, and specific products. It also describes different types of liquidity risk such as asset liquidity risk and funding liquidity risk. Additionally, it discusses liquidity black holes that can develop when the entire market moves to sell assets, exacerbating liquidity issues.
This document discusses various policies and guidelines related to loan management for banks in Bangladesh. It covers topics such as loan classification and provisioning, loan rescheduling, write offs, loan categories, and stimulus funds. Key points include:
- Loans are classified based on their status (unclassified, SME, substandard, doubtful, bad) using objective criteria like number of months past due. Higher risk loans require higher loan loss provisions.
- Rescheduling allows extending repayment terms for non-performing loans if the borrower meets certain conditions. Maximum rescheduling periods depend on loan type and classification.
- Stimulus funds provide subsidized loans to borrowers affected by COVID-19, with
This document discusses classification of investments, provisioning, and rescheduling procedures. It covers:
- Five categories of investment classification: standard, SMA, substandard, doubtful, bad/loss.
- Reasons for investment classification including assessing quality, risk level, and specific provision calculations.
- Basis for classification as continuous, demand, term or short term agri/micro investments.
- Rules for classification based on past due dates and investment type and size.
- Requirements for rescheduling defaulted investments including cash down payment, repayment assessment, and justification in writing.
The document discusses credit appraisal processes in the banking sector. It defines credit appraisal as an investigation done by banks to assess the commercial, financial, and technical viability of loans and projects. The credit appraisal process involves evaluating a customer's financial condition, repayment capacity, collateral, and other factors. Banks consider the 3Cs of credit - character, capacity, and collateral. The document then provides details about specific credit appraisal methods, ratios, and processes used by State Bank of India.
This document provides an overview of bank guarantees. It defines what a bank guarantee is, noting that it is a written contract issued by a bank on behalf of a customer to take responsibility for payment if the customer does not pay. It discusses the key parties involved, types of bank guarantees, advantages and disadvantages, procedures for applying, and audit and disclosure requirements. The document aims to cover these topics at a high level for providing an overview of bank guarantees.
Integrated treasury management in banksSahas Patil
This document discusses integrated treasury management in banks. It describes the functions of a bank's treasury, including reserve management, liquidity management, risk management, and derivatives trading. It outlines the structure of an integrated treasury with front, middle, and back offices. It discusses various money market instruments in India like treasury bills, commercial papers, certificates of deposit, repos, and the Liquidity Adjustment Facility operated by the RBI. Maintaining an integrated treasury allows banks to improve profitability, manage risk, and utilize funds more efficiently.
This document provides a summary of a research project on the home loan market from a consumer perspective. It includes an introduction, literature review, research methodology, data analysis, findings, and conclusion sections. The introduction provides background on home loans and their advantages and disadvantages. The literature review summarizes several past studies on topics like housing finance companies, home loan growth rates, and housing credit situations. The research methodology describes the study's objectives, design, data sources, sampling, and data analysis tools. The findings and conclusion sections analyze and summarize the results of the study.
This document discusses factoring, which is a financial transaction where a business sells its accounts receivable to a third party called a factor in exchange for immediate cash. There are several types of factoring described, including domestic, international, recourse, non-recourse, maturity, and invoice factoring. The key differences between factoring and a bank loan are also outlined. A case study is then provided showing how a company used export factoring and purchase order financing to fulfill several contracts requiring upfront capital.
This document discusses liquidity risk and how banks must ensure they have sufficient liquid assets to meet obligations. It outlines various sources of liquidity risk including strategic decisions, reputation issues, market trends, and specific products. It also describes different types of liquidity risk such as asset liquidity risk and funding liquidity risk. Additionally, it discusses liquidity black holes that can develop when the entire market moves to sell assets, exacerbating liquidity issues.
This document discusses retail banking in India. It provides an overview of retail banking, best practices, and the significance of product innovation. It then discusses the drivers of retail business in India, including economic growth, demographics, technology, and declining interest rates. Specific areas of retail lending discussed are credit cards and housing loans. The opportunities for retail banking in India are significant due to economic and demographic factors. However, challenges include customer retention, rising indebtedness, and managing information technology risks.
The document then discusses the key aspects of Basel I and Basel II accords. Basel I, introduced in 1998, required banks to hold capital equal to at least 8% of total assets, measured according to their riskiness across four buckets (0%, 20%, 50%, 100%). Basel II, published in 2004, consists of three pillars - minimum capital requirements, supervisory review, and market discipline. It introduced a risk
Basel III is a global regulatory standard that aims to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and leverage. It was implemented in response to deficiencies in the previous Basel II framework that were exposed by the global financial crisis. The goals of Basel III include improving the banking sector's ability to absorb shocks, reducing systemic risk, and increasing transparency. It establishes stricter capital standards, introduces capital buffers, and imposes new liquidity measures including the liquidity coverage ratio and net stable funding ratio.
The document discusses various aspects of credit risk and risk management in banks. It covers topics like the different types of credit risk, obstacles in credit risk management, methods to reduce credit risks, credit derivatives, securitization process, Basel accords, asset-liability management, capital adequacy ratio, and interest rate risk.
Prudential norms on Income recognition, asset classification and provisioning...Pankaj Baid
The document outlines the Reserve Bank of India's prudential norms for classifying bank loans as non-performing assets and provisions related to loan advances. Key points include:
- Loans are classified as NPAs if interest or principal payments are overdue for more than 90 days.
- Income from NPAs should not be recognized and any interest recorded previously must be reversed.
- NPAs are further classified as substandard, doubtful or loss assets based on number of days past due.
- Higher provisioning is required for worse classified assets to account for higher credit risk.
Letter of Credit - Complete Presentation - (Bcom-Mcom-BBA-MBA-BS)Millat Afridi
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. A letter of credit is extremely common within international trade and goods delivery, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as underwriting the credit risk of the buyer paying the seller for goods.
This document discusses risk management in banks. It outlines the major types of risks banks face: credit risk, market risk, and operational risk. Credit risk is the potential that a bank borrower fails to meet obligations and can take the form of outright default or deterioration in credit quality. Market risk includes liquidity risk, interest rate risk, foreign exchange risk, and country risk due to fluctuations in market values. Operational risk is the risk of loss from inadequate internal processes or systems. The Basel Accords provide capital adequacy guidelines for banks to manage unexpected losses from risks based on their risk profiles. Risk management in banks involves identifying, measuring, monitoring, and controlling various risks to ensure sufficient capital levels are maintained.
AML & KYC Guidelines in Bank | Anti-Money Laundering for JAIIB Exam | Bank Pr...Abinash Mandilwar
This video is based on RBI Master Circular on Prevention of Money Laundering Act, (PMLA) 2002 dated 25/02/2016 (Updated up as on 12 July 2018). This is very helpful for preparation of JAIIB Exam, Bank Promotion Exam & Bank PO Exam ( Banking Awareness). Please like, Share and Subscribe the channel. Your valuable comment for improvement is always welcome. For details You may purchase my JAIIB books online. https://www.amazon.in/s?k=abinash+man...
Follow me on twitter @amandilwar (Abinash Mandilwar)
Youtube Video Link - https://youtu.be/AJsUYo2GqvE
Banks need to recover the money lent to the borrowers. In case the funds lend becomes npa; it hampers whole banking business and decrease profitability.
“Recovery” is defined as the process of regaining and saving something lost and “Management” is the process of planning, organizing and controlling activities to achieve the objectives of business efficiently.
Recovery Management is thus concerned with designing and implementing a collection of strategy to recover the debts without losing customers.
Recovery measures could be legal and non-legal :- Banks could adopt legal measures to recover loans by filing a suit in civil court or filing an application before the DRTs. Before taking legal actions banks generally give frequent reminders by calls, messages, mails and visit to borrower’s place which is considered as non-legal measures without intervention of court.
Major reasons behind defaults :- Lack of credit evaluation, Inadequacy of collateral security/ equitable mortgage against loan, Lack of follow up measures, Default due to natural calamities etc.
Thank You For Watching
Please Subscribe To DevTech Finance
The document discusses various types of loans provided by banks including demand loans, term loans, secured loans, unsecured loans, overdrafts and bills discounted. It provides details on the process of obtaining a loan, including filling the application form, submitting documents, loan sanctioning, agreement execution and arranging security. Data from a survey on bank loans is presented, showing responses for loan type taken, loan amount, repayment period, bank chosen, occupation of borrowers and sector of lending banks. Common limitations of banks in lending and opportunities for improvement are also summarized.
This document discusses bank funds and liquidity management. It defines key concepts like funds, sources of funds, liquidity, types of liquidity, liquidity risk, and principles of liquidity management. It also outlines the regulatory initiatives for funds management in Bangladesh and emphasizes the importance of adequate liquidity for banks to ensure sustainability. Maintaining proper balance between assets and liabilities is recommended for effective liquidity management.
This document provides an overview of bank guarantees, including:
1) It defines a bank guarantee as a contract where the bank guarantees to perform a third party's liability in case of default. The parties involved are the applicant, beneficiary, and guarantor bank.
2) Common purposes of bank guarantees include providing security deposits, mobilizing funds, and ensuring performance or payment on contracts.
3) Guidelines state banks should exercise caution with performance guarantees and generally limit guarantees to 18 months, taking security such as cash margins from applicants.
4) Proper appraisal of guarantees is required similar to loans, examining the applicant's financial strength and purpose of the guarantee.
The document discusses the Bangladesh Automated Clearing House (BACH) system and the Bangladesh Electronic Funds Transfer Network (BEFTN). BACH includes the Bangladesh Automated Cheque Processing System (BACPS) and BEFTN. BACPS processes cheque clearing between participating banks in an automated way, replacing the previous manual clearing system. BEFTN allows for electronic funds transfers between participating banks in real-time. Key components of each system like eligible instruments, roles of participating banks, and transaction flows are described in detail.
Risk management in banks is important as banks are exposed to various risks in the changing Indian economy. The key risks include credit risk, market risk, operational risk, liquidity risk, and interest rate risk. Effective risk management involves identifying, measuring, monitoring, and controlling risks. Banks must have robust policies, strategies, organizational structures, and systems in place to properly manage risks like establishing risk limits, risk grading, and risk mitigation techniques. Proper risk management is essential for the long-term success of banks.
This document outlines the key components of an effective loan policy for credit risk management. It discusses the importance of having a written loan policy that establishes credit standards, procedures for managing delinquent loans, and target customer profiles. The policy should set prudential limits on loan concentrations, define appropriate collateral and credit rating standards, and provide guidelines for different business segments. Regular reviews and updates are needed to ensure the policy stays dynamic and aligned with regulatory requirements and market conditions. The overall goal is for the loan policy to balance risk and returns while guiding responsible credit expansion.
Bancassurance refers to the distribution of insurance products through banks. In India, banks were first allowed to enter the insurance sector in 2002. There are three options for banks - a joint venture allowing risk participation, investment of up to 10% of net worth, or acting as an agent without risk participation. The IRDA guidelines require dedicated insurance executives, mandatory training, and allow banks to be agents of one insurer. Bancassurance provides advantages like revenue diversification, customer retention and access to new customers for banks, insurers and consumers.
This document discusses the importance of credit monitoring and outlines the key aspects that should be monitored. It defines credit monitoring as tracking the performance of financing facilities from disbursement to repayment. Effective post-sanction monitoring is essential to evaluate asset performance and health over the loan tenure. Key areas that should be monitored include internal and external factors that could impact repayment, utilization of loans, account conduct, financial covenants, and security coverage. Timely identification of issues through monitoring can help prevent delinquency and write-offs.
This document summarizes a student internship report on Basic Bank Limited and the Hallmark scam. It includes an introduction outlining the purpose and scope of the report. The student collected data through both primary research during their internship at Basic Bank and secondary sources such as annual reports and newspaper articles. The report provides background on Basic Bank's operations, including foreign exchange, credit management, and the procedures involved. It also examines the Hallmark scam that occurred, its impact on the economy, and changes in banking regulation as a result. The summary aims to analyze banking practices and identify any shortcomings that contributed to the Hallmark scam.
Loan classification involves categorizing loans based on perceived risk levels. Loans are classified as unclassified, substandard, doubtful, or bad/loss. Provisioning means setting aside funds to cover possible loan losses. Loan classification strengthens credit discipline, improves recovery, and aids planning and regulatory reporting. It also allows banks to assess credit risk levels and financial soundness. Classified loans face restrictions like non-accrual of interest. Banks must maintain provisions at set rates depending on the loan classification.
This document discusses the importance and process of loan classification for banks. It outlines:
1) Loan classification is a key part of internal loan reviews and helps strengthen credit discipline, improve recovery positions, and aid future planning. It also allows banks to calculate expected losses.
2) Classified loans require different accounting treatment, such as ceasing to recognize interest income and requiring provisions be set aside from earnings.
3) Loans are categorized as continuous, demand, fixed term, or short-term agricultural/micro credits and have different criteria for classification as sub-standard, doubtful, or bad/loss.
4) Classification considers both objective past due criteria and qualitative factors like borrower financial impairment or uncertain recovery
This document discusses retail banking in India. It provides an overview of retail banking, best practices, and the significance of product innovation. It then discusses the drivers of retail business in India, including economic growth, demographics, technology, and declining interest rates. Specific areas of retail lending discussed are credit cards and housing loans. The opportunities for retail banking in India are significant due to economic and demographic factors. However, challenges include customer retention, rising indebtedness, and managing information technology risks.
The document then discusses the key aspects of Basel I and Basel II accords. Basel I, introduced in 1998, required banks to hold capital equal to at least 8% of total assets, measured according to their riskiness across four buckets (0%, 20%, 50%, 100%). Basel II, published in 2004, consists of three pillars - minimum capital requirements, supervisory review, and market discipline. It introduced a risk
Basel III is a global regulatory standard that aims to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and leverage. It was implemented in response to deficiencies in the previous Basel II framework that were exposed by the global financial crisis. The goals of Basel III include improving the banking sector's ability to absorb shocks, reducing systemic risk, and increasing transparency. It establishes stricter capital standards, introduces capital buffers, and imposes new liquidity measures including the liquidity coverage ratio and net stable funding ratio.
The document discusses various aspects of credit risk and risk management in banks. It covers topics like the different types of credit risk, obstacles in credit risk management, methods to reduce credit risks, credit derivatives, securitization process, Basel accords, asset-liability management, capital adequacy ratio, and interest rate risk.
Prudential norms on Income recognition, asset classification and provisioning...Pankaj Baid
The document outlines the Reserve Bank of India's prudential norms for classifying bank loans as non-performing assets and provisions related to loan advances. Key points include:
- Loans are classified as NPAs if interest or principal payments are overdue for more than 90 days.
- Income from NPAs should not be recognized and any interest recorded previously must be reversed.
- NPAs are further classified as substandard, doubtful or loss assets based on number of days past due.
- Higher provisioning is required for worse classified assets to account for higher credit risk.
Letter of Credit - Complete Presentation - (Bcom-Mcom-BBA-MBA-BS)Millat Afridi
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. A letter of credit is extremely common within international trade and goods delivery, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as underwriting the credit risk of the buyer paying the seller for goods.
This document discusses risk management in banks. It outlines the major types of risks banks face: credit risk, market risk, and operational risk. Credit risk is the potential that a bank borrower fails to meet obligations and can take the form of outright default or deterioration in credit quality. Market risk includes liquidity risk, interest rate risk, foreign exchange risk, and country risk due to fluctuations in market values. Operational risk is the risk of loss from inadequate internal processes or systems. The Basel Accords provide capital adequacy guidelines for banks to manage unexpected losses from risks based on their risk profiles. Risk management in banks involves identifying, measuring, monitoring, and controlling various risks to ensure sufficient capital levels are maintained.
AML & KYC Guidelines in Bank | Anti-Money Laundering for JAIIB Exam | Bank Pr...Abinash Mandilwar
This video is based on RBI Master Circular on Prevention of Money Laundering Act, (PMLA) 2002 dated 25/02/2016 (Updated up as on 12 July 2018). This is very helpful for preparation of JAIIB Exam, Bank Promotion Exam & Bank PO Exam ( Banking Awareness). Please like, Share and Subscribe the channel. Your valuable comment for improvement is always welcome. For details You may purchase my JAIIB books online. https://www.amazon.in/s?k=abinash+man...
Follow me on twitter @amandilwar (Abinash Mandilwar)
Youtube Video Link - https://youtu.be/AJsUYo2GqvE
Banks need to recover the money lent to the borrowers. In case the funds lend becomes npa; it hampers whole banking business and decrease profitability.
“Recovery” is defined as the process of regaining and saving something lost and “Management” is the process of planning, organizing and controlling activities to achieve the objectives of business efficiently.
Recovery Management is thus concerned with designing and implementing a collection of strategy to recover the debts without losing customers.
Recovery measures could be legal and non-legal :- Banks could adopt legal measures to recover loans by filing a suit in civil court or filing an application before the DRTs. Before taking legal actions banks generally give frequent reminders by calls, messages, mails and visit to borrower’s place which is considered as non-legal measures without intervention of court.
Major reasons behind defaults :- Lack of credit evaluation, Inadequacy of collateral security/ equitable mortgage against loan, Lack of follow up measures, Default due to natural calamities etc.
Thank You For Watching
Please Subscribe To DevTech Finance
The document discusses various types of loans provided by banks including demand loans, term loans, secured loans, unsecured loans, overdrafts and bills discounted. It provides details on the process of obtaining a loan, including filling the application form, submitting documents, loan sanctioning, agreement execution and arranging security. Data from a survey on bank loans is presented, showing responses for loan type taken, loan amount, repayment period, bank chosen, occupation of borrowers and sector of lending banks. Common limitations of banks in lending and opportunities for improvement are also summarized.
This document discusses bank funds and liquidity management. It defines key concepts like funds, sources of funds, liquidity, types of liquidity, liquidity risk, and principles of liquidity management. It also outlines the regulatory initiatives for funds management in Bangladesh and emphasizes the importance of adequate liquidity for banks to ensure sustainability. Maintaining proper balance between assets and liabilities is recommended for effective liquidity management.
This document provides an overview of bank guarantees, including:
1) It defines a bank guarantee as a contract where the bank guarantees to perform a third party's liability in case of default. The parties involved are the applicant, beneficiary, and guarantor bank.
2) Common purposes of bank guarantees include providing security deposits, mobilizing funds, and ensuring performance or payment on contracts.
3) Guidelines state banks should exercise caution with performance guarantees and generally limit guarantees to 18 months, taking security such as cash margins from applicants.
4) Proper appraisal of guarantees is required similar to loans, examining the applicant's financial strength and purpose of the guarantee.
The document discusses the Bangladesh Automated Clearing House (BACH) system and the Bangladesh Electronic Funds Transfer Network (BEFTN). BACH includes the Bangladesh Automated Cheque Processing System (BACPS) and BEFTN. BACPS processes cheque clearing between participating banks in an automated way, replacing the previous manual clearing system. BEFTN allows for electronic funds transfers between participating banks in real-time. Key components of each system like eligible instruments, roles of participating banks, and transaction flows are described in detail.
Risk management in banks is important as banks are exposed to various risks in the changing Indian economy. The key risks include credit risk, market risk, operational risk, liquidity risk, and interest rate risk. Effective risk management involves identifying, measuring, monitoring, and controlling risks. Banks must have robust policies, strategies, organizational structures, and systems in place to properly manage risks like establishing risk limits, risk grading, and risk mitigation techniques. Proper risk management is essential for the long-term success of banks.
This document outlines the key components of an effective loan policy for credit risk management. It discusses the importance of having a written loan policy that establishes credit standards, procedures for managing delinquent loans, and target customer profiles. The policy should set prudential limits on loan concentrations, define appropriate collateral and credit rating standards, and provide guidelines for different business segments. Regular reviews and updates are needed to ensure the policy stays dynamic and aligned with regulatory requirements and market conditions. The overall goal is for the loan policy to balance risk and returns while guiding responsible credit expansion.
Bancassurance refers to the distribution of insurance products through banks. In India, banks were first allowed to enter the insurance sector in 2002. There are three options for banks - a joint venture allowing risk participation, investment of up to 10% of net worth, or acting as an agent without risk participation. The IRDA guidelines require dedicated insurance executives, mandatory training, and allow banks to be agents of one insurer. Bancassurance provides advantages like revenue diversification, customer retention and access to new customers for banks, insurers and consumers.
This document discusses the importance of credit monitoring and outlines the key aspects that should be monitored. It defines credit monitoring as tracking the performance of financing facilities from disbursement to repayment. Effective post-sanction monitoring is essential to evaluate asset performance and health over the loan tenure. Key areas that should be monitored include internal and external factors that could impact repayment, utilization of loans, account conduct, financial covenants, and security coverage. Timely identification of issues through monitoring can help prevent delinquency and write-offs.
This document summarizes a student internship report on Basic Bank Limited and the Hallmark scam. It includes an introduction outlining the purpose and scope of the report. The student collected data through both primary research during their internship at Basic Bank and secondary sources such as annual reports and newspaper articles. The report provides background on Basic Bank's operations, including foreign exchange, credit management, and the procedures involved. It also examines the Hallmark scam that occurred, its impact on the economy, and changes in banking regulation as a result. The summary aims to analyze banking practices and identify any shortcomings that contributed to the Hallmark scam.
Loan classification involves categorizing loans based on perceived risk levels. Loans are classified as unclassified, substandard, doubtful, or bad/loss. Provisioning means setting aside funds to cover possible loan losses. Loan classification strengthens credit discipline, improves recovery, and aids planning and regulatory reporting. It also allows banks to assess credit risk levels and financial soundness. Classified loans face restrictions like non-accrual of interest. Banks must maintain provisions at set rates depending on the loan classification.
This document discusses the importance and process of loan classification for banks. It outlines:
1) Loan classification is a key part of internal loan reviews and helps strengthen credit discipline, improve recovery positions, and aid future planning. It also allows banks to calculate expected losses.
2) Classified loans require different accounting treatment, such as ceasing to recognize interest income and requiring provisions be set aside from earnings.
3) Loans are categorized as continuous, demand, fixed term, or short-term agricultural/micro credits and have different criteria for classification as sub-standard, doubtful, or bad/loss.
4) Classification considers both objective past due criteria and qualitative factors like borrower financial impairment or uncertain recovery
The document discusses Bangladesh Bank's regulations on risk-based capital adequacy (RBCA) for banks according to Basel III standards. It covers key aspects of the three pillars of Basel III including capital requirements, supervision/risk management, and market discipline/disclosures. The presentation provides details on capital ratios and buffers to be met under Basel III as well as guidelines for loan classification, provisioning, rescheduling, and down payments for restructuring. It emphasizes the importance of correct classification, adequate provisioning, and robust internal controls in ensuring banking stability and soundness.
The document discusses banking regulations and norms for asset classification, provisioning, and income recognition in India. It provides definitions for key terms like banking, commercial banks, cooperative banks, scheduled banks, and non-performing assets. It outlines the categories of NPAs as substandard, doubtful, and loss. It also summarizes the guidelines for classifying assets, including the timelines for classifying loans, cash credits, bills, and more as NPAs. The identification and classification of NPAs is an important area for bank audits.
The document discusses NPA norms for agriculture loans. It states that separate NPA norms apply only for farm credit like crop loans, and loans must be for activities listed in an RBI annexure. For agriculture loans, short duration crop loans become NPA if overdue for 2 crop seasons, and long duration loans if overdue for 1 crop season. Relief from NPA classification is provided if loans are restructured due to natural calamities declared by the government.
This document discusses the management of non-performing assets (NPAs) in banks. It defines NPAs as loans or advances where interest or principal payments are overdue by 90 days or more. It outlines the classification of assets as standard, sub-standard, doubtful or loss based on delinquency period. The document also discusses provisioning norms required against different asset classifications and factors contributing to rising NPAs. It examines the impact of NPAs on bank operations and various methods used for prevention and resolution of NPAs.
21 and 22 SME FINANCE Stressed Asset Management.pptxVbsReddy2
The document discusses various frameworks for restructuring loans for stressed assets in India. It summarizes the key aspects of three frameworks:
1) Prudential Framework for Resolution of Stressed Assets which provides guidelines for early recognition, reporting and resolution of stressed assets for both corporate and individual borrowers.
2) MSME Sector Restructuring of Advances which allows for one-time restructuring of loans for MSMEs to provide relief.
3) Resolution Framework for COVID Related Stress which provides guidelines for restructuring of loans that have become stressed due to COVID, including asset classification and provisioning requirements.
21 and 22 SME FINANCE Stressed Asset Management and Recovery.pptxVbsReddy2
This document discusses guidelines for restructuring loans in India. It covers three key frameworks - the Prudential Framework for resolving stressed assets, the one-time restructuring scheme for MSME loans, and the Resolution Framework for COVID related stress. Some key points:
- The frameworks provide options to restructure loans by modifying terms like payment periods, interest rates to provide temporary relief to borrowers facing financial difficulty.
- Eligibility and provisions vary depending on if the borrower is an individual, MSME or corporate and if the restructuring is for COVID or non-COVID related stress.
- The aim is to offer relief and prevent further slippage of loans into non-performing assets, while ensuring adequate
This document provides an overview of income recognition, asset classification, and provisioning norms for banks in India. It discusses key definitions such as non-performing assets (NPAs) and explains the process for classifying assets as standard, special mention, sub-standard, doubtful, or loss depending on the number of days an asset is overdue. It also outlines the provisioning requirements for different asset classifications according to Reserve Bank of India guidelines. The document concludes with an example showing how to calculate gross and net advances and NPAs.
The document summarizes the Main Street Lending Program (MSLP) established by the Federal Reserve to provide support to small and medium-sized businesses during the COVID-19 pandemic. It describes the three types of loans offered through the program - the New Loan Facility, Priority Loan Facility, and Expanded Loan Facility. It provides details on loan sizes, terms, fees, and the role of the Federal Reserve and eligible lenders. It also outlines restrictions on borrower compensation, stock repurchases, dividends, debt repayment, and use of funds to qualify for the program.
Comparative Analysis of NPA in Public, Private & in Private Sector Banks.Rajath Kunder
This document discusses non-performing assets (NPAs) in banks in India. It defines NPAs as loans that are in jeopardy of default if interest or principal payments are overdue for 90 days. Growing NPAs can negatively impact bank profitability, liquidity, and management resources. The document categorizes NPAs as sub-standard, doubtful or loss assets depending on the period of default. It also analyzes reasons for NPAs like internal factors related to borrowers or external economic issues, and lists early symptoms of emerging NPAs.
This document discusses non-performing assets (NPAs) and asset classification in Central Bank of India. It defines performing and non-performing assets, and explains that an asset becomes non-performing if interest or principal payments are overdue by more than 90 days. It outlines the different asset classifications of standard, sub-standard, doubtful, and loss. It discusses guidelines for asset classification and the process of upgrading loan accounts from NPA status. The document provides details on asset classification, provisioning norms, and exceptions for government guaranteed advances and loans under BIFR/TLI approved rehabilitation packages.
This document provides information on various topics related to banking such as the importance of loans, how core banking systems help identify NPAs, important MIS reports generated by banks, important financial commands in core banking applications, classification of loans by sector, security, and performance, and two case studies of NPAs.
The key points are: Loans are important for bank profitability. Core banking systems help identify problem loans. Loans should be properly classified by sector, security, and performance for accurate reporting and provisioning. The case studies show examples of window dressing, evergreening, and other irregularities that resulted in accounts becoming NPAs.
Audit of Restructure Assets - Nagpur Branch, ICAIPranav Joshi
The document discusses areas of concern when auditing restructured debt accounts. It defines debt restructuring as modifying loan terms to provide relief to debtors at risk of default. Two key areas for auditors are RBI guidelines on Funded Interest Term Loan accounts and provisions for Diminution in Fair Value of restructured loans. FITLs are created by converting unpaid interest to additional term loans, and guidelines address their asset classification and income recognition. Calculating the reduction in fair value compares present values of cash flows before and after restructuring to determine required provisions.
Corporate India - Distress Resolution Solutions Sumedha Fiscal
The Indian Banking scenario is going through unprecedented times with stressed loan portfolio. The portfolio of all Banks put together is more than 7 lakh crore which is > 10% of total advances and there is an apprehension that there could be significant additions too.
Realizing the problem RBI has come out with many changes and schemes to tackle such stressed accounts.
Here are come of the distress resolution solutions that you can look into.
An audit of a bank is different than other audits due to banks dealing in money as raw material and product. Banks must also comply with regulatory requirements. Major areas of a branch audit include loans, deposits, and banking operations. Loans are the largest asset and greatest risk exposure so internal controls are important. Common types of loans include overdrafts, cash finance, term loans, and export financing. Audit procedures involve verifying loan amounts, terms, and classifications.
This document discusses non-performing assets (NPAs) in the Indian banking sector. It provides background on banking sector reforms in India and defines key terms related to NPAs such as non-performing asset, past due, and overdue. It notes that while reforms progressed in areas like interest rates and reserve requirements, the pace of reform did not match expectations. It also discusses the classification of assets as NPAs, with the criteria shifting from past due over 180-270 days to overdue over 90-180 days depending on the type of loan or bank. The document provides details on identifying and managing NPAs in the Indian banking system.
The document discusses RBI guidelines on prudential norms for income recognition, asset classification, and provisioning processes in banks. Key points:
- Banks must automate their income recognition, asset classification, and provisioning processes by June 30, 2021 to ensure completeness and integrity.
- All borrowal accounts and investments must be covered in the automated system. Asset classification rules and provisioning calculations must be system-driven.
- The system must identify NPAs and calculate required reversals from income without manual intervention. Asset classification status should be updated daily.
- Guidelines cover definitions of NPAs, exceptions, reversal of income, special mention accounts, sub-standard/doubtful/loss classifications,
e-Forum of CDA and PICPA Pangasinan Chapter
Aug 19, 2020
on CDA Issuances, Statutory Reserves, MC 2020-18, Journal Entries and Philippine Financial Reporting System
Similar to Laon Classification, Provisioning, Rescheduling - 26.12.2022.pptx (20)
[4:55 p.m.] Bryan Oates
OJPs are becoming a critical resource for policy-makers and researchers who study the labour market. LMIC continues to work with Vicinity Jobs’ data on OJPs, which can be explored in our Canadian Job Trends Dashboard. Valuable insights have been gained through our analysis of OJP data, including LMIC research lead
Suzanne Spiteri’s recent report on improving the quality and accessibility of job postings to reduce employment barriers for neurodivergent people.
Decoding job postings: Improving accessibility for neurodivergent job seekers
Improving the quality and accessibility of job postings is one way to reduce employment barriers for neurodivergent people.
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting, 8th Canadian Edition by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Ebook Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Pdf Solution Manual For Financial Accounting 8th Canadian Edition Pdf Download Stuvia Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Financial Accounting 8th Canadian Edition Ebook Download Stuvia Financial Accounting 8th Canadian Edition Pdf Financial Accounting 8th Canadian Edition Pdf Download Stuvia
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
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2. Introduction
An increase in nonperforming loan (NPL) has the
multipronged adverse impacts on bank's balance
sheet having consequential effect of erosion of capital
impairing earning streams, profitability, liquidity and
solvency. Any compromise with the quality of assets at
the sanctioning process will be a contributing factor
towards enhancement of NPLs. The bank
management has no choice but to stay focused on the
issue of keeping credit portfolio performing to the
maximum extent.
3. Circulars to be followed:
For Classification:
BRPD Circular – 03/2019
BRPD Circular – 16/2020
BRPD Circular – 14/2022
BRPD Circular letter no. – 51/2022
BRPD Circular – 14/2012
For Rescheduling:
BRPD Circular – 16/2022
BRPD Circular letter no. – 33/2022
BRPD Circular letter no. – 52/2022
4. Circulars to be followed:
For Interest Waiver:
BRPD Circular – 06/2022
BRPD Circular letter no. – 18/2022
BRPD Circular letter no. – 46/2022
For Written-Off:
BRPD Circular – 01/2019
5. Categories of Loans and Advances :
1. Continuous Loan
2. Demand Loan
3. Fixed Term Loan
4 Short-term Agricultural &
Micro-Credit
6. Categories of Loans and Advances :
a) Continuous Loan: The loan accounts in which transactions may be made
within certain limit and have an expiry date for full adjustment will be treated as
Continuous Loan. Examples are: Cash Credit, Overdraft, etc.
b) Demand Loan: The loans that become repayable on demand by the bank will
be treated as Demand Loan. If any contingent or any other liabilities are turned to
forced loan (i.e. without any prior approval as regular loan) those too will be
treated as Demand Loan. Such as: Forced Loan against Imported Merchandise,
Payment against Document, Foreign Bill Purchased, and Inland Bill Purchased,
etc.
c) Fixed Term Loan: The loans, which are repayable within a specific time
period under a specific repayment schedule, will be treated as Fixed Term Loan.
d) Short-term Agricultural & Micro-Credit: Short-term Agricultural Credit will
include the short-term credits as listed under the Annual Credit Program issued by
the Agricultural Credit and Financial Inclusion Department (ACFID) of Bangladesh
Bank. Credits in the agricultural sector repayable within 12 (twelve) months will
also be included herein. Short-term Micro- Credit will include any micro-credits not
exceeding an amount determined by the ACFID of Bangladesh
8. When does a loan turn to be non
performing (as per Objective Criteria)?
1. Overdue loans:
For Continuous and Demand Loan: If not repaid/renewed within the fixed
expiry date for repayment will be treated as past due/overdue from the following
day of the expiry date.
For Fixed Term Loan: In case of any installment(s) or part of installment(s) of a
Fixed Term Loan is not repaid within the fixed expiry date, the amount of unpaid
installment(s) will be treated as past due/overdue after six months of
the expiry date.
2. SMA: If such overdue amount is not adjusted within 60 days the Loan Account
will be treated as Special Mention Account (SMA).
Treatment of SMA Account :
a) The interest charged in SMA shall be credited to Income account.
b) Loans in the SMA will be reported to the Credit Information Bureau (CIB).
c) Such a loan will not be treated as defaulted loan.
9. Three steps of classification
(other than - Cottage, Micro and Small Credits under CMSME & Short
Term Agriculture and Micro Credit)
A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 03 (three) months or beyond but less than 09 (nine) months, the
entire loan will be put into the "Sub-standard (SS)".
A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 09 (nine) months or beyond but less than 12 (twelve) months, the
entire loan will be put into the “Doubtful (DF)".
A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 12 (twelve) months or beyond, the entire loan will be put into the
“Bad and Loss (BL)".
3
9
12
10. Three steps of classification for –
Cottage, Micro and Small Credits under CMSME
A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 06 (six) months or beyond but less than 18 (eighteen) months, the
entire loan will be put into the "Sub-standard (SS)".
A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 18 (eighteen) months or beyond but less than 30 (thirty) months,
the entire loan will be put into the “Doubtful (DF)".
A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 30 (thirty) months or beyond, the entire loan will be put into the
“Bad and Loss (BL)".
30
6
18
11. The Short-term Agricultural and Micro-Credit will be considered irregular
if not repaid within the due date as stipulated in the loan
agreement.
If the said irregular status continues, the credit will be classified as
'Substandard ' after a period of 12 months,
'Doubtful' after a period of 36 months
'Bad/Loss' after a period of 60 months from the stipulated due date as
per the loan agreement.
Three steps of classification
(For - Short Term Agriculture and Micro Credit)
12. Accounting of the interest of Classified loans:
i) If any loan or advance is classified as 'Sub-standard' and 'Doubtful',
interest accrued on such loan will be credited to Interest Suspense
Account, instead of crediting the same to Income Account.
ii) In case of rescheduled loans the unrealized interest, if any, will be
credited to Interest Suspense Account, instead of crediting the
same to Income Account.
iii) As soon as any loan or advance is classified as 'Bad/Loss', charging
of interest in the same account will cease.
iv) In case of filing a law-suit for recovery of such loan, interest for the
period till filing of the suit can be charged in the loan account in order to
file the same for the amount of principal plus interest. But interest thus
charged in the loan account has to be preserved in the 'Interest
Suspense' account.
13. Accounting of recovered amount:
If classified loan or part of it is recovered i.e., real deposit is effected
in the loan account, first the interest charged and accrued but
not charged is to be recovered from the said deposit and the
principal to be adjusted afterwards.
14. Maintenance of Provision
(other than - Cottage, Micro and Small Credits under CMSME & Short
Term Agriculture and Micro Credit)
General Provision -
For Standard (STD) and Special Mention Account (SMA), provision
should be maintained on Base for Provision as follows –
• For Small Enterprise Financing (SEF) – 0.25%
• For Consumer Financing (CF) – 2%
• For House Financing (HF) – 1 % (BRPD – 01/2018)
• Loans for Professionals (LP) – 2 %
• For Brokerage House (BH), Merchant Bank, Stock Dealer – 2 %
• Others (other than above) – 1 %
15. Specific Provision-
For Sub Standard (SS), Doubtful (DF) and Bad/Loss (BL) accounts;
provision should be maintained on Base for Provision as follows –
• For Sub Standard (SS) – 20 %
• For Doubtful (DF) – 50 %
• For Bad / Loss (BL) – 100 %
Maintenance of Provision
(other than - Cottage, Micro and Small Credits under CMSME & Short
Term Agriculture and Micro Credit)
16. For - Cottage, Micro and Small Credits under CMSME:
• All Unclassified Accounts –0.25%
• For Sub Standard (SS) – 05 %
• For Doubtful (DF) – 20 %
• For Bad / Loss (BL) – 100 %
For – Short Term Agriculture and Micro Credit:
• All Unclassified Accounts – 1%
• For Sub Standard (SS) – 05 %
• For Doubtful (DF) – 05 %
• For Bad / Loss (BL) – 100 %
(provision should be maintained on Base for Provision)
Maintenance of Provision
17. Calculation of Base for Provision
• For Standard and SMA Loan,
Base for Provision = Loan Outstanding Amount
• For Sub Standard (SS), Doubtful (DF) and Bad/Loss (BL)
accounts Loan,
Base for Provision = Loan Outstanding Amount – Interest Suspense –
Eligible Security
Or
15% of Loan Outstanding
(Whichever is Greater)
18. What is Rescheduling?
Rescheduling arrangement is a process through which
a classified loan account becomes declassified and
regularized.
22. Important Guidelines for considering application for
Loan Rescheduling:
Banks while considering loan rescheduling, must consider overall
repayment capability of the borrower taking into account the
borrower's liability position with other banks and financial institutions.
Banks shall review the borrower's cash flow statement, audited
balance sheet, income statement and other financial statements in order
to ensure whether the borrower would be able to repay the rescheduled
installments/existing liability or not.
If required, bank officers shall conduct spot inspections of the
borrower's company/business place to ensure that the concerned
company/business enterprise would be able to generate a surplus to
repay the liability of rescheduling. Banks shall preserve such reports in
their branches for Bangladesh Bank’s inspection.
23. Required amount of down payment
For Continuous Loan and Demand Loan:
Loan
Outstanding
Amount
1st and 2nd
time
3rd time 4th time
Less than 50.00
crore
4.00% 5.00% 6.00%
50.00 crore and
above but less
than 300.00
crore
3.00%
(not less than
Tk.2.00 cr)
4.00% 5.00%
300.00 crore and
above
2.50%
(not less than
Tk.9.00 cr)
3.50% 4.50%
24. Required amount of down payment
For Term Loan:
Loan
Outstanding
Amount
1st and 2nd
time
3rd time 4th time
Less than 100.00
crore
4.50% on total
loan or 7.00% on
overdue
installment
amount
5.50% on total
loan or 8.00% on
overdue
installment
amount
6.50% on total
loan or 9.00% on
overdue
installment
amount
100.00 crore and
above but less
than 500.00 crore
3.50% on total
loan or 6.00% on
overdue
installment
amount
4.50% on total
loan or 7.00% on
overdue
installment
amount
5.50% on total
loan or 8.00% on
overdue
installment
amount
500.00 crore and
above
2.50% on total
loan or 5.00% on
overdue
installment
amount
3.50% on total
loan or 6.00% on
overdue
installment
amount
4.50% on total
loan or 7.00% on
overdue
installment
amount
(Which ever is less)
25. TIME LIMIT FOR RESCHEDULING
For Continuous Loan and Demand Loan:
Loan
Outstanding
Amount
1st and 2nd
time
3rd time 4th time
Less than 50.00
crore
05 years 04 years 03 years
50.00 crore and
above but less
than 300.00
crore
06 years 05 years 04 years
300.00 crore and
above
07 years 06 years 05 years
26. TIME LIMIT FOR RESCHEDULING
For Term Loan (other than Short Term Agri, Mirco and Cottage):
Loan
Outstanding
Amount
1st and 2nd
time
3rd time 4th time
Less than
100.00 crore
06 years 05 years 04 years
100.00 crore and
above but less
than 500.00
crore
07 years 06 years 05 years
500.00 crore and
above
08 years 07 years 06 years
27. TIME LIMIT FOR RESCHEDULING
Loan Outstanding
Amount
1st time 2nd, 3rd and 4th time
Any 03 years 2 years & 06 months
For Short Term Agri, Mirco and Cottage:
28. Special Conditions for Loan Rescheduling
a) Demand loans, continuous loans or term loans being of different nature,
such loans cannot be aggregated and rescheduled as a single loan.
However, multiple loan accounts of the same nature (subject to the same
order of rescheduling) can be consolidated and rescheduled as a single
loan.
b) If any classified loan is rescheduled 4 (four) or more times prior to
issuance of this circular, the loan account may be rescheduled at last
once under special consideration and which will be treated as the 4th
time rescheduling. Such rescheduling shall remain open till 31 December
2023.
c) If a loan defaults even after the 4th time rescheduling, the bank will
necessarily take appropriate legal measures including filing a case in a
Artha Rin Adalat, Alternative Dispute Resolution, Arbitration, Bankruptcy
Court or any other similar court for the purpose of recovery. However,
there is no bar in taking any of the prescribed legal measures without
rescheduling any classified debt or at any stage of rescheduling.
29. Special Conditions for Loan Rescheduling
d) No demand loan created through agreement for opening of letter of
credit for import of capital equipment/as applicable shall not be
rescheduling without prior approval from the Board of Directors/Executive
Committee of the Bank. Such debts should be recovered/settled
immediately.
e) The benefits mentioned in this circular cannot be provided in case of
loans created through fraud-forgery or any other form of
fraud/irregularity.
f) For rescheduling/restructuring under this circular, along with the notes
presented to the higher authority, the memorandum and minutes of the
meeting to be presented in the board/executive committee meeting of
the bank, the need for providing the facility, the financial capacity of the
customer, the projection of sufficient liquidity flow to repay the loan after
providing the facility should be properly presented and Due diligence
should be duly ensured by the bank.
30. Instructions for classifications and interest
suspense of rescheduling loans
Rescheduling shall thereafter be recoverable in equal installments of
principal and interest on monthly/quarterly basis. If six monthly or two
quarterly installments are unpaid, the rescheduled loan will be
categorized as bad & loss directly.
The interest retained in suspense account against the rescheduled loan
and the interest charged after the reschedule cannot be transferred to
the income account of the bank without actual recovery. Even the
provision retained against 3rd and 4th time rescheduled bad & loss
account cannot be transferred to the bank's income account without
actual realization.
31. ন্যাশন্াল বযাাংক এর সুদ মওক
ু ফ সাংক্রান্ত
ন্ীতিমালা - ২০২২
NBL circular letter no.4549 dated 24.07.2022
36. Written Off Process
Writing off is a process by which ledger outstanding of a classified liability is reduced
or shown nil without absolving the borrower from paying off the entire bank’s dues.
Which a/c can be written off: The account which is to be written off must fulfill
the following criterion:
i) The account must be classified as Bad & loss.
ii) Suit must be filed against the a/c
Priority to be written off:
The account which has been classified as Bad & Loss for 3 years.
The Bad & Loss account against which 100% provision has been built up.
37. Writing off Process
Action to be taken after writing off :
After writing off, the written off account will not be shown in the ledger
balance of the liability. On the other hand, related parties are not
absolved from paying off the liability. Therefore, the accounting of the
written off liability shall be maintained in a separate ledger.
While preparing annual report or annual statement of the Bank, the written
off liability shall be shown separately.
The borrower of the written off liability shall be treated as defaulted
borrower as usual and his/her name shall not be deleted from the Credit
Information Bureau (CIB) of Bangladesh
38. Strategies for Recovery of Non-performing Loans
No compromise with due diligence in the sanctioning process. Keeping in
mind "prevention is better than cure."
Action plan for potential NPLs.
Identification of highly risk sensitive borrowers in the credit portfolio.
Identification of Sector - wise risk sensitivity.
Targeting high value end NPL accounts
Prompt action on credit reports
Capacity building of officers and executives in the recovery department.
Preventive measures:
Understand client's business
Analyze client's financials
Frequent visits to client
Ensuring perfection of legal documentation
Investigation on market rumors
Use Credit Bureau checking
39. Strategies for Recovery of Non-performing Loans
Monitoring and follow up:
To ensure that funds are utilized for the purpose for which they were
sanctioned. To see that the terms and conditions are complied with.
To monitor the project implementation for avoiding time lag and
consequential cost over runs.
To evaluate the performance in terms of production, sales, profits on a
periodic basis for ensuring that the borrower is keeping to the original plan
and is having sufficient profits to service the debts as well as for the sake
of maintaining normal business momentum.
To assess the impact of negative externalities on the performance of the
company.
To detect the symptom of sickness at the early stage for initiating
measures at the opportune moment.
To keep check on the movement of financial position.
40. Strategies for Recovery of Non-performing Loans
Monitoring and follow up:
To ensure that funds are utilized for the purpose for which they were
sanctioned. To see that the terms and conditions are complied with.
To monitor the project implementation for avoiding time lag and
consequential cost over runs.
To evaluate the performance in terms of production, sales, profits on a
periodic basis for ensuring that the borrower is keeping to the original plan
and is having sufficient profits to service the debts as well as for the sake
of maintaining normal business momentum.
To assess the impact of negative externalities on the performance of the
company.
To detect the symptom of sickness at the early stage for initiating
measures at the opportune moment.
To keep check on the movement of financial position.
41. Strategies for Recovery of Non-performing Loans
◦ No compromise with due diligence in the sanctioning process. Keeping
in mind "prevention is better than cure."
◦ Banks should take high collateral while considering credit proposal(s).
If a borrower defaults on a loan, Bank can sell the collateral and use the
proceeds to make up for the loss. The security or collateral provided must be
valued by proper agency and branch officials. Personal Net worth statement of
the borrower/guarantor shall be obtained properly with details of properties.
◦ Action plan shall be made for potential NPLs (SMA accounts). Branch
should have some strategies to ensure regular repayment (installments) by the
borrower and to collect the Non-performing loans.
◦ Frequent communication must be made with each client. Branch shall
make borrower(s) alert that if he/she failed to repay bank’s dues, Bank will go
for appropriate legal actions.
42. Strategies for Recovery of Non-performing Loans
◦ Identification of highly risk sensitive borrowers in the credit portfolio. Banks
should take information about the clients before giving loans. Bank could
go Bangladesh Bank to collect the credit information and verify the financial
statement carefully from reliable sources to identify the risky borrowers.
◦ Identification of geographical area-wise risk sensitivity. Bank should
identify the clients according to area wise in Bangladesh, because there are some
places where growth rate is low or rate of repayment is also low.
◦ Capacity building of officers and executives in the credit disbursement
and recovery process. Bank should give proper training to employees. So they
can handle loans properly. If there is short of experienced employees, arrange to
provide extensive training for smooth running of credit and recovery process.
◦ A robust risk management culture, with a ‘well articulated’ risk management
and recovery policy can help the institutions to avoid such loan default.
43. Concluding Remarks
The professional management team of the Banks should hold high in their
most priority policy agenda to ensure that their risk asset portfolio
(RAP) is performing to the maximum extent by exercising professional
due diligence from the beginning process of the borrower selection all
along to the ultimate end of recovery.
At present there is the dire need of good corporate governance in the
Banking sector which is considered to be the necessary condition for the
Banks and financial institutions to function with efficacy by neutralizing
the adverse effect of unhealthy intervention/ interference from the
vested quarters.
In this direction the role of the Central Bank as an apex regulatory body is
critically important to promote good risk management culture of the
Banks through infusion of values of good corporate governance by
initiating appropriate measures and it is the demand of the time to
address.
44. Concluding Remarks
Under the present overall socio economic dynamics the banks should
prioritize to extend purpose oriented credit facilities with required
security/collateral support as their policy priority since diversion of fund
is one of the identified causes of loan default. So it becomes of
imperative need to keep a close watch on the borrower's business
operations and the movement of its financial indicators in an empirical
manner.
Banks have to play the role of business partner rather than a
conventional lender. It is an admitted fact that a bank's financial health is
largely dependent upon the extent and size of performing assets. Credit
losses are equivalent to capital losses.
Thank You