This document outlines policy and procedural guidelines for credit risk management at a bank. It discusses guidelines for lending focus, types of facilities, single borrower limits, sectoral lending caps, discouraged business types, loan parameters, nature of advances, purposes of lending, security requirements, and other procedural details. The key points are encouraging lending to SMEs, export industries, maintaining lending to some sectors, and discouraging others. It provides amounts and percentages for exposure limits and sectoral caps.

1. Policy & Procedural Guidelines on
Credit Risk Management (CRM)
Sk. Md. Golam Mustafa, EVP
Credit Operations Divisions-I

2. Lending Guidelines
Industry & Business Segment Focus
Trading, RMG, Textile, Chemicals/ Toiletries, Grow
Entertainment, Telecommunication/IT, Power
Generation & Distribution, Energy (Power/Fuel/Gas),
Electric Goods, Service, Steel & Re-rolling,
Engineering
SME, Agro-based Industry, Export Oriented Encourage
Industries, Pharmaceuticals, Consumer loans
Food & Allied, Ship Scrapping, Real Estate, Paper Maintain
Transport, Cold Storage, Cement Discourage

3. Types of Facilities
 CC Hypo & Pledge)  LTR
 SOD (General)  LIM
 SOD (Export)  PC
 Loan (General)  LDBP/FDBP
 LCA (Loan Against  BTB L/C
Cash Assistance)
 BG Local/Foreign
 L/C
 PAD

4. Single Borrower/Group
Limits/Syndication
Lending Caps Amount
Total Exposure (Funded & no- 35% of Bank’s total capital
Funded)
Maximum Funded exposure 15% of Bank’s total capital
Maximum non-funded 35% of Bank’s total capital
exposure where there will be
funded exposure
Maximum exposure for export 50% of Bank’s total capital
sector (Funded facility will not
exceed 15% of the total capital

5. Lending Caps (Sectoral)
Sector Caps % of total Advance
Trade & Commerce 45%
SME 10%
Industry-working capital 10%
Project Finance-Long Term 10%
Retail/Consumer (CCS) 10%
Agro Credit 5%
Work/Supply order (Contractual Finance) 5%
Others 5%
Total 100%

6. Discouraged Business Types
 Military Equipment/Weapon  Share lending
Finance
 Taking an equity stake in
 Highly leveraged transaction borrowers
 Finance of speculative  Lending to holding
business companies
 Logging, Mineral  Bridge loans relying on
Extraction/Mining or other equity/debt issuance as a
activities that is ethically or source of repayment
environmentally sensitive
 New Cold Storage Finance
 Defaulter borrower as per CIB
 Financing Cement
 Counter parties in countries Industries
subject UN sanctions

7. Loan Facility Parameters
 Nature of Advance
 Purpose
 Limit/Amount of Facility/Maximum size
 Margin/Equity
 Rate of Interest
 Rate of Commission/charges
 Mode of disbursement
 Mode of repayment
 Security
 Validity/Maximum tenor
 General/ Special conditions/Covenants

8. Nature of Advance
 Each advance to be made will be categorized
under one of the arranged types and will be
governed under the terms & conditions related
thereto

9. Purpose
 Lending to be made for legitimate purpose
 Financing for hoarding, speculative purpose and which
may degrade the character of the people will be avoided
 Credit for production, trade, commerce, import, export,
development of industries, development
activities/economic growth, infrastructural development,
employment generation, poverty alleviation etc will be
stressed

10. Limit/Amount of facility/maximum size
 Facility will be considered based on assessment of
requirement & justification subject to the overall lending
cap as per Bangladesh Bank single party exposure limit

11. Margin/Equity
 It will be general policy of the Bank to judiciously ensure
stake of the borrower in any financing plan
 Margin will be subject to institutional policy and
Bangladesh Bank guideline where applicable

12. Rate of Interest
 Rate of Interest will be charged as per declared rate of
the Bank
 Pricing will be basically risk based. Higher is the risk,
higher is the price
 Low CRG rating considered higher risk
 100% cash covered or Govt./ International top bank
guarantee are considered low risk
 In fixing rate of interest, cost of fund, prevailing market
rate etc are considered
 Concessional rate of interest may be charged for
deserving customer within band.
 Commission/charges to be realized based on market
condition and risk involved

13. Mode of disbursement
 In disbursing loan, bank shall ensure drawing for the
purpose it was sanctioned
 Where required, visit of the site/business is
recommended
 In subsequent disbursement, utilization of the previous
disbursement shall be ensured
 For acquisition of assets, payment is suggested on
receipt on assets
 For commercial lending, LIM/Pledge storage of
merchandise/goods be ensured

14. Mode of Adjustment/Repayment
 For the borrower to exhibit capability to periodically
adjust the drawings taken and as such to have idea
regarding the rationale for continuation of the facility,
adjustment mode is given
 Where revolving transaction is not allowed monthly,
quarterly etc. installment are suggested

15. Security
 Bank continue to rely on security based lending, taking
into consideration, the character of the borrower, nature
of business cash flow, environmental, economic, business
and other influencing factor
 Primary and collateral security is preferred
 Primary securities are valued on the basis of landed
cost/factory price/whole sale market price
 Collateral security to be valued by the surveyor and by
the officials of the branch prudently.
 Goods and machinery taken as security to be ensured

16. Validity/Expiry/maximum tenor
Continuous loan Not exceeding 1 year
Short term loan Upto 12 months
Medium term loan 12 months to 60
months
Long term loan More than 60 months

17. Security and support
Following securities are generally accepted:
 Machinery
 Raw materials, WIP, FG
 Land & building
 Financial obligation
 Bills receivable against work order
 Vehicle
 Shipping documents as lien against L/C
 Trust receipt for LTR
 Export document under lien for LDBP/FDBP

18. Security and support (cont.)
Following securities are generally accepted:
 Export L/C/Contract under lien for BTB
 Packing Credit letter for PC
 Personal/corporate/cross-corporate guarantee
 Post dated cheque
 1ST /2nd charge/1st ranking pari passu charge
 Authorization to debit clients account

19. Quality of Security
 Primary security having adequate market value
 Perishable and seasonal goods are discouraged
 Acceptable financial obligations are preferred
 Receivable against bill funded by foreign agencies
 Documents drawn in conformity with L/C
 Personal guarantee of those persons having high net-worth
 Subordinated rank are generally discouraged
 Land, building having defectless title, located in important
urban area
 NOC from appropriate authority where applicable to be
obtained
 1st ranking pari passu in case of syndicated loan

20. Legal Interest Protection
 Title searches are conducted periodically for collateral both
with RJSC and land Registrar for mortgage
 Collateral arrangements are detailed in the credit
proposal
 Bank’s legal advisor establishes legal documentation
 Registered mortgage are supported by registered
irrevocable power of attorney to sell the property

21. Insurance
 Insurance policy shall be obtained on all insurable
properties
 Insurance policy shall cover all possible risk
 Insurance shall be current and renewed in time
 Insurance to be taken from reputed company

22. General/Special conditions/Covenants
 General/Special conditions/Covenants will be according
to the nature of advance, security arrangement,
ownership pattern, mode of acquisition, institutional
norms/instructions, guidelines of central bank/regulatory
authority

23. Cross Boarder Risk
 Bank takes care of risks involved with Cross Border
lending. Risk associated with import of a commodity
which may arise from failure of:
 Supply of goods of specific standard and quality
 Supply of contracted goods in time
 Risks are tried to handle by obtaining suppliers credit
report, track record of exporter, past performance,
capability of exporter
 Advance payment against import is avoided in order to
avert credit associated risk

24. Thank You