The study is to analyze the credit management-A Study on Prime Bank Ltd.

Premier University
INTERNSHIP REPORT
ON
The study is to analyze the credit management
A Study on Prime Bank Ltd
PREPARED FOR
Mr.Rajib Datta
Assistant Professor
Department Of Finance
Faculty of Business Administration
Premier University
Chittagong
PREPARED BY
Md Ariful Islam Saimon Chowdhury
ID. No: 150-22080-2147
Section: A
Major: Finance
Batch: 22nd
MBA Program
Premier University
Date of Submission: 11/05/2017

Premier University
INTERNSHIP REPORT
ON
The study is to analyze the credit management
A Study Prime Bank Limited
Agrabad Branch, Chittagong.

0
May -, 2017
Mr.Rajib Datta
Assistant Professor,
Department of Finance
Premier University, Chittagong, Bangladesh.
Sub: Submission of Internship Report.
Dear Sir,
It is my great pleasure to submit the report on ““The study is to analyze the credit
management, a study on Prime Bank Limited” as a part of my Internship program.
I have closely observed different operations of Southeast Bank Ltd in my
internship period.
I enjoyed preparing this report, which enriched my practical knowledge of the
theoretical concept. I tried to reflect the practical operational aspects of the Bank,
which is complementary to the theoretical lessons. I am very much glad that you
have given me the opportunity to prepare this report for you & hope that this report
will meet the standards of your judgment.
Sincerely yours,
……………………………………..
Md Ariful Islam Saimon Chowdhury
ID. No: 150-22080-2147
Section: A
Major: Finance
Batch: 22nd
Premier University.Chittagong

1
Acknowledgement
At first I would like to express my gratitude to almighty Allah who has
given me the opportunity to go through the total process of internship
and to write a report on this regard.
I would like to acknowledge my deepest gratitude to my honorable
Internship supervisor, Mr.Rajib Datta ,Assistant Professor, Department
of Finance Premier University, Chittagong, who has given me
important suggestion and excellent guidelines for preparing this
internship report.
I would also like to thank Ms. Joynab and Mr Md.Nssiruddin
honorable coordinator of my internship program at Southeast Bank
who has provided training facilities which made me understand the
basic characteristics of banking.
I am very much grateful to the Head of Branch Mr. Mir Ahmed Bin
Islam of South East Bank Bangladesh Limited, Oxygen Branch for his
cooperation and valuable suggestion. I would also like to thank all the
personnel of South East Bank Bangladesh Limited, Oxygen Branch,
who has extended their whole-hearted co-operation for preparing the
report, especially Mr. Juwel,
Finally, I would like to convey my gratitude to all my teachers, friends
and my family members who extend their support to prepare this
report.

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Chapter One
Introductory Aspect

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Business organization, commercial banks are established also for the purpose of earning
profit. The main profit earning activity of banks is to earn interest income or profit from
extending loans of the funds mobilized as deposits. As such loans extended , both interest
& principal, must be recover on time in order to keep the deposits money safe and also to
revolving of funds so utilized as loans .It is therefore, imperative that commercial banks
should not provides loans & advance without properly analyzing the creditworthiness in
order to ensure the recovery of money so lent.
Banks perform the indispensable task of intermediating between the two groups and
offering convenient financial service to surplus-spending individuals and institutions in
order to attract fund and these loaning those fund deficit-spending individual and
institutions. Another contribution of bank make is their willingness to accept risky loan
from borrower, while using low risk securities to their depositors. Bank also satisfies
strong needs of customer liquidity. Bank satisfies these needs by offering high liquidity in
the deposit they sell and in the loan they provide. It is thus clear that the underlying
principle of a business of banking is that the resources mobilized through the acceptance
of deposit must contributes the main stream of funds which are to be utilized for lending
or investment purposes. Over the time, some principals, procedures, and theories have
been developed, innovated and practiced. Credit department is the heartbeat of a bank,
that’s why credit management takes various techniques because of how much they
improve their credit performance in every year.
As an intern I was appointed to Prime Bank Limited (Agrabad Branch) for two months
under the direct supervision of Mr. Shahidul Islam, Manager of the Branch. This report
mainly highlights on Prime Bank’s Credit Management and recovery. The organizational
structure of Prime Bank and its operation in Chittagong as well as in Bangladesh have
been exposed through this report, which had been observed during the 2-months internship
period.
1.1 INTRODUCTION

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````
The main objective of the study is to analyze the credit management of Prime Bank Ltd,
Agrabad branch, Chittagong. To attain the main objective the necessary specific objective
are as follows:
i. To have an overview of Prime Bank Ltd. ;
ii. To know the credit management rules and regulation of PBL;
iii. To evaluate the credit performance of Prime Bank Ltd. and
iv. To provide some recommendations regarding the summary of findings.
The internship program was basically executed by observing the daily activities of the
officers and working with in progress. It is a descriptive type of research. Here I have
collected information from the following sources:
Two sources of data and information have been used widely:
1.3.1 Primary sources of data:
 Face to face daily conversation with the officials of PBL, khatungonj Br.
Chittagong.
 Relevant file study as provided by the officers concerned.
 Personal interview with bank personnel.
 Practical work exposures from different desks.
1.3.2 Secondary sources of data:
 Annual Report of prime bank ltd.
 Record of the branch,
 Files of business performance,
 Web site, etc.
Data Processing:
After collecting the needed data by using the above sources these were analyzed to
derived the relevant finding. Here I have used some different statistical tools like as Bar
Diagram, Pie Chart etc.
1.2 OBJECTIVES OF THE STUDY
1.3 METHODOLOGY OF THE STUDY

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The study is only related to Prime Bank Limited Agrabad Branch, Ctg. This report focuses
on the over view of management, organizational structure and mainly focus bank’s credit
management ; their recovery policy; their success against target achieved and the position
of non-performing (classified) loans & advances of the department. So, I have tried to
explore above issues of the loans and advances department of Prime Bank Ltd
Although I have got co-operation from employee of PBL and they also gave me much
time to make this report properly in the way of my study, I have faced some problems that
may be terms as the limitations/shortcoming of the study. All data are not ready to support
us all the time and the internee student face lots of problem for collecting data from the
branch. Now-a-days the private banks are very busy and lucrative to survive. Within short
time the students can’t understand all the sector of the banks. There were some
encountered problems that obstructed me in the accomplishment of the study. Limitation
of the study is given below:
 Scarcity of sufficient written documents.
 All the employees are very busy. So that I could not get greater help from them.
 There are various sectors but internee student cannot enter there on account of
security.
 For the lack of practical knowledge, some shortcomings may be available in the
paper because in some cases we could not practically involve because of bank’s
limitations.
1.4 SCOPE OF THE STUDY
1.5 LIMITATION OF THE STUDY

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Chapter Two
Theoretical Aspect

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In banking terminology, credit refers to the loans and advances made by the bank to its
customers or borrowers. Bank credit is a credit by which a person who has given the
required security to a bank has liberty to draw to a certain extent agreed upon. It is an
arrangement for deferred payment of a loan or purchase. (Wikipedia dictionary)
Credit means a provision of, or commitment to provide, funds or substitutes for funds, to a
borrower, including off-balance sheet transactions, customers’ lines of credit, overdrafts,
bills purchased and discounted, and finance leases.
Risk means the exposure to a chance of loss or damage. Risk is the element of uncertainty
or possibility of loss that exist in any business transaction. Credit risk is the likelihood that
a borrower or counter party will be unsuccessful to meet its NBLigation in accordance
with agreed terms and conditions. (Wikipedia dictionary)
Credit risk means the risk of credit loss those results from the failure of a borrower to
honor the borrower’s credit NBLigation to the financial institution. (Guideline on credit
risk management, Bank of Mauritius). Credit risk is most simply defined as the potential
that a bank borrower or counterparty will fail to meet its NBLigations in accordance with
agreed terms (Basel Committee on Banking Supervision, 2000).
The constituent elements of credit risk can be viewed from the following flowchart:
2.1 Credit
2.2 Credit risk

8
Contemporary banking organizations are exposed to a diverse set of market and non-
market risks, and the management of risk has accordingly become a core function within
banks. Banks have invested in risk management for the good economic reason that their
shareholders and creditors demand it. But bank supervisors, such as the Bangladesh Bank,
also have an obvious interest in promoting strong risk management at banking
organizations because a safe and sound banking system is critical to economic growth and
to the stability of financial markets. Indeed, identifying, assessing, and promoting sound
risk management practices have become central elements of good supervisory practice.
Credit risk management contains.
 Identification
 Measurement
 Aggregation
 Planning and management
2.3 Credit Risk Management

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 Monitoring
Identification
A bank’s risks have to be identified before they can be measured and managed.
Typically banks distinguish the following risk categories:
— Credit risk
— Market risk
— Operational risk
Measurement
The consistent assessment of the three types of risks is an essential prerequisite for
successful risk management. While the development of concepts for the assessment of
market risks has shown considerable progress, the methods to measure credit risks and
operational risks are not as sophisticated yet due to the limited availability of historical
data.
Calculation of Credit risk
Credit risk is calculated on the basis of possible losses from the credit portfolio. Potential
losses in the credit business can be divided into
— Expected losses and
— Unexpected losses
Expected losses are derived from the borrower’s expected probability of default and the
predicted exposure at default less the recovery rate, i.e. all expected cash flows, especially
from the realization of collateral. The expected losses should be accounted for in income
planning and included as standard risk costs in the credit conditions.
Unexpected losses result from deviations in losses from the expected loss. Unexpected
losses are taken into account only indirectly via equity cost in the course of income
planning and setting of credit conditions. They have to be secured by the risk coverage.
(Credit Approval Process and Credit Risk Management, 2005, Oesterreichische National
Bank )

10
Aggregation
When aggregating risks, it is important to take into account correlation effects which cause
a bank’s overall risk to differ from the sum of the individual risks. This applies to risks
both within a risk category as well as across different risk categories.
Planning and management
Furthermore, risk management has the function of planning the bank’s overall risk
position and actively managing the risks based on these plans.
The most commonly used management tools include:
— Risk-adjusted pricing of individual loan transactions
— Setting of risk limits for individual positions or portfolios
— Use of guarantees and credit insurance
— Securitization of risks
— Buying and selling of assets
Monitoring
Risk monitoring is used to check whether the risks actually incurred lie within the
prescribed limits, thus ensuring an institution’s capacity to bear these risks. In addition, the
effectiveness of the measures implemented in risk controlling is measured, and new
impulses are generated if necessary. (Basel Committee on Banking Supervision, 2000)
PRISM model is a contemporary model used in the credit risk management in modern
world. It is called PRISM, an acronym for –
P = Perspective
R = Repayment
I = Intention
2.4 PRISM Model of credit risk management

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S = Safeguards
M = Management
Management, a PRISM component, centers on what the borrower is all about, including
history and prospects. Intention or loan purpose serves as the basis for repayment.
Repayment focuses on internal and external sources of cash. Internal operations and asset
sales produce internal cash, whereas new debt or equity injections provide external cash
sources. Internal safeguards originate from the quality and soundness of financial
statements, while collateral guarantees and covenants provide external safeguards. The
final component, Perspective, pulls other sections together: the deal’s risks and rewards
and the operating and financing strategies that are broad enough to have a positive impact
on shareholder value while enabling the borrower to repay the loan (Morton Glantz 2004).
I. Methods
The methods used show how risks are captured, measured, and aggregated into a risk
position for the bank as a whole. In order to choose suitable management processes, the
methods should be used to determine the risk limits, measure the effect of management
instruments on the bank’s risk position, and monitor the risk positions in terms of
observing the defined limits and other requirements.
II. Processes and organizational structures
Processes and organizational structures have to make sure that risks are measured in a
timely manner that risk positions are always matched with the defined limits, and that risk
mitigation measures are taken in time if these limits are exceeded. Concerning the
processes, it is necessary to determine how risk measurement can be combined with
determining the limits, risk controlling, as well as monitoring. Furthermore, reporting
processes have to be introduced. The organizational structure should ensure that those
areas which cause risks are strictly separated from those areas which measure, plan,
manage, and control these risks.
III. IT systems and an IT infrastructure
2.5 Prerequisites for Efficient Risk Management

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IT systems and an IT infrastructure are the basis for effective risk management.
Among other things, the IT system should allow
 The timely provision and administration of data;
 The aggregation of information to obtain values relevant to risk controlling;
 An automated warning mechanism prior to reaching critical risk limits.
IV. Risk Strategy
A successful, bank-wide risk management requires the definition of a risk strategy which
is derived from the bank’s business policy and its risk-bearing capacity. Risk strategy is
defined as
 The definition of a general framework such as principles to be followed in dealing
with risks and the design of processes as well as technical-organizational
structures; and
 The definition of operational indicators such as core business, risk targets, and
limits.
The risk strategy in an operational sense should be prepared at least every year, with risk
management and sales cooperating by balancing risk and sales strategies. The sales units
contribute their perspective concerning market requirements and the possible
implementation of the risk strategy. The proposal for a risk strategy thus worked out will
be presented to the executive board, and following their approval, passed on to the
supervisory board for their information. The risk strategy serves to establish an operational
link between business orientation and risk-bearing capacity. It contains operational
indicators which guide business decisions.
V. Limits
The definition of limits is necessary to curb the risks associated with bank’s activities. It is
intended to ensure that the risks can always be absorbed by the predefined coverage
capital. When the limits are exceeded, risks must be reduced by taking such steps as
reducing exposures or using financial instruments.
 Product, business area, country, and industry limits

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Product limits can be defined, among other things, for loans to retail and corporate
customers, for real estate loans, as well as for project finance. Banks with an international
focus can also define country limits in order to manage their risks arising from
transactions in other regions. They also define industry limits in order to avoid a
concentration of risks in individual industries that are subject to a degree of risk depending
on the business cycle. (Bernanke, 2006)
 Risk class limits
Monitoring and limiting the concentration of exposures in certain risk classes is necessary
to be able to detect a deterioration of the portfolio in time, and thus to be able to avoid
losses as far as possible by withdrawing from certain exposures. (Bernanke, 2006)
Limits on unsecured portions
The definition of limits for unsecured portions restricts loans that are granted without the
provision of collateral or which are collateralized only partly. These limits allow banks to
manage their maximum risks efficiently, as it is easy to determine and monitor unsecured
portions.
 Individual customer limits
Limits for individual borrowers represent the most detailed level of risk controlling. The
main purpose for their application is the prevention of cluster risks in the credit portfolio.
The more precisely the limits are defined; the more likely they are to yield control
impulses that can be taken into account already at the time of approval of individual loans.
(Bernanke, 2006)
 Rigidity of Limits
In order to allow the use of limits to manage risks, it is necessary to define how strictly
these limits should be applied. In practice, the rigidity of limits varies in terms of their
impact on a bank’s business activities.
— Certain limits are defined rigidly and must never be exceeded, as otherwise the viability
of the bank as a whole would be endangered.
— In addition, there are early warning indicators that indicate the risk of exceeding limits
ahead of time.

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 Limit Monitoring and Procedures Used When Limits Are Exceeded
The stipulated limits can have a direct impact on the credit approval. It needs to be
determined if compliance with the limits should be examined before or after the credit
decision is taken. In practice, this compliance is usually checked ex post, i.e. after the
credit approval based on the portfolio under review, and is not a component of the
individual loan decision. The credit decision is taken based on the borrower’s credit
standing and any collateral, but independently of the portfolio risk. Such ex-post
observation can result in a relatively high number of cases in which limits are exceeded,
thus reducing the effectiveness of the limit stipulations.
Credit risk management process should cover the entire credit cycle starting from the
origination of the credit in a financial institution’s books to the point the credit is
extinguished from the books.
I. Credit Processing/Appraisal
Credit processing is the stage where all required information on credit is gathered and
applications are screened. Credit application forms should be sufficiently detailed to
permit gathering of all information needed for credit assessment at the outset. In this
connection, financial institutions should have a checklist to ensure that all required
information is, in fact, collected. Financial institutions should set out pre-quall
Nationalities screening criteria, which would act as a guide for their officers to determine
the types of credit that are acceptable. For instance, the criteria may include rejecting
applications from blacklisted customers. These criteria would help institutions avoid
processing and screening applications that would be later rejected.
Moreover, all credits should be for legitimate purposes and adequate processes should be
established to ensure that financial institutions are not used for fraudulent activities or
activities that are prohibited by law or are of such nature that if permitted would
contravene the provisions of law. Institutions must not expose themselves to reputation
risk associated with granting credit to customers of questionable repute and integrity.
2.6 Credit Risk Management Process

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The next stage to credit screening is credit appraisal where the financial institution
assesses the customer’s ability to meet his NBL migrations. Institutions should establish
well designed credit appraisal criteria to ensure that facilities are granted only to
creditworthy customers who can make repayments from reasonably determinable sources
of cash flow on a timely basis. The appraisal criteria will focus on:
 Amount and purpose of facilities and sources of repayment;
 Integrity and reputation of the applicant as well as his legal capacity to assume the
credit NBLigation;
 Risk profile of the borrower and the sensitivity of the applicable industry sector to
economic fluctuations;
 Performance of the borrower in any credit previously granted by the financial
institution, and other institutions, in which case a credit report should be sought
from them;
 The borrower’s capacity to repay based on his business plan, if relevant, and
projected cash flows using different scenarios;
 Cumulative exposure of the borrower to different institutions;
 Physical inspection of the borrower’s business premises as well as the facility that
is the subject of the proposed financing;
 Borrower’s business expertise;
II. Credit-approval/Sanction
A financial institution must have in place written guidelines on the credit approval process
and the approval authorities of individuals or committees as well as the basis of those
decisions. Approval authorities should be sanctioned by the board of directors. Approval
authorities will cover new credit approvals, renewals of existing credits, and changes in
terms and conditions of previously approved credits, particularly credit restructuring, all of
which should be fully documented and recorded. Prudent credit practice requires that
persons empowered with the credit approval authority should not also have the customer
relationship responsibility.

16
Approval authorities of individuals should be commensurate to their positions within
management ranks as well as their expertise. Depending on the nature and size of credit, it
would be prudent to require approval of two officers on a credit application, in accordance
with the Board’s policy. The approval process should be based on a system of checks and
balances. Some approval authorities will be reserved for the credit committee in view of
the size and complexity of the credit transaction.
Depending on the size of the financial institution, it should develop a corps of credit risk
specialists who have high level expertise and experience and demonstrated judgment in
assessing, approving and managing credit risk. An accountability regime should be
established for the decision-making process, accompanied by a clear audit trail of
decisions taken, with proper identification of individuals/committees involved. All this
must be properly documented.
III. Credit Documentation
Documentation is an essential part of the credit process and is required for each phase of
the credit cycle, including credit application, credit analysis, credit approval, credit
monitoring, collateral valuation, impairment recognition, foreclosure of impaired loan and
realization of security. The format of credit files must be standardized and files neatly
maintained with an appropriate system of cross-indexing to facilitate review and follow
up.
The Bangladesh Bank will pay particular attention to the quality of files and the systems in
place for their maintenance. Documentation establishes the relationship between the
financial institution and the borrower and forms the basis for any legal action in a court of
law. Institutions must ensure that contractual agreements with their borrowers are vetted
by their legal advisers (L.R.Chowdhury,2004).
Credit applications must be documented regardless of their approval or rejection. All
documentation should be available for examination by the Bangladesh Bank. Financial
institutions must establish policies on information to be documented at each stage of the
credit cycle. The depth and detail of information from a customer will depend on the
nature of the facility and his prior performance with the institution. A separate credit file
should be maintained for each customer. If a subsidiary file is created, it should be
properly cross-indexed to the main credit file (L.R.Chowdhury,2004).

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For security reasons, financial institutions should consider keeping only the copies of
critical documents (i.e., those of legal value, facility letters, signed loan agreements) in
credit files while retaining the originals in more secure custody. Credit files should also be
stored in fire-proof cabinets and should not be removed from the institution’s premises.
Financial institutions should maintain a checklist that can show that all their policies and
procedures ranging from receiving the credit application to the disbursement of funds have
been complied with. The checklist should also include the identity of individual(s) and/or
committee(s) involved in the decision-making process (Morton Glantz, 2002).
IV. Credit Administration
Financial institutions must ensure that their credit portfolio is properly administered, that
is, loan agreements are duly prepared, renewal notices are sent systematically and credit
files are regularly updated. An institution may allocate its credit administration function to
a separate department or to designated individuals in credit operations, depending on the
size and complexity of its credit portfolio (Credit Risk Management: Industry Best
Practices2005, Bangladesh Bank).
A financial institution’s credit administration function should, as a minimum, ensure that:
 Credit files are neatly organized, cross-indexed, and their removal from the
premises is not permitted;
 The borrower has registered the required insurance policy in favor of the bank and
is regularly paying the premiums;
 The borrower is making timely repayments of lease rents in respect of charged
leasehold properties;
 Credit facilities are disbursed only after all the contractual terms and conditions
have been met and all the required documents have been received;
 Collateral value is regularly monitored;
 The borrower is making timely repayments on interest, principal and any agreed to
fees and commissions;
 Information provided to management is both accurate and timely;

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 Responsibilities within the financial institution are adequately segregated;
 Funds disbursed under the credit agreement are, in fact, used for the purpose for
which they were granted;
V. Disbursement
Once the credit is approved, the customer should be advised of the terms and conditions of
the credit by way of a letter of offer. The duplicate of this letter should be duly signed and
returned to the institution by the customer. The facility disbursement process should start
only upon receipt of this letter and should involve, inter alia, the completion of formalities
regarding documentation, the registration of collateral, insurance cover in the institution’s
favour and the vetting of documents by a legal expert. Under no circumstances shall funds
be released prior to compliance with pre-disbursement conditions and approval by the
relevant authorities in the financial institution (L.R.Chowdhury,2004).
VI. Monitoring and Control of Individual Credits
To safeguard financial institutions against potential losses, problem facilities need to be
identified early. A proper credit monitoring system will provide the basis for taking
prompt corrective actions when warning signs point to deterioration in the financial health
of the borrower. Examples of such warning signs include unauthorized drawings, arrears
in capital and interest and deterioration in the borrower’s operating environment. Financial
institutions must have a system in place to formally review the status of the credit and the
financial health of the borrower at least once a year. More frequent reviews should be
carried out of large credits, problem credits or when the operating environment of the
customer is undergoing significant changes.
In broad terms, the monitoring activity of the institution will ensure that:
 Funds advanced are used only for the purpose stated in the customer’s credit
application;
 Financial condition of a borrower is regularly tracked and management advised in
a timely fashion;
 Borrowers are complying with contractual covenants;

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 Collateral coverage is regularly assessed and related to the borrower’s financial
health;
 The institution’s internal risk ratings reflect the current condition of the customer;
 Contractual payment delinquencies are identified and emerging problem credits are
classified on a timely basis; and
 Problem credits are promptly directed to management for remedial actions.
The borrower should be asked to explain any major variances in projections provided in
support of his credit application and the actual performance, in particular variances
respecting projected cash flows and sales turnover (Credit Risk Management: Industry
Best Practices2005, Bangladesh Bank).
VII. Monitoring the Overall Credit Portfolio (Stress Testing)
An important element of sound credit risk management is analyzing what could potentially
go wrong with individual credits and the overall credit portfolio if conditions/environment
in which borrowers operate change significantly. The results of this analysis should then
be factored into the assessment of the adequacy of provisioning and capital of the
institution. Such stress analysis can reveal previously undetected areas of potential credit
risk exposure that could arise in times of crisis.
Possible scenarios that financial institutions should consider in carrying out stress testing
include:
 Significant economic or industry sector downturns;
 Adverse market-risk events; and
 Unfavorable liquidity conditions.
Financial institutions should have industry profiles in respect of all industries where they
have significant exposures. Such profiles must be reviewed /updated every year. Each
stress test should be followed by a contingency plan as regards recommended corrective
actions. Senior management must regularly review the results of stress tests and
contingency plans. The results must serve as an important input into a review of credit risk
management framework and setting limits and provisioning levels.

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VIII. Classification of credit
It is required for the board of directors of a financial institution to “establish credit risk
management policy, and credit impairment recognition and measurement policy, the
associated internal controls, documentation processes and information systems;”
Credit classification process grades individual credits in terms of the expected degree of
recoverability. Financial institutions must have in place the processes and controls to
implement the board approved policies, which will, in turn, be in accord with the proposed
guideline. They should have appropriate criteria for credit provisioning and write off.
International Accounting Standard 39 requires that financial institutions shall, in addition
to individual credit provisioning, assess credit impairment and ensuing provisioning on a
credit portfolio basis. Financial institutions must, therefore, establish appropriate systems
and processes to identify credits with similar characteristics in order to assess the degree
of their recoverability on a portfolio basis.
Financial institutions should establish appropriate systems and controls to ensure that
collateral continues to be legally valid and enforceable and its net realizable value is
properly determined. This is particularly important for any delinquent credits, before
netting off the collateral’s value against the outstanding amount of the credit for
determining provision. As to any guarantees given in support of credits, financial
institutions must establish procedures for verifying periodically the net worth of the
guarantor.
IX. Managing Problem Credits/Recovery
A financial institution’s credit risk policy should clearly set out how problem credits are to
be managed. The positioning of this responsibility in the credit department of an
institution may depend on the size and complexity of credit operations. The monitoring
unit will follow all aspects of the problem credit, including rehabilitation of the borrower,
restructuring of credit, monitoring the value of applicable collateral, scrutiny of legal
documents, and dealing with receiver/manager until the recovery matters are finalized.
The collection process for personal loans starts when the account holder has failed to meet
one or more contractual payment (Installment). It therefore becomes the duty of the
Collection Department to minimize the outstanding delinquent receivable and credit

21
losses. This procedure has been designed to enable the collection staff to systematically
recover the dues and identify / prevent potential losses, while maintaining a high standard
of service and retaining good relations with the customers. It is therefore essential and
critical, that collection people are familiar with the computerized system, procedures and
maintain effective liaison with other departments within the bank (Prudential regulations
for consumer financing 2004, Bangladesh Bank).
 Maintain the corporate credit policy
 Recommend changes in the credit policy to senior management
 Create a credit scoring model
 Manage customer credit files
 Monitor the credit granting and updating process
 Accept or reject the staff’s credit recommendation
 Personally investigate the largest customer credit applications
 Personally visit the largest customers to establish relations
 Monitor periodic credit reviews
 Monitoring deductions being taken by customers
 Manage the application of late fees
 Manage the corporate financing program.
2.7 Some important credit management functions

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Chapter Three
Practical Aspect

23
Prime Bank Ltd. incorporated in 12th February 1995 and started operation in 17th April
1995. The sponsors are reputed personalities in the field of trade and commerce and their
stake ranges from shipping to textile and finance energy etc. Prime Bank Ltd. has already
made significant progress within a very short period of its existence. The bank has been
graded as a top class bank in the country through internationally accepted CAMEL rating.
The bank has already occupied an enviable position among its competitors after achieving
success in all areas of business operation.
The bank has a network of 62 branches strategically located in different cities. All the
branches are functioning in computerized environment. As a fully licensed commercial
bank, Prime Bank Ltd. is being managed by a highly professional, prompt, and dedicated
team with long experience in banking. The constantly focus on understanding and
anticipating customer needs.
The bank has already occupied an enviable position among its competitors after achieving
success in all area of business operation. The growth of the deposit is growing fast.
In a fast changing business environment financial intermediaries are gradually being left
Competition is intense by the entry of new and innovative providers of financial services
through the development of money market and capital market. And to operate in
commercial ground of Bangladesh Prime Bank Ltd emerges as a new bank in the private
sector with their vision.
3.1 BACKGROUND OF PBL

24
3.2.1Vision
To be the best private Commercial Bank in Bangladesh in terms of efficiency, capital
satisfactoriness, asset quality, sound management and profitability having strong liquidity. Quick
client support is also one of their visions.
3.2.2Mission
To build Prime Bank Limited into an efficient, market driven, customer focused institution with
good corporate governance structure.
Continuous improvement in the business policies and procedure and efficiency through integration
of technology at all levels.
3.2.3Strategic priorities
 Maintain satisfactory capital to support growth and remain compliant.
 Continue to strive for sound growth by doing the business that we do well,
expanding into areas underserved, entering new sectors and exploring innovative
`ideas.
 Have a strong customer focus and build relationships based on integrity, superior
 Service and mutual benefit.
 Continue to provide new services to customers with support of superior
information technology platform.
 Establishment of good Corporate Governance by remaining efficient, transparent,
 Professional and accountable to the society and environment.
 Ensure effective risk management for sustainable growth in shareholders’ value.
 Diversification of loan portfolio through structured finance and expansion of Retail
and SME financing.
 Value and respect people and make decisions based on merit.
3.2 VISION, MISSON AND STRATEGIC PRIORITIES

25
 To build up strong pillar of capital.
 To promote trade, commerce and industry.
 To discover strategies for achieving systematic growth.
 To improve and broaden the range of product and services.
 To develop human resource by increasing employment opportunities.
 To enhance asset of shareholders.
 To offer standard financial services to the people.
 To create congenial atmosphere so that the client becomes interested to deal with the
prime bank limited.
 To keep business morality.
 To develop welfare oriented banking service.
 To offer highest possible benefit to customers.
 As to its position among its counterparts is held high to let the viewer’s cast their very
first look at it.
A Bank with a Difference
3.3 OBJECTIVES OF PBL

26
Incorporation of the Company 12th
February 1995
Formal launching of the Bank 17th
April 1995
Initial Public Offering (IPO)
Publication of Prospectus
Subscription opened
Subscription closed
29th
August 1999
9th
September 1999
22nd
September 1999
Listed with Dhaka Stock Exchange Limited 27th
March 2000
Registered as Merchant Banker
With Securities & Exchange Commission
License issued from Bangladesh Bank as
Primary Dealer
Registered with Depository Participant of
CDPL
29th
March 2001
11th
December 2003
29th
March2004
Authorized Capital (up to 2016) 25000 (Tk. in million)
Paid up capital (up to 2016) 10293.49 (Tk. in million)
Shareholders’ Equity (up to 2016) 25293 (Tk. in million)
Total Assets (up to 2016) 257553 (Tk. in million)
Number of Employees (up to 2016) 2961
Number of Branches (up to 2016) 146
3.4 CORPORATE INFORMATION

27
There are three departments of the branch –
Bank Departments
Credit /Investment Foreign Exchange
General Banking
 Account
 Remittance
 Clearing
house
 Transfer
 Cash
 Cash credit
(Hypo)
 Cash Credit
(pledge)
 Cash Credit
scheme
 Lease financing
 Savings over
draft
 Import
 Export
 Remittance
3.5 Department of Agrabad branch

28
Banks are financial service firms, producing and selling professionals management of the
public’s funds as well as performing many other roles in the economy. Their success
hinges on their ability to identify the financial services the public demands, produce those
services efficiently, and sell them a competitive price.
3.6.1 Deposit:
Deposit is the mainstay of the Bank’s sources of funds. following usual practices, it
collects deposit through:
 Monthly Benefit Deposit Scheme (MBDS)
 Contributory Savings Scheme (CSS)
 Education Savings Scheme (ESS)
 Double Benefit Deposit Scheme (DBS)
 Lakhopoti Deposit Scheme (LDS)
 Fixed Deposit Scheme
 Foreign Currency Account
 Resident Foreign Currency Deposit
Account
 Non-resident Taka Account
 Non-resident Foreign Currency Deposit
Account
 Non-resident Investors Taka Account
Depository
Products
3.6 Different Products and Services

29
3.6.2 Services:
 Full comprised accounts maintenance
services;
 Provide online services;
 Well-decorated and conditioned facilities;
 Money-counting machine for making cash
transactions easy and prompt;
 Provide loans & advance facilities.

30
3.6.3 Other services:
 Remittance services : TT. DD. PO
 Foreign trade service : Export, Import
 Guarantee service : Inland Foreign Import –Export
& Advance
 Locker service : Presentation of valuables
 Prime line : Online Branch Banking Service
 Credit card : Master card
 One stop services : Sales prize bond, all mobile
bills received.

31
The loan and credit department is one of the most important departments of any bank. The money
mobilized from ultimate surplus units are allocated through this department to the ultimate deficit
unit (borrower). Success of this department keeps a great influence on the overall profit of a bank.
Again, Failure of this department may lead the bank to huge losses or even to bankruptcy. Like
any other bank Prime bank’s credit division also tries to do their job perfectly.
Another department of Agrabad branch
Salient features of Prime Bank Credit Policy
 Assets are built based on customer’s deposit, which should not exceed 80% of
customers based deposit.
 Rate of interest is variable based on customer’s integrity and risks associated.
 Type of security varies on the basis of risks associate din credit, location, size of
credit, sectors and sub sectors etc.
 Credit operations are carried out in branch through branch credit committee as per
authority delegated to head of branch and through head office credit committee in
respect of credit sanction authority delegated to the CEO.
 No credit should be allowed for a period not exceeding 5 years.
 Aggregate long term credit facilities shall not exceed 20% of total credit portfolio.
 Single customer’s exposure should not exceed 50% of the Bank’s capital funds.
 LRA is done is most cases.
 Assessment of volume or amount of credit properly.
 Utmost care is taken in proving loans to directors.
 Funded facility 25% of paid up capital.
3.7 Credit Department of PBL

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Modern banking operations touch almost every sphere of economic activity. The
extension of bank credit is necessary for expansion of business operations. Bank credit is a
catalyst for bringing economic development. Without adequate finance there can be no
growth or maintenance of a stable output. Bank lending is important to the economy, for it
makes possible the financing of agricultural, commercial and industrial activities of a
nation. The credit facilities are generally allowed by the bank may be in two broad
categories. They are:
Funded Facilities Non-Funded
Facilities
Other advances
Overdrafts
Loan
#Short-term: Up
to 12 months.
#Medium-term:
More than 12 and
up to 36 months.
#Long-term: More
than 36 months.
#Against
hypothecation of
goods/stock
#Against pledge of
goods/stock
#Against any other
permissible
securities.
#Against import bills.
#Against imported
merchandise.
#Against Trust
receipts (T/R).
#Against Export Bills
Purchased/Discounted
#Against Work order
#Against other
securities.
#Letter of credit
(L/C)
#Letter of
Guarantee
(L/G)
3.8 Types of Bank Credit

33
Sl.
No.
Nature of Loan/Sector Interest Rate Band
(p.a)
Mid Rate Remarks
1. Agricultural Credit 10.00 to 13.00% 11.50% -
2. Term Loan/Project Loan 15.00 to 18.00% 16.50% -
3. Working Capital Loan 15.00 to 18.00% 16.550% -
4. Pre-shipment Export Credit 7.00% -
5. Commercial Lending
(CC, LIM, LTR, IBP etc.)
15.00 to 18.00% 16.50% Effective rate
of return should
be minimum 13%
6. Small/Cottage and SME scheme 17.00 to 20% 18.50% -
7. Other Special Program
(Other than commercial)
As per guideline of BB/Govt
8. Others 16.00 to 19.00% 17.50% -
In addition to the above sector-wise rates, interest rates have also for the following modes:
Sl.
No.
Nature of Loan/Sector Interest Rate Band
(p.a)
Mid
Rate
Remarks
9. Loan against deposits (FDR,
MBDR, CSS etc) maintained with
our Bank
2.00 to 4.00%
above the
respective deposit
rate
- -
10. Loan against deposits (FDR,
MBDR, CSS etc) maintained with
other Bank
15.00 to 18.00% 16.50% -
11. Loan against Share 16.00 to 19.00% 17.50% -
12. Housing Loan 15.00 to 18.00% 16.50% -
3.9 Interest rate of various credit offered by PBL

34
 Loan (General)
 House Building Loan
 Other Loans to Staff
 Cash Credit (Hypothecation)
 Hire-Purchase
 Lease Financing
 Consumer Credit
 SOD (Export)
 SOD (Others)
 PAD
 LTR
 IBP
 Packing Credit
 FDBP (Foreign)
 FDBP (Local)
 FBP
Loan & Advance
3.10 Types of Advances Offered by PBL

35
 Loan (General):
Short, Medium & Long term loans allowed to individual/firm/industries for a specific
purpose but for a definite period and generally repayable by installments fall under this
type. These are mainly allowed to accommodate financing under the categories (I) Large
& Medium Scale Industry and (ii) Small & Cottage Industry. Very often term loans for (I)
Agriculture & (ii) others are also included here.
 Housing Loan (Commercial):
Loans allowed to individual/enterprises for construction of house for commercial purpose
only fall under this type. The amount is repayable by monthly/quarterly installments
within a specified period.
 Home Loan:
Loans allowed to individuals for purchase of apartment or construction of house for
residential purpose fall under this type. The amount is repayable by monthly installments
within a specified period.
 Other Loans to Staff:
Loans allowed to employees other than House Building Loan are grouped under Staff
Loan (Gen).
 Cash Credit (Hypo):
Advances allowed to individual/firm for trading as well as wholesale purpose or to
industries to meet up the working capital requirements against hypothecation of goods as
primary security fall under this type of lending. It is a continuous credit. It is allowed
under the categories (I) "Commercial Lending" when the customer is other than an
industry and (ii) "Working Capital" when the customer is an industry.
 Hire Purchase
Hire Purchase is a type of installment credit under which the customer agrees to take the
goods on hire at a stated rental, which is inclusive of the repayment of Principal as well as
interest for adjustment of the loan within a specified period.
 Lease Financing:
Lease Financing is one of the most convenient sources of acquiring capital machinery and
equipment whereby a customer is given the opportunity to have an exclusive right to use
an asset usually for an agreed period of time against payment of rental. It is a term
financing repayable by lease rental.

36
 3.7.8 Consumer Credit Scheme (CCS)
It is a special credit scheme of the Bank to finance purchase of consumer durable by the
fixed income group to raise their standard of living. The loans are allowed on soft terms
against personal guarantee and deposit of specified percentage of equity by the customers.
The loan is repayable by monthly installments within a fixed period.
 3.7.9 SOD (General):
SOD (General) is allowed to individuals/firms for miscellaneous purpose. This is a
continuous loan having usual maturity period of 1 (one) year and renewable for further
periods at maturity.
 3.7.10 SOD (Export):
Advance allowed for purchasing foreign currency for payment Back to Back L/C liability
where the exports do not materialize before due the date of import payment. This is an
advance for temporary period and categorized as export finance and falls under the
category "Export Finance".
 3.7.11 PAD:
Payment made by the Bank against lodgment of shipping documents of goods imported
through L/C falls under this type. It is an interim advance connected with import and is
generally liquidated against payments usually made by the customer for retirement of the
documents for release of imported goods from the customs authority. It may fall under
anyone of the category "Agriculture/Export Finance/Commercial Lending/Others".
These advances are allowed against the following securities:
 Shares of various Companies approved by Head Office from time to time and
listed in the Stock Exchange.
 Term Deposit Receipts issued by any Branch of Prime Bank.
 Lien on balance in Savings A/C, Current A/C. and other Savings Schemes
 Government Promissory Notes.
 Surrender value of Life Insurance Policies.
 WEDB
 Assignment of bills against work orders/supply orders and receivables
 Stock of goods in trade (Permissible goods only) hypothecated.
 Hypothecation of power driven vehicles or watercrafts.
 Hypothecation of capital Machineries and equipments.
 Immovable Property.

37
 Imported merchandise - hypothecated.
 Trust Receipts.
 Import Bills (PADs)
 Bills Purchase
 Scheduled Bank/Insurance Guarantees
 Export Bills
 Inland Bills.
 Personal Guarantee
Prime Bank established to provide term loan (including working capital loan) and other
financial assistance (including all kinds of banking facilities) to accelerate the pace of
development to small industry of Bangladesh. It is mandated in the memorandum &
Articles of Association of bank to advance a minimum of 50% of the loan able fund to the
small industry sector. As a board policy objective In respect of small industry financing
the Bank undertakes the following tasks:
 Extend financial to small industries in private sector.
 Extend financial assistance to micro-enterprises and collaborate with other
institutions engaged in financial and developing such enterprises.
 Undertake project promotion to identify profitable area of investment.
 Cooperation and collaboration with institutions entrusted with the responsibilities
of promoting and aiding SSI sector.
3.11.1 Credit Analysis
Analysis of the eligibility for getting loan in the light of applications. At the time of credit
analysis, the loan officer should carefully examine logic and purpose of the credit.
Extending credit without analyzing and the loan applied will be very risky. Credit analysis
covers the area of analyzing the character of the borrowers, capacity to use loan amount,
condition, capital, objectives of taking loan planning for uses, probable repayment
schedule and so on.
3.11 Credit management Process of PBL

38
3.11.2 Eligibility in getting loans
 History of the first loan transaction data.
 Ability to use loan and the characteristics of the potential borrower,
 Ability to repay the applied loan amount,
 Amount of capital to support any contingencies,
 Influence on the repayment ability by the domestic and international economic
condition,
 The presence of any risk factors that may make him a defaulter by interfering his
cash flow stream.
Bank takes some necessary information from the borrower for recovery of loan & advance
and analysis of his financial condition this is called credit analysis. There are some factors
which are needed for safety followed by the PBL is given below:
3.11.3 Factors needed for safety
Five C’s Five P’s Five M’s Five R’s
Character Person Man Reliability
Capacity Purpose Management Responsibility
Capital Product Money Resources
Condition Place Materials Respectability
Collateral security Profit Market Returns
3.11.4 Lending Principles
For sound lending the following points should be kept in view:

39
The above principals are discussed below:
Purpose: The purpose of lending is a crucial point to know for the bank. It helps the
banker to know the course of action of the borrower as regards landing. So the banker
can have the idea whether the loan will be in productive purpose or not.
Liquidity: It means the availability of fund bon short notice. The bank has to know
whether the bank can get back the loan amount in liquid from or not. Because majority of
bank liabilities are payable on demand or after short notice. So the loan must have fair
change of repayment according to repayment schedule.
Security: The security by the bank from borrowers in order to cover loan if borrowers
became defaulted. It must be adequate, readily marketable, easy to handle and free from
any encumbrances.
Profitability: Banking is essentially a business, which aims at earing a good profit. The
bank will definitely invest its money if there is a strong possibility of fair return or profit.
Spread/diversification: In this connection, the principal ‘do not pull all the eggs in the
same basket; is followed. The advances should be as much broad based as possible and
must be in conformity with the deposit structure in order to minimizing the risk of
lending.
National interest: A bank should keep in mind the national development plan to play a
significant role in the economic development in the country. It is to be always
remembered that the Bank is the custodian of public money and as such we must be
judicious, careful and selective while lending out the depositors’ money to ensure timely
recovery. The deciding factors for recovery of loans are selection of right type of
borrowers, end-use of credits and effective follow-up and proper supervision.

40
3.11.5 Procedure of giving advance
1 The borrower has to apply to PBL for loan by filling up of a specific application
form.
2 After receiving loan application form, PBL sends a letter to Bangladesh Bank for
obtaining a report. This report is called CIB (Credit Information Bureau) report.
Giving of this report is essential for any amount of loan. The purpose of this report
is to informed that whether the borrower has taken loan from any other bank; if
‘yes’, then whether these loans are classified or regular.

41
3 After receiving CIB report, if the bank thinks that the prospective borrower will be
a good borrower, then the bank will scrutinize the documents. In this stage, the
bank will look whether the documents are properly filled up and signed.
4 Then comes processing stage. In this stage, the bank will prepare a proposal. A
proposal contains all relevant information (e.g. name of the client, type of the loan,
amount of the loan, period of giving loan, security, date of application, financial
data, etc.) Branch incumbent (Local Office) has the discretionary power to
sanction loans as per delegation of powers and authority. But in that case, the
branch manager has to give attention on the delegation of authority prescribed by
Head office.
For the cases, which exceeds Branch delegation, the branch manager has to send a
proposal to the head office. Head office will prepare a minute and submit it before the
competent decision-making committee. The minute has to be passed in the committee
under certain cases.
After passing the minute, it will be sent to the Bangladesh Bank for approval in the
following cases:
 If the proposal limit exceeds 15% of bank’s equity.
 If the proposal limit against cash collateral securities exceeds 25% of the bank’s
equity.
After getting the proposal it will again come to the head office.
1. After the processing stage, a sanction advice will be prepared in favor of the
client.
2. After preparing the sanction advice, bank will collect necessary documents
(charge documents).
3. After receiving all the documents, the bank will disburse the loan to the
borrowers. For withdrawing the loan amount, customer creates a current
account and the loan amount is transferred to this account.

42
3.11.6 Processing of Credit Proposals
1. A secured credit facility may be allowed to a customer only after getting a limit
sanctioned by the authorized officials.
2. The customer seeking a credit facility against acceptable security must make an
application in bank’s printed form “Request for Credit Limit” enclosing necessary
papers/documents to his nearest Branch of the Bank where he maintains his operative
account.
3. Make a preliminary study of the affairs of the intending borrower by consulting the
followings:
 Borrowers application
 Reports in confidence collected through all feasible means regarding the state of
the business of the intending borrower.
 Borrower’s own mode of dealing
 Statement of accounts of the borrower with own and other Banks
 Statement of assets and liabilities
 Financial statements for the last 3(three) years
 Income Tax statement
 Trade and other reports
Arrange an interview with the intending borrower to know on the following points :
 Present and future prospect of the customer’s business
 Total investment required in the business
 Borrower’s stack in the business
 Amount of advance required
 Experience in the line of business.
 Purpose
 Period for which the advance is required
 Source of repayment
 Customer’s previous Banker, if any.
 Present liabilities, if any, with other Bank and conduct of the same
 Securities offered
 Proposed margin
 Type of charge to be created against the proposed security

43
 Terms of repayment
 Rate of interest
4. Before finally selecting the borrower, be satisfied that;
 The customer possess character, capacity and capital
 The account is remunerative one
 Dealing items and primary security of the customer possess the quality of easy
marketability, durability and storability
 Collateral security offered possesses the quality of easy marketability and is not
encumbered and its valuation is judiciously assessed so as to leave sufficient
margin after covering the advance and belongs preferably to the borrower.
 Repayment arrangement is satisfactory
 Means, standing and respectability of the applicant and the guarantor (if any) are
satisfactory.
 Credit worthiness of the applicant is reasonable
 Location of the business is good.
5. If the proposed facility is beyond the delegated business power of the Branch
Manager, the proposal shall be submitted to Credit Division, Head Office duly
recommended in the specified Format.
6. Approval of Limit:
The sanctioning authority on receipt of the proposal shall scrutinize the same and
ensure that:
 The proposal contains all pertinent information relating to the proposed
facility and the borrower.
 All necessary papers and documents have been submitted.
 The proposal has been duly signed by the members of the Branch Credit
Committee including the Manager.
 The proposal has been duly recommended.
 The proposal does not fall within the existing credit restriction
 Minimum margin requirement against the credit facility has been
proposed.
 The primary security has got easy marketability, durability and storability
 The value of the property offered as collateral security is judiciously
assessed

44
 The proposal is viable and stands all credit tests
 The proposed borrower is not defaulter of any Bank/Financial Institution
 There is no request from other Bank/Financial institution for not
allowing/stoppage of facility to the prospective borrower
 The proposal meets all the provisions/requirement of Bank Companies
Act/Rules of Bangladesh Bank/Other Laws / Rules
7. Check list of action to be taken by the Branch Manager/Second Officer/Credit Officer
before disbursement of Credit facilities. –
 Acceptance of customers relating to the terms & conditions to be obtained on the
duplicate copy of sanction advice.
 They will thoroughly examine and ensure that the subject credit facility does not
contradict any law, rules and regulation of the country, Bangladesh Bank and
Bank’s credit policy.
 They will obtain NOC from Bank where the customer has existing liability.
 CIB Report on the borrower to be obtained through Head Office.
3.11.7 Collection of Credit Information:
For assessing the creditworthiness of a borrower a banker has to collect the above-
mentioned information from a number of sources. Every bank maintains a Credit
investigation department at its head office and main offices in larger cities to collect
information regarding the financial position of its borrowers. At other centers, branch
mangers perform credit investigation. The credit information is collected through the
following sources:
Borrower: Most of the information may be secured from the borrower directly. The loan
application form seeks basic information about the borrower and his business. The banker
may examines his accounts books and note his past dealings with other banks or parties
Market Reports: Banks try to find out the creditworthiness of the party by making
enquiries from the brokers, traders and businessmen in the same trade or industry. Their
individual opinions may differ but a balanced opinion may be formed about the borrower
on the basis of the feelings expressed by a number of such persons.
Exchange of Credit Information amongst Banks: It is the practice and customary usage
amongst banks to exchange credit information relating to the constituents in their mutual

45
interest. But the credit reports exchanged by banks are brief and superficial. They are in
general and guarded terms. Banks are reluctant to exchange meaningful credit information
because they apprehend that legal protection available to them will be lost if more facts are
divulged to the enquiring banks. A study Group appointed by the Reserve Bank concluded
“the existing legal protection is adequate to permit banks to exchange meaningful credit
information on their constituents.” The study Group, therefore, suggested that:
i) There should be free and frank exchange of credit information amongst the
banks; and
ii) There should be qualitative change in the contents of credit reports, which
should highlight the management practices of the customers, their behavioral pattern with
their buyers, sellers and with the bank instead of concentrating entirely on the worth of
assets and financial strength. Similarly, the customer’s ability, business acumen and
integrity and willingness to honor commitments should also be covered in the Credit
Reports.
iii) A central agency, to be called ‘Credit Information Trust”, i.e., ‘CREDIT’ be
established for organized collection, collation, storage and exchange of credit information
amongst the banks.
3.11.8 Securities
To make the loan secured, charging sufficient security on the credit facilities is very
important. The banker cannot afford to take the risk of non-recovery of the money lent.
PBL charges the following two types of security, -
 Primary security: These are the security taken by the ownership of the items for
which bank provides the facility.
 Collateral security: Collateral securities refer to the securities deposited by the
third party to secure the advance for the borrower in narrow sense. In wider sense, it
denotes any type of security on which the bank has a personal right of action on the debtor
in respect of the advance.
 Modes of Charging Security
There are different modes of charging securities are exercised by the bank:
1. Pledge: Pledge is the bailment of the goods as security for payment of a debt or
performance of a promise. A pledge may be in respect of goods including stocks and
share as well as documents of title to goods such as railway receipt, bills of
lading,etc

46
2. Hypothecation: In case of hypothecation, the possession and the ownership of the
goods both rest the borrower. The borrower to the banker creates an equitable charge
on the security. The borrower does this by executing a document known as
Agreement of Hypothecation in favor of the lending bank.
3. Lien: Lien is the right of the banker to retain the goods of the borrower until the loan
is repaid. The bankers’ lien is general lien. A banker can retain all securities in his
possession till all claims against the concern person are satisfied.
4. Mortgage: According to section (58) of the Transfer of Property Act,1882 mortgage
is the ‘’transfer of an interest in specific immovable property for the purpose of
securing the payment of money advanced or to be advanced by way of loan, existing
or future debt or the performance of an engagement which may give rise to a
pecuniary liability”. In this case the mortgagor does not transfer the ownership of the
specific immovable property to the mortgagee, only transfers some of his rights as an
owner. The banker exercises the equitable mortgage.
3.11.9 Documentation
Documentation can be described as the process or technique of obtaining the relevant
documents. In spite of the fact that banker lends credit to a borrower after inquiring about
the character, capacity and capital of the borrower, he must obtain proper documents
executed from the borrower to protect him against willful defaults. Moreover, when
money is lent against some security of some assets, the document must be executed in
order to give the banker a legal and binding charge against those assets. Documents
contain the precise terms of granting loans and they serve as important evidence in the law
courts if the circumstances so desire. That’s why all approval procedure and proper
documentation shall be completed prior to the disbursement of the facilities.
3.11.10 Documents required for relevant advances
1. Loan:
a. D P Note signed on revenue stamp
b. Letter of arrangement.
c. Letter of disbursement.
d. Letter of partnership (partnership firm) or Board of resolution (limited companies).
e. Letter of hypothecation.
f. Letter of lien and ownership / share transfer form (in case of advance against share).

47
g. Letter of lien for packing credit.
h. Letter of lien (in case of advance against F D R)
i. Letter of lien and transfer authority.(in case of advance against P S P, B S P)
j. Legal documents for mortgage of property (As draft by legal adviser)
k. Copy of sanction letter mentioning details of terms and condition duly acknowledge
by the borrower
l. Trust receipt.
2. Overdraft:
a. D P Note.
b. Letter of partnership.
c. Letter of arrangement.
d. Letter of continuity.
e. Letter of lien.
f. Letter of lien and ownership /share transfer form (in case of advance against
share).
g. Letter of lien and transfer authority.
h. Legal documents for mortgage of property.
3. Cash Credit:
a. D P Note.
b. Letter of partnership.(in case of partnership farm) or Board of resolution (in
case of limited company)
d. Letter of continuity
e. Letter of hypothecation [In case of cash credit (Hypothecation)]
f. Legal documents for mortgage of property
4. Bills purchased:
a. D P Note.
b. Letter of partnership.(in case of partnership farm) or Board of resolution( in
case of limited company)
d. Letter of acceptance, where it calls for acceptance by the drawee.
e. Letter of hypothecation of bill.

48
3.11.11 Credit Disbursement:
A proper disbursement procedure is essential for implementing a project, small or big ,
within the estimated time and cost . However constant monitoring of the projects on the
one hand and timely monitoring the equity on the other hand can not be under estimated
for efficient implementation of the project. Having completely and accurately prepare the
necessary loan documents, the loan officer ready to disburse the loan to the borrower’s
loan account. After disbursement, the loan needs to be monitored to ensure whether the
terms and conditions of the loan fulfilled by both bank and client or not.
3.11.12 Credit Monitoring, Follow-Up & Supervision:
Credit monitoring implies that the checking of the pattern of use of the disbursed fund to
ensure whether it is used for the right purpose or not. It includes a reporting system and
communication arrangement between the borrower and the lending institution and within
department, appraisal, disbursement, recoveries, follow-up etc.
PBL Officer checks on the following points,
a) The borrower’s behavior of turnover
b) The information regarding the profitability, liquidity, cash flow situation and trend
in sales in maintaining various ratios.
The review and classification of credit facilities starts at Credit Department of the Branch
with the Branch Manager and finally with Credit Division- Head Office.
3.11.13 Lending Risk Analysis:
Lending Risk analysis (LRA) is simply a loan processing manual and has done when the
amount of loan is above 1 core. By going through this manual the lending bankers can
assess the creditworthiness of their prospective borrowers.
Therefore, LRA is such an instrument which is definitely and directly related with lending
information to analyze the borrower’s financial, marketing, managerial and organisational
aspects subjectively and objectively. It also facilitates the analyst to know the security risk
of the credit.
Lending risk Analysis involves assessing the likelihood of repayment of loans to the bank
as per agreement on the basis of analysis of certain risks. To analyze these risks bankers
will need to fill-up a 16-page LRA form. The form leads to scoring various risk factors
involved in lending. LRA has divided the various risks into two groups namely, Business
Risk and Security Risk.

49
1) Business Risk
Business Risk is concerned with whatever the borrowing company would fail to generate
sufficient cash out of business to repay the loan Business Risk, the main component of
lending risk, consists of the Industry Risk and the company Risk
a) Industry Risk
Due to some external reasons a business may fail and the risk which arrives from external
reasons of the business is called Industry Risk. It has two components:
-Supplies Risk
When the business fails due to disruption in the supply of inputs, the consequent risk
which would arise is known as Supply Risk
- Sales Risk
When the business fails for disruption in sales, this type of risk would generate.
b) Company Risk
Company Risk is shown for some internal reasons of the business. It has also two main
components and four sub-components
i) Company position Risk
Each and every company holds a position within an industry. This position is very much
competitive. Due to weakness in the company’s position in its industry, a company may
fail and the risk of failure is called Company Position Risk. It depends on-
a. Performance Risk
If a company fails to perform well enough to repay the loan because of its weakness under
given expected external conditions, the company is said to suffer from performance risk.
b. Resilience Risk
When a company fails due to lack of its resilience to unexpected external conditions, the
resilience risk is generated.
ii) Management Risk
If the management of a company fails to exploit the company’s position effectively, the
company can fail and this risk of failure is called management Risk. It can be subdivided
further-

50
a. Management Competence Risk:
Management competence risk is the risk that the company fails because the management
is incomplete
b. Management Integrity Risk:
Management integrity risk is the risk that the company fails to repay its loan due to lack of
management integrity
2) Security Risk
Security risk is the risk that the realised value of the security does not cover the exposure
of loan. Exposure means principal plus outstanding interest. Security risk can be divided
into two parts:
a. Security Control Risk:
Security control Risk is the Risk that the bank fails to realise the security because of lack
of bank’s control over the security offered by the borrowers.
b. Security Cover Risk:
Security cover risk is the risk that the realised security value may not cover the full
exposure of loans.
3.11.14 Methods used for measuring credit risk on loans:
For small loan generally focus on stock, cash flows, accounts payables, accounts
receivables, growth & expansion of business or project which is subject to loan.
NCCBL also focus on whether they are maintaining proper accounts or not.
For large loans previously NCCBL used Lending Risk Analysis (LRA).
But now in many commercial banks Credit Risk Analysis (CRA) is most commonly used
method.
3.11.15 Credit risk grading (CRG):-
 The Credit Risk Grading (CRG) is a collective definition based on the pre-
specified scale and reflects the underlying credit-risk for a given exposure.
 A Credit Risk Grading deploys a number/ alphabet/ symbol as a primary summary
indicator of risks associated with a credit exposure.
 Credit Risk Grading is the basic module for developing a Credit Risk Management
system.

51
3.11.16 FUNCTIONS OF CREDIT RISK GRADING:
 Well-managed credit risk grading systems promote bank safety and soundness by
facilitating informed decision-making.
 Grading systems measure credit risk and differentiate individual credits and
groups of credits by the risk they pose.
 This allows bank management and examiners to monitor changes and trends in risk
levels.
 The process also allows bank management to manage risk to optimize returns.
3.11.17 Use of credit risk grading:
 The Credit Risk Grading matrix allows application of uniform standards to credits
to ensure a common standardized approach to assess the quality of individual
obligor, credit portfolio of a unit, line of business, the branch or the Bank as a
whole.
 As evident, the CRG outputs would be relevant for individual credit selection,
wherein either a borrower or a particular exposure/facility is rated. The other
decisions would be related to pricing (credit-spread) and specific features of the
credit facility. These would largely constitute obligor level analysis.
Risk grading would also be relevant for surveillance and monitoring, internal MIS and
assessing the aggregate risk profile of a Bank. It is also relevant for portfolio level
analysis.

52
3.11.18Number and short name of grades used in the CRG:
The proposed CRG scale consists of 8 categories with Short names and Numbers &
Frequencies of the credit risk grading are provided as follows:
GRADING SHORT NAME NUMBER
Review frequencies
(at least)
Superior SUP 1 Annually
Good GD 2 Annually
Acceptable ACCPT 3 Annually
Marginal/Watch list MG/WL 4 Half yearly
Special Mention SM 5 Quarterly
Sub standard SS 6 Quarterly
Doubtful DF 7 Quarterly
Bad & Loss BL 8 Quarterly
Superior - (SUP) - 1
 Credit facilities, which are fully secured i.e. fully cash covered.
 Credit facilities fully covered by government guarantee.
 Credit facilities fully covered by the guarantee of a top tier international
Bank.
Good - (GD) – 2
 Strong repayment capacity of the borrower
 The borrower has excellent liquidity and low leverage.
 The company demonstrates consistently strong earnings and cash flow.
 Borrower has well established, strong market share.
 Very good management skill & expertise.
 All security documentation should be in place.
 Credit facilities fully covered by the guarantee of a top tier local Bank.
 Aggregate Score of 85 or greater based on the Risk Grade Score Sheet
Acceptable - (ACCPT) - 3
 These borrowers are not as strong as GOOD Grade borrowers, but still
demonstrate consistent earnings, cash flow and have a good track record.
 Borrowers have adequate liquidity, cash flow and earnings.

53
 Credit in this grade would normally be secured by acceptable collateral (1st
charge over inventory / receivables / equipment / property).
 Acceptable management
 Acceptable parent/sister company guarantee
 Aggregate Score of 75-84 based on the Risk Grade Score Sheet
Marginal/Watch list - (MG/WL) - 4
 This grade warrants greater attention due to conditions affecting the
borrower, the industry or the economic environment.
 These borrowers have an above average risk due to strained liquidity,
higher than normal leverage, thin cash flow and/or inconsistent earnings.
 Weaker business credit & early warning signals of emerging business credit
detected.
 The borrower incurs a loss
 Loan repayments routinely fall past due
 Account conduct is poor, or other untoward factors are present.
 Credit requires attention
 Aggregate Score of 65-74 based on the Risk Grade Score Sheet
Special Mention - (SM) – 5
 This grade has potential weaknesses that deserve management’s close
attention. If left uncorrected, these weaknesses may result in a
deterioration of the repayment prospects of the borrower.
 Severe management problems exist.
 Facilities should be downgraded to this grade if sustained deterioration in
financial condition is noted (consecutive losses, negative net worth,
excessive leverage),
 An Aggregate Score of 55-64 based on the Risk Grade Score Sheet.

54
Substandard - (SS) – 6
 Financial condition is weak and capacity or inclination to repay is in doubt.
 These weaknesses jeopardize the full settlement of loans.
 Bangladesh Bank criteria for sub-standard credit shall apply.
Doubtful - (DF) – 7
 Full repayment of principal and interest is unlikely and the possibility of
loss is extremely high.
 However, due to specifically identifiable pending factors, such as litigation,
liquidation procedures or capital injection, the asset is not yet classified as
Bad & Loss.
 Bangladesh Bank criteria for doubtful credit shall apply.
Bad & Loss - (BL) – 8
 Credit of this grade has long outstanding with no progress in obtaining
repayment or on the verge of wind up/liquidation.
 Prospect of recovery is poor and legal options have been pursued.
 Proceeds expected from the liquidation or realization of security may be
awaited. The continuance of the loan as a bankable asset is not warranted,
and the anticipated loss should have been provided for.
 This classification reflects that it is not practical or desirable to defer
writing off this basically valueless asset even though partial recovery may
be affected in the future. Bangladesh Bank guidelines for timely write off
of bad loans must be adhered to. Legal procedures/suit initiated.
 Bangladesh Bank criteria for bad & loss credit shall apply.
 An Aggregate Score of less than 35 based on the Risk Grade Score Sheet.

55
3.11.19 Computation of credit risk grading:
The following step-wise activities outline the detail process for arriving at credit risk
grading.
Credit risk for counterparty arises from an aggregation of the following:
 Financial Risk
 Business/Industry Risk
 Management Risk
 Security Risk
 Relationship Risk
Each of the above mentioned key risk areas require be evaluating and aggregating to arrive
at an overall risk grading measure.
a) Evaluation of Financial Risk:
Risk that counterparties will fail to meet obligation due to financial distress. This
typically entails analysis of financials i.e. analysis of leverage, liquidity, profitability
& interest coverage ratios. To conclude, this capitalizes on the risk of high leverage,
poor liquidity, low profitability & insufficient cash flow.
b) Evaluation of Business/Industry Risk:
Risk that adverse industry situation or unfavorable business condition will impact
borrowers’ capacity to meet obligation. The evaluation of this category of risk looks
at parameters such as business outlook, size of business, industry growth, market
competition & barriers to entry/exit. To conclude, this capitalizes on the risk of
failure due to low market share & poor industry growth.
c) Evaluation of Management Risk:
Risk that counterparties may default as a result of poor managerial ability including
experience of the management, its succession plan and team work.
Step I : Identify all the Principal Risk Components

56
d) Evaluation of Security Risk:
Risk that the bank might be exposed due to poor quality or strength of the security
in case of default. This may entail strength of security & collateral, location of
collateral and support.
e) Evaluation of Relationship Risk:
These risk areas cover evaluation of limits utilization, account performance,
conditions/covenants compliance by the borrower and deposit relationship.
3.11.20 Recovery:
Loans and advance in whatever form granted by the bank to its clients are repayable either
on demand or at the expiry of the fixed period or as per repayment schedule agreed upon
while granting the facilities. If a loan is repayable on installment is not repaid on due date.
Overdraft and case credit are legally repayable on installment is not repaid on due date.
Overdraft and case credit is legally repayable in installments and default causes in the
payment of any installment; entire loan usually becomes immediately recoverable of at the
option of the bank. Banks generally realize their advances under the following cases:
i. If death occurs either of the borrower or of the guarantor
ii. If the borrower is reported to have committed as act of insolvency or has filed
an application for his insolvency
iii. Dissolution the partnership
iv. Liquidation the borrowing company
v. Failure to renew documents sufficiently before the expire of the limitation
vi. If there is any serious deterioration in the security charged to the bank and want
of satisfactory turnover in the account
vii. There has been a deterioration in the financial position of the party
viii. If the borrower fails to maintain in the stipulated margin and does not restore
the shortfall inspire of repeated reminders
ix. Change in the bank’s policy of lending
x. The policy of selective credit control by Bangladesh Bank
xi. Detection of any other undesirable feature in the account
xii. There may also be other reasons for withdrawing the facility, i.e. the law and
order situation at a certain place is such that it may be risky to the advancen

57
3.11.21 CLASSIFICATION PROCEDURE
After the date of expiry, if the borrowers do not adjust their loan, PBL at first gives a
notice to them. The period of giving notice depends on the nature of the loan. For
continuous loan, PBL gives notice for three months. For five-year term loan, PBL gives
notice for six months. And for more than five-year term loan, PBL gives notice for more
than 12 months.
After giving notice, if the borrower does not repay the loan, the loan will be considered as
classified. Pursuant to Bangladesh Bank’s Banking Regulation and policy Department's
Circular No. 16 (1998), loans and advances are classified both on aging and functional
criteria as follows:
3.24.1 Unclassified Loan: The repayment of advance which have regularity are called
unclassified advance .This is a clean loan that is these is no overdue installment or not the
expire due date.
ASSESMENT OF LOAN & ADVANCE
CLASSIFIED
(IRREGULAR)
UNCLASSIFIED
(REGULAR)
SUBSTANDARD
BAD LOAN
DOUBTFUL

58
3.11.22 Classified: The repayments of advance which have no regularity are classified are
classified. That means which are irregular in nature, overdue installment of payment, and
expire the due date. There are three standards of classification:
 Sub Standard
 Doubtful
 Bad Loan
Pursuant to Bangladesh Bank’s Banking Regulation and policy department’s
circular no 16(1998), loan and advances are classified both on aging and
functional criteria as follows:
For Term loan up to 5 years
(CCS, HBL-commercial, etc)
Overdue period
(in months)
CL Status
3 to less than 6 SMA
6 to less than 12 SS
12 to less than 18 DF
18 to above BL
For Term loan of more than 5 years
(Project loan, Industrial term loan)
Overdue period
(in months)
CL Status
12 to less than 18 SS

59
For Continues loan
(CC, SOD)
Overdue period
(in months)
CL Status
6 to less than 9 SS
12 to above BL

60
Analysis
In 2015 the bank has distributed loans and advance to different sectors as follow:
1. 83..85% in corporate loan
2. 6.76% in SME loan
3. 1% in staff loan
4. 7.85% in retail loan
5. .54% in credit card
Sector Percentage
Staff Loan 1%
Corporate Loan 83.85%
SME Loan 6.76%
Retail Loan 7.85%
Credit Loan o.54%
3.12 Sector wise distribution of loan and advances of PBL Agrabad
Branch for the year, 2015

61
3.13.1 RETAIL LOAN (Tk in millions)
Analysis
From the above graph, it can be said that the Retail loan has been classified into three
catagories like: car loan Swapon Neer loan, any purpose loan which are issued throughout
the 5 years. Car loan, Swapono Neer loan, any purpose loan reached on average 5.15,
17.73&30.09 millions respectively. So the retail loan of prime bank limited is going to
increase day by day.
3.13 Loan disbursement of PBL, Agrabad Branch for year
(2011- 2015)

62
3.13.2 CORPORATE LOAN (2011- 2015)
(TK in MILLION)
2011 2012 2013 2014 2015
LTR-SME 3.44 4.12 5.99 4.58 7.89
CC(HYPO)-SME 12.89 14.56 18.33 21.06 27.74
Term Loan 6.23 8.89 11.49 13.77 18.53
12.89
14.56
18.33
21.06
27.74
0
5
10
15
20
25
30
Axis
Title
Axis Title
LTR-SME
CC(HYPO)-SME
Term Loan
Analysis
The bar diagram says the corporate loan also classified into three categories like LTR-
SME, CC (HYPO)-SME, Term loan which are issued throughout over the 5 years in terms
of LTR-SME, there has some fluctuations like in 2013 it was 5.99 which are decreasing to
4.58 also increasing to 7.89.In terms of CC (HYPO)-SME, Term loan which are increasing
day by day over the years.

63
Year Disbursement Growth Rate
(Disbursement)
2011 10892.38 8.12 %
2012 12091.75 11.01%
2013 13571.28 12.24%
2014 14180.65 4.49%
2015 16504.33 16.39%
0
5000
10000
15000
20000
2011
2012
2013
2014
2015
10892.38 12091.75 13571.28 14180.65
16504.33
Disbursement
Analysis
The above figure indicates the total loan disbursement. It was lowest in the year of
2011.And the amount was 10892.38. After the year 2011, it was increasing day by day
from 2011 to 2015.Then the amount increasing from 10892.38 to 14180.65. Then, in 2015,
the amount was increasing again and continuing it.
3.14 Total loan disbursement performance of PBL for the year
(2011- 2015).

64
Year Recovery Growth Rate
(Recovery)
2011 389.26 8.38%
2012 430.65 10.26%
2013 480.42 11.63%
2014 504.14 4.94%
2015 589.76 16.98%
Analysis
Understanding the recovery it seems random increasing from 390.26 to 480.42 that
represents 2011, 2012, 2013 and May respectively where started from the first year is
increased gradually and then continues it then increased to 504.14. And finally it reached
to recovery in the year 2015. So over the graph indicates the gradual increases of recovery
from first to last years. There are a great recovery shows over the 5 years.
0
100
200
300
400
500
600
2011
2012
2013
2014
2015
390.26
430.65
480.42 504.14
589.76
Amount
3.15 Total loan recovery performance of PBL for the year (2011-
2015)

65
After conducting the study and analyzing the performance the following findings
have been found out:
i. The rate of interest is same for both high-risk borrower and low-risk borrowers
indicating average interest rate of Prime bank Ltd is around 18%.
ii. PBL has no special credit consultancy department in all branches those who will
directly communicate with the clients to gather loan related information and read
out the client nature.
iii. Cash recovery position of PBL is up most satisfactorily
iv. In the sector wise distribution of loan, PBL has distributed maximum loan and
advance in corporate loan sector the amount is 83.85% and minimum loan and
advances in staff loan and the amount is 1%.
v. The three retail loan like Car loan, Swapno Neer loan and any purpose loan which
are issued throughout the 5 years also increasing day by day.
vi. In Corporate Loan, the term of LTR-SME has some fluctuations through the years
but the term of CC (HYPO) – SME, Term Loan which are increasing day by day
over the year.
vii. Sometime the loan documentation is not fairly done.
viii. Total loan disbursement Performance of PBL for the year (2011-2015)
which are gradually increasing and continue it
3.16 Summary Findings

66
SWOT analysis enables an organization to have a comprehensive insight about its
current position in the industry compared to the competitors. It provides the
organization a scope to improve strategically its position in the market. Here, the
internal strengths and weaknesses of Prime Bank Limited as well as the external
opportunities and threats are discussed.
Strengths:
Good Customer Service: Prime Bank Limited provides quality services to the clients
compared to its other contemporary competitors. The bank has a very good
relationship with its customers. The bank believes in maintaining personal relationship
with the customers. One of the major goals of this bank is to build long-term
relationship with the customers and to create value for them.
Innovative Products: Prime Bank Limited has offered various kinds of deposit
schemes by which people have opportunity to save their small money and bank is able
to earn more for themselves for their clients. Comparatively Prime Bank Limited
offers more number of deposit schemes to customers.
Efficient Administration: Prime Bank Limited has an efficient administration. The
work is done in a timely and systematic manner for which the efficient administration
is responsible. There is close relationship between the employees and management
though the chain of command is maintained strictly. Overall, there is a good balance
between the administration and the employees.
Capital Adequacy: Prime Bank Limited is maintaining a strong capital base. By the
end of December 2007, the capital adequacy ratio was 11.50%. The bank has now
increased its authorized capital to 4000 million for its expansion program.
Weakness:
Technology: One of the major weaknesses of Prime Bank Limited is the technology
used by the bank. With the change of time, technological advancement is essential to
survive in the competition.
Promotion: When an employee gets a promotion to the next level, he/she gets more
compensation. Prime Bank Limited is regular in giving promotion but the employees
get later effect of this promotion.
Training: Prime Bank Limited has its own training institute PBTI (Prime Bank
Training Institute) to strengthen the capabilities of human resources. However, there is
a lack of specific training for specific jobs. As a result, the employees have to learn
things from the job by doing it practically.
3.14 SWOT Analysis

67
Opportunity :
Branch Expansion: Prime Bank Limited is growing quickly all over the country.
Besides expanding in the urban areas, Prime Bank Limited has prospects to open more
branches that will eventually enhance the government’s effort at receiving the rural
economy as well as reaching more people by better service.
Training Facility: Prime Bank Training Institute (PBTI) is supporting the bank by
offering in house training courses, workshops and seminars. As the bank has its own
training institute to enhance the capability of human resources, Prime bank Limited
can use this opportunity to train their employees in specific areas and create
specialized and expert people for the bank.
Banking Software: Quality service providing is a major goals of Prime bank limited.
Though Prime Bank limited is still lagging behind in upgrading their software system,
the bank has the prospect to select high quality banking software, which will make the
banking operations easier and smooth.
Threats:
Level of Competition: Competition is always a major threat for any organization. In
recent years, the number of private bank is increasing. These banks always pose a
threat for others by coming up with new product line, innovative technology, quality
services, etc. Thus, the level of competition rises and creates threats for Prime Bank
Limited.
Technological Advancement: With time, technology is getting advancement and most
of the private banks are upgrading their operating system to survive in the industry.
Prime bank Limited is lagging behind in this department and still mostly dependent on
manual work rather than technology. Advancement of technology is posing great
threat for Prime ban

68
Chapter Four
Conclusionary
Aspect

69
According to the findings of the study the following recommendations are made:
i. For low risk borrower the rate of interest of Prime Bank Ltd need to be revised.
ii. Though the credit analysis procedures followed by PBL is satisfactory it should
keep these process update as per requirement of changing regulations and business
environment.
iii. The bank should take necessary step to reduce loan process time for consumer
loan and small enterprise financing.
iv. The bank should strengthen its recovery system along with selecting the loan
request more carefully.
v. All the document verifications have to done before loan sanction.
vi. The bank has to establish a strong “Credit Manual”
vii. All the documentations have to done honestly.
viii. The branch should take more steps to disburse more amounts so the clients can
be benefited.
4.1 Recommendations

70
Proper financial system of country can contribute towards the development of the
country’s economy. In our country banks are leading in the financial system. Again private
commercial banks, which are much better than state owned bank, are playing significant as
well as imperative role and the development of our country. Certainly PBL is mobilizing
its all resources on this same track to achieve maximum possible contribution to the
nation.
Despite stiff competition among banks operating in Bangladesh both foreign and local,
PBL has achieved satisfactory progress in areas of its operations and earned an impressive
operating income over the previous years. The bank hopes to achieve a satisfactory level
of progress in all areas of its operations including target of profitability. In achieving the
aforesaid objectives of the bank, credit operation is of paramount importance as the
greatest share of total revenue of the bank is generated from it, maximum risk is centered
in it and even the very existence of bank depends on prudent management of its credit
portfolio.
PBL perform phenomenally not only in credit management but also in the field of profit
earning. This was possible for having large deposit amount to invest in various profitable
projects. From my part, I would like to suggest, a bank requires some special personal
traits that not every bank possesses. Among the most important of these are honesty,
reliability, thoroughness and willingness to always be open to new ideas and new ways of
meeting customer needs.
4.2 Conclusion

71
Chapter Five
Ending Matters

72
 Annual Report of Prime Bank Ltd. 2015.
 Bank Statistics
 Credit Risk Management Policy of Prime Bank limited.
 Credit risk grading manual of Bangladesh Bank.
 Publication of Prime Bank Limited.
 Recovery of Loan Policy Guidelines, Prime Bank Ltd.
 Website of PBL (www.primebank.com.bd)
 http://www.aresearchguide.com/1steps.html
5.1References

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