Lending and Credit procedure of Dutch Bangla Bank Limited Dutch Bangla Bank has its own lending

procedure and every branch must have to follow these steps to provide any sorts of loans and advances. A bank or branch performance totally depends on the performance of the credit division so lending procedure must have to be very precious and strict. The lending procedure starts with the building up relationship through the account opening. There are several stages and steps of approval any kind of loans and advances. Branch and head/ corporate office are involved with this lending procedure. The following steps are procedure of providing loan: Fill-up first information sheet/Initial Screening Application for credit line Collecting CIB report from Bangladesh Bank Making credit proposal Project appraisal Head office approval Sanction letter Documentation Disbursement Monitoring Renewal(if needed) Recovery

Fill-up first information sheet/Initial Screening: This is the first stage of loans and advances. This first information sheet is provided by the Narayanganj Branch office to their respective customers/borrowers. Officers interviewed the borrowers and dully fill up first information sheet. This is known as initial screening of lending procedure. In the information sheet compiled with Name of the Borrowers, Type of loan, Factory location, Mortgage information, Educational information of borrowers, Business type and operation, number of employees, Resident address and phone numbers, sponsors details, guarantors details, failures and achievements of the business and most importantly the income tax information of the clients.

Application for credit line: After receiving the first information sheet from the borrowers then officers of Narayanganj branch verifies off all the information very carefully. Officers also verifies the current and past account data that maintained by the borrowers. If the borrowers are new then it requires more inquiry about the clients and that be acquired from other banks that borrowers have accounts. If the officers of the Narayanganj branch are satisfies with all the information that provided by the borrowers then he gives application for credit line to the prospective borrowers. That application form contains with: Memorandum of Associations(MOA) Article of Associations (AOA) Board of Directors name, duty and holding shares Total capitalization and market shares of the company Nature of the business and product details Present and past Financial data Future projects and plans 5Cs that includes Character, Capacity, Capital, condition and collateral Collecting CIB report from Bangladesh Bank: after receiving the data of application for credit line, Narayanganj Branch office sends it a letter to the Bangladesh Bank to obtain a Customer Information Bureau (CIB) report. It is very important to know about the borrowers all the data to providing any loans. So providing any sorts loan Narayanganj branch must to collect a CIB reports from the Bangladesh bank. This CIB consist of that the borrower has taken any loan before and status of that loan and also the default and performance previous loans. If the CIB report is satisfactory then Narayanganj Branch goes further of that loan procedure. Making credit proposal: Narayanganj Branch office prepares a proposal of that loan which is contains terms and conditions. This proposal is made to approval from the Head/corporate office. So a good Credit proposal is very important for approving a loan. In the credit proposal consist of following documents and elements: Loan Application Declaration of the Borrowers with signatures Bio Data of the borrower dully attested

Limit sanction Legal issues MOA and AOA Tax Clearance certificate Deed copy of mortgage Trade license Credit and CIB report Sales and financial data Major competitors Risk associate and grading Previous lending and Debt/Equity Loan repayment sources and procedures Sponsors, Guarantors, stockholder, stakeholder and creditor analysis

Project appraisal: project appraisal is the pre investment strategic analysis. A bank deals with public money so it has to be deal very carefully. Project appraisal is the further investigation and analysis process done by the branch offers. It is important to know about the borrowers soundness of that investment, how borrower will achieve his organizational goal by this loan amount. There are some technics used by the branch officers and some of them are: o Technical Viability o Commercial Viability o Financial Viability o Economic viability Technical Viability: that involves: Site and location of the project Plant, machinery and equipment Production process

Commercial Viability: Commercial Viability involves: Analysis past and present demand Analysis past and present supply Marketing channel Pricing per unit
Financial Viability: Financial Viabilities are:

Debt/Equity Ratio Market share capitalization Working Capital and Earning forecast Internal Rate of Requirement(IRR) Break Even Point (BEP) Net Cash flow Economic viability: The project should ensure benefit to the national economic and create sufficient opportunity in the following areas: Generation of Employment Income distribution Opportunity cost Improvement of life-style Self-Reliance

Head office approval: The respective officer of the head office appraises the project by preparing a summery named top sheet or executive summery. And there is committee to approve the loan and this committee is known as HOCC. HOCC takes the decision either they approve the loan or not. Head office Credit Committee verifies all the sheet and proposal that prepared by the Narayanganj branch officers. If the HOCC satisfies with all the information then they approves the loan and if they thinks some modification or correction need to make then they send to branch office with recommendations. HOCC also hold the right to dismiss any loan proposal with valid reasons.

Sanction letter: After getting approval from the HOCC and the branch issues sanction letter contains with following things: Rate of Interest An Account number that with credit details Facility allowed with loan Security Period of the loan and mode of adjustment Expiry of loan Proposed and Exposure Amount Renewal Issues Charges and Fees

Documentation: documentation is very important because it helps to keep all the necessary deed and application that will require if in future some problem arises. Documents for loan and advance can be classified into two categories, one of them is Charge document and another one is security document. Documents contains the precise terms of grating loans and they serve as important evidence in the law courts if occurred circumstances arise. That is why documentation of deed and other credit related file is very important Disbursement:

Monitor: Advance allowed should be monitor very closely in order to see whether the same are being conducted in according with the terms and conditions under which the limits were sanctioned or not. The result of the inspection should be an effective guide in sorting out the measures to be adopted in respect either of correcting the unsatisfactory operation of the advances or recovery of the same.
Monitoring/controlling contains the following main sections: Control of overdrawn accounts Control of loans Control of other credit activities

Narayanganj Branch Control over the loan and advance: In Narayanganj Branch officers closely monitor all the activity over the loan advance. Some things monitor frequently and some are monitor periodic. Based on the importance of the information branch monitor below things on time: Report Frequency

Update Customer & Account Data Authorized Withdrawals Secured Over drafts Clean Over draft Excess over limit/ Excess Over drawing Power Unused facilities Temporary facilities Statement of Interest-Overdraft Accounts

Daily Daily Weekly Weekly Weekly Weekly Weekly Monthly

In the case of all unused facilities, the Naraynganj branch checks with the borrower the reasons for not using the facility. If the borrower cannot provide satisfactory reasons or if he has gone to another bank for some reason, the limit will be cancelled. A notice will be given to them, and then loan will be counted as cancelled. There are some other things to monitor by Naraynganj Branch office and those are:
Installment amount Installment frequency First installment due on First repayment- Maturity date

Renewal of loan and advance: Every loan has its maturity date, after end of the maturity date borrowers must have to return the entire due amount the interest but DBBL offers renewal of loan and advance and that has to be done in a proper channel with the acceptance of Branch Manager and head office.

Narayanganj Branch gives prior notice to the borrowers about the loan maturity period and at least 60 days before the expiry date of the loan. In many cases bank offers extensions of loans if the performance of the borrowers are satisfactory. Branch officer makes application for renewal proposal on standard form along with a financial report of the borrower. At the time of the

renewal of the limit of loan, the branch manager of Naraynganj branch shall inform the Sanctioning Authority.

If branch can renew any loan then they have hold the right to cancel any loan if the performance is not satisfactory.

Recovery: This is the last stage of loan process and perhaps counted as most important steps. In this stage Branch tries to recover their loan from the borrowers. Mostly after end of the maturity date of the loan branch gives full efforts to recover their given money. Branch officer makes a formal application and notice to the borrowers about the loan status. There are some extreme situations that branch found difficulty or implies more on their loan recovery: Borrower or the Guarantor dies Borrower or the guarantor has become insolvent Borrowing Company has been liquidated Partnership has been dissolved. Turnover in the account has not hopefully improved. Value of the security has been deteriorated. The party commits fraud of any sort. Policy of the bank has under gone change in relation to certain types of advances. Bangladesh Bank has imposed restriction on certain type of advance and desires its adjustment.

Advance allowed should be very closely watched to see whether the same are being conducted in accordance with the terms and conditions under which the limits were sanctioned or not. The result of the inspection should be an effective guide in sorting out the measures to be adopted in respect either of correcting the unsatisfactory operation of the advances or recovery of the same.