Chapter 1

Introduction

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1.1 Introduction:
The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central banks,
4nationalized commercial banks (NCB), 5 government owned specialized banks, 30 domestic private
banks, 10 foreign banks and 28 non-bank financial institutions. The Financial system also embraces
insurance companies, stock exchanges and co-operative banks. In our country Bangladesh Bank
(BB), as the central bank, has legal authority to supervise and regulate all the banks. It performs the
traditional central banking roles of note issuance and of being banker to the government and banks.
Commercial banks and domestic private banks are the profit-making institution that holds the
deposits of individuals & business in checking & savings accounts and then uses these funds to make
loans. Both general public and the government are dependent on the services of banks as the
financial intermediary. We have chosen IFIC Bank Limited as a representative of other private banks.
We have learned so many things in our course and here we tried to relate the theories with real life
situation and also find out the similarities.

1.2 Objectives of the report:

The main objective of the report is to know the overall loan and advance procedure of IFIC bank with some
specific objectives. And the specific objectives are

1.
2.
3.
4.
5.
6.

Toanalyze differentloan and advance activities of IFIC Bank Limited.

To analyze different lending regulations followed by IFIC Bank Limited.
To analyze the loan disbursement process of IFIC Bank Limited.
To analyze the loan recovery process of IFIC Bank Limited
To identify problems associated with loan and advance activities of IFICBank Limited.
To provide some suggestion to overcome such problems faced by the IFIC Bank Limited

1.3 Methodology:
For the implementation of the study I have worked on IFIC Bank Limited (IFICBL).
In order to make the Report more meaningful and presentable, two sources of data and
information have been used widely.

The Primary Sources are as follows2 | Page

Face-to-face conversation with the respective executives & officers of the Bank.
Informal conversation with the clients.
Practical work exposures form the different desks of the various departments of the Branch
covered
Relevant file study as provided by the officers concerned.
The Secondary Sources of data and information are Annual Reports of Standard Bank Limited.
Periodicals published by Bangladesh Bank.
Various books, articles, compilations etc. Regarding general banking functions, foreign
Exchange operations and credit policies.
After collection of data, a list of table was prepared on the basis of aims and objectives of the
study and processing, editing and coding of the data were done simultaneously. The tabulated
Data were then analyzed and condensed to obtain the result / objective.

1.4 Limitations:
There are some limitations in the study. I have been faced some problems during the study which
I am mentioning them. The time period of the study is very short. I had only 3 (three) months in
My hand to complete this report, which was not enough. So I could not go in depth of the
study. To prepare this report I have faced the following limitations:
The study was conducted only on the Branch level. Overall banking performance could not
be evaluated for time constraints.
Respondent havent agree withal the service related issues and some answer were indistinct.
Also some secrecy was maintained in the bank and I was not exposed to activities.
Finally, the lack of the depth of my knowledge and the analytical capacity for writing such
report is also a shortcoming of this study.

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Chapter 2
CompanyBackground

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2.1 About IFIC Bank Limited

International Finance Investment and Commerce Bank Limited (IFIC Bank) is banking
company incorporated in the Peoples Republic of Bangladesh with limited liability. It was set
up at the instance of the Government in 1976 as a joint venture between the Government of
Bangladesh and sponsors in the private sector with the objective of working as a finance
company within the country and setting up joint venture banks/financial institutions aboard. In
1983 when the Government allowed banks in the private sector, IFIC was converted into a fullyfledged commercial bank. The Government of the Peoples Republic of Bangladesh now holds
32.75% of the share capital of the Bank. Directors and Sponsors having vast experience in the
field of trade and commerce own 8.62% of the share capital and the rest is held by the general
public.

2.2 Bank's Mission

Our Mission is to provide service to clients with the help of a skilled and dedicated workforce whose
creative talents; innovative action and competitive edge make our position unique in giving quality service to
all institutions and individuals that we care for.
We are committed to the welfare and economic prosperity of the people and the community, for we
derive from them our inspiration and drive for onward progress to prosperity.
We want to be the leader among banks in Bangladesh and make our indelible mark as an active
partner in regional banking operating beyond the national boundary.
In an intensely competitive and complex financial and business environment, we particularly focus on
growth and profitability of concerned.

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2.3 Credit Rating of IFIC Bank

Credit Rating of IFIC Bank

2013
Long Term: AA3

2014
Long Term: AA2

Definition of Rating
Have very strong capacity to meet,
Their financial Commitment
.They differs from their high rate
commercial banks only to a small
Degree. AA2 is judged to be of
very high quality and is subject to
very low Credit risk

Short Term: ST-2

Short Term: ST-2

Have strong capacity for timely

repayment and characterized with
commendable position in terms of
liquidity, internal fund generation,
And access to alternative success
of funds.

2.4 Management Structure:

The thirteen members of the Board of Directors are responsible for the strategic planning and overall
policy guidelines of the Bank. Further, there is an Executive Committee of the Board to dispose of
urgent business proposals. Besides, there is an Audit Committee in the Board to oversee compliance
of major regulatory and operational issues. The CEO and Managing Director, Deputy Managing
Director and Head of Divisions are responsible for achieving business goals and overseeing the day
to day operation. The CEO and Managing Director are assisted by a Senior Management Group
consisting of Deputy Managing Director and Head of Divisions who supervise operation of various
Divisions centrally and co-ordinates operation of branches. Key issues are managed by a
Management Committee headed by the CEO and Managing Director. This facilitates rapid decisions.
There is an Asset Liability Committee comprising member of the Senior Executives headed by CEO
and Managing Director to look into all operational functions and Risk Management of the B

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2.5 Main Services of IFIC Bank

The main services that are offered by IFIC bank are given below,
Corporate Banking: It includes
Working Capital
Finance
Project Finance
Term Finance
Trade Finance
Lease Finance
Syndication Finance
Retail Banking:
Consumer Finance
Deposit Products
Credit Card
Debit Cards
Pre-paid Cards
NRB Account
Student File
SME Banking
Retailers Loan
Easy Commercial Loan :
Transport Loan
Commercial House
Building Loan
Possession Right Loan
Contractor's Loan
Bidder's Loan
Working Capital Loan
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Project Loan
Trade Finance
Muldhan
Women Entrepreneur's
Loan :
Treasury and Capital Market
Money Market
Forex Market
Brokerage House
Agriculture Credit
Krishisharonjamrin
Shechsoronjamrin
Phasalirin

2.6 IFIC Bank at a glance:

1) Name of the Bank

: International Finance Investment & Commerce Bank Ltd.

(2) Head office

: 8, Rajuk Avenue, Motijheel, Dhaka.

(3) Date of establishment

: 24th June, 1983.

(4) Company registration Number

: 4967, dated October 08,1976

(5) Market Category

: A Category

(6) Objectives

: To establish maintain, carry on transect undertake and conduct all types of

banking financial investment and trust business in Bangladesh and abroad.

(7) Branch
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: 80 Domestics & 4 Affiliates

(8) Control
(9) Board of directors

: Board of directors.
: 14 executing members including chairman & managing director.

(10) Number of employee

: 2193.

(11) Number Of shareholders : 34152

(12) Customers

: 200,000

(13) Capital & Reserve

: Authorized capital Tk. 5350 million, paid up capital Tk. 1744 million.

(14) Share

: Ownership of the Bank held by the sponsors in the private sector and

Government of the Peoples Republic of Bangladesh. Sponsors and individuals now some 65 percent of the share
capital and the Government own a little more than 35 percent of the shares
(15) Auditing System

: Both internal & external.

(16) Future Plan

:( a) to increase market share in opening student through providing logistic

support including media support.

(b) To increase sale of TCs through providing all logistic support account

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Chapter 3
Loan and advance Activities of IFIC
Banklimited

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3.1Credit Services of IFIC Bank limited

This is the survival unit of a bank, because the success of this section is a question to every bank. If
this section is not properly working, the bank itself may become bankrupt. This is important because
this is the earning unit of the bank. Banks are accepting deposits from the depositors in condition of
providing interest to them as well as keeping their deposits safely. Now the question may gradually
arise how the bank will provide interest to the clients and the simple answer is advance.
To run operations and to earn profit thereby, every bank advances and invests its deposited money
and reserves equity and other available funds in various profitable sectors. The effective and
profitable policies concerning advancing and investment is needed increasingly. Without proper
mobilization of deposits under the shadow of advances and investments, no bank can exist. In the
area of investment and advancing, IFIC Bank Limited plays a vital role among the private
commercial banks of the country.
Advances are the main revenue generating area for any bank. But a commercial bank cannot
advances all of its deposits and Bangladesh Bank governs the rules that a maximum of 80 percent of
total deposit can be advanced to the clients. The rest 20 percent of the total deposit has to be kept in
the Bangladesh Bank as government policy. IFIC bank ltd has extended its advance facilities for the
past years with the policy guidelines of Bangladesh Bank.

3.2 Types of Advances

All loans and advances that are provided by this bank can be categorized into their heads according
to the nature and characteristics of each product:

ADVANCE

Continuous

Consumer
Term Loan Small EnterpriseFinancing.
Financing
Financing.
Figure: types of loan and advances

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Last five years loan and advance of IFIC bank Limited

In million BDT
Loan

and 2014
102,282

advance

2013

2012

2011

2010

84,110

77,160

64,641

47,563

120000
102282
100000
84110
80000

77160
64641

60000

47563

40000
20000
0

1
2014

2013

2012

2011

2010

Figure: Last five years loan and advance of IFIC bank Limited

Interpretation: From the above graph and table we can say that 4he amount of loan and advance of
IFIC bank is increasing day by day. And the highest amount has given in the year 2014 and amount is
102282 million taka.

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3.3 Nature of different types of Advances

a. Continuous Loan
IFIC Bank gives in the following Continuous Loan:
i.

Cash Credit Hypothecation (CC HYPO)

ii.

Cash Credit Pledge (CC PLEDGE)

iii.

Secured Overdraft (SOD)

i.

Cash Credit Hypothecation (CC HYPO)

Cash credit is given through the cash credit account. Cash credit is an active and running
account where deposits and withdrawals may be made frequently. The debit balance of the
account on any day cannot exceed the agreed limit.

The instrument is HYPOTHECATION DEED.

50% margin requires opening a CC account. (varies)

Operation of cash credit is same as that of overdraft. The purpose of cash credit is to meet
working capital needs of traders, farmers, and industrialist.

It is granted only the first class parties.

It is charged against a property where neither the ownership nor the possession is passed to
the bank.

ii.

Cash Credit Pledge (CC PLEDGE)

The nature, operational work, and characteristics of CC- PLEDGE in as same as CC HYPO.

CC.PLEDGE in different from CC-HYPO only from the securities or business goods
against the loan amount.

It is charged against properties where the ownership may remain to the borrower but the
possession is passed to the bank.

The instrument is Pledge Deed.

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iii.

Secured Overdraft (SOD)

Overdrafts are those drawings, which are allowed by the banks in excess of the balance in
the current account up to a specified amount for definite period as arranged for.

Generally it is given to the businessmen to increase their business activities.

Usually provide against FDR, PSS, i.e. financial obligation or any primary securities. The
interest charges from the date of first withdraw.

Interest is calculated and charged only on the actual debit balance on daily product basis.

Balance of OD account are fluctuates

The interest rate of SOD is 3% above of FDR interest rate, if the FDR is in IFIC Bank. If
the FDR is in other bank then the interest r1te is 14.50%.

Cash Credit

Overdraft

2014

25,443,140,268

23,549,902,570

2013

22,525,977,977

21,179,910,669

2012
2011
2010

18,836,285,222

18,023,424,213

14,598,455,670

12,780,790,671

10,228,475,372

7,129,391,285

b. Term Loan
IFIC Bank gives in the following Term Loan:
i.

Industries Loan

ii.

Others loan

iii.

Staff House Building Loan (SHBL)

iv.

Staff loan against Provident Fund (SLPF)

v.

Loan against PSS

vi.

House Building Loan

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vii.

Consumer Credit Scheme

I. Industries Loan:

It is a term loan.
It is given for three (3) years at equal installment.
Gross period is allowed of these types of loan.
Gross period is the period that requires earning visible returns

ii. Others Loan:

Loan provided for other purposes which is productive and less risky than industrial sector are treated
as others loan.
The terms and conditions of these types of loan are same as industry loan.
iii. Staff house Building Loan:
120 times of basic salary is provided as SHBL. Bank rate + 1 % interest is charged to the loan
amount. Repayment adjusted from their monthly salary. Repayment is made at equal monthly
installment.
iv. Staff Loan against Provident Fund:

10% of basic is contributed by employee.

Repayment is adjusted from their own salary.

v. Loan against PSS:

This loan is provides against PSS fund. 80% are given of the PSS fund.
This is 100% secured for the bank.

vi. House Building Loan:

This loan is given for the construction of building house. It is gives for three (3) years at equal
monthly installment. This loan is not provided frequently.
Vii. Consumer Credit Scheme:
Under this scheme, credit is given to the customer to purchase necessary and luxury commodities
like computer, motor vehicle, television, refrigerator, music system, sewing machine, furniture etc.
Other than the employees, it is given to the valuable clients.
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 It is a 24, 36, 48 installment system @ 15.50% interest.

c. Small Enterprise financing (SEF)

IFIC Bank gives loan in the following important sectors of Small Enterprise:
1. Easy Commercial loan
2. Retailers loan
3. Transport Loan
4. Commercial house building loan
5. Possession right loan
6. Contractor's loan
7. Letter of guarantee
8. Working capital loan
9. Letter of credit
10. Loan against imported merchandise (LIM)
11. Loan against trust receipt(LTR)
12. Bidder's loan
13. Project loan

1 Easy Commercial loan:

Individual, business enterprises (other thanpublic Limited Company) engaged in any business to meet
business requirement. Any Bangladeshi individual or any business house having valid trade license
and must have an account with IFIC Bank Ltd can apply for this loan. Minimum age 21(twenty one)
years. Security needed- Pledge of instrument duly discharged by the other (where applicable),FDR/other
deposits with IFIC Bank Ltd/ FDR/other Financial instrument issued from other Banks/ ICB unit certificate/
PSS account/MIS/ Demand shares of A & B group Traded in SDE &CSE/ Any other Government security
eligible for credit facility (ies). Maximum 90% of the face value of FDR/NCD/WEDB. Face value would
mean the original amount for which the FDR/NFCD/WED was issued or the amount renewed, Maximum
90% of the MIS amount where interest is not allowed to be withdrawn until adjustment of the liability. The
tenor for the loan is maximum 12(twelve) months.2% is to be charged as a penal interest on overdue
amount (if any). Taka.500/- to be realized before disbursement as processing fee.

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2 Retailers loan:
Individual/ Proprietorship firm engaged in retail business. They need this type of loan to meet
working capital/ capital finance requirement. Any Bangladeshi individual or small and retail business
house having valid trade license and must have an account with IFIC Bank Ltd can apply for this
loan. The tenor for the loan is maximum 24(twenty four) months.2% is to be charged as a penal
interest on overdue amount (if any). 1% on the loan amount to be realized before disbursement as its
service charge and Taka. 500/- to be realized before disbursement as processing fee.
3.Transport Loan:
Individual, business Enterprises (Other than Public Limited Company) engaged in transport business.
They need fund to Purchase of Road/ Water Transport for commercial use. Any Bangladeshi
Customer of the respective branch having business house/ office in the command area with at least
2(two) years experience in their line of business. Additional 2% charged on the overdue amount as
its penal interest. The tenor for the loan maximum 48(forty eight) months.0.50% is charged as
service charge on loan amount to be realized at the time of disbursement of loan. 1 % on loan amount
(Maximum Tk. 10,000/-) to be realized at the time of disbursement of loan for process the loan.
4. Commercial house building loan:
Individual, business Enterprises (Other than Public Limited Company) having commercial plot can
apply for this loan to construct of commercial building. Any individual or business house in the
command area having account with the branch have the eligibility to apply for this loan. Additional
2% on the overdue amount charged as penal interest, if any. The maximum term of loan is maximum
5(five) years including grace period.0.25% is treated as service charge on loan amount to be realized
at the time of disbursement of loan. Loan processing fee is 1% on loan amount (Maximum Tk.
10,000/-) to be realized at the disbursement of loan.
5. Possession right loan:
Proprietorship concern having no collateral security to offer other than possession right of shop can
apply for this loan to meet up the need of Fixed Working capital Customer of the respective branch
having shop/ business place in the command area having at least 2(two) years experience in their
line of business have the eligibility for applying this loan. Additional 2% per month on the overdue
charged as penal interest (amount if any). The tenor of the loan is maximum 36(thirty six) months.
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Tk. 2000/- to be realized at the time of disbursement of loan as a loan processing fee. Service charge
is 0.50% charged on loan amount to be realized at the time of disbursement of loan.
6. Contractors loan:
Individual, business Enterprises (Other than Public Limited Company) engaged in construction and
supply business can apply for this loan to execute work order awarded by Govt. / Semi Govt. &
Autonomous Bodies. Any business house in the command area having at least 2(two) years
experience in their line of business has the eligibility for this loan.
Additional 2% is charged per annum on the overdue amount as its service charge (if any). The tenor
for this loan is maximum 12(twelve) months. Taka. 2000/- to be realized at the time of allowing of
drawings as the processing fee of the loan. Service charge is 0.25% on loan amount to be realized at
the time of disbursement of loan maximum Taka. 5000/-.

7. Letter of guarantee:
Business Enterprises (Other than Public Limited Company) engaged in construction, supply and
other business can apply for this loan to participate in tender(s) invited by Govt. / Semi Govt. &
Autonomous Bodies and execute job against work order awarded from different agencies and for any
other obligation. Customer of the respective branch having business place in the command area with
at least 2(two) years experience on their line of business have the eligibility for application. The
margin is depending upon Banker-Customer relationship.

8. Working capital loan:

Business Enterprises (Other than Public Limited Company) engaged in manufacturing/ trading
business can apply for this loan to meet working capital requirement. Firms or companies
incorporated in Bangladesh, customer of respective branch having shop or business place is in the
command area with at least 2(two) years experience on their line of business. Additional 2% is
charged on the overdue or excess over limit as the penal interest (if any). The tenor for the loan is
maximum 12(twelve) months.Tk. 2000/- to be realized before disbursement of loan as its processing
fee. Service charge is 0.25% charged on loan amount or maximum Tk. 5000/-.

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9. Letter of credit:
Letter of Credit (LC) is a commitment or an undertaken or a guarantee of a bank to the exporter on
behalf of importer in regard to the payment of certain amount subject to the payment of certain
conditions. Therefore it's called conditional guarantee.
Business Enterprises (Other than Public Limited Company) can use this service to facilitate foreign
exchange or in some cases of local payment or goods transfer. Import or procurement of merchandize

10. Loan against imported merchandise (LIM):

Business Enterprises (Other than Public Limited Company) engaged in import business can apply
for this loan to make the clearance of imported consignment. Additional 2% per annum is charged on
the overdue amount (if any) as the penal interest. The procedure of giving loan is conducted
according to the nature of imported terms and or Bangladesh Bank guideline (if any).

11. Loan against trust receipt:

Business Enterprises (Other than Public Limited Company) engaged in import of merchandize have
the eligibility for applying this loan on the purpose of retirement of shipping documents. Penal
interest is charged on the overdue amount (if any) as an additional 2% per annum. The procedure of
giving loan is conducted according to the nature of imported terms and or Bangladesh Bank
guideline (if any)

12. Bidder's loan :

Individual, business Enterprises (Other than Public Limited Company) engaged in construction and
supply business can apply for this loan on the purpose of issuance of Payment Order/ Security
Deposit Receipt/ Demand Draft only for participation in the tender.
Any business house in the command area of the branch at least 2(two) years experience on their
line of business has the eligibility for application. The Enterprise to be enlisted with Govt. /Semi
Govt. / Autonomous Bodies not below the status of Category 'C' Penal interest is additional 2%
charged on the overdue amount, if any. The tenor of the loan is maximum 12(twelve) months.
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1% on loan amount (Maximum Tk. 2000/-) to be realized at the time of disbursement of loan.0.25%
on loan amount to be realized at the time of disbursement of loan (Maximum Tk. 5000/-).
13. Project loan:
Business enterprises (Other than Public Limited Company) engaged in manufacturing/ service
industry can apply for this loan to set up new manufacturing/ service unit. To BMRE existing
manufacturing/ service unit. Firms/ companies incorporated in Bangladesh. The firm/ company
should have business account with the branch. The firm/ company should generate sufficient cash
flow from operation from which firms can make the repayment of the loan.
Penal interest is additional 2% per annum charged on the overdue amount. The tenor of the loan is
maximum 5(five) years including grace period. The length of grace period is to be determined on the
fund generation of the project.0.10% on loan amount (Minimum Tk. 2000/-) to be realized before
disbursement of loan. 0.25% on loan amount subject to minimum of Tk. 5000.00 to be realized before
disbursement of loan.

d. Consumer Financing
IFIC Bank Ltd. introduced Consumer Credit Scheme for its customer during 1999 duly approved by
the Board of Directors of the bank in their 251st meeting held on April 4, 1999 with the following loan
products:

Vehicle loan
Domestic appliances loan
Office equipment loan
Entertainment purpose loan
Loan for intangible loan

Guidelines under the prudential Regulation and Direction of Bangladesh bank have been formulated.
These guidelines will assist the branches as to how the CCs loan port-folio should be managed.
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The committee studied existing products available in the market. Considering the market demand
and investment opportunities in Consumer Financing Sector, the committee has formulated the
following 7 (seven) products for IFIC Bank to be launched under Consumer Financing Scheme:

1. Easy loan (Secured Personal loan).

2. Consumer Durable loan
3. 'Parua' (Education loan)
4. 'Thikana' (House building loan)
5. 'Flexi' loan (Personal loan)
6. Peshajeebi loan (Loan for professional)
7. Auto loan
8. Festival Loan

1. Easy loan (Secured Personal Loan):

Any individual can apply for this loan to meet personal financial requirement. This potential
borrower with minimum age 18 years must have an account with IFIC Bank Ltd. repayment will be
made in lump sum within expiry or as per acceptable terms and interest to be serviced as and when
due.
2.Consumer Durable loan:
The applicant for this loan are employees of Government/semi Govt./ Corporation/ autonomous
bodies, employee of reputed multinational corporations and large local corporate, employees of
reputed university/college/school, employees of reputed NGOs/ Aid Agencies, other salaried
persons acceptable to the bank, tax paying businessmen having adequate cash flow, tax paying selfemployed person and individual having reliable source of income. The purpose for this loan is to
purchase of consumer durables for personal/family use, goods may be like as-television, refrigerator,
Air-conditioner, Washing machine, computers or any other household durables. The potential
customer with an age limit of 25-60 (twenty five to sixty) having an account with IFIC Bank Ltd. can
apply for this loan. The size of the loan amount is maximum Taka. 1, 00,000/- (Taka one lac). The
rate of interest for this type of loan is 16.50% per annum with quarterly rest or as revised from time
to time.
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3.Parua (Education Loan):

People who are employees of Government/ Semi Govt./ Corporation/ autonomous bodies; employees
of commercial banks, foreign banks and other reputed financial institutions; employees of reputed
Multinational corporations and large local corporate; employees of reputed Universities / college /
school; employees of reputed NGOs and Aid Agencies; other salaried persons acceptable to the
bank can apply for this loan. The purpose for this loan is to get higher education.

4.Thikana (House Building Loan):

The applicant for this type are employees of Government/semi Govt./ Corporation/ autonomous
bodies, employee of reputed multinational corporations and large local corporate, employees of
reputed university/college/school, employees of reputed NGOs/ Aid Agencies, other salaried
persons acceptable to the bank, tax paying businessmen having adequate cash flow, tax paying selfemployed person and individual having reliable source of income and the purpose for this loan is to
purchase flat or construction of own house.

5.Flexi-Loan (Personal Loan):

People who can apply for this loan are employees of Government/ Semi Govt./ Corporation/
autonomous bodies; employees of commercial banks, foreign banks and other reputed financial
institutions; employees of reputed Multinational corporations and large local corporate; employees of
reputed Universities / college/ school; employees of reputed NGOs and Aid Agencies; other salaried
persons acceptable to the bank. Customer are seeking this loan on various purpose such asmarriage expenses, holiday expenses, emergency medical needs, CNG conversion for own private
car, home renovation or interior decoration and any other purpose. The potential borrower must have
an account with IFIC Bank Ltd.

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6.Peshajeebi Loan (Loan for Professional):

This type of loan is only for the people who can define under the sector of general physician and
dentist, engineers, IT professional, management consultants, other professionals individuals. The
purpose for this loan is to purpose of items to support professionals needs that are purchase of
medical beds, ultra-sonogram machine, engineering or mechanical tools, or set up an office/
chamber on small scale etc. The customer must have an bank account with IFIC Bank Ltd. The age
limit for the customer is twenty five to sixty five (25-65). The size of the loan is maximum Taka
3,00,000/- (TK. Three Lac)

without collateral security and maximum Taka 500,000/- (TK. Five

Lac) with collateral preferably liquid security.

7.Auto Loan:
People who can apply for this loan are employees of Government/ Semi Govt./ Corporation/
autonomous bodies; employees of commercial banks, foreign banks and other reputed financial
institutions; employees of reputed Multinational corporations and large local corporate; employees
of reputed Universities / college / school; employees of reputed NGOs and Aid Agencies; other
salaried persons acceptable to the bank. The purpose of this loan is to purchase new or
reconditioned vehicles for personal use only but not for commercial use. Any Bangladeshi, holding
Bangladeshi originality having a bank account with IFIC Bank Ltd. with an age limit of twenty five
to sixty (25-60) is eligible for this type of loan.

8. Festival Loan:Extended to meet expenses of major religious festival like Eid, Puja, Christmas and
BuddaPurnima.

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Chapter 4
Lending Procedures followed by IFIC
Bank ltd.

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4.1Guidelinesfor bank for giving loan:

These guidelines include objective / quantitative parameters for the eligibility of the borrowers and
determining the maximum permission limit per borrower.
Fundamentally, credit policies and procedures can never sufficiently capture all the complexities of the
product Therefore, the following credit principles are the ultimate reference points for making SE
financing decisions:
Assess the entrepreneurs character for integrity and willingness to repay.
Only lend when the entrepreneur's has capacity and ability to repay.
Only extend credit if bank can sufficiently understand and manage the risk.
Use common sense and past experience in conjunction with through evaluation and credit analysis.
Do not base decision solely on customer's reputation, accepted practice, other Lenders risk
assessment or the recommendation of other officers.
Be proactive in identifying, managing and communicating credit risk.

4.2Process of Loan Section:

Step-1

: Sanctioning by the competent authority

A secured advance may be grant to a party only after getting a limit sectioned from the competent
authority.

Step-2

: Loan/Advance Proposal

For obtaining a loan/advance the party must make an application in standard form in writing to the
branch where he maintains his operative account. After receiving the application from the party, the
branch manager will take immediate steps to compile report regarding the party based on the
following sources of information:

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 Personal investigation
Confidential supports from
Other banks,
Chamber of commerce
CIB from Bangladesh bank as the earnable.
Trading account P/C, B/S. M/A if' any and other documents submitted by the party.
The average balance and the present maintained in the account.
The nature of operations during the last six months and the date of opening account.

Step-3

: Preparation of limit proposals

The branch, may prepare a limit proposal after being fully satisfied with the following points:
The financial position of the party.
Purpose for which advance is required.
Nature of securities offered.
The payment arrangement.

Step-4

: Renewal Proposal.

Step-5

: Approval by Head Office and Branch responsible.

Limit proposal sent to HO.
Sanction/reject
Receive the limit section advice.

Step-6

: Disbursement of loan.

Step-7

: Loan monitoring and administration.

26 | P a g e

4.3 Prudential Regulations:

Regulation 1:
Source and capacity of repayment and cash flow backed lending
Bank shall specifically identify the sources of repayment and asses the repayment capacity of the
borrower on the basis of assets conversion cycle and expected future cash flows. In order to add
value, the bank must assess the conditions in the particular sector/ industry they are lending to and its
future prospects. The banks must be able to identify the key drivers of their borrowers, business, the
key risks to their business and their risk mitigate.
Regulation2:
Personal Guarantees
All facilities to SEs shall be backed by the personal guarantees of the owners of SEs. In case of
limited companies, guarantees of all directors other than nominee directors shall be obtained.
In case of proprietorship concern, spouse's guarantee other than the personal guarantee of the owners
may be taken.
Regulation: 3
Per party exposure limit
The minimum and maximum exposure of a bank on a single SE shall remain within the range of TK.
50 lac respectively subject to the following:
A) In case of working capital finance - maximum up to 100% of the net required working capital or
75% of the sum of total of inventory and receivables whichever is lower?
b) In case of fixed assets purchase - maximum up to 90% of the purchase price.

Regulation: 4
Aggregate exposure of bank on small enterprise sector

27 | P a g e

The aggregate exposure of the bank on SE sector shall not exceed the limits as specified
below:
% of classified SE advances to total

Maximum limit

portfolio of SE advances
a. below 5%
b. below 10%
c. below 15%
d. up to and above 15%

10 times of equity
6 times of the equity
4 times of the equity
Up to the equity

Regulation: 5
Limit on clean facilities
In order to facilitate growth of smaller loans, banks are free to determine security requirements for
loans up to TK. 5 lac. Guidelines for security requirements for loans of amounts more than TK. 5 lac
are given in Regulation-6.
Regulation: 6
Securities
Consequent to the regulation stated in Regulation-5, facilities provided to SEs shall be secured by
banks as follows:
Below TK. 10 lac.
As a minimum banks must take charge over assets being financed.
For loan amounting TK. 10 lac and above.
a) Legal mortgage over immovable properties with registered Power of
Attorney.
b) Personal

Hypothecation

on

the

inventory,

plant & machineries.

c) Guarantees of spouse/ parents/ other family members.
d) One third party personal guarantee,

28 | P a g e

receivables,

advance

payments,

Regulation: 7
Loan documentation
For all facilities, banks must obtain (as applicable) and not limiting to following documents before
disbursement of loan can be made:
1. Loan Application Form duly signed by the customer.
2. Acceptance of the terms and conditions of Sanction Advice.
3. Trade License.
4. in case of partnership firm:
Copy of registered partnership deed certified as true copy or partnership deed on non-judicial
stamp of TK. 150 denomination duly notarized.
5. in case of limited company:
Copy of memorandum & Articles of Association of the company including Certificate of
incorporation duly certified by Register joint Stock Companies (RJSC) and attested by the managing
director accompanied by an up-to-date list of Directors,
6. Demand Promissory Note
7. Letter of hypothecation of stocks and goods
8. Letter of hypothecation of book debts and receivables
9. Letter of hypothecation of plant & machinery
10. Charge on fixed assets
11. Personal Letter of guarantee
Regulation:8
Margin Requirements
Banks shall adhere to the minimum margin requirement as prescribed by Bangladesh Bank (if
any).

29 | P a g e

Regulation: 9
Credit information Bureau (CIB) clearance
While considering proposals for any exposure, banks should give due weights to the credit report
relating to the borrower and his group obtained from a Credit Information Bureau (CIB) of
Bangladesh Bank. The economics of obtaining CIB report will be governed by rules and
regulations as prescribed by Bangladesh Bank from time to me.

Regulation: 10
Minimum conditions for taking exposure
1. Banks shall, as a matter of rule, obtain a copy of financial statements duly e dited by a practicing
Charted Accountant, relating to the business of every borrower who is a limited company or
where exposure of a bank exceeds TK.40 lac, for analysis and re-record. However, financial
statements singed by the borrower will suffice where the exposure is fully secured by liquid
assets.
2. It is recognized that a large number of enterprises other than limited companies (I.e., sole
proprietorship/partnership firms etc.) may not have proper books of accounts including balance
sheet, profit & loss account and they may not be able to prepare current and future cash flows due
to lack of sophistication and expertise. It is expected in such cases, banks shall assist the
borrowers in obtaining/developing such books of accounts as performs/formats prescribed by
each bank. Reference with regard to how the formats should be prepared has been made in the
development guidelines.

Regulation: 11
Proper utilization of loan
The bank should ensure that the loans have been properly utilized by the SEs and for the same purpose
for which they were acquired / obtained. Banks should develop and implement an appropriate system
for monitoring the utilization of the loans.

30 | P a g e

Regulation: 12
Registration on facilities to related parties
Banks shall not take any exposure on a SE in which any of its director, shareholder, employer or their
immediate family members are holding 5% or more of the share capital of the SE.

4.4 Required Securities:

The bank require some securities that are compulsory for getting loan and the securities are:
Personal guarantee of a businessman having business at the same area or any person acceptable to
the bank.
Personal guarantees of Spouse/ Parents.
Hypothecation of vehicles. The vehicles to be registered with BRTA/ BIWTA/ Mercantile &
Marine dept. With Bank mortgage clause.
Comprehensive insurance in the joint name of the Bank & borrower.
Legal mortgage of land& building within City Corporation and/ or Municipal area preferably 1st
party.
Registered Power of Attorney to sell the mortgaged property (ies) without intervention of
court.
Personal guarantee of partner (s) / Director (s) (in case of partnership firm/ private limited
company).
Registration of charges with Joint Stock Companies under relevant section where required.
Pledge of Financial Instrument if any.
31 | P a g e

Confirmation from the concerned authority that no transfer of ownership will be allowed without
prior written consent of the Bank (Govt., Semi Govt., Autonomous Bodies, Corporation).
12 (twelve) post-dated cheques in favor of Bank for payment of monthly installments each duly
signed by the borrower. After 1 (one) year fresh cheque to be obtained along with memorandum of
deposit of cheques.
One cheque covering residual amount of loan duly signed by the borrower.
Memorandum deposit of cheques.
Assignment of work order.
Confirmation

from

Work

awarding

Authority

that

all

cheques

will

be

issued

in

favor of the borrower A/c. IFIC Bank Ltd. ------------branch.

Counter Guarantee.
Lien on financial obligation.
Hypothecation of machinery, where required.
Pledge of stocks duly insured with bank mortgage clause.
Documents of title to goods when received.
Incase of L/C, borrowers acceptance on Bill of Exchange drawn by L/C opening branch.
Trust Receipt.
Legal mortgage of the fixed assets of the company comprising land and building and machinery
already installed or to be installed thereon.
Personal guarantee of the mortgagor (s) (in case of third party mortgage). Creation of charge
with the RJSC under relevant section.

4.5 Legal Documents:

The legal documents that are needed for getting the above mentioned loan are followingD.P. Note
32 | P a g e

Letter of arrangement
Letter of installment
Letter of disbursement
Personal guarantee of guarantor
Personal guarantee of Spouses/Parents
24 (twenty four) postdatedcheques in favor of Bank for payment of monthly installments each
duly signed by the borrower.
One postdated (expiry) blank cheque duly signed by the individual or proprietor.
Memorandum of Deposit of Cheque.
Letter of Hypothecation of vehicles
Memorandum of deposit of Title deed
Deed of mortgage registered with Sub-Register
Registered Power of Attorney to sell the mortgaged property without intervention of
court.
Letter of guarantee (i.e.)
Broad resolution to borrow fund including completion of documentation as per Memorandum &
Article of Association, (in case of private limited company)
Registration of vehicle with bank mortgage clause.
Comprehensive Insurance coverage with Bank mortgage clause.
Pledge of Financial obligation where applicable.
12 (twelve) post-dated cheques in favor of Bank for payment of monthly installments each duly
signed by the borrower. After 1 (one) year fresh cheques to be obtained along with memorandum of
deposit of cheques.
Personal guarantee of the Directors in case of Private Limited Company.
Personal guarantee of all the partners (in case of partnership concern).
33 | P a g e

Insurance Policy.
Notarized Power of Attorney to sell the possession as per possession right deed in favor of Bank.
One blank cheque dated maturity date of loan duly signed by the borrower.
Tripartite agreement among the Bank, Lesser & Borrower to the effect that the Lessee and Lesser
cannot transfer possession right to the property without prior consent of the Bank (in case of the
private owner).
Letter of confirmation from the concerned authority that no transfer of ownership will be allowed
without prior written consent of the Bank (Govt., Semi Govt, Autonomous Bodies, Corporation.
Resolution of Board of Directors to issue guarantee including completion of documentation. (in
case of limited company)
Appropriate form of letter of lien on security (in case of financial obligations).
Letter of Pledge.
Letter of continuity
Lien Confirmation from issuing branch in case of FDR issued by our bank.
Lien Confirmation from issuing authority duly authenticated by the Head office of the issuing
bank in case of FDR issued by other banks.
NOC from competent authority for creation of legal mortgage in favor of the bank (if required)

4.6 Credit approval authority:

The authority to sanction or approve loans shall be delegated to Senior Executives by the managing
board based on the Executive's knowledge and experience. Approval authority shall be delegated to
individual Executives and not to commit to ensure accountability in the approval process. The
following should apply in the approval or sanctioning of loan:
1. Credit approval authority shall be delegated in writing from the MD &Board (as appropriate),
acknowledged by recipients and records of all delegation retained in CRM.
34 | P a g e

2, Delegated approval authorities shall be reviewed by Board or MD from time to time.

4. The approval function shall be separate from the marketing or relationship management function.
5. The role of credit committee shall be restricted to only review of proposals i.e. recommendations
or review of bank's loan portfolios.
6. Approvals shall be evidenced in writing or by electronic signature. Approval file shall be kept on
file with the credit application.
7. All credit risks shall be authorized by the executives within the authority limit delegated to them
by the MD.
8. Credit approval shall be centralized within the CRM function. Regional credit centers may be
established, however all large loans shall be approved by the board/ Deputy Managing Director/
Head of Credit/ delegated Head Office Credit Executive.
9. The aggregate exposure to any borrower or borrowing group shall be used to determine the
approval authority required.
10. MD/ DMD/ Head of Credit Risk Management must approve and monitor any Cross border
exposure risk.
11. Any branches of lending authority should be reported to MD, DMD, Head of Internal Control and
Head of CRM.
12. Authority will be delegated to each individual in writing by the managing director. Authority
delegated to the individual will not automatically be transferred to a replacement lending authority.
13. The Managing Director will have the right to exercise lending authority delegated to other
executives having authority lower than him.
14.The Managing Director is authorized to sub-delegated his business discretionary authority, if
deemed necessary for quick disposal of business proposals either wholly or partially to Deputy
Managing Director, head of Credit Risk Management, credit executives, Credit Managers or any
other officer within CRM.
15. The Managing Director further will have the right to suspend or withdraw either partially or fully
the business discretionary authority delegated to any subordinate officials for a temporary and
permanent period, if so required, in order to protect the interest of the Bank through the issuance of
office orders.

35 | P a g e

16. Once the credit facility is granted to any individual or group by business power delegated to
higher authority, exercise of lower authority by the subordinate will automatically stand ceased for
the same individual or group.
17. Any credit proposals that do not comply with guidelines regardless of amount may be referred to
managing director for decision.
18. A monthly summary of all new facilities approved, renewed, enhanced and a list of proposals
declined stating reasons thereof should be reported by CRM to MD.

4.7 Landing Rate:

Lending Rate (Mid-rate)

1.

Agriculture

12.00

2.

Large & Medium Industry (Terms Loan)

13.25

3.

Small Scale Industry (Terms Loan)

14.75

4.(Ka)

Large & Medium Industrial Loan (Working 13 (w.e.f. 06/10/2008)

Capital)

4.(Kha)

Small Scale Industrial Loan (Working Capital)

14.75

5.

Exports

7.00

6.

Commercial Lending

14.75

7.

Housing Loan

14.75 & 13.50

8.

Consumer Credit Scheme

15, 15.50 & 16.50

9.

Credit Card

2 (Per month)

10.

Lending to non-Banking Financial Institutions 14.75

(NBFIs)

11.

36 | P a g e

Others

14.75

Chapter 5
Loan Disbursement Process Of IFIC
bank limited

37 | P a g e

Bank provides loan by collecting deposits and other sources of fund. This branch has various types
of loan disbursement programs. Before disbursing loan bank follows the following sanctioning
process.

5.1. Application for Loan:A borrowers first applies for loan to sanction certain amount of loan
allowing with certain required papers & documents.

5.2. Credit Investigation: Bank lends its depositors money; therefore, it is required to return
back in the ordinary course of business.
Selection of the borrower:A careful and systematic study of the affairs of the intending
borrower is needed to the right selection of borrower. Therefore lending banker should
analyze 5C of borrower- Character, Capacity, Capital, Collateral and Condition.
Lending Principles: The banker should consider lending principles. These are- Safety,
Security, Liquidity, Profitability, Purpose, National Interest, Diversity.
Personal Interview: For assessing attitude, Skill, Achievement needs, Knowledge etc.
Collect Information From Various Sources: Banks own record, borrowers loan
application, spot verification, reports from friends & relatives other sources.

5.3. Credit proposal appraisal:

The following have to be considered for these feasibility testing- Location, land & building, product, raw material
- Profitability, cost, demand of sales
38 | P a g e

- Cash flow, income statement

- Planning, organizing, marketing etc.

5.4. Documentation:
The security offered for an advance is only a caution. A banker would not normally like to recover
the advance form the safe of security. A banker accepts properly as security, which is highly liquid,
easily realized, easily marketable, sound title, easy to store, stable in its market price.
The bankers create charge on the security by following methods:
Lien: It is the right to retain the property or goods of the borrower as security until the debt
are adjusted. In this case the banker can only hold the possession of the goods; he can sell
them after giving reasonable notice to the borrower.
Ledge: It is created only for movable property like goods, document etc. In case of it the
ownership of goods remains with the banker but possession of goods rests with the loan.
Mortgage: Only immovable properties are kept under mortgage total possession of the
property is not transferred, only the interest is transferred. In case the mortgager fail to repay
the loan the bank gets right to recover the debt out of the sale of the mortgage property.
Hypothecation: In this case both possession and ownership remains with the borrower.
Classification of securities:
Personal: Personal bond, promissory note, letter of acceptance etc.
Impersonal: Land, shares, building, stocks, goods etc.
Direct/Indirect: Direct security is deposited by the customer himself and the indirect is deposited
by the third parts.
- Advance against FDR.
- Advance against insurance policies.
39 | P a g e

- Advance against hypothecation and pledge.

Collateral: It means these securities, which runs parallel to or side by side with personal right of
action against a debtor in respect of on advance. These types of securities are Share certificates,
bearers bind, insurance policies, and legal mortgage.
Guarantee: At times when the personal security and collateral is not considered sufficient to a
banker then he may ask for a guarantee of third party whose financial ability and credit is acceptable
to the bank.
Execution of Documents:
It is the procedure of stamping a document. If mistake arises it is to be cancelled. So it is to be
properly signed and correctly filled by the executants. The following are to be observed at the time of
execution The documents filled by the executants correctly.
Specimen signature.
The entire page is to be signed by all the executants.
Should not have cutting, overwriting.
Documents should be kept safely.

40 | P a g e

5.5 Loan and advance disbursement of IFIC bank under the different categories:

5.5.1 Loan disbursement of IFIC bank under Residual maturity grouping of Loans,
cash credit, overdraft, etc. for last 5 years

On
demand
Up to 1
month
Over 1
month but
not more
than 3
months
Over 3
moths but
not more
than 1
years
Over 1
year but
not more
than 5
years
Over 5
years
Total

41 | P a g e

2014

2013

2012

2011

2010

2,780,772,670

14,098,217,646

866,432,305

66,516,511

10,784,108

19,451,349,311

5,157,221,187

12,556,177,758

14,662,272,312

30,295,350,45
2

24,099,900,703

30,318,215,451

26,737,679,805

25,072,696,00
9

20,186,085,450

12,166,210,00
1

21,187,528,964

11,983,418,202

13,358,101,48
9

12,988,118,766

4,715,294,024

8,238,837,006

5,350,551,378

7,567,181,655

7,300,551,089

------

94,532,881,160

77,989,360,530

77,159,761,91
0

64,641,172,520

47,563,427,88
2

14,549,496,32
2
16,121,643,42
7

35,000,000,000
30,000,000,000
25,000,000,000
20,000,000,000
15,000,000,000
10,000,000,000
5,000,000,000
0

2014

2013

2012

2011

2010

On demand

Up to 1 month

Over 1 month but not more than 3 months

Over 3 moths but not more than 1 years

Over 1 year but not more than 5 years

Over 5 years

Figure:Loan disbursement of IFIC bank under Residual maturity grouping of Loans, cash credit, overdraft, etc.
for last 5 years

Interpretation: From the above figure and table we can say that the highest loan is given under the
over 3 years but not more than 1 years category.And the loan amount under this category is
increasing continuously in the last five years. And the highest loan has given under this category is
30,318,215,451 taka in the year 2014.The lowest amount of loan has given under on demand loan.

42 | P a g e

5.5.2 Loan disbursement of IFIC bank under broad categories for last 5 years

2014
Loans

2013

2012

2011

2010

45,539,838,321

34,283,471,884 33,399,833,213 30,178,928,044 27,748,042,741

Cash

25,443,140,268

22,525,977,977 18,836,285,222 14,598,455,670 10,228,475,372

credit
Overdrafts

23,549,902,570

21,179,910,669 18,023,424,213 12,780,790,671

7,129,391,285

Bill

7,749,268,149

6,121,024,498

6,900,219,263

2,457,518,485

102,282,149,309

84,110,385,028

77,159,761,910 64,641,172,520 47,563,427,882

7,082,998,135

purchased
and
discounted

Total

120,000,000,000
100,000,000,000
80,000,000,000
60,000,000,000
40,000,000,000
20,000,000,000
0

2014
Loans

2013
Cash credit

2012
Overdrafts

2011

and discounted

Figure: Loan disbursement of IFIC bank under broad categories for last 5 years

43 | P a g e

2010

Interpretation:The above table and graph shows that the loan given loan amountunder cash
credit, over draft, loans, bill purchased has increased consistently throughout the last five years.
And the highest loan amount has given under loan is 45,539,838,321 in the year 2014 and the
secondhighest has given under cash credit is 25,443,140,268 in the year 2014.So the IFIC bank
limited focus more on direct loan more than others under this category.

5.5.3 Sector wise Loan disbursement of IFIC bank Inside Bangladesh for last 5
years:

2014

2013

2012

2011

2010

Corporate Finance

75,129,166,107

54,785,769,1
97

51,980,903,
779

42,767,798,
416

30,733,401,
883

Agricultural Finance

245,384,106

176,513,48

643,452,00
9

350,650,07
8

409,217,356

Consumer Finance

4,965,266,994

4,834,548,01
1

5,217,728,7
33

5,069,057,9
54

3,935,976,2
23

Small & Medium

Enterprise (SME)

19,054,493,358

21,428,379,2
37

19,238,841,
227

16,432,437,
551

10,841,828,
435

Capital Market
Division (CMD)

1,641,103,6
10

Women
Entrepreneurs loans
Others

2,887,838,745

2,885,175,15
5

Total

102,282,149,310

84,110,385,028

44 | P a g e

78,836,162

21,228,521

1,900,375

77,159,761,
910

64,641,172,
520

47,563,427,
882

80,000,000,000
70,000,000,000
60,000,000,000
50,000,000,000
40,000,000,000
30,000,000,000
20,000,000,000
10,000,000,000
0

2014

2013

2012

2011

2010

Figure: Sector wise Loan disbursement of IFIC bank Inside Bangladesh for last 5 years

Interpretation:Above graph shows the sector wise loan disbursement of IFIC bank limited. And the
highestamount of loan is given under corporate finance in the last five years. And the second highest
is given under SME category. But under women entrepreneurs loan they are given little amount of
loan. So the IFIC bank ltd focus on corporate sector to give the loan.
45 | P a g e

5.5.4 Industry wise Loandisbursement of IFIC bank including bills purchased and
discountedfor last 5 years

Agriculture
Industries
Jute Industries
Textile
Industries
Garments
Industries
Chemical and
Chemical
Products
Cement
Industries
Bricks &
Ceramic
Food Products &
Processing
Engineering &
Metal
Pharmaceuticals
Hospital &
Clinics
Paper & Paper
Products
Industries
Other Small
Industries
IT Sector
Other Service
Industries
46 | P a g e

2014
1,417,338,319

2013
773,386,022

2012
643,452,009

2011
350,650,498

2010
409,217,356

997,218,400
5,481,881,249

390,808,925

866,346,211
2,282,418,07
5
15,590,763,9
76
447,556,237

561,742,083
3,114,376,59
3
9,589,721,40
3
553,110,578

528,251,471
3,605,002,10
8
8,966,971,85
8
282,943,600

557,685,358
3,089,879,48
0
7,543,523,48
5
1,656,395,29
9

154,927,183

399,080,786

500,392,100

503,531,422

56,426,769

903,449,269

912,395,523

925,514,831

587,714,346

331,388,736

4,316,476,475

1,704,088,65
1
2,665,602,40
2
337,219,412
1,073,108,38
2
522,071,015

3,035,310,71
6
2,740,307,11
8
422,385,717
1,277,563,32
2
675,221,359

2,168,407,02
6
1,859,454,76
2
283,598,996
1,046,458,30
1
620,236,306

1,656,033,68
4
1,216,886,06
8
311,711,840
1,074,867,47
5
466,045,163

4,581,914,78
1
272,763,543
4,074,403,56
2

1,265,965,37
5
152,569,065
1,965,241,85
3

1,203,305,96
4
89,895,770
630,967,121

1,013,534,17
1
278,434,194
331,781,662

14,867,703,440

4,407,699,797
128,867,260
449,762,044

8,277,723,856
3,820,211,434
5,590,918,579

Trade &
Commerce
IFIC Securities

22,938,039,072

Transport
Construction
Firms/Companis
Housing

747,205,356
3,913,317,258

Cold Storage
Non-Banking
Financial
Consumer
Finance
Energy

110,746,160
638,479,766

1,199,738,281

9,306,094,561

5,647,268,264
3,562,960,031

Telecommunicati
on
Others

1,541,695,871

Total

102,282,149,309

1,471,618,458

21,180,194,1
03
1,280,703,90
2
726,798,172
4,111,287,61
5
6,797,505,52
2
124,959,002
355,893,722
5,186,254,42
3
2,329,323,56
4
1,289,532,66
1
4,224,813,76
4
84,110,385,0
28

22,620,302,7
21
1,452,144,53
0
211,333,100
3,732,043,46
4
7,601,449,94
5
137,244,902
1,227,580,79
2
5,217,728,73
3
1,358,673,02
3
637,822,892

19,654,444,5
20
1,393,587,66
7
310,615,510
5,638,372,41
9
2,783,680,02
7
147,060,417
1,560,649,96
6
5,069,057,95
4
472,337,797

12,312,629,6
66
1,641,103,61
0
346,791,084
4,588,339,79
0
528,502,745

296,674,279

280,239,848

5,540,563,68
6
77,159,761,9
10

4,587,302,41
5
64,641,172,5
20

1,671,675,39
0
47,563,427,8
82

159,627,267
1,544,148,02
8
3,935,976,22
3
560,583,491

120,000,000,000
100,000,000,000
80,000,000,000
60,000,000,000
40,000,000,000
20,000,000,000
0

2014

2013

2012

2011

2010

Figure: Industry wise Loandisbursement of IFIC bank including bills purchased and discounted for last 5 years

Interpretation:Above graph shows the industry wise loan disbursement of IFIC bank limited. And
the highest amount of loan is given in the trade and commerce industry in the last five years. And the
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second highest is given in the garments industry in the last five years. And the highest amount of
loan in trade & commerce industry is22,938,039,072 in the year 2014 and the loan amount is
increasing day by day in this industry. So the IFIC bank ltd focus on trade and commerce industry to
give the loan

Chapter 6
Loans Recovery Process of IFIC
Bank Limited

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In case Borrower fails to come forward or shows reluctance, Bank is to take various steps to recover
its assets, safeguard its possible losses and overcome crisis of the situation due to non-recovery. IFIC
Bank follows some guidelines and procedure to recover its losses and over-come the obstacles. Like
followings Close monitoring during validity/repayment period of loan.
Gear up persuasion right from initial stage of its default/non-payment of installments.
Understanding reasons of non-payment to obviate the problem.
Constant follow-up with defaulting borrowers.
Take effective steps to save the loan from turning it to NPL.
Relationship Manager (RM) must try to identify reasons of default of loan non-payment and find out
ways to get the loan recovered/regularized.
Policy objectives of IFIC BANK for recovery of loans and advances are to:i) Ensure normal flow of income by taking appropriate measure so that loans are not converted to
Non-Performing Loans (NPL).
ii) Recover stuck-up loans and advances entirely.
iii) Maximize Banks earning by converting Non-Performing Loans (NPL) to regular loans
through re schedulement.
iv) Reach to an amicable settlement duly protecting interest of the Bank.
v) Take timely legal steps as per law in enforce to avoid law of limitation.
vii) Adhere to Bangladesh Bank policy guidelines.

6.1 Credit Recovery:

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The Remedial Asset Management (RAM) directly manages accounts which sustained deterioration (a
Risk Relating to Sub-Standard or worse). Whenever an account is handed over from Relationship
Manager to RAM, a Handover/Downgrade Checklist (Appendix-2) shall be completed.
The RAMs primary functions are:

To determine account Action Plan/Recovery Strategy.

To pursue all options to maximize recovery, including placing customers into receivership
or liquidation as appropriate.
To ensure adequate and timely loan loss provisions are made based on actual and expected
losses.
To conduct regular review of Sub-Standard or worse accounts.
The management of Non-Performing Loans (NPLs) must be a dynamic process, and the associated
strategy together with the adequacy of provisions must be regularly reviewed. A process should be
established to share the lessons learned from the experience of credit losses in order to update the
lending guidelines.

6.2 NPL Account Management:

All NPLs should be assigned to a Remedial Asset Management Executive (Account Manager) within
the RAM, who is responsible for coordinating and administering the action plan/recovery of the
accounts, and should serve as the primary customer contact after the ac-count is downgraded to
substandard. Some assistance from Corporate Banking/ Relationship management may be sought.
In order to achieve the above objectives, Banks policy guidelines on recovery of loans and advances
are enumerated in the following chapters.

6.3 Classification and provisioning

In order to strengthen credit discipline and to improve the recovery position of loans, Bangladesh
Bank from time to time, has given broad outline for loan classification. All good loans are treated as
unclassified loans and overdue loans have been classified into 4 categories (i) Special Mention (SM)
Account (ii) Sub-Standard (SS) (iii) Doubtful (DF) and (iv) Bad-Loss (BL) loan.
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Note: Special Mention (SM) Accounts treated as Unclassified Loan.

Objective criteria for determining the preliminary classification status is as under:-

For Continuous Loans and Demand Loans

Past due / Overdue Classification Status
a) Less than 3 months UC
b) 3 months or more but less than 6 months SM
c) 6 months or more but less than 9 monthsSS
d) 9 months or more but less than 12 monthsDF
e) 12 months or more BL
Term Loans up to 5 years
Past due / Overdue Classification Status
a) Less than 3 months UC
b) 3 months or more but less than 6 monthsSM
c) 6 months or more but less than 12 months SS
d) 12 months or more but less than 18 months DF
e) 18 months or moreBL

Term Loans for more than 5 years

Past due / Overdue Classification Status
a) Less than 3 monthsUC
b) 3 months or more but less than 12 monthsSM
c) 12 months or more but less than 18 months SS
d) 18 months or more but less than 24 months DF
e) 24 months or more BL

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6.4 Qualitative Judgment:

Whether any continuous credit or Demand Loan or Fixed term loan are classifiable or not on the
basis of objective criterion but there is doubt or uncertainty for recovery of that loan then the loan
will be classified on the basis of Qualitative Judgment (QJ).
If the recovery of the credit becomes uncertain resulting from change of circumstances under which
credit was extended or the borrower sustains loss of capital or the value of the security decreases or
there may be any adverse situation then the credit will be classified on the basis of Qualitative
Judgment. Besides, if the credit is extended without any logical grounds or the credit is rescheduled
frequently or the rules of rescheduling are violated or the trends of excess over limit (EOL) is
observed frequently or a suit is filed for recovery of the credit or the credit is extended without the
approval of the competent authority, then the loan will be classified on the basis of Qualitative
Judgment.
Due to the reasons stated above or for any other reason despite possible loss of any credit, there is
probability of changing the present situation resorting to proper steps, the credit will be classified as
Sub-Standard on the basis of Qualitative Judgment. But even after taking proper steps, if the full
recovery is not ensured, the credit will be classified as Doubtful and after rendering all out efforts, if
the probability of recovery becomes totally bleak the credits will be classified as Bad Loan.
The Bank will classify the credit on the basis of Qualitative Judgment and if any improvement is
achieved, those credits will again be declassified.

6.5 Assignment of Accounts (Account Transfer Procedures) to RAM Division:

Within 7(seven) days of a account being downgraded as Sub-Standard, a Request for Action and a
Handover/ Downgrade Check List shall be completed by the RM and forwarded to Corporate
Banking & Marketing (CBM) Division, Head Office, Dhaka. The CBM handover the respective account to Remedial Asset Management (RAM) Division through CRM with their comments and
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views. Simultaneously, RM will review all documentation, meet the Customer and prepare a
Classified Loan Review (CLR) within 15(fifteen) days after the completion of Handover/ Downgrade Check List and forward it to RAM for its approval.
Remedial Asset Management shall ensure that the following steps are carried out when an account is
classified as Sub-Standard or worse:
Facilities are withdrawn or repayment is demanded as appropriate. Any drawings or
advances shall be restricted and disbursement/drawing can only be approved after careful
scrutiny and approval from appropriate executives within CRM.
CIB reporting is updated according to Bangladesh Bank guidelines and the borrower Risk
Grade is changed as appropriate.
Loan loss provisions are taken based on Forced Sale Value (FSV).
Loans are only rescheduled as per Loan Rescheduling guidelines of Bangladesh Bank.
Any rescheduling shall be based on projected future cash flows specifically deter-mined.
Prompt legal action shall be taken if the borrower does not cooperate.

6.6 Persuasion and Follow up

Recovery persuasion shall start depending upon the nature and merit of advance. In cases of
continuous and demand loan, persuasion shall start as soon as operation of the account be-comes
unsatisfactory, irregular and its validity expires. But in case of Term Loans, persuasion has to be
made when the borrowers refrain from paying installments. Nevertheless, persuasion may start any
time ahead of these criteria if Bank perceives that a loan account has lost its maturity somehow and
seems to be difficult for recovery in future.
Persuasion at initial stage of default:
Borrowers become unwilling to repay for various reasons. Some of the borrowers incur loss in their
businesses resulting disruption of cash inflow to such a high degree that they cannot repay banks
loans. Some borrowers divert their fund to businesses/enterprises other than the business for which

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the Bank loan was sanctioned which is undesirable. Furthermore, there are willful defaulting
borrowers as well.
Depending on the nature of the borrower involved, the style and degree of persuasion shall differ
from case to case keeping in mind that the ultimate aim is to recover and settle defaulting loan within
the shortest possible time with a view to ensuring maximum return for Bank. Various modes of
persuasion are as under:

Letters/reminders:
In case of continuous loans like Cash Credit (Hypo), Cash Credit (Pledge), Secured Overdraft etc.
letters/ reminders are to be sent two months ahead of expiry date of limit to get response of the
borrower whether they are interested for renewal of the limit. In case of unsatisfactory performance
of the account, a letter shall be issued to the concerned borrower allowing 30(thirty) days time to
repay Banks dues with interest. In case of Term Loan Accounts, such letters shall be sent to the
borrowers as soon as one installment remains unpaid urging them to regularize their account. Copy
of such letters shall be endorsed to the Guarantors/mortgagors if any. Reminders are required to be
sent on fortnightly/monthly intervals. Constant follow up through letters shall be made to the
borrowers availing Demand Loan, LIM, LTR and for PAD outstanding to regularize their account
and to avoid classification.

Inspections/Site-visits:
Concerned Branch / RM shall collect information regarding reasons of default through personal
contact / visit etc. Branch Officials shall inspect the shop/factory/residential address of the borrower
to ascertain the position of their business and reason of failure. They will submit report along with
their findings. On the basis of their report and information provided by the borrower Branch/RM
shall ascertain the reasons of default. Branch/RM shall also assess the valuation of securities held
against the advance if such information is not updated.

Negotiation:
Branch/RM will, then, start persuasion/negotiation with the borrower and try to resolve the issue. In
the process of negotiation, following measures may be considered subject to approval of the
competent authority: a) Possibility of adjustment within a shorter time frame.
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b) Reschedulement of existing limits after realization of required down payment.

c) Restructuring of the limit with provision for gradual adjustment on monthly/quarterly basis on
phased manner. Longer period and period without provision for gradual adjustment shall be declined.
d) Permitting additional time reasonable and acceptable to both Bank and the borrower.

6.7Reschedulement
Bangladesh Bank has laid down prudential guidelines which are to be followed by the IFIC Bank for
reschedulement of loans.

Guidelines for consideration of reschedulement proposal:

Bank will examine reasons for default. Reschedulement proposal shall not be considered for
borrower who diverted fund and for habitual defaulter. Rather, Bank will initiate litigation process
for recovery of such loans.
Borrowers ability to repay loan and liabilities of other Bank shall be taken into consideration.
Cash flow statement, audited balanced sheet, income projection and other financial statements
shall be examined.
On the spot inspection of Company/Business enterprise shall be done and Inspection Report shall
be preserved.
While fixing repayment schedule it is to be fixed for a minimum realistic period.
Impact on Banks income and other implications of reschedulement shall be brought before the
notice of the Management/Board

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Down payment requirement:

Requirement of down payment for reschedulement is as under Term Loan:
Proposal for 1streschedulement may be considered on cash payment of at least 15% of the
overdue installment or 10% of the total outstanding whichever is lower.
Proposal for 2ndreschedulement may be considered on cash payment of at least 30% of the
overdue instilments or 20% of the total outstanding in cash whichever is lower.
Proposal for reschedulement for more than two times may be considered on cash payment of at
least 50% of the overdue installments or 30% of the total outstanding in cash whichever is lower.

6.8 Sale of pledged goods, mortgaged, properties and filing of suit:

If the borrower fails to adjust their outstanding liabilities even after all out persuasion, Bank shall sell
pledged goods, securities under lien and mortgaged properties if such right has been conferred upon
the Bank.

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6.9 Loan Recovery from Loan disbursement of IFIC bank for the last five years:
2014

2013

2012

2011

2010

102,282,149,30

84,110,385,02

77,159,761,91

64,641,172,52

47,563,427,88

disbursemen 9

t
Loan

100134224174

81654361785

74806389172

62061989736

45689428823

Recovery
Percentage

97.90%

97.08%

96.95%

96.01 %

96.06%

Loan

of Recovery

Loan Recovery
97.90%
97.08%

2014

2013

96.95%

2012

96.01%

96.06%

2011

2010

Figure:Loan Recovery from Loan disbursement of IFIC bank for the last five years

Interpretation: Above graph shows that loan recovery is 97.90% in 2014, 97.08% in 2013, 96.95% in 2012,
96.01% in 2011 and 96.06% in 2010.From recovery result, we can say that they are rapidly recovering most of

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the loan disbursed. It is a positive mark for IFIC bank limited. And in the year 2014, they recover highest
amount of loan amount. So we can say that IFIC bank credit management system is more active and strong.

Chapter 7
Problems in loan and advance process
of IFIC bank limited

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While working at International Finance Investment & Commerce Bank Limited, in Konapara
BranchI have attained a newer kind of experience. After collecting and analyzing data I have got
some findings and recommendations. These findings are from the personal points of view, which are
given below:

A. All the employees are not professionally trained enough in the computer literacy part. For
credit appraisal, the bank some time depends on the client for its authentication.
B. According to the annual report published by the IFIC Bank Ltd in 2013, Recovery rate of
loans and advances is satisfactory in comparison to the Industry. Recovery rate of Konapara
branch is more than 85%.
C. Credit investigation is not conducted to cover almost all the associated credit risk. It is not
possible to measure al the external variables affecting the credit.
D. Credit officer depends largely on the balance sheet and income statement figure supplied by
applicants. Sometimes financial statements supplied by credit officer cannot be relied upon.
E. Most of the borrower does not pay their payment timely.
F. Most of the clients are under graduate and unable to understand the term and conditions, as a
result they fail to understand that when they have to repay the loan, even after repeating them
G.

again and again the schedule of their repayment.

Every time the bank has incurred a very big bad debt because of irresponsibility of

employees.
H. Loans and advance department take a very long time to sanction a loan; as a result they are
losing the clients.
I. Sometimes the employees overvalued the mortgage property, As a result if the client fails to
repay the loan the bank authority cannot collect even the principal money invested by the
J.

selling those assets.

Some tomes CIB reports are not prepared properly.

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Chapter 8
Recommendations

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A. Strict Supervision must be adapted in case of high risk borrowers. Time to time visit to the
projects should be done by the bank officers.
B. The average number of days required for sanctioning and disbursement of credit against
specific loan proposal should be reduced.
C. The performance evaluation system is not updated. The organization should follow the 360degree performance evaluation system. In this case, the superior executives will not be much
rude to the subordinates because the top-level employees performance will be evaluated by
the subordinates.
D. Selection of borrower shall be made as per rules and procedures of the advances and after
making proper assessment of business establishment, respectability, creditability, actual
requirement of fund repayment capacity etc. Appraisal of feasibility and viability of the
projects shall be done in proper manner examining all the factors by an efficient and
qualified appraiser so that no difficulties are faced at any stage of the project from
construction to production stage.
E. The bank should not always be very much sensitive of recovery of loans and will not bring
necessary pressures for recovery provided the borrowers are incorrigible and habitual
defaulters. The lenders shall not resort to any hasty decision and take legal action against the
borrowers if there is any scope for recovery of the dues on compromise terms even by
allowing some concession of interest and rescheduling the repayment program by allowing
F.

reasonable time to the borrowers.

Problem of the borrowers projects or business, which have turned sick unavoidable
circumstances of unforeseen events, shall be looked into sympathetically by the lending
bank. If necessary, bank shall not hesitate to allow further finance to revive the sick unit to
ensure safe recovery of the loan in future for which a suitable repayment schedule may be

G.
H.
I.
J.

prepared in consultation with borrowers.

Highly efficient employee should take responsibility for loan and advance section.
CIB report should maintain properly.
Documentation about loans should maintain properly.
The lenders shall sanction and disburse loan to the borrowers in proper time of investment.
They will see that no delay is caused in completing formalities and processes which may
create problem to the borrowers to divert funds elsewhere or want of scope for investment
and thus the funds become stuck up ultimately. So loans should always be sanctioned &

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disbursed in proper time of investment to ensure recovery of the loan in time from the
borrowers.

Chapter 9
Conclusion

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Form the learning and experience point of view I can say that I really enjoyed my internship period
in IFIC Bank Ltd. from the very first day. I am confident that this 3 (three) months internship
program will definitely help me to realize my further carrier in the job market.
Loans & Advances of a bank is not so sufficient to measure and express perfectly within this short
time of my internship period. But it is a great opportunity for me to get used to with the Loan &
Advance Procedure of commercial banking of IFIC Bank. I have tried by soul to incorporate the
necessary relevant information in my report.

The selection and the awareness about the loans type is one of the key determinants of the right and
proper use of fund. The loan default in the banking sector of our country has been hindering the
growth of the economy. The problem has also been reducing the level of investment, the productivity
of capital and the volume of savings. In managing loans and advances of the commercial banking
sectors, the critical factors are needed to be identified and managing of those factors will have
positive impact on the overall banking sector. The analyzed factors are not the only determinants of
the loans and advances as well as the selection procedure. In this study, several qualitative factors
are considered and casual relationship of types of loan and the selection procedure, compliance with
covenants by borrowers and strength of supervision is established. The study was conducted by using
the data of the Bank. So, findings of this study are not applicable in the macro environment but
further study can be conducted on the basis of the findings of the report.

During the course of my practical orientation I have tried to learn the practical banking to relate it
with my theoretical knowledge, what I have gathered and going to acquire from various courses.
.

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References
1) Annual Report of IFIC of year 2009,2010,2011,2012,2013,2014
2) Manual and brushier of IFIC bank.
3) Eugene F. Brigham, joel F. Houston ; Fundamental of financial management;9 th edition.
4) www.ific-bd.com
5) www.google.com
6) Website of Bangladesh Bank
7) A Journal Banking published by IFIC BANK LTD.
8) Several Booklets from IFIC BANK LTD
9) Several News letters fromIFIC BANK LTD

Appendix 1
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IFIC Bank at a glance:

Financial highlights

1
2
3
4
5
6
7

Particular
Paid up capital
Total capital
Capital surplus
Total assets
Total deposits
Total loan & advances
Total
contingent
liabilities

2014
4,377,499,280
11,308,447,906
151,078,903
156,338,637,021
129,745,805,362
102,282,149,309
& 47,824,432,743

2013
3,806,521,120
9,630,845,996
339,309,207
132,062,628,567
110,463,796,836
84,110,385,028
42,304,360,063

8
9

commitments
Credit deposit ratio
78.83%
Percentage of classified loan against 4.95%

76.14%
3.77%

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

total loans & advances

Profit after tax & provision
Amount of classified loans
Provision kept against classified loans
Provision surplus/deficit
Cost of fund
Interest earning assets
Non-interest earning assets
Return on Investment (ROI)
Return on Assets (ROA)
Income from investment
Earnings per share
Income per share
Net Asset Value (NAV)
Net Asset Value (NAV) per share
Net Operating Cash Flow Per Share

1,544,733,051
5,061,133,652
1,966,388,319
108,665,348
6.79%
132,838,447,524
23,500,189,497
7.22%
1.07%
2,377,463,292
3.53
36.76
10,628,115,868
24.28
10.17

1,345,490,024
3,168,075,634
1,620,060,000
373,995,151
6.88%
109,474,123,577
22,588,504,991
7.16%
1.09%
2,168,408,245
3.07
39.47
9,097,850,797
23.90
23.43

25

(NOCFPS)
Price earnings ratio (Times)

7.40

11.16

Appendix 2
Milestones in the development of IFIC BANK

1976established as an Investment & Finance Company under arrangement of jointventure with the
Govt. of Bangladesh.
1980commenced operation in Foreign Exchange Business in a limited scale.
1982 obtained permission from the Govt. to operate as a commercial Bank, Set up its first overseas
joint venture (Bank of Maldives Limited) in the Republic of Maldives (IFICs share in Bank of
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Maldives limited was subsequently sold to Maldives Govt. in 1992)

1983commenced operation as a full-fledged commercial bank in Bangladesh.
1985 Set up a joint venture Exchange Company in the Sultanate of Oman, titledOman Bangladesh
ExchangeCompany (Subsequently renamed as Oman International Exchange, LLC)
1987set up its first overseas branch in Pakistan at Karachi
1993set up its second overseas branch in Pakistan at Lahore
1994setup its first joint venture in Nepal for banking operation, titled NepalBangladesh Bank Ltd.
1999set up its second joint venture in Nepal for lease financing, titled Nepal Bangladesh Finance &
Leasing Co. Ltd. (Which was merged with NBBL in2007)
2003set up a new Bank in Pakistan, NDLC-IFIC Bank Ltd. (Subsequently renamed NIB Bank Ltd.)
and the Overseas Branches of IFIC and a local leasing company, NDLC were amalgamated with and
into it.
2005 acquired MISYS solution for real time online banking application or Risk Management
implemented
2007launched VISA branded Credit Card (completed full range of Cards i.e. Debit, Credit& Prepaid
by 2010)
LENDING
ANALYSIS
2010set
upRISK
Offshore
Banking Unit (OBU)

2011established a fully owned subsidiary exchange company named IFIC MoneyTransfer (UK) Ltd.
2012 inauguration
of 100th
Business
Risk Branch at Tejgaon-Gulshan Link Road in Dhaka
Supply Risk
Industry Risk
Industry Risk

Sales Risk

Company Risk

Appendix 3

Performance Risk
Figure: Shows the
Components that analyzed in the LRA
Company
Reliance Risk

Mgt. Competence Risk

Management Risk
Mgt. Integrity Mgt. Competence Risk

Security Control Risk

Security Risk
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Security Cover Risk

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