A Bank With A Difference

Prime Bank Limited
a bank with a difference
1.1 Introduction
The principle activities of bank are providing banking services and related with
businesses. The banking businesses include accepting deposits, extending credit to
corporate organization, retail and small & medium enterprises, trade financing, project
financing, lease and hire purchase financing, issuance of local and international credit
cards etc. At present, the banking institutions are showing a greater success in
Bangladesh. The backbone of the bank mainly depends on the interest income of credit.
So, for the prosperity of a bank we should know the credit facilities and its management.
This report related with the Credit Management of PRIME BANK LTD. Data has been
collected on the basis of the practical knowledge and observation in the bank was
conducted. Then the results of this study are analyzed to identify the most important
aspects of the Credit Management and determine different factors of its operations.
Finally, a set of recommendations is given on the basis of the analysis of the study, to
improve the overall quality of credit management.
Prime Bank Ltd. being Banking Company has been registered under the companies Act
1913 with its registered office at 112/113, Adamjee Court Annex Building Motijheel
Commercial Area Dhaka-1000, Bangladesh. The Bank operates as a schedule Bank
under banking licensed issue by Bangladesh Bank, the Central Bank of the country. A
group of renowned industrialists, business houses and professionals of the country
sponsor the Prime Bank Ltd.
Prime Bank Limited

1.2 Objectives of the Study

The main objective of the report is to know about Credit Management of Prime bank
Limited.
The specific objectives are as follows:
To know about the different credit products of Prime Bank Ltd.

To know about credit portfolio of PBL.
To know about credit or loan sanction procedure of PBL.
To know about credit recovery system of PBL.
To know about credit grading system of PBL.
To identify the problem relating to Credit Management of prime Bank Ltd and
provide suggestion to overcome the problem.
1.3 Methodology of the study

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Prime Bank Limited

The methodology of this report is totally different from conventional reports. I have
emphasized on the practical observation. Almost the entire report consists of my practical
observation. While preparing the report, I have collected information from the following
sources:
Two sources of data and information have been used widely:
Primary sources of data:

Face to face daily conversation with the officials of PBL, Halishahar Br.
Chittagong.
Personal interview with bank personnel.
Practical deskwork.
Secondary sources of data:

Different brochures of the prime bank.
Website of Prime Bank Ltd.
Different Book- Guidelines about Credit facilities.
Annual report of Prime Bank Ltd. (2011).
Other published materials of the Bank.
Different circulars sent by Head Office and Bangladesh Bank.
1.4 Scope of the study

3
Prime Bank Limited

Prime Bank Ltd. is one of the largest private Bank in Bangladesh and highly progressive
one among the private commercial banks. A bank has different product, different services
and different customer. The focus of the report is on the Credit Management of Prime
Bank Limited. Scopes of the study are as follows:
Different kinds of credit facilities to the Customers.
Procedures and system of Credit granting.
Documents required for different kinds of loan.
Different loan disbursement files.
Practical knowledge about loan recovery.
1.5 Limitations of this study

In spite of having the wholehearted effort, there were some limitations, which acted as a
barrier to conduct the program and for doing an empirical research work. My tenure was
only 03 months which was somehow not sufficient. It is also to be mentioned here that it
is a sensitive issue for any bank and this bank was also not willing to disclose the whole
information. Any bank do not to disclose their lacking in front of others as the market is
highly competitive.
Specific limitations were -- Some data could not be collected for confidentiality or secrecy of the
management.
It is very much difficult to collect data from a Bank because of strategic purpose,
so most
of the time I had to rely on web site and secondary data-sources.
I got very little opportunity to do work practically for avoiding serious errors that
the officials are responsible for.
For the lack of my adequate practical knowledge, some short cuttings may be
available in the report.
2.1 Portrait of Prime Bank Ltd

4
Prime Bank Limited

Prime Bank Limited (PBL) started banking operation on April 17, 1995. Government
then held 49 percent shares, while the rest were held by the sponsors and the general
public. The objectives of the finance company were to establish joint venture banks,
finance companies and affiliates abroad and to carry out normal functions of a finance
company at home.
Prime Bank Ltd. is the preferred choice in banking for friendly and personalized services,
cutting edge technology, tailored solutions for business needs, global reach in trade and
commerce and high yield on investments.
The Prime Bank Ltd. being Banking Company has been registered under the companies
Act 1913 with its Registered office at 112/113, Adamjee Court Annex Building
Motijheel Commercial Area Dhaka-1000, Bangladesh.
The Bank operates as a schedule Bank under a banking licensed issued by Bangladesh
Bank, the Central Bank of the country.
A group of renowned industrialists, business houses and professionals of the country
sponsor the Prime Bank Ltd.
2.2 Vision
To be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital
adequacy, asset quality, sound management and profitability having strong liquidity.
2.3 Mission
To build Prime Bank Limited into an efficient, market driven, customer focused
institution with good corporate governance structure.
Continuous improvement of our business policies, procedure and efficiency

through integration of technology at all levels.
2.4 Corporate Philosophies

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Prime Bank Limited

2.4.1 For Customers

To provide the most courteous and efficient service in every aspect of its business.
To be innovative in the development of new banking products and services
2.4.2 For Employees

By promoting their well-being through attractive remuneration and fringe
benefits.
By promoting good staff morale through proper staff training and development,
and provision of opportunities for career development.
2.4.3 For Shareholders

By forging ahead and consolidating its position as a stable and progressive
financial institution.
By generating profits and fair return on their investment.
2.4.4 For Community

By assuming our role as a socially responsible corporate citizen in a tangible
manner.
By adhering closely to national policies and objectives thereby contributing
towards the progress of the nation, upholding ethical values and best practices
Constantly seeking to improve performance by aligning our goals with
stakeholders expectations. Because we value them.
2.5 Strategic Priorities

Maintain satisfactory capital to support growth and remain compliant.
Continue to strive for sound growth by doing the business that we do well,
expanding into areas underserved, entering new sectors and exploring innovative
ideas.
Have a strong customer focus and build relationships based on integrity, superior
Service and mutual benefit.
Continue to provide new services to customers with support of superior
information technology platform.
Establishment of good Corporate Governance by remaining efficient, transparent,
Prime Bank Limited

Professional and accountable to the society and environment.

Ensure effective risk management for sustainable growth in shareholders value.
Diversification of loan portfolio through structured finance and expansion of
Retail and SME financing.
Value and respect people and make decisions based on merit.
Expansion of Brand Image by in-house capacity development through continuous
Training.
Be responsible, trustworthy and law-abiding in all that we do
Be leader in serving the interest of our community and country
2.6 Objectives of Prime Bank Limited

1.
2.
3.
4.
5.
6.
7.
8.
To build up strong pillar of capital.

To promote trade, commerce and industry.
To discover strategies for achieving systematic growth.
To improve and broaden the range of product and services.
To develop human resource by increasing employment opportunities.
To enhance asset of shareholders.
To offer standard financial services to the people.
To create congenial atmosphere so that the client becomes interested to deal
with the prime bank limited.

9. To keep business morality.
10. To develop welfare oriented banking service.
11. To offer highest possible benefit to customers.
12. As to its position among its counterparts is held high to let the viewers cast
their very first look at it.
2.7 SWOT ANALYSIS
Prime Bank Limited

Strengths
Weakness
SWOT
Opportunit
ies
Threats
SWOT stands for Strength, Weakness, Opportunity, and Threat. This is a very important
tool for a company for a company to analyze its internal external environment. Now, we
will see a SWOT analysis of Prime Bank Limited.
Internal Factor:
It is to prevail the concern the inside situation, it includes strength and weakness. These
are controllable factor.
External factor:
Opportunity and threat are uncontrollable factor.
Strengths:
Good profit margin
Loan recovery is positive
Getting the membership of SWIFT
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Prime Bank Limited

It focus on trade finance

Strong liquidity position
High NPL ratio
Several schemes and financial product offered by PBL
Good marketing policy
Well-furnished and Air-conditioned Bank
Executives are highly qualified and experienced.
Weakness:
Lack of employees
Huge utility cost to run the branches
Short time experience of the Branch.
Lack of full automation system,
Absence of regular training program,
Opportunities:
Online banking system to run
PBL charge a low amount for maintaining a savings account and there is no
system of charging money to collect the cheque book.
Many customer
PBL provide maximum loan to large enterprise and so SME. So it is the great
opportunity to recover loan easily
Opportunity to ensure innovative product
Opportunity to offer new branches throughout the whole Bangladesh.
Threats:
Heavy competition in current market
Everyone is now copying one anothers good ideas
Some banks provide huge FDR rate
2.8 Corporate information

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Prime Bank Limited

PRIME BANK LIMITED

Head Office:
Adamjee Court Annex
Building-2,119-120,Motijhil C/A,Dhaka,Bangladesh.
Phone:9567265,9570747-8 PABX
Fax:880-2-9567230
Email:info@primebank.com.bd
Website: www.primebank.com.bd
Date of Incorporation
12th February 1995
Date of Commencement of Business
12th February 1995
Listed with Chittagong Stock Exchange 15th November 1999
Ltd
Listed with Dhaka Stock Exchange Ltd
Authorized Capital (up to 2011)
Paid up capital (up to 2011)
Shareholders Equity (up to 2011)
Total Assets (up to 2011)
Number of Employees (up to 2011)
Number of Branches (up to 2011)
27th March 2000

10000 (Tk. in million)
2292
102
2.9 Ownership Structure

Ownership of the Bank is held by the sponsors in the private sector, General public,
Financial Institution, Non-resident Bangladeshi and Foreign investment. Sponsors now
own 40.75% of the share capital, General public own 35.70%, Financials institution own
20.95%, and foreign investment 1.83% and Non-resident Bangladeshi own 0.77% of the
shares.
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Prime Bank Limited

Ownership
Sponsor
General Public
Finansial Instition
Foreign Investors
Non-Resident Bangladeshi
21%
2% 1%
41%
36%
2.10 Board of Directors

Board of Directors consists of eighteen Directors, Chairman, Vice-chairman and Managing
Directors. From the list of the Directors of the board it will be seen that the Bank has as
many as four senior Government officials in its Board as compared to one representation
of Govt. in other Private commercial banks.
Chairman
Md. Shirajul Islam Mollah
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Prime Bank Limited

Vice Chairman
M. A. Khaleque
Mizanur Rahman Bhuiyan
Managing
Director
Md. Ehsan Khasru
Director
Marina Yasmin Chowdhury

Nasim Anwar Hossain
Mohammad Aminul Haque
Khandker Mohammad Khaled
Quazi Sirazul Islam
Salma Huq
Muslima Shirin
Mafiz A. Bhuiyan
Md. Abul Quashem
Md. Nader Khan
Firoja Amin
Md. Shahadat Hossain
Nafis Sikder
Tanjil Chowdhury
Dr. Mohammed Aslam Bhuiyan
Prof. Dr. Ainun Nishat, Ph.D
Manzur Murshed
2.11 Branch Network
The bank covers by its activities all the important trading and commercial centers of the
country. As on 2011, it had 102 branches within Bangladesh. Almost all the important
branches are equipped with computer in addition to the modern facilities and logistics and
professionally competent manpower.
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Prime Bank Limited

2.12 Organizational structure of Prime Bank Ltd.

Managing Director (M.D)
Additional Managing Director (A.M.D)
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Prime Bank Limited

Deputy Managing Director (DMD)

Senior Executive Vice President (S.E.V.P)
Executive Vice President (E.V.P)
Senior Vice President (S.V.P)
Vice President (V.P)
Senior Assistant Vice President (S.A.V.P)
Assistant Vice President (A.V.P)
First Assistant Vice President (F.A.V.P)
Senior Executive Officer (S.E.O)
Executive Officer (E.O)
Senior Officer (S.O)
Management Trainee Officer (M.T.O)
Officer (O)
Junior Officer (J.O)
Trainee Assistant (T.A)
2.13 Overview of PBL, Halishahar Branch, Ctg.

Name of the Branch: Prime Bank limited
Halishahor Branch
Location: Nandita house(1st & 2nd Floor)
Plot No.#5/A,Lane#2,Road#2,Block#G
Halishahor Housing Estate,Double Mouring,
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Prime Bank Limited

Chittagong.
Total number of employee in Halishahor Branch
Total=17
Officer
Sales team
Staff
9
4
4
Branch in charge: Mr. Syed Tajul Islam,AVP & Manager
Operation in charge:Mr.Mujahid Bin Alam,EO &Deputy Manager
2.14 Organizational Structure of the PBL,

Halishahar branch, Chittagong.
Assistant Vice President (A.V.P) & Head of Branch
Executive Officer (EO) & Manager
Operation
Senior Officer (S.O) &

Officer (O) &
Al-Wadiah Current Account
Credit
Current
Deposit
GB-in-charge
in-charge
Mudaraba Savings Deposit
Savings Deposit
Mudaraba Short Term Deposit
Short Term Deposit
Convertible Taka Account
Non Resident Taka Account
Mudaraba Term Deposit
Mudaraba Special Saving Scheme
NR Investors Taka Account
Security Deposit Receipt
Deposit
Junior Officer
(J.O) Scheme
Junior
OfficerUnder
(J.O) Scheme :
Deposit
Contributory
Savings
Contributory Savings Scheme
Lakhopoty Saving Scheme
Lakhopoty Saving Scheme
Trainee Assistant
(TA) Scheme
Monthly
Benefit Deposit
Monthly Benefit Deposit Scheme
Double Benefit Deposit Scheme
Conventional
Double Benefit Deposit Scheme
Education
Islamic Savings Scheme
Banking
Education Savings Scheme DEPOSITE
Hajj
Deposit
Banking
Prime Millionaire Deposit Scheme
Mudaraba Prime Millionaire
HBL Deposit Scheme
Deposit Scheme
Mudaraba HBL Deposit Scheme
2.15 Product and Services of PBL
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Prime Bank Limited

Packing Credit
Loan Against Imported
Merchandize (LIM)
Letter of Trust Receipt (LTR)
Payment Against Documents
(PAD)
EDF Loans
Secured Overdraft (SOD)
Inland Documentary Bills
Bai-Murabaha
Bai-Salam
Purchased (IDBP)
Quard
Cash Credit
Foreign
Currency
Deposit
A/C
Loan General
Bills
(Islamic)
Bai-Muajjal
Lease Finance
Hire Purchase
Izarah
HP under Sirkatul Milk
Housing Loan-Commercial
Retail Loans
Musharaka
Foreign Currency Account
Term Investment-Retail
FCY Account under ERQ
- Auto Loans
Resident FCY Deposit
- Doctors Investment Scheme
- Home Loan (Swapna Neer) Non Resident Foreign
- Household durables investment
- Consumer Durable Loan
Currency Deposit
- Car Investment
- Doctors
Loans
Conventional
Islamic
Loan
&
Advance
Banking
- HomeBanking
Investment
- Marriage
Loan
- Travel Loan
- Travel Investment
- Education Loan
- Education Investment
- Hospitalization Loan
- Hospitalization Investment
- CNG Conversion Loan
- CNG Conversion Investment
- Advance Against Salary
- Investment Against Salary
- Any Purpose Loan
- Any Purpose Investment

16
Prime Bank Limited

Treasury
Treasury Bills
Treasury Bonds
REPOs
Reverse REPOs
SWIFT
Fund
BEFTN
Transfer(Bangladesh
Locker Service
Added
Value
Insured
Deposit
Services
Senior Citizen Scheme
Internet Banking
SMS Banking
Credit Card Cheque
Credit Cards
Visa Credit Card-Local
Visa Credit Card-International
Master Card-Local
Master Card-International
Electronic Fund Transfer
Network)
Issuing and Encashing
Foreign Drafts
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Prime Bank Limited

Special
Other
Services
Services
Cash Services
ATM Services
Cheque encashment
Foreign Currency
Travelers Chaques
Letters of Credit
- Letter of Credit-Sight
- Letter of Credit-Deferred
- Back to Back L/C
Letters of Guarantee
- Advance Payment Guarantee
Forex & Fund Management
- Bid Bond
- Performance Bond
SWAPS
Import/Export Financing
Custodian Services
Money Market Lending &
- Payment Bond
- Custom Guarantee
- Retention Money Guarantee
2.16 Financial Highlights

of PBL
- Shipping Guarantee
Borrowing
(Taka in millions)
Gross revenue
Operating income
Profit after tax
Total capital
Total deposits
2011
24,293
11,645
3,662
24,273
159,816
2010
17,618
9,795
3,101
21,483
124,574
16,622
8,196
2,784
12,168
106,956
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Prime Bank Limited

Total loans & advances

Total assets
No. of deposits accounts
No. of loans & advances accounts
Return on assets (%)
Return on equity (%)
Liquidity ratio (%)
Capital adequacy ratio (%)
139,409
199,950
830,544
58,192
2.07
20.32
32.62
12.49
116,057
154,342
660,295
52,990
2.22
21.65
25.76
11.69
89,252
124,806
518,878
86,087
2.37
30.19
27.60
14.71
No. of employees
No. of branches
No. of SME branches/centers
2,292
102
17
2,139
94
14
1,844
84
5
Rating
Long term
Short-term
"AA+"
ST-1
"AA+"
ST-1
"AA"
ST-1
3.1 Credit Department of PBL

Bank is a financial intermediary whose prime function is to move scarce resources in the
form of credit from savers to those who borrow for consumption and investment. The
word credit is derived from the Latin word credere, which means to trust. The
fundamental nature of credit is that an element of trust exists between buyer and sellerwhether of goods or money. In a modern industrial society, Banks are uniquely important
because of their ability to create money. Lending comprises a very large portion of a
Banks total assets and forms the backbone of the Bank and interest on lending
constitutes the highest proportion of income of a Bank. As such credit quality remains the
prime indicator of its commercial success. Unsound credit reduces the ability of a Bank to
provide credit towards profitable borrowers and undermine liquidity and solvency.
Therefore lending is very important for the profitability and success of a Bank.
When a bank advances a loan, it does not pay the amount in cash. But it opens an account
in his name and allows him to withdraw the required amount by cheque. Banks provide
credit facilities to businessmen by way of loans and advances, overdraft and cash credit.
When a loan is granted or overdraft is sanctioned, the amount of loan or overdraft is
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Prime Bank Limited

entered in the account of the customer and he is allowed to draw cheques up to the
amount agreed upon. Thus the bank creates a deposit in the name of the borrower.
Basically credit is the function by which people can perform their job by depositing and
lending money from the bank with an implied interest rate and bank performs here as a
middleman. Banks create money and credit. It happens in two ways. First, when a
customer is granted loan, he has to sign a promissory note and receive in turn, a banks
demand deposit, or cash. The promissory note does not act as money but it receives
money and can readily spend almost everywhere. Thus it creates credit. Second, the
entire systems of banks also create money as the deposits generated by lending flow from
bank to bank. By law, each bank must set aside a fractional reserve behind each deposit it
receives and the remaining excess can be loaned out.
3.2 Types of Bank Credit

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

#Against
securities.
other
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Prime Bank Limited

3.3 Interest rate of various credit offered by PBL

Sl.
Nature of Loan/Sector
Interest Rate Band Mid Rate
No.
1.
2.
3.
4.
5.
Agricultural Credit
Term Loan/Project Loan
Working Capital Loan
Pre-shipment Export Credit
Commercial Lending
(p.a)
10.00 to 13.00%
15.00 to 18.00%
15.00 to 18.00%
7.00%
15.00 to 18.00%
Remarks
11.50%
16.50%
16.550%
Effective rate
16.50%
(CC, LIM, LTR, IBP etc.)
of return should
6.
7.
Small/Cottage and SME scheme

Other Special Program
be minimum 13%
17.00 to 20%
18.50%
As per guideline of BB/Govt
8.
(Other than commercial)

Others
16.00 to 19.00%
17.50%
In addition to the above sector-wise rates, interest rates have also for the following
modes:
Sl.
No.
9.
Nature of Loan/Sector
Loan
against
deposits
Interest Rate Band
(p.a)
Rate
(FDR, 2.00 to 4.00% above -
MBDR, CSS etc) maintained with the

10.
our Bank
Loan against
deposits
Mid
Remarks
-
respective
deposit rate
(FDR, 15.00 to 18.00%
16.50%
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Prime Bank Limited

MBDR, CSS etc) maintained with

11.
12.
13.
14.
other Bank
Loan against Share
Housing Loan
Consumer Credit Scheme
Loan to NBFIs
16.00 to 19.00%
15.00 to 18.00%
17.50 to 20.00%
15.00 to 18.00%
17.50%
16.50%
18.50%
16.50%
3.4 Types of Advances Offered by PBL
Loan & Advance
3.4.1.Loan (General):
Loan (General)
House Building Loan
Other Loans to Staff
Cash Credit (Hypothecation)
Hire-Purchase
Lease Financing
Consumer Credit
SOD (Export)
SOD (Others)
PAD
LTR
IBP
Packing Credit
FDBP (Foreign)
FDBP (Local)
FBP
Short, Medium & Long term loans allowed to individual/firm/industries for a specific
purpose but for a definite period and generally repayable by installments fall under this
type. These are mainly allowed to accommodate financing under the categories (I) Large
& Medium Scale Industry and (ii) Small & Cottage Industry. Very often term loans for (I)
Agriculture & (ii) Others are also included here.
3.4.2.Housing Loan (Commercial):
Loans allowed to individual/enterprises for construction of house for commercial purpose
only fall under this type. The amount is repayable by monthly/quarterly installments
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Prime Bank Limited

within a specified period.

3.4.3.Home Loan:
Loans allowed to individuals for purchase of apartment or construction of house for
residential purpose fall under this type. The amount is repayable by monthly installments
within a specified period.
3.4.4. Other Loans to Staff:
Loans allowed to employees other than House Building Loan are grouped under Staff
Loan (Gen).
3.4.5. Cash Credit (Hypo):
Advances allowed to individual/firm for trading as well as wholesale purpose or to
industries to meet up the working capital requirements against hypothecation of goods as
primary security fall under this type of lending. It is a continuous credit. It is allowed
under the categories (I) "Commercial Lending" when the customer is other than an
industry and (ii) "Working Capital" when the customer is an industry.
3.4.6. Hire Purchase
Hire Purchase is a type of installment credit under which the customer agrees to take the
goods on hire at a stated rental, which is inclusive of the repayment of Principal as well
as interest for adjustment of the loan within a specified period.
3.4.7.Lease Financing:
Lease Financing is one of the most convenient sources of acquiring capital machinery and
equipment whereby a customer is given the opportunity to have an exclusive right to use
an asset usually for an agreed period of time against payment of rental. It is a term
financing repayable by lease rental.
3.4.8.Consumer Credit Scheme (CCS)
It is a special credit scheme of the Bank to finance purchase of consumer durable by the
fixed income group to raise their standard of living. The loans are allowed on soft terms
against personal guarantee and deposit of specified percentage of equity by the
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Prime Bank Limited

customers. The loan is repayable by monthly installments within a fixed period.

3.4.9.SOD (General):
SOD (General) is allowed to individuals/firms for miscellaneous purpose. This is a
continuous loan having usual maturity period of 1 (one) year and renewable for further
periods at maturity.
3.4.10. SOD (Export):

Advance allowed for purchasing foreign currency for payment Back to Back L/C liability
where the exports do not materialize before due the date of import payment. This is an
advance for temporary period and categorized as export finance and falls under the
category "Export Finance".
3.4.11. PAD:
Payment made by the Bank against lodgment of shipping documents of goods imported
through L/C falls under this type. It is an interim advance connected with import and is
generally liquidated against payments usually made by the customer for retirement of the
documents for release of imported goods from the customs authority. It may fall under
anyone of the category "Agriculture/Export Finance/Commercial Lending/Others".
3.4.12. LTR:
Advance allowed for retirement of shipping documents and release of goods imported
through LC falls under this type. The goods are handed over to the importer on trust with
the arrangement that sale proceeds will be deposited to liquidate the loan account within
the stipulated time. This is a temporary advance connected with import and known as
post-import finance and falls under the category "Commercial Lending".
3.4.13. IBP:
Payment made through purchase of inland bills/cheques denominated in local currency to
meet urgent requirement of the customer of other than Export Sector falls under this type.
This temporary advance is adjustable from the proceeds of bills/cheques purchased and
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Prime Bank Limited

sent for collection. It may fall under any of the category "Commercial Lending".
3.4.14. Packing Credit (P.C.):
Advance allowed to a customer against specific L/C and/or firm contract for
processing/packing of goods to be exported falls under this type and is categorized as
"Packing Credit". Packing Credit must be adjusted from proceeds of the relevant exports
within 180 days. It falls under the category "Export Credit".
3.4.15.F D B P:
Payment made to a customer through purchase/negotiation of a Foreign Documentary bill
falls under this type. This temporary advance is adjusted from the proceeds of the
shipping/export documents. It falls under the category "Export Credit".
3.4.16.F B P:
Payment made to a customer through Purchase or Foreign Currency Cheques/Drafts falls
under this type. This temporary advance is adjustable from the proceeds of the
cheque/draft.
These advances are allowed against the following securities:

Shares of various Companies approved by Head Office from time to time and
listed in the Stock Exchange.

Term Deposit Receipts issued by any Branch of Prime Bank.
Lien on balance in Savings A/C, Current A/C. and other Savings Schemes
Government Promissory Notes.
Various Sanchaya Patras
Surrender value of Life Insurance Policies.
WEDB
Assignment of bills against work orders/supply orders and receivables
Stock of goods in trade (Permissible goods only) hypothecated.
Hypothecation of power driven vehicles or watercrafts.
Hypothecation of capital Machineries and equipments.
Immovable Property.
Imported merchandise - hypothecated.
Trust Receipts.
Import Bills (PADs)
Bills Purchase
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Prime Bank Limited

Scheduled Bank/Insurance Guarantees

Export Bills
Inland Bills.
Personal Guarantee
Corporate Guarantee
3.5 Procedure of Giving Advance

1. The borrower has to apply to PBL for loan by filling up of a specific application
form.
2. After receiving loan application form, PBL sends a letter to Bangladesh Bank
for obtaining a report. This report is called CIB (Credit Information Bureau)
report. Giving of this report is essential for any amount of loan. The purpose of
this report is to informed that whether the borrower has taken loan from any
other bank; if yes, then whether these loans are classified or regular.
3. After receiving CIB report, if the bank thinks that the prospective borrower will
be a good borrower, then the bank will scrutinize the documents. In this stage,
the bank will look whether the documents are properly filled up and signed.
4. Then comes processing stage. In this stage, the bank will prepare a proposal. A
proposal contains all relevant information (e.g. name of the client, type of the
loan, amount of the loan, period of giving loan, security, date of application,
financial data, etc.) Branch incumbent (Local Office) has the discretionary
power to sanction loans as per delegation of powers and authority. But in that
case, the branch manager has to give attention on the delegation of authority
prescribed by Head office.
For the cases, which exceeds Branch delegation, the branch manager has to send a
proposal to the head office. Head office will prepare a minute and submit it before
the Competent decision-making committee. The minute has to be passed in the
committee under certain cases.
After passing the minute, it will be sent to the Bangladesh Bank for approval in the
following cases:
a
If the proposal limit exceeds 15% of banks equity.

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Prime Bank Limited

If the proposal limit against cash collateral securities exceeds 25% of

the banks equity.
After getting the proposal it will again come to the head office.
1
After the processing stage, a sanction advice will be prepared in favor of the
client.
After preparing the sanction advice, bank will collect necessary documents
(charge documents).
After receiving all the documents, the bank will disburse the loan to the
borrowers. For withdrawing the loan amount, customer creates a current
account and the loan amount is transferred to this account.
27
First Information
Prime Bank Limited

3.6 Lending Principles

Loan Application
For sound lending the following points should be kept in view:
Credit Investigation
Sound lending principle pf PBL

Loan Appraisal
Judicious selection of Customers
Credit
List Proposal
Purpose
Safety
Security
Sanction Letter
Liquidity
Adequate return (Profitability)
Supervision
Loan
Documentation
National/Social interest
Credit Control Policy of Bangladesh Bank
Loan Disbursement
Follow Up
It is to be always remembered that the Bank is the custodian of public money and as
such we must be judicious, careful and selective while lending out the depositors
Loan Adjustment
money to ensure timely recovery. The deciding factors for recovery of loans are
selection of right type of borrowers, end-use of credits and effective follow-up and
Recovery of Loan
proper supervision.
3.7 Processing of Credit Proposals

1
A secured credit facility may be allowed to a customer only after getting a limit
sanctioned by the authorized officials.
The customer seeking a credit facility against acceptable security must make an
application in banks printed form Request for Credit Limit enclosing necessary
papers/documents to his nearest Branch of the Bank where he maintains his
operative account.
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Prime Bank Limited

Make a preliminary study of the affairs of the intending borrower by consulting the
followings:
Borrowers application
Reports in confidence collected through all feasible means regarding the
state of the business of the intending borrower.
Borrowers own mode of dealing
Statement of accounts of the borrower with own and other Banks
Statement of assets and liabilities
Financial statements for the last 3(three) years
Income Tax statement
Trade and other reports
Arrange an interview with the intending borrower to know on the
following points :
Present and future prospect of the customers business
Total investment required in the business
Borrowers stack in the business
Amount of advance required
Experience in the line of business.
Purpose
Period for which the advance is required
Source of repayment
Customers previous Banker, if any.
Present liabilities, if any, with other Bank and conduct of the same
Securities offered
Proposed margin
Type of charge to be created against the proposed security
Terms of repayment
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Prime Bank Limited

Rate of interest
4
Before finally selecting the borrower, be satisfied that;

The customer possess character, capacity and capital
The account is remunerative one
Dealing items and primary security of the customer possess the quality of easy
marketability, durability and storability
Collateral security offered possesses the quality of easy marketability and is not
encumbered and its valuation is judiciously assessed so as to leave sufficient
margin after covering the advance and belongs preferably to the borrower.
Repayment arrangement is satisfactory
Means, standing and respectability of the applicant and the guarantor (if any) are
satisfactory.
Credit worthiness of the applicant is reasonable
Location of the business is good.
1. If the proposed facility is beyond the delegated business power of the Branch
Manager, the proposal shall be submitted to Credit Division, Head Office duly
recommended in the specified Format.
The following Papers/documents are to be submitted by the Branch Managers along
with the proposals:
Request for Credit limit of customers.
Project Profile / Profile of Business
Copy of Trade License duly attested
Copy of TIN Certificate
Certified copy of Memorandum and Articles of Association, Certificate of

Incorporation, Certificate of commencement of business in case of Public Ltd.
Co., Resolution of Board of Director, Partnership Deed, (where applicable)
Personal Net worth Statement of the Owner/Director/Partner/Proprietor in

Banks Format.
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Prime Bank Limited

Valuation Certificate in Banks Format along with photograph of collateral

security (land & building with detail particulars on the back duly authenticated
by the Branch Manager.
In case the value of the property offered as security exceed Tk.50.00 lac, the
value to be assessed by banks enlisted surveyor and report thereof to be
obtained.
3 years Balance sheet and profit and loss A/C
CIB Enquiry Form duly filled in (For proposal of Tk.10.00 lac and above)
Lending Risk Analysis for Credit facilities of Tk.50.00 lac and above
Inspection/Visit Report of Factory/Establishment/Business premises of the

customer.
Stock Report duly verified (where applicable)
Credit Report from other Banks.
Indent/Proforma Invoice/Quotation (Where applicable)
Price verification report (where applicable)
Statement of A/C (CD/SB/CC) for the last 12 months. In case the customer
maintaining account with other Bank, Statement of Account for the last 12
months of the concerned Bank should be furnished.
In case of renewal/enhancement of credit facility, Debit Turnover, Credit

Turnover, highest drawing, lowest drawing, Total income earned, Detailed
position of existing liabilities of the customer i.e. Date of sanction, Date of
expiry, Present outstanding, Remarks, if any.
Declaration of the customer of the name of sister/allied concerns and liabilities

with other Banks, if any, and an undertaking to the effect that they have no
liability beyond those declared.
In case of L/C proposal, detailed performance of L/C during the last year i.e. No.
and date of L/C opened, commodity, L/C value, Date of creation of PAD, date of
retirement, mode of retirement etc.
Whether the applicant is Shareholder/Director of Prime Bank Ltd. as per

definition of Banking Companies Act.
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Prime Bank Limited

Financial Analysis to be prepared by the Branch Manager based on the financial

performance of the company which should show trends in sales/profitability,
liquidity, leverage etc. It should also contain an assessment of the competence
and quality of the business management, the general economic & competitive
environment of the borrowers industry and any other pertinent factors that is
relevant for managements credit decision.
Justification/consideration for the facility.
Approval of Limit:
The sanctioning authority on receipt of the proposal shall scrutinize the same and ensure
that :
The proposal contains all pertinent information relating to the proposed facility and
the borrower.
All necessary papers and documents have been submitted.
The proposal has been duly signed by the members of the Branch Credit Committee
including the Manager.
The proposal has been duly recommended.
The proposal does not fall within the existing credit restriction
Minimum margin requirement against the credit facility has been proposed.
The primary security has got easy marketability, durability and storability
The value of the property offered as collateral security is judiciously assessed
The proposal is viable and stands all credit tests
The proposed borrower is not defaulter of any Bank/Financial Institution
There is no request from other Bank/Financial institution for not allowing/stoppage of

facility to the prospective borrower
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Prime Bank Limited

The proposal meets all the provisions/requirement of Bank Companies Act/Rules of

Bangladesh Bank/Other Laws / Rules
Where the proposed accommodation in the form of working capital may be

considered on the project financed by any other Bank including DFI. Favorable status
report and No Objection Certificate (NOC) from the financing Institution to be
obtained.
Where 2nd charge on the fixed and floating assets (in case of a limited company) or 2 nd
mortgage on real estate is offered, clearance in respect of creation of 2 nd charge on the
property together with confirmation that documents will be held by them on behalf of
the Bank and that they shall not part with the same without consent of the Bank, is
obtained from the 1st mortgagee.
2. Check list of action to be taken by the Branch Manager/Second Officer/Credit Officer

before disbursement of Credit facilities
Acceptance of customers relating to the terms & conditions to be obtained on the
duplicate copy of sanction advice.
They will thoroughly examine and ensure that the subject credit facility does not
contradict any law, rules and regulation of the country, Bangladesh Bank and
Banks credit policy.
They will obtain NOC from Bank where the customer has existing liability.
CIB Report on the borrower to be obtained through Head Office.
Lending Risk Analysis as per FSRP Formula in case of credit of Tk.50 lac and
above.
No objection certificate of Bangladesh Bank in case the credit facility exceeds
15% of Capital Funds of the Bank.
Regularization/Adjustment of classified/overdue credit of the customer/their
sister/allied concerns with our Bank/other Banks, if any.
Original Title deed, Bia deed, Khatian, Mutation parcha, uptodate rent receipt,
Municipal Tax receipt, Map, Plan approved by RAJUK/Municipality, Power of
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Prime Bank Limited

attorney, relay certificate about the actual physical possession of the property to
be mortgaged, valuation certificate, photograph of the property to be mortgaged
with detail particulars on the back.
Non-encumbrance certificate relating to the property to be mortgaged from the
Banks panel lawyer.
Deed of Mortgage and power of attorney to be drafted and executed under the
supervision of B.L.A.
Lawyers certificate to the effect that proper Registered/Equitable Mortgage (as
the case may be) has been created on the land and building in favor of the Bank as
per the terms & conditions of the sanction letter.
Registered Power of attorney to be obtained from the borrower (contractor) as per
Head Offices approved specimen assigning the work order favoring the Bank.
The power of attorney to be filed with the work order-giving Agency. A consent
letter to be obtained from them that they will issue all cheques in payment of bills
against the work order favoring the Bank A/C the customer as per the power of
attorney.
Storage of pledge goods in Banks godown (as the case may be) under proper
security and the same duly insured.
Insurance Policies covering risks as per sanction terms & conditions.
Charge documents as per sanction letter.
Obtention of certified copies of Blue Book/Registration Certificate, Route Permit,
Tax Token, Fitness Certificate, Insurance Policy in respect of vehicles finance.
Procurement of post-dated cheques against installments of loans/HirePurchase/Lease /CCS (as the case may be).
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Prime Bank Limited

Satisfaction certificate of the lawyer in respect of all documentation both banking

& legal. The Branch Managers should show all the legal & charge documents to
their lawyer & obtains their certificate that documents have been completed as per
sanction terms & are in order for extending the facility.
Entry has been made in the Safe-in and Safe-out Register and the documents are
preserved under joint custody of the 2nd man/ In-charge of the Credit Dept./ F.Ex.
Dept.
3.8 Collection of Credit Information:

For assessing the creditworthiness of a borrower a banker has to collect the abovementioned information from a number of sources. Every bank maintains a Credit
investigation department at its head office and main offices in larger cities to
collect information regarding the financial position of its borrowers. At other
centers, branch mangers perform credit investigation. The credit information is
collected through the following sources:
Borrower: Most of the information may be secured from the borrower
directly. The loan application form seeks basic information about the borrower
and his business. The banker may examines his accounts books and note his past
dealings with other banks or parties
Market Reports: Banks try to find out the creditworthiness of the party by
making enquiries from the brokers, traders and businessmen in the same trade or
industry. Their individual opinions may differ but a balanced opinion may be
formed about the borrower on the basis of the feelings expressed by a number of
such persons.
Exchange of Credit Information amongst Banks: It is the practice and
customary usage amongst banks to exchange credit information relating to the
constituents in their mutual interest. But the credit reports exchanged by banks are
brief and superficial. They are in general and guarded terms. Banks are reluctant
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Prime Bank Limited

to exchange meaningful credit information because they apprehend that legal

protection available to them will be lost if more facts are divulged to the enquiring
banks. A study Group appointed by the Reserve Bank concluded the existing
legal protection is adequate to permit banks to exchange meaningful credit
information on their constituents. The study Group, therefore, suggested that:
i) There should be free and frank exchange of credit information amongst the
banks; and
ii) There should be qualitative change in the contents of credit reports, which
should highlight the management practices of the customers, their behavioral
pattern with their buyers, sellers and with the bank instead of concentrating
entirely on the worth of assets and financial strength. Similarly, the customers
ability, business acumen and integrity and willingness to honor commitments
should also be covered in the Credit Reports.
iii) A central agency, to be called Credit Information Trust, i.e., CREDIT be
established for organized collection, collation, storage and exchange of credit
information amongst the banks.
3.9 Securities
To make the loan secured, charging sufficient security on the credit facilities is very
important. The banker cannot afford to take the risk of non-recovery of the money lent.
PBL charges the following two types of security, a
Primary security: These are the security taken by the ownership of the
items for which bank provides the facility.
b Collateral security: Collateral securities refer to the securities deposited

by the third party to secure the advance for the borrower in narrow sense.
In wider sense, it denotes any type of security on which the bank has a
personal right of action on the debtor in respect of the advance.
3.10 Modes of Charging Security

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Prime Bank Limited

There are different modes of charging securities are exercised by the bank:
1. Pledge: Pledge is the bailment of the goods as security for payment of a debt or
performance of a promise. A pledge may be in respect of goods including stocks
and share as well as documents of title to goods such as railway receipt, bills of
lading, dock warrants etc. duly endorsed in banks favor.
2. Hypothecation: In case of hypothecation, the possession and the ownership of
the goods both rest the borrower. The borrower to the banker creates an equitable
charge on the security. The borrower does this by executing a document known as
Agreement of Hypothecation in favor of the lending bank.
3. Lien: Lien is the right of the banker to retain the goods of the borrower until the
loan is repaid. The bankers lien is general lien. A banker can retain all securities
in his possession till all claims against the concern person are satisfied.
4. Mortgage: According to section (58) of the Transfer of Property Act,1882
mortgage is the transfer of an interest in specific immovable property for the
purpose of securing the payment of money advanced or to be advanced by way of
loan, existing or future debt or the performance of an engagement which may give
rise to a pecuniary liability. In this case the mortgagor does not transfer the
ownership of the specific immovable property to the mortgagee, only transfers
some of his rights as an owner. The banker exercises the equitable mortgage.
3.11 Documentation
Documentation can be described as the process or technique of obtaining the relevant
documents. In spite of the fact that banker lends credit to a borrower after inquiring about
the character, capacity and capital of the borrower, he must obtain proper documents
executed from the borrower to protect him against willful defaults. Moreover, when
money is lent against some security of some assets, the document must be executed in
order to give the banker a legal and binding charge against those assets. Documents
contain the precise terms of granting loans and they serve as important evidence in the
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Prime Bank Limited

law courts if the circumstances so desire. Thats why all approval procedure and proper
documentation shall be completed prior to the disbursement of the facilities.
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Prime Bank Limited

3.12 Charge Documents:

Following charge documents are necessary while giving loans.
For SOD against F.D.R/P.S.P./Saving Scheme/General Loan:
a) Demand promissory (D.P.) note.
b) Letter of Arrangement.
c) Letter of Lien.
d) Letter of Continuity.
For SOD General, Cash Credit (C.C.) Hypothecation:
b) Letter of Arrangement.
c) Letter of Hypothecation.
d) Letter of continuity.
e) Supplementary Arrangement.
For Staff Loan:
b) Letter of Undertaking.
c) Letter of Authority.
d) Letter of installment.
e) Letter of Disbursement.
f) Letter of Arrangement.
g) Letter of Hypothecation.
h) Supplementary letter of
Hypothecation/pledge.
For Public Limited Company:

With the above documents, Personal Guarantee of all directors is necessary.
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Prime Bank Limited

3.12.1 Letter of guarantee:

This is a document given by the proprietor, directors or the third party in favor of the
principal debtor. The beneficiary of this document is the bank. Surety is bound to pay the
guaranteed amount if such situation arises.
3.12.2 Counter guarantee:
The principal debtor agreeing that if the guarantor pays any amount, the principal debtor
is bound to pay this amount gives this guarantee.
3.12.3 Letter of authority:
BY this letter, the principal debtor gives the authority to the bank to debit the current
account or investment account of the principal debtor for the following cases:
i
Insurance premium and
ii
Any other expenses regarding these functions.
3.12.4 Letter of recall the loan:

This letter is given to the bank by the borrower, giving the bank the right of recalling the
loan amount at any time if the borrower fails to repay any one of the installments. And
the borrower can not protest such recalling.
3.12.5 Letter of continuity:
By this letter, the borrower agrees that the promissory note given by the bank will be act
as security for the repayment of the ultimate balance or sum remaining unpaid on account
of the overdraft or advance.
3.12.6 Letter of revival:
By this letter, the borrower agrees that he will be liable to bank for payment of the
promissory note with interest in respect of all present and future indebtedness liabilities
secured thereby which promissory note is to remain in force with all relative securities,
agreements and obligations.
3.12.7 Joint promissory note:
This promissory note is given to the bank by the borrower if the borrowers are more than
one person.
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Prime Bank Limited

3.12.8 Single promissory note:

The borrower to the bank gives this promissory note if the borrower is a single person.
3.12.9 Letter of undertaking:
This document is given to the banker by the borrower acknowledging the right to cancel
the facility at any time with or without intimation to the borrower..
3.12.10 Loan disbursement letter:
By this letter, the borrower request to disburse the loan sanctioned in his favor by the
bank. All the persons, in whose names the account is opened, should sign the letter.
3.12.11 Charge over bonds or certificate of shares etc.:
It is a document given by the borrower to the banker declaring that the stocks, shares,
debentures, securities and investments which are now deposited to the bank and which
may from time to time be deposited by the borrower shall stand charged and
hypothecated to bank as security for the payment to bank on demand of the balance of the
loan amount and of any other indebtedness and liability to the bank of any kind whether
mature or accruing and whether incurred alone or jointly with others and whether as
principal or surety including all interest document, commission, expenses, charges and
costs incurred by the bank in relation any such indebtedness or liability.
3.12.12 Letter of lien against fixed deposit receipt:
By this letter, the borrower gives the right to the bank to hold the Fixed Deposit Receipt
(FDR) if the borrower fails to repay or adjust the loan on demand or discharge the
liabilities to bank. In this letter, FDR number, issuing branch, name of the favoring
person and amount are written.
3.12.13 Letter of authority to encash FDR:
By this letter, the borrower gives the right to bank to encash the FDR in case of need.
Here the amount and address of the bank of issue and the signature of the holders are
given.
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Prime Bank Limited

3.12.14 Memorandum of deposit of title deeds:

Here the mortgagor agrees that he has deposited necessary documents of the property to
the bank.
3.12.15 Hypothecation of goods to secure a demand cash credit or overdraft or loan
account:
Here the amount of loan, interest, and the name of the borrowers are written. Here the
bank and the borrowers agree on the following terms:
Security
Balance due to the bank
Borrowers not to the encumber or parts of the goods
Sale
Inspection
Insurance
Margin
Interest rate
Repayment
Sale of goods
Deficiency
Surplus
Statement of account
Continuing security
Title
Saving
Change of borrowers and
3.12.16 Guarantee by third party:
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Prime Bank Limited

Sometimes third party guarantee is needed for allowing loan. Here third party gives the
guarantee that of the principal debtor fails to repay the loan, and then the guarantor will
be bound to repay the loan to bank.
3.12.17 Hypothecation of vehicle:
This document is necessary in case of transport loan. Here the borrower hypothecated the
vehicle to the bank. In case of failure of repay the loan, bank will sell the vehicle to
collect the money.
3.13 Documents required for relevant advances

1. Loan:
a
D P Note signed on revenue stamp
Letter of arrangement.
Letter of disbursement.
Letter of partnership (partnership firm) or Board of resolution (limited

companies).
Letter of hypothecation.
Letter of lien and ownership / share transfer form (in case of advance against
share).
Letter of lien for packing credit.
Letter of lien (in case of advance against F D R)
Letter of lien and transfer authority.(in case of advance against P S P, B S P)
Legal documents for mortgage of property (As draft by legal adviser)
Copy of sanction letter mentioning details of terms and condition duly

acknowledge by the borrower
Trust receipt.
2. Overdraft:
a
D P Note.
Letter of partnership.
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Prime Bank Limited

Letter of continuity.
Letter of lien.
Letter of lien and ownership /share transfer form (in case of advance against
share).
Letter of lien and transfer authority.
Legal documents for mortgage of property.
3. Cash Credit:
a
D P Note.
Letter of partnership.(in case of partnership farm) or Board of resolution (in

case of limited company)
Letter of continuity
Letter of hypothecation [In case of cash credit (Hypothecation)]
Legal documents for mortgage of property
5. Bills purchased:
a. D P Note.
b. Letter of partnership.(in case of partnership farm) or Board of resolution( in case
of limited company)
c. Letter of arrangement.
d. Letter of acceptance, where it calls for acceptance by the drawee.
e. Letter of hypothecation of bill.
3.14 Credit Disbursement:

Having completely and accurately prepare the necessary loan documents, the loan officer
ready to disburse the loan to the borrowers loan account. After disbursement, the loan
needs to be monitored to ensure whether the terms and conditions of the loan fulfilled by
both bank and client or not.
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Prime Bank Limited

3.15 Credit Monitoring, Follow-Up &Supervision:

Credit monitoring implies that the checking of the pattern of use of the disbursed fund to
ensure whether it is used for the right purpose or not. It includes a reporting system and
communication arrangement between the borrower and the lending institution and within
department, appraisal, disbursement, recoveries, follow-up etc.
PBL Officer checks on the following points,
a
The borrowers behavior of turnover
The information regarding the profitability, liquidity, cash flow situation and trend
in sales in maintaining various ratios.
The review and classification of credit facilities starts at Credit Department of the Branch
with the Branch Manager and finally with Credit Division- Head Office.
3.16 Classification Procedure:

After the date of expiry, if the borrowers do not adjust their loan, PBL at first gives a
notice to them. The period of giving notice depends on the nature of the loan. For
continuous loan, PBL gives notice for three months. For five-year term loan, PBL gives
notice for six months. And for more than five-year term loan, PBL gives notice for more
than 12 months.
After giving notice, if the borrower does not repay the loan, the loan will be considered as
classified.
Pursuant to Bangladesh Banks Banking Regulation and policy Department's Circular No.
16 (1998), loans and advances are classified both on aging and functional criteria as
follows:
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Prime Bank Limited

For Term loan up to 5 years

(CCS, HBL-commercial, etc)
Overdue period
(in months)
3 to less than 6
6 to less than 12
12 to less than 18
18 to above
CL Status
SMA
SS
DF
BL
For Term loan of more than 5 years

(Project loan, Industrial term loan)
Overdue period
CL Status
(in months)
3 to less than 12
12 to less than 18
18 to less than 24
24 to above
SMA
SS
DF
BL
For Continues loan

(CC, SOD)
Overdue period
(in months)
3 to less than 6
6 to less than 9
9 to less than 12
12 to above
CL Status
SMA
SS
DF
BL
Following measures are available for non-repayment of loanI)
To issue notice for adjustment

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Prime Bank Limited

ii)
To issue legal notice for filing suite.
iii
To encash securities (in case of demand loan)
iv
To issue legal notice for selling the hypothecated goods (in case of
transport loan, cash credit-hypo).
To issue suite for foreclosure.
vi
Finally to sue in money loan court or insolvency court whichis

suitable.
3.17 Credit Risk Grading (CRG)

Credit risk grading is an important tool for credit risk management as it helps the
Banks & financial institutions to understand various dimensions of risk involved in
different credit transactions. The aggregation of such grading across the borrowers,
activities and the lines of business can provide better assessment of the quality of
credit portfolio of a bank or a branch. The credit risk grading system is vital to
take decisions both at the pre-sanction stage as well as post-sanction stage. At the
pre-sanction stage, credit grading helps the sanctioning authority to decide whether
to lend or not to lend, what should be the loan price, what should be the extent of
exposure, what should be the appropriate credit facility, what are the various
facilities, what are the various risk mitigation tools to put a cap on the risk level.
At the post-sanction stage, the bank can decide about the depth of the review or
renewal, frequency of review, periodicity of the grading, and other precautions to
be taken.
The Lending Risk Analysis (LRA) manual introduced in 1993 by the
Bangladesh Bank has been in practice for mandatory use by the Banks & financial
institutions for loan size of BDT 1.00 crore and above. However, the LRA manual
suffers from a lot of subjectivity, sometimes creating confusion to the lending
Bankers in terms of selection of credit proposals on the basis of risk exposure.
Meanwhile, in 2003 end Bangladesh Bank provided guidelines for credit risk
management of Banks wherein it recommended the introduction of Risk Grade
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Prime Bank Limited

Score Card for risk assessment of credit proposals.
Bangladesh Bank expects
all commercial banks to have a well defined credit risk management system, which
delivers accurate, and timely risk grading. In practice, a banks credit risk grading
system should reflect the complexity of its lending activities and the overall level
of risk involved. The following procedure is followed by PRIME BANK Limited
to Grade Credit Risks.
3.17.1 Risk Grading:

After preparation of Risk Grading Scorecard, concerned Relationship Officer will assign
risk grade to the customer within the following Credit Risk Grading Model:
GRADING
SHORT NAME
NUMBER
SCORE
Superior
SUP
100% Cash covered

Government guarantee
International Bank guarantee
Good
GD
85+
Acceptable
ACCPT
75-84
Marginal/Watch
MG/WL
65-74
Special Mention
SM
55-64
Sub Standard
SS
45-54
Doubtful
DF
35-44
Bad & Loss
BL
<35
list
3.17.2 Credit Risk Grading Definitions A clear definition of the different categories
of Credit Risk Grading is given as follows:
Superior - (SUP) 1
Credit facilities, which are fully secured i.e. fully cash covered.
Credit facilities fully covered by government guarantee.
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Prime Bank Limited

Credit facilities fully covered by the guarantee of a top tier international Bank.
Aggregate Score of 85 or greater based on the Risk Grade Score Sheet
Good - (GD)
Strong repayment capacity of the borrower
The borrower has excellent liquidity and low leverage.
The company demonstrates consistently strong earnings and cash flow.
Borrower has well established, strong market share.
Very good management skill & expertise.
All security documentation should be in place.
Credit facilities fully covered by the guarantee of a top tier local Bank.
Acceptable - (ACCPT)
These borrowers are not as strong as GOOD Grade borrowers, but still
demonstrate consistent earnings, cash flow and have a good track record.
Borrowers have adequate liquidity, cash flow and earnings.
Credit in this grade would normally be secured by acceptable collateral (1st
charge over inventory / receivables / equipment / property).
Acceptable management.
Acceptable parent/sister company guarantee.
Aggregate Score of 75-84 based on the Risk Grade Score Sheet.
Marginal / Watch list - (MG/WL) 4
This grade warrants greater attention due to conditions affecting the borrower,
the industry or the economic environment.
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Prime Bank Limited

These borrowers have an above average risk due to strained liquidity, higher
than normal leverage, thin cash flow and/or inconsistent earnings.
Weaker business credit & early warning signals of emerging business credit
detected.
The borrower incurs a loss.
Loan repayments routinely fall past due.
Account conduct is poor, or other untoward factors are present.
Credit requires attention.
Aggregate Score of 65-74 based on the Risk Grade Score Sheet.
Special Mention - (SM)

This grade has potential weaknesses that deserve managements close attention.
If left uncorrected, these weaknesses may result in a deterioration of the
repayment prospects of the borrower.
Severe management problems exist.
Facilities should be downgraded to this grade if sustained deterioration in
financial condition is noted (consecutive losses, negative net worth, excessive
leverage),
An Aggregate Score of 55-64 based on the Risk Grade Score Sheet.
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Prime Bank Limited

Substandard - (SS) - 6
Financial condition is weak and capacity or inclination to repay is in doubt.
These weaknesses jeopardize the full settlement of loans.
Bangladesh Bank criteria for sub-standard credit shall apply.
Doubtful - (DF) - 7
Full repayment of principal and interest is unlikely and the possibility of loss is
extremely high.
However, due to specifically identifiable pending factors, such as litigation,
liquidation procedures or capital injection, the asset is not yet classified as Bad
& Loss.
Bangladesh Bank criteria for doubtful credit shall apply.
Bad & Loss - (BL) 8
Credit of this grade has long outstanding with no progress in obtaining

repayment or on the verge of wind up/liquidation.
Prospect of recovery is poor and legal options have been pursued.
Proceeds expected from the liquidation or realization of security may be
awaited. The continuance of the loan as a bankable asset is not warranted, and
the anticipated loss should have been provided for.
This classification reflects that it is not practical or desirable to defer writing
off this basically valueless asset even though partial recovery may be affected
in the future. Bangladesh Bank guidelines for timely write off of bad loans
must be adhered to. Legal procedures/suit initiated.
Bangladesh Bank criteria for bad & loss credit shall apply.
An Aggregate Score of less than 35 based on the Risk Grade Score Sheet.
51
Prime Bank Limited

3.17.3 How To Compute Credit Risk Grading

The following step-wise activities outline the detail process for arriving at credit
risk grading.
Step I
Identify all the Principal Risk Components
Step II
Allocate weight to Principal Risk
Components
Step III
Establish the Key Parameters
Step IV
Assign weight ages to each of the key
Parameters
Step V
Input data to arrive at the score on the
key parameters.
Step VI
Arrive at the Credit Risk Grading based
On total score obtained
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Prime Bank Limited

3.17.4 Credit Risk Grading Process
Credit Risk Grading should be completed by a Bank for all exposures

(irrespective of amount) other than those covered under Consumer and Small
Enterprises Financing Prudential Guidelines and also under The Short -Term
Agricultural and Micro - Credit.
For Superior Risk Grading (SUP-1) the score sheet is not applicable. This will be
guided by the criterion mentioned for superior grade account i.e. 100% cash
covered, covered by government & bank guarantee.
Credit risk grading matrix would be useful in analyzing credit proposal, new or
renewal for regular limits or specific transactions, if basic information on a
borrowing client to determine the degree of each factor is a) readily available, b)
current, c) dependable, and d) parameters/risk factors are assessed judiciously and
objectively.
Relationship manager should ensure to correctly fill up the Limit Utilization Form
in order to arrive at a realistic earning status for the borrower.
Risk factors are to be evaluated and weighted very carefully, on the basis of most
up-to-date and reliable data and complete objectivity must be ensured to assign
the correct grading. Actual parameter should be inputted in the Credit Risk
Grading Score.
Credit risk grading exercise should be originated by Relationship Manager and

should be an on-going and continuous process. Relationship Manager shall
complete the Credit Risk Grading Score Sheet and shall arrive at a risk grading in
consultation with a Senior Relationship Manager and document it as per Credit
Risk Grading Form, which shall then be concurred by the Credit Officer in
consultation with a Senior Credit Officer.
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Prime Bank Limited

All credit proposals whether new, renewal or specific facility should consist of a)
Data Collection Checklist, b) Limit Utilization Form c) Credit Risk Grading Score
Sheet, and d) Credit Risk Grading Form.
The credit officers then would pass the approved Credit Risk Grading Form to
Credit
Administration
Department
and
Corporate
Banking/Line
of
Business/Recovery Unit for updating their MIS/record.
The appropriate approving authority through the same Credit Risk Grading Form
shall approve any subsequent change/revision i.e. upgrade or downgrade in credit
risk grade.
3.18 Conclusion:
Credit Management policies and techniques used in PBL at present no doubt is
comparable to international standards. The officials follow the policy very strictly. They
are choosy and conservative in sanctioning loan. The proposal is thoroughly scrutinized
by the loan sanctioning authority. The total function of the credit division is monitored
periodically. The banks classified loan to the total Advance is very low. As the advance
amount increasing, classified loan amount is also increasing at a very low increasing rate.
Management and others related to Prime Bank are trying to formulate new services and
products. They are very quick in giving decision. The major source of fund raised from
FDR scheme. It raised the cost of fund. Increasing savings deposit may reduce it. There is
a scope to expand credit facility. It may help to increase the interest income.
54
Prime Bank Limited

4.1Sector wise distribution of loans & advance in PBL

Sector
Percentages
Staff Loan
Corporate Loan
SME Loan
Retail Loan
Credit Card
1%
83.85%
6.76%
7.85%
0.54%
Sector wise Distribution of loan
8%1%1%
7%
Staff Loan
Corporate Loan
SME Loan
Retail Loan
Credit Card
84%
Analysis
In 2011 the bank has distributed loans and advance to different sectors as follow:
1.
2.
3.
4.
5.
83..85% in corporate loan

6.76% in SME loan
1% in staff loan
7.85% in retail loan
.54% in credit card
4.2 Loan disbursement of PBL Halishahar Branch for

the year 2011.
55
Prime Bank Limited

4.2.1 RETAIL LOAN (Tk in millions)
Analysis
Any purpose loan issued throughout the year, each reached on average 2 million. Till
slight increasing from start to end of the year, meanwhile |Sopno Neer loan (home loan)
issued only in May, August and October. That last reached to over 12 million. Meanwhile
car lone issued to less than 2 million for month April, May and December.
4.2.2 CORPORATE LOAN (TK in MILLION)
56
Prime Bank Limited

Corporate Loan
14
12.06
12
10
6.49
64.58
3.87
3.41
2
0
JAN
FEB
MAR APRIL MAY JUNE
JULY
AUG
SEP
OCT
NOV
DEC
Analysis
The bar diagram says no lone is issued for the month January, February, March, June,
July, September, October, and November. In the April and May only term loan is issued
and another month in August that shows 3.87, 6.49 and 3.41 respectively. The majority of
all portion issued in August and December as CC both representing 9 and 12.06.
Meanwhile the only LTR-SME issued in December as indicates 4.58.
4.2.3 Secure Over Draft (TK in MILLION)
57
Prime Bank Limited

SOD
25
22.08
20.71
20
15
10
0 0
JAN
4.61
0.48
FEB
MAR
0
APRIL
MAY
JUNE
JULY
AUG
SEP
OCT
NOV
DEC
Analysis
The indicator of SOD own no information for Jan, March, April, May, June and August.
This solely in February as.001 for February and from July and December both represents
22.08 and 20.71. Meanwhile information for September to November is slowly increased
and sharp in November to December that reached on summit.
4.3 Total loan disbursement performance of PBL

for the year 2011.
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Prime Bank Limited

Disbursement
44
DEC
7.61
NOV
15.29
OCT
5.04
SEP
15.84
AUG
25.75
JULY
JUNE
3.41
15.43
MAY
6.28
APRIL
MAR
FEB
JAN
0
1.79
1.38
2.14
5
10
15
20
25
30
35
40
45
Analysis
The above figure indicates the total loan disbursement. It was exactly 25 million that
from steady to sharp increase from January to July. as the figure shows 2.14 to 25.75
million.
Meanwhile for the second half of the year it was rapid fluctuating declination to
November that reached 7.61 but reverse trends for December that has boosted 44 million.
so the overall tendency is to disbursement of loan to 3/4 quarter of ending year.
4.4 Total loan recovery performance of PBL for the year

2011.
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Prime Bank Limited

Analysis
Understanding the recovery it seems random fluctuating flows from 0.86 to 1.32 that
represents January and May respectively where started from the first month it increased
gradually after sharp fall from the first month 0.86 to 0.48 then increased to 0.56 and 0.71
where it boosted 1.32 after that it falls to 0.6 In June. And finally it reached to 0 recovery
in the month of December following a gradual descending 0.47,0.27, 0.13,0.06 in July,
August,October November and December respectively except slight increase of recovery
in September that indicates 0.36 millions
So over the graph indicates the gradual increases of recovery for first half and descending
order in last half. But a great recovery shows in the month of may almost 1.32 million
4.5 Comparisons between Disbursement and Recovery
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Prime Bank Limited

Disbursement VS Recovery
44
45
40
35
30
25.75
25
20
15.84
15.43
15.29
15
10
7.61
6.28
3.41
5 2.14 1.38 1.79

0
JAN
FEB
MAR APRIL
5.04
MAY
JUNE
JULY
AUG
SEP
OCT
NOV
DEC
Analysis
It is very in comparative figure of disbursement versus recovery. Their comparisons are
very discriminate but slight in first of three months and ratio comprised 1.75:1 but it is
over estimation to calculate it for the rest of year when the ratio is 44:0 in December.
5.1 Findings
There are 22 loan products in the loan portfolio of prime bank Ltd.
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Prime Bank Limited

The rate of interest is same for both high-risk borrower and low-risk borrowers
indicating average interest rate of Prime bank Ltd is around 18%.
There are seven steps in loan disbursement process.
In the credit portfolio the bank has disbursed loan & advance to different sectors
of which 83.85% in corporate loan, 6.76% in SME loan, 1% in staff loan, 7.85%
in retail loan, and 54% in credit card.
All types of loan having fluctuation in growth rate but the total growth rate of the
loan from January to December increase 163% for the round years.
In the year 2011 total sanctioned loan by Halishahar branch is Tk 143.96 million.
Considering the disbursement the performance of SOD (own) is in the

1st position.
The overall recovery of prime bank Halishahar branch is 4.043%.
The highest recovery of the loan gained in May which is Tk 1.32 million.
There are eight grades in the CRG system of PBL.
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Prime Bank Limited

5.2 Recommendations
For low risk borrower the rate of interest of Prime Bank Ltd need to be revised.
Through the credit analysis procedures followed by PBL is satisfactory it should
keep these process update as per requirement of changing regulations and
business environment.
The bank should take necessary step to reduce loan process time for consumer
loan and small enterprise financing.
The bank should give preference to SOD (OWN) and than other products so that
it can make more profit as well as risk free for bank.
The bank should strengthen its recovery system along with selecting the loan
request more carefully.
The bank should focus on the growth of loan so that interest income would be
high.
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Prime Bank Limited

5.3 Conclusion
Proper financial system of country can contribute towards the development of the
countrys economy. In our country banks are leading in the financial system. Again
private commercial banks, which are much better than state owned bank, are playing
significant as well as imperative role and the development of our country. Certainly PBL
is mobilizing its all resources on this same track to achieve maximum possible
contribution to the nation.
Despite stiff competition among banks operating in Bangladesh both foreign and local,
PBL has achieved satisfactory progress in areas of its operations and earned an
impressive operating income over the previous years. The bank hopes to achieve a
satisfactory level of progress in all areas of its operations including target of profitability.
In achieving the aforesaid objectives of the bank, credit operation is of paramount
importance as the greatest share of total revenue of the bank is generated from it,
maximum risk is centered in it and even the very existence of bank depends on prudent
management of its credit portfolio.
PBL perform phenomenally not only in credit management but also in the field of profit
earning. This was possible for having large deposit amount to invest in various profitable
projects.
From my part, I would like to suggest, a bank requires some special personal traits that
not every bank possesses. Among the most important of these are honesty, reliability,
thoroughness and willingness to always be open to new ideas and new ways of meeting
customer needs.
64
Prime Bank Limited

5.4 Bibliography
Annual Report of Prime Bank Ltd. 2011.

Website of PBL (www.primebank.com.bd)
Publication of Prime Bank Limited.
http://www.aresearchguide.com/1steps.html
Credit Risk Management Policy of Prime Bank limited.
Recovery of Loan Policy Guidelines, Prime Bank Ltd.
Credit risk grading manual of Bangladesh Bank.
Bank Statistics.
65

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