Internship report on Credit Management of Janata Bank Limited

Internship Report

Credit Management of Janata Bank Limited

Jamil Mahmud

Roll no. 114893

Reg. no.1101324893

BBA- 6th Batch

Department of Management Studies

Faculty of Business Studies

Jagannath University

August, 2015

Internship Report

Credit Management of Janata Bank Limited

Jamil Mahmud

Roll no. 114893

Reg. no.1101324893

6th Batch

Supervisor

Md. Rashedul hoque

Lecturer




August, 2015

Supervisor' Forwarding

………………………….

Md. Rashedul hoque

Lecturer




Jagannath University, Dhaka.

Letter of Transmittal

Md. Rashedul Hoque Sajib
Lecturer

Subject: Submission of Internship Report.

Dear Sir,
This is my pleasure that I have completed my internship report and hereby
ready to
submit my report on "Credit Management of Janata Bank Limited".According to
the instruction I have worked on the actual loan operation & credit
management of JBL. I have really enjoyed the working environment of the
Janata Bank Limited, Badda Branch. I have tried my best to present all
those things that I have experienced over there while preparing my report.

I have thoroughly enjoyed the overall work during my internship period
which is
carrying vast description of practical knowledge. This report along with
all kinds of
necessary information regarding the internship is being submitted to you
for your
evaluation. I sincerely hope that you will appreciate my effort.

Sincerely yours,

__________________
Jamil Mahmud
BBA 6th Batch

Acknowledgement:

Education involves not only reading books and doing exercise but also
acquiring knowledge through doing in practical. I prepared this report for
considering these objectives. In this period of time, I enjoyed warm co-
operation from every person in the bank.
For the successful accomplishment of this report, first I would like to
thank Almighty Allah. And Finally I would like to thank to my honorable
supervisor for this report Md.Rashedul Hoque Sajib who has always given
support, effort and wise direction to reach at the peak level of
effectiveness to complete my report.
Additionally, with my warm gratitude from the deepest of my soul I would
like to remember all of them who have helped me from every aspect in
accomplishing this report as well as my internship program.
I also wish to render my grateful thanks to all senior and junior officers
of Janata Bank Limited, Badda Branch, who helped me during the time of my
internship program at the bank. I must mention the excellent working
environment and the positive group behavior of this bank, which helped me
tremendously to observe the banking activities, work with the them and to
stay there for 45 days without any kind of uncomforted feel. I take this
opportunity to express my deep sense of gratitude, thanks and appreciation
to the following:

1. Md.Rashedul Hoque Sajib, for her help, encouragement, Guidance and
valuable suggestions throughout the period of this study, without which it
would not have been possible to submit this report on time.
2. All the officers and staffs of the Badda Branch for their co-operation
and assistance.
3. My friends who were beside me wherever they were needed
Finally, I would like to thank everyone at Janata Bank Limited, (Badda
Branch) who provided me with ideas and invaluable experience of the
corporate culture.

Jamil Mahmud

ID- 114893




Preface

As a part of the course curriculum, each student of the Business
Administration of Jagannath University has to accomplish a project work,
which is to preparing an Internship report. In order to face the challenges
of the new millennium, there is no better sector for us than to learn about
the Banking system and its Activities. The report has been prepared on the
basis of Loan and advancement activities and the analysis of performance of
the bank in a specific financial year. I have prepared this Internship
report on "Credit Management of Janata Bank Ltd" which is one of the better
positions within the bank .I tried my level best to learn something during
3months internship period and prepared this report. The case study will
play a great role to teach us about the Bank and its rules, activities and
practices in different field and different sectors of the country.

Executive Summary

Commercial banks lend money to different categories of borrowers for
various purposes with a view to generating revenue. Accordingly, while
processing and appraising a loan proposal, banks essentially analyze the
information relating to borrowers, assess the purposes of loan
and determine the viability of the loan proposal. If the proposal is sound
and safe for lending, loan is sanctioned and disbursed. The report
discusses about the management practices of different credit facilities,
approval process, monitoring and performances of the bank under study.
This report is categorized in seven different chapters. Firstly, the
introductory of the study. Secondly, overview of the organization.
Thirdly, Concept of Credit Management. Fourth portion of this report is
Credit Risk Management Process. Fifth the classified loans and Bangladesh
Bank guidelines. Then the performance of Badda Branch JBL. Next discussion
is the analysis and findings about different variables of Credit
facilities. At the end, the report makes some valuable recommendations.

Janata Bank Limited is the second largest Government owned Bank. It
operates credit facilities for business purpose as well as welfare of the
economy. Bank finance at the rural level at a very low interest rate. It
has also Special loan procedures for the rural farmers. This helps for the
development of the rural economy of the country. As a government owned
bank, Janata Bank Ltd. faces different problems for credit facilities. But
still it has more transparent Credit program than other government banks

BACKGROUND OF THE STUDY

After completion of all the credit hours of BBA program demands a report on
practical experience. Internship program is a must criterion for Bachelor
of Business Administration (BBA) students, designed to put them in a
challenging environment of the relevant field, where the students get
sample opportunity to apply their theoretical knowledge into practical
applications. During the internship training, students have the opportunity
to adopt themselves into the particular environment of the organization. It
provides a unique opportunity to see the reality of business during student
life, which enables them to building confidence and working knowledge in
advance of the start of their career. To fulfill this requirement every
university of business arrange a program of internship. Here we get a
chance to apply our theoretical knowledge that we acquired from class
lectures, books, journals, case studies, seminar, project, workshop, etc
and compare them with practical setting. As part of the internship program
of Masters of Business Administration course requirement,

Table of Contents:

"Topic "Page "
" "Number "
" "CHAPTER ONE " "
" "INTRODUCTION " "
"1.1 Origin of the study "9 "
"1.2 Rationale "9 "
"1.3 Objective of the Report "10 "
"1.4 Scope of the study "10 "
"1.5 Acronyms "11 "
" "CHAPTER TWO " "
" "PROFILE OF JANATA BANK " "
"2.1 History of Janata Bank Limited "12 "
"2.2 Corporate Profile of JBL "12-13 "
"2.3 Board of Director "14-15 "
"2.4 Mission of Janata Bank Limited "15 "
" 2.5 Vision of Janata Bank Limited "15 "
"2.6 Values of Janata Bank Limited "15 "
"2.7 Key Milestones of Janata Bank Ltd "16-18 "
"2.8 Services Provided by Janata Bank Ltd "18-23 "
"2.9 Hierarchy of position "23 "
" "CHAPTER THREE " "
" "METHODOLOGY " "
"3.1 Limitations of the report "24 "
"3.2 Methodology of the report "24 "
" "CHAPTER FOUR " "
" "CREDIT MANAGEMANT SYSTEM JANATA BANK LIMITED " "
"4.1 What is Credit? "25 "
"4.2 Credit Related Information of Janata Bank "26 "
"Limited, Badda Branch: " "
"4.3 Types of Credit Offered by Janata Bank Limited "27-30 "
"4.4 Credit Management System "30-34 "
"4.5 Credit Risk Management System of JBL: "35-43 "
"4.6 Special Credit Schemes of Badda Branch "44-48 "
"4.7 Credit Evaluation Principles "48-49 "
"4.8 Problems in Loan Recovery "49-51 "
" " "
" "CHAPTER FIVE " "
" "CONCLUSION & RECOMMENDATIONS " "
"5.1 Findings of the Report "52 "
"5.2 Recommendations "53 "
"5.3 Conclusion "54 "
"References "55 "
"Bibliography "55 "

CHAPTER-ONE
(INTRODUCTION)

1.1 Origin of the Report
BBA program is designed with an excellent combination of theoretical and
practical aspects. As the classroom discussion alone cannot make a student
perfect in handling the real business situation, so it is an opportunity
for the students to know about real life situation through this internship
program. This internship program provides the students to link up their
theoretical knowledge with practical fields. In this connection, I was
assigned to Janata Bank Badda Branch, Credit department for my practical
orientation.
I am required to prepare an internship report under the supervision of our
honorable teacher Md.Rashedul Hoque Sajib on "Credit Management System of
Janata Bank Limited" to conduct a depth analysis on this subject matter. I
have tried my level best to present my experience of the practical
orientation in this report.

1.2 Rationale:
Bangladesh is one of the developing country in the world. The economy of
the country has a lot left to be desired and there are lots of scopes for
massive improvement. In an economy like this, Credit Performance can play a
vital role to improve the overall economic condition of the country. The
banks by playing the role of an intermediary can mobilize the excess fund
of surplus sectors to provide necessary finance, to those sectors, which
are needed to promote for the sound development of the economy.
This report is an effort to reflect a clear idea about the strategies,
activities, and performance of Bangladesh regarding Credit Performance
Business.

1.3 Objectives of the report

The objectives of the report are to determine how credit policy applied in
sanctioning and recovering loans and advances. Credit policy varies in
terms of loan sector, status of the organization, government policy, fiscal
budget and guidelines etc.

Specific objectives:
ϖ To present an overview of Janata Bank Limited.
ϖ To measure the effectiveness of the bank in the utilization of available
resources.

ϖ To assess the credit structure of the Janata Bank. Limited in practice.

ϖ To identify the recovery performance of Janata Bank. Limited.

ϖ To point out the problems in fund utilization and recovery thereon.
ϖ To make a critical reasoning in respect to the treatment of provision for
bad and doubtful credit.
ϖ To assess and highlight on the legal actions followed by the Janata Bank.
Limited.
ϖ To find out the extent of similarities and dissimilarities in the course
of action followed by Janata Bank. Limited.
ϖ To compare the credit supervision of Janata Bank. Limited.

ϖ To find out problems and suggesting recommendations for further
improvement.

1.4 Scope of the report
Janata Bank Limited is the second largest commercial Bank in Bangladesh.
Janata Bank Limited operates through 898 branches including 4 overseas
branches. It is linked with 1239 foreign correspondents all over the
world. I am assigned to learn practical knowledge from Janata Bank
Limited, at Badda Branch. In this study I would try to concentrate on the
theoretical aspect of credit management, that is, the definition of credit
management, policy of credit management, tools for managing credit etc. I
would analyze the data on the bank and various programs for loan recovery,
problems in loan in loan recovery, pattern of loan recovery and the
performance of the bank under study in loan recovery, the information in
respect to the classification of unsound credit and provision thereon and
also concentrates on the performance of the bank. And finally I would
conclude with the critical evaluation of the credit management under the
guidelines of the Bank Companies Act 1991, IAS#30 and a discussion on the
major findings and recommendations.

1.5 Acronyms:

BB Bangladesh Bank
CRG Credit Risk grading
CRM Credit Risk Management
FDR Fixed Deposit Receipt
JBL Janata Bank Limited
L/C Letter of Credit
GM General Manager
DMD Deputy Managing Director
DGM Deputy General Manager

CHAPTER-TWO
(PROFILE / JANATA BANK LIMITED)

2.1 History of Janata Bank LTD
Janata Bank Limited welcomes you to explore the world of progressive
Banking in Bangladesh. It is a state owned commercial bank and is
catering the need of the mass business people. It was corporatized on
15th November 2007. Janata Bank was born with a new concept of purposeful
banking sub serving the growing and diversified financial needs of
planned economic development of the country. Our commitment and the
people's belief in us have given us the edge over others to earn this
trust about the safe keeping of their money in the right kind of banking
channel. Janata Bank Limited, one of the state owned commercial banks in
Bangladesh, has an authorized capital of Tk. 20000 million (approx. US$
283.33 million). The total asset of the bank in FY 2013 was BDT 586,083
million which was BDT 511,129 million in the previous year. Net profit of
the bank stood at BDT 9,551.39 million in the FY 2013 as against BDT
15,280.34 million net losses in the previous year. The deficit of capital
of bank was BDT 20,117 million in the FY 2012 which has transformed into
a surplus of BDT 908 million in the FY 2013. As a result capital adequacy
ratio rose from 3.70% to 10.27%. Janata Bank Limited operates through 898
branches

2.2 Corporate Profile of Janata Bank:
"Name : "Janata Bank Limited "
"Registered Address : "Janata Bhaban 110, Motijheel "
" "Commercial Area Dhaka – 1000. "
"Date of Incorporation : "21 May, 2007 "
"Authorized Capital : "TK. 20,000 Million "
" Paid up Capital "TK. 5,000 Million "
"Reserve "TK.10823.01 Million "
"Retained surplus "Tk. 5167.18 Million "
" Asset " Tk. 345233.92 Million "
"Face value of per share "TK. 100 per share "
"Shareholding Pattern "100% Share owned by the Government "
" "of Bangladesh "
"Domestic Network: "
"Numbers of Branch "898 "
"Numbers of Divisional Office "10 "
"Numbers of Area Office "47 "
"Numbers of AD Branches "57 "
"Overseas Network: "
"Numbers of Branch "04 "
"Subsidiaries: "
"1. Janata Capital and Investment Ltd. "
"2. Janata Exchange Company "
"Numbers of Correspondent "1239 "
"Number of Exchange House "68 "
"Departments "38 "
"Numbers of Employees "15,485 "
"Banking License (obtained from "31 May, 2007 Bangladesh Bank) "
"Telex "675840 JBDBJ, 671288 JBHOBJ "
"Phone "9560000, 9566020, 9556245-49, "
" "9565041-45, 9560027-30. "
"Fax "88-02-9564644, 9560869 "
"E-mail "[email protected] "
"Swift "JANB BDDH "
"Corporate Rating Status "
"Entity Rating (2012) "A+ in the long run : "
" "AR-2 in the short run As Government"
" "owned Bank : AAA in the long run : "
" "AR-1 in the short run "

2.3 Board of Directors:
The Board of Directors is composed of 11 (eleven) members headed by a
Chairman. The Directors are representatives from both public and private
sectors. The name and position of directors are as under.
Chairman of the Board of Directors
Professor Dr. Abul Barkat
Members of the Board of Directors
Dr. Jamaluddin Ahmed, FCA
Mr. Md. Emdadul Hoque
Mr. Nagibul Islam Dipu
Dr. R M Debnath Syed Bazlul Karim, B.P.M.
Prof. Mohammad Moinuddin
Mr. Md. Abu Naser
Mrs. Sangita Ahmed
Prof. Dr. Nitai Chandra Nag
Mr. A.K.M Kamrul Islam, FCA
Mr. Md. Mahabubur Rahman Hiron
Mr. S M Aminur Rahman, CEO & Managing Director

2.4 Mission of the Janata Bank
1. To actively participate in the socio- economic development of the
nation by
2. Operating a commercially sound banking organization.
3. Providing credits to viable borrowers.
4. Efficiently delivered and competitively priced credit for the viable
borrower.
5. Simultaneously protecting depositor's funds.
6. Providing a satisfactory return on equity to the owners.
2.5 Vision of the Janata Bank

To become effective largest commercial bank in Bangladesh to support socio-
economic development of the country and to be a leading bank in South-Asia.

2.6 Values of Janata Bank Ltd.
Janata Bank Ltd. holds the following values and will be
guided by them as they do their jobs.
Creating an honest, open and enabling environment.
Have a strong customer focus and relationships based on
integrity, superior service and mutual benefit.
Strive for profit & sound growth.
Work as a team to serve the best interest of their owners.
Relentless in pursuit of business innovation and improvement.
Value and respect people and make decisions based on merit.
Base recognition and reward on performance.
Responsible, trustworthy and law-abiding in all that they do.

2.7 Key Milestones of Janata Bank Ltd.
International Awards
Recently The Bank has been recognized nationally and
internationally for its
outstanding performance.
Janata Bank Limited achieves '2013 Performance Excellence
Award' by Citi Bank N.A. Citi Bank N.A recently recognized
Janata Bank Limited with '2013 Performance Excellence Award'. The
awarding ceremony was held on 11 September, 2013 at the Head Office
premise of the BankJanata Bank Ltd achieved this award for
solidifying leadership in the payment space.
Janata Bank Limited won 'The Asian Banking & Finance Wholesale
Banking Awards 2013 & Retail Banking Awards 2013, awarded by Asian
Banking and Finance (ABF) Magazine, a concern of Carlton Media Group
(CMG), Singapore. Evaluating Janata Bank Limited's last year's
performance in different fields the magazine has judged JBL
winner of three awards in two following categories:
A. Asian Banking & Finance Wholesale Banking Awards 2013
i. Bangladesh Domestic Project Finance Bank of the Year
ii. Bangladesh Domestic Trade Finance Bank of the Year
B. Asian Banking & Finance Retail Banking Awards 2013
iii. Domestic Retail Bank of the Year Bangladesh

"The Banker"- a magazine of Financial Times Group, London
ranked JBL in its Global Ranking of Banks-2012 as follows:
i. Top 5 ROC, Asia pacific- 1st
ii. Top 25 top 1000 ontenders,Tier-1 growth- 4th
iii. Top 1000 Contenders by region, Asia Pacific- 7th
iv. Top 25 top 1000 Contenders, ROC -16th
v. Top 100 of the top 1000 Contenders-23rd
The Banker" selected winning banks based on their overall performance.
Janata Bank Limited has been awarded 'Business Asia Most
Respected Company Awards-2012' by Business Asia. Business Asia has
selected winning banks based on Overall performance.
ICMAB Best Corporate Award-2011: Janata Bank Limited has been awarded
ICMAB Best Corporate Award - 2011 by the Institute of Cost and
Management Accountants of Bangladesh. This Bank secured first
position among the State Owned Commercial Banks in Bangladesh.
World's Best Bank Award-2009 in Bangladesh: Janata Bank Limited was
awarded Best Bank-Bangladesh in the Global Finance, World's Best
Bank Awards, 2009 by New York based Financial Magazine
"Global Finance". "Global Finance" has selected winning banks
based on number of criteria including growth in Assets,
Profitability, Strategic relationships, Customer
Service,Competitive pricing and innovative products.
World's Best Bank Award-2008 in Bangladesh: Janata Bank Limited was
awarded Best Bank-Bangladesh in the Global Finance, World's Best
Bank Awards, 2008 by New York based Financial Magazine
"GlobalFinance". "Global Finance" has identified winning banks based
on number of criteriaincluding growth in Assets, Profitability,
Strategic relationships, Customer Service, Competitive pricing and
innovative products.
Janata Bank Limited receives "Asian Banking Awards 2005" on
Credit Scheme for Handicapped People: The Awards were presented
by the Asian Bankers Association (ABA) and Bank Marketing
Association of the Philippines (BMAP) in the Asia Pacific
Bankers Congress (APBC) 2005 on June 17, 2005 in Manila, Philippines.
International Award -The Bank of the Year-2004 in Bangladesh Janata
Bank Limited has been awarded as 'The bank of the year 2004 in
Bangladesh by the London based Financial Magazine "The Banker of
the Financial Times Group". This is for the second consecutive year
that the Janata Bank Limited has been awarded 'Bank of the year'.
Janata Bank Limited shows a remarkable progress in the year 2003.
Its return on assets was 1.36% and return on investment was
6.47% respectively. Janata Bank Limited is also emerging as the strong
and innovative bank within the country. The profile of its
success is enriched by a package of new qualitative product
lines, prudent liability and assets management and others. Most of the
key financial indicators of the bank showed a very positive
improvement at the year ended December 2003.
Janata Bank Limited receives "Asian Banking Awards 2004" on
Financing Program for Women Entrepreneurship. Financing program for
Women Entrepreneurship of Janata Bank Limited has highly been
commended as a Runner-Up in the Micro-Finance Product or Program
category of the Asian Banking awards 2004. The Awards were presented
by the Asian Bankers Association (ABA) and Bank Marketing
Association of the Philippines (BMAP) in the Asia Pacific
Bankers Congress (APBC) 2004 on March 26, 2004 in Manila,
Philippines.
Janata Bank Limited gets "The Banker Award-2003" The Banker, an
International Banking Magazine of the Financial Times group in
London has selected Janata Bank Limited as "The Bank of the Year,
2003" among all other banks in Bangladesh. The Banker's assessment for
award is based on a number of criteria. Besides core data and
results, the criteria include key growth and performance
measures, the use of technology and particular achievement in
the past and overall strategy, it may be mentioned that Janata Bank
Limited could achieve the same award for the year 2001.

2.8 Services provided by Janata Bank
Janata Bank Ltd. offers all the major banking facilities and services to
its customers.
The Bank with its network spreading throughout the country has a
unique feature of
ploughing back savings from those places and then investing them into
different loan
portfolios.
Janata Bank Ltd. with its wide ranging branch network and skilled personnel
provides
prompt and personalized services like issuing:
1. Demand Draft
2. Telegraphic Transfer
3. Mail Transfer
4. Pay Order
5. Security Deposit Receipt
6. Transfer of fund by special arrangement
a. Normal transfer
b. Electronic transfer through Ready Cash Card
7. Foreign Remittance Payment

Interest Facilities:
The Bank provides the following Interest facilities:
Current/Savings/STD account status
FDR account status
Advance account status
Loan account status
NRB Accounts
International Banking
Janata Bank Limited has already established a worldwide network
and
relationship in international Banking through its 4 (four) overseas
branches
and 1239 foreign correspondents.
The bank has earned an excellent business reputation in handling and
funding
international trade particularly in boosting export & import of the
country.
The bank finances exports within the frame-work of the export
policy of the
country.
It is one of the pioneers in promoting back to back Letter of
Credit for the
RMG (Ready Made Garments) sectors.

Export Finance
To boost up country's Export, Janata Bank Limited has been
providing
different kinds of assistance to exporters. Some of which are as below:-
Providing Pre-Shipment and Post-Shipment Finance, Export Guarantee
and
bonding facility etc.
Concessional rate of interest for exports Finance.
Back to Back L/C under bonded Warehouse facility
Sight & Unasked L/C against Firm Contract for import of raw materials.
Sight L/C under EDF
Exporter's Retention Quota A/C both interest bearing and non-interest
bearing.
Export incentive Program.
Banking at Export Processing Zone
Scope for establishment of export oriented industry by 100%
foreign
investment and by joint-venture
The sole bank to disburse Government Export Promotion Fund against export

of computer software & data entry processing
Undergone to an agreement with Bangladesh Bank to obtain fund
from
Government EEF (Equity & Entrepreneurship Fund) to build up entrepreneur's
equity.
Consultancy and advisory services by an expert group of officials.
Special export financing program towards computer software data
entry and
service export.
Export Trend of Janata Bank.
(Taka in Crore)
Year 2009 8,865
Year 2010 11,851
Year 2011 15,375
Year 2012 15,652
Year 2013 15,325
Source: Janata Bank Limited, Annual Report 2009-2013 (page 21)

Scope of Further Expansion
The Janata Bank Ltd. has the following scopes for further expansion in
international
banking:-
Software and data entry
Jewellery
Frozen fish
Dry & dehydrated fish
Processed and semi-processed food fishes and shrimps
Electrical and electronics item
Toys and Luggage
Fashion item
Leather goods
Stationary goods
Diamond cutting and polishing
Orchid
Gift item
Bamboo, Cane and Wooden furniture

Working Capital Loan
from EPB under Government Export Promotion Fund
(EPF),Government Equity and Entrepreneurship Fund from Bangladesh Bank
Working Capital Loan from Epb Under The Government Export
Promotion
FundThe eligibility for obtaining this loan is:-Limited Company,
Partnership or Proprietorship firm having valid ERC and
members of BASIC or BCS.
Import Finance
Through quite a good number of Authorized Dealer Branches and 1198 nos.
foreign
correspondents world wide Janata Bank Limited has been extending full range
import
and relevant finance facilities.
Import Items:
Fuel & Lubricants.al Machineries and Industrial raw materials.
Intermediate goods.
Consumer durable, spare parts and equipment.
Consumer goods : Food & Food Grains, Baby food, Petroleum, CDSO
(Crude Degummed Soya bean Oil), CPO (Crude Palm Olin) Oilseeds, Cement
Clinker, Construction Materials, Fertilizer, Chemicals and many
other goods
permissible by Import by Import Policy of the country.
Facilities Offered:
Opening of L/C at competitive/ reasonable margin and commission
Interest at concession rate on import finance to the prime customers &
interest rebate
facilities.

Import Trend
Setting Industrial vision to facilitate optimally, bank's involvement has
been showing
sharp rising trend as under:
(Taka in Crore)
Year 2009 11,852
Year 2010 18,374
Year 2011 19,728
Year 2012 18,828
Year 2013 17,667
Correspondent Banking
Janata Bank Limited always aims to increase its foreign exchange business
The Bank
has been doing international banking with all major Banks of the world. It
has been,
however, handling bulk of the international businesses with the
following
multinational Banks:
i. Citibank N. A.
ii. American Express Bank Ltd.
iii. Standard Chartered Bank
iv. HSBC.
v. The Chase Manhattan Bank

Utility Services of Janata Bank Ltd.
Besides normal banking operation, Janata Bank Limited offers
special services to a
large number of clients/agencies throughout the country. Under the network
of utility
service, customers of different govt. organizations, corporate
bodies, local bodies,
educational institutions, students, etc are continuously getting benefits
from the Bank.
Janata Bank Limited's utility services are:

Bills Collection:
a. Gas bills of Titas, Bakhrabad and Jalalabad Gas Transmission and
Distribution Companies.
b. Electricity bills of Dhaka Electricity Supply Authority, Dhaka
Electricity
Company, Bangladesh Power Development Board and Rural
Electrification
Board.
c. Telephone bills of Telegraph and Telephone Board.
d. Water/Sewerage bills of Water and Sewerage Authority.
e. Municipal holding tax of City Corporation/Municipalities.
f. A pilot scheme is underway to provide personalized services to our
clients.

Payments made on behalf of Govt. to:
a. Non- Govt. teachers salaries
b. Girl Students scholarship/stipend & Primary Student Stipend.
c. Army pension d. Widows , divorcees and destitute Women Allowances
e. Old-age Allowances f. Food procurement Bills
Issuance of Television License:
The only Bank providing this service in Bangladesh
.2.9 Hierarchy of position

The JBL has its Divisional Office, Local Office, Regional office and 83
branches in Dhaka, and other regional office and other branches are held in
another district in country. While the full range of services is available
at the headquarters, other branches offer specific services appropriate for
the location. The organizational structure of the Janata Bank operation is
depicted in the following figure:

CHAPTER-THREE
(Methodology)

3.1 Limitations of the report
To prepare this report, I have faced some limitations, which are mentioned
below.
Limitation of time: It was one of the main constraints that hindered to
cover all aspects of the study.
Lack of Secondary Information: The secondary source of information was
not enough to complete the report.
Limitation of the Scope: Some confidential information was not disclosed
by various personnel of their respective department. Such as:

In many case the relevant authorities are not helpful to provide
information.
Since the Bank personnel were very busy with their activities, they
failed to co-operate me to complete this report.
The main difficulty of the study was insufficiency of current
information relevant to the study.
Consolidated data related to the study were not given due to time
shortage.
Duration of the study was too short to find out the exact calculation
from the Employee.

3.2 Methodology of the report
This report is done mainly secondary source of data and some primary
source.

The Primary source are :
Personal observation
Desk work in different section, of the bank.
Conversation with bank's employees.
Secondary Source:
Annual report of Janata Bank Limited
Variety of books, articles & journal related to banking.
Information from the internet.
Credit books, banking all credit documents.

CHAPTER-FOUR
(CREDIT MANAGEMANT SYSTEM OF JANATA BANK LIMITED)

4.1 What is Credit?

The word credit comes from the Latin word "Credo" meaning "I believe". It
is a lender's trust in a people /firms or company's ability or potential
ability and intention to repay. In other words, credit is the ability to
command goods or services of another in return for promise to pay such
goods or services at some specified time in the future. For a bank, it is
the main source of profit and on the other hand, the wrong use of credit
would bring disaster not only for the bank but also for the economy a
whole.
The objective of the credit management is to maximize the
performing asset and the minimization of the non-performing asset as well
as ensuring the optimal point of loan and advance and their efficient
management. Credit management is a dynamic field where a certain standard
of long-range planning is needed to allocate the fund in diverse field and
to minimize the risk and maximize the return on the invested fund.

4.2 Credit Related Information of Janata Bank Limited, Badda Branch:
(Account Information)

"Types of Account "Number of Account "Balance "
"Savings (Party A/C) "
"CD "380 "52642354.26 "
"SD "5575 "451256.36 "
"SND "14 "2644375.94 "
"Loan A/C "
"Party Loan A/C "
"CC "10 "15919279.00 "
"FDR "9 "1015057.00 "
"SOD "15 "1293146.00 "
"SBDS "21 "6084340.00 "
"Staff Loan "
"SHBL "6 "35848066.00 "
"SMCL "5 "1096776.00 "
"SCL "8 "389885.00 "

4.3 Types of Credit Offered by Janata Bank Limited
Cash Credit (Hypothecation)
The mortgage of movable property for securing loan is called hypothecation.
Hypothecation is a legal transaction whereby goods are made available to
the lending banker as security for a debt without transferring either the
property in the goods or either possessing. The banker has only equitable
charge on stocks, which practically means nothing. Since the goods always
remain in the physical possession of the borrower, there is much risk to
the bank. So, it is granted to parties of undoubted means with highest
integrity.
Interest rate is 13%

Cash Credit (Pledge)
Transfer of possession in the judicial sense of essential in the valid
pledge. In case of pledge, the bank acquire the possession of the goods or
a right to hold goods until the repayment for credit with a special right
to sell after due notice to the borrower in the event of non-repayment.
Interest rate is 13%.

Consumer Credit Scheme
This scheme is aimed to attract consumers from the middle and upper middle
class population with limited income. The borrower should have saving or
current deposit account with the bank. Minimum 25% of the purchase cost of
the product is to be deposited be the borrower with the bank is equity
before the disbursement of the loan. The rest 75% is to be kept as cash
collateral (FDR, Shanchay Patra etc.) with the bank. Loan amount is
disbursed through a/c payee pay order/demand draft directly to the seller
after submission of the indent, deposit of client equity and completion of
documentation formalities.

Loan (general)
JBL considers the loans, which are sanctioned for more than one year as
loan (g). Under this facility, an enterprise of financed from the stating
to its finishing, i.e. from installment to its production. JBL offers this
facility only to big industries.

Working Credit
Loans allowed to the manufacturing unit to meet their working capital
requirement, irrespective of their size big, medium or large fall under
the category.

Staff Loan
Bank official from senior officer and above is eligible for this loan. The
maximum amount disbursed is Tk. 50,000/- for a period of 2 years.

House Building Loan
This loan is provided against 100% cash collateral, besides; the land &
building are also mortgaged with the bank. Interest rate is 17% p.a.

Small Loan Scheme
JBL introduced three new small loan scheme are:
a) House Renovation Loan
b) Personal Loan
c) Small Business Loan

House Repairing/Renovation Loan Scheme
This loan is offered for renovation and modernization of the
house/building/flat which are acquired by inheritably or purchasing and
other ways to make the properties liable and durable.

Personal Loan for Salaried Person
This loan is provided to fixed salaried persons in various organizations to
meet any emergency cash needs at various events- treatment/operations of
critical disease, matrimonial, maternity expenditure etc. Interest rate is
10% p.a. and maximum credit ceiling is Tk1, 00,000/-

Small Business Loan Scheme
This loan is offered to the small and promising entrepreneurs to meet their
capital requirement and enable them to operate and expand the business
purposely.
Maximum credit ceiling is Tk 5.00 lac with interest rate is 10% p.a.

Loan against Imported Merchandise (LIM)
Advances allowed for retirement of shipping documents and release of goods
imported through L/C taking effective control over the goods by pledge fall
under this type of advance, when the importer failed to pay the amount
payable to the exporter against import L/C, than JBL gives loan against
imported merchandise to the importer. The importer will bear all the
expenses i.e. the go down charge, insurance fees, etc. and the ownership of
the goods is retaining to the bank.

Loan against Trust Receipt (LTR)
Investment allowed for retirement of shipping documents and release of
goods imported through L/C fall under this heard. The goods are handed over
to the importer under trust with the arrangement that sale proceeds should
be deposited to liquidate the investments within a given period. This is
also a temporary investment connected with import and knows as post-import
finance and falls under the category "Commercial Lending".

Payment Again Documents (PAD)
This facility originates payment of Import bills on lodgment of CLEAN
shipping documents received from FOREIGN correspondent against Letter of
Credit opened on behalf of the customers. This is an obligation which the
bank shall extend strictly on the merit of shipping document and which must
conform to the terms & conditions of LC.

Loan documentary Bill Purchase (LDBP)
Payment made against documents representing sell of goods to local export
oriented industries, which are deemed as exports, and which are deemed as
exports, and which are dominated in local currency/foreign currency falls
under this head. The bill of exchange is held as the primary security. The
client submits the stance bill and the bank discounts it. This temporarily
liability is adjustable from the proceeds off the bill.

Loan against Other Securities (LAOS)
Loan against other securities is a 100% secured advance, which requires no
sanction from the Head Officer. It is sanctioned by marketing lien of FDR,
ICB Unit Certificate.
Interest rate is16%

4.4 Credit Management System
Getting Credit Information

Janata Bank collects credit information about the applicant to determine
the credit worthiness of the borrower. The bank collects the information
about the borrower from the following sources:

Personal investigation.
Confidential report from other bank Head Office/Branch/chamber of the
commerce.
CIB Report from Central Bank.

Information Collection

The loans and advances department gets a form filled by the party seeking a
lot of information. The information is listed below:

Name and address of the borrower (present and permanent).
Constitution or status of the business.
Data of establishment and place of incorporation.
Particulars of properties, partners and Directors.
Background and business experience of the borrowers.
Particulars of personal assets, name of subsidiaries, percentage of
share holding and
nature of business.
Details of liabilities in name of borrowers, in the name of any
directors.
Financial Statement of the last three years.
Nature and details of business/products.
Details of securities offered.
Proposed debt equity ratio.
Other relevant information.

Analyzing these Information

Janata Bank then starts examination whether the loan applied for, is
complying with its lending policy. If comply, then it examines the
documents submitted and the credit worthiness. Credit worthiness analysis,
i.e. analysis financial conditions of the loan applicant is very important.
If loan amount is more than 50, 00,000, then bank goes for Lending Risk
Analysis (LRA) and Spreadsheet Analysis (SA) which are recently introduced
by Bangladesh Bank. According to Bangladesh Bank Rules, LRA and SA are a
must for the loan exceed of one crore. If these two analyses reflect
favorable condition and document submitted for the loan appeared to be
satisfactory, then bank goes for further action.

Lending Risk Analysis (LRA)

LRA is a very important and vital analysis for deciding whether the loan
proposal is potential or not. Many types of scientific, mathematical,
statistical and managerial tools and devices are required to perform this
analysis. Janata Bank maintains a prescribed format for Lending Risk
Analysis, which includes a spreadsheet to analyze a lot of things. It is
not possible to discuss the entire LRA in this report.

Proposal Analysis

The Project Proposal is analyzed and decision about the project is taken.
The loans and advance department is responsible for the analysis. After
preliminary appraisal of the loan project the final approval is obtain from
the manager. If the loan amount crosses a certain amount (no found),
managers send the loan project to the principal office for final approval.
The experts in principal office find out different projected ratios and
developed and understanding about the potentiality of the project. Bank
evaluates a loan proposal by considering, few predetermined variables.
These are:

Safety
Liquidity
Profitability
Security
Purpose of the loans
Sources of repayment
Diversification of risk etc.

The most important measure of appraising a loan proposal is safety of
proposal. Safety is measured by the security offered by the borrower and
repaying capacity of the borrower. The attitude of the borrower is also
important consideration. Liquidity means the inflow of cash into the
project in course of its operation. The profit is the blood of any
commercial institution. Before approval of any loan project the bank
authority has to ensure that the proposed project will be profitable
venture. Profitability is assessed from the projected Profit and Loss
Statement. The security is the only tangible asset remains with the
banker. Securing of collateral is the only weapon to recover the loan
amount. So bank has to see that the collateral is easy to sale and
sufficient to recover the loan amount. Bank can not sanction loan by only
depending on collateral.

The sources of the payment of the project should be a feasible one. During
sanctioning any loan Bank has to be attentive about diversification of
risk. All money must not be disbursed amongst a small number of people. In
addition any project must be established for the national interest growth.

Collateral Evaluation

Janata Bank is very cautious about valuation of the collateral. The bank
officials simultaneously evaluate the collateral of the party offered by
the private firm. The valuation of the collateral increases the accuracy of
its value estimated. Three types of value of the collateral are assumed:

Current market price
Distressed price
Price after five years

The legal officers of the bank check the document ascertain their impurity.

Final Decision about the Project

If the loan decision remains with the branch level, that branch sanctions
the loan and if the approving authority is Head Office then the decision
comes to the branch by telex or fax.

Proper Supervision of the Project

If such provision is kept in the sanction contracts, the Janata Bank
officials go to the project area to observe how the loan is utilized. If no
such clause to supervise the loan is added, even then the bank can see the
performance of the project.

Documentation of the Loan

These are the most frequently used and common documents of above mentioned
charged and for other formalities for sanctioning the loan:

Demand Promissory Note: Here the borrower promises to pay the loan as
and when
demanded by the bank to repay the loan.
Letter of Arrangement: Here the written amount of the loan sanctioned
to the borrower
is specified.
Letter of Continuity: It is used to take continuous facilities as
providing continuous
securities.
Letter of Hypothecation: It is the written document of the goods
hypothecated thus to
put in case of need.
Stock Report: This report is used for SOD and CC. In this report
information about the
quality and quantity of goods hypothecated have furnished.
Personal guarantee: It is the additional confirmation of the borrower
to repay.
Guarantee of the Directors of the company.
Resolution of the board of directors: It is used to borrow the fund
to execute
Documents and complete other documents.
Letter of disclaimer: By this letter, the borrower withdraws his all
claim on the
property/mortgaged.
Letter of Acceptance: Letter indicating the acceptance of the sanction
proposal by the
borrower.
Letter of Pledge: It is the written document of the goods pledge thus
the legality of
holding the goods.
Letter of Disbursement: This is the document through which the payment
of sanctioned
loan indicates.
Letter of partnership: In case of partnership firm, the partnership
deeds are to be
provided.
Letter of Installment: The amount of installment that is to be paid at
certain intervals.
Tax Paying Certificate.
Any document if described, as essential in the sanctioned advice
sanctioned by the
Head Office.

Creation of Charges for Securing Loan

For the safety of loan, Janata Bank requires security from the loaner so
that it can recover the loan by selling security if borrower fails to
repay. Creation of a charge means making it available as a cover for an
advance. The method of charging should be legal, perfect complete.
Importance of charging securities is as:
Protection of interest.
Ensuring the recovery of the money lent.
Provision against unexpected change.
Commitment of the borrower.

4.5 Credit Risk Management System of JBL:
The Credit Risk Management Division is vital for the efficient functioning
of JBL. It
critically scrutinizes the credit proposals from risk weighted point
of view before
sanctioning approvals ensuring a high quality credit portfolio. The goal of
credit risk
management is to maximize a bank's risk-adjusted rate of return by
maintaining credit
risk exposure within acceptable parameters. Banks need to manage the
credit risk
inherent in the entire portfolio as well as the risk in individual credits
or transactions.
The credit management process of Janata Bank Ltd. covers the following
tasks:
Credit Processing/Appraisal
Credit Approval/Sanction
Credit Documentation
Credit Administration
Disbursement
Monitoring and Control of Individual Credits
Monitoring the Overall Credit Portfolio (stress testing)
Credit Classification
Disbursement of Loan
Classified Loans
Recovery of Loan
Credit Processing/Appraisal
Credit processing is the stage where all required information on credit is
gathered and applications are screened. Credit application forms
should be sufficiently detailed to permit gathering of all information
needed for credit assessment at the outset. In this connection, financial
institutions should have a checklist to ensure that all required
information is, in fact, collected. Financial institutions should set out
pre-qualification screening criteria, which would act as a guide for their
officers to determine the types of credit that are acceptable. For
instance, the criteria may include rejecting applications from
blacklisted customers. These criteria would help institutions avoid
processing and screening applications that would be later rejected. The
next stage to credit screening is credit appraisal where the
financial institution assesses the customer's ability to meet his
obligations. Institutions should establish well designed credit appraisal
criteria to ensure that facilities are granted only to
creditworthy customers who can make repayments from reasonably
determinable sources of cash flow on a timely basis.
As a general rule, the appraisal criteria will focus on:
amount and purpose of facilities and sources of repayment;
integrity and reputation of the applicant as well as his
legal capacity to
assume the credit obligation;
risk profile of the borrower and the sensitivity of the applicable
industry
sector to economic fluctuations;
physical inspection of the borrower's business premises as
well as the
facility that is the subject of the proposed financing;
current and forecast operating environment of the borrower;
management capacity of corporate customers

Credit Approval/Sanction
A financial institution must have in place written process and the
approval authorities of individuals or committees as well as the basis of
those decisions. Approval authorities should be sanctioned by
the board of directors. Approval authorities will cover new
credit and changes in terms and conditions of previously
approved credits, particularly credit restructuring, all of which
should be fully documented and recorded. Prudent credit practice
requires that persons empowered with approval authority should not
also have the customer relationship responsibility.
Depending on the size of the financial institution, it should develop a
corps of credit risk specialists who have high level expertise and
experience and demonstrate judgment in assessing, approving and
managing credit risk. An accountability regime should be established
for the decision trail of decisions taken, with proper identification
of individuals/committees involveAll this must be properly documented.

Graph 5: Net Profit (Figures in millions)
Source: Credit Risk Management Guideline, Bangladesh Bank (page 18)

Credit Documentation
Documentation is an essential part of the credit process and is required
for each phase of the credit cycle, including credit application, credit
analysis, credit approval, credit monitoring, and collateral
valuation, and impairment recognition, foreclosure of impaired loan
and realization of security. The format of credit files must
be standardized and files neatly maintained with an appropriate system of
cross-indexing to facilitate review and follow up. The Bangladesh Bank
will pay particular attention to the quality of files and the
systems in place for their maintenance. Documentation establishes
the relationship between the financial institution and the
borrower and forms the basis for any legal action in a court
of law. Institutions must ensure that contractual agreements with
their borrowers are vetted by their legal advisers.
For security reasons, financial institutions should consider keeping only
the copies of critical documents (i.e., those of legal value,
facility letters, and signed loan agreements) in credit files while
retaining the originals in more secure custody. Credit files should also
be stored in fire-proof cabinets and should not be removed from the
institution's premises.
Financial institutions should maintain a checklist that can show that all
their policies and procedures ranging from receiving the credit
application to the disbursement of funds have been complied with.
The checklist should also include the identity of individual(s)
and/or committee(s) involved in the decision-making process.

Disbursement
Once the credit is approved, the customer should be advised of
the terms and conditions of the credit by wa5y of a letter of offer.
The duplicate of this letter should be duly signed and returned to
the institution by the customer. The facility disbursement process
should start only upon receipt of this letter and should involve, inter
alia, the completion of formalities regarding documentation, the
registration of collateral, insurance cover in the institution's favor
and the vetting of documents by a legal expert. Under no circumstances
shall funds be released prior to compliance with pre-disbursement
conditions and approval by the relevant authorities in the financial
institution.

Graph 6: Credit Disbursement Process
Source: Credit Risk Management Guideline, Bangladesh Bank (page 20)

Monitoring and Control of Individual Credits
To safeguard financial institutions against potential losses, problem
facilities need to be identified early. A proper credit monitoring system
will provide the basis for taking prompt corrective actions when
warning signs point to deterioration in the financial health of
the borrower. Examples of such warning signs include unauthorized
drawings, arrears in capital and interest and deterioration in the
borrower's operating environment. Financial institutions must have a
system in place to formally review the status of the credit and
the financial health of the borrower at least once a year. More
frequent reviews (e.g at least quarterly) should be carried out of
large credits, problem credits or when the operating environment
of the customer is undergoing significant changes.

In broad terms, the monitoring activity of the institution will ensure
that:
funds advanced are used only for the purpose stated in the
customer's credit application;
financial condition of a borrower is regularly tracked and
management advised in a timely fashion;
collateral coverage is regularly assessed and related to the
borrower's financial health;
The institution's internal risk ratings reflect the current
condition of the customer.
Monitoring the Overall Credit Portfolio (stress testing)
An important element of sound credit risk management is analyzing
what could potentially go wrong with individual credits and the
overall credit portfolio if conditions/environment in which borrowers
operate change significantly. The results of this analysis should
then be factored into the assessment of the adequacy of
provisioning and capital of the institution. Such stress analysis can
reveal previously undetected areas of potential credit risk exposure that
could arise in times of crisis. Possible scenarios that financial
institutions should consider in carrying out stress testing include:
Significant economic or industry sector downturns;
Adverse market-risk events; and
Unfavorable liquidity conditions.
Financial institutions should have industry profiles in respect of
all industries where they have significant exposures. Such profiles must
be reviewed /updated every year. Each stress test should be followed
by a contingency plan as regards recommended corrective actions.
Senior management must regularly review the results of stress tests and
contingency plans. The results must serve as an important input into a
review of credit risk management framework and setting limits and
provisioning levels

Credit Classification
It is required for the board of directors of a financial
institution to "establish credit risk management policy, and credit
impairment recognition and measurement policy, the associated internal
controls, documentation processes and information systems;"Credit
classification process grades individual credits in terms of the expected
degree of recoverability. Financial institutions must have in place the
processes and controls to implement the board approved policies, which
will, in turn, be in accord with the proposed guideline. They should
have appropriate criteria for credit provisioning and write off.
International Accounting Standard 39 requires that financial
institutions shall, in addition to individual credit provisioning,
assess credit impairment and ensuing provisioning on a credit portfolio
basis. Financial institutions must, therefore, establish appropriate
systems and processes to identify credits with similar
characteristics in order to assess the degree of their recoverability on a
portfolio basis.
Financial institutions should establish appropriate systems and controls to
ensure that collateral continues to be legally valid and enforceable and
its net realizable value is properly determined. This is particularly
important for any delinquent credits, before netting off the
collateral's value against the outstanding amount of the credit
for determining provision. As to any guarantees given in support
of credits, financial institutions must establish procedures for
verifying periodically the net worth of the guarantor.
Classified Loans
Banks are financial service firm, producing and selling
professional management of the public's funds as well as performing many
other roles in the economy. But now-a-days commercial banks are not
performing their activities smoothly for a large burden of default
loan. Every year Janata Bank distributes thousand crore taka among
individuals, organizations etc. but a large sum of these
distributed fund cannot be recovered in due time. The Bank has to
classify this loan.
Signs for Classification: First and foremost requirement for any
and all credit managers is to identify a problem credit in its
earlier stages by recognizing the signs of deterioration. Such signs
include but not limited to the following:
Non-payment of interest or principal or both on due dates or past dues
beyond a reasonable period or recurring past dues.
In case of Overdraft no movement in the account beyond a reasonable
period.
Deterioration in financial condition of the client, as
gathered from client's latest financial statement.
A shortfall in collateral coverage, particularly if the collateral was
a key factor in the decision-making.
Death or withdraw of key-owners or management personnel.
Company filing for bankruptcy or voluntary dissolution.
Adverse market report about the company itself or its principal
owners.
Loan Classification Guidelines from Bangladesh Bank

Classification of overdue loans and advances opened a new era in
the credit management of commercial banks in Bangladesh. Before 1989 no
specific guidelines were followed by the commercial banks for this
purpose. In 1989, Bangladesh Bank issued BCD circular No.34/1989
stating specific rules and conditions of loan classification. After
that each schedule banks except BKB, RAKUB, and BSB would be responsible
for its own loan classification according to the guidelines are presented
in the following table:
Loan Classification Systems:

Table – 7 Loan Classification Systems
*Source: BCD Circular no. 34/1989
According to this circular loans and advances were classified on a loan by
loan basis rather sample classification. This process was continued
till 1994. Bangladesh Bank further issued a circular in1995 (BCD
circular#20/1994). The title of the circular was "Revised rules of
classification and provisioning of loans and advances," which came into
implementation from January 1, 1995.
Summary of Loans and Advances with the Risk Status
The summary of loans and advances of Janata Bank Ltd. with the risk status
is given below

Table: Table 8: Summary of Loans and Advances with the Risk Status

Recovery of Loan
The Recovery procedure of Janata Bank is the ultimate combination of time,
effort of money. It follows several procedural steps to recover the
lending amount, which is joint effort of Bank, society and legal
institutions. There are several programs taken by the bank to recover
the disbursed loans. They are discussed hereafter.
Programs for Loan Recovery
When Janata Bank sanctions loans and advances to its customers,
they clearly state the repayment pattern in the loan agreement. But some
credit holders do not pay their credit in due period. The nationalized
and private sector commercial banks have to face this sort of
problems. This situation is especially severe in Janata Bank. To
overcome the problem of overdue loan, the bank needs to take some
particular loan recovery programs. They are:
Establishing credit supervision and monitoring cell in the bank
Re-structuring the loan sanctioning and distributing policy of the
bank
Sanctioning loans and advances against sufficient securities as best
as possible
Giving more powers to the branch manager in credit management
decision
making process
Offering a package of incentives to the sound borrowers
Giving more emphasis on short term loans and advances
Imposing restrictions on loans and advances for sick industries
Taking legal actions quickly against unsound borrowers as best
as possible
within the period specified by the law of limitations.
Steps for Loan Recovery Against Defaulters
The following steps are taken by Janata Bank Ltd against the defaulters for
recovery of loan: Reminding the party to repay the loan after validity
dates: First of all, the Credit Administration division reminds the
borrower about the remaining days to repay the loan mentioning the
validity dates from time to time.
i. Send final notice: If the borrower fails to repay the loan within the
sanctioned period for repayment then he or she is given an
additional period for the repayment of the loan attaching a final notice
for the repayment as well.
ii. Send legal notice: When the borrower fails to repay the loan
even after the additional period and the final notice, the credit
administration of JBL sends a legal notice to the borrower mentioning that
if he or she is not capable to repay the loan within a specific time then
the bank will file a suit in the court against him or her.
iii. Eventually sue a case against the party: Finally, the bank,
not getting any repayment from the borrower, suits a case against
the defaulter according to the respective law. Then the decision of the
court will be final for the recovery process and both the party and bank
will have to abide by the law.
These are the general procedures for recovery of loan followed by Janata
Bank Ltd.

4.6 Special Credit Schemes of Badda Branch

A. Entrepreneurship Development Program:

1.Women Entrepreneurship Development Credit Program: Women Entrepreneurs
Development Scheme has been introduced to encourage women in doing
business. Under this scheme, the bank finances the small and cottage
industry projects sponsored by women. Interest rate is 10%. It is
repayable in monthly installment within 3 years that star from the
4th month after obtaining loans

2. Cyber Café loan: This type of loan is given to the trained youth in
computer technology in order to create employment opportunity for the
unemployed trained youth and expansion of information business in the
country. Up to tk. 300000, no collateral is required. It is given through
personal guarantee at 10%.
3. Doctor's Loan: Doctor Credit scheme is designed to facilitate financing
to fresh medical graduates and established physicians to acquire medical
equipments and set up clinics and hospitals and to create employment
opportunity of Doctor's possessing certificate. Interest rate is 10%.

4. Small business development loan scheme: This scheme has been evolved
especially for small shopkeepers who need credit facility for their
business. This credit facility is given to the small business by third
party guarantee that is acceptable to the bank at 11% interest rate. It is
to be repaid in 5 years in 60 monthly installments in case of term loan or
1 year in working capital. Besides, bank also extends credit facilities
for the goat farming, seed development program, forestry/horticulture
Nursery, flower plantation & garden, handicapped/disable people to make
them self-reliant

B. Other special credit programs:

1 .Credit for Employees: This type of credit is given to the employees of
the bank to meet up the emergency needs at 12% interest rate. Advance
cheques of monthly salary are considered as security that is repaid within
2 years in 24 installments.

2. Consumer Credit Scheme: Consumer Credit Scheme is related to relatively
new field of collateral free finance of the Bank. People with limited
income can avail of this credit facility to buy household goods including
computer and other consumer durables. Interest rate is 12% that is repaid
between 1 and 2 years.

3. Personal Loan Scheme: Personal Loan Scheme has been introduced to
extend credit facilities to cater to the credit needs of low and medium
income group for any purpose. Government and semi-government officials,
employees of autonomous bodies, banks and other financial organizations,
multinational companies, reputed private organizations and teachers of
recognized public and private schools, collages and universities are
eligible for the loan facilities.

4. Financing in IT Sectors: Today, we are living in the age of information
that is Internet. To accelerate the growth of information and expanding IT
business in our country and to attract young energetic in IT professions
JANATA BANK has launched a new credit scheme titled "Financing Computer
Software Development & Data Export." The maximum loan amount is take. 10
million, with debt to equity ratio being 80:20. The rate of interest is
10%. But anybody with export market exposure can get the benefit at 9%
interest rate. The main feature of this scheme is to set up industrial
based IT projects for development of software for data export. No
collateral is required. if anyone wants to show interest to provide
collateral security, they will be given priority.

5. Car Loan Scheme: Car Loan Scheme has been introduced to enable middle-
income people to purchase Cars/SUVs/Jeeps. Governments and semi-government
officials, employees of autonomous bodies, banks and other financial
organizations, multinational companies, reputed private organizations,
teachers of recognized public and private universities and businessmen are
eligible for the loan facilities.

6. Gharoa Prokalpa: Performance of on going micro-credit programs has
encouraged Janata Bank authority to undertake a new product. 'Gharoa
Prokalpa' which is a package of facilities employment and retain them in
the rural areas. It was launched on 25th July 2000.

7. Financing of Industries: Janata Bank Limited entrusted with the
responsibility of developing industries within the frame work of
Industrial policy of the Government of Bangladesh and credit norms of
Bangladesh Bank as well as by the Investment Board. If the project is
managerially, marketing Pont of view, technically, commercially and
financially viable, then Janata Bank Limited finances the project.
Sponsors/companies having prior experience in the related field are given
priority.

Loan Limit: Janata Bank Limited may be financed up to Tk. 129.60 million
in single project a year. But if any project required above the limit, the
project may be financed under consortium/syndication arrangement with
other financial institutions.

Rate of Interest: Rate of interest of project loan ranges from 11%-13%.
Working capital rate of interest is 12% to 13.50% and with that in export
oriented industries ranges from 7% to 14%(changeable).

Debt Equity Ratio: Normally debt equity ratio is 50:50. But higher equity
ratio sharing is given preference. Above all, Bankers/Customers relation
is also considered in fixing debt equity ratio.

Repayment Mode and Period: 5 years to 10 years with 6-24 months grace
period inclusive of construction period. Project loan is repayable by half
yearly installment. Working capital loan and export credit are sanctioned
for 1 (one) year and they are renewable every year.

Security: The project land, building, machineries and others i.e. project
assets are considered as primary security against term/project loan. But
if the project is to be set up on rented premises, collateral securities
is obtained minimum 1.3 times of project loan.

Sanctioning Authority: Janata Bank Limited, Head Office, Dhaka.

8. Ready Cash:
Janata Bank Limited has entered into an agreement with American
International Investment (AII) to provide financial plastic card services
to Janata Bank Limited's clients. This product is a"Debit Card" called
the Ready Cash. Currently, the Ready Cash system is operating in Dhaka and
will soon be expanded to other urban areas of Bangladesh. Cardholder's
primary benefits are Safety, Shopping at a wide merchant network, Payment
of Utility Bills, flexible saving plan and the convenience of not having
to carry cash. As the only micro-processor chip based debit card available
in Bangladesh for financial payment. It combines the most desirable
aspects of the credit card, together with the advantages of the Debit or
ATM card. It is the first step that most Bangladeshi citizens will take on
the path to a cashless economy. Ready Cash is a debit card as it allows
the cardholder to spend no more money than he/she has in his/her Bank
account – unless a credit line Page 30has been extended.

9.Financing in SME Sector:
From the very inception of Industrial credit financing of Janata Bank
(Currently Janata Bank Limited) SME division has sanctioned term loan in
small and medium industries sector in 4535 projects of taka 941.36 crore.
Among which taka 548.69 crore has been disbursed against 4310 projects.
Outstanding as 31.12.2007 is taka 446.12 crore and recovery of loan is
70%.

10. Loan to Travel Agencies:
Eligibility : Annual business turnover should be
satisfactory
Loan Sanction : On a case to case basis
Nature of Loan : CC (HYP).
Purpose of Loan : For running travel agency business
Rate of Interest : 15%
Security : Hyp. Of receivables/tickets, all office
furniture and equipments Collateral to be twice the value of the
loan
Mode of repayment : Sale proceeds of tickets.
Duration of the Loan: One year

11. Loan to Diagnostic Centers:
Eligibility: Annual business turnover should be good; the diagnostic
centre should have been set up as per Govt. health policy and this must be
confirmed by the loanee.
Loan Sanction : On a case to case basis
Nature of Loan : CC (HYP).
Purpose of Loan : For running a diagnostic centre
Rate of Interest : 15%
Margin : 40%

4.7 Credit Evaluation Principles

Some principles or standards of lending are maintained in approving loans
in order to keep credit risk to a minimum level as well as for successful
banking business. The main principles of lending are given below:

Liquidity:
Liquidity means the availability of bank funds on short notice. The
liquidity of an advance means it repayment on demand on due date or after
a short notice. Therefore, the banks must have to maintain sufficient
liquidity to repay its depositors and trade off between the liquidity and
profitability is must.

Safety:
Safety means the assurance of repayment of distributed loans. Bank is in
business to make money but safety should never be sacrificed for
profitability, To ensure the safety of loan. The borrower should be chosen
carefully. He should be a person of good character & capacity as well as
bank must have to maintain eligible number of security from borrower.

Profitability:
Banking is a business aiming at earning a good profit. The difference
between the interest received on advances and the interest paid on deposit
constitutes a major portion of the bank income, Besides, foreign exchange
business is also highly remunerative. The bank will not enter into a
transaction unless a fair return from it is assured.

Intent:
Banks sanction loans for productive purpose. No advances will be made by
bank for unproductive purposes though the borrower june be free from all
risks.
Security:
The security offered for an advance is an insurance to fall bank upon in
cases of need. Security serves as a safety value for an unexpected
emergency. Since risk factors are involved, security coverage has to be
taken before a lending.
National interest:
Banking industry has significant role to play in the economic development
of a country. The bank would lend if the purpose of the advances can
contribute more to the overall economic development of the country.

4.8 Problems in Loan Recovery

There are a lot of reasons for which the loan recovery of the bank is very
defective. In most cases, problems june be raised from sanctioning
procedures of loan, investigation of the project, and investigation of the
loans etc. that is, the problem in loan recovery proves the outcomes of
the default process in loan disbursement. The main reasons of
poor loan recovery are categorized in four broad types as follow:

Problems created by government
The following problems are arisen by the government:

External pressure: Janata Bank Ltd. has also faced many problems in the
loan recovery process as a part of continuous pressure from
various interested groups.
Loan to government organization: Janata Bank Ltd. is bound to sanction loan
to government organization, though these are losing concern. For
this reason, banks faced problems in loan recovery.
Legal problems: Existing rules and regulations are insufficient to cover
the legal aspects of loan recovery. As a result, defaulters can get release
easily from all charges against them.

Problems created by the bank:
The following problems are created by the banks:

Lack of analysis of business risk: Before lending, Janata Bank
Ltd. does not properly analyze the business risk of the borrowers
and the bank cannot forecast whether the business will succeed or fail.
If it fails to run well, the loan becomes classified.

Lack of proper valuation of security or mortgage property: In most cases,
bank fails to determine the value of security against the loan. As a
result, if the loan becomes classified, the bank cannot recover its
loan through the sale of mortgage.

Other general causes of poor loan recovery:
Apart from the specific reasons creating problems to recoup
loan, there exists some other general causes which have a great impact
on creating the problems which are faced by the Janata Bank Ltd. under
study in the loan recovery process. These are:
Lack evaluation of technical and economic feasibility of the
program.
Credit is not allowed to actual entrepreneurs.
Lack of proper supervision.
Illiteracy of borrowers.
Deterioration of the value system of the borrowers.
All of these reasons discussed above are general reasons for problems
loan recovery of Janata Bank Ltd. Besides these, there are some
specific reasons for loan recovery problems faced.
continuously by Janata Bank Ltd. They are as:

Loans are given under fictitious names and enterprise
Loans are given without sufficient securities
Approval of the loans in excess of the branch manager's power
Improper monitoring and supervision of credit
Political misuse if loan programs operated by the public sector banks

Problems in loan recovery are the outcome of the default on loans
disbursements in the earlier period.

CHAPTER-FIVE
(FINDINGS, CONCLUSION & RECOMMENDATION)

5.1 Findings of the report

Every bank has its own credit procedure. Bank under study
possesses a standard credit procedure. As the objective of my study is
to make a comment on the credit management of Janata Bank Ltd, I try my
best to collect data for the study and find out the reality. Based on the
data generated during my study period I will sum up my findings here and
I think this will help me to achieve my objectives.
Janata Bank Ltd. has a significant role in long term project financing in
both agriculture and industrial sectors. Again JBL has a deep concern for
rural farmers.
Janata Bank Ltd. house building loan interest rate is high
Private sector usually concentrates in the urban areas where as public
sector i.e. JBL spread their banking network all over the world.
According to the standard and bank's credit procedure, credit operation
is started from the customer application to the branch for the loan. But
in most cases, many customers go directly to the directors of the bank
and directors send them to the branch offices
Bangladesh Bank monitors all the policies of all the private and
nationalized banks of the country. According to the Bangladesh
Bank's strategy, all banks must possess the standard policies
which are designed by the central bank. Janata Bank Ltd. Also
possesses a standard credit proposal form. In that form all necessary
information are required to fill up. But in practice credit
officers do not fill up the proposal form properly. Most of the
cases, they use assumption rather than exact figure. This practice might
end up with bad or classified one.
JBL distribute loans without sufficient security in some cases. This is
violation of the Bangladesh bank order.
JBL does not keep enough provisions against classified loans and
advances.
The credit management of JBL are not fully conformity with the
guidelines prescribed in the bank companies Act 1991 and International
Accounting Standerd-30(IAS-30)
5.2 Recommendations
To improve the risk management culture further, Janata Bank
Limited should adopt some of the industy's best practices that are not
practiced currently. These are:
Continuous monitoring of the customer should be conducted so that
loan cannot be classified.
The bank should emphasis more on loan diversification like loans on
different promising sectors and newly invented thrust sectors in the
economy.
Political intervention should be avoided while approving and sanctioning
loan.
Every day the business environment is changing and so the risk. So the
bank should be developed as a dynamic organization to adapt with
the changing circumstances.
All the loan documentations have to done honestly. The bank
should concentrate more on proper documentation of all types of
loans to make the department trustworthy & healthy.
The documents supporting the security against the loan have to
be verifiedproperly by the bank before sanctioning the loan.
An Early Alert Account system should be introduced to have
adequate monitoring, supervision or close attention by management
There should be a Recovery Unit to manage directly the accounts
with sustained deterioration. To encourage Recovery Unit, incentive
program may also be introduced.

5.3 Conclusion

I have discussed so far about the different aspects of credit management
Janata Bank Limited. For my report, I have selected Janata bank Ltd. JBL
plays an important role in the banking sector as well as in our
economy. The success of a bank depends largely on the efficient
credit management. A successful credit management is not only need for a
bank's own performance but also it is needed for the smooth development of
an economy. In any strategy of economic development, therefore, it is
essential to emphasize the evaluation of a sound and well
integrated credit management system from the view point of both resources
mobilization and efficient allocation of funds. In conclusion it can be
suggested a number of recommendations in order to overcome the problems
and how to remove the causes of problem in credit management.

1. Central Bank should take proper actions for ensuring equivalent
distribution of loans and advances.
2. Lending policies in our country should be geared to growth
potential rather than being determined by the pre-existing collateral.
3. House loan interest rate reducing.
4. The new entrepreneurs should be encouraged in disturbing loans and
those who have the records of regular payment, should be given
preference.
5. It is observed that the defaulters generally get various sorts of
exemptions as declared by the regulatory authority.

References

1. Managing Core Risk in Banking: Credit Risk Management, Janata Bank
Ltd, Head Office, Dhaka.
2. Daily Financial Express ( Online Achieve)
3. https://www.bb.org.bd
4. http://www.janatabank-bd.com
5. Overview of Janata Bank: http://www.janatabank-bd.com/jb1.htm
6. Corporate Profile: http://www.janatabank-bd.com/Corporate_Profile.pdf
7. Credit Facilities and Programs: http://www.janatabank-bd.com/jb2.htm
8. Rural Banking Credit Programs: http://www.janatabank-bd.com/jb4.htm
9. Micro and Special Credit Scheme: http://www.janatabank-bd.com/jb15.htm
10. Annual Report 2012, 2013, 2014: http://www.janatabank-
bd.com/finance2004.htm

Bibliography:

1.Managing Core risk in Banking by Janata Bank Limited.
2.Annual Report 2010, 2011, 2012, 2013, by Janata Bank Limited.
3.Training Manuel's for E O by Janata Bank Limited.
4.Credit policy of Janata Bank Limited by Janata Bank Limited.

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AGM & Manager

EO & Operation Manager

General Banking Division

Loans & Advances Division

Deposit

Remittance

A/C Opening & Others

Clearing Department

Accounts Department

Cash Department

Internship report on Credit Management of Janata Bank Limited

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