1.1.

Origin of the Report Bachelor of Business Administration (BBA) course requires 45 days attachment with an organization followed by a report assigned by the supervisor in the organization and endorsed by the faculty advisor. I took the opportunity to do my internship in National Credit and Commerce Bank Ltd (NCCBL). My topic of internship is authorized from the head office of NCC Bank Ltd. My faculty supervisor Mr. Akram Hossain, Lecturer of Department of Management Information Systems, University of Dhaka, also approved the topic and authorized me to prepare this report as part of the fulfillment of internship requirement. As a part of the Internship Program of Bachelor of Business Administration course requirement, I am assigned for preparing a report on the activities that I am currently doing at NCC Bank Limited (NCCBL) for the period of 45 Days starting from January 3, 2012 to February 20, 2012. At NCC Bank Limited (NCCBL), I am assigned in the SME Reconciliation Department. 1.2. Objective of the Report General Objective The general objective of the study is to draw a comparative picture of SME loan at NCC Bank Limited as well as view the current status of SME loan. Specific Objectives The specific focuses of the study are: 1. To find out the activities of credit management system. 2. To depict the procedures they follow for lending credit to the customers. 3. To describe the detailed operational procedure of SME Loan along with their associated benefits. 4. To identify customers level of satisfaction 5. To explore the opportunities and competitive advantages that has been ignored by NCCBL. 6. To present my suggestion to the bank from my observation.

1.3. Scope of the Report As I was sent to NCC Bank, Dilkusha Branch, the scope of the study is only limited in this branch. The report covers the over view of SME loan, identification of problems regarding SME loan, types of SME and sector of SME allocation of NCC Bank Ltd. 1.4. Methodology Primary Sources Major sources of Primary information have been collected through discussing with my senior colleagues, Manager Operation, Head of Branch, Credit In charge etc. Secondary Source Sources of secondary information are as follows: Internal Sources: Banks Annual Report Group Business Principal

External Sources: Credit Manual of NCCBL Internet

1.5. Limitations The study has suffered from a number of barriers 1. Data from NCC Bank is highly confidential for the outside people and access to software is not provided. 2. Time is also a big constraint for this research. The topic of this report is vast in compare to time. 3. It was difficult to communicate with the customers, as many of them were unable to give time for interview

2.1. Overview of NCC Bank Limited (NCCBL) NCC Bank Limited is the leading private sector bank in Bangladesh offering full range of Personal, Corporate, International Trade, Foreign Exchange, Lease Finance and Capital Market Services. NCC Bank Limited 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, assuring Excellence in Banking Services. 2.2. Background of NCC Bank Limited National Credit and Commerce Bank Ltd. popularly known as NCC Bank Ltd., bears a unique history of its own. The organization started its journey in the financial sector of the country as an investment company named National Credit Limited back in 1985. The aim of the company was to mobilize resources from within and invest them in such way so as to develop country's Industrial and Trade Sector and playing a catalyst role in the formation of capital market as well. Its membership with the browse helped the company to a great extent in this regard. The company operated up to 1992 with 16 branches and thereafter with the permission of the Central Bank converted in to a fully fledged private commercial Bank in 1993 with paid up capital of Tk.39.00 crore to serve the nation from a broader platform. At present the bank is operating with 87 Branches with online facility across the country. Since its inception NCC Bank Ltd. has acquired commendable reputation by providing sincere personalized service to its customers in a technology based environment. The Bank has set up a new standard in financing in the Industrial, Trade and Foreign exchange business. Its various deposit & credit products have also attracted the clients-both corporate and individuals who feel comfort in doing business with the Bank.

2.3. Mission To mobilize financial resources from within and abroad to contribute in Agriculture's, Industry & Socio-economic development of the country and to play a catalytic role in the formation of capital market. 2.4. Vision To become the Bank of choice in serving the Nation as a progressive and Socially Responsible financial institution by bringing credit & commerce together for profit and sustainable growth. 2.5. Slogan Where Credit & Commerce Integrates 2.6. Motto The Bank will be a confluence of the following three interests: Of the Bank Of the Customer Of the Society : Profit Maximization and Sustained Growth. : Maximum Benefit and Satisfaction. : Maximization of Welfare.

2.7. Corporate Profile of NCCBL At a glance:

Name of the Company Chairman Vice Chairman Managing Director Company Secretary Legal Status Date of Incorporation Registered Office Line of Business Authorized Capital Paid up capital Year of initial Public offer Stock Exchange Listing Phone NCC Bank Limited Alhaj Md. Nurun Newaz Mostafizur Rahman Mohammed Nurul Amin Mr. A.K.M Nurul Islam Public Limited Company May 17, 1993. 7-8, Motijheel C/A, Dhaka - 1000, Banking. Tk. 10,033,986,280 Tk. 4,501,253,300 1999 May 10, 2000 ( DSE), May 18, 2000 (CSE) 9561902-4, 9566283, 9563981-3

Fax SWIFT E-mail Website Number of branches Number of ATMs

88029566290 NATCREDIT DHAKA nccbl@bdmail.net www.nccbank.com.bd 87 Branches 28 in major places all over the country.

Corporate Profile of NCCBL. 2.8. Product of NCC Bank Ltd. Deposit product 1. Current A/C 2. Savings Bank Deposit A/C 3. Short Term Deposit A/C 4. Term Deposit A/C 5. Premium Term Deposit A/C 6. Instant Earnings Term Deposit A/C 7. Special Savings Scheme 8. Special Fixed Deposit Scheme 9. NFCD 10. RFCD Loans and Advance Products 1. Working Capital Financing 2. Commercial and Trade Financing 3. Long Term (Capital) Financing 4. House Building Financing 5. Retail and Consumer Financing 6. SME Financing 7. Agricultural Financing 8. Import and Export Financing Retail/Consumer Loan Products 1. Personal Loan 2. Car Loan Scheme 3. Education Loan

4. House Building Financing

5. Consumer Finance Scheme

6. House Repairing & Renovation Loan 7. Home Improvement Loan Remittance Products 1. Special Interest rate on Savings and Term Deposits 2. Wage Earners Welfare Deposit Pension Scheme 3. Loans for Real Estate (Land purchase and House construction/renovation) 4. Advance against Regular Remittance Service of NCC Bank 1. Brokerage House. 2. Treasury Service. 3. Remittance Service Card 1. ATM Card 2. Credit Card (Local, International and Dual) 2.9. An Overview of NCC Bank Ltd. at Dilkusha Branch The NCC Bank Ltd., Dilkusha Branch was established in 24 July, 1997 in Hossain Chamber, 43,Dilkusha C/A, Dhaka, at the present time, number of officers and staff at this branch is 38 which include, manager, second officer senior principal officer, principal officer, senior officer, officer, cashier, and others. 2.10. Name of the Chief of the Organization Mr. Humayun Soeb, Senior Vice President & Manager of NCC Bank Ltd. at Dilkusha, Branch. 2.11. Objectives of NCC Bank Ltd. at Dilkusha Branch The main objectives of NCC Bank Ltd. are as follows: 1. To earn profit and

2. To give service. 3. To maximize profit and wealth for the shareholder. 2.12. Organizational Structure of NCC Bank at Dilkusha Branch Organization structures of NCC Bank Ltd. at Dilkusha Branch are as follows:
Sr. Vice President & Manager MmmBrancMssMmmaMManager

Vice President Asst. Vice President Senior Principal Officer Principal Officer Senior Officer Officer Grade I Provisional Officer Junior Officer Asst. Junior Officer Staff Guard Postman Tea Boy

Cleaner 7

3.1. Definition of SME An SME is defined as, A firm managed in a personalized way by its owners or partners, which has only a small share of its market and is not sufficiently large to have access to the stock exchange for raising capital. SME ordinarily have few accesses to formal channels of finance and depend primarily upon savings of their owners, their families & friends. Consequently, most SME are sole proprietorships & partnerships. As with all definitions, this one is not perfect. Depending on context therefore definition of an SME will vary. Despite the common features globally, countries do not use the same definition for classifying their SME sector. Also, a universal definition does not appear feasible or desirable. SME have been defined against various criteria. The three parameters that are generally applied by the Governments to define SMEs are: Capital investment in plant and machinery Number of workers employed Volume of production or turnover of business Other definitions are based on whether the owner of the enterprise works alongside the workers, the degree of sophistication in management, and whether or not an enterprise lies in the "formal" sector. The definitions in use depend on the purposes these are required to serve according to the policies of the respective countries/Governments. A quantitative definition in each national context is, however, advantageous, as it makes it easier to target macro-level policies for a specific group of enterprises. The countries with such definitions have recorded a higher growth rate in the SME sector. This indicates that the more precise the definition, the more effective the transaction of policies intended to benefit the sector with actual results. In countries where no definition exists, the enterprises are in a disadvantageous position.

3.2. SME Finance SME finance is the funding of small and medium sized enterprises, and represents a major function of the general business finance market in which capital for different types of firms are supplied, acquired, and costed or priced. Capital is supplied through the business finance market in the form of bank loans and overdrafts; leasing and hire-purchase arrangements; equity/corporate bond issues; venture capital or private equity; and asset-based finance such as factoring and invoice discounting. However, not all business finance is external/commercially supplied through the market. Much finance is internally generated by businesses out of their own earnings and/or supplied informally as trade credit, that is, delays in paying for purchases of goods and services. 3.3. Importance of SME Finance The economic and social importance of the small and medium enterprise (SME) sector is well recognized in academic and policy literature. It is also acknowledged that these actors in the economy may be under-served, especially in terms of finance. This has led to significant debate on the best methods to serve this sector. Although there have been numerous schemes and programmes in different economic environments, there are a number of distinctive recurring approaches to SME finance. Collateral based lending offered by traditional banks and finance companies is usually made up of a combination of asset-based finance, contribution based finance, and factoring based finance, using reliable debtors or contracts. Information based lending usually incorporates financial statement lending, credit scoring, and relationship lending. Viability based financing is especially associated with venture capital. Reliable for all the small ticket loan.

3.4. Why Small & Medium Enterprises Need Financing Small and medium-sized businesses can require financing for several different reasons. Some can't afford large investments with their current cash flow and obtain outside financing to improve their business; others need financing merely to get started. The amount of financing a business can receive is determined by the size of the business, its financial health and the projects to be financed. Start-Up Costs Most small and medium businesses use outside financing to begin their operations. Financing can be needed for office equipment, lease agreements, raw materials and initial payroll expenses, among other start-up costs. Lenders typically require the owner to submit a business plan that shows how the business will operate, why it will be successful and the repayment method the lender can expect for the loan. Capital Expenditures New businesses may need to purchase new equipment for operations or replace outdated equipment, and these capital expenditures can be expensive. Production equipment, service vehicles, accounting systems and computer networks are some examples of this type of large capital expenditure. These expenditures usually are financed so daily cash-flow operations won't be affected by the expenses. Expansion Small and medium businesses that become successful may look to expand their current operations. Adding a new location or purchasing a competitor requires large amounts of upfront capital. Expansion might require retooling certain business procedures for the new location, while a new acquisition might call for increased employee training, additional raw materials or new company vehicles. Business expansions require outside financing to help the process go through quickly without limiting current cash flow.

10

Operating Cash Flow Some small and medium businesses require outside financing for daily operations. Businesses with a slow cash flow may draw on a credit line to pay current liabilities, such as accounts payable or payroll. The credit line is paid off when the cash comes in from accounts receivable. Credit lines should be used judiciously because a balance can build quickly and the interest rate might not be favorable for long-term debt. Sources Most small and medium businesses obtain financing through banks and other lending firms. Finding a lender can take time, because smaller businesses typically have more stringent loan requirements. Small and medium companies also can find financing through private investors. 3.5. SME Banking-Opportunities in Financial Markets Small and Medium Enterprises (SMEs) are critical for the economic and social development of the emerging markets. They play a major role in creating jobs and generating income for low income people; they foster economic growth, social stability, and contribute to the development of a dynamic private sector. As such, access to financial services is vital in developing a vibrant SME sector in any economy. In many emerging markets, however, access to financial services for SMEs remains severely constrained. Most financial intermediaries (FIs) have hesitated to target this sector. Banks, which have traditionally served the corporate and large segments of the market, view SMEs as a challenge because of information asymmetry, lack of collateral, and the higher cost of serving smaller transactions. However, as corporate banking margins continue to shrink and increasing fiscal restraint lowers yields on government borrowings, banks have begun to assess the opportunities offered by SMEs. Providing banking services to this underserved SME market segment can increase their access to financial services and generate more employment opportunities and income.

11

3.6. Advantages of SME 1. Shorter establishment period 2. Low cost of establishment 3. Widely dispersed building wider industrial base. 4. Low capital intensive. 5. Potential for employment 6. Effective mobilisation rural resource 7. Crisis resistant 8. Loyal in paying the loan

3.7. Challenges to Develop SMEs Market Access 1. Lack of raw material supply, 2. Weak in competing in free market, 3. Lack of quality orientation, 4. Narrowed market share, 5. Lack of business partnership opportunity Information Technology 1. Traditional equipment, 2. Lack of transportation & communication infrastructure Funding Access 1. Limited capital 2. Not eligible to perform banks requirement 3. Misunderstanding of banking approaches : Management 1. Unable to identify clear target market 2. Product and service are not market driven 3. Simple work mechanism 4. Simple accounting system

12

5. Lack of cost and benefit analysis Human Resources 1. Run by family members or relatives 2. Lack of high education, 3. Lack of skill, traditional oriented 4. Lack of accessibility to information and technology development

3.8. SME Development in Bangladesh Historically, Bangladesh followed a development strategy in which private investment was controlled through a host of regulations involving investment sanctioning, credit disbursement, import licensing, foreign exchange allocation, etc. While these regulatory barriers thwarted private investment in general, the impact fell unevenly on SMEs. This was because of the relative inability of the SMEs to cope with the regulations compared to their large-scale counterparts. Thus, the policy regime was largely biased against the SMEs although, paradoxically, promoting SME development was a stated objective of successive governments. In a bid to render its industrial sector internationally competitive and to move towards greater efficiency in its production structure, Bangladesh implemented a number of economic reforms during the 1980's, underwritten by the familiar structural adjustment policy. These included deregulation of sanctioning procedure and relaxation of other regulatory barriers, easing of import procedure, reducing trade barriers, following a market oriented exchange rate policy, and implementation of fiscal, monetary and public enterprise reforms. These reforms helped remove a large part of the policy bias against SMEs that prevailed earlier. Recent studies confirm that these reforms had positive impacts reflected in a fairly rapid growth of the sector during the past decade. However, because of their structural weaknesses, the SMEs may need more pro-active policies for their development in addition to the further removal of the policy biases.

13

4.1. Introduction of SME in NCC Bank Ltd. There are many small and medium entrepreneurs in our country that have innovative idea spirit and potentially to do something productive for local customers as well as export abroad. The can generate income and contribute to the GDP. They may also provide employment. Development growth of SME is vital for national development. Such type of beneficial enterprising borrower cannot go a long way for want of financial support because they have no access to institutional credit facilities. National Credit and Commerce Bank Limited is committed to play positive role in the overall socioeconomic development of the country. In view of above a credit scheme titled Small and Medium Enterprise Financial Scheme has been formulated. Taking this aspect into consideration and with a view to expanding our banks investment base and to associate us more effectively with a profitable socially desirable and economically viable investment area the Board of Directors of the Bank in its 150th meeting held on 05.06.2006 has approved introduction of Small and Medium Enterprise Financial Scheme which will come into force with immediate effect. 4.2. Objectives 1. To provide credit facilities to the small and medium size entrepreneurs located in Urban and Sub urban areas and easily accessible by our Branches. 2. To flow credit for creation of employment and generation of income on a sustainable basis through development of small and medium enterprises. 3. To assist potential entrepreneurs to take part in economic activities so that they can improve their living standard. 4. To reduce dependence on moneylenders 5. To make the small and medium enterprises self-reliant. 6. To develop saving habit and making acquaintance with banking facilities.

14

7. To inspire for understanding small projects for creation employment through income generating activities. 4.3. SME Concepts in NCC bank Ltd. Small and Medium Enterprise refers to those enterprises other than Public Limited Co as per guidelines of Bangladesh Bank. 1. Where goods are produced, recycled, replaced or traded and rendering service in traditional way. 2. Small Enterprise Nature of Enterprise Service Concern Trading Concern Manufacturing Concern Total Assets at cost excluding land and building Tk. 5 lac to Tk. 1 crore Tk. 5 lac to Tk. 1 crore Tk. 50 lac to Tk. 10 crore Total number of employees 10 to 25 persons 10 to 25 persons 25 to 99 persons

3. Medium Enterprise Nature of Enterprise Service Concern Trading Concern Manufacturing Concern Total Assets at cost excluding land and building Tk. 1 crore to Tk. 15 crore Tk. 1 crore to Tk. 15 crore Tk. 10 crore to Tk. 30 crore Total number of employees 50 to 100 persons 50 to 100 persons 100 to 250 persons

4.4. Classification of Entrepreneurs Two types of entrepreneurs will come under this scheme: 1. New and inexperienced entrepreneurs. 2. Experienced and successful entrepreneurs.

15

4.5. Eligible Criteria for the loans 1. The borrower must maintain a saving/current/STD account. 2. The entrepreneurs must be literate. 3. The entrepreneurs should be skilled in managing his/her business. 4. If the applicant is an individual, the borrower must be a national or permanent resident of Bangladesh. If the borrower is firm, it must be in Bangladesh. 5. The entity of the applicant must be 100% privately owned, controlled, and operated. 6. The project shall be financially viable and socially desirable. 7. The applicant shall have reputation in the society. 8. The innovative project, manufacturing enterprise shall get preference. 4.6. Target Segments for SME Financing Initially Small & Medium Size Enterprise located within accessible area of our branches will be the target area under this program. The Entrepreneurs should have an existing profitable business or a value business plan. S.L. 1 2 3 4 5 6 7 8 9 10 11 12 13 Sector Hospitals and Clinics It related business Agricultural and Agricultural Development items Fishing and fishing business promotion Transportation and Communication Forestry and furniture Construction business and housing development Leather marketing and leather goods knitwear and readymade garments Entertainment Photography Hotel and tourism Warehouse and container services

16

14 15 16 17 18 19 20

Printing and packaging Gunning and Bailing Pathological Laboratories Cold Storage Horticulture- Flower growing and Marketing Food and oil processing plants Higher education and expertise knowledge society

4.7. Restricted Business The Bank will discourage lending to following areas of business: 1. Military Equipment/Weapons Finance 2. Companies listed on CIB black list or known defaulters 3. Highly Leveraged Transactions. 4. Finance of Speculative Investments 5. Share Lending (Not more than 60% of share value of last 6 (six) months market average or maximum 35 lac whichever is lower or as per guidelines of Bangladesh Bank) 6. Taking an Equity Stake in Borrowers (except under Islamic Banking Operation) 7. Bridge Loans relying on equity/debt issuance as a source of repayment. 8. Manufacturing Alcoholic beverages. 9. Manufacturing tobacco. 10. Crop and fish production. 11. Production and trading of any item banned by Government. 12. Any activity not permissible by the law of the land. 4.8. Purpose 1. Working Capital 2. Capital Machinery 3. Delivery van/Transport for business.

17

4.9. Loan under SME 1. Cash Credit Hypo/Pledge: For small enterprise, the range of CC hypo loan is 1 lac to 50 lac maximum 1 year period and for medium enterprise, the range of CC hypo loan is 50 lac to 1 crore maximum 1 year period. 2. Lease Finance: For small enterprise, the range of Lease Finance is 1 lac to 50 lac for used/reconditioned machinery/vehicle maximum 3 years period and for new maximum 5 years period. For medium enterprise, the range of Lease Finance is 50 lac to 1 crore for used/reconditioned machinery/vehicle maximum 3 years period and for new maximum 5 years period. 3. Term Loan: For small enterprise, the range of Term Loan is 1 lac to 50 lac maximum 5 years period and for medium enterprise, the range of Term Loan is 50 lac to 1 crore maximum 5 years period. 4. Small Business Loan Scheme: The range of Small Business Loan Scheme is 5 lac maximum 3-5 years period. 5. Festival Personal Loan Scheme: The range of Festival Personal Loan Scheme is 1 lac maximum 3 month period. 6. Home Improvement Loan: The range of Home Improvement Loan Scheme is 10 lac maximum 5 years period. 7. Personal Loan: The range of Personal Loan is 1 lac maximum 5 years period. 8. Consumer Finance Scheme: The range of Consumer Finance Scheme is 1 lac maximum 5 years period. 4.10. Mode & Period of Finance 1. Cash Credit (H) for maximum 1 year period. 2. Lease finance for used/reconditioned machinery/vehicle maximum 3 year and for new maximum 5 year. 3. Term loan for business, maximum 5 year.

18

4.11. Loan ceiling For SME working capital, for lease financing, for SME term loan: Nature of Enterprise Small Enterprise Medium Enterprise Borrower exposure (For all items) Minimum Tk. 1 lac & Maximum Tk. 50 lac. Above Tk. 50 lac & Maximum Tk. 1 crore.

4.12. Discretionary power Discretionary power for sanctioning loan under Small & Medium Enterprise Financing Scheme will be as under: 1. Branch Manager 2. Area Chief 3. Additional Managing Director 4. Managing Director 5. Executive committee/ Board of Directors 4.13. Fees and Charges of SME Financing 1. Interest Rate: 18% 2. Risk Fund: 1% 3. Service charge: 1% 4. Application Fee: Tk. 600.00 5. Loan Processing Fee: Tk. 500.00 6. CIB Charge: Th. 100.00 7. Penal interest: 2% (Maximum Tk.100) 4.14. Insurance Fire insurance and other insurance should be done at the cost of the customer. : nil : Up to Tk. 5 lac : Up to Tk. 10 lac : Up to Tk. 15 lac : Above Tk. 15 lac

19

4.15. Collateral Securities Collateral security will be required for the loan amounting more than Tk. 5.00 lac. However, two personal guarantees acceptable to the Bank should be taken for all SME loans. 4.16. Site Visit Report Branch will forward a detailed site visit report regarding the project to the Head Office duly signed by the officer and Head of Branch / Operations Manager. On the contrary, SME Team, Head Office will assist (on need basis) in site visitation. 4.17. Command Area Command area may preferably be within radius of 5 Kilometer from the branch.

20

4.18. Valuation Valuation of property provided as security should be done by a survey firm enlisted with the Bank prior to sanction / disbursement of loans. In NCC Bank, valuation must be done after every 3 year. In 3 year, any borrower enhances his loan then there is no need for valuation. Valuation is only for Cash Credit (Hypo), Lease finance, and Term loan.

Application received with required document from customer

SME officer collates and scrutinize the application

Then lawyer send his/her opinion to SME unit

Lawyer check all document which is correct or incorrect

SME officer sends valuation report to H.O

SME officer send this document to lawyer.

H.O. approved this valuation

SME unit visit the site

SME unit survey the site value & estimate value

4.19. Repayment of Loan 1. Term Loan: Maximum 60 installments. 2. Working Capital: Maximum 12 installments, 40% of the loan amount should be recovered within 1st 6 months and remaining 60% should be recovered within next 6 months. At maturity the loan will be fully adjusted. After repayment of 75% of the loan the customer may apply for new credit facility. 4.20. Application procedure Application procedures include the following steps: 1. Prescribed application form duly filled in and signed by the clients. 2. Submission of the applicant along with supporting documents.

21

4.21. Required Document for available SME Facilities 1. Application from the borrower (Company Pad). 2. Application from the borrower (Bank Format). 3. Audited Financial Statement with Cash Flow of last 3 years. 4. Projected Financial Statement with Cash Flow of last 2 years. 5. Bio-Data of directors/partner/proprietor with top management official. 6. Feasibility Report/Project Profile (if any). 7. Upto date Trade License. 8. TIN Certificate. 9. VAT Certificate (if applicable). 10. BOI Certificate. 11. IRC 12. ERC 13. Stock Report. 14. Liabilities with other bank with 1 year statement. 15. Net worth of the directors/partner/proprietor. 16. Net worth of the company/form. 17. Angikarnama KA for CIB Enquiry. 18. Memorandum and Article of Association for limited company. 19. Board Resolution for availing facilities from NCC Bank Limited. 20. Photograph of the proprietor or designated account holder. 4.22. Terms and conditions for SME Loan The SME department of NCC Bank will provide small loans to potential borrower under the following terms and condition: 1. The bank shall not be obliged to make the loan available until it has received formal written acknowledgement from the borrower. 2. The SME Loan facility will be made available to the customer subject to a clean CIB report from Bangladesh Bank and Compliance of Bangladesh bank formalities (if any).

22

3. The Bank reserves the right to withdraw the loan facility and thereby terminate the agreement. 4. The loan shall be utilized for the specified purpose for which it has been sanctioned. 5. The borrower unconditionally undertakes to repay the facility as per terms and condition of the banking arrangement letter. 6. The security documents will remain lodged with the bank and will be enforceable by the bank against the borrower in the event of breach of agreement by the borrower. 7. If the event of death of borrower, the bank shall be entitled to recover the outstanding amount from the end of service benefits from his/her employer and his/her legal heir(s) and or from the guarantor. 8. The bank reserves the right to review the facility and/ or these terms and condition and/or terminate the facility and/or call back the money due there under at anytime without ongoing any version whatsoever. 9. These terms and conditions shall be governed by the laws of Bangladesh and the borrower and the bank hereby irrevocably submit to the nonexclusive jurisdiction of the courts of Bangladesh. 10. Bank will charge penalty@ tk. 100 for each bouncing of cheque. Bank may deal the matter according to section 138 of negotiable Instrument Act1881. 11. Loan can be repaid in two ways: a. In equal monthly loan installment with monthly interest payment, or b. By one single payment at maturity, with interest repayable a quarter end residual on maturity 12. Loan may have various validates, such as, 3 months, 4 months, 6 months, 9 months, 12 months, 15 months, 18 months, 24 months, 30 months and 36 months. 13. The borrower must open a bank account with the same bank and branch where the SME has its account.

23

4.23. SME Loan Process Flow When a customer comes to the unit office for a loan request, first he/she meets with the customer relationship officer to discuss about the loan, which loan product is suitable for him/her. After then the following process takes place.

Flow Chart for processing SME Loans

Application received with required document from customer

SME officer collates and scrutinize the application

SME Team visit customer business site & valuation this site

SME officer applies for CIB enquiry

Loan Admin checks the docs and sends them to Credit for analysis

Application meets basic criteria

Approval / Rejection & advises accordingly

SME officer sends Proposal to H.O

HO receives proposal & sends to Credit & Loan Admin

Disbursement of loan after getting all the required original docs including CIB Clearance from Bangladesh Bank

Customer signs sanction advice & submit original charge docs/insurance etc.

SME officer declares about terms & conditions to the customer

24

4.24. Disbursement Process

Customer must open an account

SME officer send all required document to CID for limit loading

SME unit load account limit for disbursement

CID also load customer limit for disbursement

CID approved this document

SME unit sanction the loan

SME unit pay customer through cash or cheque

4.25. Marketing of SME Financing Scheme To achieve the objectives of SME Financing Scheme, everybody should take vigorous initiative from the beginning. By selecting potential customer, making quick decision and prompt disbursement and proper supervision bank will be able to achieve target easily. Generally SME Financing Scheme is a supervisory credit scheme. The total success of this scheme depends on selection of potential customer and positive marketing effort is only the way to collect potential customer. So facilities under the scheme will be provided to the enterprise that will actually stand the credit test of the bank, having capability to run it successfully, the project is commercially viable to generate income to refund the loan money. Supervision and monitoring shall be done by bank to ensure proper running of the project and timely repayment of the loan so that the scheme can survive.

25

4.26. Loan Monitoring and Review This is a supervisory credit scheme. The success of this scheme depends on the extensive and intensive post disbursement supervision follow up & monitoring: 1. Regular checking the balance of SB/CD/STD accounts of the borrower. 2. Regular communication physically over telephone. 3. Issuance of letter to customers immediately after dishonor of cheque. 4. Issuance of letter to the defaulter customers and respective guarantors. 5. Issuance of legal notice to the defaulter customers and guarantors prior to classification of the loans (After 03 overdue installments). 6. Issuance of Appreciation/Greetings letter to the regular customers. 7. Legal action to be taken after failing all possible efforts to recover the Banks dues. with defaulter customers and guarantors

4.27. SME Portfolio Statement of SME loans as on 31.12.2011 Concern Enterprise Small Enterprise Medium Enterprise Total Trading Concern 228.39 Lac 628.20 Lac 856.59 Lac Service Concern 17.64 Lac 177.81 Lac 195.45 Lac Manufacturing Concern 219.92 Lac 855.81 Lac 1075.73 Lac Total 465.95 Lac 1661.82 Lac 2127.77 Lac

26

900 800 700 600 500 400 300 200 100 0

S m all Enterpris e MediumEnterpris e

Trading

S ervice

Manufacture

Taka in Lac Figure: Statement of SME loans 4.28. Comparative analysis of SME loan of six different banks Loan Size Prime Bank Ltd.
1 lac - 75 lac

Dhaka Bank Ltd.

1 lac - 50 lac

Eastern Bank Ltd.

1 lac-300 lac

Mercantile Bank Ltd.

2 lac - 50 lac

BRAC Bank Ltd.

3 lac - 30 lac

NCC Bank Ltd.

1 lac-300 lac

Rate of Interest Prime Bank Ltd.

18%

Dhaka Bank Ltd.

17%

Eastern Bank Ltd.

18%

Mercantile Bank Ltd.

15%

BRAC Bank Ltd.

15%

NCC Bank Ltd.

18%

Loan Processing Fee Prime Bank Ltd.

.50% of the loan amount

Dhaka Bank Ltd.

Free

Eastern Bank Ltd.

Free

Mercantile Bank Ltd.

TK 500.00

BRAC Bank Ltd.

.50% of the loan amount

NCC Bank Ltd.

TK 500.00

27

Period of loan Prime Bank Ltd.

1 year to 5 years

Dhaka Bank Ltd.

1 year to 3 years

Eastern Bank Ltd.

Upto 1 years

Mercantile Bank Ltd.

Upto 2-5 years

BRAC Bank Ltd.

1 year to 3 years

NCC Bank Ltd.

1 year to 5 years

Mode of Finance Prime Bank Ltd.

Term loan and working capital loan

Dhaka Bank Ltd.

Term loan and working capital loan

Eastern Bank Ltd.

working capital loan

Mercantile Bank Ltd.

Only Term loan

BRAC Bank Ltd.

Only Term loan

NCC Bank Ltd.

Term loan, lease finance and working capital loan

Management Overall the management of the bank engaged in SME banking is efficient and have diverse knowledge and banking sector. NCC Bank has initiated to provide training of staff for well managing and SME customer. Portfolio size of six different banks in SME sector Name of bank Prime Bank Limited Dhaka Bank Limited Eastern Bank Limited Mercantile Bank Limited BRAC Bank Limited NCC Bank Limited Portfolio size 10.80 18.00 20.00 16.38 25.72 21.27 Total 112.17 (TK. In crore)

28

From the table we can see that BRAC bank has the highest investment in the SME sector followed by NCC Bank Limited in second position. While the Eastern Bank Ltd., Dhaka Bank Ltd., Mercantile Bank Ltd. and Prime Bank Limited are third, fourth, fifth and sixth respectively.

P ortfolio S iz e

19%

10% 16%
Prim eB ank Dhaka B ank Eastern B ank Mercantile B ank B R AC B ank N CC B ank

22% 15%

18%

29

5.1. Findings NCC Bank Ltd actively participates in the growth and expansion of the national economy by providing SME Loan to viable borrowers. While analyzing the SME Loan policies and procedures of the Bank, the following areas were mostly viewable. 1. Lack of sufficient Executives or Officers especially in the Credit Division hampers the Loan Sanctioning Process in time. 2. In SME Loan Service NCCBL doesnt comply with the requirements of its policy and Bangladesh bank guidelines exactly. 3. Lack of information on loan application requirement among the SME loan seekers. 4. Most of the customers want to reduce the interest rate and increase tenure. 5. Some customers are not satisfied with the attitude/behavior of SME officer. 6. Huge number of documents in the helpdesk causes delay in the disbursement process. 7. Area office can approve up to 5 lacs, but at present the percentage of repeat customers increase rapidly and most of the cases they apply for more than 5 lacs. 8. Lack of marketing activities in the urban area, whereas other competitors are giving more ad at different spot. 5.2. Recommendations The following suggestions are put forward for present and future sustainability of the SME of NCCBL: 1. NCCBL should disburse their SME loans in various sector rather than specific scheme. 2. SME Loan sanctioning and disbursement procedure should be easy and flexible being considered the requirements of different classes of people.

30

3. Amount of loan can be raised in proportion with the existing demand of people in SME loan, SME loan can be popular among the small trader and lower income group people like NCCBL DPS. 4. NCCBL credit Policies can be revised being considered with the increase demand of telecom, transportation, Knit and packaging and plastic industry. 5. Bottlenecks or barriers should be removed by taking advanced steps in mode of disbursement, charge documents and approval process. 6. Loan facility parameter should be expanded so that all the people can get loan according to their needs. 7. Business Power for sanctioning loans and advances can be increased at branch level. 8. In rural areas, NCC Bank should provide the SME Loan to alginate the poverty and also increase the self relevance. It will act as a promotion policy. 9. The Bank should have more conference in overseas, work shop, symposium, and seminar for more expansion of SME loan. 10. More SME service unit need to be added to fully take the advantage of the huge potential customer segments. 11. The sectors where the bank is investing should need much concern and need a revision so that investments are not resulting in desired outcome. 5.3. Conclusion NCC Bank Limited is a strong and effective player in the financial system. It is a solid, forward-looking, modern local bank with a record of sound performance. It is a new generation bank. It is committed to provide high quality financial services /products to contribute to the growth of GDP of the industrialization, boosting up export, creating employment opportunity for the educated youth, rising standard of living of limited income group and overall sustainable socioeconomic development of the country. The bank has the vision to be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital adequacy,

31

asset quality, sound management etc. it is now one of the top most profitable private sector commercial banks. As concluding remark the bank is able to attain a leading role with the 25 years success story but to remain unrivalled among new generation banks, the bank must face new challenges. The bank must make a positive attempt to be more outward looking in their goals and aware of what is happening. They must also emphasize on the domestic scenario more closely and analyze any certain trends and strategies of their competitors. The bank must accept any failures and think of them as an objective to pursue future goals instead of blaming such failures on other factors and in this way the Bank will be able to keep on playing its important roles in our economy.

32

6.1. Reference Books: 1. Entrepreneurship, Robert D. Hisrich, Michael P. Peters, Dean A. Shepherd Tata McGraw-Hill Publishing Company Limited. 2. Annual report of 2010, NCC Bank.

Web: A. http://en.wikipedia.org/wiki/SME_finance B. http://www.bangladeshbank.org/ C. http://www.nccbank.com.bd/ D. http://www.bracbank.com/?drgn=1 E. http://www.mblbd.com/ F. http://www.dhakabankltd.com/ G. http://www.primebank.com.bd/ H. https://www.easternbank.com/ I. http://www.cse.com.bd/ J. http://www.dse.com.bd/

33

6.2. Appendix ACRONYMS NCC NCCBL SME A/C ATM CEO CD SB FDR SSS Govt. GDP NFSD RFCD DSE CSE Pay Order POS SWIFT TIN CIB CID HO VAT National Credit and Commerce National Credit and Commerce Bank Limited Small and Medium Enterprise Account Automatic Teller Machine Chief Executive Officer Current Deposit Saving Bank Fixed deposit receipt Special Saving Scheme Government Gross Domestic Production Non-resident Foreign Currency Deposit Resident Foreign Currency Deposit Dhaka Stock Exchange Chittagong Stock Exchange Payment order Point of Sales Society for Worldwide Interbank Financial Telecommunication Tax Identification Number Credit Information Bureau Credit Information Department Head Office Value Added Tax

34

Work Activities My work activities at NCC Bank are listed below: 01.01.2012 03.01.2012 I got the letter of confirmation from NCC Bank Head Office. I joined NCC Bank at Dilkusha Branch and got introduced with manager, Mr. Humayun Soeb and all the employees of the 04.01.2012 05.01.2012 08.01.2012 09.01.2012 10.01.2012 11.01.2012 12.01.2012 15.01.2012 16.01.2012 17.01.2012 18.01.2012 19.01.2012 22.01.2012 23.01.2012 24.01.2012 25.01.2012 26.01.2012 29.01.2012 branch. I am appointed in General Banking Section specially, and learnt how to open account. My job was to sort CD, SB, FDR, DPS, SSS form and put the seal into the form and help customers to open account. My job was to fill up deposit from and check everything required to be included in the form. My job was to sort CD, SB, FDR, DPS, SSS form and put the seal into the form and help customers to open account. My job was to fill up deposit from and check everything required to be included in the form. My job was to sort CD, SB, FDR, DPS, SSS form and put the seal into the form and help customers to open account. My job was to fill up deposit from and check everything required to be included in the form. Estimated Excise Duty. Calculated the Excise Duty balance sheet. Washed Sundry Debitors and made balance sheet. Washed Sundry Creditors and made balance sheet. All this Excise Duty/Sundry Debitors/Sundry Creditors balance sheet put in computer and made printed copy. I enlisted the applicants of Padma Islami Life Insurance IPO into the entry book in cash section. I enlisted the applicants of Padma Islami Life Insurance IPO into the entry book in cash section. I enlisted the applicants of Padma Islami Life Insurance IPO into the entry book in cash section. I enlisted the applicants of Padma Islami Life Insurance IPO into the entry book in cash section. I enlisted the applicants of Padma Islami Life Insurance IPO into the entry book in cash section. Worked in cheque requisition section.

35

30.01.2012

Enlisted CB and SB cheque in cheque register book and sorted cheque by date, setial no. and took signature of the customers before issuing new cheque. Worked in pay order table to write pay order voucher and pay order block. Worked in the remittance table. My job was write down the form of Money Gram, UAE Exchange, Placid etc Worked in the account opening section. My job was to sort CD, SB, FDR, DPS, SSS form and put the seal into the form and help customers to open account and fill up deposit from and check everything required to be included in the form.. My job was to sort CD, SB, FDR, DPS, SSS form and put the seal into the form and help customers to open account and fill up deposit from and check everything required to be included in the form.. My job was to sort CD, SB, FDR, DPS, SSS form and put the seal into the form and help customers to open account and fill up deposit from and check everything required to be included in the form.. Worked in the SME Department. My job was to write down loan application to help customer and check application form by date, serial no. and put branch seal and other seal into the form. My job was to write down loan application to help customer and check application form by date, serial no. and put branch seal and other seal into the form. My job was to write down loan application to help customer and check application form by date, serial no. and put branch seal and other seal into the form. My job was to write down loan application to help customer and check application form by date, serial no. and put branch seal and other seal into the form. Worked in cash section.

31.01.2012 01.02.2012 02.02.2012 06.02.2012 07.02.2012

08.02.2012

09.02.2012

12.02.2012 13.02.2012

14.02.2012

15.02.2012

16.02.2012

20.02.2012

36

37