Internship Report

Internship Report
An analysis of Consumer Credit Scheme of

Private Commercial Banks in Bangladesh
The case of Premier Bank limited.
March 15, 2006
Department of Finance, University of Dhaka.
Internship Report
An analysis of Consumer Credit Scheme

of
Private Commercial Banks in
Bangladesh The case of Premier
Bank limited.
Submitted to:
Dr. M. Khairul Hossain

Professor
Department of Finance,
Faculty of Business Studies,

University of Dhaka.
Submitted By:
Fahmida Begum
BBA 7th Batch
Section-B
ID No.-19
March 15, 2006
Department of Finance, University of Dhaka.
March 15, 2006

Dr. M. Khairul Hossain
Professor
Subject: Submission of Internship Report

Dear Sir,
I am pleased to submit the internship report titled An analysis of Consumer Credit
Scheme of Private Commercial Banks in Bangladesh ---- the case of Premier Bank
limited , as a partial requirement of the BBA program in University of Dhaka.
This report highlights the overall consumer credit activities of Premier Bank Limited &
compared with other Bank, along with the brief description of Premier Bank Limited.
Writing this report has been a great pleasure & an interesting experience. It enabled me to
know the insight activities of Consumer Credit Scheme.
This project helped me tremendously to understand the implication of my book
knowledge in the practical field. It has also shaped some of my basic views like how to
communicate & carry one self in the world of business. I realize that certain information
enclosed in this report is confidential & should be confined within academic discourse &
interest.
I am extremely grateful to you for your valuable guidance, diligent effort & awareness
whenever it was required. I tried my best to follow your instruction, schedule, format &
discipline obediently & sincerely.
Thanking You
Sincerely Yours
Fahmida Begum
Id No.-19
BBA 7th Batch
ACKNOWLEDGEMENT
Successful completion of any course requires support from various persons. I am very much
fortunate to get the guidance & supervision of my teachers, Premier Bank officials & officials of
other banks.
First of all I express my gratitude to Almighty Allah, The supreme authority of the universe. Then I
would like to express my deep sense of gratitude & sincere appreciation to my internship
supervisor Dr M. Khairul Hossain, Professor, Department of Finance, University of Dhaka for his
continuous support & guidance during the practical orientation period. His suggestions and
comments were really a great source of spirit to make the report a good one.
My sincere gratitude goes to Mr. Dewan Anwarul Latif, Executive Vice President & Manager,
Motijheel Branch, The Premier Bank Limited who gave special attention to me from the very
beginning and whenever I went there. I would also like to thank Mr. Ashraful Azad, FAVP, Motijheel
Branch, The Premier Bank Limited for his cordial attitude and helping hand guides me in all
situations during my tenure in the bank. I would also like to express my gratitude to Mr. M. Shafiqul
Islam, AVP, Motijheel Branch, The Premier Bank Limited for his valuable advice and suggestions.
My special thanks goes to Mr. M. Azizur Rahman Suman, First Executive Officer, Motijheel Branch,
The Premier Bank Limited for his sincere co-operation & valuable advice to make the report
effective during my orientation period.
We recognize the laudable performance of the staff of Bangladesh Bank, AB Bank, Prime Bank.
They really spent much of their valuable time in haste to provide us substantial information with
relevant papers. We are grateful to them because they showed the highest degree of temperament
in answering our relentless questions.
Last but not the least, I would like to thank all of the people who helped me by answering my
questionnaires & providing the information on which I conducted my survey.
Finally in the end I would like to add some words that this report is prepared from the experience
that I had working in the Bank If any errors & mistakes are found in the Report, I hope all of you will
take it as unwilling mistake.
Executive Summary
The internship report titled An analysis of Consumer Credit Scheme of Private
Commercial Banks in Bangladesh ---- the case of Premier Bank limited , is submitted
an partial prerequisite of the BBA program of University of Dhaka. The purpose of this
internship report is to learn how to conduct a professional research by exploring
practically in banking sector. The topic was assigned by my internship supervisor Dr. M.
Khairul Hossain, Professor, Department of Finance, University of Dhaka. In essence it
comprises the comparative analyst that lies on private sector banks of Bangladesh
competing within the business of consumer credit.
To complete this study, I have used structured questionnaire & each of the respondents
has been interviewed through it. To represent an apparent sight I have used tables &
graphs while analysis. My work proceedings- from data collection to report writing was
carried out on the basis of my preliminary work Schedule.
Although this research paper was carried out within short spell of time, but I have tried
my best to impart the accurate & hue information concerning the comparative study on
consumer credit scheme of different banks. I hope tills paper will facilitates Premier Bank
LTD with the latest news flash on consumer credit of different banks.
In order to understand the organization on which the report was carried on, a brief
overview of Premier Bank Limited has been presented. Basically Premier Bank Ltd is a
solid, forward looking, modern local bank with a record of sound performance. It is
discarding its erstwhile conservative mould & in response to current dynamic trends in
financial activities, adopting an aggressive customer focused banking system. The effort
that PBL makes in order to portray the Bank as a brand image it is- trustworthy, efficient,
helpful & committed.
A brief overview of consumer credit scheme has been presented. Factor that affect the
demand for consumer installment credit such as, Consumers disposable income, the real
income for the proceeding year, the size of the monthly installment, the growth in family
formation, Down payment and contract length
In Bangladesh Consumer credit may be defined as credit provided to individuals or
groups to purchase consumer durables. Practically consumer credit is a facility designed
to help the consumer to purchase goods or services for their personal use on the
assumption that the consumers have a stable source of income over the next few years. In
Bangladesh, Consumers Credit Scheme program of different private sector banks and
foreign commercial banks has made a significant change in the middle class fixed income
group for providing household durables. This loan is very much convenient for general
people as well as profitable for the offering banks.
This report deals with the detail description of CCS of Premier Bank Ltd & how the
organization functions in harmony to create & present a visual description as well as
representation of the entire relative in formation. It also highlights on other financial
products & services offered by the Bank & thus prove the importance of this project from
a business perspective. Total outstanding in this segment stood at Tk. 2937.65 lac &
recovery rate was 93.5% as at December 31, 2005.
First of all Islami Bank Bangladesh Limited introduced this loan in 1993. Following their
success other private banks like Prime Bank Ltd., Premier Bank limited, Arab
Bangladesh limited and other introduced this scheme later. Now about to every private
sector banks offers this household durable loan. But among the foreign commercial banks
this is not that much practiced. A Comparative Study, it highlights the similarities as
well as differences on context of Consumer credit scheme of 3 concerned banks
according to Bank Generation such as Arab Bangladesh Bank Ltd (1 st generation bank),
Prime Bank Ltd.(2nd generation Bank), Premier Bank Ltd. The comparison was derived
from the raw facts collected through questionnaire, interviews & by observation.
On the basis of data information a simple SWOT analysis recognize the strengths,
weakness, opportunities & threat of Premier Bank Limited, regarding Consumer Credit
Scheme. Strengths of the consumer credit scheme comprise of ease of sanction and
disbursement, reversal of risk fund as token reward for good payment behavior, and
diversification of credit base on consumer credit scheme. Weaknesses of the consumer
credit scheme comprises of ease of security documentation, trend diversification of fund,
and recovery inefficiencies. Opportunities of the consumer credit scheme comprises of
introduction of new products under consume credit scheme, opportunity of having higher
portfolio in consumer loans, opportunity of higher income in the form of interest spread
and fees, ease of documentation. Threats of the consumer credit scheme comprises of
higher rate of interest, diversification of fund, higher rate of overdue, monitoring
requirements.
In conclusion & Recommendation the overall picture of this research is compressed in
brief & in recommendation part I highlight all the suggestions that I have made as a
researcher, to improve the performance of CCS department of PBL, Motijheel Branch & I
have also presented my work report of my internee program.
The last chapter deals with the part that I have worked as an internee while my internship
program at Premier Bank LTD (Motijheel Branch).
Table of Contents
Contents
Page no.
CHAPTER 1: INTRODUCTION
1-4
1.1
1.2
1.3
1.4
1
2
3-4
4
Rationale of the study

Objectives of the study
Methodology
Limitations
CHAPTER 2: PROFILE OF PREMIER BANK LTD.
4-9
2.1
2.2
2.3
2.4
2.5
2.6
4
5-7
8
8-9
9
9
10-11
Overview of the Premier Bank Ltd.

Performance of the Premier Bank Ltd.
Branch Network of the Premier Bank Ltd.
Objectives of the Premier Bank Ltd.
Vision of Premier Bank Ltd
Values & Missions of Premier Bank Ltd
CHAPTER
SCHEME
3.1
3.2
3.3
3.4
3:
OVERVIEW
OF
THE
CONSUMER
CREDIT
History of Consumer Credit Scheme

Types of Consumer Credit Scheme
Reasons behind popularity of Consumer Credit
Factors that affect the demand for Consumer Credit
CHAPTER 4: CONSUMER CREDIT SCHEME IN BANGLADESH

4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Introduction
History of Banks in this Scheme &CCS in Bangladesh
Objectives of CCS Policy
Eligibility for CCS Loan
Goods under this Scheme
CCS Execution process
Related Documents
Key Factors of Consumer Credit Scheme
16-31
CHAPTER 5: AN OVERVIEW OF CONSUMER CREDIT

SCHEME (CCS) of PREMIER BANK LIMITED.
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
Introduction
Objectives of the Scheme
The Consumer Loan Products of Premier Bank Limited
Modes of Repayment
Security & documentation
Other Conditions
Steps taken against Defaulter
Follow up, monitoring & supervision
Performance of CCS of PBL
Introduction of loans for Executives/Officers of Premier Bank
Limited under Consumer Credit Scheme
CHAPTER 7: A comparative analysis of CCS

among
Premier Bank Limited, Prime Bank
Limited & Premier Bank Limited.
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
7.10
Introduction
Amount of disbursement
Recovery percentage
Amount of outstanding
Number of customers
Sector wise customers
Default analysis
Number of branches offering CCS
Interest factor
Supervision & flexibility
CHAPTER 8: STATISTICS ANALYSIS

CHAPTER 8: SWOT ANALYSIS
CHAPTER 9: PROBLEMS
CONCLUSION & RECOMMENDATIONS
WORK REPORT
My experience at Premier Bank Ltd, Motijheel Branch.
My assignment for Internship program.
Problem identification
16
19
21
24
APPENDIX
Bibliography
CHAPTER I: INTRODUCTION
Heres one about the middle-aged person who wanted a loan for Tk.10, 000 that will he
repaid within 15 days. The banker pulled out the loan application & asked, What are
you going to do within money? I will buy some fruits & going to sell those in market,
was the respond. Banker was asking for collateral? That man doesnt know what the
collateral is. So the man left bank & went into another. 2 nd bank asked for another
requirement. As he came across one after another banks, different banks asked for
different criterion. Finally one banker decided to make the Tk. 10,000 loan,.
From the above story it is clear that some customers may not know about the specific
product that banks offer. So they have to be well informed about particular product. It is
very common that customers always look for their own benefit. Where ever they will find
flexible procedure or less complex loan procedure, they will approach to that bank. In my
report I have tried my best to find which bank offers the most suitable, desirable
consumer loan package that customer desire for. Consequently the result derives on the
basis of my comparative analysis on consumer credit scheme of different generation
banks in private bank.
1.1
Background of the Study
Internship program is a pre-requisite for acquiring BBA degree in University of Dhaka.

The entire BBA program is divided into twelve semesters. The internship program is
generally executed in the last semester & it has got the same weight as other courses in
the evaluation process. As the classroom discussion alone cannot give proper picture of
real business situation, therefore it is as opportunity for the students to know about real
life situation through this program. The program consists of at least three phases:
Orientation with the organization: To acquaint the internee with the structure
functions & performance of the organization.
Completing the project work
Writing the report
My Internship supervisor Dr. M. Khairol Hossain, Professor, Department of Finance,

has selected the topic for my internship report A comparative study on analysis of
Consumer Credit Scheme of Private Commercial Banks in Bangladesh.
1.2
Rationale of the Study
Banks are in the business of managing risk. If done correctly, the bank will create
economic value obviously. If done incorrectly, real resources will be misallocated, and
the bank may fail.
Historically commercial banking has always depended upon the credit insights of the
banker, his ability to measure the capacity & willingness of a borrower to repay a loan,
his ability to sense, which risks appear to hedge others. These old fashioned concepts are
still relevant in evaluating todays commercial banking, even as we move toward
sophisticated risk management techniques of risk reduction.
Indeed, modern banking is not inherently different from traditional banking, except that
there are now many more financial products & services involved than before.
As the complexity of the financial market has increased, so has the complexity of risk
management. But although modern banking may create sophisticated mathematical
structures, the raw data of these systems remain the credit judgment of the individual loan
officers or credit committee in classifying the risk of a potential loan.
In brief, the bank of the future will generate its profits not only from offering the
technology of the future, but also from using its knowledge & credit evaluation abilities
to extend credit of profitable margins to customers with calculated risks.
However, The Premier Bank Ltd. has been recognized as one of the leading private
commercial banks in Bangladeshi banking sector. Due to free market economy,
competition is growing rapidly along the nationalized, foreign & private Commercial
Banks. Each Bank is trying to make their products & services more attractive to the
customers. Premier Bank Ltd. has launched their Consumer Credit Scheme to keep pace
with the growing expectations with the customers. This report basically deals with the
Consumer Credit Scheme (CCS) of Premier Bank Limited. It also describes the
competitive position of the scheme in the market.
The main purpose of this report is to evaluate the market compatibility of the Consumer
Credit Scheme of Prime Bank Ltd.
1.3
objective of the Study
General Objective:
To know about the management system of PBL as a private sector commercial bank, its
formation, its functional, operational & financial aspects.
Project Objective:
I. To present an overview of the Bank.
II. To make a comparison of Consumer Credit Scheme of Premier Bank
Limited with other private sector banks.
III. To identify the problems of existing credit policy
IV. To give suggestions for the development of the credit policy.
V. To appraise the Consumer Credit Scheme of Premier Bank Ltd.
VI. To find out how Consumer Credit Scheme system works.
VII. To assess the impact of Consumer Credit Scheme on Organization Growth
of Premier Bank Ltd.
VIII. To verify the scope of further improvement of CCS.
1.4
Scope of the Report
A comparative study on analysis Consumer Credit Scheme of analysis of Private Banks

in Bangladesh covers a wide scope. Here an overview of Premier Bank Ltd. is done,
discussion about various consumer credit schemes, credit monitoring & review, lending
process of Premier Bank Ltd, some drawbacks of existing policy & recommendations for
improving that are also done. The comparative analysis of CCS has conducted according
to generation with private banks in Motijheel commercial area, which is actually based on
my personal experience at Premier Bank Limited, Motijheel branch. Throughout my busy
schedule I had to make time out to carry out questionnaire survey on Consumer Credit
Scheme of different banks. The feedback of my survey is presented in this report.
1.5
Research Methodology
i. Data Collection:
For this research both primary and secondary data have been collected.
a) Primary Data:
- Discussion with the personnel of PBL & other private commercial banks.
b) Secondary Data:
-
Annual report of PBL
Website of PBL
Published documents, circulars, statements & brochures
Information from Internet
Bangladesh Bank Library
ii. Sampling Plan:

For conducting this study following plan has been followed.
Contact Method
: Questionnaire and Interview
Sampling Unit
: Selected leading banks in CCS program.
Sample Size
: 3 Private commercial banks

according to Bank Generation
Sampling Area
: Dhaka City (Commercial area)
The name of 3 concerning banks are given below:
Arab Bangladesh Bank LTD: 1st generation bank
Prime Bank Ltd
: 2nd generation bank
Premier Bank Ltd
: 3rd generation bank
iii. Data Analysis Method:

Incase of this research a simple qualitative judgment has been drawn on the basis of
available information. Some data has been judged quantitatively. Both the primary &
secondary data will be analyzed through quantitative as well as qualitative judgment. The
raw data will be processed through the computer program, namely MS Word, Excel etc.
Secondary data will be analyzed manually time to time.
iv. Justification of the report:
I have attempted to compare the overall condition of CCS of Premier Bank
Limited(PBL), Motijheel Branch with the mentioned local private banks. I also tried my
best to cover all the concerned matters which will be valuable be the future of PBL.
v. Language:
Abstract terminology and technical terms have been avoided as much as possible so that
any person can understand the theme of the report.
vi. Layout:
All necessary parts of conventional formal report have been followed. The readers are
expected to get a different taste from the report
1.6
Limitations
I have obtained enthusiastic co-operation of the employees of Prime Bank Limited.

Several limitations have taken in my project. Among them the following worth
mentioning:
Time constrains: The time frame for the preparation of the report was spare.
It proved to be very much scanty to engage in detailed research.
Inexperience: During the internship, in many part of my inquiry, my
performance was stuck by some lacking in experience.
Lack of information due to confidential reason: The survey on CCS
was conducted in commercial banks. But the response was not inspiring, on the
pretext of confidentially. For having inadequate data, extensive statistical analysis
e.g. hypothesis testing, inferences, time series analysis etc. was not possible.
CHAPTER-II
PROFILE OF PREMIER BANK LIMITED
2.1 Overview of the Premier bank Ltd.

The Premier Bank Limited is incorporated in Bangladesh as banking company on June
10, 1999 under Companies Act.1994. Bangladesh Bank, the central bank of Bangladesh,
issued banking license on June 17, 1999 under Banking Companies Act.1991. The Head
Office of The Premier Bank Limited is located at Banani, one of the fast growing
commercial and business areas of Dhaka city. Dr. H.B.M. Iqbal, Chairman in association
with a few successful entrepreneurs from varios fields of business activities to fulfil his
dream to create a Financial Institution that would stand out from the crowd & meet the
demands of 21st century, established the Bank. Premier Bank not only ranked as the top
performer of the 3rd generation private banks but also surpassed almost all banks in terms
of overall growth & profit.
2.2 Performance at a glance:

(Tk. in million)
Particulars
Authorised Capital
Paid-up Capital
Reserve Fund
Deposits
2000
2001
1000.00
1000.00
222.00
2.86
1856.13
2002
2003
2004
1000.00
1000.00
2000.00
239.76
408.91
557.55
98.24
130.00
301.08
222.00
25.30
2206.39
5373.75 10030.52 18005.20
Advances
1089.22
2057.96
4280.73
Investments
140.15
270.13
680.09
Foreign Trade Business
2348.20
8095.57 15383.93
1330.20
2750.00
6158.43
11782.80 20934.30 33937.38
Foreign Remittance
Income
24.62
224.36
57.51
54.80
364.50
1408.00
576.78
1251.76
2395.45
415.41
Expenditure
Operating Profit
Fixed Assets
Total Assets
199.18
25.18
46.79
2832.25
291.27
380.54
851.03
1464.52
196.24
400.73
930.93
73.29
107.90
149.57
124.14
47.59
3448.94
6036.92 11096.30 20100.25
Book Value per share (Taka)

Earning per share
Dividend
Loan as % of total Deposits
Non-Performing Loan as
percentage of total Loan
Capital Adequacy Ratio
Number of Branches
No of Foreign Correspondents
Number of Employees
Graphically Presentation:
100.00
3.85
58.68%
-
17.13%
6
103
127
121.68
140.97
168.12
207.69
28.30
67.02
84.40
13.70%
36.35%
79.66%
80.71%
85.44%
1.16%
0.36%
0.43%
9.27%
11.76%
10.69%
12
17
21
156
238
297
281
435
554
26.09
13.50%
93.27%
0.64%
12.47%
7
131
164
The Capital
800
758.72
700
600
500
400
380.6
303.2
300
235.8
200
100
0
1999
2000
2001
2002
2003
2004
Total Deposit
Paid up Capital
12000
450
408.91
400
10030.52
10000
350
8000
300
250
222
239.76
222
6000
5373.75
200
4000
150
100
2000
1424.22
50
0
1999
1856.13
2206.39
2000
2001
2002
2003
2004
1998
1999
2000
2001
2002
2003
2004
Loans and Advances

9000
8095.57
8000
7000
6000
5000
4280.73
4000
3000
2057.96
2000
1000
0
1998
1089.22
11.21
2000
2002
2004
2.3 Branch Network

Last year, highest numbers of branches were opened with modern facilities as part of
network expansion plan. The Bank opened branches at Elephant Road, (Dhaka);
Mohakhali, (Dhaka); Khulna; Sylhet and Saver. Out of 17 branches, 9 branches are now
authorized to handle foreign exchange business directly and 2 branches Mohakhali
(Dhaka) and Sylhet are offering Islamic Banking facilities. In January 2004, Barisal branch
was opened.
2.4 Objectives of Premier bank limited:
Service First: To hold a prime & central focus in the Banks operation.
Easier Banking: To provide their customers with a comfortable & friendly

environment & up to date technology application.
Better Relationship: To View banking to be a long term relationship with their

customers to fulfill their needs & satisfaction.
Assured Confidentiality: To assure our customers with uncompromising

commitment to transact their financial activities with strict confidentiality &
professional manner.
2.5 Vision of the Bank

To be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital
adequacy, asset quality, sound management and profitability having strong liquidity
Values & Mission of the Bank:
2.6
To be the most caring & customer friendly provider of financial services, creating
opportunities for more people in more places.
To ensure stability & sound growth which enhancing the value of shareholders
investments.
To aggressively adopt technology at all levels of operations& to improve

efficiency & reduce cost per transaction.
To ensure a high level of transparency & ethical standards in all business

transacted by the Bank.
To provide congenial atmosphere which will attract competent work force that
will be proud & eager to work for the Bank.
To be socially responsible & strive to uplift the quality of life by making effective
contribution to national development.
CHAPTER-III : OVERVIEW OF THE COSUMER CREDIT

SCHEME
3.1 History of Consumer Credit Scheme:
During the 18th century & first half of the 19th century, the principal non-bank agencies
that extended credit were small merchants, physicians & pawnbrokers. The industrial
revolution brought about changes in credit demands & institutions. Industrialization made
more goods available for consumers & created a class of wage earners. The credit needs
of the industrial wage earners different from the credit needs of farmers, who generally
borrowed on Open-Book accounts (without formal agreements) & paid off their debts
with the crops that were sold.
In contrast, industrial wage earners received steady incomes & could pay their debts on a
regular basis throughout the year. Accordingly, the concept of installment credit evolved,
since many workers received low wages & required credit to raise their standard of living
above substance levels. These credit needs were partially satisfied by small loan
companies that concentrated on making personal loans secured by personal property &
wage assignments. Those who could not obtain credit from legitimate small loan
companies borrowed from loan sharks, individuals who charged excessive rates of
interest- sometimes required the borrowers physical well being as collateral.
Now the availability of consumer durable goods such as automobiles & washing
machines expanded the demand for consumer credit. Sales finance companies, which buy
consumer installment credit contracts from retail dealers & provide wholesale financing
to those dealers, grew from these demands. Commercial banks were the next institution
to enter the consumer loan field. Therefore, they found a great potentiality in the
consumer credit market. So, most of the private commercial banks have introduced their
own Consumer Credit Scheme, banks provided their credit line to individual consumers
to finance their household appliances & office equipment. Loans under this Consumer
Credit Scheme are relatively small in amount that is to be repayable with equated
monthly installment.
3.2 Types of Consumer Credit:

George H. Hempel, Donald G. Semonson, Alan B. Coleman said that the following types
of consumer credit products are typically offered by an aggressive retail loan department:
Checking revolving overdraft line of credit
Large personal revolving line of credit
Installment loan
Short term, up to 5 years maturity
Long term, maturity period more than five years
Single payment loan.
Checking overdraft credit loan: Customer having a solid record of disciplined credit
activity can trigger the line by writing checks in excess of his or her account balance,
usually with a notice to the bank. The credit is usually restricted to small amount and
bears a high rate of interest.
Installment loans: Installment loans are made for a fixed amount and repayable in two or
more installment, Repayments schedule are set up to amortize the principle fully, usually
on a monthly basis over the life of the loan. Maturate typically within 4 to 5 years (short
term) although long-term installment credit may be extended as far as 20years. However
unsecured loan, usually do not exceed three years or so in maturity.
Single payment loan: Loans that are paid up at a time. The support for a single payment
loan usually is a single source of repayment available at the time of maturity. Repayment
typically does not come from regular income source, but from source such as maturity
securities or from planned sale of financial assets.
However based on the type of arrangement made with the financier, Kothari divided
consumers into the following three types.
Open end and close end credit

Loan and of money and credit purchase
Secured and unsecured credit
Open end and close end credit: Open end credit is an on-going credit arrangement with
financier of a revolving nature, such as revolving retail charge account, credit card
arrangement etc. The close-end credit on the other hand, is comparable to a term loan
from a bank, which is granted for a fixed period. It has a closed-end that is within a
stipulated period the credit accounts are monthly installment loans, hire purchase etc.
Loan of money and credit purchase: In case of a credit purchase, the seller himself
extends credit whereas in case of a loan of money, the lender and the seller are not the
same. The loan may either a conditional loan for a particular purpose only of may be a
general person loan. In case of a money loan, the lender has no responsibilities of a seller.
In between these two, there are hybrid forms such as leasing and hire purchase, where a
pure money loan is distinguished as the loan of commodity.
Secured and unsecured credit: Secured credit involves putting up some collateral that
the creditor can take to satisfy the debt in case of default. The collateral may be personal
property, real property of liquid assets. But in case of unsecured credit there is no
collateral. In this case personal guarantee is most suitable.
3.3 Reasons behind popularity of Consumer Credit Scheme

Commercial banks aggressively compete for consumer loans for a variety of reasons. In
recent year net yield of consumer loans have exceeded those on commercial loans.
Default rate stands higher than those on other loans, but the gross yield charged is more
than required to compensate for the higher loses. When rate decline, net profits on
consumer loans rise sharply because these loan rates are sticky. Individuals also typically
maintain deposit account where they borrow. Retail deposits are relatively low cost and
not nearly as rate sensitive as commercial deposits. Thus liquidity risk is reduced when
the volume of consumer deposit increases at a bank.
3.4 Factors that affect the demand for Consumer Credit

Avran Kiselgolf (Kothari, p-1446) reported the following factor that affect the demand
for consumer installment credit.
Consumers disposable income
The real income for the proceeding year
The size of the monthly installment
The growth in family formation
Down payment and contract length
Finance charges (Finance charges to demand elasticity is very low).
CHAPTER 4: CONSUMER CREDIT SCHEME IN

BANGLADESH
4.1. Introduction
Bangladesh is a third world developing country. Per capita income of our country is very
poor. So, the majority of our population is forced to live a sub-standard life. The middle
class and the disciplined professionals cannot afford to buy essential utility products at a
time. As such, they cannot able to raise their living standard to an expected level.
Different private sector banks and foreign commercial banks have introduced the
household durable loan scheme known as Consumers Credit Scheme to fulfill the
dreams and desires of middle class fixed income group by providing loan to purchase
necessary products.
In general, financial institution that supplies credit for the purchase of consumer goods &
services by purchasing time-sales contracts of merchants or by granting small loans
directly to the consumers is known as Consumer Credit. In other word short-term loans
used to finance the purchase of commodities or services for personal consumption is
regarded as Consumer Credit.
4.2 CCS in Bangladesh:
Consumer Credit is the combination of two words- Consumer and Credit. Consumer
means one who consumes or it also means one who uses article produced. Credit comes
from the Latin word Credo meaning I believe. When one borrows money, the loan is
based upon confidence in the future solvency of the person and in his repaying the loan as
per agreement. Consumer Credit Scheme is becoming very popular in our country. A
good number of financial institutions in our country are successfully operating this
scheme.
First of all Islami Bank Ltd. introduced this loan in 1993. Following their success other
private banks like Prime Bank Ltd., Uttara Bank Ltd., Bank Asia, IFIC Bank, Premier
Bank, Mercantile Bank Ltd.& other introduced this scheme later. These days most of the
private sector banks are offering this household durable loan. But very few of those banks
offer this CCS loan extensively. Some of those private sector banks have failed to operate
Consumer Credit Scheme successfully & thus they bound to close-up this program.
4.2 History of Banks in this Scheme
Now it is monitored the name of banks that operate CCS program extensively as much as
possible. Table-1 CCS of Different private Banks:
Name of the Bank
Name of the Scheme
Starting Date
1. Islamic Bank Bangladesh Ltd.
Households Durables
1993
Investments Scheme
3. Prime Bank Ltd.
Consumer Credit Scheme
1995
4. Uttara Bank Ltd.
Uttaran Consumer Credit Scheme
1996
5. Arab Bangladesh Bank Ltd.
Consumer Loan Scheme
1997
6. Standard Chartered Bank
Personal Finance
1996
Name of the Bank
Name of the Scheme
Starting Date
7. Mercantile Bank Ltd.
1999
8. One Bank Ltd.
1999
9. Premier Bank Ltd.
1999
10. Dhaka Bank Ltd.
2003
11. IFIC Bank Ltd.
IFIC Consumer Credit Scheme
1999
12. The City Bank Ltd.
1999
Households Loan
1995
1996
13. Social Investment

Limited
14. Pubali Bank Limited
Bank
15. Arafa Islami Bank Limited

16. Al- Baraka Bank Limited
Kengkhito
Prokalpo
Al- Baraka
Scheme
Source: Brochure of those mentioned banks
Samagri
Biniog
1997
Consumer
Credit
1997
4.3 Objectives of Consumer Credit Scheme

Every scheme is covered through some objectives, which is prepared in line with the
corporate goal, mission and vision. The objectives of introducing consumer credit scheme
by banks are considered to be as follows
To bring our credit services to a wide range of customers.

To provide financial assistance to the limited income group towards buying
utility products.
To help the professionals in rising their standard of living. To participate in the

socioeconomic development of the country. To fulfill the dream whatever they
want to buy, can afford.
To sell our services to a wide range of customers and increase our Consumer
Credit Scheme portfolio.
To provide financial assistance to the limited income group for buying

household durables and utility products.
To provide investment facility to the depositors of the bank. To develop small

capitalist or industrialist.
To build up strong communication to a wider range of customer through

provide loan.
To enhance job opportunities through credit facilities.
4.4 Eligibility for CCS Loan:

To be eligible for CCS loan different banks have different criteria. Most of the banks
offer this loan to the following professionals:
Age limited 20-59 years.
Government Organizations.
Semi-Government & Autonomous organizations
Banks, Insurance companies, Multinational companies.
Armed force, BDR, Police & Ansar.
University, college & School Teacher
Locally established & renounced Public Limited Companies.
Professional like, Doctor, Engineer, Lawer, Architect, Journalist, Chartered

accountant & self-employed person.
4.5 Goods under this Scheme:
The area for which CCS loan is disbursed can be classified as follows:
New car, microbus & motorcycle.

Recondition car, microbus & motorcycle.
Air conditioner
Fan
Refrigerator
Washing machine
Micro wave oven
Knitting machine
Furniture
Mobile/ Telephone
Personal computer
Photocopier
Fax machine
UPS/ Generator
Television
VCD
VCR
Music system
Camera
Holidays, education, medical, wedding expences
Home repair, recommendation.
4.7 Consumer Credit Scheme Execution process:

Though the policy may differ from bank to bank, but the overall process of this scheme is
about to same. The CCS execution process is a three-step process. The steps are follows:
First step:
On proper security of the application, banks CCS department will inform the initial
decision (accepted for procedding/decline) to the client within three working days
from the date of application receive.
Second step:
If the application is accepted for processing, branch will provide some additional
papers to the applicant. Those are as followes:
Particulars of Guarantors form
Letter of Guarantee
Personal net-worth statement forms
Applicants will have to submit the previously mentioned forms, duly filled-in-with
The following additional papers:
Salary Certificate (for the service holders)
Trade License & TIN Certificate (for the Businessmen)
Attested photocopies of current Tax Receipt, Electric bills & lease agreement ( if
the source of income is house rent as a landlord).
Third step:
In this phase, bank will inspect & evaluate the given information in respect of the
eligibility of the client, feasibility of the information & security of the loan. In completion
of all necessary formalities, the branch in which the application was submitted, will
disburse the loan within 7 working days from receiving date of the additioonal papers.
Price of the item will be given directly to the supplier of th articles through Payment
Order (P.O.) after completion of necessary documentations. The amount of P.O will be
equals to [Owners Equity + Loan Amount]
4.6 Related Documents:
For execution of CCS loan bank usually use two types of documents. One is application
from and other is clear document. A detail of these documents are given bellow:
I. Application Form : The application form contents of the CCS loan of different banks
is about to same & as followed:
a) Personal Details of the applicant: Here, all about the applicant will have to
mention specifically.
b) Employment Details: Here, the applicants have to specify the name of the
organization where he/ she works address, contact no., designation, salary & s
so on.
c) Loan details: Here, the amount of loan, period, interest, clients equity,
purpose of loan, mode of disbursement & repayment & other charges are to
be mentioned.
d) Financial details: Here, total assets, total liability, monthly income, monthly
expenses & all other financial information about the applicants are tobe
mentioned here.
e) Particular of guarantors: Details about the guarantors are to be mentioned

including name, fathers name, address, designation, monthly income &
expenses etc.
f) Quotation: Quotation contains the details description of the goods like price,
brand, model, size, origin & also contains details of the supplier.
g) Certification of the Organization: In this section, the working organization
of the client will certify that the applicant is the employee of that organization.
h) Letter of assurance: This is the assurance of the working organization of the
client that if the borrower fails to pay the installments the organization will fill
it up.
i) Declaration: This is the declaration of the borrower that all the information
regarding the quoted goods is correct & he/she agrees with the all the terms &
conditions of the bank.
j) Trade License: If the applicant is a businessman he/she must submit the trade
license & TIN certificate of his/her business to the bank, which will certify
that the information given by the borrower is correct.
k) Photograph: Two copies of passport size photograph of the applicant & one
copy of passport size photograph of each guarantor is required with the
application form
Charge Documents:
Before disbursing the CCS loan, the following documents must be completed by the
customer or borrower. Legal stamps are needed to be attached on these documents for
legislative reasons.
Letter of Guarantee: This letter of guarantee is two sided. One is borrower side
guarantee. Borrower side guarantee & the other is guarantor side guarantee.
Borrower side guarantee cosists of agreement of all terms & conditions of bank as
well as assurance of proper & regular payment of installment. The guarantor side
guarantee consists of the assurance that guarantor will repay all the outstanding
balances if the borrower fails to do so.
Demand Promissory Note: It contains a promise of the borrower that he/she
will pay on demand to the bank.
Letter of Hypothecation: It consists of the terms & conditions of CCS loan &
borrower is hypothecated for the equipment.
Letter of Disbursement: This is the declaration of loan disbursement to the

borrower by the bank.
Letter of Installment: In this document borrower promise to pay all regular and
irregular installments in nay time.
Letter of Agreement: This is the agreement of borrower that he/she is bound to
pay all dues together with all other charges and given the bank the authority to
discharge the agreements any time due to the fault in borrower side.
Letter of Authority: It gives the bank the authority to Debit/credit the borrowers
account to realize margin, charges, interest & other charges.
After delivery of the goods, the borrower will have to provide the following documents &
paste the banks sticker on the supplied goods:
Cash Memo
Delivery Challan/invoice of goods signed by the borrower mentioning that
Received the goods in good condition.
4.7 Key factors of Consumer Credit Scheme:
Consumers Credit Scheme program of different banks is executed based on the policy of
the concerned banks. Though the policy may differ from bank to bank, but the main
framework of this program is about to same. The overall process of this scheme is
describing step wise in the following.
Application:
The loan process begins when a customer requests for loan. Therefore, the loan officers
work with prospective borrowers by explaining to them what kind of information they
must provide to the bank. Then the bank makes necessary verifications about the
applicant. If they find that the applicant is suitable & competent for the loan, they sell an
application form to them at a price of Taka 10 to 20, differ from bank to bank.
Amount of loan & duration :
The amount of loan varies from commodity to commodity. Different banks offer different
amount of loan for different commodities. Usually, the ceiling of CCS loan is higher for
vehicle. This loan is disbursed for the period of 1 to 5 years duration.
Security:
For CCS loan on bank demand any kinds of monetary security or mortgage. The only
security for this loan is guarantor in the borrower. This guarantor may be one person or
may be two as the bank demand. The duty of this guarantor (s) is to give the assurance to
the bank that if in any case the borrower fails to pay the installment he/she (guarantor)
with be liable for the whole amount. This Guarantor (s) must be acceptable to the bank.
Down Payment:
Down payment or the borrowers equity of the total loan differ from bank to bank. This
down payment means that the borrower has pay a certain percentage of total price of the
commodity before disbursement of the loan. This percentage usually differs from 10% to
40% for different commodities. The borrower is to open an account in the bank where the
down payment amount and installment are deposited.
Interest & Other Charges:
Interest on CCS loan also differs from bank to bank. The amount of interest on loan,
which is charged by the banks, is ranged from 12% to 16% per year. Every bank
determines the installment amount of the borrower considering this interest rate along
with repayment of loan. Few banks charge penalty interest for the defaulters. Other
charges include service charge and risk fund, which are not refundable and differ from
bank to bank.
Repayment Process:
The CCS loan is to pay through monthly installment with interest, as the bank
determines. The first installment begins from the following month of the disbursement of
CHAPTER 5: AN OVERVIEW OF CCS of PREMIER BANK
LIMITED (PBL).
5.1 Introduction
Premier Bank is one of the leading private sector banks, which is successfully operating
its business in Bangladeshi banking sector. It offers a wider range of banking facility for
its valued customers. One of the beneficiary services for the customers of Premier Bank
Ltd. is Consumer Credit Scheme. This Bank started its CCS in 1999. The Bank is
extending credit facilities through its Consumer Credit Scheme to cater the credit needs
of the fixed income group for household durables & cars/automobiles. Total outstanding
in this segment stood at Tk. 293.77 million & recovery rate was 93% as at December 31,
2005.
5.2 Objectives of the scheme

i) Prime
objective:
To extend credit facility to the limited income group.
To develop standard of living of middle and upper middle class people.
To participate in the socio economic development of the country.
ii) Other Objectives:

o
o
o
o
Increase the number of beneficiaries through CCS program.

To provide investment facility to the depositor of the bank.
Increase relationship network of the bank.
To popularize banks product among the mass people.
5.3 The Consumer Loan Products of Premier Bank Limited (1 st
generation Bank):
They Are Mainly offering two schemes under Consumer Credit Scheme:
Personal Loan (Secured)
Personal Loan (Unsecured)
1. Personal Loan (Secured): (Newly introduced on April, 02 2005)

a) Eligible: Any person having a CD/SB/STD Account.
b) Margin: Best effort basis. Accrued interest to be serviced quarterly.
c) Limit: As per delegation of power circulated from time to time.
d) Security: Lien on FDR and any other savings instruments duly
discharged with letter of authority to encash in case of default.
e) Rate of Interest: In case of FDR: 2-3% above FDR interest rate.
In case of other deposit- 14% p.a with quarterly interest.
f) Period: Maximum 12(twelve) months (renewable as applicable)
2. Personal Loan (Unsecured):
Household Durable Loan
Car Loan
Marriage Loan
Household Durable Loan: (Interest Rate- 17%):

i)
Eligibility of customers :
Service Persons:
Officers/executives from following organizations having confirmed/permanent job
& getting the salary as mentioned below with minimum lenth of service of 2 years
within the age between 20-55 years will be eligible for availing loans under
Consumer Credit Scheme:
a. Officers/Executives of any Scheduled Bank & getting minimum
monthly gross salary of Tk.12, 000.
b. Officers/Executives of any other financial institutions & getting
minimum monthly gross salary of Tk. 15,000.
c. Officers/Executives of any Multinational Company getting minimum
monthly gross salary of Tk.15, 000.
d. Officers/Executives of any Public Limited Company & getting
minimum monthly gross salary of Tk. 20,000.
e. Officers of Private Limited Company having corporate structure &
getting minimum monthly gross salary of Tk. 30,000.
f. Officers of any Govt. Organization & getting minimum monthly
gross salary of Tk. 8,000 per month.
g. Teachers of Universities, Colleges & Schools & getting minimum
monthly gross salary of Tk. 12,000.
h. Officers of Semi Government Organizations & Autonomous Bodies
& getting monthly gross minimum salary of Tk. 10,000.
Self Employed Persons:
The self-employed persons, such as, Doctors, Chartered Accountants, Lawyers or who
have their own business by any nature having minimum income of Tk. 35,000 per month
may be eligible to get loans under C.C.S. The lenth of profession shall not be less than
three years. (In this case he/she will have submit supporting papers of profession for last
three years.
ii) Purpose :
For purchasing the following items:
Domestic appliance: Air conditioner, refrigerator, deep freezes, washing machine,
mobile phone, cooking range, micro-wave, motor Cycle, furniture, sewing machine,
Personal Computer, photocopier, I.P.S./ U.P.S., small non-commercial Generator & other
domestic appliances.
Entertainment items: Television, VCD, VCP, music system, sound system, video
Camera with accessories etc.
Loan amount, Down payment, Risk fund, Service charge &
Period:
iii)
Under CCS program of Premier Bank Ltd. a borrower can get maximum Tk. 10 lac.
The loan limit, down payment, risk fund, service charge and period of loans are given
below according to product wise
Sanctioning
Authority
Name of the Loan Limit
Item
Down
Payment
Motor Cycle
Tk. 1 Lac
1
1% of 2% of 2-yrs
advanced
loan
loan
Installment amount amount
Full Limit
PC/Laptop
Tk. 1 Lac
30%
1%
2%
2-yrs
Full Limit
Other Item
Tk1 Lac
1advanced 1%
Installment
2%
2-yrs
Tk. 2Lac
iv.
Risk
Fund
Service
Charge
Period Retail
of Loan Banking
HO/Branc
h
Head
Office
Credit
Commi
ttee
Full
Limit
Security:
Hypothecation of the purchased item shall be the primary security against the loan
under the scheme.
Two Personal guarantee
Undated cheques
Car Loan: (Interest Rate- 17%)

Car Loan will be sanctioned against Registration of the Vehicle in the name of the bank.
Instead of down payment, the Customer shall have option to avail loan against advance
installment which bank will keep in the sundry deposit A/C & will be adjusted with the
last installment of the loan.
i) Eligibility of customers :
Any interested person with a age range have 20 to 55 and having a permanent job
or officer of the following organization can apply for the CCS loan of the bank.
All employees of Government, Semi-Government, Autonomous, NonGovernment organization / Institutes, Self employed business executives who
have regular monthly fixed income and dully repayment capacity.
Monthly income: Govt: Tk. 8,000/-, Se. Govt. & Auto: Tk.10, 000/-, Banks:
Tk.12, 000/-, Fin. Org & Mult. National: Tk.15, 000/-, Pub. Ltd.: Tk. 20,000/-,
Pvt. ltd.: Tk. 30,000/-, teachers: Tk. 12,000/-, Business & Professionals: Tk.
35,000/-.
ii)
Purpose :
Car/
Microbus,
Small jeeps,
Pick-up etc.
Such vehicles should be new or newly reconditioned ( not second hand reconditioned
vehicles) & must remain unregistered at the time of purchase.
Loan amount, Down payment, Risk fund, Service charge &

Period:
iii)
below:
Sanctioning Authority
Name of the Item Loan

Limit
Down Payment
Risk
Fund
Service
Charge
Period
of
Loan
Retail
Banking
HO/Branch
Head
Office
Credit
Committee
Tk. 15 Lac
New Car
Tk.
Lac
10 30%%(Cash/
Instruments)
1%
2%
5-yrs
Tk.
Lac
Recondition
Tk.
Lac
7 30%%(Cash/
Instruments)
1%
2%
4-yrs
Tk. Lac
Tk. 15 Lac
Microbus
Tk.
Lac
4 30%%(Cash/
Instruments)
1%
2%
2-yrs
Tk. Lac
Tk. 15 Lac
Pivk-up
Tk.
Lac
3 30%%(Cash/
Instruments)
1%
2%
2-yrs
Tk. Lac
Tk. 15 Lac
IV) Security :
One Personal guarantee

Undated cheques
Registration of the car in the name of the bank.
Joint registration of the vehicle shall be made in the Banks & clients name
Comprehensive Insurance covering all possible risks shall have to be obtained by
the borrower at his/her cost who will also ensure timely renewal of insurance &
other required papers.
Third party guarantee acceptable to the bank should be obtained.
Marriage Loan: (Interest Rate- 14%)

I) Eligibility of customers:
This scheme is for meeting the fund requirement for marriage purpose of salaried
person in Government/ Semi-Government/ Autonomous bodies/ Multinational
Company/ Banks/ Insurance/ Financial Institutes/ Educational Institutes with
confined 3-years service ahead and businessman having adequate cash flow.
below:
Name
Item
of
the Loan Limit
Down
Payment
Risk
Fund
Service
Charge
Period Retail
of Loan Banking
Head
Office
Salaried Person/ Tk. 1Lac

Businessman
1
1% of 2% of 2-yrs
advanced
loan
loan
Installment amount
amount
HO/Branch
Credit
Committee
Tk. 1.50 Lac
Full Limit
II) Security :
Bank officers will endeavor to obtain collateral by way of pledge/lien on financial

obligations (other than BCD) such as BSP, PSP, ICB unit certificates.
The receipt under MIS, MSS, ESS etc issued by the Premier Bank Limited is also
acceptable. In these case the loan amount should not exceed 85% value of
financial obligation without equity participation.
Third party guarantee to be obtained in case of collateral provided by third party.
5.4 Repayment Arrangement:

The consumer loan will be repaid in 24/36/48 equal monthly installments. 36 or 48
installments will be allowed in case the loan amount is over Tk. 1,00,000/The borrower will have to submit postdated A/C payee cheques (one for each installment)
in favor of the premier bank limited prior to the disbursement of the loan. The borrower
shall keep sufficient fund in his/her account for the purpose. The rest outstanding, if the
borrower along with the last installment shall adjust any, As such, the last cheque shall be
blank.
The installment shall be payable within the first week of every month starting from the
following month of disbursement of loan.
Penalty for delayed payment will be charged @ Tk. 50.00 if loan installment is not paid
within 15 days from the 8th day of each month & @ Tk. 75.00 for further delay of each 15
days.
This penalty will be realized by debiting the borrowers account maintained with the
Branch.
5.5 Securities & Document to be obtained:

The borrower with submits the agreement paper to pay the monthly installment properly.
For the government employee, semi-government employee, autonomous bodies, bank,
insurance companies and other financial institution, defense; and teachers the guarantors
will be the senior officers. For other types of customers the bank will accept same amount
of bank guarantee or insurance guarantee. For private organization the guarantors will be
the head (employer) of the organization and a bank accepted personal having a high
social status.
Except these any person who is competent and eligible for the loan can apply for the loan
by depositing Bangladesh Sanchay Patra, Potirakkha Sanchay Patra, Fixed deposit receipt
etc to the concerned bank.
Prior to disbursement of loan, the following charge documents must be completed at
borrowers cost.
Demand Promissory Note
Letter of Agreement
Letter of Hypothecation
Letter of Trust Receipt
Letter of Authority
Letter of Continuity
Letter of Revival
Letter of Disbursement
Personal guarantee of the guarantors.
Money receipt & Delivery challan for the items purchased (after purchasing the
item.
5.6 Other Relevant terms & Conditions:
The borrower shall use the product for his personal use only & shall not the lend
the item or transfer the ownership/possession to any third person before the loan
is adjusted or without prior written permission from the Bank.
The borrower shall maintain the article properly & shall be responsible for
loss/damage to it during the period of the loan. He/she shall pay all the Banks
dues in full, in case the article is fully damaged, lost or become unusable due to
negligence, carelessness to inefficient handling.
Client will bear all necessary expenses relating to license, registration, insurance
etc, of the goods supplied.
The client will bound to allow the banks authorized agent and representatives to
inspect good as and when required.
The borrower shall immediately inform the Bank of any changes in address or
profession related to himself/herself & his/her guarantor.
The borrower shall obtain comprehensive insurance policy for car loan at his/her
cost in the joint name of the Bank & bear all other expenses for registration &
other purposes as & when required.
The borrower will submit a declaration as per enclosed format authorizing his/her
monthly salary in case of non payment by the borrower till final adjustment of the
loan.
The Bank reserves the right to change the rate of interest from time to time.
5.7 Steps Taken Against Defaulters :

If a borrower fails to pay 3 installments consecutively then he/she will be considered as
defaulter. Prime bank Ltd. usually follows the following guideline for treatment of its
overdue installments.
Telephone contact
Cheque bounce letter
Overdue recover letter
Letter to guarantors
Letter to authority
Legal notice to borrower and guarantor suit notice.
Premier bank Limited in these contexts is very much successful. It started the CCS
operation from the beginning of its banking operation with keeping a separate cell to deal
and look after the program in each branch. The bank to be the pioneer in the field of
consumers credit scheme program as it is in the field of banking operation.
5.8 Follow up, Monitoring and Supervision:

The credit under the scheme is fully supervised and the success of the scheme will
depend on the porter and persistent supervision, follow up persuasion and monitoring of
the credits by the branches. CCS unit shall monitor and supervise the CCS loan portfolio
of all the branches. Branches shall maintain proper records of the applicants received,
loans sanctioned, disbursed and recovery made thereon. The Branch shall send
Fortnightly statement of loan under Consumer Credit Scheme to Head office credit
Division as per enclosed format. The Management may change rate of interest & fees
from time to time under this scheme. In this respect a condition to be incorporated in the
sanction letter issued to the borrower/ client.
5.9 Performance of CCS of Premier Bank Limited:

Table 7: Amount of disbursement
(Tk.
In Lac)
Year
2003
Household
loan
1592.1
2004
2005
durable
149.0
Others
loan
_
1580.5
1481.2
314.24
1929.6
2676.9
900.89
3000
2500
2000
1500
1000
500
0
Household
durable loan
Car loan
2003 2004 2005
Others loan
Yearly Outstanding of CCS

Am ount of CCSTk In
Lac
Am ount of CCSTk In
Lac
Yearly Disbursement of CCS
Car loan
3000
2000
Household
durable loan
1000
Car loan
Year
Others loan
2003 2004 2005

Year
Table 7: Amount of outstanding

In Lac)
Year
(Tk.
2003
Household
loan
949.4
durable
2004
807.5
1019.0
189.94
2005
1929.6
2676.9
900.89
Table 7: Amount of Recovery percentage
Car loan
118.2
Others loan
_
Graphically presentation:
Car loan
100%
Others
93.72%
2004
92%
91%
2005
90.50%
86.25
Recovery percentage of CCS

Recovery
amount
(percentage)
Year
2003
110%
100%
90%
80%
70%
Car Loan
Others
2003 2004 2005
Year
5.10 Introduction of loans for Executives/Officers of our Bank under

Premier Bank has approved the introduction of loans for Executives/Officers of our Bank
under Consumer Credit Scheme under the following guidelines:
Only the confirmed employees (Junior Officer & above Officers/Executives) of

the Bank will be eligible for the proposed loan facility.
A maximum loan of Tk. 1,50,000/-(one lac fifty thousand) only will be allowed to
any executive/officer at a time for one or more items.
The amount of loan will be adjusted in 48 (forty-eight) equal monthly

installments.
Once a loan is fully or partly adjusted, concerned Executive/Officer may avail

loan again to buy similar or other item.
Since the borrowers are Banks own Executive/Officers, they will be exempted
from the following charges:
I. Down payment (advance deposit of installment/equity)
II. Risk Fund
III. Service charge
The monthly installments for availing the loan will be deducted directly from the
salary of the concerned Executive/Officer.
As the borrower are Banks own Executive/Officers & the installments will be
deducted directly from the salary, so they will exempt from third partys Personal
guarantee.
Interest on loan for Executive/Officers under C.C.S. will be charged @ 12% P.A.
Credit Division, Head Office, will sanction the loans to Executive/Officers of the
Bank under the scheme.
The divisional Heads of Head office & Branch Managers will forward loan
application of the Executive/Officers of their respective Division/Branch to
credit Division, Head Office duly recommended in the enclosed application
format for approval.
After approval a sanction letter will be issued in favor of the concerned

Executive/Officer, copy of which will be given to divisional Head Office/Branch
Manager, HRD, and FAD for necessary action at their end.
After getting the approval the loan will be disbursed directly to the concerned
Executive/Officers SB/CD A/C.
Other terms & condition will remain same as the policy of CCS for the customer
rather than Bank employees.
CHAPTER 6: AN APPRAISAL OF CCS OF SOME PRIVATE

COMMERCIAL BANKS ACCORDING TO BANK GENERATION
The term-Consumer Credit varies from bank to bank. Almost all the concerning local
private banks provide similar credits (small) to the consumer; therefore they named
consumer credit differently.
Premier Bank LTD provides necessary finance to the Under Served limited income
group who needs access to formal credit to purchase consumer durables & improve their
standard of living. Such credit facility recognizes as Consumer Credit Scheme (CCS).
Premier Bank offers different products, like refrigerator, computer, car etc under
consumer credit scheme & that serves only on the basis of personal consumption not for
business purpose. Premier Bank started its CCS in 1999.
Rather than Premier Bank LTD, Islamic Bank Bangladesh Ltd provides loans to the
limited earner group to acquire domestic durable, like: refrigerator, television, computer
etc. This particular scheme is known as House Hold Durable Scheme, Dhaka Bank
identifies such scheme as personal loan, where it offers household item, computer, car
etc. Its personal loan scheme has started from 2001; Prime Bank LTD provides necessary
finance to the Under Served limited income group who needs access to formal credit to
purchase consumer durables & improve their standard of living. Such credit facility
recognizes as Consumer Credit Scheme (CCS). On the contrary foreign private banks
like, HSBC (commencing year of personal loan: 1997) & Standard Chartered Bank
(starting year of personal credit: 1999) their concept of consumer credit scheme varies
from local private sector bank. Both of them are providing loans to consumer but under
different schemes. For an example; HSBC offers credit facility under diverse schemes.
Such as : car loan regarded as personal loan, home loan & these are regarded as consumer
loan. It does not provide any financial assistance particularly for such small items, like;
refrigerator, television. Standard Chartered Bank offers such credit facility in the name of
different scheme, like; personal loan etc.
For the comparative study of Consumer Credit Scheme of Premier Bank Limited I have chose
some other Commercial Banks. They are:
1) Prime Bank (2nd generation bank)
2) Arab Bangladesh Bank (1nst generation bank)
Consumer Credit Scheme of Prime Bank Ltd:

Introduction:
Prime Bank Limited is one of the strongest and leading privet sector bank operating in
Bangladesh. Is offers a wider range of banking facility for its valued customers. One of
the beneficiary services for the customer of Prime Bank Ltd. is Consumers Credit
Scheme. The CCS program of the bank, which aims to help the fixed income group in
raising standard of living, has been widely appreciated. Up to 31 st December 2000, a total
of 14, 128 customers were extended the facility under the scheme to the extent of
721.95million in aggregate under the scheme.
Objectives of the Scheme

Prime Bank Limited started the Consumers Credit Scheme program with a view to fulfill
its beneficiary institutional objectives through financing the middle class limited income
of prime Bank Ltd. are bellow.
To ting the credit facility to the middle class limited income group not
Keeping the facility only for the reach and industrialist.
To improve the living standard of limited income group through financing to

purchase necessary goods.
To participate in the socio-economic development of the country.
The Consumer Loan Products of Prime Bank Limited:

The Consumer Loan Products are as follows:
Personal Loan (Secured)
Personal Loan (Unsecured)
1. Personal Loan (Secured):

g) Eligible: Any person having a CD/SB/STD Account.
h) Margin: Best effort basis. Accrued interest to be serviced quarterly.
i) Limit: As per delegation of power circulated from time to time.
j) Security: Lien on FDR and any other savings instruments duly discharged
with letter of authority to encash in case of default.
k) Rate of Interest: In case of FDR: 2-3% above FDR interest rate.
In case of other deposit- 14% p.a with quarterly interest.
l) Period: Maximum 12(twelve) months (renewable as applicable)
2. Personal Loan (Unsecured):
a) Household Durable Loan
b) Car Loan
c) Doctors Loan
d) Advance Against Salary
e) Any Purpose Loan
f) Education Loan
g) Travel Loan
h) Marriage Loan
i) CNG Conversion Loan
j) Hospitalization Loan (Newly introduced on April 02 2005)
Household Durable Loan: (Interest Rate- 15%)

Under This head, Loans will be sanctioned against guarantee of third parties acceptable to
the bank or pledge of FDR. Saving instrument of Banks and assignment of salary where
applicable.
Eligibility of customers:
Employees of Government
Non-Government organizations/ Institutes
Semi-Government
Autonomous
Sector Corporations
Professionals
Business Executives
Businessman and Self Employed Persons who have regular and monthly fixed
income with repayment capacity.
Non-Officers are also included where the monthly installment size will not exceed
one third of their take home salary.
Purpose:
Motor Cycle
Personal Computer
Photocopier/Fax Machine
Small PABX system
Television
Mobile phone set
Refrigerator
Audio-video Equipment
Other home electric appliance
Furniture
Any other household durables
The loan limit, down payment, risk fund, service charge and period of
loans are given below:
Limit
Down
Payment
Risk
Fund
Service Period
Charge of
Loan
Retail
Banking
HO/Branch
Motor Cycle
Tk. 1 Lac
10%
1%
1%
2-yrs
Full Limit
PC/Laptop
Tk. 1 Lac
10%
1%
1%
2-yrs
Full Limit
Photocopier/Fax
Tk. 1 Lac
10%
1%
1%
2-yrs
Full Limit
Other
Item/Furniture
Tk. 5 Lac
10%
1%
1%
3-yrs
Tk. 3 Lac
Head
Office
Credit
Committee
Full Limit
Security:
Undated cheques
Car Loan: (Interest Rate- 14%)

Car Loan will be sanctioned against Registration of the Vehicle in the name of the bank.
Instead of down payment, the Customer shall have option to avail loan against their FDR
or any other savings instruments up to 90% of the loan amount.
Employees of Government
Non-Government organizations/ Institutes
Semi-Government
Autonomous
Sector Corporations
Professionals
Business Executives
Businessman and Self Employed Persons who have regular and monthly fixed
income with repayment capacity.
Purpose:
Car
Jeep
Station Wagon
Pick up Van
Cover Van
Any other vehicles for own use
Bus/Truck for Corporate Bodies (own use)
Ambulance for Corporate bodies/ Medical Professionals
Limit
Down
Payment
Risk
Fund
Service Period
Charge of
Loan
Retail
Banking
HO/Branch
Head
Office
Credit
Committee
New Vehicle
Tk.
Lac
40 10%
Nil
1%
5-yrs
Tk. 10 Lac
Tk. 15 Lac
Recondition
Vehicle
Tk.
Lac
15 10%
Nil
1%
4-yrs
Tk. 8 Lac
Tk. 15 Lac
Bus/Truck
for Tk.
corporate bodies Lac
for own use only
40 10%
Nil
1%
5-yrs
Any limits would be

approved by EC/Board
Security:
Undated cheques
Registration of the Vehicle in the name of the bank.
Doctors Loan: (Interest Rate- 15%)

Any Bangladeshi citizen who is a graduate in Medical science/ Dentist/ Eye/ Allopathic/
General Practitioners desiring to setup chamber, medical store with necessary medical
equipments and to become self- employed have the opportunity to take this loan.
Limit
Down
Payment
Risk
Fund
Service Period
Charge of
Loan
Retail
Banking
HO/Branch
Head
Office
Credit
Committee
General
Practitioner
MBBS/ BDS
Tk. 5 Lac
10%
Nil
1%
4-yrs
Tk. 3 Lac
Full Limit
Specialized
Doctor
Tk.
Lac
10 10%
Nil
1%
5-yrs
Tk. 5 Lac
Full Limit
Security:
Undated cheques
The ownership of Medical equipments to be purchased must be hypothecated to
the bank under hire purchase mood.
Advance Against Salary: (Interest Rate- 15%)

This scheme is for salaried person in Government/ Semi-Government/

Autonomous bodies/ Multinational Company/ Banks/ Insurance/ Financial
Institutes/ Educational Institutes with confined 3-years service ahead.
A letter of introducing including name, fathers name, designation, date of birth,

date of joining, place of posting, date of last promotion, date of retirement, basic
salary, total emolument, total PF, take home salary etc will be required.
Loan limit is 8 times of gross salary that have Salary account with us and 6 times
of gross salary who have not salary account with us subject to highest Tk. 3.00
Lac.
Down
Risk
Service Period
Retail
Head
Salaried Person
Limit
Payment
Fund
Charge
of
Loan
Banking
HO/Branch
Tk. 3 Lac
Nil
1%
1%
2-yrs
Tk.
Lac
Office
Credit
Committee
1.50 Full Limit
[Note: Risk fund is Nil who has salary account with us].
Security:
Two Personal gaurantee
Undated cheques
Lien on Service benefit of the concerned employee from the employer
Any purpose Loan: (Interest Rate- 15%)

This scheme is for salaried person in Government/ Semi-Government/

Autonomous bodies/ Multinational Company/ Banks/ Insurance/ Financial
Institutes/ Educational Institutes with confined 3-years service ahead.
A letter of introducing including name, fathers name, designation, date of birth,

date of joining, place of posting, date of last promotion, date of retirement, basic
salary, total emolument, total PF, take home salary etc will be required.
This scheme is only for service holder.
Limit
Salaried Person
Tk.
Lac
Down
Payment
1.50 Nil
Risk
Fund
Service Period
Charge of
Loan
Retail
Banking
HO/Branch
1%
1%
Full Limit
[Note: Risk fund is Nil who has salary account with us].
Security:
Undated cheques
2-yrs
Head
Office
Credit
Committee
Lien on Service benefit of the concerned employee from the employer
Education Loan: (Interest Rate- 15%)

This scheme is for meeting the fund requirement for higher education of children
of salaried person in Government/ Semi-Government/ Autonomous bodies/
Multinational Company/ Banks/ Insurance/ Financial Institutes/ Educational
Institutes with confined 3-years service ahead and businessman having adequate
cash flow.
Item
Down
Payment
Risk
Fund
Service Period
Charge of
Loan
Retail
Banking
HO/Branch
Salaried
Person/
Businessman
10%
1%
1%
Tk.
Lac
Tk. 3 Lac
2-yrs
Head
Office
Credit
Committee
1.50 Full Limit
Security:
Undated cheques
Travel Loan: (Interest Rate- 15%)

This scheme is for meeting the fund for traveled purpose of salaried person in
Government/ Semi-Government/ Autonomous bodies/ Multinational Company/
Banks/ Insurance/ Financial Institutes/ Educational Institutes with confined 3-years
service ahead and businessman having adequate cash flow.
Down
Risk
Service Period
Retail
Head
Item
Salaried
Person/
Businessman
Tk. 2 Lac
Payment
Fund
Charge
of
Loan
Banking
HO/Branch
10%
1%
1%
3-yrs
Tk.
Lac
Office
Credit
Committee
1.50 Full Limit
Security:
Undated cheques
Marriage Loan: (Interest Rate- 15%)

This scheme is for meeting the fund requirement for marriage purpose of salaried
person in Government/ Semi-Government/ Autonomous bodies/ Multinational
Company/ Banks/ Insurance/ Financial Institutes/ Educational Institutes with confined
3-years service ahead and businessman having adequate cash flow.
Item
Down
Payment
Risk
Fund
Service Period
Charge of
Loan
Retail
Banking
HO/Branch
Salaried
Person/
Businessman
10%
1%
1%
Tk.
Lac
Tk. 3 Lac
Security:
Undated cheques
CNG Conversion Loan: (Interest Rate- 15%)

3-yrs
Head
Office
Credit
Committee
1.50 Full Limit
This scheme is for meeting the fund requirement for CNG conversion of vehicles for
those who are salaried person in Government/ Semi-Government/ Autonomous bodies/
Multinational Company/ Banks/ Insurance/ Financial Institutes/ Educational Institutes
with confined 3-years service ahead and businessman having adequate cash flow and
corporate bodies.
The loan limit, down payment, risk fund (nil), service charge and period of
Item
Down
Payment
Service
Charge
Owner/ Valid Tk.60

user of the thousands
vehicles
10%
Tk.1000 1.5-yrs Full limit

or 1%
Corporate
bodies
10%
Tk.1000 1.5-yrs Full Limit

or 1%
Tk. 1 Lac
Period
of
Loan
Retail
Banking
HO/Branch
Head
Office
Credit
Committee
Security:
One or Two Personal gaurantee
Undated cheques
Hospitalization Loan
Eligible Criteria:
The age limit should be in between 25-60 years
Bangladeshi Citizen
This loan shall be available for the salaried person i.e. employee of the
Govt./Semi govt./Autonomous bodies/MultinationalCo./Banks/Inurance/Financial
Inst./Educational Inst with confirmed 3 years service ahead and businessman
having adequate cash flow.
Before allowing loan the prescription, medical Report of Doctors thereof be
recorded.
Letter of introduction to be obtained from employer with a salary certificate for
service holder and trade License for businessman.
Persons having own house in municipal area, T&T telephone connection and
insurance policy shall be given preferences.
Initially Dhaka and Chittagong metropolitan City will be covered under this
scheme.
This loan would be provided for treatment in the following hospitals or clinics of
Dhaka and Chittagong:
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.
XIII.
XIV.
XV.
BIRDEM
Holy family Hospital
Central Hospital
Monwara Hospital
Samrita Hospital
XVI.
XVII.
XVIII.
XIX.
XX.
Medinova
Comfort Diagnostic Center
& Hospital
Metropoliton Hospital
Bangladesh Medical
Sikder Medical
Ibne Sina Hospital
Dhaka Renal Center
Gastro lever Clinic
Islami Bank Hospital
Lab Aid Cardiac Hospital
XXI.
XXII.
National Health Foundation

CMH, Dhaka
Appolo Hospital
Medical Center, Chittagong
Metropoliton
Hospital
Chittagong
Royal Hospital Chittagong
Holy Crescent, Chittagong
XXIII.
XXIV.
XXV.
XXVI.
XXVII.
XXVIII.
XXIX.
XXX.
Health Home, Chittagong

Health Care, Chittagong
Poly Clinic, Chittagong
Nebedita Hospital, Chittagong
Miramoy Clinic, Chittagong
Holy Health, Chittagong
Sergiskip Clinic, Chittagong
CMH, Chittagong
Loan Ceiling:
90% of the estimated cost up to a maximum of loan amount Tk. 5.00 lac. However the
monthly repayment of the customer should not exceed 30% of his/her take home salary.
Interest rate & other charges:

The rate of interest is 14% P.A with monthly rest. In addition, the customer will have to
pay Risk fund @ 1% and service charge 1% on the loan amount.
Documents to be obtained:
The customer will execute the following documents:
D.P note
Letter of Authority
Letter of Guarantee
Loan Agreement under Consumer Loan Retail Banking
A declaration to be obtained from the customer to the effect that no

director/sponsor of Prime Bank Ltd. Or any of their family
members/dependent has got any direct or indirect business in his business.
Letter of Arrangement
Letter of Undertaking
Letter of Installment
Mode of repayment:
Repayment of loans including accrued interest will be made by equal monthly
installments, which will start from the following month of the disbursement of loan.
Before disbursement of loan, the customer will deposit crossed cheque covering the total
number of monthly installments in favor of the bank which will have to be presented for
collection on the due dates. Installments will be paid within 7th day of each month.
However prepayment is allowed.
Other Conditions:
a) Customer will intimate the bank of any change of his address immediately after
the change.
b) If the customer fails to repay the monthly installment within due date, penal
interest will be charged at the rate of 2% on the outstanding amount, which will
be realized along with the overdue installments.
c) The Customer is at liberty to repay the entire outstanding amount in lump sum
before expiry of validity period of the loan.
Follow up, Monitoring and Supervision

The credit under the scheme is fully supervised and the success of the scheme will
depend on the porter and persistent supervision, follow up persuasion and monitoring of
the credits by the branches. CCS unit shall monitor and supervise the CCS loan portfolio
of all the branches. Branches shall maintain proper records of the applicants received,
loans sanctioned, disbursed and recovery made thereon. Branches shall send the
statements of CCS loan and the overdue list to the CCS Unit within the first week of
every month. The CCS unit shall properly utilize the MIS (Management Information
System) available in the existing computer program for consumer Credit Scheme of the
bank to closely monitor and supervise the scheme.
Steps Taken in case of Default Installment

Before disbursement of loan, the customer will deposit crossed cheque covering the total
number of monthly installments in favor of the bank which will have to be presented for
collection of the due dates. Installments will be paid then within 7 th day of each month. If
one installment is not paid then it has become overdue. Actions are taken on the basis of
default installment.
Steps taken are described below:
If one month installment is due then concerned officer will call a phone to the
client:
In case of installment due for two months letter is given to the client and
phone is also called;
In case of three months phone and letter to client as well as visit is done;
If installment is not given within four months then letter is given to the
guarantor;
If installment is not given within five months then legal notice is send to the
client;
In spite of all these steps if installment is not given then case is sued against
the client.
In case of installment due for six months the loan is treated as classified loan.
Introduction of loans for Executives/Officers of our Bank under

Policy Guidelines for loans under Consumer Credit (CCS) Scheme to the
Executives/officers of Premier Bank LTD:
1. Revolving limit to be enhanced from Tk. 2.5 crore to Tk. 5 crore.
2. Maximum loan limit per employee may be allowed as under:
a. Tk. 150000 for the confirmed officers i.e. other than executives.
The above limit will be utilized as under:
Tk. 40000/- shall be used for purchase of Computer, printer & UPS
repayable in 4( four) years & Tk. 10000/- for purchase of mobile phone
repayable in 2 years.
b. Tk. 200000 for confirmed executives i.e. from AVP to above .
The above limit will be utilized as under:
Tk. 50000/- shall be used for purchase of computer, printer & UPS
repayable in 4 years & Tk. 15000/- for purchase of mobile phone
repayable in 2 years.
The rest loan amount will be utilized for purchasing consumer durables other than
computer, printer, UPS & mobile phone.
3. The loan ceiling of Tk. 50000/- only in case of confirmed officers & Tk.
65000/- only in case of confirmed executives shall remain unchanged if
computer & mobile phones as mentioned above in(2) are not purchased.
4. Interest shall be charged @ 11% p.a. or 3% less than the average lending
rate allowed to the general public, whichever is higher for CCS loans to
the banks employees at quarterly rest since the lending rate has been
reduced 1% to 2% recently.
5. Employees are allowed CCS loans to purchase computer & mobile phone
even of they have outstanding CCS loan for other items subject to have
available room within the loan ceiling.
6. FAVP may avail of loan of Tk. 1.5 lac to buy private car but in that event
they will not be entitled to avail of any loan for other items. The amount of
such loan should be adjusted by 48 (forty-eight) equal monthly
installments. The monthly installment should not exceed 50% of take
home salary excluding employees House Building Loan Installments.
7. The amount of loan for computer & other items excluding mobile phone
should be adjusted by 48 equal monthly installments. The monthly
installments should not be exceeds 50% of take home salary excluding
employees House Building Loan Installments.
8. Once a loan is fully adjusted, concerned executives/officers may avail loan
again to buy similar or other items. However car loan cannot be repeated
within a period of 5 years from the date of availing the loan.
9. Since the borrowers are Banks own executives/officers, they will be
exempted from the following payment:
a. Down payment
b. Payment of risk fund
c. Service charge
10. Since the borrowers are Banks executives/officers, the monthly
installments for availing of loan shall be deducted directly from monthly
salary of concerned executives/officers.
CCS of Arab Bangladesh Bank Limited (1st generation Bank)

Introduction:
Arab Bangladesh Bank limited is one of the oldest and largest private sector banks in
Bangladesh. It has been of levying its propitious banking facilities to the country people
through its 58 branches all over the country. AB Bank Limited introduced Consumers
Credit Scheme program in 1997 in to provide financial facilities to middle class limited
income group.
Objectives of this scheme

Maximum muddle-class and limited income group of our country are unable to purchase
their necessary goods by their limited savings. In order to finance this group of people to
purchase the necessary goods AB Bank Ltd. executes its CCS program. The broad and
specific objectives of this scheme are.
To build up the saving attitude in limited income group.
To increase the work ability of job holders and self-employed people through the
improvement of their standard of living.
To contribute in the over all socio-economic development
Eligibility of the Customers

a.
Any citizen of Bangladesh falling under the following categories.

i. Salaried individuals such as - Confirmed Officers / Executives of Private /
Multinational Companies, Corporation, Banks, Insurance Companies.
ii. Officers / Executives of Government / Semi-Government or Autonomous
Bodies, NGOs, International Aid Agencies and UN Bodies.
iii. Teachers of Educational Institutions.
iv. Self-employed Professionals (Doctors / Engineers / Chartered Accounts /
Architects Consultants).
v. Businessmen.
b.
Holding an S/B, C/D Account with any Branch of Arab Bangladesh Bank Limited or
any other Bank.
Age group: 25 - 52 years.
Minimum 2 (Two) years work experience.
Income
Tk.15,000/(for
Personal
Loan
unsecured).
Income Tk.25, 000/- (for Auto Loan - unsecured).
Debt burden maximum 30% for all categories.
c.
d.
e.
f.
Visualizing the present scenario, Arab Bangladesh Bank Limited has relaunched the
Consumer Credit Scheme into 6 (Six) product Brands as follows:
1.
2.
3.
4.
5.
6.
Personal Loan (secured).

Personal Overdraft (secured).
Personal Loan (unsecured).
Q-Cash Staff Overdraft (unsecured).
Q-Cash Customer Overdraft (unsecured).
Auto Loan (unsecured).
Procedure for availing the credit facility:

Minimum loan amount
Minimum loan amount
Minimum loan amount
a.
: Tk.25, 000/- and

: Tk.5, 00,000/- (for Personal Loan - unsecured).
: Tk.10, 00,000/- (for Auto Loan - unsecured).
Obtain the prescribed application form along with the folder and fill-in the detailed
b.
c.
d.
e.
information required.
Open an account with the Bank under proper introduction.
Submit required papers along with the quotation for purchase of proposed product or
for any other purpose.
One undated cheque for total payment amount (Loan tenor : equal monthly
installment).
Charge documents to be signed by applicant / guarantors.
Rate of Interest :
Products
a. Personal Loan (secured).
b. Personal Overdraft (secured).
c. Personal Loan (unsecured).
Interest Rate
11% p. a. (with 2% spread on ABBL FDR)
11% p. a. (with 2% spread on ABBL FDR)
15% - 16% p. a. (as per decision of Branch
Manager)
d. Q-Cash Staff Overdraft (unsecured). 13% p. a.
e. Q-Cash
Customer
Overdraft
16% p. a.
(unsecured).
f. Auto Loan (unsecured).
15% p. a.
Goods Under the Scheme:

Under Consumers Credit Scheme of AB Bank Ltd. the following goods are offered.
Vehicles: New and recondition car. Motorcycle, Baby Taxi, Tempo, Micro Bus,
Bicycles.
Domestic Appliance: Refrigerators, Air Conditioners, Wetter Coolers, Water

Pumps, Washing Machines, Sewing Machines, Micro Wave Ovens Presser
Cookers, Telephone, Mobile, Furniture etc.
Personal and Office Equipments:

Photocopiers, Fax, and Generators.
Entertainment: Televisions, VCD VCR, Music Systems, Tow-in one, Dish

Antenna.
Personal Computers, UPS, Printers,
Loan Amount, Down payment and Period:

Under the CCS program of AB Bank Ltd. a borrower can get at most three lac taka as
loan. After sanctioning of and before disbursement of goods the borrower to deposit to
the bank a down payment in the following rate.
Table: Loan Amount, Down payment and Period

Items
New and newly reconditioned Car
Domestic Appliances;
Television, Refrigerator, Furniture etc.
Entertainment
Office Equipment- Personal Computer
Others
Ceiling Amount
Tk. 30 lac
Tk. 2 lac
Down Payment
30%
25%
Period
3 Years
3 Years
Tk. 2 lac
Tk. 1 lac
Tk. 2 lac
25%
25%
25%
2Years
2Years
2 Years
The entire loan amount along with interest has to pay in the equal monthly installments.
Interest and Other Charges:

AB Bank limited charges different type interest and fees for its CCS program. It also
offers some incentives for its valued customers to proper payment of installments. The
interest and other charges are as bellow:
Particulars
Rate
Application form
Tk. 10
Interest rate
16.5% (Simple
interest yearly)
Processing fees
2% on the loan amount
Stamp Charge
Tk. 1220
Penalty interest
Yearly 2%
Rebate
5% on total interest
rate
Details/Modes
of collection
Cash received during the
issue of Form
of Equated
with
monthly
installments
Cash deposited during of
disbursement
Cash deposited during of
disbursement
In
case
of
default
installments
Calculating during final
adjustment
Mode of Repayment
From the following month of disbursement of goods the borrower is to pay his/her
installment. This installment must have to pay on or before 7th of the month, otherwise
the borrower will be considered as defaulter. From the beginning the borrower will pay
cheques all installments to the bank. The bank will debit the borrower account in each
month for each installment is each with in the first week of the month.
Security and Documents:

The following securities and documents are needed for the CCS loan of AB Bank
Letter of guarantee.
Letter of undertaking.
Deed of hypothecation.
Demand promissory note
Bank accepted Guarantor
Purchase Receipt in the name of client
The acceptance of borrower to pay installments in due time
Advance cheques for all installments
Hire Purchase Agreements.
Other Conditions:
After delivery of the article, client will be responsible if the articles are damaged.
Thus the client will be liable to adjust the banks dues on demand.
Customer will have to inform the bank in case of any change in his address or
service, immediately after the change.
The customers will have to keep all the articles available, for the inspection of the
bank officials when required.
If the borrower defaults the payments of 3 consecutive installments, the bank will
render the client liable to hand over the articles to the bank.
Step Taken Against Defaults:

AB Bank Ltd. has an incentive for the customers that is if the borrower pays all the
installment in due time then he/she will get 5% of total interest back. The bank also
charges 2% penalty interest borrowers try to pay their installments in due time. But not
all borrowers able to do so, for those clients bank follow some steps that are.
Regular communication
physically/over telephone.
with
the
defaulter
customers
&
guarantors
Issuance of letter to the defaulter customers & respective guarantors.

Issuance of legal notice to the defaulter customers & guarantors prior to the
classification of the loans.
Legal action to be taken after failing all possible efforts to recover the bank'
Monitoring:
The members of the Consumer Banking Department review the position of all the
Branches and monitor each and every account. Letters, reminders or even phone calls are
made to any Branch, which fails to realize the installments timely. The Branches are
given time limit to reduce the overdue liabilities or face the consequence of having to
lose their discretionary power of disbursing further Consumer Loans.
Chapter 7: Comparison of Consumer Credit

Scheme
7.1 Introduction:
Now, in this part I have compared the consumer credit scheme of our three banks Premier Bank Limited (1st generation bank)
Prime Bank (2nd generation bank)
Arab Bangladesh Bank (1nst generation bank)
Table: CCS of the selected banks at a glance
Category
Introduction of
the scheme
Operation
(branches)
Age Range
Ceiling
Maximum Period
Down Payment
Interest
Risk Fund
Service Charge
Application Form
Premier Bank Ltd. Prime Bank Ltd.

1999
1995
AB Bank Ltd.
1997
21
27
42
20 to 55
TK. 10 Lac
5 Years
20% to 30%
17% p.a.
1%
1%
Tk.10
20 to 52
TK. 10 Lac
5 Years
10% to 20%
13.5%p.a.
2%
1%
Tk.10
20 to 55
TK. 5 Lac
4 Years
25 % to 30%
15%
1.5%
2%
Tk.10
7.2 Amount of Disbursement

Amount of disbursement under the scheme is one of the vital factor s to judge the strong
position in CCS program. So to find out the extent of a bank in the CCS program we
should consider the amount of disbursement and rat of recovery of the selected banks for
the last four years are given.
Table : Amount of disbursement

(Tk. In Lac)
Yearly Disbursement
Prime Bank Ltd.
AB Bank Ltd.
2002
Premier
Bank Ltd.
599.35
3404
519
2003
1741.19
4405
1309
2004
3375.94
4705
1219
2005
5507.39
4288
1301
Yearly disbursement amount
Amont in lac
12000
10000
8000
6000
4000
2000
0
2002
2004
Year
AB
Bank
Ltd.
Prime
Bank
Ltd.
Premier
Bank
Ltd.
From the above table we see that the amount of disbursement is increasing gradually. The
recovery rate is good among the banks. The recovery rate is high in the AB bank among
the observed PCBs.
7.3 Recovery Percentage:
Year
Premier
Bank Ltd.
Prime Bank Ltd.
AB Bank Ltd.
2002
97
94.51
96
2003
94.02
94.23
94.02
2004
94.00
93.02
96.02
2005
93.05
93.69
93
Recovery Percentage of CCS

98%
96%
Recovery 94%
Percentage 92%
90%
Premier Bank Ltd.

Prime Bank Ltd.
2002 2003 2004 2005
AB Bank Ltd.
Year
The recovery rate is good among the banks. The recovery rate is high in the AB bank
among the observed PCBs.
7.4 Amount of Outstanding:
Year wise outstanding of the selected banks for the last six years is as follows.
Table: Amount of outstanding
(Figures in lac)
Year
Premier
Prime Bank Ltd.
Bank Ltd.
2000
2001
2002
2003
2004
2005
158
191
391.07
1067.54
2016.44
2937.65
2002
3727
5016
5703
7419
12238
AB Bank Ltd.
710
952
1202
1352
1402
20
02
20
03
20
04
20
05
20
01
15000
10000
5000
0
20
00
Amount in Lac
amount of outstanding
Year
Premier
Bank Ltd.
Prime
Bank Ltd.
AB Bank
Ltd.
Outstanding amount depends on the period of loan, that means if the loan of disbursed for
a loan period of time then the amount of outstanding will be high. Again if the rate of
default accounts increases then the total amount of outstanding increases as well.
7.5 Number of Customers
Number of customers depends on the range of customer group to whom the loan is
offered and the period of operation. So it is very simple that the number of customer of a
bank will be high, who operate the scheme for a longer period of time and offers the loan
to a wider range of customers category. To judge the strong position in the field of CCS
in the context of total customer, one should consider the yearly growth rate of customers.
Total number of customers and its growth rate are given in the following table and graph
respectively.
Table : Cumulative number of customer
Year
Premier Prime
Bank Ltd. Bank
Ltd.
AB Bank
Ltd.
25000
2000
20000
2001
15000
2330
5641
7641
10141
11641
2002
10000
2003
5000
2004
Lt
d.
Ba
nk
AB
Pr
im
e
Ba
nk
Lt
d.
Lt
d.
0
Ba
nk
14128
17512
18512
19412
20537
3250
5750
7750
8250
8775
Pr
em
ie
r
2000
2001
2002
2003
2004
From the above table and the line chart we see that the number of customers is increasing
in all the selected banks. Here the increasing number of customers is much higher in the
PCBs than the FCBs. Though we know that the number of branches is lower in the FCBs
than the PCBs. The FCBs do there banking with very selective customers.
7.6 Sector wise Customers
Most of the banks offers CCS loan to all type of customer group, who have a monthly
fixed income. But the proportion of sector wise customers to whom the loan is offered
varies from bank to bank. Some bank offers this loan to service holders on the other hand
other banks keep the loan facility open to all types of the customers. The sector wise
proportion of the selected banks is as bellow.
Table : Sector wise proportion of customer
Service
(Govt.)
Service
(Pvt.)
Premier
Bank Ltd.
55
Prime
Bank Ltd.
60
AB Bank
Ltd.
20
20
20
40
Business
Others
20
5
15
5
30
10
We see that the PCBs prefer service holder both the Govt. sector and the Pvt. Sectors to
be their client under the scheme.
7.7 Default analysis
Analysis of CCS program of the banks in the context of default rate is another better way
to find out the strength of a bank in this scheme. The Premier bank has a large number of
default rate compared with its total customers. The rate of default is an indicator of
performance in the field of CCS program. In the following table the rate of default rate in
terms of total customers of the selected banks is given.
Table: Proportion of defaulters
Premi Prime
er
Bank Ltd.
Bank
Ltd.
Total
8720
17512
Customers
Defaulters
1200
2189
Proportion
13.76 12.5%
AB Bank
Ltd.
5641
767
13.6%
Total defaulters and the rate of default in terms of total customers are comparatively low
in the Prime Bank.
6.7 Number of branches offering CCS
Another key point of judge extensiveness of CCS program of a bank is the operating area
that means in how many branches the bank operates the scheme. In the following table
the numbers of branches offering the CCS loan of selected banks are given.
Table: Number of branches offering CCS
Total
Branches
Offering
Branches
Premier
Bank
Ltd
21
Prime
Bank
Ltd.
24
AB Bank
Ltd.
21
24
58
58
Most of the banks operate CCS program through their all branches. except Uttara Bank
Ltd. as it operates banking operation all over the country through many branches. From
this point of view we do not see any difference between the FCBs and the PCBs in our
country.
7.7 Interest factor
Among the banks interest on CCS varies from bank to bank. The rate is also differing on
the customer relation and the previous record of the customer. The different interest rates
of the banks are given bellow.
Table 13: Rate of interest of the selected banks
Premier
Prime Bank AB
Bank
Bank Ltd.
Ltd.
Ltd.
17%
16%
15%
At a glance it seems that all PCBs in our country charge at a fixed rate on CCS loan
amount. In Premier Bank Ltd. the interest is comparatively high than other selected
Banks.
7.8 Supervision and Flexibility
Among the selected banks some banks appoint separate supervising agents to look after
the program where other banks supervise the scheme through their own officers. To
supervise the CCS program actually the target of the CCS scheme are the middle class
fixed earning group of the society. And they need a low repayment schedule. So the
banks fix the repayment schedule according to their choice. Foreign banks are very much
flexible in this regard. So the possibility of repayment increases and supervision is less
required.
Chapter 8
SWOT Analysis on The Consumer Credit Scheme of The Premier Bank

Limited
Strengths:
1. Ease of Sanction and Disbursement: Branch Managers have been given the
delegation power to sanction credits under Consumer Credit Scheme to the extent
of Tk. 1.00 Lac for most of the Branches. Thats why sanction of small scale
credits is relatively easier for this Bank. As such the sanction and disbursement of
Consumer Credit Scheme is easier in respect to other Banks.
2. Reversal of Risk Fund as token reward for good payment behavior: Bank has
the policy to reverse back 50% of the risk fund realized at the time of
disbursement back for the individuals who has paid their installments regularly
and on time. Such reversal is performed at the time of adjustment of the loan. As
such, the internal beauty of the loan is to reward the clients for their due
payments.
3. Diversification of credit base on Consumer Credit Scheme: Credit facilities are
allowed to different segment of clients for different purposes. Credit facilities are
allocated for different purposes including credits for consumable items, marriage
purpose, educational purposes, and treatment purposes.
Weaknesses:
1. Security Documentation: there are some weaknesses in the documentation
process of the credit sanctioned under Consumer Credit Scheme. Spouses
guarantee, which is a very vital collateral for such loans, is not mandatory as
collateral for such loans in this bank. It could protect the Bank in the demise of
the borrower of such credit facility. Moreover, the bank could go for taking a
single check covering the full loan amount as a collateral security.
2. Diversification of fund: As the proceeds of this loan is not given to the seller of
the commodity directly, except Car Loan, there is always a chance of fund
diversification. Bank may select a panel of suppliers for different commodities
and allow credit facilities against commodities of the panel sellers. It can earn a
substantial profit as commission of such trading, in excess of its interest income.
3. Recovery inefficiencies: the same group of officers/executives does Credit
appraisal, credit disbursement, credit administration and credit recoveries. For the
operational efficiency, there should be a clear distinction of the

Officers/Executives working at the department in terms of the type of work,
which is not found there.
Opportunities:
1. Introduction of New Products under Consume Credit Scheme: Bank may
introduce new products considering the needs of individuals, distinguishable
professionals, such as: Executive Loan; IT Loan; Engineers Loan; Lawyers
Loan, Education Loan, Marriage Loan etc. thus the Bank may impart
diversification in their portfolio and reduce the manageable risk.
2. Opportunity of having higher portfolio in Consumer Loans: Civilization of
Bangladesh is a on going process which is following an upward trend. The
portfolio of consumer loan is expected to be increased with that of the civilization.
3. Opportunity of Higher Income in the form of interest spread and fees: Rate of
spread on the lending and borrowing is highest for the consumer loans and
substantial fees are earned in the form of commission, risk fund and service
charge.
4. Ease of documentation: Documentation of such loan is easier as it is mainly
paper based and requires execution by least number of people.
Threats:
1. Rate of Interest: Rate of interest of the consumer credit schemes is at the higher
side of the market [effective rate of interest is 18.00% on monthly rest,
approximately], though its reflection at the nominal rate of interest [10.00% flat]
is low. Once people have the feelings to feel the actual rate of interest, it is
expected people would be less interest to enjoy such facility.
2. Diversification of fund: As bank does not pay the proceeds of disbursement of
this loan to the account of the beneficiary/supplier, there exists a chance of fund
diversification, which is observed at the consumer credit schemes of this Bank.
3. Higher rate of Overdue: It is observed that rate of overdue of Consumer Credit
Loans is relatively higher than the then types of loans. Due to diversification of
customers among different segment of people in the society, recovery is highly
laborious and cumbersome if credit processing is not done properly.
4. Monitoring requirements: Selection of clients, sanctioning, disbursing and
recovering of overdue loans under Consumer Credit Scheme is highly technical
and laborious. The cost of monitoring is high if selection is not proper and not
done carefully.
Chapter: 9
PROBLEMS OF THE CCS OF PREMIER BANK LTD.

The contribution of CCS loan in the total loan & advance portfolio is very small.
But compared to the total investment default rate is very high.
Consumers are not communicated properly about the impact of default on them &
on the Bank. The recovery percentage is decreasing day by day.
Premier Bank Ltd. is charging a higher interest rate & other charges.
Premier Bank Ltd. provides loans for some of their selected items. An applicant
may need such an item, which is not in their list. In that case, they usually lie &
submit false quotation to the bank.
Elaborate inquiry about the borrowers is not possible in most of the cases due to
the small size of manpower in the CCS section.
Lack of information about the credit worthiness of the borrowers.
Banks pay the money through a pay order in the name of the supplier, but they
dont check whether the money is utilized properly or not.
Customers have lack of knowledge about the installment calculation.
In case of default of the borrower most of the guarantors are not helpful for the
recovery of the loan. Loans disbursed on references of some higher officials of
PBL are hard to recover.
The brochures of different loan schemes are not designed properly & contain very
little information.
Conclusion & Recommendations:

From the aforesaid topic & my point of origin to work in Prime Bank Limited, I can say
that I really enjoyed my internship period at Prime Bank Limited, CCS Department, and
Foreign Exchange Branch form the very first day. I am confident that this 3 (three)
months internship program at PBL of Bangladesh will definitely help me to realize my
further career in the job market.
Consumers credit scheme- a comparative study in Prime Bank Limited with other
private sector banks is not so sufficient to measure and express perfectly within this
short time of my internship period. But it is a great opportunity for me to get use to with
the operational environment of micro credit of Prime Bank Limited. I have tried my soul
to incorporate the research report with necessary relevant information in my report.
Though there are some lacking in the operational activities of CCS loan facilities but
overall performance of consumer credit scheme are formidable to fight with other private
sector banks.
It seems to me that day-by-day CCS demand is growing. Ultimately the consumer credit
scheme would take part in vital position of the micro credit. The ultimate comparison
among the several banks of personal loans is drawn through the entire report.
Considering comparative study of consumer credit scheme of different banks it can be
said that premier bank ltd. (PBL) is holding a very sound position in banking sector.
Despite the tremendous popular support, image & spectacular success in terms of
Consumer Credit Scheme, therefore there are some shortcomings. To retain its position as
a leader amongst various banks & also to improve its position-year after year, PBL should
adopt some suggestions that are given below:
There are some charges for the loan disbursement like Risk fund that should be
reduced & definitely refundable after the repayment of the installments.
Rate of interest should be reduced.
Instead of 2 peoples security 1 people security would simplify the loan

processing.
There should be special incentives for those of the regular payer.
Loan disbursement procedure should be within 1 day after the application of the
CCS.
Efficient group of people should be there to accelerate the loan disbursement

procedure.
Recovery of the loan by the monthly installment should be done through the
automated adjusted installment software by the banks.
Interest rate differential should be there to encourage a group of people.
Corporate people should be offered at a rate of 13% to encourage rest of the

corporate bodies.
The equal monthly installment chart should be enrolled to the brochure according
to the various loan amounts.
Every branch should be provided a target for selling the CCS loan & the top most
sellers would be rewarded by the monetary benefits that would encourage the
employers.
Workshop on CCS loan should be arranged for initiating new ideas between the
concerned officer & Retail credit division to initiate new concepts & ideas to
compete with other banks.
At least 2 loans fair should be arranged to sell the large amount of loans & the
special waiver should be offered at that time.
Various festivals loan (Eid, Puja) should be provided for the different people.
During the period of festival loans loan-processing fees should be nil & interest
rate waiver should be offered to sell the large amount.
Proper communication through the publicity should be there to encourage all

kind of CCS facilities.
Total marketing team should be prompt enough to initiate the large number of
customers every month.
The advertising media like Banner add, billboard, brochures & sometimes through
the TV channel various CCS facilities should be communicated.
Sometimes the customer should be offered the cash incentives for managing new
clients.
Customers should be offered the interest rate waiver for the following loan
application if he completes the due time repayment.

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Internship Report

An analysis of Consumer Credit Scheme of

March 15, 2006

Department of Finance, University of Dhaka.

An analysis of Consumer Credit Scheme

Dr. M. Khairul Hossain

Faculty of Business Studies,

Department of Finance, University of Dhaka.

March 15, 2006

Subject: Submission of Internship Report

Rationale of the study

CHAPTER 2: PROFILE OF PREMIER BANK LTD.

Overview of the Premier Bank Ltd.

History of Consumer Credit Scheme

CHAPTER 4: CONSUMER CREDIT SCHEME IN BANGLADESH

CHAPTER 5: AN OVERVIEW OF CONSUMER CREDIT

CHAPTER 7: A comparative analysis of CCS

CHAPTER 8: STATISTICS ANALYSIS

Background of the Study

Internship program is a pre-requisite for acquiring BBA degree in University of Dhaka.

My Internship supervisor Dr. M. Khairol Hossain, Professor, Department of Finance,

Rationale of the Study

objective of the Study

Scope of the Report

A comparative study on analysis Consumer Credit Scheme of analysis of Private Banks

Annual report of PBL

Published documents, circulars, statements & brochures

Information from Internet

Bangladesh Bank Library

ii. Sampling Plan:

: Questionnaire and Interview

: Selected leading banks in CCS program.

: 3 Private commercial banks

: Dhaka City (Commercial area)

The name of 3 concerning banks are given below:

Arab Bangladesh Bank LTD: 1st generation bank

Prime Bank Ltd

: 2nd generation bank

Premier Bank Ltd

: 3rd generation bank

iii. Data Analysis Method:

I have obtained enthusiastic co-operation of the employees of Prime Bank Limited.

PROFILE OF PREMIER BANK LIMITED

2.1 Overview of the Premier bank Ltd.

2.2 Performance at a glance:

Foreign Trade Business

Book Value per share (Taka)

Loans and Advances

2.3 Branch Network

2.4 Objectives of Premier bank limited:

Easier Banking: To provide their customers with a comfortable & friendly

Better Relationship: To View banking to be a long term relationship with their

Assured Confidentiality: To assure our customers with uncompromising

2.5 Vision of the Bank

Values & Mission of the Bank:

To aggressively adopt technology at all levels of operations& to improve

To ensure a high level of transparency & ethical standards in all business

CHAPTER-III : OVERVIEW OF THE COSUMER CREDIT

3.2 Types of Consumer Credit:

Open end and close end credit

3.3 Reasons behind popularity of Consumer Credit Scheme

3.4 Factors that affect the demand for Consumer Credit