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An Internship Report

On
Credit Management System: A Study on
Janata Bank Ltd.
Prepared For:
Md. Siddikur Rahman
Lecturer
Department of Management Studies
Comilla University

Prepared By:
Md. Jafar Iqbal
ID: 1008018
Reg. No: BBA-MGT-400070
Session: 2010-11

DEPARTMENT OF MANAGEMENT STUDIES


COMILLA UNIVERSITY

Date of Submission: January 21, 2016

An Internship Report
On

Credit Management of Janata Bank Ltd.

ii

Letter of Transmittal
January 21, 2016
Md. Siddikur Rahman
Lecturer
Department of Management Studies
Comilla University, Comilla

Sub: Submission of Internship Report.

Dear Sir,
I am pleased to submit the Internship Report as a part of BBA program. I tried my best to
present this Internship Report on Credit Management System: A Study on Janata Bank
Limited according to your guideline. I tried my best to work sincerely to cover all aspects
regarding the matter. Practical exposure is very essential for orientation with the real worldworking arena. I have learned a sound knowledge and understood on the basic operation of
the bank. Though I faced some limitations to prepare the report due to scarcity of organized
data, time limitation, I have thoroughly enjoyed in preparing this internship report which has
contributed significantly to my understanding on the essentials and importance of practical
knowledge.
All of my efforts will be successful if the report can serve its purpose. I have tried my best to
explain everything related with this report. I am always available for any further queries
regarding this report. I sincerely hope that you will appreciate my effort.

Yours truly,

Md. Jafar Iqbal


ID No: 1008018
Session: 2010-2011
BBA (5th Batch)
Department of Management Studies
Comilla University

iii

Students Declaration
I do hereby declare that the internship report entitled Credit Management System: A
Study on Janata Bank Limited is an original report. It or any part of it has not been copied
from any other report. It or any part of it has not been submitted to any other institution or
university for any other degree or diploma.
The entire work has been planned and carried out under the supervision of the honorable
faculty member Md. Siddikur Rahman, Lecturer, Department of Management Studies,
Comilla University.

Yours truly,

..
Md. Jafar Iqbal
ID No: 1008018
Session: 2010-2011
BBA (5th Batch)
Department of Management Studies
Comilla University

iv

Supervisors Certificate
This is to certify that the report presented here has been prepared by Md. Jafar Iqbal,
bearing Id: 1008018, Session: 2010-2011, BBA (5 th Batch) for the submission to the
Department of Management Studies, Comilla University. In the partial fulfillment of the
requirements for the degree of Bachelor of Business Administration (BBA). This report is
suitable for submission.
He has completed the internship program under my supervision. He has always maintained
communication with me and has taken necessary advice. He has prepared the Internship
Report on Credit Management System: A Study on Janata Bank Limited under my
guidance. I wish him all success in life.

With best regards,

.
Md. Siddikur Rahman
Lecturer,
Department of Management studies
Comilla University

Internship Certificate

vi

Acknowledgement
At the very beginning, I would like to express my deepest gratitude to Almighty Allah for
giving me the opportunity with strength and patience to carry on this work. In conducting this
study, I have received generous help from many corners, which I like to mention with
gratitude and great pleasure.
I would like to express my gratitude to my internship supervisor Md. Siddikur Rahman,
Lecturer, Department of Management Studies, Comilla University. His suggestion and
comment have greatly inspired me to prepare the Internship Report successfully.
I express my heartiest respect to Dr. Mohammad Ahsan Ullah, Honorable chairman,
Department of Management Studies, Comilla University for giving me permission for
Internship.
I would also like to express my deep gratitude to Md. Abdul Matin (AGM, Loan&
Advance), Md. Magfar Hasan Bahadur (FAGM) and Md. Abdul Gafur (AGM, Admin).
Indeed I am grateful to the officials of Janata Bank Ltd, Local office, Dhaka. Their support
gave me opportunities to use various documents during my internship period and their
valuable suggestion, advice and extended helping have contributed most.
Lastly, I would like to express my special and cordial thanks to all of my teachers, friends and
many individuals for their enthusiastic encouragements, supports and helps during the
preparation of this report.

Sincerely yours,

Md. Jafar Iqbal


ID No: 1008018
BBA (5th Batch)
Department of Management Studies
Comilla University, Comilla

vii

Executive Summary
This report is prepared on the basis of my three months practical experience at Janata Bank
Ltd. (Local Office). The internship program has helped me a lot to learn more about the
practical situation of a financial institution. Loans or credits comprise the most important
asset as well as the primary source of earning for the banking institutions. On the other hand,
loan/credit is also the major source of risk for the bank management. A prudent bank
management should always try to make an appropriate balance between its return and risk
involved with the loan portfolio. From this report, I have learned about how Janata Bank
provides and recovers loans and advances. I have also learned about their credit policy
applied for disbursement and recovery of loan and advance. In this report, I have used
mainly secondary data. But I have also used some primary data. During the preparation of
the report, I have faced some problems. The main problems are lack of information and time
limitation.
For the convenience, I have divided the report into five chapters.
In the first chapter, the introductory part has been developed for the proper execution of the
study.
In the second chapter, overview of Janata bank and its local office, where I completed my
internship, has been described.
In the third chapter, I have discussed the theoretical aspects of credit management system.
In the fourth chapter, the credit management system of Janata bank Ltd. has been
described. I have discussed the loans and advances provided by Janata bank, sector wise
credit disbursement and credit recovery policy of the bank.
In the fifth chapter, I have mentioned the findings of the study. I have provided several
recommendations that might be useful for the further development of the credit management
system of the bank. Then I have drawn the conclusion to the report.

viii

TABLE OF CONTENTS
LETTER OF TRANSMITTAL..............................................................................III
STUDENTS DECLARATION.............................................................................IV
SUPERVISORS CERTIFICATE...........................................................................V
INTERNSHIP CERTIFICATE..............................................................................VI
ACKNOWLEDGEMENT...................................................................................VII
EXECUTIVE SUMMARY.................................................................................VIII
ACRONYMS................................................................................................XIII
CHAPTER 1.................................................................................................... 1
INTRODUCTION.............................................................................................. 1
1.1 BACKGROUND OF THE STUDY...........................................................................................2
1.2 ORIGIN OF THE REPORT............................................................................................ 2
1.3 OBJECTIVES OF THE REPORT....................................................................................2
1.3.1 Specific Objectives............................................................................................ 2
1.4 SCOPE OF THE STUDY..............................................................................................3
1.5 METHODOLOGY OF THE STUDY................................................................................3
1.5.1 Data Assortment Procedure..............................................................................3
1.5.2. Data Dispensation & Study..............................................................................4
1.6 LIMITATIONS OF THE STUDY.....................................................................................4
CHAPTER 2.................................................................................................... 5
ORGANIZATIONAL PROFILE.............................................................................5
2.1 HISTORY OF JANATA BANK........................................................................................6
2.2 ORGANIZATIONAL STRUCTURE OF JANATA BANK LTD...............................................7
2.3 CORPORATE PROFILE................................................................................................8
2.3.1 Vision of JBL...................................................................................................... 9
2.3.2 Mission of JBL.................................................................................................... 9
2.4 CORPORATE SLOGAN OF JBL.....................................................................................9
2.5 OBJECTIVES OF JANATA BANK LIMITED......................................................................9
2.6 CORE VALUES OF JANATA BANK LIMITED.................................................................10
2.6.1 Core Strengths................................................................................................10
2.6.2 Core Competencies.........................................................................................10
2.7 ETHICAL PRINCIPLE................................................................................................ 11
2.8 FUNCTIONAL STRUCTURE OF JBL............................................................................11
2.9 BRANCHES OF JANATA BANK LIMITED.....................................................................11
2.10 CORPORATE CREDIT RATING OF JBL......................................................................12
2.11 PRODUCTS OFFERED BY JANATA BANK LTD..........................................................12
2.12 CORPORATE GOVERNANCE...................................................................................13
2.13 CSR ACTIVITIES OF JANATA BANK LIMITED............................................................13
2.14 KEY FINANCIAL HIGHLIGHTS OF JBL......................................................................14
2.15 OVERVIEW OF JANATA BANK, LOCAL OFFICE.........................................................15
2.15.1 Corporate Profile of Local Office, Janata Bank...............................................15
2.15.2 Departments of the Branch...........................................................................16

ix

2.15.3 Organizational Structure of the Branch.........................................................16


2.15.4 Total Number of Accounts of the Branch.......................................................17
2.15.5 Total Financial Affairs of the Branch..............................................................17
CHAPTER 3.................................................................................................. 18
THEORETICAL DISCUSSION ON CREDIT MANAGEMENT....................................18
3.1 CREDIT................................................................................................................... 19
3.2 FACTORS RELATED WITH CREIDT...........................................................................19
3.3 PRINCIPLES OF CREDIT........................................................................................... 19
3.4 IMPORTANCE OF CREDIT......................................................................................... 20
3.5 SOURCES OF CREDIT.............................................................................................. 20
3.6 MODES OF CREDIT................................................................................................. 20
3.6.1 Continuous Loan.............................................................................................20
3.6.2 Demand Loan..................................................................................................21
3.6.3 Term Loan....................................................................................................... 21
3.7 CREDIT MANAGEMENT............................................................................................ 21
3.8 PROCESS OF CREDIT MANAGEMENT.......................................................................21
3.8.1 Policy Guidelines............................................................................................. 21
3.8.2. Program Guidelines........................................................................................23
3.9 CREDIT RISK GRADING (CRG).................................................................................23
3.9.1 Steps in Credit Risk Grading............................................................................23
3.9.2 Functions of Credit Risk Grading.....................................................................23
3.9.3 Use of Credit Risk Grading..............................................................................24
3.9.4 Number and Short Name of Grades Used in the CRG......................................24
3.10 CREDIT POLICY..................................................................................................... 24
3.10.1 Objectives of Credit Policy.............................................................................25
3.10.2 Formulation of Credit Policy..........................................................................25
3.10.3 Principles of Sound Lending..........................................................................25
3.10.4 Components Required for a Sound Credit Policy...........................................26
3.11 CREDITWORTHINESS OF A BORROWER................................................................27
3.12 CREDIT GRANTING PROCEDURES.........................................................................27
3.13 CREDIT COMMITTEE.............................................................................................. 28
3.14 SECURITIES FOR CREDIT MANAGEMENT...............................................................29
3.15 SWOT ANALYSIS FOR CREDIT MANAGEMENT OF JBL.............................................30
3.15.1 Strengths...................................................................................................... 30
3.15.2 Weaknesses.................................................................................................. 31
3.15.3 Opportunities................................................................................................ 31
3.15.4 Threats.......................................................................................................... 31
CHAPTER 4.................................................................................................. 32
CREDIT MANAGEMENT OF JBL.......................................................................32
4.1 LOANS AND ADVANCES.......................................................................................... 33
4.2 TYPES OF LOAN...................................................................................................... 33
4.2.1 Continuous Loan.............................................................................................33
4.2.2 Demand Loan..................................................................................................34
4.2.3 Term Loan....................................................................................................... 34
4.3 TABLE OF LOAN CLASSIFICATION............................................................................34
4.4 DIFFERENT TYPES OF LOANS AND ADVANCES........................................................35

4.5 CREDIT SCHEMES OF JANATA BANK LIMITED...........................................................37


4.5.1 Micro Credit Programs.....................................................................................37
4.5.2 Entrepreneurship Development Program........................................................37
4.5.3 Other Special Credit Programs........................................................................38
4.6 INTEREST RATE OF LOANS IN JBL............................................................................38
4.7 LOAN SANCTIONING PROCEDURE OF JBL................................................................39
4.7.1 Getting Credit Information..............................................................................39
4.7.2 Information Collection.....................................................................................39
4.7.3 Analyzing the Information...............................................................................39
4.7.4 Lending Risk Analysis (LRA)............................................................................40
4.7.5 Processing Loan Proposal................................................................................40
4.7.6 Proposal Analysis............................................................................................ 40
4.7.7 Collateral Evaluation.......................................................................................41
4.7.8 Final Decision about the Project......................................................................41
4.7.9 Proper Supervision of the Project....................................................................41
4.7.10 Documentation of the Loan...........................................................................41
4.7.11 Creation of Charges for Securing Loan..........................................................42
4.7.12 Disbursement................................................................................................43
4.8 LOAN DISBURSEMENT OF JBL.................................................................................43
4.8.1 Overall Sector wise Loan Disbursement of JBL................................................43
4.8.2 Loans & Advances with Risk Status.................................................................44
4.8.3 Sector wise Loan Disbursement of JBL, Local Office........................................45
4.8.4 Sector wise Classified Loans of JBL, Local Office.............................................45
4.9 LOAN RECOVERY.................................................................................................... 47
4.9.1 Programs for Loan Recovery...........................................................................47
4.9.2 Recovery Programs to Be Taken......................................................................47
4.9.3 Recovery Patterns of Loan & Advances...........................................................48
4.9.4 Sector wise Recovery Rate of Janata Bank, Local Office..................................48
4.10 PROBLEMS IN LOAN RECOVERY............................................................................49
CHAPTER 5.................................................................................................. 50
FINDINGS, RECOMMENDATIONS AND CONCLUSION........................................50
5.1 FINDINGS.................................................................................................................. 51
5.2 RECOMMENDATION...................................................................................................... 52
5.3 CONCLUSION.............................................................................................................. 52
REFERENCES............................................................................................... 54
APPENDICES................................................................................................ 55
APPENDIX A: QUESTIONNAIRE......................................................................................55
APPENDIX B: FINANCIAL AFFAIRS OF LOCAL OFFICE.....................................................56
APPENDIX C: SECTOR WISE LOANS & ADVANCES.........................................................58

xi

LIST OF FIGURES
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE

1: ORGANIZATIONAL STRUCTURE OF JBL........................................................................7


2: CORE VALUES OF JBL........................................................................................... 10
3: FUNCTIONAL STRUCTURE OF JBL.............................................................................11
4: CORPORATE CREDIT RATING OF JBL.........................................................................12
5: CORPORATE GOVERNANCE.....................................................................................13
6: ORGANIZATIONAL STRUCTURE OF THE BRANCH..........................................................16
7: MODES OF CREDIT............................................................................................... 20
8: CREDIT GRANTING PROCEDURES.............................................................................27
9: CREDIT COMMITTEE.............................................................................................. 29
10: SECTOR WISE LOANS & ADVANCES........................................................................46
11: SECTOR WISE CLASSIFIED LOANS..........................................................................47

LIST OF TABLES
Table
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE

xii

1: Corporate Profile of JBL.......................................................................................8


2: BRANCHES OF JBL................................................................................................. 11
3: KEY FINANCIAL HIGHLIGHTS OF JBL...........................................................................15
4: OVERVIEW OF JBL, LOCAL OFFICE.............................................................................15
5: NUMBER OF ACCOUNTS OF THE BRANCH....................................................................17
6: FINANCIAL AFFAIRS OF THE BRANCH..........................................................................17
7: NUMBER & SHORT NAMES USED IN CRG....................................................................24
8: LOAN CLASSIFICATION............................................................................................. 34
9: INTEREST RATE OF LOANS IN JBL..............................................................................38
10: OVERALL SECTOR WISE LOAN DISBURSEMENT OF JBL (SOURCE: ANNUAL REPORT 2014)..43
11: LOANS & ADVANCES WITH RISK STATUS...................................................................44
12: SECTOR WISE LOAN DISBURSEMENT OF JBL, LOCAL OFFICE.........................................45
13: SECTOR WISE CLASSIFIED LOANS OF JBL, LOCAL OFFICE.............................................46
14: SECTOR WISE LOAN RECOVERY RATE OF JBL............................................................48

Acronyms

xiii

Abbreviation

Full Name

JBL

Janata Bank Limited

A/C

Account

CD

Current Deposit

SBA

Savings Bank Account

STD

Short Term Deposit

FDR

Fixed Deposit Receipt

JBDS

Janata Bank Deposit Schemes

JBMSS

Janata Bank Monthly Saving Scheme

EDS

Education Deposit Scheme

DPS

Deposit Pension Scheme

DD

Demand Draft

CIB

Credit Information Bureau

CRG

Credit Risk Grading

LIM

Loan against Imported Machine

LTR

Loan against Trust Receipt

PAD

Payment against Document

LDBP

Loan Documentary Bill Purchase

SWOT

Strength, Weakness, Opportunity, Threats

DL

Doubtful Loan

SME

Small & Medium Enterprise

CSR

Corporate Social Responsibility

LAOS

Loan against Other Securities

JANATA BANK LIMITED


A Committed partner in Progress

CHAPTER 1
INTRODUCTION

1.1 BACKGROUND OF THE STUDY


Banking is the backbone of an economy. All kinds of economic and financial activities
revolve around the axis of the bank. An industry produces goods and commodities. A bank
creates and controls money market and promotes formation of capital. From this perspective,
banking- a technical profession- can be termed as an industry. Services to its customers are
the products of banking industry. As all economic and fiscal activities revolve around this
Credit Management System: A Study on Janata Bank Limited

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JANATA BANK LIMITED


A Committed partner in Progress

important Industry, the role of banking can hardly be over emphasized. In these
circumstances, it becomes crucial to find out the roles that banks are now playing in the
country and analyze their operational aspects so as to learn the importance of this delicate
financial sector and their overall impacts on our national economy.
The role of banks is far reaching and more penetrating in the economic and fiscal discipline,
trade, commerce, industry, export and import- all carried through the bank. Banks are the
only media through which international trade and commerce emerge and perform entire credit
transactions, both national and international. Banks collect small savings from individual
depositor and create capital for investment. Banks transfer fund from surplus unit to deficit
unit and thus reduce gap between savings and investment and foster economic growth. Banks
provide interest to the depositor at a lower rate, collect interest from the borrower at a higher
rate and the difference between these two is their profit.
However, the main element of the banking business is credit. A bank sometime faces loss
when it cannot collect disbursed credit. So a bank is always under risk about the credit issue.
Therefore, it has been quite essential to know about the credit management system of our
banking industry. This report has been prepared to analyze the credit management system of
Janata Bank Limited, Local Office.

1.2 ORIGIN OF THE REPORT


Since the BBA Program is an integrated, practical and theoretical method of learning, the
students of this program are required to have practical exposure in any kind of business
organization last term of this course. This report on practical orientation has been originated
from above thinking.
The report entitled Credit Management System: A study on Janata Bank Limited Local
Office, Dhaka, has been prepared as an internship report fulfillment of BBA Program
authorized by the Department of Management Studies in Comilla University.

1.3 OBJECTIVES OF THE REPORT


The main objective of the report is to identify and evaluate the credit and loan management
system of Janata bank limited, which includes the following specific objectives:

1.3.1 Specific Objectives


To present an overview of Janata Bank Limited
To assess the credit structure of the Janata Bank Limited in practice
To identify the recovery performance of Janata Bank Limited
To point out the problems in fund utilization and recovery thereon
To make a critical reasoning in respect to the treatment of provision for bad and
doubtful credit
To assess and highlight on the legal actions followed by the Janata Bank Limited
Credit Management System: A Study on Janata Bank Limited

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JANATA BANK LIMITED


A Committed partner in Progress

To find out problems and to suggest recommendations for further improvement

1.4 SCOPE OF THE STUDY


The reporter was assigned to learn practical knowledge from Janata Bank Limited, Local
Office Branch. In this study, the reporter has tried to concentrate on the theoretical aspects of
credit management, i.e. the definition of credit management, policy of credit management,
tools for managing credit etc. The reporter has analyzed the data on the bank and various
programs for loan disbursement system, loan recovery, problems in loan recovery, and the
performance of the bank in credit management. And finally, the reporter has concluded with
the critical evaluation of the credit management under the guidelines of the Bank Companies
Act and a discussion on the major findings and recommendations.

1.5 METHODOLOGY OF THE STUDY


The study is performed based on the information extracted from different sources collected
by using a specific methodology. To fulfill the objectives of this report, total methodology has
been divided into two major parts:

1.5.1 Data Assortment Procedure


In order to make the report more meaningful and presentable, two sources of data and
information have been used widely.
The Main Sources are as follows:
Questionnaire survey of both managers of credit department and the customers who
have taken loans from Janata Bank Limited
Relevant file study as provided by the officers concerned
Sharing practical knowledge of officials
Desk-work in different sections, of the bank
Conversation with the banks employees
The Subordinate Sources are as follows:
Annual report of Janata Bank Limited
Periodicals Published by Bangladesh Bank
Office files and documents
Study related books and journals

1.5.2. Data Dispensation & Study


Collected information has been processed & compiled with the aid of MS Word, Excel &
other related computer software. Necessary tables have been prepared on the basis of
collected data. Detail explanation and analysis have also been incorporated in the report.

Credit Management System: A Study on Janata Bank Limited

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JANATA BANK LIMITED


A Committed partner in Progress

1.6 LIMITATIONS OF THE STUDY


To prepare a report on the topic like this in a short duration is not an easy task. From the
beginning to end, the study has been conducted with the intention of making it as a complete
and truthful one. In preparing this report, some problems and limitations have been
encountered which are as follows:
Insufficiency of required information.
Lack of opportunity to access to internal data due to security and other corporate
obligations.
As the data, in most cases, are not in organized way, the reporter failed to process
most of the information.
Due to time limitation, many of the aspects could not be discussed in the report.
The reporter had to base on secondary data for preparing this report.
Legal action related information was not available.
Lack of in-depth knowledge and analytical ability for writing such report.

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JANATA BANK LIMITED


A Committed partner in Progress

CHAPTER 2
ORGANIZATIONAL
PROFILE

2.1 HISTORY OF JANATA BANK


Janata Bank Limited is one of the biggest commercial banks of the country. Its a state
owned bank that was formed just after liberation of Bangladesh. In fact it was a combination
of two smaller banks namely United Bank Limited and Union Bank Limited. Janata Bank
Credit Management System: A Study on Janata Bank Limited

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JANATA BANK LIMITED


A Committed partner in Progress

Limited welcomes you to explore the world of progressive Banking in Bangladesh. It is a


state owned (second largest commercial bank) bank and is catering the need of the mass
business people. It was corporatized on 15th November 2007. Janata Bank was born with a
new concept of purposeful banking sub serving the growing and diversified financial needs of
planned economic development of the country.
Janata Bank Limited, one of the state owned commercial banks in Bangladesh, has an
authorized capital of Tk. 30,000 million (approx. US$ 375 million), paid up capital of
Tk. 19,140.00 million, reserve of Tk. 20,321.54 million and retained surplus Tk. 353.39
million. The Bank has a total asset of Tk. 629,454.14 million as on 31st December 2014.
Janata Bank Limited operates through 904 branches including 4 overseas branches at United
Arab Emirates. It is linked with 1,242 foreign correspondents all over the world. The Bank
employs more than 14 (fourteen) thousand persons. The corporate head office is located at
Dhaka with 35 (thirty five) Divisions. As a part the conscious development of existing
Human Resources, Janata Bank through its three training institutes during the year 2003
imparted training to 4699 officers and staffs. It computerized All of their 904 branches;
ONLINE Banking in 174 important branches under important branches under
implementation; we have installed 15 ATM booths and shared 4102 ATM of other banks
across the country. The Board of Directors is composed of 11 members headed by a
Chairman. The Directors are representatives from both public and private sectors. The Bank
is headed by the Managing Director (Chief Executive), who is a reputed banker.
The bank was registered as a public limited company on May 21, 2007.

2.2 ORGANIZATIONAL STRUCTURE OF JANATA BANK LTD


There is a Board of Directors consisting of 13 members who manage Janata Bank Limited.
For efficient operation of the bank, the Board of directors forms an Executive Committee of
19 members. Besides, a management Committee looks after the affairs of the bank. The bank
maintains transparency in its entire works. All decisions of the management come through
discussions in appropriate forum and required follow-ups are also made to see their
effectiveness.
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JANATA BANK LIMITED


A Committed partner in Progress

Chairman
Board of Directors
CEO & Managing Director
Deputy Managing Director
Assistant General Manager
First Assistant General Manager
Senior Executive Officer
Executive Officer
Assistant Executive Officer
Assistant Officer, Grade 1
Assistant Officer, Grade 2
Support Stuff-1
Support Stuff-2

Figure 1: Organizational Structure of JBL

2.3 CORPORATE PROFILE


Features
Name

Values
Janata Bank Limited

Credit Management System: A Study on Janata Bank Limited

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JANATA BANK LIMITED


A Committed partner in Progress

Janata Bank Limited, the 2nd largest State Owned Commercial Bank (SCB)
in Bangladesh, is playing pivotal role in overall financial activities of the
country. The Bank emerged as Janata Bank by combining the erstwhile
United Bank Limited and Union Bank Limited under the Banks
Nationalization Order (Presidents Order- 26) of 1972 and was restructured
Genesis
as a limited company in November, 2007. Since inception in 1972 the Bank
has commendably contributed to the socio-economic development of
Bangladesh and helped structuring solid financial ground of the country as
well. Janata Bank runs its business with 904 branches across the country
including 4 overseas branches in United Arab Emirates.
Registered Address Janata Bhaban, 110, Motijheel Commercial Area Dhaka - 1000, Bangladesh.
Legal Status
Public Limited Company
Chairman
Shaikh Md. Wahid-uz-Zaman
Managing Director
Md. Abdus Salam
& CEO
Company Secretary Md. Mosaddake-Ul-Alam
Date of
21 May 2007
Incorporation
Authorized Capital BDT 30,000 Million
Paid up Capital
BDT 19,140 Million
Face value per
BDT 100 per share
share
Shareholding
100% Share owned by the Government of Bangladesh
Pattern
Number of
14244(As on 01.05.2015)
Employees
Banking license
obtained from
31 May 2007
Bangladesh Bank
Phone
9560000, 9566020, 9556245-49, 9565041-45, 9560027-30
Fax
88-02-9554460, 9553329, 9552078
SWIFT
JANB BD DH
Website
http://jb.com.bd
E-mail
md@janatabank-bd.com

Table 1: Corporate Profile of JBL

2.3.1 Vision of JBL


To become the effective largest commercial
bank in Bangladesh to support social
development on country and to be a leading
bank in South Asia.

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JANATA BANK LIMITED


A Committed partner in Progress

2.3.2 Mission of JBL


Janata Bank Limited will be an effective
commercial bank by maintaining stable growth
strategy and deliver high quality financial
products, providing excellent customer service
through and experienced management team and
ensuring good corporate governance in every
step of banking network.

2.4 CORPORATE SLOGAN OF JBL


Slogan: Excellence of Banking
Motto: The bank will be a confluence of the following three interests:
Of the bank: Profit maximization and sustained growth
Of the customer: Maximum benefit and satisfaction
Of the society: Maximization of welfare

2.5 OBJECTIVES OF JANATA BANK LIMITED


The objectives for which the bank is established are as follows:
To carry on, transact, undertake and conduct the business of banking in all branches.
To receive, borrow or to raise money on deposit, loan or otherwise upon such terms as
the company may approve.
To carry on the business of discounting and dealing in exchange of specie and
securities and all kinds of mercantile banking.
To provide for safe-deposit vaults and the safe custody of valuables of all kinds.
To carry on business as financiers, promoters, capitalists, financial and monitory
agents, concessionaires and brokers.
To act as agents for sale and purchase of any stock, shares or securities or for any
other momentary or mercantile transaction.
To establish and open offices and branches to carry on all or any of the business
abroad and within the country provided prior permission is obtained from Bangladesh
bank.
To ensure optimum utilization of all available resources.
To remain one of the best banks in Bangladesh in terms of profitability and asset
quality
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JANATA BANK LIMITED


A Committed partner in Progress

2.6 CORE VALUES OF JANATA BANK LIMITED

Figure 2: Core Values of JBL

2.6.1 Core Strengths


Transparent and Quick Decision

Making.

2.6.2 Core Competencies


Knowledge.
Experience & Expertise.

Efficient Team of Performer.


Satisfied Customers.
Internal Control.
Skilled Risk Management.

Customer Orientation/ Focus.


Transparency.
Determination.
Zeal for Improvement.

Diversification.

2.7 ETHICAL PRINCIPLE


Bank deals with public money where ethics, integrity and trust are the most essential. Janata
Bank protects and upholds these principle issues in every area of its management activities
and customer services. The basic characteristics of employee code of ethics and business
conduct are as follows:
To ensure customer service with utmost care, respect, dedication, integrity and
unwavering responsibility
To protect privacy and confidentiality of customers information. Prevent money
laundering and fraud forgery
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To protect and uphold corporate values

2.8 FUNCTIONAL STRUCTURE OF JBL


Head Office
GM Office
Principal Office
Regional Office
Branch Office
Figure 3: Functional Structure of JBL

2.9 BRANCHES OF JANATA BANK LIMITED


Branches

No. of Branches

Local Office

Special corporate

Corporate-1 Branch

22

Corporate-2 Branch

71

Overseas Branch

04

Grade-1 Branch

201

Grade-2 Branch

221

Grade-3 Branch

272

Grade-4 Branch

111

Total

904

Table 2: Branches of JBL

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2.10 CORPORATE CREDIT RATING OF JBL

Figure 4: Corporate Credit Rating of JBL

2.11 PRODUCTS OFFERED BY JANATA BANK LTD.


Deposits
Current& call deposit
Savings Bank Deposit
Monthly Scheme
Term Deposit
Special Notice Deposit

Micro & cottage Industry


Loan
Import & Export Finance
Letter of credit
Letter of Guarantee
Other Credit Program

Loans and Advances


Term loan
Small & Medium
Enterprise loan
Continuous loan
Rural & Agro credit
Poverty Alleviation
Program
Specialized loan program

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Services
Financial services (Foreign Remittance)
Financial Services (Inland Remittance
Utility services
ATM
Welfare Services
Service to Government
Other services
Customer Service

2.12 CORPORATE GOVERNANCE

Figure 5: Corporate Governance

2.13 CSR ACTIVITIES OF JANATA BANK LIMITED


For bringing dynamism in CSR activities and including the most part of the deprived people,
the total activities have been categorized and sub-categorized in the following ways:
Education & Research
Health & Treatment
Poverty reduction & rehabilitation
Combat against natural calamity
A try to bring the marginal agriculturists and the poor out of the grip of loan
Preservation of history-tradition, culture and sports
Preservation of environment
Expansion of technology
Invention
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2.14 KEY FINANCIAL HIGHLIGHTS OF JBL


Key Operational Indicators and Financial Information
(BDT in million unless stated otherwise)

S/l

Particulars

2014

2013

2012

2011

2010

A.

Operational Information's & Indicators

Total Deposits

516010

478535

409767

361677

286566.84

Total Loans & Advances

319773

285747

305339

257801

225732

Import

144556

176671

188284

197285

183744

Export

154079

153252

156525

153758

118515

Foreign Remittance

106677

103982

100089

72285

52640

Non-Interest Income

-----

5145

8134

9357

7283

Total Classified Loans & 37375


Advances
(Including
Overseas)

31766

53202

15040

11827

Operating Profit

1212

14534

15722

12036

Reduction
Advance

3532

4357

3645

5561

10

Rate of Classified Loans & 11.69%


Advances

11.12%

17.16%

5.60%

5.30%

11

Deposits Advances Ratio

59.71%

74.52%

71.28%

78.77%

B.

Financial Indicators & Information

12

Authorized Capital

30000

20000

20000

20000

20000

13

Paid up Capital

19140

19140

11000

8125

5000

14

Required Capital

35420

33392

31898

30643

22973

15

Capital Kept

-----

34301

11780

31242

23454

16

Capital (Shortfall)/Surplus

1048

908

(20118)

599

481

17

Loan loss provision required


a) For classified loans and 21684
advances

19345

31772

8175

6823

b) For unclassified loans -----and advances

2946

2240

2998

2152

18

Provision Kept

-----

22291

34012

11173

8975

19

Total Assets

629454

586082

511129

440389

345234

20

Earning Assets

496785

461290

434578

376071

293020

of

10683
Classified -----

61.97%

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21

Total
Contingent 72495
Assets/Liability
(Off
Balance Sheet Items)

99726

112559

151207

106228

22

Profit after tax & Provision

9551

(16280)

4445

4908

23

Rate of Return on profit ---after tax

----

(3.19%)

1.01%

1.42%

24

Return on Investment (ROI)

8.47%

9.39%

8.04%

7.72%

4.89%

25

Cost of Deposit

7.34%

7.75%

7.24%

5.57%

4.17 %

26

Operating Cost

-----

8731

1.97%

2.23%

2.31%

27

Cost of Fund

8.82%

9.23%

9.21%

7.80%

6.48%

28

Average Return on Loan & 11.44%


Advances

12.39%

12.12%

9.84%

8.97 %

29

Interest Spread

4.10%

4.64%

4.88%

4.27%

4.80%

30

Net spread

2.06%

3.16%

2.40%

2.13%

2.50%

31

Earning per share

19.92

86.31

(148.0)

60.45

98.16

32

Current Ratio

-----

1.04

1.03

1.06

1.10

33

Efficiency Ratio

-----

15.86%

15.11%

17.54%

21.61%%

3813

Table 3: Key Financial Highlights of JBL

2.15 OVERVIEW OF JANATA BANK, LOCAL OFFICE


2.15.1 Corporate Profile of Local Office, Janata Bank
Bank Name
Branch Name
Address
SWIFT Code
Telephone

Janata Bank Limited


Local Office
1 Dilkusha C/A, Motijheel, Dhaka 1000
JANBBDDHJBD
02 9556242-44, 9553106

District
Working Days

Dhaka
Sunday - Thursday (Except Holidays)

Table 4: Overview of JBL, Local Office

2.15.2 Departments of the Branch


Account Opening Department
Administration Department
Cash Department
Cleaning and Collection
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Loans and Advance Department


Loan and Advance Recovery Department
Export & Import Department
Foreign Remittance Department
Foreign Exchange Department

2.15.3 Organizational Structure of the Branch

General Manager
Deputy General Manager
Assistant General Manager
Fast Assistant General Manager
Senior Executive Officer
Executive Officer
Assistant Executive officer/Tailor
Staff
Figure 6: Organizational Structure of the Branch

2.15.4 Total Number of Accounts of the Branch

Number of Account
Current
Savings
SND
FDR
DPS

Quantity
2360
14348
130
649
2

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FC
JBSPS
Loan & Advance
JBDS
SDS
MDS
EDS
MSS
MBS
DBS
MAP
LRSS
Total

13656
16
4779
195
51
0
0
79
0
214
590
0
37,326

Table 5: Number of Accounts of the Branch

2.15.5 Total Financial Affairs of the Branch

Total Deposit

37363110877.29 Tk.

Total Advance
Less interest suspense
Sub Total
Less: loan to BDC
Total Net Advance

66517057765.62 Tk.
3286601482.39 Tk.
63230456283.23 Tk.
0.00
63230456283 Tk.

Table 6: Financial Affairs of the Branch

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CHAPTER 3
THEORETICAL
DISCUSSION ON CREDIT
MANAGEMENT

3.1 CREDIT
The word credit is derived from the Latin word credo which means - I believe and is
usually defined as the ability to buy with a promise to pay. It consists of actual transfer and
delivery of goods and services in exchange for a promise to pay in future. It is simply the
opposite of debt. Diversification of banking service has accelerated the use of credit in the
expansion of business operation. It is a fundamental precept of banking everywhere that
advances are made to customers in reliance on his promise to pay rather than the security held
by the banker.

3.2 FACTORS RELATED WITH CREIDT


Risk
Time

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Interest rate
Security or Collateral
Operating Expense
Legal Considerations
Inflation
Finance Charge

3.3 PRINCIPLES OF CREDIT


A prudent banker should always adhere to the following general principles of lending funds
to his customers:
Background, Character and ability of the borrowers,
Purpose of the facility,
Term of facility,
Safety,
Security,
Profitability,
Source of repayment,
Diversity.

3.4 IMPORTANCE OF CREDIT


Bank gives interest at a fixed rate to the different types of depositor. Moreover Bank needed
huge money for maintaining administrative expenses. Banks have to make profit after
meeting these expenses and also providing the interest to the depositor. Bank cannot make
equal profit the entire loan. It depends on the right use and principles of the loan. All
depositors do not want money at a time. If bank give the entire deposit at a time then bank
cant meet the demand of the customer on the other hand all the deposit to keep as a reserve is
prohibited by it principle. So, banks to make combination between them.

3.5 SOURCES OF CREDIT


The sources of providing loan of a bank are given below:
Different types of deposit
Paid up Capital

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Retained earnings
Loans from Bangladesh Bank and other Bank
Among these sources different types of deposits are the main sources.

3.6 MODES OF CREDIT


Loan and advance have primarily been divided into major groups:

Figure 7: Modes of Credit

3.6.1 Continuous Loan


These are the advances having no fixed repayment schedule but have a date at which it is
renewable on satisfactory performance of the clients. Continuous loan mainly includes Cash
credit both hypothecation and pledge and Overdraft.

3.6.2 Demand Loan


In opening letter of credit (L/C), the clients have to provide the full L/C amount in foreign
exchange to the bank. To purchase this foreign exchange, bank extends demand loan to the
clients at stipulated margin. No specific repayment date is fixed. However, as soon as the L/C
documents arrive, the bank requests the clients to adjust their loan and to retire the L/C
documents. Demand loans mainly include Payment against Documents, Loan against
imported merchandise (LIM) and Later of trust Receipt.

3.6.3 Term Loan


These are the advances made by the bank with a fixed repayment schedule. Terms loans
mainly include Consumer credit scheme, Lease finance, Hire purchase, and Staff
loan. The term loans are defined as follows:
Short term loan: Up to 12 months.
Medium term loan: More than 12 months & up to 36 months
Long term loan: More than 36 months.
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3.7 CREDIT MANAGEMENT


Loans or credits comprise the most important asset as well as the primary source of earning
for the banking institutions. On the other hand, loan/credit is also the major source of risk for
the bank management. A prudent bank management should always try to make an appropriate
balance between its return and risk involved with the loan portfolio. Credit appraisal process
is the tool, which helps the bank to predict the risk and return on the proposed project for
credit disbursement. To get a clear idea about credit appraisal process we need to know the
key factors of credit appraisal procedures.

3.8 PROCESS OF CREDIT MANAGEMENT


Credit management must be organized in such a process that the bank can minimize its losses
for payment of expected dividend to the shareholders. The purpose of this process is to
provide directional guidelines that will improve the risk management culture, establish
minimum standards for segregation of duties and responsibilities, and assist in the ongoing
improvement of concerned bank. The guidelines for credit management may be organized
into the following sections:

3.8.1 Policy Guidelines


A. Lending Guidelines: The lending guidelines include the followingIndustry and Business Segment Focus
Types of loan facilities
Single borrowers/ group limits/ syndication
Lending caps
Discouraged business types
B. Credit Assessment and Risk Grading: A thorough credit and risk assessment should be
conducted prior to the granting of loans, and at least annually thereafter for all facilities.
Credit Applications should summaries the results of the risk assessment and include, as a
minimum, the following detailsEnvironment or social risk inputs
Amount and type of loan (s) proposed
Purpose of loans
Loan structure ( tenor, covenants, repayment schedule, interest)
Security arrangement
Any other risk or issue

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Risk triggers and action plan-condition prudent, etc.


Risk is graded as per Lending Risk Analysis (LRA), Bangladesh Banks Guidelines of
classification of loans and advances.
C. Approval Authority: Approval authority may be as the followingCredit approval authority has been delegated to Branch Manager, Credit
Committee by the MD/ Board
Delegated approval authorities shall be reviewed annually by MD/ Board.
Approvals must be evidenced in writing. Approval records must be kept on file with
credit application
The aggregate exposure to any borrower or borrowing group must be used to
Determine the approval authority required.
Any credit proposal that does not comply with Lending Guidelines, regardless of
Amount, should be referred to Head Office for approval.
D. Segregation of Duties: Banks should aim at segregating the following lending function
Credit approval/ risk management
Relationship management/ marketing
Credit administration

3.8.2. Program Guidelines


Approval Process: The credit program undergoes through several approval process.
Credit Administration: The credit administration function is critical in ensuring that
proper documentation and approvals are in place prior to the disbursement of loan
facilities.
Credit Monitoring: To minimized credit losses, monitoring procedures and systems
should be in place that provides an early indication of the deteriorating financial health
of borrower.
Credit Recovery: The recovery unit of branch should directly manage accounts with
sustained deterioration (a risk rating of sub-standard or worse).

3.9 CREDIT RISK GRADING (CRG)


The Credit Risk Grading (CRG) is a collective definition based on the pre- specified scale
and reflects the underlying credit-risk for a given exposure. A Credit Risk Grading deploys a
number/ alphabet/ symbol as a primary summary indicator of risks associated with a credit
exposure.
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Credit Risk Grading is the basic module for developing a Credit Risk Management system.

3.9.1 Steps in Credit Risk Grading


Step I: Identify all the Principal Risk Components
Step II: Allocate weights to Principal Risk Components
Step III: Identify the Key Parameters
Step IV: Assign weight to each of the key parameters
Step V: Input data to arrive at the score on the key parameters
Step VI: Arrive at the Credit Risk Grading based on total score obtained

3.9.2 Functions of Credit Risk Grading


Well-managed credit risk grading systems promote bank safety and soundness by facilitating
informed decision-making. Grading systems measure credit risk and differentiate individual
credits and groups of credits by the risk they pose. This allows bank management and
examiners to monitor changes and trends in risk levels. The process also allows bank
management to manage risk to optimize returns.

3.9.3 Use of Credit Risk Grading


The Credit Risk Grading matrix allows application of uniform standards to credits to
ensure a common standardized approach to assess the quality of individual obligor,
credit portfolio of a nit, line of business, the branch or the bank as a whole.
As evident, the CRG outputs would be relevant for individual credit selection,
wherein a borrower or a particular exposure/ facility are rated. The other decisions
would be related to pricing (credit-spread) and specific features of credit facility.
These would largely constitute obligor level analysis.
Risk grading is also relevant for surveillance and monitoring, internal MIS and
assessing the aggregate risk portfolio level analysis.

3.9.4 Number and Short Name of Grades Used in the CRG


The proposed CRG scale consists of 8 categories with short names and numbers are provided
as follows:
Grading

Short Name

Number

Superior

SUP

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Good

GD

Acceptable

ACCPT

Marginal/ Watch list

MG/ WL

Special Mention

SM

Sub Standard

SS

Doubtful

DF

Bad and Loss

BL

Table 7: Number & Short names used in CRG

3.10 CREDIT POLICY


Policy entails projected course of action. Janata Bank Ltd. has its own policy granting credit
although credit is always a matter of judgment applying common sense in the light of ones
experience.
A sound credit policy includes among other things safety of funds invested vis- vis
profitability of the bank. Encouraging maximum number of small loans is better than
concentration in a particular type of advances, which ensures sufficient liquidity with least
incidence of bad debts.
It has to be borne in mind that a good loan allowed to a properly selected borrower is half
collected. In order to make a good loan there should have a good loan policy.

3.10.1 Objectives of Credit Policy


There are some objectives behind a written credit policy of Janata Bank Ltd. that are as
follows:
To provide a guideline for giving loan
Prompt response to the customer need
Shorten the procedure of giving loan
Reduce the volume of work from top level management
Delegation of authority of work from top level of management
To check and balance the operational activities

3.10.2 Formulation of Credit Policy


One of questions that should arise in a discussion of credit is who should formulate
the policy.

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Although the ultimate responsibilities lay at the highest level in the organization i.e.
the board of directors. Yet the actual drafting shall have to be done by the senior
lending office in consultations with the chief executive officer and with contribution
from senior officers, associates and subordinates.
Obviously the level of origin will vary with the size and structure of the organization.
The matter then referred to the board for approval after careful examination
consideration and discussion.

3.10.3 Principles of Sound Lending


It should be clearly understood that the criteria/principles are not inflexible laws & are given
as guidelines for protecting credit. In a practical competitive world, risks are defined,
accepted and credit is often granted even though a proposal does not strictly with some of the
criteria described below:
The basic lending criteria can be considered as eight main headings, as follows:
1) Principle of Safety
2) Principle of Liquidity
3) Principle of Purpose
4) Character and ability of the borrower
5) Principle of Security
6) Principle of profitability
7) Source of repayment
8) Principle of National Interest

3.10.4 Components Required for a Sound Credit Policy


There can be some variations based on the needs of a particular organization, but at least the
following areas should be covered in any comprehensive statement of credit policy and JBLs
policy also covers these areas:
Legal consideration: The banks legal lending limit and other constraints should be
set forth to avoid inadvertent violation of banking regulations.
Delegation of authority: Each individual authorized to extend credit should know
precisely how much and under what conditions he or she may commit the banks
funds. These authorities should be approved, at least annually, by written resolution of
the board of directors and kept current at all times.
Types of credit extension: One of the most substances parts of a loan is a delineation
of which types of loans are acceptable and which type are not.
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Pricing: In any profit motivated endeavor, the price to be charged for the goods or
services rendered is of paramount without it, individuals have few guidelines for
quoting retag or fees, and the variations resulting from human nature will be a source
of customer dissatisfaction.
Market Area: Each bank should establish its proper market area, based upon, among
other things, the size and sophistication of its organization its capital standpoint,
defining ones market area is probably more important in the lending function than in
any other aspect of banking.
Loan Standard: This is a definition of the types of credit to be expended, wherein the
qualitative standards for acceptable loans are set forth.
Credit Granting procedures: This subject may be covered in separate manual, and
usually is in larger banks. At any rate, it should not be overlooked because proper
procedures are essential in loan establishing policy and standards. Without proper
procedure for granting credit and constant policing to ensure that these procedures are
meticulous carried out, the best conceived loan policy will not function and inevitable,
problems will develop.

3.11 CREDITWORTHINESS OF A BORROWER


3.11.1 Character
To determine whether the borrower has a responsible attitude towards borrowed funds
and whether he will have every effort to repay what is owed.
Responsibility, truthfulness, serious purpose, and serious intention to repay loans make
up the characters of the borrower
3.11.2 Capacity
Whether customer requesting loan has the authority to request loan and have the legal
standing to sign loan agreement and documents.
3.11.3 Economic Condition/Assets
Whether borrower has sufficient assets to repay the loan.
Other loans and liabilities of the borrower
3.11.4 Credit History/Credit Habit
Whether loans borrowed by the customers previously and how those earlier loan were
handled.
Whether there is any loan default earlier.
Whether legal action has ever been taken against him for recovery of default loan.
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3.11.5 Credit Rating


Credit Ratings of the borrower by credit rating agencies

3.12 CREDIT GRANTING PROCEDURES


In Janata bank (Local office branch), for granting credit to the clients, there is followed
several steps to ensure about the party. By following these steps the lender can achieve
efficiency of loan disbursement. The steps are discussed below:
Receiving
proposal

Scrutinizing

Inspection

Placing the
authority

Approval

Documentation

Evaluation

Disbursement

Figure 8: Credit Granting Procedures


Receiving proposal: The bank first receives the loan proposal from the clients who
want to get loan. The party has to fulfill the requirements which are wanted in the
prescribed form. The information provided in the form has to be accurate and fair.
Scrutinizing: Scrutinizing means to examine closely, it is conducted to make security.
The information provided in the form are examined that it is true or not.
Inspection: At this stage, the lender inspect the actual condition of the clients that he
or she provided the information is right or wrong. The bank sends the officer related
to loan and security who observe the physical picture of the asset or business firm.
Evaluation: The information which are collected from the clients, are evaluated here.
It is also called screening. The lender evaluates the core factors and fix what kind of
amount can be lent to the clients.
Placing the authority: Loans is disbursed by the Head office Board of Directors. The
branch credit committee sends the document to the Head office credit committee and
the committee also provides to the Board of Director for sanctioning loan.
Approval: At this stage, the Head office Board of Director will take decision that the
loan can be approved or not.
Documentation: Before final decision to disburse loan, the client has to provide all
the documents are needed to get loan. If any document cannot be ensured to the bank,
then the loan cannot be provided.

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Disbursement: It is the last step of loan sanctioning. If the board seems that the
formalities and information provided by the clients are accurate and reliable, then the
board can disburse the fixed amount of loan for a certain period of time.

3.13 CREDIT COMMITTEE


The credit committee of Local Office, Janata bank consists of 10 members including 1
Chairman, 8 members and 1 member secretary.

GM, Local Office


Chairman of the committee

DGM, Administration Department, member


DGM, Foreign Trade Department, member
DGM, Loan and Advance Department, member
DGM, Establishment Department, member
AGM, ICD Loan and Advance Department, member
AGM, Foreign Trade Department, member
AGM, Foreign Trade Department, member
AGM, Foreign Trade Department, member
AGM, Loan and Advance Department, member

AGM,
Recovery
Department
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Figure 9: Credit Committee

3.14 SECURITIES FOR CREDIT MANAGEMENT


One of the most important functions of a bank is to employ its fund by way of loans and
advances to its customers and a banks strength depends considerably on the quality of its
loans and advances. In older times, when the bankers knew the customers personally and
intimately and had complete confidence in the integrity and honesty of a customer, they used
to allow loans and advances without a security.
The position is quite different today. Banks having a large number of officers over a wide
area cannot allow loans and advances without retention of security in one form or the other.
Security is obtained as a line of last defense to fall back upon. It is meant to be an insurance
against emergency. But taking security, bank acquires a claim upon the assets of the borrower
if repayment is not made as planned. But what should be the significant securities of loans
depends on the guidelines prescribed by the Bangladesh Bank through BCD circular no.
17/1977 and also the negotiation of the respective branch to its borrowers. The most
significant categories of security lodged are as:
Goods and commodities
FDR
Real estate
Stock exchange securities
Life insurance policies
Gold and gold ornaments
Documents of title of goods
Supply bills
Janata Bank Ltd. (Local office) branch keeps sufficient security before final sanctioning of
loans and advances.

3.15 SWOT ANALYSIS FOR CREDIT MANAGEMENT OF JBL


SWOT Analysis is an important tool for evaluating the companys Strengths, Weaknesses,
Opportunities and Threats. It helps the organization to identify how to evaluate its
performance and can scan the macro environment, which in turn would help the organization
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to navigate in the Turbulence Ocean of competition. SWOT analysis is commonly used in


marketing and business in general as a method of identifying opposition for a new venture or
strategy. Short for Strengths, Weaknesses, Opportunities and Threats, this allows
professionals to identify all of the positive and negative elements that may affect any new
proposed actions. SWOT analysis of Janata Bank Ltd is given below:

3.15.1 Strengths
Large customer base
Strong capital and asset quality
The bank is financially safe
Community involvement
Speedy foreign remittance payment system with Western Union Money Transfer
The Image/Goodwill of the bank is very good
The bank has huge amount of deposit and market potentiality
Regulatory performance is strong and positive

3.15.2 Weaknesses
Lack of technological resources such as computerized banking as well as Internet
banking
Because of manual service, it is more costly and time consuming
Lack of promotional activities
Poor information based website.
There is no specific training institute for JBL employees
The bank has more non-performing assets
Credit providing procedures are very lengthy

3.15.3 Opportunities
Internal conditions those are helpful to achieve organizations objectives. Some opportunities
of the deposit department of JBL are as follows A large number of private banks coming into the market in recent times. In this
competitive environment JBL must expand its product line to enhance its sustainable
competitive advantage
In that product line, they can introduce the ATM to compete with the local and the
foreign bank

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They can introduce credit card and debit card system for their potential customers. In
addition of those things, JBL can introduce special corporate scheme for the corporate
customer or officer who has an income level higher from the service holder
At the same time, they can introduce scheme or loan for various service holders. In
order to reduce the business risk, JBL has to expand their business portfolio

3.15.4 Threats
Loan defaulter
Political instability of the country
The continuing increase in non-bank competitors offering similar services
A large number of private banks are increasing in Bangladesh day by day by taking
huge capital and skilled human resources
Private Banks provide handsome salary to the employees
Government facilities may be insufficient when the economic condition of the country
becomes unfavorable

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CHAPTER 4
CREDIT MANAGEMENT
OF JBL

4.1 LOANS AND ADVANCES


In common practice, the loan document means any written record which serves as evidence
in respect of a transaction and can be described as anything obtained for recording a
transaction. Documentation may be described as the process or technique of obtaining the
relevant documents. A banker must obtain proper documents executed from the borrower to
protect himself against willful defaults. Moreover, when money is lent against security of
some assets, the documents must be got executed in order to give to the banker a legal and
binding charge against those assets. Documents contain the precise terms of granting loans
and advance and they serve as important evidence in law counts if the circumstance so
require. It is, therefore, absolutely necessary for a banker to obtain proper documents from
the borrower while granting a loan or advance to him. In banking system, loan interest is
calculated in daily basis.
Janata bank is one of the leading largest commercial banks in our country. It has been playing
a vital role in our economy flourishing industrial sector by providing financial support.
Following the guidelines of Bangladesh Bank, credit facilities have been extended to
productive and priority sectors. In consideration of the importance of rural sector on overall
economy of the country Janata Bank has been involved in Rural Financing through the vast
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branch network spread all over the country. The main objectives of the rural credit policy and
programs of the bank have been designed to cover all segments of rural population whether
skilled or unskilled such as farmers, landless, laborers, women, unemployment educated and
vocational trained youths, weavers, and other rural dwellers and artisan.
A good number of micro credit programs have been launched for poverty reduction
sponsored by the bank on its own and in collaboration with local and foreign agencies.
Emphasize has been given on entrepreneurship development and Gender Equality in the
credit programs. Besides, the bank has also given emphasis on agro-based industries. Most of
the rural and micro credit programs are collateral free. Interest has been fixed up at 10%. To
provide co-operation and necessary counseling to the rural entrepreneurs, bank has opened
Micro Enterprise Wing at Head Office, Regional Office and branch level.

4.2 TYPES OF LOAN


Cash Credit (Hypothecation)

4.2.1 Continuous Loan


Secured

Over Draft Against


Financial Obligation [SOD(FO)]

Cash Credit (Pledge)


Export Cash Credit (ECC)

Secured Over Draft Against Work

Order [SOD(G)]
Local documentary bills purchased

4.2.2 Demand Loan

(LDBP)

Loan general
Demand loan against ship breaking
Payment against documents (pad)
Loan against import merchandise

Festival business loan

4.2.3 Term Loan


Project loan
Transport loan

(LIM)
Loan against trust receipt (LTR)

House building loan

Forced loan

Small business loan

Packing credit

Consumer finance loan

Secured over draft against cash

Lease finance

incentives
Foreign

documentary
purchased (FDBP)

Personal loan

bills

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4.3 TABLE OF LOAN CLASSIFICATION


Loan Type

Unclassified
(Month)

Substandard

Doubtful
(Month)

Bad

Continues
Loan Demand
Loan

Expiry up to 5
month

6 to 8 month

9 to 11 month

12 month +

Term Loan Up
to 5 years

0 to 5 month

6 to 11 month

12 to 17
month

18 month +

Term Loan
more than 5
years

0 to 11 month

12 to 17 month

18 to 23
month

24 month +

Micro Credit

0 to 11 month

12 to 13 month

36 to 59 moth

60 month+

(MONTH)

(Month)

Table 8: Loan Classification

4.4 DIFFERENT TYPES OF LOANS AND ADVANCES


SOD (FO): Advance is granted to a client against financial obligations. The security
of advance is granted to the person to whom the instrument belongs. The discharged
instrument is surrendered to the bank along with a letter signed by holder/holders. The
banks lien is prominently noted on the face of the instrument under the signature of
an authorized bank official. Interest rate is 13% to 15%.
SOD (G): Granted against the work order of government departments, corporations
autonomous bodies and reported multinational private organization. To arrive at
logical decision, the clients managerial capability, equity strength, nature of
scheduled work is to be judged. Disbursement is made after completion of
documentation formalities, besides usual charge, documents like a notarized
irrevocable power of attorney to collect the bills from the concerned authority and a
letter from the concerned authority confirming direct payment to the bank is also
obtained. The work is strictly monitored to review the progress at each interval.
Interest rate is 13% to 15%.
Cash Credit (Hypothecation): The mortgage of movable property for securing loan
is called hypothecation. Hypothecation is a legal transaction whereby goods are made
available to the lending banker as security for a debt without transferring either the
property in the goods or either possessing. The banker has only equitable charge on
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stocks, which practically means nothing. Since the goods always remain in the
physical possession of the borrower, there is much risk to the bank. So, it is granted to
parties of undoubted means with highest integrity. Interest rate is 13%.
Cash Credit (Pledge): Transfer of possession in the judicial sense of essential in the
valid pledge. In case of pledge, the bank acquire the possession of the goods or a right
to hold goods until the repayment for credit with a special right to sell after due notice
to the borrower in the event of non-repayment. Interest rate is 13%.
Consumer Credit Scheme: This scheme is aimed to attract consumers from the
middle and upper middle class population with limited income. The borrower should
have saving or current deposit account with the bank. Minimum 25% of the purchase
cost of the product is to be deposited be the borrower with the bank is equity before
the disbursement of the loan. The rest 75% is to be kept as cash collateral (FDR,
Shanchay Patra etc.) with the bank. Loan amount is disbursed through a/c payee pay
order/demand draft directly to the seller after submission of the indent, deposit of
client equity and completion of documentation formalities.
Loan (General): JBL considers the loans, which are sanctioned for more than one
year as loan (g). Under this facility, an enterprise of financed from the stating to its
finishing, i.e. from installment to its production. JBL offers this facility only to big
industries.
Staff Loan: Bank official from senior officer and above is eligible for this loan. The
maximum amount disbursed is Tk. 50,000/- for a period of 2 years.
House Building Loan: This loan is provided against 100% cash collateral, besides;
the land & building are also mortgaged with the bank. Interest rate is 17% p.a.
Small Loan Scheme: JBL introduced three new small loan scheme are:
I. House Renovation Loan
II. Personal Loan
III.Small Business Loan
Loan against Imported Merchandise (LIM): Advances allowed for retirement of
shipping documents and release of goods imported through L/C taking effective
control over the goods by pledge fall under this type of advance, when the importer
failed to pay the amount payable to the exporter against import L/C, than JBL gives
loan against imported merchandise to the importer. The importer will bear all the
expenses i.e. the godown charge, insurance fees, etc. and the ownership of the goods
is retaining to the bank. Interest rate is 16%.
Loan against Trust Receipt (LTR): Investment allowed for retirement of shipping
documents and release of goods imported through L/C fall under this heard. The
goods are handed over to the importer under trust with the arrangement that sale
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proceeds should be deposited to liquidate the investments within a given period. This
is also a temporary investment connected with import and knows as post-import
finance and falls under the category Commercial Lending. Interest rate is 16%.
Payment Again Documents (PAD): This facility originates payment of Import bills
on lodgment of CLEAN shipping documents received from FOREIGN correspondent
against Letter of Credit opened on behalf of the customers. This is an obligation
which the bank shall extend strictly on the merit of shipping document and which
must conform to the terms & conditions of LC.
Loan Documentary Bill Purchase (LDBP): Payment made against documents
representing sell of goods to local export oriented industries, which are deemed as
exports, and which are deemed as exports, and which are dominated in local
currency/foreign currency falls under this head. The bill of exchange is held as the
primary security. The client submits the stance bill and the bank discounts it. This
temporarily liability is adjustable from the proceeds off the bill. Interest rate is 10%.
Inland Bill Purchase (IBP): Payment made through purchase of inland bills/cheques
to meet urgent requirement of the customer falls under this type of investment facility.
This temporary investment is adjustable from the proceeds of bills/cheques purchased
for collection. It falls under the category Commercial Landing.
Foreign Bill Purchase (FBP): Payment made to customer through Purchase of
Foreign Currency Cheques/Drafts fall under this head. This temporary investment is
adjustable from the proceeds of the cheque/draft. Foreign Exchange Department deals
with Letter of credit (L/C) operation and foreign remittance. L/C operation divided
into import operation, export operation and inland trade. Janata Bank offers two types
of credit facilities to its customers such as:
I. Funded Credit
II. Non Funded Credit

4.5 CREDIT SCHEMES OF JANATA BANK LIMITED


4.5.1 Micro Credit Programs
A. Small Farmers & Landless Laborers Development Project (SFDP):
Target Group: Small Farmers & Landless
Objectives: To increase production and to create employment amongst rural poor by
providing credit
Security: No collateral is required

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Interest: 10%
Repayment: Loan repayable by installment
B. Short Credit Scheme: This type of credit facility is given to the poor and landless rural
people. The objective of this scheme is to create employment opportunity amongst poor. The
interest is 10%. It is repayable by 52 weekly installments.
C. Co-operative Credit for Rural Poor: This credit is given to the members of Co-operative
Association to create employment to the rural poor co-operators. The Association gives
guarantee. Interest rate is 10%.

4.5.2 Entrepreneurship Development Program


A. Women Entrepreneurship Development Credit Program: Women Entrepreneurs
Development Scheme has been introduced to encourage women in doing business. Under
this scheme, the bank finances the small and cottage industry projects sponsored by women.
Interest rate is 10%. It is repayable in monthly installment within 3 years that star from the
4th month after obtaining loans.
B. Small Business Development Loan Scheme: This scheme has been evolved especially
for small shopkeepers who need credit facility for their business. This credit facility is given
to the small business by third party guarantee that is acceptable to the bank at 11% interest
rate. It is to be repaid in 5 years in 60 monthly installments in case of term loan or 1 year in
working capital. Besides, bank also extends credit facilities for the goat farming, seed
development program, forestry/horticulture Nursery, flower plantation & garden,
handicapped/disable people to make them self-reliant.

4.5.3 Other Special Credit Programs


Credit for Employees
Consumer Credit Scheme
Personal Loan Scheme
Car Loan Scheme
Financing of Industries

4.6 INTEREST RATE OF LOANS IN JBL


The interest rates of various types of loans are as follows:
Types of Loans & Advances

Interest
Rate

Collateral Required

Loan limit

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C.C (Pledge)

15%

Not Compulsory

100000-200000

C.C (Hypothecation)

DO

Do

Do

Over Draft (O.D)

DO

Bank Deposit

50000-100000

Real Estate (Resident)

12%

Documents of Assets

No limit

Real Estate(Commercial)

15.5%

Do

Do

Palli Rin

10%

Personal Guarantee

<50000

Service Loan

12%

Check of monthly

<50000

Consumer Credit

13%

Personal Guarantee

<50000

Doctors Loan

10%

Do

<50000

Cyber Caf Loan

10%

Do

<50000

Pratibondhi Loan

10%

Do

<50000

General Loan

10%

<50000

Table 9: Interest Rate of Loans in JBL

4.7 LOAN SANCTIONING PROCEDURE OF JBL


The following procedure is applicable for giving advance to the customer. These are:

4.7.1 Getting Credit Information


Janata Bank Ltd. collects credit information about the applicant to determine the credit
worthiness of the borrower. The bank collects the information about the borrower from the
following sources:
Personal investigation.
Confidential report from other bank Head Office/Branch/chamber of the commerce.
CIB Report from Central Bank.

4.7.2 Information Collection


The loans and advances department gets a form filled by the party seeking a lot of
information. The information is listed below:
Name and address of the borrower (present and permanent).
Constitution or status of the business.
Data of establishment and place of incorporation.
Particulars of properties, partners and Directors.
Background and business experience of the borrowers.
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Particulars of personal assets, name of subsidiaries, percentage of shareholding and


nature of business.
Details of liabilities in name of borrowers, in the name of any directors.
Financial Statement of the last three years.
Nature and details of business/products.
Details of securities offered.
Proposed debt equity ratio.
Other relevant information.

4.7.3 Analyzing the Information


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

4.7.4 Lending Risk Analysis (LRA)


Industry Risk
Supply Risk- What is the risk of failure to disruption in the supply of input?
Sales Risk- What is the risk of failure due to disruption sales?
Company Risk:
Company Position Risk
Management Risk
Security Risk
Security Control Risk- What is the risk that the bank fail to realize the security?
Security Cover Risk- What is the risk that realized security value is less than the
exposure?

4.7.5 Processing Loan Proposal


After receiving CIB report from Bangladesh Bank, respective branch prepares an Investment
proposal, which contains terms and conditions of Investment for approval of Head Office.
These documents are necessary for sending investment proposal. While advancing money,
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banks create a lot of documents, which are required to be signed by the borrowers before the
disbursement of the loan. Of them some are technically called charge documents.

4.7.6 Proposal Analysis


The Project Proposal is analyzed and decision about the project is taken. The loans and
advance department is responsible for the analysis. After preliminary appraisal of the loan
project the final approval is obtain from the manager. If the loan amount crosses a certain
amount (no found), managers send the loan project to the local office credit committee for
final approval.
The experts in local office find out different projected ratios and develop an understanding
about the potentiality of the project. The bank evaluates a loan proposal by considering few
predetermined variables. These are:
Safety
Liquidity
Profitability
Security
Purpose of the loans
Sources of repayment
Diversification of risk etc.

4.7.7 Collateral Evaluation


Janata Bank Ltd. is very cautious about valuation of the collateral. The bank officials
simultaneously evaluate the collateral of the party offered by the private firm. The valuation
of the collateral increases the accuracy of its value estimated. Three types of value of the
collateral are assumed:
Current market price
Distressed price
Price after five years
The legal officers of the bank check the document ascertain their impurity.

4.7.8 Final Decision about the Project


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

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4.7.9 Proper Supervision of the Project


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

4.7.10 Documentation of the Loan


These are the most frequently used and common documents of above mentioned charged and
for other formalities for sanctioning the loan:
Demand Promissory Note: Here the borrower promises to pay the loan as and when
demanded by the bank to repay the loan.
Letter of Arrangement: Here the written amount of the loan sanctioned to the
borrower is specified.
Letter of Continuity: It is used to take continuous facilities as providing continuous
securities.
Letter of Hypothecation: It is the written document of the goods hypothecated thus
to put in case of need.
Stock Report: This report is used for SOD and CC. In this report information about
the quality and quantity of goods hypothecated have furnished.
Personal Guarantee: It is the additional confirmation of the borrower to repay.
Guarantee of the Directors of the Company
Resolution of the Board of Directors: It is used to borrow the fund to execute
documents and complete other documents.
Letter of Disclaimer: By this letter, the borrower withdraws his all claim on the
property/mortgaged.
Letter of Acceptance: Letter indicating the acceptance of the sanction proposal by
the borrower.
Letter of Pledge: It is the written document of the goods pledge thus the legality of
holding the goods.
Letter of Disbursement: This is the document through which the payment of
sanctioned loan indicates.
Letter of Partnership: In case of partnership firm, the partnership deeds are to be
provided.
Letter of Installment: The amount of installment that is to be paid at certain
intervals.
Tax Paying Certificate
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4.7.11 Creation of Charges for Securing Loan


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

Securities are of two typesa) Primary Security- Security deposited by the borrower himself to cover the
loan such as FDR, cash, PSS, PSP, easily cashable items.
b) Collateral Security- Any type of security on which the creditor has personal
right of action.

4.7.12 Disbursement
After sanction and completion of all formalities the respective officer disburses the loan. The
officer writes cheque and provides it to the borrower. For this borrower has to open an
account through which he/she can withdraw the money.

4.8 LOAN DISBURSEMENT OF JBL


JBL has identified some sectors in which it finances. From loan and advance, Janata Bank
achieves maximum amount of profit. The following table shows the comparative distribution
of sector-wise financing.

4.8.1 Overall Sector wise Loan Disbursement of JBL


Sectors

2014

2013

Rural credit

18,78,13,00000

16,95,5670000

Export credit

50,40,00,00000

48,85,04,00000

Import credit

46,22,79,00000

50,69,49,60000

Industrial credit

76,43,82,00000

57,53,06,00000

Sugar and food

8,93,05,00000

6,87,99,00000

Steel and Engineering

8,41,21,00000

7,98,08,00000

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Textile

19,77,82,00000

18,80,58,00000

Jute

5,69,67,00000

7,56,58,00000

Tannery

5,57,91,00000

5,43,09,00000

Transport

34,01,00000

2,13,93,0000

Others

79,18,91,00000

64,83,88,00000

Total

319,77,32,00,000

285,74,76,50,000

Table 10: Overall Sector wise Loan Disbursement of JBL (Source: Annual Report 2014)
Comment: In the above figure and graph we see that the percentage of Loans in the Textile
Ind. has decreased from 2% because of the high Interest rate. On the other hand, Janata bank
ltd loans process needs long time. On the other hand, the flow of Loans and advances has
increased in case of import credit, Industrial Credit and Rural, ME&SP financing sectors.

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4.8.2 Loans & Advances with Risk Status

Table 11: Loans & Advances with Risk Status

4.8.3 Sector wise Loan Disbursement of JBL, Local Office


Janata Bank (Local Office) provides large amount of loans to various sectors all over the
Bangladesh. Some sector wise loans and advances are summarized below:
Sectors

2014

2015

Textile, Garments

22,96,40,000

51,33,61,000

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Food and Beverage

33,05,76,000

9,47,41,000

Pharmaceutical and Medical

50,00,00,000

SME

9,95,50,28,706

Housing Finance

23,84,36,011

Staff loan

185,90,47,198

Tannery

8,00,00,000

Jute

19,50,00,000

Export

4015273207

7,00,00,000
3213241198

Table 12: Sector wise Loan Disbursement of JBL, Local Office

4.8.4 Sector wise Classified Loans of JBL, Local Office


SL

Sector

Total Advance

Total CL

Jute (Industries & Trade)

2712639000.00

Textile, Garments (Industries & Trade)

31206487000.00

1446278000.00

Tea (Industries & Trade)

263000.00

263000.00

Tannery (Industries & Trade)

2877952000.00

7406000.00

Steel and Engineering (Industries & Trade)

1048616000.00

1027018000.00

Salt (Industries & Trade)

142000.00

142000.00

Food and Food Products

403957000.00

110081000.00

Transport

566000.00

566000.00

Cold Storage

129068000.00

2769000.00

10

Chemical and Pharmaceuticals

9188434000.00

213370000.00

11

Paper, Printing, Publishing

300569000.00

6458000.00

12

Computer, Software & IT

2206000.00

2206000.00

13

Staff House Building

1747713000.00

12427000.00

14

General House Building

203859000.00

18276000.00

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15

Trading

261812000.00

5856000.00

16

Import Credit

7152197000.00

84590000.00

17

Export Credit

1288512000.00

186609000.00

18

Others

3782379000.00

1449252000.00

Total

62307371000.00

4573567000.00

Table 13: Sector wise Classified Loans of JBL, Local Office


The amounts of sector wise loans and advances are outstanding balance from which they are
identified as classified loans which are also called non- performing loans.

Figure 10: Sector wise Loans & Advances

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Figure 11: Sector wise Classified Loans

4.9 LOAN RECOVERY


4.9.1 Programs for Loan Recovery
When Janata Bank Ltd. sanctions loans and advances to its customers, they clearly state the
repayment pattern in the loan agreement. But some credit holders do not pay their credit in
due period. The nationalized and private sector commercial banks have to face this sort of
problems. This situation is, especially severe in Janata Bank Ltd. To overcome the problem of
overdue loan, the bank needs taking particular loan recovery programs.

4.9.2 Recovery Programs to Be Taken


To establish credit supervision and monitoring cell in the bank
To re-structure the loan sanctioning and distributing policy of the bank
To sanction loans and advances against sufficient securities as best as possible
To give more powers to the branch manager in credit management decision making
process
To offer a package of incentives to the sound borrowers
To give more emphasis on short term loans and advances
To impose restrictions on loans and advances for sick industries
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To take legal actions quickly against unsound borrowers as best as possible within the
period specified by the law of limitations.
To avoid political intrusion tactfully.
To sanction loans considering Character. Capital and Capacity.

4.9.3 Recovery Patterns of Loan & Advances


Generally Janata bank Ltd. sanctions loans and advances to every sector of an economy.
Before going into details of recovery performance, we have to be familiar with some terms
used in recovery performance:
Disbursement: highest outstanding balance on any date during the reporting period
minus outstanding balance at the end of the preceding period.
Demand for recovery: overdue at the end of the reporting period plus recovery during
the reporting period.
Recovery: highest outstanding balance on any date during the reporting period minus
outstanding balance at the end of the recovery period.
Outstanding: Outstanding figures in the ledger at the end of the reporting period.
Overdue: Demand for recovery minus recovery.

4.9.4 Sector wise Recovery Rate of Janata Bank, Local Office


The local office of Janata bank has yet to publish the complete database of loan disbursement
for the FY 2014-15. The following data have been prepared based on the recovery database of
local office:
Sector

Recovery rate

Jute
Textile, Garments
Tannery
Tea
Food and Beverage
Chemical and Pharmaceutical
Paper, Printing, Packaging
Staff Housing Building
General Housing Building
Trading
Import credit
Export credit

87%
85%
82%
65%
68%
78%
88%
98%
85%
81%
90%
85%

Table 14: Sector wise Loan Recovery Rate of JBL

4.10 PROBLEMS IN LOAN RECOVERY


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

Changing in the management pattern

ii.

Changing in industrial patterns

iii.

Operation of open market economy

iv.

Rapid expansion of business

B. Problems created by government: The following problems are arisen by the government:
i.

External pressure Loan to government organization

ii.

Legal problems

C. Problems created by the bank: The following problems are created by the banks:
i.

Lack of analysis of business risk

ii.

Lack of proper valuation of security or mortgage property

Besides these, there are some specific reasons for loan recovery problems faced continuously
by Janata Bank Ltd. They are as:
Loans are given under fictitious names and enterprise
Loans are given without sufficient securities
Approval of the loans in excess of the branch managers power
Improper monitoring and supervision of credit
Political misuse if loan programs operated by the public sector banks
Lack of timely action against willful defaulter
Loans are sometimes for economically unsound project

SI Name of Sector 2013 2014


%
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CHAPTER 5
FINDINGS,
RECOMMENDATIONS
AND CONCLUSION

5.1 FINDINGS
Almost each bank has its own credit policy. Janata bank possesses a standard credit policy. As
the objective of my study is to make remarks on the credit management of Janata Bank Ltd., I
have tried my best to collect data for the study and find out the real scenario. On the basis of

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the data generated during my study, I have summed up my findings here and I think this will
help me to attain those objectives. The findings are as follows:
1. Janata banks primary objective is to contribute in national economy by generating
income and employment.
2. As the bank uses some modern technology such as: SWIFT, BASE, Internet,
Computer, Telex & other electronic devices, hence its service is better than other banks.
3. As a public bank Janata Bank Ltd. is successfully operating its credit activities.
4. Janata Bank Limited distributes loans with sufficient security in most of the cases.
5. JBL has proper guidelines about where to invest. Moreover, it has future plan to
maintain a well-structured portfolio to decrease the possibility of classified loans.
6. Janata Bank normally tries to invest in long term projects like agriculture, industry and
housing that can bring long run profit which are very much essential for economic
growth.
7. JBL is relatively insufficient in processing and executing legal actions against defaulters
for their non-payment of loans and advances within due time.
8. JBL faces problems to recover loans as it executes govt. policies rather than credit
worthiness.
9. Most of the loans that JBL distributes are as cash credit hypothecation and JBL
emphasizes less on demand loan.
10. The procedure of loan approval depends on the Board of Director of Janata Bank Head
Office, but a certain amount is to be approved by the branch credit committee.
11. There are found several programs for recovering loans such as face to face meeting,
loan fair, consulting and so on.
12. At the local office, the rate of loan recovery in each sector is approximately 70% to
75%.
13. JBL faces pressure on loan recovery from the company owners, affiliated with political
parties and also for nepotism of the corporate officials of the bank.

5.2 RECOMMENDATION
Though Janata Bank Ltd. tries to provide the best customer support, it has some lacks
compared to other commercial banks.

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To increase the level of efficiency and effectiveness in banking activities, to innovate newer
services, to provide better credit management and so on, some steps should be adopted by the
bank authority. They are as follows:
1. The credit proposal evaluation process and time should be shortened.
2. JBL should put credit information in CIB more accurately and carefully.
3. The security must be valued properly and constantly monitored so that the value of
mortgage property becomes sufficient to recover the default loans.
4. More and more competent personnel must be recruited to reduce the weakness of credit
management. Competent executives will ensure the reduction of wrong appraisal and
evaluation of projects.
5. Loans should be given to those who have the records of regular payment.
6. Some interactive programs and field investigations are to be conducted to recover the
outstanding balance of the borrowers.
7. Prompt legal actions should be taken against willful loan defaulters.
8. Political intervention should be effectively handled while approving and sanctioning
loans.
9. Sufficient micro credit programs should be ensured to the poor people and the young
entrepreneurs so that they can get the loan easily.
10. Janata Bank should practise modern banking system in each and every activity such as
cash, voucher and so on. It will help to decrease its operating expenses.
11. The bank should offer international credit card, because in modern world the use of
paper currencies is decreasing.

5.3 CONCLUSION
Like any other segment of the economic policy, credit is very important for any financial
institution as it generates profit and gear up economic activities of the country. In other
words, credit is business and it is input in the production process of the country. Since credit
has an inherent risk, proper utilization of the loans are essential to meet the requirements of
the borrower. The loan applied for by the borrower must not be employed for unproductive
sector. In this regard, the Janata Bank Limited must closely monitor the progress of the loan
and the way the borrower is utilizing the funds. In this way the Janata Bank Limited will
deter any fake activities on the part of the borrower.
The success of a bank depends largely on the efficient credit management. A successful credit
management is not only needed for a banks own performance but also it is needed for the
smooth development of an economy. The credit management system of Janata Bank Limited
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is more or less effective as recovery rate of classified loan is high and classified loan has been
decreasing gradually during the year. They are trying to improve their credit policy for
minimizing loss and maximizing profit and various measures are undertaken to develop the
overall credit management system.

REFERENCES
Books Journals:
Alam, Z. M. & Jaman, M. (2009), Risk Management Practices: A Critical Diagnosis
on some Commercial Banks in Bangladesh, page (1-20).
Khan, Dr Athiur Rahman, Bank Management, A Fund Emphasis, 1st edition,
Brothers publications.

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Peter, S. & Rose, L. (1996), Commercial Bank Management, 9 th Edition, McGrawHill Companies Inc., Boston.
Kothari, C.R. (2004), Research Methodology, Methods and Techniques, 2 nd edition,
New Age International Publishers.
Rayhan, S. J., Ahmed, S. M., Mondal, R. K., Performance Evaluation and
Competitive Analysis of State Owned Commercial Banks in Bangladesh.
Maheshwari, S. N. (2011), Banking Law and Practice, 11th edition.
Zikmund, W. G. (2003), Business Research Method, 7th edition, New Delhi, Prentice
Hall.
Reports:
Manual Document & Brochure of the Branch
Annual Report of Janata Bank Ltd. 2012.
Annual Report of Janata Bank Ltd. 2013.
Annual Report of Janata Bank Ltd. 2014.
Statement Affairs of JBL at Local Office, Dhaka
Credit Manual of JBL
Websites:
http://janatabank-bd.com --------------------------- (December 23, 2015)
http://en.m.wikipedia.org -------------------------- ( December 30, 2015)
www.jb.com.bd/jb/about_us/online_branches ---- (January 05, 2016)
www.janatabank-bd.com/csr/csr.html -------------- (January 07, 2016)
www.yourdictionary.com/swot analysis-------------- (January 14,2016)

APPENDICES
APPENDIX A: QUESTIONNAIRE
I am Md. Jafar Iqbal, a student of Comilla University doing my BBA Internship on
Credit Management System: A study on Janata Bank, Local Office. To prepare this
report, I need your valuable information as well as opinions.
Respondents Name:
Age:
Occupation:
S/l

Statement for the Response

Very
bad
1

Bad

Average

Good

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Very
good
5

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01

What you will say about the branch location?

02

07

How the behaviors of employees in the bank impress


you?
The banks internal environment is
Has the bank enough modern technology and
equipment?
Do you see service quality as a way of attracting
customers?
How do you think about the procedure of opening an
account?
Total products and services provided to customers?

08

How are the credit facilities provided by the bank?

09

Do you think that credit policy is flexible and


attractive?

10

The required documentation of getting loan

11

What do you think about the loan proposal analysis?

12
13

Do the credit officers properly inspire you to avail the


consumer loan?
Can you say the amount of security that bank takes?

14

The times needed for procuring loan

15

The procedure of loan disbursement

16

The amount provided to the sector wise loan is

17

What do you think about the monthly installment of


credit?
Interest rate of the bank

03
04
05
06

18
19

How do you compare Janata banks credit facility


services with the other banks credit services?

(Thank you for your nice cooperation)

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APPENDIX B: FINANCIAL AFFAIRS OF LOCAL OFFICE

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APPENDIX C: SECTOR WISE LOANS & ADVANCES

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