Internship Report

Credit Management of Janata Bank Limited

Jamil Mahmud
Roll no. 114893
Reg. no.1101324893

BBA- 6th Batch

Department of Management Studies
Faculty of Business Studies
Jagannath University

August, 2015

Internship Report

Credit Management of Janata Bank Limited

 Jamil Mahmud
Roll no. 114893
Reg. no.1101324893
6th Batch

Supervisor

Md. Rashedul hoque

Lecturer

Department of Management Studies

Faculty of Business Studies

Jagannath University

August, 2015
 Supervisor Forwarding

Md. Rashedul hoque

Lecturer

Department of Management Studies

Faculty of Business Studies

Jagannath University

Jagannath University, Dhaka.

Letter of Transmittal

Md. Rashedul Hoque Sajib

Lecturer
Department of Management Studies
Jagannath University

Subject: Submission of Internship Report.

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

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

Sincerely yours,

__________________
Jamil Mahmud
BBA 6th Batch
Department of Management Studies
Jagannath University

Acknowledgement:

Education involves not only reading books and doing exercise but also acquiring
knowledge through doing in practical. I prepared this report for considering these
objectives. In this period of time, I enjoyed warm co-operation from every person in
the bank.
For the successful accomplishment of this report, first I would like to thank Almighty
Allah. And Finally I would like to thank to my honorable supervisor for this report
Md.Rashedul Hoque Sajib who has always given support, effort and wise direction to
reach at the peak level of effectiveness to complete my report.
Additionally, with my warm gratitude from the deepest of my soul I would like to
remember all of them who have helped me from every aspect in accomplishing this
report as well as my internship program.
I also wish to render my grateful thanks to all senior and junior officers of Janata
Bank Limited, Badda Branch, who helped me during the time of my internship
program at the bank. I must mention the excellent working environment and the
positive group behavior of this bank, which helped me tremendously to observe the
banking activities, work with the them and to stay there for 45 days without any kind
of uncomforted feel. I take this opportunity to express my deep sense of gratitude,
thanks and appreciation to the following:
1. Md.Rashedul Hoque Sajib, for her help, encouragement, Guidance and valuable
suggestions throughout the period of this study, without which it would not have been
possible to submit this report on time.
2. All the officers and staffs of the Badda Branch for their co-operation and
assistance.
3. My friends who were beside me wherever they were needed
Finally, I would like to thank everyone at Janata Bank Limited, (Badda Branch) who
provided me with ideas and invaluable experience of the corporate culture.

Jamil Mahmud

ID- 114893
Department of Management Studies
Faculty of Business Studies
Jagannath University
 Preface

As a part of the course curriculum, each student of the Business Administration of

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

Executive Summary

Commercial banks lend money to different categories of borrowers for various

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

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

BACKGROUND OF THE STUDY

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

Table of Contents:

Page
Topic
Number

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

CHAPTER FIVE
CONCLUSION & RECOMMENDATIONS
5.1 Findings of the Report 52
5.2 Recommendations 53
5.3 Conclusion 54
References 55
Bibliography 55

CHAPTER-ONE
(INTRODUCTION)

1.1 Origin of the Report

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

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

1.3 Objectives of the report

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

Specific objectives:
To present an overview of Janata Bank Limited.
To measure the effectiveness of the bank in the utilization of available resources.
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.
To find out the extent of similarities and dissimilarities in the course of action
followed by Janata Bank. Limited.
To compare the credit supervision of Janata Bank. Limited.

To find out problems and suggesting recommendations for further improvement.

1.4 Scope of the report

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

1.5 Acronyms:

BB Bangladesh Bank
CRG Credit Risk grading
CRM Credit Risk Management
FDR Fixed Deposit Receipt
JBL Janata Bank Limited
L/C Letter of Credit
GM General Manager
DMD Deputy Managing Director
DGM Deputy General Manager
 CHAPTER-TWO
(PROFILE / JANATA BANK LIMITED)

2.1 History of Janata Bank LTD

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

2.2 Corporate Profile of Janata Bank:

Janata Bank Limited
Name :

Janata Bhaban 110, Motijheel

Registered Address :
Commercial Area Dhaka 1000.
Date of Incorporation : 21 May, 2007
Authorized Capital : TK. 20,000 Million
Paid up Capital TK. 5,000 Million
Reserve TK.10823.01 Million
Retained surplus Tk. 5167.18 Million
Asset Tk. 345233.92 Million
Face value of per share TK. 100 per share
100% Share owned by the Government
Shareholding Pattern
of Bangladesh
Domestic Network:
Numbers of Branch 898
Numbers of Divisional Office 10
Numbers of Area Office 47
Numbers of AD Branches 57
Overseas Network:
Numbers of Branch 04
Subsidiaries:
1. Janata Capital and Investment Ltd.
2. Janata Exchange Company
Numbers of Correspondent 1239
Number of Exchange House 68
Departments 38
Numbers of Employees 15,485
Banking License (obtained from 31 May, 2007 Bangladesh Bank)
Telex 675840 JBDBJ, 671288 JBHOBJ
9560000, 9566020, 9556245-49,
Phone
9565041-45, 9560027-30.
Fax 88-02-9564644, 9560869
E-mail md@janatabank-bd.com
Swift JANB BDDH
Corporate Rating Status

Entity Rating (2012) A+ in the long run :

AR-2 in the short run As Government
owned Bank : AAA in the long run : AR-1
in the short run
2.3 Board of Directors:
The Board of Directors is composed of 11 (eleven) members headed by a Chairman.
The Directors are representatives from both public and private sectors. The name
and position of directors are as under.
Chairman of the Board of Directors
Professor Dr. Abul Barkat
Members of the Board of Directors
Dr. Jamaluddin Ahmed, FCA
Mr. Md. Emdadul Hoque
Mr. Nagibul Islam Dipu
Dr. R M Debnath Syed Bazlul Karim, B.P.M.
Prof. Mohammad Moinuddin
Mr. Md. Abu Naser
Mrs. Sangita Ahmed
Prof. Dr. Nitai Chandra Nag
Mr. A.K.M Kamrul Islam, FCA
Mr. Md. Mahabubur Rahman Hiron
Mr. S M Aminur Rahman, CEO & Managing Director

2.4 Mission of the Janata Bank

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

To become effective largest commercial bank in Bangladesh to support socio-

economic development of the country and to be a leading bank in South-Asia.

2.6 Values of Janata Bank Ltd.

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

2.7 Key Milestones of Janata Bank Ltd.

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

"The Banker"- a magazine of Financial Times Group, London ranked

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

2.8 Services provided by Janata Bank

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

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

Export Finance
To boost up country's Export, Janata Bank Limited has been providing
different kinds of assistance to exporters. Some of which are as below:- Providing
Pre-Shipment and Post-Shipment Finance, Export Guarantee and
bonding facility etc.
Concessional rate of interest for exports Finance.
Back to Back L/C under bonded Warehouse facility
 Sight & Unasked L/C against Firm Contract for import of raw materials.
Sight L/C under EDF
Exporter's Retention Quota A/C both interest bearing and non-interest bearing.
Export incentive Program.
Banking at Export Processing Zone
Scope for establishment of export oriented industry by 100% foreign
investment and by joint-venture
The sole bank to disburse Government Export Promotion Fund against export
of computer software & data entry processing
Undergone to an agreement with Bangladesh Bank to obtain fund from
Government EEF (Equity & Entrepreneurship Fund) to build up entrepreneur's
equity.
Consultancy and advisory services by an expert group of officials.
Special export financing program towards computer software data entry
and
service export.
Export Trend of Janata Bank.
(Taka in Crore)
Year 2009 8,865
Year 2010 11,851
Year 2011 15,375
Year 2012 15,652
Year 2013 15,325
Source: Janata Bank Limited, Annual Report 2009-2013 (page 21)

Scope of Further Expansion

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

Working Capital Loan

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

Import Trend
Setting Industrial vision to facilitate optimally, bank's involvement has been showing
sharp rising trend as under:
(Taka in Crore)
Year 2009 11,852
Year 2010 18,374
Year 2011 19,728
Year 2012 18,828
Year 2013 17,667
Source: Janata Bank Limited, Annual Report 2009-2013 (page 21)
Correspondent Banking
Janata Bank Limited always aims to increase its foreign exchange business The
Bank
has been doing international banking with all major Banks of the world. It has
been,
however, handling bulk of the international businesses with the following
multinational Banks:
i. Citibank N. A.
ii. American Express Bank Ltd.
iii. Standard Chartered Bank
iv. HSBC.
v. The Chase Manhattan Bank

Utility Services of Janata Bank Ltd.

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

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

Payments made on behalf of Govt. to:

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

AGM & Manager

EO & Operation Manager

General Banking Division Loans & Advances Division

Deposit

Remittance

A/C Opening & Others

Cash Department

Clearing Department

Accounts Department

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

CHAPTER-THREE
(Methodology)

3.1 Limitations of the report

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

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

3.2 Methodology of the report

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

The Primary source are :

Personal observation

Desk work in different section, of the bank.

Conversation with banks employees.

Secondary Source:

Annual report of Janata Bank Limited

Variety of books, articles & journal related to banking.

Information from the internet.

Credit books, banking all credit documents.

CHAPTER-FOUR
(CREDIT MANAGEMANT SYSTEM OF JANATA BANK LIMITED)
4.1 What is Credit?

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

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

(Account Information)

Types of Account Number of Account Balance

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

4.3 Types of Credit Offered by Janata Bank Limited

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

Cash Credit (Pledge)

Transfer of possession in the judicial sense of essential in the valid pledge. In case
of pledge, the bank acquire the possession of the goods or a right to hold goods
until the repayment for credit with a special right to sell after due notice to the
borrower in the event of non-repayment.
Interest rate is 13%.
Consumer Credit Scheme
This scheme is aimed to attract consumers from the middle and upper middle class
population with limited income. The borrower should have saving or current deposit
account with the bank. Minimum 25% of the purchase cost of the product is to be
deposited be the borrower with the bank is equity before the disbursement of the
loan. The rest 75% is to be kept as cash collateral (FDR, Shanchay Patra etc.) with
the bank. Loan amount is disbursed through a/c payee pay order/demand draft
directly to the seller after submission of the indent, deposit of client equity and
completion of documentation formalities.

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

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

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

House Building Loan

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

Small Loan Scheme

JBL introduced three new small loan scheme are:
a) House Renovation Loan
b) Personal Loan
c) Small Business Loan
House Repairing/Renovation Loan Scheme
This loan is offered for renovation and modernization of the house/building/flat
which are acquired by inheritably or purchasing and other ways to make the
properties liable and durable.
Interest rate is 14%

Personal Loan for Salaried Person

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

Small Business Loan Scheme

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

Loan against Imported Merchandise (LIM)

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

Loan against Other Securities (LAOS)

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

4.4 Credit Management System

Getting Credit Information

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

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

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

Name and address of the borrower (present and permanent).

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

Analyzing these Information

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

Lending Risk Analysis (LRA)

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

Proposal Analysis

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

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

The most important measure of appraising a loan proposal is safety of proposal.

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

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

Collateral Evaluation

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

Current market price

Distressed price
Price after five years

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

Final Decision about the Project

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

Proper Supervision of the Project

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

Documentation of the Loan

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

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

Creation of Charges for Securing Loan

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

4.5 Credit Risk Management System of JBL:

The Credit Risk Management Division is vital for the efficient functioning of JBL. It
critically scrutinizes the credit proposals from risk weighted point of view
before
sanctioning approvals ensuring a high quality credit portfolio. The goal of credit risk
management is to maximize a bank's risk-adjusted rate of return by maintaining
credit
risk exposure within acceptable parameters. Banks need to manage the credit
risk
inherent in the entire portfolio as well as the risk in individual credits or transactions.
The credit management process of Janata Bank Ltd. covers the following tasks:
Credit Processing/Appraisal
Credit Approval/Sanction
Credit Documentation
Credit Administration
Disbursement
Monitoring and Control of Individual Credits
Monitoring the Overall Credit Portfolio (stress testing)
Credit Classification
Disbursement of Loan
Classified Loans
Recovery of Loan

Credit Processing/Appraisal

Credit processing is the stage where all required information on credit is gathered
and applications are screened. Credit application forms should be sufficiently
detailed to permit gathering of all information needed for credit assessment at the
outset. In this connection, financial institutions should have a checklist to ensure
that all required information is, in fact, collected. Financial institutions should set out
pre-qualification screening criteria, which would act as a guide for their officers to
determine the types of credit that are acceptable. For instance, the criteria may
include rejecting applications from blacklisted customers. These criteria would
help institutions avoid processing and screening applications that would be later
rejected. The next stage to credit screening is credit appraisal where the
financial institution assesses the customers ability to meet his obligations.
Institutions should establish well designed credit appraisal criteria to ensure that
facilities are granted only to creditworthy customers who can make repayments
from reasonably determinable sources of cash flow on a timely basis.
As a general rule, the appraisal criteria will focus on:

amount and purpose of facilities and sources of repayment;

integrity and reputation of the applicant as well as his legal capacity to

assume the credit obligation;

risk profile of the borrower and the sensitivity of the applicable industry

sector to economic fluctuations;

physical inspection of the borrowers business premises as well as the

facility that is the subject of the proposed financing;

current and forecast operating environment of the borrower;

management capacity of corporate customers

Credit Approval/Sanction

A financial institution must have in place written process and the approval
authorities of individuals or committees as well as the basis of those decisions.
Approval authorities should be sanctioned by the board of directors.
Approval authorities will cover new credit and changes in terms and
conditions of previously approved credits, particularly credit restructuring, all
of which should be fully documented and recorded. Prudent credit practice
requires that persons empowered with approval authority should not also have
the customer relationship responsibility.

Depending on the size of the financial institution, it should develop a corps of

credit risk specialists who have high level expertise and experience and
demonstrate judgment in assessing, approving and managing credit risk. An
accountability regime should be established for the decision trail of decisions
taken, with proper identification of individuals/committees involveAll this must be
properly documented.
Graph 5: Net Profit (Figures in millions)
Source: Credit Risk Management Guideline, Bangladesh Bank (page 18)

Credit Documentation

Documentation is an essential part of the credit process and is required for each
phase of the credit cycle, including credit application, credit analysis, credit
approval, credit monitoring, and collateral valuation, and impairment
recognition, foreclosure of impaired loan and realization of security. The
format of credit files must be standardized and files neatly maintained with an
appropriate system of cross-indexing to facilitate review and follow up. The
Bangladesh Bank will pay particular attention to the quality of files and the
systems in place for their maintenance. Documentation establishes the
relationship between the financial institution and the borrower and forms the
basis for any legal action in a court of law. Institutions must ensure that
contractual agreements with their borrowers are vetted by their legal advisers.

For security reasons, financial institutions should consider keeping only the
copies of critical documents (i.e., those of legal value, facility letters, and
signed loan agreements) in credit files while retaining the originals in more
secure custody. Credit files should also be stored in fire-proof cabinets and
should not be removed from the institution's premises.

Financial institutions should maintain a checklist that can show that all their
policies and procedures ranging from receiving the credit application to the
disbursement of funds have been complied with. The checklist should also
include the identity of individual(s) and/or committee(s) involved in the decision-
making process.

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

Graph 6: Credit Disbursement Process

Source: Credit Risk Management Guideline, Bangladesh Bank (page 20)

Monitoring and Control of Individual Credits

To safeguard financial institutions against potential losses, problem facilities need to

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

In broad terms, the monitoring activity of the institution will ensure that:

funds advanced are used only for the purpose stated in the customers
credit application;

financial condition of a borrower is regularly tracked and management

advised in a timely fashion;

collateral coverage is regularly assessed and related to the borrowers

financial health;

The institutions internal risk ratings reflect the current condition of the
customer.

Monitoring the Overall Credit Portfolio (stress testing)

An important element of sound credit risk management is analyzing what

could potentially go wrong with individual credits and the overall credit portfolio
if conditions/environment in which borrowers operate change significantly. The
results of this analysis should then be factored into the assessment of the
adequacy of provisioning and capital of the institution. Such stress analysis can
reveal previously undetected areas of potential credit risk exposure that could arise
in times of crisis. Possible scenarios that financial institutions should consider in
carrying out stress testing include:

Significant economic or industry sector downturns;

Adverse market-risk events; and

Unfavorable liquidity conditions.

Financial institutions should have industry profiles in respect of all industries

where they have significant exposures. Such profiles must be reviewed /updated
every year. Each stress test should be followed by a contingency plan as
regards recommended corrective actions. Senior management must regularly
review the results of stress tests and contingency plans. The results must serve as
an important input into a review of credit risk management framework and setting
limits and provisioning levels
Credit Classification

It is required for the board of directors of a financial institution to establish

credit risk management policy, and credit impairment recognition and measurement
policy, the associated internal controls, documentation processes and information
systems;Credit classification process grades individual credits in terms of the
expected degree of recoverability. Financial institutions must have in place the
processes and controls to implement the board approved policies, which will, in
turn, be in accord with the proposed guideline. They should have appropriate
criteria for credit provisioning and write off. International Accounting Standard 39
requires that financial institutions shall, in addition to individual credit
provisioning, assess credit impairment and ensuing provisioning on a credit
portfolio basis. Financial institutions must, therefore, establish appropriate systems
and processes to identify credits with similar characteristics in order to assess
the degree of their recoverability on a portfolio basis.

Financial institutions should establish appropriate systems and controls to ensure

that collateral continues to be legally valid and enforceable and its net realizable
value is properly determined. This is particularly important for any delinquent credits,
before netting off the collaterals value against the outstanding amount of the
credit for determining provision. As to any guarantees given in support of
credits, financial institutions must establish procedures for verifying periodically
the net worth of the guarantor.

Classified Loans

Banks are financial service firm, producing and selling professional

management of the publics funds as well as performing many other roles in the
economy. But now-a-days commercial banks are not performing their activities
smoothly for a large burden of default loan. Every year Janata Bank distributes
thousand crore taka among individuals, organizations etc. but a large sum of
these distributed fund cannot be recovered in due time. The Bank has to classify
this loan.

Signs for Classification: First and foremost requirement for any and all
credit managers is to identify a problem credit in its earlier stages by
recognizing the signs of deterioration. Such signs include but not limited to the
following:
Non-payment of interest or principal or both on due dates or past dues
beyond a reasonable period or recurring past dues.

In case of Overdraft no movement in the account beyond a reasonable period.

Deterioration in financial condition of the client, as gathered from

clients latest financial statement.

A shortfall in collateral coverage, particularly if the collateral was a key factor

in the decision-making.
 Death or withdraw of key-owners or management personnel.

Company filing for bankruptcy or voluntary dissolution.

Adverse market report about the company itself or its principal owners.

Loan Classification Guidelines from Bangladesh Bank

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

Table 7 Loan Classification Systems

*Source: BCD Circular no. 34/1989

According to this circular loans and advances were classified on a loan by loan basis
rather sample classification. This process was continued till 1994. Bangladesh
Bank further issued a circular in1995 (BCD circular#20/1994). The title of the circular
was Revised rules of classification and provisioning of loans and advances, which
came into implementation from January 1, 1995.

Summary of Loans and Advances with the Risk Status

The summary of loans and advances of Janata Bank Ltd. with the risk status is given
below

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

Source: Janata Bank Limited, Annual Report 2009-2013 (page 119)

Recovery of Loan

The Recovery procedure of Janata Bank is the ultimate combination of time, effort of
money. It follows several procedural steps to recover the lending amount, which
is joint effort of Bank, society and legal institutions. There are several programs
taken by the bank to recover the disbursed loans. They are discussed hereafter.

Programs for Loan Recovery

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

Establishing credit supervision and monitoring cell in the bank

Re-structuring the loan sanctioning and distributing policy of the bank

Sanctioning loans and advances against sufficient securities as best as

possible

Giving more powers to the branch manager in credit management

decision

making process

Offering a package of incentives to the sound borrowers

Giving more emphasis on short term loans and advances

Imposing restrictions on loans and advances for sick industries

Taking legal actions quickly against unsound borrowers as best as

possible

within the period specified by the law of limitations.

Steps for Loan Recovery Against Defaulters

The following steps are taken by Janata Bank Ltd against the defaulters for recovery
of loan: Reminding the party to repay the loan after validity dates: First of all, the
Credit Administration division reminds the borrower about the remaining days to
repay the loan mentioning the validity dates from time to time.
i. Send final notice: If the borrower fails to repay the loan within the sanctioned
period for repayment then he or she is given an additional period for the
repayment of the loan attaching a final notice for the repayment as well.
ii. Send legal notice: When the borrower fails to repay the loan even after the
additional period and the final notice, the credit administration of JBL sends a legal
notice to the borrower mentioning that if he or she is not capable to repay the loan
within a specific time then the bank will file a suit in the court against him or her.
iii. Eventually sue a case against the party: Finally, the bank, not getting any
repayment from the borrower, suits a case against the defaulter according to
the respective law. Then the decision of the court will be final for the recovery
process and both the party and bank will have to abide by the law.
These are the general procedures for recovery of loan followed by Janata Bank Ltd.

4.6 Special Credit Schemes of Badda Branch

A. Entrepreneurship Development Program:

1.Women Entrepreneurship Development Credit Program: Women

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

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

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

B. Other special credit programs:

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

2. Consumer Credit Scheme: Consumer Credit Scheme is related to relatively

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

3. Personal Loan Scheme: Personal Loan Scheme has been introduced to

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

4. Financing in IT Sectors: Today, we are living in the age of information that is

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

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

6. Gharoa Prokalpa: Performance of on going micro-credit programs has

encouraged Janata Bank authority to undertake a new product. Gharoa Prokalpa
which is a package of facilities employment and retain them in the rural areas. It
was launched on 25th July 2000.

7. Financing of Industries: Janata Bank Limited entrusted with the responsibility

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

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

Rate of Interest: Rate of interest of project loan ranges from 11%-13%. Working
capital rate of interest is 12% to 13.50% and with that in export oriented industries
ranges from 7% to 14%(changeable).
Debt Equity Ratio: Normally debt equity ratio is 50:50. But higher equity ratio
sharing is given preference. Above all, Bankers/Customers relation is also
considered in fixing debt equity ratio.

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

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

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

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

9.Financing in SME Sector:

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

10. Loan to Travel Agencies:

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

11. Loan to Diagnostic Centers:

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

4.7 Credit Evaluation Principles

Some principles or standards of lending are maintained in approving loans in

order to keep credit risk to a minimum level as well as for successful banking
business. The main principles of lending are given below:

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

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

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

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

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

Problems created by government

The following problems are arisen by the government:

External pressure: Janata Bank Ltd. has also faced many problems in the loan
recovery process as a part of continuous pressure from various interested
groups.

Loan to government organization: Janata Bank Ltd. is bound to sanction loan to

government organization, though these are losing concern. For this reason,
banks faced problems in loan recovery.

Legal problems: Existing rules and regulations are insufficient to cover the legal
aspects of loan recovery. As a result, defaulters can get release easily from all
charges against them.

Problems created by the bank:

The following problems are created by the banks:

Lack of analysis of business risk: Before lending, Janata Bank Ltd. does
not properly analyze the business risk of the borrowers and the bank cannot
forecast whether the business will succeed or fail. If it fails to run well, the loan
becomes classified.
Lack of proper valuation of security or mortgage property: In most cases, bank
fails to determine the value of security against the loan. As a result, if the loan
becomes classified, the bank cannot recover its loan through the sale of
mortgage.

Other general causes of poor loan recovery:

Apart from the specific reasons creating problems to recoup loan,

there exists some other general causes which have a great impact on
creating the problems which are faced by the Janata Bank Ltd. under
study in the loan recovery process. These are:

Lack evaluation of technical and economic feasibility of the

program.

Credit is not allowed to actual entrepreneurs.

Lack of proper supervision.

Illiteracy of borrowers.

Deterioration of the value system of the borrowers.

All of these reasons discussed above are general reasons for problems
loan recovery of Janata Bank Ltd. Besides these, there are some
specific reasons for loan recovery problems faced.

continuously by Janata Bank Ltd. They are as:

Loans are given under fictitious names and enterprise

Loans are given without sufficient securities

Approval of the loans in excess of the branch managers power

Improper monitoring and supervision of credit

Political misuse if loan programs operated by the public sector banks

Problems in loan recovery are the outcome of the default on loans

disbursements in the earlier period.
 CHAPTER-FIVE
(FINDINGS, CONCLUSION & RECOMMENDATION)

5.1 Findings of the report

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

5.3 Conclusion

I have discussed so far about the different aspects of credit management

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

1. Central Bank should take proper actions for ensuring equivalent

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

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

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