Credit Management & Performance Analysis Along With a Brief

Focus on HRM practices: A Study on Janata Bank Ltd

Introduction

Banks are the financial institution which are engaged in mainly collecting deposits from the
surplus unit of an economy and utilize it for lending that money to the deficit unit of the
economy. A commercial bank is an institution that provides services such as accepting deposits,
providing business loans, and offering basic investment products. These financial services help
to make the overall economy more efficient. So, a sound and efficient banking system is one of
the most important preconditions to achieve economic development. Due to their importance in
the financial stability of a country, banks are highly regulated in most countries. Most nations
have institutionalized a system known as fractional reserve banking under which banks hold
liquid assets equal to only a portion of their current liabilities. Bangladesh now has 56 public and
private commercial banks. Already 3rd generation private commercial banks are operating their
services.

A bank’s survival in the industry depends upon the efficiency of it’s credit department. The
necessity of credit and loan department in bank occurs. The money mobilized from ultimate
surplus units are allocated through this department to the ultimate deficit unit (borrower). The
success of this department keeps a great influence over the profit of a bank. Failure of this
department may lead the bank to huge losses or even to bankruptcy.

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 maximizing the return on the
invested fund. Continuous supervision, monitoring and follow-up are highly required for
ensuring the timely repayment and minimizing the default. Actually the credit portfolio is not
only constituted the bank’s asset structure but also a vital factor of the bank’s success. The
overall success in credit management depends on the banks credit policy, portfolio of credit,
monitoring, supervision and follow-up of the loan and advance. Therefore, while analyzing the
credit management of Janata Bank, it is required to analyze its credit policy, credit procedure and
quality of credit portfolio. The credit risk management process of JBL has to perform consistent
monitoring of the transactions within approved limits and recovering the bank's dues in time.

There is no doubt that the world of work is rapidly changing. As part of an organization then,
HRM must be equipped to deal with the effects of the changing world of work. For them this
means understanding the implications of globalization, technology changes, workforce diversity.
Changing skill requirements, continuous improvement initiatives contingent workforce,
decentralized work sites and employee involvement are the issue for confront. Now it is a big
challenge for the HRM to support the organization by providing the best personnel for the
suitable position in shortest possible time. Starting with recognizing the vacancies and planning
for them is a great task. Moreover selecting attracting the suitable candidates and selecting the
best person in time is a challenge.

Objectives of the Report

The objectives of the study are as follows:

Broad Objective

The broad objective of the report is to have an overview of credit analysis, approval process, risk
management techniques adopted by credit department along with relevant data analysis and
human resource practices of JBL.

Specific Objectives

 To know about the policies and regulations related with credit management
practices of Janata Bank Ltd.
 To examine the sector wise credit disbursement of JBL..
 To examine the overall Credit Management Process of JBL.

 To achieve the difference between theoretical and practical knowledge to have an

exposure on the human resource function of Janata Bank Ltd

 To determine the steps involved with HRM

 To identify the type of system is in HRM.

 Methodology of the study

A) Sources of data:

The study based on primary and secondary data collected data directly from the different sectors
of Janata Bank head office based on personal interview and secondary data were collected from
published reports of the bank and review of journals.

The sources are-

1. Primary Sources:
1. Interviewing the Bank officials of Corporate Credit Approval Department, Credit
Risk Management Division, Credit restructuring department and Credit Recovery
division of Janata Bank Limited.
2. Interviewing loan clients of Small and Mid-Segment Enterprises
3. Official records and observing practical works.
2. Secondary Sources:

1. Annual reports of Janata Bank Limited, Business review report 2017, Published
Booklets/Manuals of the Bank,
2. Website of the Bank, Bangladesh Bank, BIBM, journals& others.

B) Data analysis techniques:

This report consists of different information that has been collected from both primary and
secondary data which help to understand the overall process of corporate loan approval,
disbursement and risk management process of Bank. The foreign exchange operations involve
the activity of- export, import, remittance. The analytical part of this report involves-

- Time Series Analysis

- Regression Analysis

Both qualitative and quantitative methods were applied for preparing this report. Regression and
time series analysis are done using the MS Excel and shows percentage, graphical presentation
and different types of charts. Best effort was given to analyze the numerical findings.

c) Presentation of Results and Recommendations:

Recommendations are made based on the critical evaluation of the different phases of process
and techniques involved in credit approval and monitoring.
 Background of the study

Banking sector is expanding its hand in different financial events every day. At the same time the
banking process is becoming faster easier and the banking arena is becoming wider. As the for
better service increase day by day, they are coming with different innovative idea and product. In
order to service in the competitive field of the banking sector all banking organization are
looking for better service opportunities to provide there fellow clients .As a result it has become
essential for every person to have some idea on the bank and banking procedure.

Banks provide important capital in the form of loan and advances which are subject to non-
repayment which is termed as credit risk, the chance that a loan will not be repaid timely. Hence
the main concern of the banks is credit analysis and its risk management as credit or loans and
advances are the main source of income for them.

Janata Bank Limited is one of the leading government banks in this sector which arranges
corporate and retail credit. This Bank is very much concerned with the credit analysis and its risk
management. The success of the banks is hidden in the proper analysis of a credit proposal and
credit risk management of all sorts of risk related to the banking business. Hence credit analysis
and its risk management has become a vital part of the bank. This report will give us an overall
idea about the credit analysis and its risk management as practiced by the JBL.

Human Resources department is the emerging sector in the new era of corporate world.
Previously HRM was ignored by big organizations. Today the situation has changed, most of the
organizations are emphasizing on HRM practice. The main reason is, the organization runs by
the people or human resources not by the machine. So, it is important to maintain these human
resources in order to gain long term success in Business. JBL also gives emphases on HRM
practice.

Organizational Profile:

Janata Bank Limited (JB) is the second largest commercial bank in terms of net worth with 872
branches and fully owned by Government of Bangladesh. The mission of the bank is to actively
participate in the socio-economic development of the nation by operating a commercially sound
banking organization. Immediately after the independence of Bangladesh in 1971, the erstwhile
United Bank Limited and Union Bank Limited were nationalized and renamed as Janata Bank.
Janata Bank is a state owned commercial bank which was incorporated as a Public Limited
Company on 21 May 2007 as per Companies Act 1994 and took over the business of the then
Janata Bank with all of its assets, liabilities, right, power, privilege and obligation on a going
concern basis through a vendor agreement signed between the People’s Republic of Bangladesh
and Janata Bank Limited on 15 November 2007 with a retrospective effect from 1st July 2007.
All of its operational activities are governed by the Bank Companies Act 1991.

The Bank provides all kinds of commercial banking services to its customers including accepting
deposits, extending loan & advances, discounting & purchasing bills, remittance, money transfer,
foreign exchange transaction, guarantee, commitments etc. The principal activities of its
subsidiary are to carry on the remittance of hard-earned foreign currency to Bangladesh. Janata
Bank Ltd. has a plan to switch over to a multi-disciplinary financial institution by conducting
Merchant Banking business and Islamic Banking operation. The mission of the Bank is to
actively participate in the socio-economic development of the nation by operating commercially
sound banking organization, providing credit to viable borrowers, efficiently delivered and
competitively priced, simultaneously protecting depositor’s funds and providing a satisfactory
return on equity to the owners.

Services provided by Janata Bank Ltd:

Janata Bank Ltd provides all commercial banking services to its clients focusing on the national
interest and sustainable growth. The major fields of its activities may be represented as below:

Deposit Products
 Current Deposit Account
 Short Term Deposit
 Savings Bank Deposit Account
 Fixed Deposit
 Foreign Currency Deposit
 Medical Deposit Scheme
 Janata Bank Monthly Savings Scheme
 Janata Bank Special Deposit Scheme
 Janata Bank School Banking Savings Karjakram
Credit Products
 Term Loan
 Trade Finance
 Import Finance
 Export Finance
 SME Financing
 Micro Credit
  Agriculture & Rural Credit
 Consumer Credit
 Home loan
 Loan for Merchant Banking

Loan Disbursement Procedure of JBL:

Janata Bank Ltd. gathers up credit information about the applicant to determine the credit
earnestness of the borrower. The loans and advances department acquires a form filled by the
borrowing party seeking a lot of information. The information is listed through name, address of
the borrower etc. Then lending risk analysis is conducted. This is a very significant and vital
analysis for deciding whether the loan proposal is prospective or not.

Credit management process of JBL:

JBL follows the following credit management process where the Branches originate the loan and
assesses the loan if the loan is within the business delegation of the Branch. Or else, above the
business delegation of the Branch, the Branch must prepare proposal for assessment by the head
office. The head office approves the loan after assessment or rejects the same if not eligible and
communicates the Branch accordingly. After the loan has been sanctioned, the head Office
monitors the loan status- specially every quarter the overdue loans are mentioned by the
corporate office- CRM department and notifies the respective Branch for adjustment or
regularization by the customer within a time frame. If the customer disagrees to the notification,
the Branch needs to inform the planning to recovery the overdue amount to the corporate office
before getting classified. So, proper monitoring is being done JBL and controlling is done
according to the situation

Credit Risk Grading

According to Bangladesh Bank guidelines, JBL has a duly implemented a credit risk grading
policy in its credit risk assessment program. The system outlines the risk profile of borrower’s to
ensure that account management, structure and pricing are commensurate with the risk involved.
Risk grading is a key measurement of a Bank’s asset quality. All abilities are assigned a risk
grade. Where deterioration in risk is noted, the Risk Grade assigned to a borrower and its
facilities are immediately changed. Credit Memorandum includes a clear statement of the
borrower's risk grade.JBL applies the credit risk grading matrix as provided by Bangladesh Bank
guidelines. If any facility is to be relegated, The Early Alert Repor is duly forwarded to the
higher authority for approval. After approval, the report is forwarded to Credit Administration,
who is responsible to ensure the correct facility/borrower Risk Grades are updated on the system.
Credit Approval Process
Before initiation of the credit approval process, a proper credit analysis is done with the help of
Credit Memorandum. No credit facility may be approved unless a satisfactory presentation
package has been prepared. Prior to securing the requisite approval, the authority ensures due
diligence such as:
 The Bank is in possession of all credit information required to properly evaluate the risk
being undertaken.
 A detailed credit analysis has been completed, to include a written analysis of the
financial condition of the borrower.
 The proposed extension of credit fully meets the standard of purpose, quality etc.
 The Board of Investment Registration, permission for all regulatory bodies, clean CIB
reports etc. are obtained.
In the approval process, the bank segregates its relationship management from the approving
authority. All the facilities offered by the branch must be approved from the Head of Credit
Committee.

Credit Performance Analysis

- Sector Wise Distribution of Loans in 2017
-Small and Medium Enterprise Financing
- Industrial Credit
-Time series
-Regression analysis
- Comparison & data interpretation