Executive Summary

In order to provide a student with job exposure and an opportunity of the transition of theoretical
knowledge into real life experience, an internship is a must. A better balance between theory & practice
can be gained through this program. The report is a combination of three months’ internship program with
Jamuna Bank Limited. I acknowledged different banking functions and day-to-day banking operations on
my way to complete internship.

The objective of this study is to acquire the knowledge about the loan recovery system of Jamuna Bank
Ltd. To prepare this report both primary and secondary sources of data have been used.

In the beginning of this study contains some description about the banking sector and perspective of the
Jamuna Bank Limited. The next part is Historical Background of the Bank. Their corporate mission and
vision. How they exercise their corporate and social responsibility. Then a brief description about the
board of director and key management profile. The performance of the last few year and growth was well
satisfactory. The next part is described about the product & services of the Jamuna Bank Limited. Jamuna
Bank Limited offers a diversified asset and liability product. Those are broadly described in credit
operation in two chapters. For the sanction of loan and some other expenditure, authorization from the
Head Office is required. A target of profit is given by the Head Office and the branch is trying it best to
achieve it. During my internship program in this branch I have found some lacings. I found that the credit
policy is required for better performance of the bank. After that I also found that some problems of
Jamuna Bank Ltd. under the study period. It is to be mentioned that this is from my point of view. I have
also pointed out some recommendations which I believe to be the best form to solving that the problems
and Jamuna Bank Ltd. will be better perform in future and bank will be a great position among the all
banks in Bangladesh. Finally I observed that Jamuna Bank Ltd. will ensure the better services to the
People of Bangladesh and they will be more contribution on development of economy of Bangladesh.

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 CHAPTER 1

INTRODUCTION

Background of the Study

A banker is a dealer in money and credit. The business of banking consists of borrowing and lending.
Bank acts as financial intermediaries between savers (lenders) and investors (borrowers) by accepting
deposits of money from large number of customers and then on lending a major portion of accumulated
pool of money to those who wish to borrow. Successful deployment of bank credit requires a philosophy
of lending, a scientific and methodical approach to and upgrading of skills in loan appraisal, assessment
of credit needs of borrowers, proper and adequate documentation to ensure safety and security of funds
and a mechanism for monitoring and controlling loans and advances after the funds are disbursed, apart
from well-planned nursing and effective recovery proceedings where needed. It has been said that a bank
never makes a bad loan-- a loan goes bad after it has been made. The account of a borrower when he has
defaulted in his commitment is considered a sticky account. Recovery of dues in growing number of
sticky accounts is emerging a nerve-wrecking problem for banks. Generally speaking, those advances
would be recalled where repayment is doubtful and nursing the account is not considered workable. Other
circumstances in which a bank would recall its advance are death, insanity or insolvency of a customer,
and winding up of a corporate borrower. Commercial lending, lending to a business, is often very
different from lending to a personal customer. The main reason for this difference is that the risk of not
being paid has an added dimension in commercial lending. In both cases, there is risk concerning the
character, commitment and capability of the person borrowing money, but in commercial lending there is
additional risk associated with the business. A highly capable person may do badly in business because of
factors like- the state of economy, trend in demand for the product or service provided competition from
other suppliers, technological changes etc. which no-one could have reasonably expected. From the
bank's point of view such unexpected problems result in a bad debt. So a banker with a watchful eye can
often help a business customer steer clear of financial difficulty before it begins, thus holding problem
loans to a minimum. In providing loans to both personal and business customers, the bank's aim is to
make profit. To lend too incautiously will mean losses from bad debts. To be too cautious will mean
missed opportunities for profitable business. So after making credit to outsiders every banker should
follow up recovery management in order to have systems for monitoring all credits, even those it believes
to healthy, and to highlight those borrowers whose quality is either deteriorating.

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Scope of the study

This study has been prepared through extensive discussion with the bank employees and the clients.
While preparing this study, I had a great opportunity to have an in depth knowledge of all loans and
advances by the Jamuna Bank Limitted. It also helped me to acquire a fast hand prospective of a leading
bank in Bangladesh.

Objectives of the study

This study has been carried out with the following objectives:

 To know how they recover the loan from clients.

 To acquire knowledge about different types of loans.
 To know procedure for approval of loans.
 To understand the technique of factor analysis.
 To analyze the loan disbursement process.
 To analyze the loan recovery scenario.
 To know why and how the loans are defaulted.
 To know the step taken after a default.

Limitations of the Study

Lack of Supervision by the bank officers

As the officers were busy with their daily working activities, they were not able to give me much time
apart from their daily working activities.

Lack of time

I was in the bank for three months so within this short span of time it is very difficult to be familiar with
all the activities of the bank.

Restricted Information

There were various types of information’s that the bank officers cannot disclose due to the security and
other corporate obligations.

Other limitation

As I was a newcomer and had no previous experiences in the banking sector and many practical matters
in the bank were in written form so my own observations may vary from person to person.

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 CHAPTER 2

REVIEW OF LITERATURE

Hong Wang, Catherine Forbes, Jean-Pierre Fenech, John Vaz find that factors explaining bank loan
recovery rates vary depending on the state of the economic cycle. Modeling approach incorporates a two-
state Markov switching mechanism as a proxy for the latent credit cycle, helping to explain differences in
observed recovery rates over time. The probability of default and certain loan-specific and other variables
hold different explanatory power with respect to recovery rates over 'good' and "bad' times in the credit
cycle. That is, the relationship between recovery rates and certain loan characteristics, firm characteristics
and the probability of default differs depending on underlying credit market conditions. This holds
important implications for modelling capital retention, particularly in terms of counter cyclicality
[ CITATION Hon18 \l 1033 ].

Matthaw A. Laseinde & Felicia O.Olokoyo explain that loan recovery techniques depend on customer
relationship and banks should carefully select the loan recoveries techniques depending on the type of
customer and situation also banks to improve closer relationship with customer.[CITATION Mat16 \l
1033 ]

Eyo O. Emmanuel, Ofem I. Uket evaluate loan recovery performance among group based micro credit
institution in Delta state. This shows to improve their economic activities and creating wealth and
redistribution of resources for rural economic growth.[CITATION Loa17 \l 1033 ]

M.A. Baqui Khalily and Richard L. Meyer have said that the negative effect of political intervention in
loan allocation and recovery outweighs the effect of positive real interest rates.The government in
Bangladesh intervenes in rural loan allocation and recovery formally through policies interest exemptions,
credit committees and interest rates — and informally through elected local government officials and
local socio-political leaders. The intensity of informal intervention is expected to increase during an
election period.[ CITATION Kha93 \l 1033 ]

Ahmed, Ezaz, Rahman, Ziaur and Ahmed, Rubina I. have found that currently the magnitude of loan
defaultis quite enormous in the Banking sector. However, the general perception and belief regarding the
Islamic Banking is better recovery rate of loans and advances. [ CITATION Ahm06 \l 1033 ]

Jo ao A. Bastos indicated that the variables which the neural network models use to derive their output
coincide to a great extent with those that are significant in parametric regression models. [ CITATION
Joa \l 1033 ]

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 CHAPTER 3

METHODOLOGY OF THE STUDY

Approach:

This report is the reflection of three months’ internship program at the Jamuna Bank Limited at Bhola
branch, Bhola. This study covered by both the primary as well as the secondary form of data was used to
prepare the report. To prepare this internship report I have collected data and information both from
primary and secondary sources. I had observed the operations and worked with the officers at the same
time. I had interviewed the JBL officials for getting more information.

Source of Information:

The data collection method of the study consists of both primary and secondary sources. But majority of
the information was collected from secondary sources.

Primary Source: The data is used for the first time or not used before is called the primary data. Primary
data collected from the people by their views, opinion, comment etc. The primary data are collected by
interviewing employees, manager by the process assigned by Jamuna Bank Ltd. Observing various
organizational procedures, structures. Primary data were mostly derived from the discussion with the
employees and customers of the organization.

Secondary Sources: The data is used before is called secondary data. These kinds of data are collected
from relevant books, newspapers, journals, websites, magazines etc. in this study the secondary data
collected from:

Internal Sources:

 Jamuna Bank’s Annual report 2016, 2017, 2018.

 Jamuna Bank’s Instruction manual and Training manual.
 Annual and journal study published by Jamuna Bank Ltd. Of Bangladesh.

External Sources

1. Different books and periodicals related to the banking sector.

2. Bangladesh Bank Circulars
3. Newspapers.
4. Website Information.

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 CHAPTER 4

ORGANIZATION OVERVIEW

Historical Background

Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 with its
Head Office at Hadi Mansion, 2, Dilkusha C/A, Dhaka. The Bank started its operation from 3rd June
2001. Jamuna Bank Limited is a highly capitalized new generation Bank with an Authorized Capital and
Paid-up Capital of Tk.10000 million and Tk.4488 million respectively. The Paid-up capital has been
raised to 3004.26 million and the total capital of the bank stands at 26430.07 million as on December 31,
2018. JBL undertakes all types of banking transactions to support the development of trade and
commerce of the country. JBL's services are also available for the entrepreneurs to set up new ventures
and BMRE of industrial units. Jamuna Bank Ltd. the only Bengali named new generation private
commercial bank was established by a group of winning local entrepreneurs conceiving an idea of
creating a model banking institution with different outlook to offer the valued customers, a
comprehensive range of financial services and innovative products for sustainable mutual growth and
prosperity. Jamuna Bank Ltd. offers different types of Corporate and Personal Banking Services
involving all segments of the society within the purview of rules and regulations laid down by the Central
Bank and other regulatory authorities. As per the provisions of Bangladesh Bank license, the Bank has
offered initially its shares to public by Pre – IPO and subsequently sold shares to the public through IPO
in the year 2004. The shares of the Bank are listed with both Dhaka Stock Exchange Ltd. & Chittagong
Stock Exchange Ltd.

Mission of the Bank

The bank is committed to satisfy diverse need of its customers through an array of products at a
competitive price by using appropriate technology and providing timely service so that a sustainable
growth, reasonable return and contribution to the development of the country can be ensure with a
motivated and professional workforce.

Vision of the Bank

To become a leading banking institution by playing a significant role in the development of the country

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Corporate Organogram

Chairman

Vice Chairman

Board of Director

Managing Director

Deputy Managing Director (DMD)

Executive Vice President (EVP)

Senior Vice President (SVP)

Vice President (VP)

Senior Assistant Vice President

Assistant Vice President (AVP)

Senior Executive Officer (SEO)

Executive Officer (EO)

Senior Officer (SO)

Officer

Junior Officer

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Objectives of Jamuna Bank Limitted

 To establish relationship banking and improve service quality through development of Strategic
Marketing Plans.
 To earn and maintain CAMEL Rating 'Strong'
 To ensure an adequate rate of return on investment.
 Delivering customers’ desired products and services to create true customers’ value.
 Focusing on maintenance of assets quality rather than its aggressive expansion
 To maintain adequate liquidity to meet maturing obligations and commitments.
Core Values

 Place customer interest and satisfaction as first priority and provide customized banking
products and services.

 Value addition to the stakeholders through attaining excellence in banking operation.

 Contribute significantly for the betterment of society.
 Ensure higher degree of motivation and dignified working environment for our human capital
and respect optimal work-life balance.

 Committed to protect the environment and go green.

Awards and Recognition

Jamuna Bank Ltd. achieved "Certificate of Merit Award" in the 16th ICAB National Award for Best
Presented Annual Reports 2015. Jamuna Bank Limited has received the best "Performing Bank" Award
2015-16 from ICICI Bank

Present Situation of Jamuna Bank Limitted

SL Particulars 2016 (Million) 2017 (Million) 2018 (Million)
01 Paid up Capital 6,141.19 6,141.19 7,492.26
02 Total Capital 15,809.24 19,894.12 26,430.07
03 Capital surplus/deficit 1,348.26 922.44 1,841.22
04 Total Assets 168,418.30 197,058.54 225,018.22
05 Total Deposits 141,550.96 167,571.33 188,034.30
06 Total Loans and Advances 117,099.61 142,252.94 165,402.85

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 07 Total Contingent Liabilities 56,810.35 74,533.43 87,831.16
and Commitments
08 Credit Deposit Ratio 82.73% 84.89% 87.96%
09 Percentage of classified 4.05% 4.02% 3.77%
loans against total loans
and advances
10 Profit after tax and 1,876.36 2,021.01 2,316.69
provision
11 Amount of classified loans 4,743.50 5,725.10 6,231.12
during current year
12 Provisions kept against 1,608.11 1,799.71 1,662.39
classified loan
13 Cost of fund 9.21% 5.69% 6.15%
14 Cost of deposit 5.60% 5.73% 5.88%
15 Interest earning Assets 152,437.69 146,863.42 166,409.37
16 Non-interest earning Assets 15,980.61 50,195.12 58,608.85
17 Return on Investment 11.52% 9.31% 6.36%
(ROI)
18 Return on Asset (ROA) 1.21% 1.11% 1.10%
19 Incomes from Investment 3,735.87 2,615.20 1,836.38
20 Earning per Share 3.06 2.70 3.09
21 Net Income per Share 3.06 2.70 3.09
22 Net asset value per share 25.81 20.60 24.12
23 Price Earning Ratio 5.11 6.69 5.69

Management
JBL is managed by highly professional people. The present Managing Director of the Bank is a forward
looking senior banker having decades of experience and multi discipline of knowledge to his credit both
at home and abroad. He is supported by an educated and skilled professional team with diversified
experience in finance and banking. The management of the bank constantly focuses on the understanding
and anticipating customers’ needs and offer solution thereof. Jamuna Bank Limited has already achieved
tremendous progress within a short period of its operation. The Bank is already ranked as one of the
quality service providers and known for its reputation.

Human Resource

The Bank's ongoing success speaks to the excellence off its team. Jamuna Bank Ltd. has a well-
diversified pool of human resources, which is composed of people with high academic background. Also,

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there is a positive demographic characteristic-most employees are comparatively young in age yet rich in
experiences, hi an increasingly competitive market for highly skilled staff, Jamuna Bank Ltd. focusing on
providing a stimulating corporate environment and an attractive compensation package.

IT Support

The Board, attaches great importance to acquisition and use of appropriate Information Technology in
the Bank. Both Windows and UNIX based Local Area Network (LAN) has been installed in the Head
Office and different Branches. The Bank had its own Banking Software and then this software is used
for performing normal banking transactions. Besides, SWIFT is being used in the AD Branches the
Head Office of the Bank trade finance related operations. Reuters 3000xtra HTA is being used at the
Head Office for offering the best exchange rates to the Bank's customers.
Training Division
The main objective of this division is to make the employees efficient. Usually this division offers
training to their employee time to time. This is helps to employee to do their job efficiently and
effectively.
Marketing Department
The Marketing department mainly works for to promote the different types of services of information to
the people. To improve the marketing network throughout the country. To implements the marketing
strategies and the concept of Trade marketing.
Credit Department
The credit department mainly deals with different types of loan and advances. This department analysis
the proposal, approvable, monitoring the credit, disbursement, credit recovery position and credit policy
that is given by all branches.
International Banking Department
The foreign exchange department mainly deals with export, import and foreign currency of different
branches of the Bank. Common Services Department: They take care of Banks assets and utilize their
assets properly.
Common Service Department
This department deals with people & coveys people's views to the management.
Public Relation and Protocol Department
This department deals with people & coveys people's views to the management.
Dead Stock and Stationery
This department print all security documents of bank and looks after of this security items.

Products and Services of Jamuna Bank Limitted

Products and Services:
Products of Jamuna Bank Ltd. can be divided into two parts. They are asset product and liability product.
Generally, liability product means deposits of many kinds that are payable to parties. On the other hand,
asset products are the products which clients are liable to pay to bank. Different types of undertaking by

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the bank to the clients or on behalf of the clients are also a type of liability to bank. On the other hand, a
different type of promises makes by the clients to bank is considered as bank’s asset.
Depository Products
 Current Account
 Savings Account
 STD (Short term deposit)
 Fixed Deposit
Savings Scheme Products
 Monthly Savings Scheme (MSS)
 Marriage Deposit Scheme
 Lakhpati Deposit Scheme
 Millionaire Deposit Scheme
 Kotipati Deposit Scheme
 Education Savings Scheme
 Monthly Benefit Scheme
 Double/Triple Growth Deposit Scheme
Loan Products
 Overdraft
 Cash Credit
 Term Loan
 Loan (General)
 Letter of Credit (L/C)
 Back-to Back L/C
 Local Bill Purchase (LBP)
 Foreign Bill Purchase (FBP)
 Loan against Imported Merchandise (LIM)
Services
 Q-Cash
 ATM
 Remittance
 Export
 Import
Assets Products

Funded: Funded means those type products in which bank directly fund. This type of product is provided
against mortgage, guarantee previous performances. For example: Overdraft, Term Loan, Time Loan,
Consumer credit, Car Loan, Professional Loan and Small Business Loan. These will be described on
credit part later on.

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Non Funded: Non funded means when the bank provides this type of service bank need not provide
immediate fund. It is a high income source for the bank. But the bank has to provide high care when
provide such type of services to the clients. These types of products are LC, Bank Guarantee.
Discussion on LC is later on Foreign Exchange part.

Corporate Banking

The motto of Jamuna Bank Ltd. Corporate Banking services is to provide a personalized solution to our
customers. The Bank distinguishes and identifies corporate customers' need and designs tailored
solutions accordingly.
Jamuna Bank Ltd. offers a complete range of advisory, financing and operational services to its
corporate client groups combining trade, treasury, investment and transactional banking activities in one
package. Whether it is project finance, term loan, import or export deal, a working capital requirement
or a forward cover for a foreign currency transaction, our Corporate Banking Managers will offer you
the accurate solution. Our corporate Banking specialists will render high class service for speedy
approvals and efficient processing to satisfy customer needs.
Corporate Banking business envelops a broad range of businesses and industries. You can leverage on our
know-how in the following sectors mainly:
o Agro processing industry
o Industry (Import Substitute / Export oriented)
o Textile Spinning
o Dyeing Printing
o Export Oriented Garments, Sweater.
o Food
o Paper and Paper products
o Engineering
o Chemical and chemical products
o Real-estate
o Wholesale Trade
o Transport
o Hotel and Restaurants
o Non-Banking Financial Institutions
o Loan Syndication
o Lease Finance
o Project Finance

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 o Hire Purchase
o International Banking
o Import Financing
o Export Financing

Personal Banking Division

Personal Banking Division (PBD) introduces to the customers with a variety of products. Our PBD
continuously meets the challenges of developing new products and services to match the specific
requirements of customers.

Personal Banking Division (PBD) issues both VISA Debit Cards and VISA Credit Cards. VISA is the
renowned Card brand in the earth. Jamuna Bank Limited is a principal member of VISA Worldwide.
Remittance Cell is another successful wing of the Personal Banking Division. Our product range includes:

VISA Debit Cards - You can now avail the convenience of VISA Debit Card. It is the easiest and the
most secured way of utilizing your money for 24/7 retail purchases as well as cash withdrawal.
VISA Credit Cards - The JBL Credit Card gives you a fast, convenient and reliable way to pay, 24 hours
a day, wherever you are in the world.
VISA Classic
VISA Gold
International Credit Cards – JBL International Credit Cards (VISA) allows you flexibility and
convenience when you travel internationally. The VISA International card entitles you to exclusive
discounts worldwide.
VISA Dual (Gold)
JBL Remittance Cell – “Remit Fast” is the motto of JBL Remittance Cell. It provides the best & faster
services to its customers and connects the world through the renowned money exchange agencies. Such
as Placid Nk Corporation, Moneygram Payment System Inc., Raffles Exchange Ltd.UK, Euro Bangla
Money Transfer (UK) Ltd., Moneylink,UK, Homelink Remit (UK) Ltd., Rumana Money Services.
Customers can avail improved pricing on remittance.
Bank Transfer
 Instant Cash
 Spot Cash
 BFTN

Credit Facilities of Jamuna Bank Limited

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The word "Credit" is derived from the Latin word Credo or Krado meaning I believe. It is usually defined
as one's ability to buy to a promise to pay. From the Banker's point of view Credit is the confidence of the
lender on the ability and willingness of the borrower to repay the debt as per schedule of repayment. A
bank provides loan to a company, with a fixed maturity and often featuring amortization of principal. If
this loan is in the form of a line of credit, the funds are drawn down shortly after the agreement is signed.
Otherwise, the borrower usually uses the funds from the loan soon after they become available.

Different types of Credit Facilities

Loans and advances are the heart of asset of all commercial banks. All over the world, Banks try
immensely to make such a loan portfolio which helps maximize revenue at a minimum risk. Jamuna
Bank continued to extend its credit facility by offering different customized loan products to business
entities and individuals.
Types of loan of Jamuna Bank Limitted
Depending on the various nature of financing, all the lending activities have been brought under the
following major heads:
Loan (General)
Short term, Medium term & Long term loans allowed to individual/firm/industries for a specific purpose
but for a definite period and generally repayable by installments fall under this head. This type of lending
is mainly allowed to accommodate financing under the categories:
i. Large and Medium Scale Industry
ii. Small and Cottage Industry
iii. Very often term financing for Agriculture & Others like,
House Building Loan (General)
Loans allowed to individual/enterprises for construction of house (residential or commercial) fall under
this type of advance. The amount is repayable by monthly installment within a specified period. Such
advances are known as Loan (HBLGEN).
House Building Loan (Staff)
Loans allowed to our Bank employees for purchase/construction of house shall be known as Staff Loan
(HBL-STAFF).
Other Loans to Staff
Loans allowed to employees other than for House Building shall be grouped under head - Staff Loan
(Gen).
Cash Credit (Hypo.)
Advances allowed to individual/firm for trading as well as wholesale purpose or to industries to meet up
the working capital requirements against hypothecation of goods as primary security fall under this type
of lending. It is a continuous credit. It is allowed under the categories

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 I. "Commercial Lending" when the customer is other than an industry and

II. "Working Capital" when the customer is an industry.

Cash Credit (Pledge)

Financial accommodations to individual/firms for trading as well as for whole-sale or to industries as

working capital against pledge of goods as primary security fall under this head of advance. It is also a
continuous credit and like the above allowed under the categories:

i. Commercial Lending and

ii. Working Capital.

Hire Purchase
Hire-Purchase is a type of installment credit under which the Hire-Purchaser agrees to take the goods on
hire at a stated rental, which is inclusive of the repayment of Principal as well as interest for adjustment of
the loan within a specified period.

Lease Financing

Lease Financing is one of the most convenient sources of acquiring capital machinery and equipment
whereby a client is given the opportunity to have an exclusive right to use an asset usually for an agreed
period of time against payment of rent. It is a term financing repayable by installment.

Time Loan

This is one-time financial accommodation for short period maximum 12 months to meet some specific
purpose. The loan is adjustable within the validity and not renewable and no transaction is allowed.

Consumers Credit Scheme

It is a special credit scheme of the Bank to finance purchase of consumers' durable to the fixed income
group to raise their standard of living. The loans are allowed on soft terms against personal guarantee and
deposit of specified percentage of equity by the customers. The loan is repayable by monthly installment
within a fixed period.

SOD (General)

Advances allowed to individual/firms against financial obligation (i.e. lien on FDR/PSP/ BSP/Insurance
Policy/Share etc). This may or may not be a continuous Credit.
SOD (Others)

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Advances allowed against assignment of work order for execution of contractual works falls under this
head. This advance is generally allowed for a definite period and specific purpose i.e. it is not a
continuous credit. It falls under the category "Others".

SOD (Export)

Advance allowed for purchasing foreign currency for payment against L/Cs (Back to Back) where the
exports do not materialize before the date of import payment. This is also an advance for temporary
period which is known as export finance and falls under the category "Commercial Lending".

PAD

Payment made by the Bank against lodgment of shipping documents of goods imported through L/C falls
under this head. It is an interim advance connected with import and is generally liquidated against
payments usually made by the party for retirement of the documents for release of imported goods from
the customs authority. It falls under the category "Commercial Lending".

LIM
Advances allowed for retirement of shipping documents and release of goods imported through L/C
taking effective control over the goods by pledge in godowns under Bank's lock & key fall under this type
of advance. This is also a temporary advance connected with import which is known as post-import
finance and falls under the category "Commercial Lending".

LTR

Advance allowed for retirement of shipping documents and release of goods imported through LC falls
under this head. The goods are handed over to the importer under trust with the arrangement that sale
proceeds should be deposited to liquidate the advances within a given period. This is also a temporary
advance connected with import and known as postimport finance and falls under the category
"Commercial Lending".

IBP

Payment made through purchase of inland bills/cheques to meet urgent requirement of the customer falls
under this type of credit facility. This temporary advance is adjustable from the proceeds of bills/cheques
purchased for collection. It falls under the category "Commercial Lending".

Export Cash Credit (ECC)

Financial accommodation allowed to a customer for exports of goods falls under this head and is
categorized as "Export Credit". The advances must be liquidated out of export proceeds within 180 days.

Packing Credit (PC)

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Advance allowed to a customer against specific L/C/firm contract for processing/packing of goods to be
exported falls under this head and is categorized as "Packing Credit". The advances must be adjusted
from proceeds of the relevant exports within 180 days. It falls under the category "Export Credit".

IDBP

Payment made against documents representing sell of goods to Local export oriented industries which are
deemed as exports and which are denominated in Local Currency / Foreign Currency falls under this
head. This temporary liability is adjustable from proceeds of the Bill.

Credit Securities

In Jamuna Bank Bhola main branch they took all securities against advance. Selection of loner. Bank
should find loner who properly invest loan amount and timely repay of interest. Loner should create a
believer to bank that he will invest the amount and timely repay of interest. The loner he has to have some
virtues. These virtues are evaluated before disbursement of loan. They are
1. Character: Identify a good loner character is to invest loan amount properly and repay interest.
Loner has to be honest and reliable. Honesty is the most important character in loner's virtue. For
identifying loner's honesty some verifications are made. They are:
 Past record of loner.
 Collect different information.
 Analysis of loners document
 Analysis of loners transections
 Analysis of loners banking period

2. Past record of loner: Analysis of past business record of loner with bank and analysis of his
financial statements to verify if he is telling truth about his business.
3. Collect different information: Collect information from his living area to identify his character.
4. Analysis of Loaner Document: Generally, loan loaner submitted different documents. Verify
these documents.
5. Analysis of loner's transection: Analysis of loaners transaction of a bank tell us about business
transaction, issue of cheque tell us about his honesty.
6. Analysis of loners banking Period: Individual maintain long banking period tells more
information about him then short business time.
7. Reliability: Analysis of reliability is very difficult for bank. A loner maintains good relation with
bank and repay of interest timely tell him he is reliability. A loner with new banking relation bank
looks into his social status.
8. Capacity: It tells us that loner's business capability, Production capability, marketing capability
and cash flow capability. To find out business capability business has to be maintaining solid

17 | P a g e
 growth and asset liability ratio, sells growth at least for three years. Identify the sector growth and
loner's position in that sector. A good cash flow in recent years tells us about the business
capacity.
9. Capital: Amount of capital tell us about loner's intention and interest about the amount keeps the
loners interest in business. So he is active in finding new opportunity in business. Identify
Business asset and liabilities, invest for Tuture needs and find out any connection that affects
business.
10. Condition: Condition refers as business condition, sector wise condition, competitive condition,
government support, consumer attraction. Business condition refers as product production, sells
etc. Sector condition means overall sectors risk, threat and growth. Sometimes government
support some industries like tax free, and sometimes customer's attraction on specific product like
fertilizer in rural market. Collateral: To minimize risk on loan bank tend to take collateral for
loan. For taking collateral bank has to take some strategy about collateral.
Securities against Advances
Generally, JBL receives different types of securities against different types of credit facilities from which
some of are as follows:

Types of Credit Securities

House building loan Primary securities: mortgage of the land or any property
Car loan Primary securities: joint registration and comprehensive
insurance policy. Two valuable guarantors.

Collateral securities: mortgage of land or any property. Any

type financial obligation

Auto loan Primary securities: joint registration and comprehensive

insurance policy.
Two valuable guarantors and post dated cheques
Any purpose loan Primary securities: two valuable guarantors and post dated
cheques.

Payments against documents(PAD) Pledge or hypothecation of stock-in trade, goods, produce

and merchandise, machineries, land or building on which
machineries are installed
Loan against imported merchandise Pledge of imported merchandise
Loan against trust receipt Trust receipt in lieu of import document
Local bills purchased Bill itself
Foreign bill purchased Shipping documents for exports
Overdraft Primary securities: Hypothecation of book depth
Collateral securities: Mortgage of landed property and IPA.
Cash credit Primary securities: Hypothecation of stock of goods in trade

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 duly insured produce merchandise.
Collateral securities: Mortgage of land and building, any
financial obligation

Overall Procedure for Sanctioning Loan

Before disbursement of loan bank must go through some selection process. These processes are given
below:

 Borrower Selection
 Security Selection
 Assessment of the borrower
 Visit Business
 Fund requirement analysis.
Borrower Selection: Select suitable borrower from pool of borrowers. This includes borrower's present
and past business information, nature of borrower, and ethical value of the borrower. This information
gives us entity's historical business information and nature of borrower whether he might default or not.
Security Selection: Selection of collateral security is as important as disbursement of loan. Proper
selection of security gives bank an upper hand when borrower may default.

Assessment of the borrower: Proper assessment of borrower gives us solid information of the borrower.
It helps bank to sensation loan to worthy borrower. In assessment of borrower bank should go through
selection of loaner.

Visit Business: Visiting business gives us valid information about the business, its prospect and field
evaluation of security.

Fund Requirements Analysis: Why borrower need fund tells us situation of the business. If banks
advance team satisfied that the loan requirement is valid then deflation of that loan chance is very low.

Before disbarment of loan advance team should go through the process this gives bank the breathing
space and avoid default lone.
1. The following procedure need to be followed for giving advances to the customer.

These are: Party's application

2. Filling form-A
3. Collecting CIB study from Bangladesh Bank
4. Processing loan proposal
5. Project appraisal

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 6. Head office approval
7. Sanction letter
8. Documentation
9. Disbursement

1. Party's application:

At first borrower had to submit an application to the respective branch for loan, where he has to clearly
specify the reason for loan. After receiving the application form the borrower Bank officer verifies all the
information carefully. He also checks the account maintains by the borrower with the Bank. If the official
becomes satisfied, then he gives form-X (prescribed application form of Bank) to the prospective
borrower.

2. Filling Form -X:

After satisfying with party's application the applicant need to fill Form-X It is the prescribed form
provided by the respective branch that contains information of the borrower It contains- Name with its
factory location, Official address and telephone number, details of past and present business, its
achievement and failures, type of loan needed etc.

3. Collecting CIB Study from Bangladesh Bank:

After receiving the application for advance, Janata Bank sends a letter to Bangladesh Bank for obtaining a
study from there. This study is called CIB (Credit Information Bureau) study. Jamuna Bank generally
seeks this study from the head office for all kinds of investment. The purpose of this study is to being
informed that whether the borrower has taken loan from any other Bank.

4. Processing loan Proposal:

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

 Loan application form duly signed by the customer.

 Acceptance of the term and conditions of sanction advice.
 Trade license
 In case of Partnership Firm, copy of registered partnership deed duly certified as true copy or a
partnership deed on non-judicial stamp of taka-150 denomination duly notarized.
 Demand promissory notes.
 Letter of hypothecation of stocks and goods.
 Letter of hypothecation of books debt and receivable.
 Letter of hypothecation of plant and machinery.
 Personal letter of guarantee.

5. Project Appraisal

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It is the pre-investment analysis. Project appraisal in the Banking sector is important for the following
reasons:

 To achieve organizational goals

 To recommend if the project is not designed properly.
 To justify the soundness of an investment.
 To ensure repayment of Bank finance. An appraisal is a systematic exercise to establish that the
proposed project is a viable preposition. Appraising officer checks the various information
submitted by the promoter in first information sheet, application for Investment and Investment
proposal. The Head Office (HO) mainly checks the technical, commercial and financial viability
of the project. For others, HO is dependent on branch's information. But when the investment size
is big, then the HO verifies the authenticity of information physically.

6. Head Office Approval

When Head office receive appraisal from the branch then, Head Office again appraises the miect. If it
seems to be a viable one, the HO sends it to the Board of Directors for the approval of the Investment.
The Board of Directors (BOD) considers the proposal and takes decision whether to approve the
Investment or not. If the BOD approves the investment, the HO sends the approval to the concerned
branch. The respective officer of Head Office appraises the project by preparing a summary named “Top
Sheet” or “Executive Summary" and then he sends it to the Head Office Credit Division for the approval
of the Loan. The Head Office Credit Division considers the proposal and takes decision whether to
approve the Investment or not. If the committee approves the investment; the HO sends the approval to
the concerned branch.

7. Sanction Letter
After approval of HO the branch issues sanction latter to the borrower. A sanction latter contains:
▪ Name of borrower
▪ Facility allowed
▪ Purpose
▪ Rate of interest
▪ Period of the Investment and mode of adjustment
▪ Security and Other terms and condition

8. Documentation

If the borrower accepts the sanction letter, the Documentation starts. Documentation is a written
statement of fact evidencing certain transactions covering the legal aspects duly signed by the authorized
persons having the legal status. The most common documents used by the Jamuna Bank for sanctioning
different kinds of Investment are:

 Joint Promissory Note

 Latter of Arrangement
 Letter of Disbursement
 Letter of Installment
 Letter of Continuity
 Trust Receipt
 Counter Guarantee

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  Stock Study
 Letter of Lien
 Status Study
 Letter of Hypothecation
 Letter of Guarantee
 Documents Relating to Mortgage

9. Disbursement

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

Credit Operating system of Jamuna Bank

1. Prospective Borrower
Most bank loans to individuals arise from a direct request from a customer who approaches a member
of the bank's staff and asks to fill out a loan application. In the Jamuna Bank Ltd. Bank, business loan
request often arises from the contacts the bank's loan officers and sales representatives make as they
solicit new accounts from firms operating in the bank's market area. Sometimes loan officers will call
on the same company for months before the customer finally agrees to give the bank a try by filling out
a loan application.
2. Client's Interview
When a customer decides to request a loan, an interview with a loan officer usually follows right ways,
giving the customer the opportunity to explain his or her credit needs. That interview is particularly
important because it provides an opportunity for the bank's loan officer to assess the customer's
character and sincerity of purpose. If the customer appears to lack sincerity in acknowledging the need
to adhere to the terms of a loan, this must be recorded as a strong factor weighing against approval of
the loan request.
3. Client's Request with FIS
The borrower is providing with an instruction paper, which help him or her to prepare the loan proposal
properly. Information on loan proposal should be furnished in prescribed First Information Sheet (FIS)
in triplicate properly typed in each pages / set should be duly sealed and signed by the applicant(s)/
sponsor(s).
4. Information Sheet
Complete information should be furnished in respect of each item supported by documentary evidences,
wherever necessary, to avoid further reference/ delay/ rejection of the application. The bank reserves the
right to reject the application forthwith if the application given in the form is incomplete and not fully
documented in all respects. Information may be provided in additional sheets of papers, if required.

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However, ensure all the pages and annexure are signed under official seal. Also ensure that all the facts/
evidences have been enclosed properly including the feasibility reports/ detailed study reports on loan
proposal.

 The clients are required to deposit with the application the project examination fee and also
apportion of the equity at the following rate either by cheque or pay order or demand draft drown
in favor of Jamuna Bank Ltd. and payable in any scheduled Banks within the country.
 Memorandum and the Articles of Association together with the certificate of
registration/incorporation commencement of business of the company certified by an aging
director of the company should be submitted.
 Certificates from the surveyor for determining the price of land of the project/price of adjacent
land sold during last three years should be submitted. Also to be submitted are site/ mouza map.
 Machinery layout plan, price quotation of three suppliers together with illustrated brochures and
literatures should be submitted for both import and local machinery. Consent letter from Power
Development Board/ Rural Development Board/ Gas Authority/ Pollution Control Board should
be submitted whatever required.
 Soil Test/ Water Test report (if required).
 Nationality certificate along with attested passport size photographs of the directors/partners/
proprietor should be submitted.
 Declaration of asset and liability of the proposed directors/ partners/ proprietor. Declaration of
payment of income tax should be submitted.

5. Justification of Facility Requested

Compared to other financial institutions' usual two months’ average processing time for its medium and
large loan program, the processing time for small industry loans remains well below the above
processing time because of its lesser detailed studied as well as the bank considers that small
entrepreneurs look for their sources of credit at their time of need.
 The processing/approval time for small industry loan is not more than two months from the date
of receiving complete application from.
 Application in prescribe form of received in triplicate, duly filled in, and sealed and signed by
the sponsoring directors along with their attested photographs duly affixed in the space
provided for.
 Draft layout plan of the proposed building and the estimated for constriction cost is obtained.
 In case of project to be located in any BSCIC industrial estate, BSCIC latter of consent particulars
of the land, copy of lease deed is obtained.
 For location of industry in other areas, permission / no- objection for setting up the small
industry is obtained from the appropriate authorities.
 Utility agency's letter of consent of providing necessary utility services to the unit to be obtained.
 Detailed credit report of the sponsors/ project is prepared i.e. the Bank should carry out detailed
credit investigation of the promoters.
 Tentative list of machinery / work with detailed specification should be obtained supported by 3
price quotation.
 The individual project appraisal report for small scale and cottage industry may not be very
elaborate and exhausted. However, it covers the Jamuna Bank Ltd. area of project viability.
 Join report from the Bank and the borrower is prepared for informal sector.

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 6. Analysis a Proposals

JAMUNA BANK LTD. was established to provide term loan and other financial assistance including
all kinds of banking facilities to accelerate the pace of development to small industry. The financial
assistance includes short term working capital loan, medium and long term finance to viable new- small
scale industry (SSI) projects and BMRE of SSI projects which fulfill the banks criteria of viability and
acceptability. Project appraisal/ analysis in the banking sector is needed for the following reasons:
 To justify the soundness of an investment.
 To ensure repayment of bank finance.
 To achieve organizational goals.

7. Provide Loan
After the analysis procedure bank provide loan to the customers.
Credit Ratings
As per Bangladesh Banks mandatory requirement vide BRPD circular No. 06 dated July 05 2006 Credit
Rating of Jamuna Bank Limited was done by the Credit Rating Agency of Bangladesh Limited (CRAB)
on the audited Balance Sheet as on 31.12.2018 CRAB has submitted their report as under:

Long Term Short Term

Current Rating AA2 ST-2
Previous Rating AA2 ST-2
Date of Rating June 27 2018
Rating Based on Audited financials up to December, 31 2017 and relevant quantitates as well as
qualitative information up to the date of declaration
Validity of Rating June 30 2019
Outlook Stable
(AA2= Very strong capability to meet their financial commitments. ST-2= Strong capacity timely repayment.)

The above rating has been done in consideration of Banks visible improvement in fundamentals such as
capital adequacy, liquidity position, profitability, introduction of real time online banking etc. However,
the above rating is moderated, to some extent, by limited market share, increase in NPL, high cost of
fund, moderate corporate governance, dependency on team deposit etc.
Financial institutions rated in this category are adjudged to offer adequate safety to timely repayment of
financial obligation. This level of rating indicates a corporate entity with an adequate credit profile. Risk
factors are more variable and greater in period of economic stress than those rated in the higher
categories. The short term rating indicates good certain of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total financing
requirements, access to capital markets is good. Risk factors are small.
Principles of lending

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Disbursement of lone is one of the prime tools of a banks income. Normally banks pay more attention in
disbursement of lone then deposit collection. Bank took over its collateral if any loner fails to repay loan
amount. Every loan has its own risk. To minimize risk a sound lending principal is needed.

1. Safety: A banks entity depends on safety of lending. Grant lone in unproductive sector and risky
business, dishonest loner, unfit loner leads the lone to default loan. So safety of the lone is the
main principal of lending.
2. Liquidity: Loans and advances maturity should not be long-term it imposes preacher on liquidity
of bank and harder to recover. Bank should disburse loan and maintain a certain percentage of
cash to meet the needs of depositor.
3. Purpose of the loan: Purpose of the loan and source of repayment of loan is very important.
Loans purpose should be productive.
4. Security: Bank may take collateral in loans and advance in term of security. If it took security it
should be enough, easily sellable and completely risk free.
5. Profitability: Interest income is banks main source of income. So bank tend to give loan where
interest income is high and easily collectable.
6. Spread: Bank should have diversified its loan It should give small amount to large group.

7. National Interest:  Bank invests in market to improve national economy. Sometimes bank
invest in project with low interest income for the sake of national interest.

Lending Criteria
I. Entrepreneur
Entrepreneur/promoter has to be creditworthy and competent enough to run the proposed industry.
II. Viability of the project
The project should be viable from organizational, technical, commercial, financial and economic points of
view.
a. Technical Viability
The project should be technically sound and environment-friendly. Technology transfer in case of
borrowed know-how ought to be ensured. Building should be well planned and well-constructed.
b. Commercial viability
Market prospect and potential for the product has to be fully assured at competitive prices. Marketing
channel for the product should be accessible to the entrepreneur.
c. Financial Viability
There should be reasonable debt equity ratio as determined by the Bank on individual case basis. Debt
service coverage ratio should be at least 2.5 times at the optimum level of production. IRR should
preferably be not less than 20 %.
d. Economic Viability
The project should ensure benefit to the national economy and create sufficient employment opportunity
and be environment friendly.

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 CHAPTER 5
RESULT AND DISCUSSION
Recovery Procedure of Investment

Recovery procedure of Jamuna Bank is ultimate combination of time, effort of money. It follows
procedural steps to recover the lending amount which is joint effort of bank, society and legal institutions
which are shown below:

Principles of Sound Lending

i. Safety:

Jamuna Bank exercises the lending function only when it is safe and the risk factor is adequately
mitigated and covered. Safety depends upon:

 The security offered by the borrower.

 The repaying capacity and willingness of the borrower is to repay the advance.
ii. Liquidity:

The liability of a Bank is repayable of demand or at a short notice. So the Bank has to maintain its
liquidity at a sufficient level. Investment on building, plant, machinery, land etc. cannot be recovered
quickly, so it is less liquid.

26 | P a g e
 iii. Profitability
Profit is needed to pay interest to depositors, depreciation and maintenance declare divided to
shareholders, provide or reserve against bad and doubtful debts etc so like all other banks, Jamuna bank
also disburse advances to earn profit.

iv. Security
To ensure safety of advances, Banks takes different types of securities like MIDR, Sanchaypatra, land,
work order etc. Banker should ensure that the securities are adequate, marketable and free from
encumbrances.

Diversification if risks
It is very risky for a bank to invest all its assets into a particular sector or a single borrower or to one
particular region. If somehow the business of that sector or area or borrower collapses, the bank may fall
in a critical situation. So it is better to invest in different sectors borrowers and spread over the country.
That’s why Jamuna bank invests its fund in various sectors.

Loan Classification
Loan classification attempts to categorize the debt information in a systematic manner. Loan
classification is defined in terms of degree of risk associated with loans. Classification of loans mean and
include only such assets of the balance sheet of a bank which do not yield interest income and which have
remained past due for some quarters. Loans are generally categorized in two types.

Loan

Classified Loan

Unclassified Loan

Classified Loan

If any continuous credit is not adjusted/renewed within expiry date, the loan will be treated as classified,
irregular loan from the next day of the expiry date. Loans are classified which are judge to have a reduced
chance of repayment. Classified loan can be three types:
 Sub-standard
 Doubtful
 Bad/Loss

Sub-standard: If the loan unadjusted for six months or more but less than nine months, the loan will be
treated as substandard.

Doubtful: For nine months and above but less than twelve months the loan will be treated as doubtful.

Bad/Loss: If the period is twelve months or more, the loan will be classified as “bad”. The above time
frame is applicable in respect of demand loan also.

Unclassified Loan

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Unclassified loans are those which are repay regularly.
Objectives of Loan Classification:
o Help for assessing financial soundness of a bank.
o Calculate the required provision and the amount of interest suspense.
o Put the bank on sound footing in order to develop sound banking practice in Bangladesh

Loan Provisioning

A certain amount of money is kept for the purpose of provisioning. The percentage is set follow by the
Bangladesh Bank rules.

Loan Type Continuous Sub-standard Doubtful Bad/Lose

Continuous Loan 1% 20% 50% 100%

Demand Loan 1% 20% 50% 100%

Term Loan up to 5 years 1% 20% 50% 100%

Term Loan more than 5 years 1% 20% 50% 100%

Micro Credit 5% 5% 5% 100%

Importance of loan classification:

 Strengthen credit discipline

 Improve loan recovery position
 Make planning for future course of loan

Basis for loan classification: All loans and advances are classified on the basis of two criteria,

 Qualitative judgment criteria

 Objective criteria

Discouraged sectors of investment

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  Investment in following sectors is discouraged by Jamuna Bank.
 Military equipment/Weapons Finance Highly Leveraged transactions.
 Finance of Speculative Investment.
 Logging, Mineral Extraction/Mining, or other activity that is Ethically of Environmentally
Sensitive.
 Lending to companies listed on CIB black list or known defaulters.
 Counter parties in countries subject to UN sanctions.
 Taking an Equity Stake in borrowers.
 Lending to Holding Companies.
Loan Monitoring

Investment monitoring implies that the checking of the pattern of use of the disbursed fund to ensure
whether it is used for the right purpose or not. It includes a reporting system and communication
arrangement between the borrower and the lending institution and within department, appraisal,
disbursement, recoveries, follow-up etc.

 The borrower's behavior of turnover.

 The information regarding the profitability, liquidity, cash flow situation and trend in sales in
maintaining various rations
 Regular checking the balance of SB/CD/STD accounts of the borrower.
 Periodical visit with the customers to maintain relationship and supervision of supplied articles.
 Legal action to be taken after failings all possible efforts to recover the bank's due.
 Issuance of legal notice to the defaulter customers and guarantors prior to classification of the
loans.

Credit Risk Grading

Credit Risk Grading scale has been classified as following 8 categories:
1. Superior-low risk
2. Good- satisfactory risk
3. Acceptable- fair risk
4. Marginal risk
5. Special Mentioned
6. Sub Standard
7. Doubtful & Bad
8. Bad & Loss
Weight of main risk components:
i. Financial Risk 50%
ii. Business/Industry Risk 18%
iii. Management Risk 12%
iv. Security Risk 10%
v. Relationship Risk 10%

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The total weight of the above five components comprise 100% weight and the weight is put to the
previously mentioned 8 categories and the weight is distributed as follows:
1. Superior-low risk -100
2. Good- satisfactory risk-85+
3. Acceptable- fair risk-75-84
4. Marginal risk-65-74
5. Special Mentioned-55-64
6. Sub Standard-45-54
7. Doubtful & Bad-35.44
8. Bad & Loss-<35

Computation Credit Risk Grading

To measure the actual risk associated with the loan that is going to be paid by the bank to the particular
client, we have to follow some steps and get a statistical parameter of the risk. There are five steps follow
the JBL to compute credit risk grading. Those are given and described below:

Step 1: Identify all the Principal Risk Components Credit risk for counterparty arises from an aggregation
of the following:
a) Financial Risk
b) Business/Industry Risk
c) Management Risk
d) Security Risk
e) Relationship Risk.
Each of the above mentioned key risk areas require be evaluating and aggregating to arrive at an overall
risk grading measure.
Evaluation of Financial Risks
Risk that counterparties will fail to meet obligation due to financial distress. This typically entails analysis
of financials i.e. analysis of leverage, liquidity, profitability & interest coverage ratios. To conclude, this
capitalizes on the risk of high leverage, poor liquidity, low profitability & insufficient cash flow.

Evaluation of Business/Industry Risks

Risk that adverse industry situation or unfavorable business condition will impact borrowers' capacity to
meet obligation. The evaluation of this category of risk looks at parameters such as business outlook, size
of business, industry growth, market competition & barriers to entry/exit. To conclude, this capitalizes on
the risk of failure due to low market share & poor industry growth.
Evaluation of Management Risks
Risk that counterparties may default as a result of poor managerial ability including experience of the
management, its succession plan and team work.
Evaluation of Security Risk
It is that the bank might be exposed due to poor quality or strength of the security in case of default. This
may entail strength of security & collateral, location of collateral and support.

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Evaluation of Relationship Risk

These risk areas cover evaluation of limits utilization, account performance, conditions compliance by the
borrower and deposit relationship.
Step 2: Allocate weights to Principal Risk Components
 Weight Financial Risk 50%
 Business/Industry Risk 18%
 Management Risk 12%
 Security Risk 10%
 Relationship Risk 10%
According to the importance of risk profile, the following weightings are proposed for corresponding
principal risks.
Step 3: Establish the Key Parameters.
Principal risk components key parameters are:
a) Financial Risk
(Leverage, Liquidity, Profitability & Coverage ratio)
b) Business / Industrial Risk
(Size of Business, Age of Business, Business Outlook, Industry Growth, Competition & Barriers to
Business)
c) Management Risk
(Experience, Succession & Team Work)
d) Security Risk
(Security Coverage, Collateral Coverage and Support)
e) Relationship Risk
(Account Conduct, Utilization of Limit, Compliance of covenants/conditions & Personal Deposit)

Step 4: Input data in Excel sheet

MS Excel based credit risk scoring sheet to arrive at a total score on each borrower. The excel program
requires inputting data accurately in particular cells for input and will automatically calculate the risk
grade for a particular borrower based on the total score obtained.

Step 5: Obtain score

Scores are divided into groups. For example:
▪ Superior obtains 100
▪ Good obtains 85+
▪ Acceptable obtains 75-84

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 ▪ Marginal/Watch list obtains 65-74
▪ Special Mention obtains 55-64
▪ Sub-standard obtains 45-54
▪ Doubtful obtains 35-44
▪ Bad & Loss obtains below 35
Before disbursement of lone bank should consider this credit risk score to get rid of future bad or doubtful
loan.
After disbursement of loan bank keeps an eye on borrowers’ business through some regulatory process
like early alert system and some other. According to the interest income bank classified loan to two
sectors. They are:
1. Performing Loan
2. Non-performing Loan

How Jamuna Bank Recover their Loan

When Jamuna 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
also found in Jamuna Bank. To overcome the problem of overdue loan, the bank has taken particular
loan recovery programs.

Recovery Programs taken by Jamuna Bank Limited:

 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.

Recovery Patterns of Loan and Advance

Generally, Jamuna bank sanctions loans and advances to every sector of an economy. Before going into
details of recovery performance, we have to be familiar with some terms used in recovery performance:

o Disbursement: Highest outstanding balance on any date during the reporting period minus
outstanding balance at the end of the preceding period.
o Demand for recovery: Overdue at the end of the reporting period plus recovery during the
reporting period.
o Recovery: Highest outstanding balance on any date during the reporting period minus
outstanding balance at the end of the recovery period.
o Outstanding: Outstanding figures in the ledger at the end of the reporting period.
o Overdue: Demand for recovery minus recovery.

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Strategies for Recovery
Recovery of loan can be made in the following three methods:
1. Persuasive Recovery:

The first step in recovery procedure is private communication that creates a mental pressure on borrower
to repay the loan. In this situation bank can provide some advice to the borrower for repaying the loan.

2. Voluntarily:

In this method, some steps are followed for recovering loan. These are:
 Building Task Force
 Arranging Seminar
 Loan Rescheduling Policy
 Waiver of Interest Rate

3. Legal Recovery:
When all steps fail to keep an account regular and the borrower does not pay the installments and interests
then the bank take necessary legal steps against the borrower for realization of its dues.
Procedures for Recovery
After identify the non-performing/classified loan bank manager employ more employee and officer to
collect that loan. First approach is to contact with loner. Collection of loan can be divided in to two
processes.
1. Collect Cash
2. Follow Bangladesh Bank recovery policy:
o Reschedule of loan.
o Exit policy
o Reduce loan to write off policy.
o Apply to money and loan court.
o Appoint an agent through Alternative dispute resolution.
3. Approach to loner's family member, neighbor and local important people for help to recover loan.
4. Issue recovery letter.
5. Issue final legal notice.
6. Create a recovery seal and debt collection unit in local branch.
7. Quarterly visit of the entity.
8. Create a task force in head office and follow up the satiation.
9. Create a mobile team for recovering loan.
10. Appoint an attorney.
11. Meeting with attorney about case frequently.

Problems in Loan Recovery

Though Jamuna bank is performing better in managing loan and advances, still 12.39% (branch) of total
loan and advances are classified. There are a lot of reasons for which the loan recovery of the bank is still
now defective. In most cases, problems may 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.

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The main reasons of poor loan recovery are categorized in four broad types as follow:
Problems created by economic environment
The following problems arise from the effect of economic environment:
1. Changing in the management pattern: Changing of management patterns may delay the
recovery of mature loan.
2. Changing in industrial patterns: The banks sometimes sanction loan to the losing concern for
further improvement of the respective sector, but in most cases, they fail to achieve progress.
3. Operation of open market economy: In our country mainly industries become sick and also
close their business on account of emerging of open market economy. The cost of production is
high and the quality of goods is not of required of standard. As a result, they become the losing
concerns and the amount of bad loan increases.
4. Rapid expansion of business: There are many companies which expand their business rapidly,
but the expansion is for short time. In the long run, the amount of classified loan increases.

Problems created by government:

The following problems are arisen by the government:

1. External pressure: Jamuna Bank has also faced many problems in the loan recovery process as a
part of continuous pressure from various interested groups.
2. 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.
3. Instability of Govt. policy: Frequent changes in government policies in regard to recovery of
loan.

Problems created by the bank:

The following problems are created by the banks:

1. Lack of analysis of business risk: Before lending, Sometime Jamuna Bank fails to 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.
2. Lack of proper valuation of security or mortgage property: In some 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 Jamuna Bank under study in
the loan recovery process. These are:

1. Early sanction and disbursement of loan to the borrowers without proper inspection of the project
by the bank on account of pressure from lobbying group.
2. Lack evaluation of technical and economic feasibility of the program.

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 3. Delay in disbursement of credit.
4. Sometime credit is not allowed to actual entrepreneurs sometime.
5. Lack of proper supervision.
6. Illiteracy of borrowers.
7. Negative attitude of borrowers to repay the loan.
8. Deterioration of the value system of the borrowers.
9. Money borrowers use their loan-money other than specified project, i.e., if the loan is sanctioned
for industrial purpose; they use the money in house building or purchase of land for their own
purpose.
10. Sometimes borrowers invest their money outside the country. Many borrowers transfer loan
money to abroad where they deposited this money in their own account or spent some other
purpose.
11. Sometimes local borrowers are found to be so much compelled to grant them loan without proper
study due to some unexpected reasons. Since these borrowers are capable of getting loan by
exercising their influence, they can also escape the repayment liability.
12. Problems responsible for non-implementation and delayed implementation of project for which
the entrepreneurs of the project cannot repay the loan. The causes of failure may be:
 Failure to ascertain the economic availability of the projects.
 Time lag between approval and sanctioning of the projects.
 Import of machinery and raw materials both are the problems of paucity of foreign
exchange and procedures of licensing.

Interest Exemption

Except Service Loan, a bank can exempt the interest of any loan given. The head office of the bank can
exempt up to 100% of the interest of a loan. The branch area office can exempt up to 50% of the interest
of a loan.

Black Figure

When the service holder pays more than the payable amount to the bank, the negative balance turns to
positive balance. Then it is called a Black Figure.

Following steps will be taken against a defaulter:

 Reminder the party to repay the loan after validity dates.

 Send final notice.
 Send legal notice.
 Eventually sue a case against the party.

CHAPTER 6
Findings, Recommendations and Conclusion
Findings:
The study has been made to find out the how they recover their loan specially classified loan. The study is
focused on sanctioning loan and the recovery process of Jamuna Bank Limitted. After the discussion the
findings are:

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  Jamuna Bank, Bhola branch, is able to achieve excellent rating from their clients in two important
criteria of branch location & comfortable interior decoration.
 Branch managers are made fully liable for the selection of the new borrower in the bank.
 It prohibits the way to improper selection of the new borrower by the branch manager.
 There are some cases where effective monitoring and persuasion are needed especially for
substandard and doubtful cases. Persuasion and monitoring are effectively performed by the
branch manager.
 In some cases, those loans become classified which the head office has recommended. So to some
extent it is true that, sometime head office decision is also creating classified loans.
 The employees are very good in nature, highly educated and helpful, if subordinate makes a
mistake, higher authority motivates politely rather than blaming.
 The employees of credit departments that are so crucial matter are highly experienced and can
handle smartly the clients.
 Number of employee in the branch is few.
 The nepotism by the high officials and political influence.
 Cash limit is low; because of this sometimes clients cannot get service properly.
 ATM service is medium.
 The branch manager, officer and executive who have achieved target in all respect may be
rewarded.
 The website of Jamuna Bank Ltd.; does not contain adequate information about loans and
advances
 From the study it has been found that the pricing policy of JBL is not much satisfactory. For this
reason, they should hire marketing specialists who will help them to develop effective service
strategy, different critical decision and prepare various plans.

Recommendation
As we all know JBL is one of the well-known banks in our country. From my little knowledge it’s quite
hard to give recommendation to such a well-established bank. Still from my learning and observation, I
am giving following recommendation to follow:

 JBL need to more concentrate on loan and advance services. And they need to offer attractive
packages to promote their loan and advance product.

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  Maximum amount of loan is provided to the long-term industrial sectors. They intentionally
ignore the agriculture sector because of riskiness and safety issues. But for the overall economic
development of the country they should diversify their loans in agriculture sector.
 For improving the recovery position and reducing huge overdue loans, first action needed to
attract political support and urge upon the govt. and political parties to take necessary steps for
repayment of defaulted loans within a limit.
 New credit culture needs to be developed in place of default culture. Efforts to be taken as soon
as possible to safeguard the interest of banking sector.
 Real value of business can come from making regular visits to the customer's place of business
rather than holding all meetings in the Bank.
 Emphasize more on SME, Green Banking and Rural Area Banking.
 Increase branch wise promotional activities.
 Try to faster the service.
 Jamuna Bank Ltd. should recruit more employees on the branch.
 Cash limit should be increased.
 Number of ATM booth should be increased.
 Provide enough training program.
 Maintaining strong ethical principles.

Conclusion
Jamuna Bank Ltd. is a commercial bank launched its operation in 2001. It has already developed goodwill
among its clientele by offering its excellent services by different divisions. This success has resulted from
the dedication, commitment and dynamic leadership among its management over the periods. The
working atmosphere of the Jamuna Bank Limited is very simulating. During the short span of time of its
operation, the bank has been successfully to the position itself as a progressive and dynamic financial
institution in the country.

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The banking sector of Bangladesh is passing thorough a tremendous reform under the economic
deregulation and opening up the economy. Currently this sector is becoming extremely competitive with
the arrival of multinational banks as well as emerging and technological infrastructure, effective credit
management, higher performance level and utmost customer satisfaction. Jamuna Bank Ltd. fairly
follows the credit policy and practices set by the management of the bank. And by that they are doing
well in reducing the high classification rate and in attaining the profit target of the bank. It has been
observed that Jamuna Bank Ltd has been maintaining an encouraging trend of overall performance in the
country. High employee efficiency, high profitability, rapid growth of deposit and advances and high loan
recovery prove evidence of sound financial condition of Jamuna Bank Ltd.
The modern business world is on the fastest flow of competition which is growing wider and wider. To
have sustainability in this competitive world the organization are formulating new strategies and
business plan with maximum efficiency levels in all sectors.
To build a strong base for the bank and to uphold the image of bank determination of firm or customer
is not an outsider on their business he she is a part of the bank. They should have decrease the
knowledge gap that means the gap between customer expectation and management perception of
customer expectation. They should also decrease communication gap and ultimately the bank should
adjust the customer perception with their expectation. JBL is a modernized bank; goodwill of JBL is
increasing day by day. Because it makes a good employment opportunity. It provides high standard and
expectation facilities for their customers. It contributes in the economic development of the country.
There are many services providing by JBL that is carry out good opportunity for general people of the
country and also for savings. Besides the policy and strategies of JBL is high standard than other private
bank. But they need to be more careful dynamic to retain the old customer and create new customer in
existing competitive situation.

References
Ahmed, E. R. (2006). Comparative analysis of loan recovery among nationalized, private and islamic
commercial bank of Bangladesh. 03.

Bastos, J. a. (n.d.). Predicting bank loan recovery rates with neural networks.

Eyo O. Emmanuel, O. I. (2017). Loan recovery performance of group.

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Hong Wang, C. F.-P. (2018). The determinants of bank loan recovery rates in good times and bad-new
evidence. The determinants of bank loan recovery rates in good times and bad-new evidence.

Khalily, M. B. (1993). Saving and Development. 17.

O.Olokoyo, M. A. (2018). Deposit money banks loan recovery strategies and customer, Bank
relationship. 06.

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