Credit Management of Standard Chartered Bank

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Company Profile

  Name
of the Organization   : Standard
Chartered Bank Bangladesh

1948 (Chittagong)

ry
Chief Executive Officer :
Jim McCabe

Head Office :
Gulshan

Logo:

Nature of the organization   : Multinational Company with subsidiary group in Bangladesh.

Local Time :
GMT + 7 Hours

Taka (BDT)

Population :
161.3 million (UN,
2008)

Number of Branches   :
25

50

Technology   :
Offers full online
banking from branch to branch and also from Dhaka to
Chittagong.

Service Coverage & Customers   :
Serves individual and corporate   customer   within Dhaka & Chittagong.

2.2 Background of the Bank

 Background

The Standard Chartered Group was
formed in 1969 through a merger of two banks: The Standard Bank of British
South Africa founded in 1863 and the Chartered Bank of India, Australia and
China, founded in 1853. Both companies were keen to capitalize on the huge
expansion of trade and to earn the handsome profits to be made from financing
the movement of goods from Europe to the East and to Africa.

The Chartered Bank: The
details about the Chartered Bank include:

• Founded by
  James Wilson following the grant of a Royal Charter by Queen Victoria in
  1853.
• Chartered
  opened its first branches in Mumbai (Bombay), Calcutta and Shanghai in
  1858, followed by Hong Kong and Singapore in 1859.
• Traditional
  business was in cotton from Mumbai (Bombay), indigo and tea from Calcutta,
  rice in Burma, sugar from Java, tobacco from Sumatra, hemp in Manila and
  silk from Yokohama.
• Played a major
  role in the development of trade with the East which followed the opening
  of the Suez Canal in 1869 and the extension of the telegraph to China in
  1871.
• In 1957
  Chartered Bank bought the Eastern Bank together with the Ionian Bank’s
  Cyprus Branches. This established a presence in the Gulf.

The Standard Bank: The details about the Standard Bank include:

• Founded in the
  Cape Province of South Africa in 1862 by John Paterson. Commenced business
  in Port Elizabeth, South Africa, in January 1863.
• Was prominent
  in financing the development of the diamond fields of Kimberley from 1867
  and later extended its network further north to the new town of
  Johannesburg when gold was discovered there in 1885.
• Expanded in
  Southern, Central and Eastern Africa and by 1953 had 600 offices.
• In 1965, it
  merged with the Bank of West Africa expanding its operations into
  Cameroon, Gambia, Ghana, Nigeria and Sierra Leone.

In 1969, the decision was made by Chartered and by Standard to undergo a
friendly merger. All was going well until 1986, when a hostile takeover bid was
made for the Group by Lloyds Bank of the United Kingdom. When the bid was
defeated,

Standard Chartered entered a period of change. Provisions had to be made
against third world debt exposure and loans to corporations and entrepreneurs
who could not meet their commitments. Standard Chartered began a series of
divestments notably in the United States and South Africa, and also entered
into a number of asset sales.

From the early 1990s, Standard Chartered has focused on developing its
strong franchises in Asia, the Middle East and Africa using its operations in
the United Kingdom and North America to provide customers with a bridge between
these markets. Secondly, it would focus on consumer, corporate and
institutional banking and on the provision of treasury services – areas in
which the Group had particular strength and expertise.

In the new millennium SCB acquired Grindlays Bank from the ANZ Group and
the Chase Consumer Banking operations in Hong Kong in 2000.2005 and 2006 were
historic years for as several milestones with a number of strategic alliances
and acquisitions that is expected to extend SCB’s customer or geographic reach
and broaden their product range at the same time.

The bank rejuvenated its 150-year-old logo in 2003 by bringing in colors
of green and blue. The logo shows the letters ‘S’ in blue and ‘C’ in green,
twisted and curled with one another. The logo of the bank depicts the merger of
two banks.

Standard Chartered today: Today Standard Chartered is the
world’s leading emerging markets bank employing 30,000 people in over 500 offices
in more than 50 countries primarily in countries in the Asia Pacific Region,
South Asia, the Middle East, Africa and the Americas. The new millennium has
brought with it two of the largest acquisitions in the history of the bank with
the purchase of Grind lays Bank from the ANZ Group and the acquisition of the
Chase Consumer Banking operations in Hong Kong in 2000. These acquisitions
demonstrate Standard Chartered firm committed to the emerging markets, where we
have a strong and established presence and where we see our future growth.

2.3 Company Vision

At Standard Chartered Bank, we draw our
inspiration from the distant. Our vision is to assure a standard that makes
every banking transaction a pleasurable experience. Our endeavor is to offer
you supreme service through accuracy, reliability, timely delivery, cutting
edge technology and tailored solution for business needs, global reach in trade
and commerce and high yield on your investments. Our people, products and
processes are aligned to meet the demand of our discerning customers. Our goal
is to achieve a distinct foresight. Our prime objective is to deliver a quality
that demonstrates a true reflection of our vision – Excellence in Banking.

2.4 Company
Mission

To be the premier
financial institution in the country providing high quality products and
services backed by latest technology and a team of highly motivated personnel
to deliver Excellence in Banking.

2.5 Values

Standard
Chartered also operates according to certain key business values. These are –

·
The highest personal
standards of integrity at all levels

·
Commitment to truth and
fair dealing

·
Hands-on management at
all levels

·
Commitment to quality
and competence

·
A minimum of
bureaucracy

·
Fast decisions and
implementation

·
Putting the team’s
interests ahead of the individual’s

·
The appropriate
delegation of authority with accountability

·
A commitment to
complying with the spirit and letter of all laws and regulations wherever we
conduct our business.

SCB reputation is founded
on adherence to these principles and values. All section taken by a member of
the SCB Group or staff member on behalf of a Group company should confirm to
the principles and values. Additionally they have code of conduct for staff in
all operations.

2.6 Goal

SCB people, products and
processes are aligned to meet the demand of its discerning customers. Its goal
is to achieve a distinction like the luminaries in the sky. Its prime objective
is to deliver a quality that demonstrates a true reflection of its vision – Excellence
in Banking.

2.7
Strategic Objectives

·
To
conduct transparent and high quality business operation within the legal and
social framework.

·
To
provide customers continually efficient, innovative and high quality products
with excellent delivery system.

·
To
generate profit with qualitative business as a sustainable ever-growing
organization.

·
We
are committed to our community as a corporate citizen and contributing towards
the progress of the nation as our corporate social responsibility.

·
·
We
strive for fulfillment of our responsibility to the government through paying
entire range of taxes and duties and abiding the other rules.

·
We
are cautious about environment & climatic change and dutiful to make our
world a green and clean soul.

2.8 The main Objective of
Standard Chartered Bank

Through
an international network linked by advanced technology, including a rapidly
growing e-commerce capability, SCB provides a comprehensive range of financial
services, personal financial services, commercial banking, corporate,
investment banking and markets, private banking and other activities.

2.9 Principles of Standard Chartered Bank

The
Standard Chartered Group is committed to five core business principles. These
are –

·
Outstanding customer
service

·
Effective and efficient
operations

·
Strong capital and
liquidity

·
Prudent lending policy

·
Strict expense
discipline

2.10.
Organogram  

Figure 1: Organogram

: Chief Executive
Officer

:
Head of Consumer Banking

: Head of
wholesale Banking

: Head of
Human Resource

: Head of
Finance & Administration

HOCA :
Head of Corporate Affairs

Remarks: All Departmental Heads indirectly report to country CEO, and directly
report to regional head

2.11. Branch Location & Banking Hour

2.12. Management Structure
of Standard Chartered Bank

2.12.1 Board of Directors

2.12.2 Board of Members

Source: Standard Chartered Bank
website (www.standardchartered.com/bd)

2.13. Physical Evidence

The environment in which the
reference and information service are delivered that performance and
communication of the service,

The appearance of building, landscaping, vehicles, interior
furnishing, equipment, staff members, signs, printed materials, and other than
visible cues all provide tangible evidence of the banks service quality.
Standard Chartered Bank manages its physical evidence very carefully, as it can
have a profound impact on customers’ impression.

They have:

• Well decorated office space
• Prayer time & space
• Necessary furniture & electric equipment
• Seating arrangement for customers
• Car parking facility
• Printed materials
• Skilled manpower etc.

2.14.
Process:

• Standard Chartered Bank creates
  and delivers product elements based on customer requirement.
• They design and implementation
  by effective process.
• Standard Chartered Bank designs
  its process in such a way that lead to fast, dynamic and very effective
  service delivery and result in satisfied customers.
• As the process of the bank is
  very well designed, it helps a lot to the front line staffs to do their
  jobs well, resulting in high productivity and decrease likelihood of
  service failure.
• In the bank most of the directions
  comes from head office but there are different culture in different branch
  based on location but everywhere a specific process is highly maintained.

2.15. Capital Structure

The capital structure of Standard
Chartered Bank is quite strong. Its authorized capital is Tk 6,000 million and
paid up capital is Tk 2,128 million. Market price per share is tk 780.

(Amount in
million)

Source: Annual Report
Standard Chartered Bank (Year 2005-2009)

From the graph it is seen that in
2005 and 2006 the authorized capital was tk 2,650 million and from 2007 it is
tk 6,000 million. Their paid up capital is also increasing year by year. In
2005 it was tk 1,228 million and in 2009 it stood at tk 2,128 million.

2.16. Products and Services of Standard Chartered Bank

Source: Annual Report of Standard
Chartered Bank (Year 2009)

Fig: – 2 (d) Products and Services of Standard Chartered Bank

2.17.
Different Departments:

Figure:
2(e) – Different Departments

2.18.
Department of Gulshan Branch

General Banking (GB)
Department:

Some of the day-to-day
activities of this department are the following.

Account Opening

2
Issuance of Cheque

Receiving Cheques for Clearing, Transport, and Dispatch

4
Issuance of PO (Pay Order), DD (Demand Draft), etc.

Opening and Maintaining of FDR and other Scheme Deposits

Fund Transfer

Closing and Transfer of Accounts

Maintaining the Locker of the Bank

9
Outward Clearing of IBC and OBC

10
Maintaining On-line Voucher

11
Utility bill, Rent of building and work of accounts department was
done by GB because they don’t have any separate accounts department.

Cash Department:

This department is
responsible for cash payment and receipt. The employees in this department are
also liable for computer posting, passing cheques, and accuracy of posting,
balancing on-line accounts, etc.

Credit Department:

This department is
responsible for the following jobs:

1
Prepare the application form to provide loan

2
Preparing CIB  Statements

Preparing Credit Proposal and Statement

4
Administration of Retail Credit

Foreign Exchange Department

1. L/ C opening.
2. Verification o L/C application
3. Sanction the application
4. Advising L/C
5. Export trade financing
6. Remittance

Marketing and Customer Care Department

Searching for new customer, answer the inquiry about the
product to the customer. They also look whether customer all documents are
given or not.

2.19 Credit
Rating Report

Standard
Chartered Bank was rated by Credit Rating Agency of Bangladesh (CRAB) on the
basis of financial audited Statement, as on December 31 .2009.The Summary of
rating is presented below:

Commercial banks rated A1 in the long term are adjudged to be
to be strong banks, characterized by good financials, healthy and sustainable
franchises and a first rate operating environment. This level of rating
indicates strong capacity for timely payment of financial commitments with low
likeliness of being adversely affected by foreseeable events.

Commercial banks rated ST-2 in the
short term are considered to have strong capacity for timely repayment. Banks
rated in this category are characterized with commendable position in terms of
liquidity, internal fund generation, and access to alternative sources of funds
is outstanding.

Theoretical Aspects

Credit: Credit is a contractual Agreement,
in which a borrower receives something of value now, with the agreement to
repay the lender at some date in the future.

Pay Order: A
pay order is a draft issued by one another or on its branch. The purchase of a
draft makes to the seller in local currency at the domestic center while the
paying after presentation of the draft by the beneficiary pays the beneficiary.
There is also risk of loss of the draft in transit.

Demand Draft: The person intending to remit the money through a pay order has to
deposit the money to be remitted with the commission which the banker charges
for its services. The amount of commission depended on the amount to be
remitted .On issue of the pay –order the remitter does not remit a party to the
instrument 1) drawer branch 2) drawee branch 3) payee. This is treated as the
current liability of the bank as banker on the presentation of the instrument
should pay the money.

Telegraphic transfer: Telex transfer is another widely used mode for remittance of
funds. In case of telex transfer the message for transfer of funds is
communicated through tested telex. SCB generally recovers from the telex
charges in addition to the usual service charge.  Now a day’s Standard Chartered are not
covering this service.

Secured Overdraft-SOD
(FO): Advance is granted to a client against financial obligations
that is deposited in the bank. A client can get up to 90% loan of the total
deposited value.

Secured Overdraft-SOD
(G): Granted against the work order of government departments,
corporation’s autonomous bodies and reported multinational private
organization. To arrive at logical
decision, the client’s managerial capability, equity strength, nature of
scheduled work is to be judged.

Cash Credit-CC
(Hypothecation): The mortgage of movable property for
securing loan is called hypothecation. Hypothecation is a legal transaction
whereby goods are made available to the lending banker as security for a debt
without transferring either the property in the goods or either possessing.

Cash Credit-CC (Pledge): Transfer
of possession in the judicial sense of essential in the valid pledge. In case
of pledge, the bank acquire the possession of the goods or a right to hold
goods until the repayment for credit with a special right to sell after due
notice to the borrower in the event of non-repayment.

Lim: It stands
for loan against important merchandise. It’s one kind of post import finances
allowed for very shorter period, usually 30 to 60 days or 30 to 90 days.

LTR: This is an arrangement under
which credit is allowed against trust receipts. Imported or exportable goods
remain in the custody of the importer of exporter. But he is to execute a
stamped trust receipt in favor of the bank wherein a declaration is made that
the goods imported or bought with the bank’s financial assistance are held by
him in trust for the bank. As soon as goods are sold, generally the importer or
exporter is required to deposit the sale proceeds there of the bank.

PAD: It stands
for payment against documents. By opening letter of credit on behalf of the
importer in favor of the seller banks undertake to make payment to the seller
subject to shipments of goods and submission of shipping documents in strict
compliance with L/C terms, giving title of goods to the buyer. After shipment
and having document in hand, the bank asks the importer to retire the import
bills immediately that the bank undertakes. Thus liability under the L/C is
converted to bank’s advance. It is a practice to allow the importer to retire
the documents until ship carrying the goods arrives. If the importer retires
the bill the transaction ends.

Primary security: There are
the securities taken by the ownership of the items for which banks provides the
facility.

Collateral security: Collateral securities refer to the securities
deposited by the third party to secure the advance for the borrower in narrow
sense. In wider sense, it denotes any type of security on which the bank has a
personal right of action on the debtor in respect of the advances.

Sub-standard Advances:
This
classification contains accounts where irregularities have occurred but where
such irregularities are considered to be either “technical” or
“temporary” in nature. The main criteria for a sub-standard advance
are that despite these “technical” or temporary irregularities no
loss is expected to arise.

These accounts will require close supervision by
the management to ensure that the situation does not deteriorate further.

Provision @ 15% of the base is required for debt
in this classification where the base is the outstanding balance less interest
kept in Interest Suspense Account less the value of eligible securities.

Doubtful Debt: This classification
contains debts where doubt exists the full recoverability of the principal
and/or interest. Although a loss is anticipated it is not possible at this
state to quantify the exact extent of that loss. Management is required to
handle such debts with the utmost caution to either avoid or minimize the
Bank’s losses. Provision @ 50% of the base is required for debts in this
classification.

Bad-Debts: These facilities are
considered to be uncorrectable shall be made a provision @ 100% of the base.

In addition to the above classification
rating, there should be another category which is not classified but where
special attention is necessary to keep the account out of classification. This
category will be known as Special Mention. Facilities required special
monitoring are to be flagged or put on a watch list.

About Credit

4.1 Credit

The word credit comes from the Latin
word “Credo” meaning “I believe”. It is a lender’s trust in a person’s or firms
or company’s ability or potential ability and intention to repay. Credit is a
contractual Agreement, in which a borrower receives something of value now,
with the agreement to repay the lender at some date in the future. One of the
basic functions of the bank is deposit extraction and credit extension.
Managing credit operations is the crying need for any bank.

The objective of the credit management is to maximize the
performing asset and the minimization of the non-performing asset as well as
ensuring the optimal point of loans and advances and their efficient
management.

4.2 Factors Related with Credit

·
Risk

·
Time

·
Interest
Rate

·
Security
or Collateral

·
Operating
Expense

·
Legal
Considerations

·
Inflation

·
Finance
Charge

4.3 Importance of Credit

Credit plays a vital role
in national economy in the following ways-

I.
It
provides working capital for industrialization

II.
It
helps to create employment opportunities

III.
Credit
controls almost all kinds of production activities of the country

IV.
It
brings social equity

V.
Cash
generation occurs for its successful performance

VI.
Business
cycle can run well only by the help of lending system

VII.
Economic
stabilization

  VIII. Raise standard of living.

4.4 Credit
Management

Credit management is a dynamic field
where a certain standard of long-range planning is needed to allocate the fund
in diverse field and to minimize the risk and 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 SCB, it is required to analyze its credit policy,
credit procedure and quality of credit portfolio.

4.5 Credit Policy of SCB

One of the most important ways, a bank can make sure that its
loans meet organizational and regulatory standards and they are profitable. It
is important to establish a loan policy. Such a policy gives loan management a
specific guideline in making individual loans decisions and in shaping the
bank’s overall loan portfolio. In Standard Chartered Bank there is perhaps a
credit policy but there is no credit written policy.

4.6 Credit
Principles

In the feature, credit principles
include the general guidelines of providing credit by branch manager or credit
officer. In Standard Chartered Bank they follow the following guideline while
giving loan and advance to the client.

1. Credit advancement shall focus
   on the development and enhancement of customer relationship. All credit
   extension must comply with the requirements of Bank’s Memorandum and
   Article of Association, Banking Company’s Act, Bangladesh Bank’s
   instructions, other rules and regulation as amended from time to time.
2. Loans and advances shall
   normally be financed from customer’s deposit and not out of temporary
   funds or borrowing from other banks.
3. The bank shall provide suitable
   credit services for the markets in which it operates.
4. It should be provided to those
   customers who can make best use of them.
5. The conduct and administration
   of the loan portfolio should contribute within defined risk limitation for
   achievement of profitable growth and superior return on bank capital.
   Interest rates of various lending categories will depend on the level of
   risk and types of security offered.

4.7 Principles of Sound Lending

It should be clearly understood that the criteria/principles
are not inflexible laws & are given as guidelines for protecting credit. In
a practical competitive world, risks are defined, accepted and credit is often
granted even though a proposal does not strictly with some of the criteria
described below:

The basic lending criteria can be considered as
eight main headings, as follows:

§  Principle of Safety

§  Principle of Liquidity

§  Principle of Purpose

§  Character and ability of the borrower

§  Principle of Security

§  Principle of profitability

§  Source of repayment

§  Principle of National Interest

Each of the headings will now be discussed further in the following
paragraph:

Principle of Safety

The first lending Principle of sound
lending is safety. The very existence of a bank depends upon the safety of its
advances. Safety should not be sacrificed for profitability.  So utmost care should be exercised to ensure
that the funds go to the right type of borrower, are utilized in such a way
that they remain safe and the repayment comes in the normal course.

Principle of Liquidity

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

Principle of Purpose

The bank should not lend money for any purposes for
which a borrower may be free from all risks but if the funds borrower are
employed for unproductive. Purpose like marriage ceremony, pleasure trip etc or
speculative activities, the repayment in the normal course will become
uncertain. Banks therefore discourage advances from boarding stocks and refuse
advances for speculative activities.

Character and ability of the borrower:

The primary responsibility of the leading banker is
“know your customer and his business”. While considering the character and
ability of a borrower, the following point must be kept in mind.

§  Do know your customer already?

§  Was he respectively introduced?

§
If he was
previously customer of another bank, why has he come to United Commercial Bank
Ltd. Try to see previous bank statement?

§
Have you
made the account opening inquiries required by the bank?

§
What are
the business its ownership?

§
What is the
customer’s background and financial track record?

§
Customer’s
honesty & integrity and personal stability?

§  How has the customer managed his financial
circumstances in the past?

The branch manger should have the answer of the above queries and should
be to judge his ability to use the credit facilities to his advantage. Advance
should be granted only to those borrowers in whom the branch manager has full
confidence. Integrity of the borrower and his ability to conduct business are of
paramount importance and take precedence over the value of securities offered.

Principle of Security

The
security offered by a borrower for an advance is insurance to the banker. It serves as the safety value
for an unforeseen emergency. So another principle of sound lending is the
security of lending. The security accepted by a banker to cover a bank advance
must be adequate, readily marketable, easy to handle and free from any
encumbrance.

Principle of Profitability

Banking is essentially a business, which aims at
earning of a good profit. The working funds of a bank are collected mainly by
means of deposit from the public and interest has to be paid on those deposits.
Banks have also to meet their establishment charges and other expenses.
Interest earned by a bank on its advance is the main source of its income. The
different between the interest received on advances and the interest paid on
deposits constitute a major portion of the banker’s income. Besides foreign
exchange business is also highly remunerative. The bank will not enter into a
transaction unless a fair return form it is assured.

Source of Repayment

After the branch manager has ensured that the credit
will be a profitable propositioning for the bank, he should then turn his
attention to the cash flow situation of the borrower. The bank’s credit can be
classified into three main categories, as follows:

• A very short-term
  advance will be liquidated by funds received in the very near future, such
  as advances against foreign or local bills or bridge functioning where
  evidence of credit sanction from another financial institution is
  available.
• Provision for current
  assets; this type facility is needed for trading and /or manufacturing
  activities.
• Long term loans,
  generally over 5 years; example of such facilities as investment in plant
  and machinery, a farm or a shop, generally, a long term is repaid out
  profits generated by the business.

Principle of National
Interest

The development of banking has
reached a stage where a banker is required to identify his business with
national policies. Banking Industry has significant role to play in the
economic development of a country. So, the savings of the people which are
mobilized by banks must be distributed to those sectors which require
development in the country’s Planning Program.

4.8 Global Credit Portfolio Limit of SCB

The features which deals with how much total deposits would
be used as lending the proportion of long term lending, customer exposure,
country exposure, proportion of unsecured facility etc. the most notable ones
are:

The aggregate of all cash facility will not be more than the
80% of the customers deposit

Long term loan must not exceed 20% of the total loan portfolio. Facilities are
not allowed for a period of more than 5 (Five) years. Credit facilities to any
one customer group shall not normally exceed 15% of the capital fund or TK. 100
crores.

4.9 Type of
Credit Activities: Credit may be classified with
reference to elements of time, nature of financing and provision base.

Classification on the basis of time: On
the basis of elements of time, bank credit classified as:

Continuous loan:

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

Demand loan:

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

Term loan:

These are
the advances made by the bank with a fixed repayment schedule. Terms loans
mainly include “Consumer credit scheme”, “Lease finance”,”
Hire purchase”, and “Staff loan”. The term loans are defined as
follows:

• Short
term loan: Up to 12 months.

• Medium
term loan: More than 12 months & up to 36 months

• Long term loan: More than 36
months.

Classification on characteristics of financing of Standard
Chartered Bank (SCB):

Short Term Agricultural Loan and Micro Credit

These loans are short term
credits enlisted by Agricultural Credit division of Bangladesh Bank in its
‘annual loan program’. Loans disbursed in agricultural sector for a period not
more than 12 months are also included in this category. Short term micro credits
are the credits not exceeding BDT 25,000/- (taka twenty five thousand) only and
repayable within twelve months.

Application Based Categories of Loan

Based on the purpose of the loan,
loans are classified as follows:

Corporate Loan

Any loan exceeding 1, 00, 00,000
BDT and issued for business and trade purposes is defined as corporate loan.
Such loans mainly serve the purpose of initials for the establishment of
industry or large scale factory.

SME (Small & Medium Enterprise) Loans

This type of loan is disbursed
for business purposes but the amount loaned does not exceed 1, 00, 00,000 BDT.
The amount loaned here serves the purpose of potential (partial) working
capital for small and medium business ventures.

Retail Loan

Retail loans are given for personal
usage rather than for business purposes. It includes auto loan, personal loan,
vacation loan, and home loan.

Personal Loan (Consumer Credit Scheme):

The
objectives of this loan are to provide essential household durable to the fixed
income group (Service Holders) and other eligible borrowers. Car loan, loan for
house renovation, vacation loan, marriage loan and loan for household equipment
well as entertainment products are governed by personal loan program. Personal loan is given under personal
guarantee of the borrower and another third parson known to the borrower. There
is also a processing fee of 1% taken at the time of disbursement of the loan.

Salaried
Individuals (salary must taken by Bank).

Professionals
(minimum one year Bank transaction script from any Bank).

Minimum Age of the Applicant: 21
Years

Maximum Age of the Applicant: 57 Years

Requirements: For Different professions people
Bank gives different conditions.

*:

*:

15.00 % -19.00 %per annum

Minimum Gross Family Income: BDT 14,500.00

Auto Loan

a) Salaried Individuals (salary must
taken by Bank).

b) Professionals (minimum one year Bank transaction script from any Bank).

Loan Size:

-Minimum Loan Amount : BDT 5, 00,000.00

-Maximum Loan Amount :   Up to 50% of
Auto price.

Interest Rate:

15.00 % per annum (Conditions Apply)

Age Limit:

-Minimum Age of the Applicant: 21 Years.

-Maximum Age of the Applicant: 57 Years.

Gross Income: Minimum: BDT 50,000.00

Loan Facility for –

-Brand New or Re-Conditioned Vehicle,
not older than 6 Years.

-Vehicle should be for personal use only.

Home Loan

Home Loan is a term loan facility to
purchase your desired home/flat.

Who Can Apply?

a) Salaried Individuals

b) Professionals

c) Business Persons (Requirements are
same for all product & customer)

Loans are available to Bangladeshi
nationals:

-Minimum age of eligibility
:   21 years

-Maximum age of eligibility :
65 years

-Verified gross family income :   BDT
40,000

Loan Size:

-Minimum
:   BDT 15, 00,000*

-Maximum :   BDT 200,
00,000*

*conditions apply

Maximum
:   15 Years

Depending on the size and tenure,
Dhaka Bank Home Loan interest rates vary from 12% to 13.50%

Security: Registered Mortgage of the
House/Apartment

Govt. Charges: As per Government Specification.

4.10 Business Credit Facilities under SME

·
OD WO (Overdraft Work Order)

·
OD PO (Overdraft Pay Order)

·
SOD (Secured Overdraft)

·
OD SME (Overdraft SME)

OD WO (Overdraft Work
Order)

SCB, OD WO is a credit against assignment of receivables (under
the awarded work) and lien / mortgage of collateral. It’s for contractors /
suppliers and can be availed on one off basis for financing the working capital
requirement in business against specific work order or the same under a
revolving line with renewal option.

Charges:

• Interest rate: Small – [Men: 13%
  – 17%; Women: 10%] & Medium – 13%.
• Overdue interest: 3%.
• Processing fee: 1.00%.
• VAT: 15% of processing fee.

OD PO (Overdraft Pay Order)

SCB, OD PO is a renewable credit against lien / mortgage of
collateral(s). It’s for contractors / suppliers as well and can be availed at a
pre determined margin for meeting the obligation of pledging pay order(s) with
the work order awarding authority as earnest money / security deposit.

Charges:

• Interest rate: Small – [Men: 13%
  – 17%; Women: 10%], Medium – 13%
• Overdue interest: 3%
• Processing fee: 0.50% to 1.00%
• VAT: 15% of
  processing fee.

SOD (Secured Overdraft)

SCB, SOD facility is provided against different types of FDRs, ICB
Unit Certificate, Life Insurance policy, etc. It is renewable and can be
availed on a continuous basis to support the day-to-day operations and / or
sudden escalation of financial requirement in a business.

Charges:

• Interest rate: 3% above the
  deposit interest rate.
• Overdue interest: 3%
• Processing fee: Nil
• VAT: Nil.

OD SME (Overdraft SME)

SCB, OD SME is also a credit against hypothecation of stocks
insured (covering all risks) under Bank’s mortgage clause and lien / mortgage
of collateral(s). It’s renewable and can be availed on a continuous basis to
support the day-to-day operations and finance growth of a business.

Charges:

• Interest rate: Small – [Male:
  13% – 17%; Female: 10%] & Medium – 13%
• Overdue Interest: 3%
• Processing fee: 0.50% to 1.00%
• VAT: 15% of processing fee

4.11 Rates of
Interest and Lending:

Source: Standard Chartered Bank Website
(www.standardchartered.com/bd)

4.12 Different Securities for Different Advances

Securities offered to the bank by the borrowers are
of different types. Each security has its own suitability. Some of the examples
of the securities obtained by the banks while allowing advance are shown below
against the types of advances-

4.13 Modes of Charging Securities

A wide
range of securities is offered to banks as coverage for loan. In order to make
the securities available to banker, in case of default of customer, a charge
should be created on the security. Creating charge means making it available as
a cover for advance. The following modes of charging securities are applied in
the Standard Chartered Bank.

Lien

A lien is
right of banker to hold the debtor’s property until the debt is discharged.
Bank generally retains the assets in his own custody but sometimes these goods
are in the hands of third party with lien marked. When it is in the hand of
third party, the third party cannot discharge it without the permission of
bank. Lien gives banker the right to retain the property not the right to sell.
Permission from the appropriate court is necessary. Lien can be made on
moveable goods only such as raw materials, finished goods, shares debentures
etc.

Pledge

Pledge is
also like lien but here bank enjoys more right. Bank can sell the property
without the intervention of any court, incase of default on loan, But for such
selling proper notice must be given to the debtor. To create pledge, physical
transfer of goods to the bank is must.

Hypothecation

In this
charge creation method physically the goods remained in the hand of debtor. But
documents of title to goods are handed over to the banker. This method is also
called equitable charge. Since the goods are in the hand of the borrower, bank
inspects the goods regularly to judge it s quality and quantity for the maximum
safety of loan.

Mortgage

Mortgage is
transfer of interest in specific immovable property. Mortgage is created on the
immovable property like land, building, plant etc. Most common type of mortgage
is legal mortgage in which ownership is transferred to the bank by registration
of the mortgage deed. Another method called equitable mortgage is also used in
bank for creation of charge. Here mere deposit of title to goods is sufficient
for creation of charge. Registration is not required. In both the cases, the
mortgaged property is retained in the hand of the borrower.

Trust Receipt

Generally
goods imported or bought by bank’s financial assistance are held by bank as
security. Bank may release this lien / pledge these goods against trust
receipt. This means that the borrower holds goods in trust of the bank; trust
receipt arrangement is needed when the borrower is going to sell these goods or
process it further but borrower has no sufficient fund to pay off the bank
loan. Here proceeds from any part of these goods are deposited to this bank.

Advance against
Work-Order

Advances
can be made to a client to perform work order. The following points are to be
taken into consideration. The client’s management capability, equity strength,
nature of scheduled work and

feasibility
study should be judiciously made to arrive at logical decision. If there is a
provision for running bills for the work, appropriate amount to be deducted
from each bill to ensure complete adjustment of the liability within the payment
period of the final bill besides assigning bills receivable, additional
collateral security may be insisted upon. Disbursement should be made only
after completion of documentation formalities and fulfillment of arrangements
by the client to undertake the contract. The progress of work under contract is
reviewed periodically.

Advance against Approved
Shares

Credit
facilities to extend against shares will be called “Investment Scheme against
Shares”. Advance may be allowed against shares of companies listed with the
Stock Exchange Ltd. Subject to margin or may other restrictions imposed by
Bangladesh Bank/Head Office of the bank from time to time. Value of shares
& margin should be worked out as per guidelines issued from time to time by
Bangladesh Bank / Head Office of the bank.

Advance against Fixed
Deposit Receipts

Advance
against Fixed Deposit Receipt will be subject to credit Restrictions imposed
from time to time by Head Office / Bangladesh Bank. Standard Chartered Bank
usually sanctions credit limit up to 90% of the FDR value. Scrutinize the Fixed
Deposit Receipts with regard to the following points.

a) The
Fixed Deposit Receipt is not in the name of minor.

b) It
is discharged by the depositor on revenue stamp of adequate value & his
signature is verified.

c) Creation
of liability on Fixed Deposit issued in joint names by any one of the
depositors is regular.

d) If
the Deposit Receipt is offered as a security for allowing advances, a letter of
lien shall be obtained from the depositors, on the appropriate form.

e) If
the Deposit Receipt has been issued by the branch-allowing advance, lien
against that specific Deposit Receipt to be marked in the fixed Deposit
Register of the branch.

4.14 The C’s of Good and Bad Loan in Credit Management

The Branch
manager of SCB try to judge the possible client based on some criteria. These
criteria are called the C’s of good and bad loans. These C’s are described
below:

 Character

The outcome
of analyzing the character is to have overall idea about the integrity,
experience, and business sense of the borrower. Two variables;
Interaction/interview, and Market Research are used to analyze the character of
the borrower.

a) Prompt
and consistent information supply, information given has not been found false
(Willingness to give information).

b) CIB
also reveals business character.

c) Willingness to give
owns stake/equity & collateral to cover.

d) Tax
payer.

a) Information
on business is verified.

b) Dealing
with supplier and or customer as supplier is also a kind of lender; the payment
character can also be verified.

Capital

For
identifying the capital invested in the business can be disclosed using the
following indicators:

a) Financial Statements

b) Receivable,
Payable, statements to practically assess the business positions. Net worth
through financial statements or from declaration of Assets & Liability
statement.

Capacity (Competence)

Capability
of the borrower in running the business is highly emphasized in the time of selecting
a good borrower. As the management of the business is the sole authority to run
the business that is use the fund efficiently, effectively and
profitably.  The indicators help to identify the capacity of the borrower.

a)
Entrepreneurship skills i.e. risk taking attitude
shown by equity mobilization.

b)
Management competencies both marketing and products
detail, ability to take decision.

c)
Resilience or shock absorption:
Connection, Back up (if first time falls second lines come to help).

Collateral

Make sure
that there is a “second way out” of a credit, but do not allow that to drive
the credit decision.

Cash Flow

Cash flow
is the vital factor that is used to identify whether the borrower will have
enough cash to repay the loan or advance. Cash keeps the liquidity to ensure
repayment. The relationship manager tries to identify the annual cash flow from
the submitted statements.

Conditions

Understanding
the business and economic conditions can and will change after the loan is
made.

Complacency

Do not rely
on past history to continue. Stay alert to what can go wrong in any loan.

Communication

Share
credit objectives and credit decision making both vertically and laterally
within the bank.

Credit Query:

The loans
and advance department gets a form filled up by the party seeking a lot of
information.

4.15 Different Types of Risks Associated with CM

LRA divides the credit risk into two
categories, namely

a) Business Risk: It refers to
the risk that the business falls to generate sufficient cash flow to repay the
loan. Business risk is subdivided into two categories- Industry Risk and
Company Risk.

a.1 Industry Risk:Due to some external reasons a
business may fail and the risk, which arrives from external reasons of the
business, is called industry risk. It has two components- Supply Risk and Sales
Risk.

a.1.1 Supply Risk:It indicates that the business
suffers from external disruption to the supply of imputes. Components of
supplies risk are as raw material, Labor, power, machinery, equipment, factory
premises etc. Supply risk is assessed by a cost breakdown of the inputs and
then assessing the risk of disruption of supplies of each item.

a.1.2 Sales Risk: This refers to the risk that the business suffers from
external disruption of sales. Sales may be disrupted by changes to market size,
increasing in competition, and change in the regulation or due to the loss of
single large customer. Sales risk is determined by analyzing production or
marketing system, industry situation, Government policy, and competitor profile
and companies strategies.

a.2 Company Risk:This refers to the risk that the
company fails for internal reasons. Company risk is subdivided into Company
Position Risk and Management Risk.

a.2.1
Company Position Risk: Within an industry each and every company holds a
position. This position is very competitive. Due to the weakness in the
company’s position in the industry, a company is the risk for failure. That
means, company position risk is the risk of failure due to weakness in the
companies position in the industry. It is subdivided into performance risk and
resilience risk.

a.2.1.1 Performance Risk:This risk refers to the risk that the
company’s position is so weak that it will be unable to repay the loan even
under Favor able external condition. Performance risk assessed by SWOT
analysis, Trend analysis, and Cash flow forecast analysis and credit report
analysis (i.e. CIB repot from Bangladesh Bank).

a.2.1.2
Resilience Risk: Resilience means to recover early injury. This refers
to risk that the company falls due to resilience to unexpected external
conditions. The resilience of a company depends on its leverage, liquidity and
strength of connection of its owner or directors. The resilience risk is
determined by analyzing different financial ratio, flexibility of production
process, shareholders willingness to support the company if need arise and
political and private affiliation of owners and key personnel.

a.2.2
Management Risk: The management risk refers to the risk that the
company fails due to management not exploiting effectively the company’s
position. Management risk is subdivided into Management Competence Risk and
Integrity Risk.

a.2.2.1
Management Competence Risk: This refers to the risk that falls because the
management is incompetent. The competence of management depends upon their
ability to manage the company’s business efficiently and effectively. The
assessment of management competence depends on management ability and
management team work. Management ability is determined by analyzing the ability
of owner or board of the members first and then key personnel for finance and
operation. Management team work is determined by analyzing management structure
and its strength and weakness.

a.2.2.2 Management Integrity Risk: This refers
to the risk that the company fails to repay the loan amount due to lack of
management integrity. Management integrity is a combination of honesty and
dependability. Management integrity risk is determined by assessing management
honesty, which requires evaluating the reliability of information supplied and
then management dependability.

b) Security
Risk:This sort of risk is associated with the realized value of the security,
which may not cover the exposure of loan. Exposure means principal plus
outstanding interest. The security risk is subdivided into two major heads i.e.
Security Control Risk and Security Cover Risk.

b.1
Security Control Risk: This risk refers to the risk that the bank falls to
realize the security because of bank’s control over the security offered by the
borrower i.e. incomplete documents. The risk of failure to realize the security
depends on the difficulty in obtaining favorable judgments and taking
possession of security. For analyzing the security control risk the credit
office is required to verify documentation to ensure security protection,
documentation completeness, documentation integrity and proper insurance
policy. He/she also conducts site visit to verify security existence.
Assessment of security control risk requires analyzing the possibility of
obtaining favorable judgment and analyzing the case with which the bank could
take the possession and liquidate the securities.

b.2
Security Cover Risk: This refers to the risk that the realized value of
security is less than exposure. Security cover risk depends on speed of
realization and liquidation value. For analyzing security cover risk, the
official requires assessing the power of the customer to prolong the legal
process and to analyze the market demand for the security For assessment of
security control risk, the officials times the time that would require to
liquidate the security and assess the risk and estimates the security value at
liquidation and assess the risk.

4.16 General procedure of sanctioning loan

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

a)
Party’s
application

b)
Filling
form-A

c)
Collecting
CIB report from Bangladesh Bank

d)
Processing
loan proposal

e)
Project
appraisal

f)
Head
office approval

g)
Sanction
letter

h)
Documentation

i)
Disbursement

A.  Party’s application

At first borrower had to submit an
application to the respective branch for loan, where he/she 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-A (prescribed application form of Bank) to the prospective
borrower.

B.  Filling Form -A

After satisfying with party’s
application the applicant need to fill Form-A. It is the prescribed form
provides 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.

C. Collecting CIB Report
from Bangladesh Bank

After receiving the application for
advance, Standard Chartered Bank sends a letter to Bangladesh Bank for
obtaining a report from there. This report is called CIB (Credit Information
Bureau) report. Standard Chartered Bank generally seeks this report from the
head office for all kinds of investment. The purpose of this report is to being
informed that whether the borrower has taken loan from any other Bank; if ‘yes’
then whether the party has any overdue amount or not.

D.  Processing loan Proposal

After receiving CIB report from
Bangladesh Bank, then respective branch prepare 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 be
signed by the borrowers before the disbursement of the loan. Of them some are
technically called charge documents. Necessary steps and documents:

1. Loan application form duly signed by the
   customer.
2. Acceptance of the term and conditions of
   sanction advice.
3. Trade license.
4. 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.
5. In Case Of Limited
   Company
   1. Copy
      of memorandum and articles of association of the company including
      certificate of incorporation duly certified by Registered Joint Stock
      Companies (RJSC) and attested by the managing director and accompanied by
      an up-to-date list of directors.
   2. Copy
      of board resolution of the company for availing credit facilities and
      authorizing managing director/chairman/director for execution of
      documents and operation of the accounts.
   3. An
      undertaking not to change the management of the company and the
      memorandum and article of the company without prior permission
   4. Copy
      of last audited financial statement up to last 3 years.
   5. Personal
      guarantee of the directors including the chairman and managing director.
   6. Certificate
      of registration of charges over the fixed and floating assets of the
      company duly issued by RJSC.
   7. Certificate
      of registration of amendment of charges over the fixed and floating
      assets of the company duly issued by RJSC in case of repeat loan or
      change in terms and conditions of sanction advice regarding loan amount
      and securities etc.
6. Demand promissory
   notes.
7. Letter of
   hypothecation of stocks and goods.
8. Letter of
   hypothecation of books debts and receivable.
9. Letter of
   hypothecation of plant and machinery.
10. Personal letter of
    guarantee.

Required Doc’s for Retail (Individual) Loan

Photograph- 2 Copies

Passport/National
ID/Driving License

Visiting card/company
ID

Tin

Trade license (For
Businessman)

LOI (For service
holder)

Utility Bill
(electricity/WASA/Gas)

Bank statement- last 6
months

Quotation (For Auto or
HHD)

Partnership Deed (for
partnership firm)

Company memorandum

Rental/Lease/Title Deed

Certificate of
professional degree

Guarantor

Spouse- photo with
signature, Attested by applicant

Eligible photo with
signature, Attested by the applicant, Visiting card, TIN

Sanction letter with
Related Bank Statement (If Enjoying Any Loan)

Required
Doc’s for SME

Total stock

Total sale for 1 year

Guarantor

Photograph

Visiting card

TIN

·
Trade license

Credit Risk Grading (CRG)
System

Credit risk grading is an important tool for credit
risk management as it helps the Banks & financial institutions to
understand various dimensions of risk involved in different credit
transactions. The aggregation of such grading across the borrowers, activities
and the lines of business can provide better assessment of the quality of
credit portfolio of a bank or a branch. The credit risk grading system is vital
to take decisions both at the pre-sanction stage as well as post-sanction
stage. At the pre-sanction stage, credit grading helps the sanctioning
authority to decide whether to lend or not to lend, what should be the loan
price, what should be the extent of exposure, what should be the appropriate
credit facility, what are the various facilities, what are the various risk
mitigation tools to put a cap on the risk level. At the post-sanction stage, the bank can decide about
the depth of the review or renewal, frequency of review, periodicity of the
grading, and other precautions to be taken.
Usually there includes six steps for CRG. This are –

• Step I Identify
  all the Principal Risk Components
• Step II
  Identify the Key Parameters
• Step IV
  Assign weight to each of the key parameters
• Step
  VI Arrive at the Credit
  Risk Grading based on total score obtained.

1. Identify all the principal risk components

At the
first step all the principal risk such as financial risk, business risk,
management risk, security risk and relationship risk are identified. These
principal risks cover all possible uncertainty that may occur.

2. Allocate weight to principal risk components

In this
step, weight is distributed to the risk components. Risk factors have to be
evaluated and weighted on the basis of updated & reliable data and complete
objectivity.

Source: SCB Website

3. Identify the key parameters of principal risk

In this step,
key parameters of principal risk are identified. The parameters are shown on
table below:

4. Assigning weight to key parameters

After
identifying key parameters, weight is given to each parameter of principal risk
components. In this case, high weight is given to the risky parameters.

5. Input data to arrive at score

Finally,
data is put on Excel based CRG matrix for getting the score.

Number	Grading	Short	Score
1	Superior	SUP	Fully cash secured, secured by govt. guarantee/international bank guarantee
2	Good	GD	85+
3	Acceptable	ACCPT	75-84
4	Marginal/Watch list	MG/WL	65-74
5	Special Mention	SM	55-64
6	Substandard	SS	45-54
7	Doubtful	DF	35-44
8	Bad/Loss	BL	6. Arrive at the Credit Risk Grading based on total score obtained: At last bank select a grade for the borrower. CRG System Review CRG system should be reviewed by the respective loan officer regularly. Frequencies of review of CRG are mentioned below; Risk grading Frequency (at least) Superior Annually Good Annually Acceptable Annually Marginal/Watch list Half yearly Special Mention Quarterly Substandard Quarterly Doubtful Quarterly Bad/Loss Quarterly Early Warning Signals (EWS) Any early alert is one of that has risk or potential weakness of a material nature requiring monitoring, supervision, or close attention by management. If theses weakness are left uncorrected, it may result in deterioration of the of the payment prospects for the asset or in the bank’s credit position at the same future date with a likely prospect of being downgraded, within the next twelve months. Early identification, prompt reporting and proactive management of early alert account are prime responsibilities of all Relationship Manager and must be undertaken on a continuous basis. An early alert report should be completed by the RM and sent to the approving authority in CRG for any account that is showing signs of deterioration within seven days from the identification of weaknesses. The risk grade should be updated as soon as possible and no delay should be taken in referring problem accounts to the CRM department for assistance in recovery. Despite a prudent credit approval process, loans may still become trouble. Therefore, it is essential that early identification and prompt reporting of deterioration credit signs be done to ensure swift action to protect the bank’s interest. E. Project Appraisal 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,   Techniques of Project Appraisal 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. Standard Chartered Bank considers the following aspects in appraising a proposal. Technical viability Commercial viability Financial viability Economic viability 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. F. Head Office Approval When Head office receive appraisal from the branch then, Head Office again appraises the project. 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. G. Sanction Letter After getting the approval of the HO the branch issues sanction letter to the borrower. A sanction letter contains:   Name of borrower, Facility allowed, Purpose, Rate of interest, Period of the Investment and mode of adjustment, Security and Other terms and condition.   H. 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 Standard Chartered Bank for sanctioning different kinds of Investment are:   Joint Promissory Note, Letter of Arrangement, Letter of Disbursement, Letter of Installment, Letter of Continuity, Trust Receipt, Counter Guarantee, Stock Report, Letter of Lien, Status Report, Letter of Hypothecation, Letter of Guarantee Documents Relating to Mortgage.   I. 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. Strategies for Recovery:Recovery of loan can be made in the following three methods:   Persuasive Voluntarily Legally 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: a. Building Task Force b. Arranging Seminar c. Loan Rescheduling Policy d. 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. In this case “Artha Rin Adalat Law 2003” plays an important role for collecting the loan.   4.17 Status of Loans Unclassified These are the loans with which the bank satisfied about repayment. No doubt exists up till now about their recovery. Classified These are the loans which the bank finds overdue after the due date. The bank applies its predefined policy and procedures, after a loan becomes classified. · Special Mention Account When a loan installment is first missed by the borrower, the loan account is classified as a Special Mention Account (SMA). The tenure of SMA varies with the category of loans. · Sub-Standard If a loan is not repaid or reschedule within the SMA period, it becomes sub-standard loan. From this stage the loan is treated as defaulted. Interest is treated the same way as in SMA. · Doubtful If a loan is not repaid or reschedule within the sub-standard period, it becomes a doubtful loan Interest will be treated as before in this stage. · Bad & Loss If a loan is not repaid or reschedule within the doubtful stage, it is termed as bad & loss. Serious doubts exist as to the recovery of such loans.     Loan Classification   4.17.1 Criteria for Loan Classification     Stages   Continuous Loan Demand Loan Fixed term loan Short Term Agricultural And Micro Credit Loan Term loan for within 5 years Term loan for more than 5 years Special Mention Account Irregular for 3 to 6 months Irregular for 3 to 6 months Irregular for 3 to 6 months Irregular for 3 to 12 months Irregular for 3 to 12 months Sub-Standard Irregular for 6 to 9 months Irregular for 6 to 9 months Irregular for 6 to 12 months Irregular for 12 to 18 months Irregular for 12 to 36 months Doubtful Irregular for 9 to 12 months Irregular for 9 to 12 months Irregular for 12 to 18 months Irregular for 18 to 24 months Irregular for 36 to 60 months Bad and Loss Irregular for more than 12 months Irregular for more than 12 months Irregular for more than 18 months Irregular for more than 24 months Irregular for more than 60 months 4.17.2 Interest and Payments on Classified Loans a) Interest on loans classified as sub-standard and doubtful are charged on the account, but instead of being credited to income account; it is credited to Income Suspense Account.  b) No interest on loans classified as bad & loss will be charged on the account. However, when suit will be filed to recover the loan, interest upon filing of such suit will be charged on the account and suit will be filed for the outstanding amount including interest. Such charged interest will also be credited to Interest Suspense Account. 4.17.3 Maintenance of Interest Suspense Account Though interest on loans classified as bad & loss may not be charged on the account, branches should calculate interest on monthly basis to charge it to Interest Receivables on Classified Loans account and credit to Interest Suspense account, but it is not entered into the accounting books. Amount wise record of such interest will be maintained and monthly proof will be prepared to confirm it with the ledger balance. 4.17.4 Treatment of Payment Received In Classified Loan Account Whenever any payment is received in respect of any classified loan account, the order of application will be as follows: a) To uncharged interest, if any b) To interest charged but credited to interest suspense account and c) To principal However, if any partial payment is received on account of a classified loan account for rescheduling, branches will keep the amount not yet paid in the Accounts Receivable – Classified loan instead of applying the fund out right to adjustment as stated above. For such adjustment, branches should seek permissions from the head office and verify and report the necessary data for the final decision of the head office. 4.18 Provisioning Provisioning is maintained at branch levels. This is followed in order apply the Matching Principle and Expense and loss Recognition Principle that suggest the recording of a probable loss account to be adjusted in the period it operates and is assumed to occur.  For every provisioning, each branch debits Income Account and credits Provision against loans to better match expense with revenue and show the effects by reducing income for any given period. 4.18.1 Rate of Provision Provision will be provided against all types of loans including short term agricultural and micro credit at the following rates:     Rate of provision Fig: 4(a) – Provision against Loan Provisioning rate against short term agricultural and micro credit will be as follows: a) For irregular, unclassified, sub-standard and doubtful loans 5% b) For loans classified as bad & loss 100%. 4.19 Declassification of Loans Classified By Standard Chartered Bank A loan classified by any branch may be declassified upon its recovery or rescheduling. A rescheduled loan will be classified again if any of the terms of rescheduling is unsatisfied and such rescheduling will be computed with retrospective effect from the date of rescheduling. However, once the loan is declassified on the basis of qualified judgment, branches may declassify the amount with the prior permission from the head office on the ground that the conditions for which classification was made has materially been improved and that no adverse situation exists. A loan classified by Head Office inspection team/ credit division will only be declassified with prior permission from the respective authority. A loan classified by Bangladesh Bank Inspection Team will be declassified either after obtaining permission from Bangladesh Bank or during the next inspection by Bangladesh Bank. 4.19.1 Issuance of Notice to the Client for Loans to Be Classified As per the Bangladesh Bank directives, Standard Chartered Bank has to issue a prior notice to the concerned client (borrower) at least one month before the date of treating each of the outstanding loans as classified/ overdue. Bangladesh Bank has a suggested specimen of such a notice to be followed and notified by the bank. 4.19.2 Consideration of Rescheduling Request for Classified Loans Any rescheduling request has to be approved by Head Office. For consideration of rescheduling request of the client, the client has to deposit minimum 1% of the total overdue amount. In this case, amount of interest not charged to the account for a bad & loss situation will be included for defining the outstanding overdue. As per the Bangladesh Bank Directives, a decision has to be conveyed to the client within three months from the date when the rescheduling request was received. Therefore, branches must forward rescheduling request to Head Office within 15 (fifteen) days from the date of receipt of the request along with the branch’s opinion on the proposal and recommendation as per the situation of the claim. 4.19.3 Resorting To Legal Action for Recovery of Stuck-Up Advances Branches can initiate the legal procedures only when they are assured that the classified loan will not be recovered through persuasion alone .For initiating legal action branch shall obtain prior permission from Head Office. Request for such permission should indicate desired nature of legal action to be initiated and the request should accompany a resume of the account. While initiating legal action a careful consideration shall be made to take all the “off-ledger” interest elements of the account and that all the concerned persons have been involved with such action. As soon as the legal action is initiated, it will be circulated to Head office along with all the particulars of such action. Legal expenses incurred will be charged to prepaid expenses (legal action). It is very important to note that filing of a suit is only a start of a lengthy legal process and branches have to make necessary arrangement to follow-up and monitor the progress of the suit so as to ease the disposal of the suit. It is quite normal that the borrower may resort to different tactics to delay the procedure and branches must be vigilant to protect the banks. It shall be the particular responsibility of the branch manager to ensure proper monitoring and supervision of the legal proceedings so as to protect the bank’s interest. 4.19.4 Furnishing Lists of Defaulted Borrowers to Other Banks Branches under the authorization of the Head Office have to circulate the list of defaulting borrowers to Bangladesh Bank or other banks and financial institutes. This ensures that other banks will not extend credits to any previous loan defaulters. The Actual Write-Off When Standard Chartered Bank fails to recover some portion of the defaulted loan because of getting a cash amount less than the outstanding loan amount from selling the security, it writes off the rest of the loan amount. For this write off, it debits a loss account and credits the Accounts Receivable–classified loan for the amount left after making adjustments to recover the outstanding loan. 4.20 Credit Administration The administration function is critical in ensuring that proper documentation and approvals are in place prior to the disbursement of loan facilities. For this reason it is essential that the function credit administration be strictly segregated from relationship management/ marketing in order the possibility of controls being compromised of issues not being highlighted at the appropriate level. 4.21 Credit Monitoring: To minimize credit losses, monitoring procedures and systems shall be in place that provides an early indication of the deteriorating financial health of a borrower. At a minimum, systems shall be in place to report the following exceptions to relevant executives in CRM and RM team:  Past due principal or interest payments, past due trade bills, account excesses, and breach of loan covenants.  Loan terms and conditions are monitored, financial statements are received on regular basis, and any covenant braches or exceptions are referred to CRG and the RM team for timely follow-up.  Timely corrective action is taken to address finding of internal, external or regulator inspection/audit. All borrower relationships/loan facilities are reviewed and approved through the submission of a credit proposal at least annually.   Analysis and Findings 5.0 Analysis of Standard Chartered Bank. Analysis is an important part of a report. Two types of analysis have been done in this report- Quantitative and Questionnaire survey analysis. This analysis will give an idea about the credit performance of Standard Chartered Bank. Quantitative Analysis o Trend Analysis o Ratio Analysis o Comparative Analysis v  Questionnaire Survey Analysis Before starting qualitative and quantitative analysis here I am doing some general analysis regarding loan and advance about Standard Chartered Bank. 5.1 Total loan and advances: Loan Status 2007 2008 2009 Unclassified 1,43,376.12 1,46,705.55 1,48,796.61 Classified 7,373.43 6,292.15 5,122.21 Total 1,50,749.55 1,52,997.70 1,53,918.82   Fig: 5(a) – Total loan and advances of Standard Chartered Bank. From the graph it is seen that the total loan and advances of Standard Chartered Bank is increasing year by year. If Standard Chartered Bank gives more attention in various Sector than they can earn more income from loan and advances.     5.2 Classification of loan and advances: In million Loan status 2007 2008 2009   Standard 1,43,376.12 1,46,705.55 1.48,796.61 Special Mention Account 1,982.56 2,083.89 1,176.06 Sub Standard 1,134.88 939.78 831.59 Doubtful 1,981.63 1,404.91 1,391.16 Bad or loss 2,274.36 1,863.57 1,723.40 Total Classified Amount 7,373.43 6292.15 5,122.21 Source: Annual Report -2009 and 2008   Fig: 5(b) – Classification of loan and advances of Standard Chartered Bank. From the graph it is seen that the amount of classified loan is increasing year by year. In 2008 total classified loan amount was tk 6,292.15 million and in 2009 it stood at tk. 5,122.21 million. The amount of good also increased. 5.3 Sector wise Advances: A wide range of business industries and sectors constitutes the Bank’s advance portfolio. Major sectors where the Bank extended credit include steel and engineering, ship breaking, edible oil, sugar, housing and construction, pharmaceuticals, chemicals, electronic and automobiles, energy and power, service industries, trade finance, personal  consumer credit, leasing etc. The Bank continued to support Small and Medium Enterprises (SME) and expended credit facilities to them through its SME Cell. Sectoral allocation of advances reveals a well-diversified portfolio of the Bank with balance exposure in different sectors. High concentration sectors are textile and garment industries with outstanding of Tk.9,729 million, housing and construction with Tk.6,916 million, food and allied industries with Tk.3,506 million and engineering and metal including ship breaking with Tk.3,937 million as at 31 December 2009. .   Source: Annual Report 2009 Sectors 2007 2008 2009 Agricultural Industries 12% 13% 13% Textile and Garment Industries 15% 17% 18% Engineering and Metal Industries 4% 6% 7% Others 48% 46% 43%                                     Fig: 5(d) – Sector wise advances of Standard Chartered Bank  From the graph it is seen that the sector wise advances of Standard Chartered Bank is increasing year by year. Agricultural industries, Textile and Garment industries, Engineering and Metal industries are taken more percentage of advances. But the major portion (others) is decreasing year by year. Because the Bank is given more advances in the above sectors.   5.4 Geographical location wise loans and advances: Year by year Urban (in million) Region 2007 2008 2009 Dhaka 1,27,869.56 1,34,296.12 1,36,419.76 Chittagong 16,763.26 17,512.54 18,974.34 Sylhet 1,462.78 1,563.15 1,620.29 Other 3,691.61 4,226.39 4,371.40 Total 1,49,787.21 1,57,598.20 1,61,385.79 Rural Region 2007 2008 2009 Dhaka 11,478.21 11,645.87 11,725.51 Chittagong 298.86 309.42 327.29 Sylhet 262.54 288.78 301.18 Other 2,164.23 1,398.12 1,469.54 Total 14,203.84 13,642.19 13,823.22 Source: Annual Report -2009         From the graph it is seen that Standard Chartered Bank provides most of the portion of loan and advances in urban area, whereas they provide a little portion in rural area. As we seen before that this bank provide more loan and advances in other industries than agricultural industries. Because of this their contribution to urban area is more than rural area. This Bank is also decreasing to give their loan and advances amount in rural area year by year. 5.5 Investment: The Bank’s Investment during the year 2009 were mostly in long term Government Securities which stood at Tk.8,660 million as against Tk, 7,239 million making a growth of 20% over the last year. Fig: 5(e) – Year wise Investment of Standard Chartered Bank. Source: Annual Report 2005-2009 5.6 Deposit Analysis  (Amount in million) Year Deposit 2005 28,439 2006 41,554 2007 48,731 2008 56,986 2009 60,918 Source: Annual Report 2005-2009     Fig: 5(f) – Year wise deposit of Standard Chartered Bank.   Source: Annual Report 2005-2009   The deposit base of Standard Chartered Bank continued to register a steady growth and stood at Tk.60, 918 million excluding call as of 31 December 2009 compared to Tk. 56,986 million of the previous year. If deposit increases than the bank can use more proportion of deposit for loans and advances.   5.7 Provision After getting list of the classified accounts where no loss is anticipated, partial or total loss is anticipated, audit report by Audit division and Bangladesh bank, previous and current portfolio by external auditors and branch managers comments on the classified accounts, Head office credit division prepares a list of credit accounts which are considered to be totally or partially be unrecoverable. Provision against Loan and Advances (2005-2009) (Amount in million) Year Provision against Loan and Advances 2009 69,519 2008 65,388 2007 61,511 2006 58,363 2005 56,519     Fig: 5(g) – Provision against Loan and Advances. Source: Annual Report (2005-2009) From the graph it is seen that the provision is increasing year by year. In 2005 the provision against loan is 56,578 in 2006 58,363 in 2007 61,511 in 2008 65,388 and in 2009 the provision against loan amount is 69,519. 5.8 Recovery and Disbursement Analysis   Year Disbursement Recovery 2005 2,23,372 2,18,732 2006 2,34,049 2,28,908 2007 2,39,972 2,35,406 2008 2,49,698 2,44,303 2009 2,52,910 2,48,750 Source: Annual Report 2005-2009     Fig: 5(h) – Year wise Disbursement and Recovery of Standard Chartered Bank. From the graph it is seen that the disbursement amount of Standard Chartered Bank increases every year. In 2008 disbursement amount was tk. 249,698 million and in 2009 disbursement amount was tk. 252,910 million. In 2008 recovery amount was tk 242,303 million and in 2009 recovery amount was tk. 245,750 million. 5.9 Recovery in Percent The following Graph shows the ability of Standard Chartered Bank to recover the loan. Year Disbursement Recovery Recovery Percent 223372 218732 80.15% 2006 234049 228908 79.87% 2007 239972 235406 88.26% 2008 249698 244303 91.45% 2009 252910 248750 93.23% Source: Annual Report 2005-2009       Fig: 5(i) – Year wise Recovery rate of Standard Chartered Bank From the graph it is seen that the recovery rate of Standard Chartered Bank is increasing day by day. But they can not achieve their targeted standard percentage of recovery. They are trying hard to achieve their target year by year. The standard recovery percentage is 95% given by target of this bank. 5.10 Non Performing Loan Analysis: Year Non Performing Loan 2005 1.51% 2006 1.64% 2007 3.15% 2008 3.84% 2009 5.57%           Source: Annual Report 2005-2009                 Fig: 5(j) – Year wise non performing loan of Standard Chartered Bank From the graph it is seen that the non performing loan of Standard Chartered Bank increases every year. In 2008 non performing loan was 3.84% and in 2009 it stood on 5.57% because a large portion of loan provided to Mahbub traders goes default as they were fraud. 5.11 Interest income on loan and advances: (Amount in million) Year Interest income 2009 5323.18 2008 5845.36 2007 6295.12 2006 6577.25 2005 6907.66 Source: Annual Report -2005-2009 Fig: 5(k) – Interest income on loan and advances of Standard Chartered Bank. From the graph it is seen that the interest income from loan and advances of Standard Chartered Bank is increasing year by year. If Standard Chartered Bank gives more attention in this Sector then they can earn more income from loan and advances. 5.12 Ratio Analysis Ratio analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firm’s performance. The basic inputs to ratio analysis are the firm’s income statement and balance sheet.   Credit/ deposit Ratio  Credit/ deposit ratio= Credit/ Deposit Year Credit/deposit Ratio 2007 82.03% 2008 87.21% 2009 86.85% Source: Annual Report 2007-2009     Fig: 5(l)-Credit/Deposit ratio Interpretation: Credit deposit ratio measures the portion of deposit used for credit. The more the ratio the more the bank is using its deposit as its credit. According to the Bangladesh Bank, any Bank cans keep maximum 85% of their deposit as assailer. But in 2008 and 2009 the Bank uses more deposit as credit than the standard ratio given by Bangladesh Bank. Capital Adequacy Ratio Capital Adequacy Ratio= Total capital/ Risk weighted Assets Year C.A Ratio 2007 11.13% 2008 11.84% 2009 11.31% Source: Annual Report 2007-2009                 Fig: 5(m)-C.A Ratio Interpretation: Capital adequacy ratio determines the capacity of the bank in terms of meeting the liabilities and other risk such as credit risk, operational risk etc. Generally 10% is acceptable line for this ratio, in that sense bank is good enough, because in every year this ratio is more than standard line and this is good sign for the bank. Debt ratio Debt ratio= Total Liabilities/ Total assets Year Total Liability (Million) Total Asset (Million) Debt Ratio 2007 1,53,434 1,57,443 93% 2008 1,63,051 1,71,137 89% 2009 1,68,722 1,77,767 88% Source: Annual Report 2007-2009     Fig: 5(n) – Debt Ratio Interpretation: Debt ratio indicates the proportion of debt or leverage in total capital structure. The higher this ratio the greater the amount of other people’s money being used to generate profits. In the above graph in year 2007 the ratio was 93%, in year 2008 it decreases in 89% and year 2009 it is 88%. 5.13 Comparative Analysis   Comparative Analysis with other Banks Every bank is different in terms of their organizational structure and operating system. So no direct comparison can be made in credit policy and practices. But it can be compared with other banks by analyzing the efficiency in credit management. In that we will segregate the banks operating in Bangladesh into four types: Nationalized Commercial Banks Local Private Banks And then we will analyze and compare credit management efficiency of Standard Chartered Bank with those banks. 5.13.1 Nationalized Commercial Banks Nationalized banks are playing an important role in our banking and economic sector. There are four nationalized bank: Agrani Bank, Sonali Bank, Janata Bank and Rupali Bank. Here I am comparing Standard Chartered Bank with Sonali Bank: (Amount in Million) Particulars SCB Sonali Bank Total Deposits 360,918 406,151 Total Loans & Advances 252,910 254,022 Classified Loans 13521 69,833 Classified Loans Percentage (Total Loans & Advances) 5.34% 27.49% Provision kept against Classified Loans 21,488 43,380 Credit Deposit Ratio 93.88% 62.54% Return on Asset (ROA) 1.29% 0.42% Return on Investment (ROI) 11.58% 6.79% Source: Annual Report 2009 (Standard Chartered Bank & Sonali Bank) Sonali bank is one of the large nationalized banks in our country. From the table we see that in 2009 total deposit and total loans and advances of Standard Chartered Bank are lower than Sonali Bank. The classified loans also lower, which is a good sign for the credit management of Standard Chartered Bank. In year 2009 this banks classified loan was 27.49% of total loans and advances, where as Standard Chartered Bank was 5.34% his loan classification rate clears that there is huge gap in credit management between Sonali bank and Standard Chartered Bank. Also other particulars are so much good enough than Sonali Bank, which include in the table. Because of effective management, update credit management techniques, credit supervision, Standard Chartered Bank is doing great in credit management as their credit deposit ratio is better than Sonali Bank. So that we can say that the credit management of Standard Chartered Bank is better than a nationalized bank. 5.13.2 Local Private Commercial Banks In our country local private commercial bank play an effective role in our country’s banking sector. These banks are doing their work effectively and also providing better service for our country people. Prime Bank and Mercantile Bank are well recognized private commercial bank in Bangladesh. These banks are modern in their nature and activity. Like other banks these bank are much concern about their credit policy and follows Bangladesh Banks credit grading policies and rules in case of credit management. Vs Prime Bank
Particulars	SCB	Prime Bank
Total Deposits	360918	106,956
Total Loans & Advances	252910	89,252
Classified Loans	13521	1,149
Classified Loans Percentage (Total Loans & Advances)	5.34%	1.29%
Provision kept against Classified Loans	21,488	631
Credit Deposit Ratio	93.88%	83.45%
Return on Asset (ROA)	1.29%	2.37%
Return on Investment (ROI)	11.58%	15.67%

Source:
Annual Report 2009 (Standard Chartered Bank & Prime Bank)

Prime bank is one of the reputed
banks in our country. From the graph we can see that in year 2009 this banks
classified loan was 1.29% of total loans and advances, where as Standard
Chartered Bank was 5.34% in case credit management of SCB is less effective
than Prime Bank. Prime Bank follows a well structured credit policy than
Standard Chartered Bank. Apart this, total deposit of SCB is almost twice than
Prime Bank and they are using a large proportion of this deposit as loans and
advances and monitoring it properly.

5.14 Questionnaire Survey Analysis

Questionnaire is important for any
types of research. Questions are designed and asked to respondents to extract
specific information. It serves two basic purposes: to (1) collect the
appropriate data (2) make data comparable and amenable to analysis.

For preparing this report I have used
a questionnaire and interviewed 25 clients of Standard Chartered Bank. Such
questions are analyzing from questionnaire and those are followings:

5.14.1 How Standard Chartered Bank is different from other
banks?

Figure: 5(o) – How Standard Chartered Bank is different from other
banks?

From the graph it is seen that 44%
client prefer Standard Chartered Bank because of their easy loan
disbursement. 32% client said that interest rate is low so they prefer this
bank. 5% prefer for the SME facility and 1% prefer for the other privilege.

5.14.2 Income level of clients.

Figure: 5(p) – Income level of
clients.

From the graph it is seen that most
of the clients’ income level is above 55,000, which is good for providing loan.
Because they are financially solvent so it will be less risky to provide them
loan as they can easily pay the interest rate.

5.14.3 Experience of clients

Figure: 5(q) – Experience of clients

Experience
in business is a very important criterion for providing loan. Bank should
provide loan to those who are experienced so that there is less possibility of
loan default. From the graph it is seen that most of the clients’ experience is
in between 15-25 years, which is good for providing loan.

5.14.4 Opinion regarding interest rate.

Figure: 5(r) – Opinion regarding
interest rate.

From the graph it is seen that 44%
client are satisfied with the interest rate of Standard Chartered Bank. But the
dissatisfaction level is also near about the satisfaction level. So the bank
should adjust the interest rate in compare to other banks.

5.14.5 Opinion regarding Service charge.

Figure: 5(s) – Opinion regarding
Service charge.

From the graph it is seen that 52%
people said that the service charge of Standard
Chartered Bank is high, 44% said it is medium and 4% said it is low. So
bank should work on this factor.

5.14.6 The loan processing time is lengthy.

Figure: 5(t) – The loan processing
time is lengthy.

From the graph it is seen that 48%
client agree with the statement, 44% fully agree, 8% disagree, and no one is
fully disagree with this statement.

5.14.7 In which area(s) do you think that they should take
care of?

Figure: 5(u) – Area should improve

From the graph it is seen that 36%
said that the bank should work on their loan processing time, 32% said that
service charge should reduce, 12% said installment period should increase and
20% said interest rate should decrease.

Major Findings, Conclusion & Recommendations

Major Findings:

·
The
loan and advances of Standard Chartered Bank is increasing year by year. And it carries positive sign
for Standard Chartered Bank.

• Provision against loans of Standard
  Chartered Bank is increasing
  day by day.
• From the last two years analysis it is seen that Standard Chartered
  Bank is providing
  more credit facilities in urban areas than rural areas.

·
This Bank is also
decreasing to give their loan and advances amount in rural area year by year.

·
Higher rate of interest plays a great role in credit management.
Some times the rate is so high that the return from the investment is not so
adequate enough to repay the loan. And hence default occurs.

• Credit deposit ratio of Standard Chartered Bank is quite satisfactory.
• According to the Bangladesh Bank, any Bank cans keep
  maximum 85% of their deposit as assailer. But in 2008 and 2009 the Bank
  uses more deposit as credit than the standard ratio given by Bangladesh
  Bank.

• Debt ratio of Standard
  Chartered Bank is decreasing year by
  year. The major case is they can not achieve their targeted deposit from
  their clients.

·
Capital
adequacy ratio is above the standard line. Generally 10% is acceptable line for
this ratio, in that sense bank is good enough, because in every year this ratio
is more than standard line and this is good sign for the bank.

• It is found from the survey that most of the client
  prefers Standard Chartered Bank because
  of their easy loan and disbursement.
• The loan processing time of
  Standard Chartered Bank is quite lengthy according to the
  clients of Standard Chartered Bank.

• Standard Chartered Bank is providing loan to those who
  are experienced enough in their respective field. It is found from the
  survey.
• Classified loan percentage of Standard
  Chartered Bank is better than Sonali bank
  but worse than Prime Bank.

·
The
recovery rate of Standard Chartered Bank has increased in last two years. Before that, recovery rate
was not satisfactory.

• Day by day non performing loan of Standard Chartered
  Bank is increasing
  and in year 2009 the non performing loan percentage of Standard Chartered
  Bank was greater in
  compare to Prime Bank.

6.2 Conclusion

Proper financial system of country
can contribute towards the development of the country’s economy. In our country
banks are leading in the financial system. Again private commercial banks,
which are much better than state owned bank, are playing significant as well as
imperative role and the development of our country. Certainly Standard Chartered Bank
is mobilizing its all resources on this same track to achieve maximum possible
contribution to the nation.

Despite stiff competition among banks
operating in Bangladesh both foreign and local, Standard
Chartered Bank has achieved
satisfactory progress in areas of its operations and earned an impressive
operating income over the previous years. The bank hopes to achieve a
satisfactory level of progress in all areas of its operations including target
of profitability.

In achieving the aforesaid objectives
of the bank, credit operation is of paramount importance as the greatest share
of total revenue of the bank is generated from it, maximum risk is centered in
it and even the very existence of bank depends on prudent management of its
credit portfolio.

7.3 Recommendations

· The interest income from loan and
advances of Standard Chartered Bank is
increasing year by year. If Standard Chartered Bank give
more attention in this Sector than they can earn more income from loan and
advances

· Proper and effective monitoring
system should be developed in order to minimize the amount of non performing
loan.

·
As
we have seen that deposit amount of Standard
Chartered Bank is higher than Prime Bank, so if Standard Chartered Bank
can increase more their deposit than they can use more deposit portion to
provide credit facilities.

· As from the graph we have seen that
the bank is providing a large portion in unproductive sector, which is not a
good sign for our economy. So the bank should pay more concentration on
productive sectors like industrial loan instead of unproductive sector car
loan.

·
Standard Chartered Bank is focusing urban areas to provide credit facilities. Still
they are ignoring rural areas. But they can earn from agro sector so Standard Chartered Bank should provide more credit
facilities in rural areas.

· The bank should strictly follow ‘The
Principle of Sound Lending’. The bank should not sanction loan to the customer
without all necessary documents.

·
Recently
Bangladesh bank reduced the bank rate to encourage investment. But still in the
present economic context the private banks are charging too high rate of return
on the loans. So Standard Chartered Bank should reduce their interest rate as per Bangladesh Banks
guideline.

·
Capital
adequacy is important for a financial institution. Standard
Chartered Bank capital adequacy ratio is in better position and they
should maintain it.

· As Standard
Chartered Bank is providing loan to experienced clients so there is less
possibility to default the loan and bank should maintain it.

Appendix

Books:

• Lawrence,
  J Gitman (2003), “Principle of Managerial Finance”, 10^th
  edition, Pearson Education Pte. Ltd, Singapore.
• Bedi,
  H.L. “Practical Banking Advances” UBS
  Publishers Distributions Ltd. New Delhi.
• C.R
  Kotheri, “Research
  Methodology” 2^nd Edition, 2003-2004, Wishwa Prakashan,
  Calcutta, India.
• Frederic
  S. Miskhin, “The
  Economics of Money Banking & Financial Market” 6^th
  Edition, 2003, Boston.
• Frank
  K. Reilly & Keith C. Brown, “Investment Analysis Portfolio
  Management”, 7^th Edition.

Prospectors:

• Standard Chartered Bank, Annual report 2005-2009.
• Prime
  Bank Ltd, Annual Report 2009.

Websites:

www.standardchartered.com/bd

www.bangladesh-bank.org.bd

www.primebank.com

www.mblbd.com