Credit Management of Standard Chartered Bank

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Credit Management of Standard Chartered Bank

Company Profile

Name of the Organization : Standard Chartered Bank Bangladesh

Year of Establishment : 1948 (Chittagong)

Country 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

Currency Name : Taka (BDT)

Population : 161.3 million (UN, 2008)

Number of Branches : 25

Number of ATM’s : 50

Technology : Offers full online banking from branch tobranch 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.

· Our employees are our backbone. We promote their well being through attractive compensation package, promoting staff morale through training, development and career planning.

· 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

CEO : Chief Executive Officer

HOCB : Head of Consumer Banking

HOWB : Head of wholesale Banking

HOHR : Head of Human Resource

HOFA : Head of Finance & Administration

CIO : Chief Information Officer

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

City Branch Name & Address
Dhaka Gulshan Branch
67 Gulshan Avenue
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Evening Banking (Sun – Thu): 6:00 pm to 8:00 pm
Saturday Banking: 10:00 am to 1:00 pm
North Gulshan Branch
Block-NW(A), 189 Gulshan Avenue (North), Gulshan 2
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Banani Branch
14 Kemal Ataturk Avenue, Banani
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Evening Banking (Sun – Thu): 6:00 pm to 8:00 pm
Dhanmondi Road# 2 Branch
House 37, Road 2, Dhanmondi R/A
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Evening Banking (Sun – Thu): 6:00 pm to 8:00 pm
Saturday Banking: 10:00 am to 1:00 pm
Dhanmondi Road# 5 Branch
House 6, Road 5, Dhanmondi R/A
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Evening Banking (Sun – Thu): 6:00 pm to 8:00 pm
Saturday Banking: 10:00 am to 1:00 pm
Kakrail Branch
Karnaphuli Garden City, 109 Kakrail Road
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Kawran Bazar Branch
53 Kawran Bazar
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Saturday Banking: 10:00 am to 1:00 pm
Sonargaon Branch
L101 Pan Pacific Sonargaon Hotel, 107 Kazi Nazrul Islam Avenue
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Mirpur Branch
Dynasty Tower, Plot 01, Road 12, Block G, Section 6, Pallabi, Mirpur
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
City Centre Branch
City Centre, Plot 5/A, Motijheel C/A
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Saturday Banking: 10:00 am to 1:00 pm
Motijheel Branch
Alico Building, 18-20 Motijheel C/A
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Saturday Banking: 10:00 am to 1:00 pm
Chawk Bazar Branch
12 Water Works Road, Dalpatty, Chawkbazar
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Evening Banking (Sun – Thu): 6:00 pm to 8:00 pm
Savar Branch
Dhaka Export Processing Zone, Zone Service Complex
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Sheraton Branch
Dhaka Sheraton Annex Building, 1 Minto Road, Ramna
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Uttara Branch
House 81, Road 7, Sector 4, Uttara
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Evening Banking (Sun – Thu): 6:00 pm to 8:00 pm
aadiq Centre
102 Gulshan Avenue
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Chittagong Main Branch
Sheikh Mujib Road, Agrabad
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Saturday Banking: 10:00 am to 1:00 pm
Agrabad Branch
PHP House, 31 Agrabad C/A
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Khatunganj Branch
Asma Chamber, 1649 (New) Ramjoy Mohajon Lane, Khatungonj
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Nasirabad Branch
Bulbul Centre, 486/B, O R Nizam Road, CDA Avenue, East Nasirabad
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Evening Banking (Sun – Thu): 6:00 pm to 8:00 pm
Saturday Banking: 10:00 am to 1:00 pm
Station Road Branch
Jibon Bima Corp Shopping Center, 22/23 Station Road
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Evening Banking (Sun – Thu): 6:00 pm to 8:00 pm
Saturday Banking: 10:00 am to 1:00 pm
Bogra Bogra Branch
Shatani House, Sherpur Road
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Saturday Banking: 10:00 am to 1:00 pm
Khulna Khulna Branch
Jibon Bima Bhaban, KDA Avenue
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Saturday Banking: 10:00 am to 1:00 pm
Narayanganj Narayanganj Branch
26 Shaista Khan Road (near Narayanganj Club)
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Saturday Banking: 10:00 am to 1:00 pm
Sylhet Sylhet Branch
7 Noya Sharak, Jail Road, Ward # 16
Banking Hours (Sun – Thu): 10:00 am to 4:00 pm
Saturday Banking: 10:00 am to 1:00 pm

2.12. Management Structure of Standard Chartered Bank

2.12.1 Board of Directors

· Mr. John Peace Chairman
· Mr. Hossain Mehmood Vice Chairman
· Mr. Jon Macmain Managing Director and CEO
· Mr. Rubel Aziz Director
· Evana Fahmida Mohammad Director
· Mr. Hossain Khaled Saifullah Director
· Rajibul Haque Chowdhury Director
· Mr. Mobarak Ali Director
· Ms. Tabassum Kaiser Director
· Mr. Rafiqul Islam Khan Director
· Ms. Meherun Haque Director
· Ahmed Rajib Samdani Director

2.12.2 Board of Members

· Mr. Peter Sands Group CEO
· Mr. Rudy Markham Senior Independent Non Executive Director
· Mr. Richard Meddings Group Finance Director
· Mr. Steve Bertamini Group Executive Director
· Mr. Jaspal Bindra Group Executive Director
· Mr. Gareth Bullock Group Executive Director
· Mr. Richard Delbridge Non Executive Director
· Ms. Jamie Dundas Non Executive Director
· Dr. Han Seung –Soo, KBE Non Executive Director
· Ms. Val Gooding, CBE Non Executive Director
· Mr. Simon Lowth Non Executive Director
· Mr. Ruth Markland Non Executive Director
· Mr. John Paynter Non Executive Director
· Mr. Mike Rees Non Executive Director
· Mr. Paul Skinner Non Executive Director
· Mr. Oliver Stocken Non Executive Director
· Mr. Annemarie Durbin Non Executive Director

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)

Year Authorized Capital Paid up Capital
2005 2,650 1,228
2006 2,650 1,289
2007 6000 1,547
2008 6,000 1,934
2009 6,000 2,128

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

Fig: 2(c) – Authorized & paid up capital

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.

1 Account Opening

2 Issuance of Cheque

3 Receiving Cheques for Clearing, Transport, and Dispatch

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

5 Opening and Maintaining of FDR and other Scheme Deposits

6 Fund Transfer

7 Closing and Transfer of Accounts

8 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

3 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:

Status 2009 2008
Long Term A1 A+
Short Term ST-2 ST-2

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.

Special Mention: 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):

Funded Non-funded
Overdraft Letter of Credit
Loan Bank Guarantee
Consumer Credit
LTR
PAD
Cash Credit (Pledge & Hypo)
Staff Loan
Term Loan

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.

Who can apply?

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

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

Age Limit:

Minimum Age of the Applicant: 21 Years

Maximum Age of the Applicant: 57 Years

Requirements: For Different professions people Bank gives different conditions.

Loan Size*:

Minimum : BDT 25,000.00

Maximum : BDT 10, 00.000.00

Interest Rate*:

15.00 % -19.00 %per annum

Other Terms & Conditions:

Minimum Gross Family Income: BDT 14,500.00

Auto Loan

Who can apply?

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.

Other Terms & Conditions:

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

Tenure:

Maximum : 15 Years

Interest Rate:

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.

Features Eligibility
Secured by assignment of receivables and lien / mortgage of collateral. Must be an affiliate of any valid cluster under any broad sectors of Trade, Service and Industry.
Single facility limits max up to Tk.50.00 Lac for Small enterprise and Tk.100.00 Lac for Medium enterprise. Must be a firm (proprietorship / partnership) or a private limited company incorporated in Bangladesh.
Disbursement in multiple phases Must have a min. average business income of Tk.35,000/- p.m.
Interest charged only on the utilized amount Must have a Tax Identification Number (TIN).
Low processing fee Must be able to provide last 3 years’ (audited / un-audited) financials like Income Statement, Balance Sheet, Cash Flow Statement, etc.

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.

Features Eligibility
Secured by lien / mortgage of collateral. Must be an affiliate of any valid cluster under any broad sectors of Trade, Service and Industry.
Credit max up to 90% of the amount of pay order. Must be a firm (proprietorship / partnership) or a private limited company incorporated in Bangladesh.
Single facility limit max up to Tk.50.00 Lac for Small enterprise and Tk.100.00

Lac for Medium enterprise.

Must have a min. average business income of Tk.35,000/- p.m.
Low processing fee. Must have a Tax Identification Number (TIN).
Validity max up to 1 year. Must be able to provide last 3 years’ (audited / un-audited) financials like Income Statement, Balance Sheet, Cash Flow Statement, etc.

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.

Features Eligibility
100% secured by cash / quasi cash instruments Must be an affiliate of any valid cluster under any broad sectors of Trade, Service and Industry.
Credit max up to 90% of cash / current encashment value of quasi cash

instruments

Must be a firm (proprietorship / partnership) or a private limited company incorporated in Bangladesh.
Single facility limit max up to Tk.100.00 Lac Must have a min. average business income of Tk.35,000/- p.m.
Low processing fee. Must have a Tax Identification Number (TIN).
Validity max up to 1 year. Must have a min. average business income of Tk.35,000/- p.m.

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.

Features Eligibility
Secured by hypothecation of stocks and lien / mortgage of collateral Must be an affiliate of any valid cluster under any broad sectors of Trade, Service and Industry.
Credit max up to 100% of net working capital or 75% of the sum total of inventory and receivable whichever is lower. Must be a firm (proprietorship / partnership) or a private limited company incorporated in Bangladesh.
Single facility limit up to a max of Tk.50.00 Lac for Small enterprise and Tk.100.00 Lac for Medium enterprise Must have a min. average business income of Tk.35,000/- p.m.
Low processing fee. Must have a Tax Identification Number (TIN).
Validity max up to 1 year. Must have a min. average business income of Tk.35,000/- p.m.

Charges:

  • Interest rate: Small – [Male: 13% – 17%; Female: 10%] & Medium – 13%
  • Overd

Credit Management of Standard Chartered Bank

View With Charts And Images  

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

City

Branch Name &
Address

Dhaka

Gulshan Branch

67
Gulshan Avenue

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

North Gulshan
Branch

Block-NW(A),
189 Gulshan Avenue (North), Gulshan 2

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Banani Branch

14
Kemal Ataturk Avenue, Banani

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

 

Dhanmondi Road# 2
Branch

House
37, Road 2, Dhanmondi R/A

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Dhanmondi Road# 5
Branch

House
6, Road 5, Dhanmondi R/A

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Kakrail Branch

Karnaphuli
Garden City, 109 Kakrail Road

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Kawran Bazar Branch

53
Kawran Bazar

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Sonargaon Branch

L101
Pan Pacific Sonargaon Hotel, 107 Kazi Nazrul Islam Avenue

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Mirpur Branch

Dynasty
Tower, Plot 01, Road 12, Block G, Section 6, Pallabi, Mirpur

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

City Centre Branch

City
Centre, Plot 5/A, Motijheel C/A

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Motijheel Branch

Alico
Building, 18-20 Motijheel C/A 

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Chawk Bazar Branch

12
Water Works Road, Dalpatty, Chawkbazar

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

 

Savar Branch

Dhaka Export Processing Zone, Zone Service Complex

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Sheraton Branch

Dhaka
Sheraton Annex Building, 1 Minto Road, Ramna

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Uttara Branch

House
81, Road 7, Sector 4, Uttara

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

 

aadiq Centre

102
Gulshan Avenue

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Chittagong

Main Branch

Sheikh
Mujib Road, Agrabad

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Agrabad Branch

PHP
House, 31 Agrabad C/A

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Khatunganj Branch

Asma
Chamber, 1649 (New) Ramjoy Mohajon Lane, Khatungonj

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Nasirabad Branch

Bulbul
Centre, 486/B, O R Nizam Road, CDA Avenue, East Nasirabad

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Station Road Branch

Jibon
Bima Corp Shopping Center, 22/23 Station Road

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

 

Bogra

Bogra Branch

Shatani
House, Sherpur Road

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

 

Khulna

Khulna Branch

Jibon
Bima Bhaban, KDA Avenue

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

 

Narayanganj

Narayanganj Branch

26
Shaista Khan Road (near Narayanganj Club)

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

 

 

Sylhet

Sylhet Branch

7
Noya Sharak, Jail Road, Ward # 16

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

2.12. Management Structure
of Standard Chartered Bank

2.12.1 Board of Directors

 

·  
Mr. John Peace 

Chairman

·  
Mr. Hossain Mehmood

Vice
Chairman

·  
Mr. Jon Macmain

Managing
Director and CEO

·  
Mr. Rubel Aziz 

Director

·  
 Evana Fahmida Mohammad

Director

·  
Mr. Hossain Khaled Saifullah 

Director

·  
Rajibul Haque Chowdhury

Director

·  
Mr. Mobarak Ali

Director

·  
Ms. Tabassum Kaiser

Director

·  
Mr. Rafiqul Islam Khan

Director

·  
Ms. Meherun Haque

Director

·  
Ahmed Rajib
Samdani

Director

2.12.2 Board of Members

·  
Mr. Peter Sands

Group
CEO

·  
Mr. Rudy Markham

Senior
Independent Non Executive Director

·  
Mr. Richard Meddings

Group
Finance Director

·  
 Mr. Steve Bertamini

Group
Executive Director

·  
Mr. Jaspal Bindra 

Group
Executive Director

·  
Mr. Gareth Bullock

Group
Executive Director

·  
Mr. Richard Delbridge

Non
Executive Director

·  
Ms. Jamie Dundas

Non
Executive Director

·  
Dr. Han Seung –Soo, KBE

Non
Executive Director

·  
Ms. Val Gooding, CBE

Non
Executive Director

·  
Mr. Simon Lowth

Non
Executive Director

·  
Mr. Ruth
Markland

Non
Executive Director

·  
Mr. John
Paynter

Non
Executive Director

·  
Mr. Mike Rees

Non
Executive Director

·  
Mr. Paul
Skinner

Non
Executive Director

·  
Mr. Oliver
Stocken

Non
Executive Director

·  
Mr. Annemarie
Durbin

Non
Executive Director

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)

Year

Authorized
Capital

Paid
up Capital

2005

2,650

1,228

2006

2,650

1,289

2007

6000

1,547

2008

6,000

1,934

2009

6,000

2,128

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:

Status

2009

2008

Long
Term

A1

A+

Short
Term

ST-2

ST-2

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):

Funded

Non-funded

Overdraft

Letter
of Credit

Loan

Bank
Guarantee

Consumer
Credit

LTR

PAD

Cash
Credit (Pledge & Hypo)

Staff
Loan

Term
Loan

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.

Features

Eligibility

Secured
by assignment of receivables and lien / mortgage of collateral.

Must
be an affiliate of any valid cluster under any broad sectors of Trade,
Service and Industry.

Single
facility limits max up to Tk.50.00 Lac for Small enterprise and Tk.100.00 Lac for Medium enterprise.

Must
be a firm (proprietorship / partnership) or a private limited company
incorporated in Bangladesh.

Disbursement
in multiple phases

Must
have a min. average business income of Tk.35,000/- p.m.

Interest
charged only on the utilized amount

Must
have a Tax Identification Number (TIN).

Low
processing fee

Must
be able to provide last 3 years’ (audited / un-audited) financials like
Income Statement, Balance Sheet, Cash Flow Statement, etc.

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.

Features

Eligibility

Secured
by lien / mortgage of collateral.

Must
be an affiliate of any valid cluster under any broad sectors of Trade,
Service and Industry.

Credit
max up to 90% of the amount of pay order.

Must
be a firm (proprietorship / partnership) or a private limited company
incorporated in Bangladesh.

Single
facility limit max up to Tk.50.00 Lac for Small enterprise and Tk.100.00

Lac
for Medium enterprise.

Must
have a min. average business income of Tk.35,000/- p.m.

Low
processing fee.

Must
have a Tax Identification Number (TIN).

Validity
max up to 1 year.

Must
be able to provide last 3 years’ (audited / un-audited) financials like
Income Statement, Balance Sheet, Cash Flow Statement, etc.

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.

Features

Eligibility

100%
secured by cash / quasi cash instruments

Must
be an affiliate of any valid cluster under any broad sectors of Trade,
Service and Industry.

Credit
max up to 90% of cash / current encashment value of quasi cash

instruments

Must
be a firm (proprietorship / partnership) or a private limited company
incorporated in Bangladesh.

Single
facility limit max up to Tk.100.00 Lac

Must
have a min. average business income of Tk.35,000/- p.m.

Low
processing fee.

Must
have a Tax Identification Number (TIN).

Validity
max up to 1 year.

Must
have a min. average business income of Tk.35,000/- p.m.

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.

Features

Eligibility

Secured
by hypothecation of stocks and lien / mortgage of collateral

Must
be an affiliate of any valid cluster under any broad sectors of Trade,
Service and Industry.

Credit
max up to 100% of net working capital or 75% of the sum total of inventory
and receivable whichever is lower.

Must
be a firm (proprietorship / partnership) or a private limited company
incorporated in Bangladesh.

Single
facility limit up to a max of Tk.50.00 Lac for Small enterprise and Tk.100.00 Lac for Medium enterprise

Must
have a min. average business income of Tk.35,000/- p.m.

Low
processing fee.

Must
have a Tax Identification Number (TIN).

Validity
max up to 1 year.

Must
have a min. average business income of Tk.35,000/- p.m.

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:

SL
NO

Categories
of lending   Fixed

Rate

Mid
Rates

(
Existing)

Mid
Rates (New)

1

Agriculture 07.00%p.a

2

Industrial
Term Loan

Large
and medium

scale industry

Small
scale industry

13.00%p.a

14.00%p.a

13.25%p.a

14.00%p.a

3

Working
capital

Type
1

Pharmaceuticals

Textile

Garments

Chemical

Financial
intuitions

Type
2

Transport
and

 communication

Electronics
and

allied

Automobiles

Construction

Ship
breaking/

steel
engineering

Industrial
raw

 materials

others

13.50%p.a

13.50%p.a

13.50%p.a

14.00%p.a

13.50%p.a

14.50%p.a

13.50%p.a

14.00%p.a

15.00%p.a

14.00%p.a

13.50%p.a

14.00%p.a

13.50%p.a

13.00%p.a

13.00%p.a

13.00%p.a

13.50%p.a

14.50%p.a

13.50%p.a

14.00%p.a

15.00%p.a

14.00%p.a

13.50%p.a

14.00%p.a

4

Other
commercial Lending

trading

others

15.00%p.a

13.50%p.a

15.00%p.a

13.50%p.a

5

Energy/power

14.00%p.a

14.00%p.a

6

Telecom

14.00%p.a

14.00%p.a

7

Urban
housing- Residential

–  commercial

14.50%p.a

15.00%p.a

14.50%p.a

15.00%p.a

8

Special
program

small
and cottage industries

other
special program

14.00%p.a

14.00%p.a

14.00%p.a

14.00%p.a

9

SME

16.50%p.a

16.50%p.a

10

Secured
against FDR

Incase
of FDR with DBL interest to be (2.5%—3.00%) Higher than the FDR rate. Incase
of FDR with other bank.

14.50%p.a

14.50%p.a

11

Loan
against DPS

14.50%p.a

14.50%p.a

12

Commercial
Bill Discount/Purchase

14.50%p.a

14.50%p.a

13

Lease
against DPS

15.50%p.a

15.50%p.a

14

Consumer
loan

12-15%p.a

12-15%p.a

15

Credit
card

2.50%per
month

16

Share
margin Account

16.00%p.a

16.00%p.a

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-

Types of advances

Securities

House building loan

Primary securities: mortgage of the land or any
property

Transport loan

Primary securities: joint registration and
comprehensive insurance policy. Two valuable guarantors.

Collateral securities: mortgage of land or any
property. Any type financial obligation.

Auto loan

Primary securities: joint registration and
comprehensive insurance policy. Two valuable guarantors and post dated
cheques.

Any purpose loan

Primary securities: two valuable guarantors and post
dated cheques.

Payments against documents(PAD)

Pledge or hypothecation of stock-in trade, goods,
produce and merchandise, machineries, land or building on which machineries
are installed.

Loan against imported merchandise

Pledge of imported merchandise

Loan against trust receipt

Trust receipt in lieu of import document

Local bills purchased

Bill itself

Foreign bill purchased

Shipping documents for exports

Overdraft

Primary securities: hypothecation of book depth

Collateral securities: mortgage of landed property
and IPA.

Secured overdraft

Primary securities: Lien on any types of financial
obligation.

Cash credit

Primary securities: Hypothecation of stock of goods
in trade duly insured produce merchandise.Collateral securities: Mortgage of
land and building, any financial obligation.

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.

Financial
risk

50%

Business
risk

18%

Management
risk

12%

Security
risk

10%

Relationship
risk

10%

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:

Risk components

Key parameters

Financial
risk

Leverage,
liquidity, profitability,& coverage ratio

Business
risk

Size
& age of business, business outlook, industry growth, competition &
barriers to business

Management
risk

Experience,
Succession & team work

Security
risk

Security
coverage, collateral coverage & support

Relationship
risk

Account
conduct, utilization of limit, compliance of covenants & personal deposit

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:

Text Box: a) For unclassified loans                                     1%
b) For special mention   account       5%
c) For loans classified as sub-standard   20%
d) For loans classified as doubtful    50%
e) For loans classified as bad and loss    100%


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 Receivableclassified 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?

Opinions

No.
of Respondents

Percentage

Low interest rate

8

32%

Easy loan disbursement

11

44%

SME loan

5

20%

Other
privilege

1

4%


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.

Income
level

No.
of Respondents

Percentage

10,000-24,999

2

8%

25000-39,999

4

16%

40,000-54,999  

7

28%

55,000+

12

48%

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

Experience

No.
of Respondents

Percentage

Below
5 Years

5

20%

5-15
years

8

32%

15-25
years

9

36%

Above
25 years

3

12%

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.

Opinion

No.
of Respondents

Percentage

Very
satisfactory

1

4%

Satisfactory

11

44%

Unsatisfactory

8

32%

Extremely
unsatisfactory

5

20%

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.

Opinion

No.
of Respondents

Percentage

High

13

52%

Medium

11

44%

Low

1

4%

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.

Opinion

No. of Respondents

Percentage

Agree

12

48%

Fully agree

11

44%

Disagree

2

8%

Fully disagree

0

0%

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?

Opinion

No.
of Respondents

Percentage

Interest
rate

5

20%

Installment
period

3

12%

Service
charge

8

32%

Loan
processing time

9

36%

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

Credit Management of Standard Chartered Bank

View With Charts And Images  

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

City

Branch Name &
Address

Dhaka

Gulshan Branch

67
Gulshan Avenue

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

North Gulshan
Branch

Block-NW(A),
189 Gulshan Avenue (North), Gulshan 2

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Banani Branch

14
Kemal Ataturk Avenue, Banani

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

 

Dhanmondi Road# 2
Branch

House
37, Road 2, Dhanmondi R/A

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Dhanmondi Road# 5
Branch

House
6, Road 5, Dhanmondi R/A

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Kakrail Branch

Karnaphuli
Garden City, 109 Kakrail Road

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Kawran Bazar Branch

53
Kawran Bazar

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Sonargaon Branch

L101
Pan Pacific Sonargaon Hotel, 107 Kazi Nazrul Islam Avenue

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Mirpur Branch

Dynasty
Tower, Plot 01, Road 12, Block G, Section 6, Pallabi, Mirpur

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

City Centre Branch

City
Centre, Plot 5/A, Motijheel C/A

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Motijheel Branch

Alico
Building, 18-20 Motijheel C/A 

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Chawk Bazar Branch

12
Water Works Road, Dalpatty, Chawkbazar

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

 

Savar Branch

Dhaka Export Processing Zone, Zone Service Complex

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Sheraton Branch

Dhaka
Sheraton Annex Building, 1 Minto Road, Ramna

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Uttara Branch

House
81, Road 7, Sector 4, Uttara

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

 

aadiq Centre

102
Gulshan Avenue

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Chittagong

Main Branch

Sheikh
Mujib Road, Agrabad

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Agrabad Branch

PHP
House, 31 Agrabad C/A

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Khatunganj Branch

Asma
Chamber, 1649 (New) Ramjoy Mohajon Lane, Khatungonj

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

 

Nasirabad Branch

Bulbul
Centre, 486/B, O R Nizam Road, CDA Avenue, East Nasirabad

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

Station Road Branch

Jibon
Bima Corp Shopping Center, 22/23 Station Road

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Evening
Banking (Sun – Thu): 6:00 pm to 8:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

 

Bogra

Bogra Branch

Shatani
House, Sherpur Road

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

 

Khulna

Khulna Branch

Jibon
Bima Bhaban, KDA Avenue

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

 

Narayanganj

Narayanganj Branch

26
Shaista Khan Road (near Narayanganj Club)

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

 

 

 

Sylhet

Sylhet Branch

7
Noya Sharak, Jail Road, Ward # 16

Banking
Hours (Sun – Thu): 10:00 am to 4:00 pm

Saturday
Banking: 10:00 am to 1:00 pm

2.12. Management Structure
of Standard Chartered Bank

2.12.1 Board of Directors

 

·  
Mr. John Peace 

Chairman

·  
Mr. Hossain Mehmood

Vice
Chairman

·  
Mr. Jon Macmain

Managing
Director and CEO

·  
Mr. Rubel Aziz 

Director

·  
 Evana Fahmida Mohammad

Director

·  
Mr. Hossain Khaled Saifullah 

Director

·  
Rajibul Haque Chowdhury

Director

·  
Mr. Mobarak Ali

Director

·  
Ms. Tabassum Kaiser

Director

·  
Mr. Rafiqul Islam Khan

Director

·  
Ms. Meherun Haque

Director

·  
Ahmed Rajib
Samdani

Director

2.12.2 Board of Members

·  
Mr. Peter Sands

Group
CEO

·  
Mr. Rudy Markham

Senior
Independent Non Executive Director

·  
Mr. Richard Meddings

Group
Finance Director

·  
 Mr. Steve Bertamini

Group
Executive Director

·  
Mr. Jaspal Bindra 

Group
Executive Director

·  
Mr. Gareth Bullock

Group
Executive Director

·  
Mr. Richard Delbridge

Non
Executive Director

·  
Ms. Jamie Dundas

Non
Executive Director

·  
Dr. Han Seung –Soo, KBE

Non
Executive Director

·  
Ms. Val Gooding, CBE

Non
Executive Director

·  
Mr. Simon Lowth

Non
Executive Director

·  
Mr. Ruth
Markland

Non
Executive Director

·  
Mr. John
Paynter

Non
Executive Director

·  
Mr. Mike Rees

Non
Executive Director

·  
Mr. Paul
Skinner

Non
Executive Director

·  
Mr. Oliver
Stocken

Non
Executive Director

·  
Mr. Annemarie
Durbin

Non
Executive Director

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)

Year

Authorized
Capital

Paid
up Capital

2005

2,650

1,228

2006

2,650

1,289

2007

6000

1,547

2008

6,000

1,934

2009

6,000

2,128

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:

Status

2009

2008

Long
Term

A1

A+

Short
Term

ST-2

ST-2

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):

Funded

Non-funded

Overdraft

Letter
of Credit

Loan

Bank
Guarantee

Consumer
Credit

LTR

PAD

Cash
Credit (Pledge & Hypo)

Staff
Loan

Term
Loan

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.

Features

Eligibility

Secured
by assignment of receivables and lien / mortgage of collateral.

Must
be an affiliate of any valid cluster under any broad sectors of Trade,
Service and Industry.

Single
facility limits max up to Tk.50.00 Lac for Small enterprise and Tk.100.00 Lac for Medium enterprise.

Must
be a firm (proprietorship / partnership) or a private limited company
incorporated in Bangladesh.

Disbursement
in multiple phases

Must
have a min. average business income of Tk.35,000/- p.m.

Interest
charged only on the utilized amount

Must
have a Tax Identification Number (TIN).

Low
processing fee

Must
be able to provide last 3 years’ (audited / un-audited) financials like
Income Statement, Balance Sheet, Cash Flow Statement, etc.

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.

Features

Eligibility

Secured
by lien / mortgage of collateral.

Must
be an affiliate of any valid cluster under any broad sectors of Trade,
Service and Industry.

Credit
max up to 90% of the amount of pay order.

Must
be a firm (proprietorship / partnership) or a private limited company
incorporated in Bangladesh.

Single
facility limit max up to Tk.50.00 Lac for Small enterprise and Tk.100.00

Lac
for Medium enterprise.

Must
have a min. average business income of Tk.35,000/- p.m.

Low
processing fee.

Must
have a Tax Identification Number (TIN).

Validity
max up to 1 year.

Must
be able to provide last 3 years’ (audited / un-audited) financials like
Income Statement, Balance Sheet, Cash Flow Statement, etc.

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.

Features

Eligibility

100%
secured by cash / quasi cash instruments

Must
be an affiliate of any valid cluster under any broad sectors of Trade,
Service and Industry.

Credit
max up to 90% of cash / current encashment value of quasi cash

instruments

Must
be a firm (proprietorship / partnership) or a private limited company
incorporated in Bangladesh.

Single
facility limit max up to Tk.100.00 Lac

Must
have a min. average business income of Tk.35,000/- p.m.

Low
processing fee.

Must
have a Tax Identification Number (TIN).

Validity
max up to 1 year.

Must
have a min. average business income of Tk.35,000/- p.m.

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.

Features

Eligibility

Secured
by hypothecation of stocks and lien / mortgage of collateral

Must
be an affiliate of any valid cluster under any broad sectors of Trade,
Service and Industry.

Credit
max up to 100% of net working capital or 75% of the sum total of inventory
and receivable whichever is lower.

Must
be a firm (proprietorship / partnership) or a private limited company
incorporated in Bangladesh.

Single
facility limit up to a max of Tk.50.00 Lac for Small enterprise and Tk.100.00 Lac for Medium enterprise

Must
have a min. average business income of Tk.35,000/- p.m.

Low
processing fee.

Must
have a Tax Identification Number (TIN).

Validity
max up to 1 year.

Must
have a min. average business income of Tk.35,000/- p.m.

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:

SL
NO

Categories
of lending   Fixed

Rate

Mid
Rates

(
Existing)

Mid
Rates (New)

1

Agriculture 07.00%p.a

2

Industrial
Term Loan

Large
and medium

scale industry

Small
scale industry

13.00%p.a

14.00%p.a

13.25%p.a

14.00%p.a

3

Working
capital

Type
1

Pharmaceuticals

Textile

Garments

Chemical

Financial
intuitions

Type
2

Transport
and

 communication

Electronics
and

allied

Automobiles

Construction

Ship
breaking/

steel
engineering

Industrial
raw

 materials

others

13.50%p.a

13.50%p.a

13.50%p.a

14.00%p.a

13.50%p.a

14.50%p.a

13.50%p.a

14.00%p.a

15.00%p.a

14.00%p.a

13.50%p.a

14.00%p.a

13.50%p.a

13.00%p.a

13.00%p.a

13.00%p.a

13.50%p.a

14.50%p.a

13.50%p.a

14.00%p.a

15.00%p.a

14.00%p.a

13.50%p.a

14.00%p.a

4

Other
commercial Lending

trading

others

15.00%p.a

13.50%p.a

15.00%p.a

13.50%p.a

5

Energy/power

14.00%p.a

14.00%p.a

6

Telecom

14.00%p.a

14.00%p.a

7

Urban
housing- Residential

–  commercial

14.50%p.a

15.00%p.a

14.50%p.a

15.00%p.a

8

Special
program

small
and cottage industries

other
special program

14.00%p.a

14.00%p.a

14.00%p.a

14.00%p.a

9

SME

16.50%p.a

16.50%p.a

10

Secured
against FDR

Incase
of FDR with DBL interest to be (2.5%—3.00%) Higher than the FDR rate. Incase
of FDR with other bank.

14.50%p.a

14.50%p.a

11

Loan
against DPS

14.50%p.a

14.50%p.a

12

Commercial
Bill Discount/Purchase

14.50%p.a

14.50%p.a

13

Lease
against DPS

15.50%p.a

15.50%p.a

14

Consumer
loan

12-15%p.a

12-15%p.a

15

Credit
card

2.50%per
month

16

Share
margin Account

16.00%p.a

16.00%p.a

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-

Types of advances

Securities

House building loan

Primary securities: mortgage of the land or any
property

Transport loan

Primary securities: joint registration and
comprehensive insurance policy. Two valuable guarantors.

Collateral securities: mortgage of land or any
property. Any type financial obligation.

Auto loan

Primary securities: joint registration and
comprehensive insurance policy. Two valuable guarantors and post dated
cheques.

Any purpose loan

Primary securities: two valuable guarantors and post
dated cheques.

Payments against documents(PAD)

Pledge or hypothecation of stock-in trade, goods,
produce and merchandise, machineries, land or building on which machineries
are installed.

Loan against imported merchandise

Pledge of imported merchandise

Loan against trust receipt

Trust receipt in lieu of import document

Local bills purchased

Bill itself

Foreign bill purchased

Shipping documents for exports

Overdraft

Primary securities: hypothecation of book depth

Collateral securities: mortgage of landed property
and IPA.

Secured overdraft

Primary securities: Lien on any types of financial
obligation.

Cash credit

Primary securities: Hypothecation of stock of goods
in trade duly insured produce merchandise.Collateral securities: Mortgage of
land and building, any financial obligation.

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.

Financial
risk

50%

Business
risk

18%

Management
risk

12%

Security
risk

10%

Relationship
risk

10%

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:

Risk components

Key parameters

Financial
risk

Leverage,
liquidity, profitability,& coverage ratio

Business
risk

Size
& age of business, business outlook, industry growth, competition &
barriers to business

Management
risk

Experience,
Succession & team work

Security
risk

Security
coverage, collateral coverage & support

Relationship
risk

Account
conduct, utilization of limit, compliance of covenants & personal deposit

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:

Text Box: a) For unclassified loans                                     1%
b) For special mention   account       5%
c) For loans classified as sub-standard   20%
d) For loans classified as doubtful    50%
e) For loans classified as bad and loss    100%


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 Receivableclassified 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