Prime bank ltd. credit management analysis

Assignment

On Credit Management System

Of Prime Bank Limited

Submitted by: S.M.M. Abdullah : 100307 Syeda Noozhat Ahsan : 100314 Antara Anupama Adhara : 100318 Md. Zayed Iqbal : 100330 Abdus Salam Sarder : 100335 Abdullah Al Mahmud : 100355

Submitted to:

Tarun Kanti Bose Lecturer

Business Administration Discipline Khulna University

khulna

9/25/2011

Prime bank ltd.

Acknowledgement

First of all we would like to show all my respect and gratitude to the

Almighty for being with us in this work.

Next we would like to thank our respected teacher Tarun Kanti Bose for

giving us guidelines and helpful hints in preparing the assignment.

We would also like to thank Md. Abdul Raafi (assistant vice president of

prime bank) to help us with valuable information and necessary documents

for our assignment.

Finally we would like to thank the bank staffs who provided us with

necessary facilities while working with the assignment.

Prime bank ltd.

What is credit?

The word credit comes from the Latin word ‘Credo’ meaning ‘I believe’. It is a lender’s trust in a person’s/firm’s or company’s potential ability and intention to repay.

The fundamental nature of credit is that an element of trust exists between buyer and seller-whether of goods or money.

Credit Operation:

Bank is a financial intermediary whose prime function is to move scarce

resources in the form of credit from savers to those who borrow for consumption and

investment. The main use of bank fund is to collect money from surplus unit and lend it

to deficit economic unit as credit. A bank’s main earning source is interests on different

credits. In order to ensure the effectiveness and efficiency of utilization of bank fund in

the form of credit, the bank has to carry out a certain course of action that is known as

credit operation

Credit Management:

Credit Management is a dynamic arena in banking industry where a certain

standard of long-range planning is needed to allocate the fund in diverse field and to

minimize the risk and maximize the return on the invested fund. While sanctioning of

credit undergoes some steps like collecting of related documents and information with

duly filled-up credit application form, scrutinizing, investigation, preparation of

proposal, sanctioning, pre-disbursement compliance, disbursement, supervision,

monitoring. Credit Management deals with all this process.

An important task under this section is credit risk management which is simply

defined as the potential that a bank borrower or counterparty will fail to meet its

obligations in accordance with agreed terms. Effective credit administration works to

ensure good recovery of loan which is the key to long-term success of any banking

organization.

Credit risk management:

Credit risk is most simply defined as the potential that a bank borrower or

counterparty will fail to meet its obligation in accordance with agreed terms. The goal

of credit risk management is to maximize a bank’s risk adjusted rate of return by

maintaining credit risk exposure within acceptable parameters. Banks need to manage

the risk inherent in the entire portfolio as well as the risk in individual credits. Banks

should also consider the relationship between credit risk and other risk. The effective of

management of credit risk is a critical component of a comprehensive approach to risk

management and essential to the long-term success of any banking organization.

Prime bank ltd.

Prime bank Intro:

Prime Bank Limited (PBL) was incorporated as a scheduled Bank under the

Companies Act 1994, Initiated its operation on April 17, 1995 with the target to play a vital role on the socio-economic development of the country.

PBL focuses on a wide range of financial products and services, which include commercial banking through both Conventional and Islamic mode, Merchant and

Investment Banking, SME & Retail banking, Credit Card and off-shore banking. It plays leading role in Syndicated Financing. It has expertise in corporate credit

and trade finance and made extensive market penetration with continuous growth in corporate, Commercial and Trade Finance sectors. It has a fully owned exchange house

at Singapore focusing on remittance inflow to Bangladesh.

PBL has already made significant progress within a very short period of its

existence. The bank has been graded as a top class bank in the country through internationally accepted CAMEL rating. The bank has already occupied an enviable

position among its competitors after achieving success in all areas of business operation.

The Loan Schemes of Prime Bank includes General Loan Scheme, Consumer Credit Scheme, Personal Loans, Lease Finance, Hire Purchase, Small and Medium

Enterprise (SME). The Current Chairman of Prime Bank is Mr. Azam j Chowdhury and at present

the bank has 97 branches all over Bangladesh. The Khulna Branch of Prime which

opened on 20th November, 1995 is located at 7, Old Jessore Road, Khulna-9100. The present branch manager is Sk. Anisuzzaman.

Credit Operation & Management of Prime Bank:

Prime has been established with the objective of providing efficient and

innovative banking services to the people of all sections of our society. The Bank has

separated the functions of credit approval, administration, monitoring and recovery by

forming three separate units within Credit Division. To attain its goals and objectives,

the bank pursues diversified credit policies and strategic planning in credit

management. To name a few, the bank has extended micro credit, consumers durable

scheme loans, house building loans etc. to cater to the needs of the individuals. The

bank also extends business loan in the form of trade finance, industrial finance, and

project finance, export & import finance etc. In determining the credit limit, the

instructions of Bangladesh Bank are strictly followed. The class of Loans is made as per

Bangladesh Bank guidelines

Prime bank ltd.

Credit Risk Management Of Prime bank:

This is one of the major risks that carry a potential loss arising from the failure

of a borrower to perform as per contractual agreement with Prime Bank. The Board of

Directors of Prime usually develops a credit risk strategy. The strategy reflects bank’s

tolerance for risk and the level of profitability the bank expects to achieve for incurring

various credit risks.

Senior management has the responsibility for implementing the credit risk strategy

approved by the Board of Directors and for developing standard policies and procedures

for identifying, measuring, monitoring and controlling credit risk

Modes of Credit:

Loans and advances primarily have been divided into two major groups.

Continuous credit and fixed term loans. Continuous credits are the advances having no

fixed repayment schedule, but have an expiry date at which it is renewable on

satisfactory performance. Fixed term loans are the advances made by the bank with

fixed repayment schedules.

Types of Credit:

Prime Bank offers a variety of credit under different sectors which includes

Corporate Banking, Retail Banking, SME and Agricultural Banking.

Under Conventional or Corporate Banking following Loans are available:

i) Packing Credit: This facility is given to the exporter for payment of wages,

salaries, freight and other factory overhead expenses during execution of an

Export L/C.

ii) Loan against Imported Merchandize (LIM): Loan granted to when the

importer fails to pay the amount stipulated in bill of exchange, take the

imported goods as security for the loan.

iii) Letter of Trust Receipt (LTR): This facility is given to the importer to

retire of shipping documents against import of raw materials or capital

machinery. This facility is given for the short time usually for 90-120 days

for commercial purpose and maximum 180 days for industrial purpose.

iv) EDF Loans: Export Development Fund loans given to manufacturer-

exporter.

v) Cash Credit: Cash credit account is like a current account with a limit up to which one can withdraw from the bank. Cash credit is normally sanctioned

for a period of one year where a regular limit is sanctioned against goods to meet day to day expenses of business.

Prime bank ltd.

vi) Inland Documentary Bills Purchased (IDBP): This facility is given to the

exporter to meet up short term fund requirements. Bank purchases the bill. This facility is also for the short time maximum 180 days.

vii) Hire purchase: The bank (hiree) and the client (hirer) purchase asset jointly

with specified equity sharing the ownership.

viii) House Building Loan (Commercial): Banks provide this facility to

construct building for commercial purposes.

Under Retail Banking Following loans are available:

i) Housing Loan-Residential: Prime bank offers loan to customers to finance

the purchase or construction of new house or flat. For construction the

maximum amount is 1 cr taka and maximum tenure is 25 years, for

renovation the amount is 40 lak and tenure 10 years.

ii) Car Loan: Loan offered for purchasing personal vehicle where maximum

amount offered is 20 lac and tenure is 6 years.

iii) Consumer/Household Durables Loan: Loan for purchasing furniture and

other home appliances. Maximum amount offered is 5 lac for 5 years

iv) Doctor’s Loan: Loan for furnishing of doctor’s chamber. Maximum loan

allowed is 10 lacs for a period of 5 years.

v) Marriage Loan: Financial aid of up to 3 lac for the expenses of wedding.

Maximum tenure is 3 years.

vi) Travel Loan: Credit offered for holiday expenses.

vii) Hospitalization Loan: A maximum loan of 2 lacs for hospital expenses.

There is a processing fee of 1% of the loan. This loan has a tenure of 2

years.

viii) Education Loan: Loan to cover the expenses of education. Maximum

amount available is 5 lacs for a tenure of 5 years.

ix) CNG conversation Loan: Credit to cover the cost of converting vehicle to

CNG>

x) Advance Against Salary: Loan given with the salary as security to cover

miscellaneous financial/family requirements.

xi) Any Purpose Loan: Loan amount of 10 lac or 10 times of monthly income

to cover any other loans.

To be eligible for retail loans there are different requirements for each loan. Depending

upon the loan the minimum age must be between 21-25 years and a legal and ethical

source of income of 10,000-30,000 Taka per month.

Prime bank ltd.

Under SME Banking the following loans are available:

Sahaj Rin (Collateral Free Loan): loan facility to successfully grow your small &

medium enterprise business.

Sampad Rin (Capital Loan):loan facility to augment capital base for your business

expansion, purchase of new business space or expansion of existing outlets and capital

machineries and also to purchase light or heavy vehicles for business use.

Chalti Rin (Working Capital Loan): loan facility to increase the working capital base

by financing day to day business of your Small and Medium Enterprise (SME)

business.

Moushami Rin (Seasonal Loan): Loan facility to grab the additional opportunities in

various festivals and seasonal events (i.e. Eids, Pujas, Christmas, Bengali and English

New Year etc.)

Digun Rin (Double Loan): Under this SME product, if any cashable security is

provided then credit double the amount of the value of security is provided.

Anchol (Women Entrepreneurs' Loan): It is the credit facility for the women

entrepreneurs to expand and operate their businesses at desired level.

To be eligible an entrepreneur must be 21 years old and must have the experience of

successfully managing the business for at least two years. Documents and security vary according to the loan.

Under Agricultural Banking the following loans are available according to the

agricultural policy given by Bangladesh bank

i) Abad (for crops loan)

ii) Khamar (for farm loan)

iii) Nabanno (any other agriculture purpose loan)

These loan products are designed to meet up working capital and capital expenditure

requirements of the farms/projects/enterprises/individual farmers.

Prime bank ltd.

Lease Finance Unit:

Prime Bank provides one of the most convenient long term sources of loans in the industry for

acquiring capital machineries and equipments under lease financing. It is a very popular scheme

whereby a customer is given the opportunity to have an exclusive right to use an asset, usually

for an agreed period of time, against payment of installments.

Lease Finance Products/Items:

Prime Bank offers lease finance facility against the following items:

Capital Machinery required for industrial units;

Capital Machinery required for BMRE of the existing industrial units

Medical Equipments/ Machinery for Clinics, Pathological Laboratories, hospitals

etc.

Elevators, Central Air Conditioners, Generators etc.

Vehicles including luxury coach, bus, minibus, micro-bus trucks etc.

Construction Equipments

Selection of the Lease Items:

The customers have the right to decide and select machinery/equipment or vehicles, its

specification and model, as well as negotiate the price with the manufacturer/supplier. Bank will

purchase the item(s) in accordance with the specifications given by the customers. The price

should be competitive and acceptable to the Bank.

Eligibility for Availing Lease Finance:

Entrepreneurs having adequate experience and expertise are eligible to apply for lease finance

under the scheme. Lease Finance facility may provide 100% cost of the equipment, according to

the merit of the proposal. But in most of the cases the bank ensures minimum equity

participation by the customer.

Prime bank ltd.

Discouraged Loans:

According to the guidelines of Bangladesh Bank and its own policy Prime Bank

does not provide loan to individual or businesses for the following purposes.

Military Equipment/Weapons Finance

Highly Leveraged Transactions

Finance of Speculative Investments

Logging, Mineral Extraction/Mining, or other activity that is ethically or

environmentally sensitive.

Lending to companies listed on CIB black list or known defaulters

Counter parties in countries subject to UN sanctions

Share Lending

Lending to Holding Companies

Bridge Loans relying on equity/debt issuance as a source of repayment.

Prime bank also strongly discourages name lending. i.e. they believe credit proposals

should not be unduly influenced by an over reliance on the sponsoring principal’s

reputation, reported independent means, or their perceived willingness to inject funds

into various business enterprises in case of need.

CREDIT POLICY OF PRIME BANK LIMITED

The credit policy guidelines of Bangladesh Bank which all commercial banks

follows is aimed at ensuring development of scare bank resources in the best possible

manner for increasing production, employment and Real income within its objective

and justice need for containing money supply within a safe limit.

Prime Bank takes the policies, which help the development of several sectors of

the country under general credit division. For achieving the proposed goals of the

principles of development of a number of sectors such as Agricultural, Economical,

Industrial and Trade the bank follow the guidelines of Bangladesh Bank; this is the

credit policy of Prime Bank. This policy is changeable. If Bangladesh Bank resists

providing credit in any sector Prime Bank does not provide any credit in those sectors.

Prime bank ltd.

Collateral:

The bank has the guideline on the acceptability of specific classes of collateral or credit

risk mitigation, and determines suitable valuation parameters. Such parameters are

expected to be conservative, reviewed regularly and supported by empirical evidence.

The principal collateral types are as follows:

o Cash

o Gold

o Securities rated by a recognized ECAI

o Debt not rated by a recognized ECAI

o Equities those are enlisted and regularly traded in DSE and CSE.

o Undertaking for collective investments in transferable securities (UCITS) and

mutual fund.

o Land (in case of housing loan)

In addition to all these, Prime bank takes other various types of collateral as security

depending on various types of loan.

Steps in lending process:

The primary factor determining the quality of the bank’s credit portfolio is the

ability of each borrower to honour, on a timely basis. The authorizing credit personnel

prior to credit approval must accurately determine this. If the report of the project

appraisal is very satisfactory to approve the loan proposal, then the following steps

furnish the approval procedure:

Once a customer decides to request a loan after filling a loan application, an

interview with a loan officer usually follows right away, giving the customer the

opportunity to explain his or her credit needs. That interview is particularly important

because it provides an opportunity for the bank’s loan officer to assess the customer’s

character and sincerity of purpose.

The approval process must reinforce the separation of Relationship

Management/Marketing (RM) from the approving authority. The responsibility for

preparing the Credit Application should rest with the RM within the

corporate/commercial banking department. Credit Applications should be

recommended for approval by the RM team and forwarded to the approval team within

Customer Relationship Management (CRM) and approved by individual executives.

Banks may wish to establish various thresholds, above which, the

recommendation of the Head of Corporate/Commercial Banking is required prior to

onward recommendation to CRM for approval. In addition, banks may wish to establish

regional credit centres within the approval team to handle routine approvals. Executives

Prime bank ltd.

in head office CRM should approve all large loans. The recommending or approving

executives should take responsibility for and be held accountable for their

recommendations or approval.

Delegation of approval limits should be such that all proposals where the facilities are:

Up to 15% of the bank’s capital should be approved at the CRM level,

Up to 25% of capital should be approved by CEO/MD,

With proposals in excess of 25% of capital to be approved by the EC/Board only after

recommendation of CRM, Corporate Banking and MD/CEO

Figure: steps of lending from bank’s perspective

Credit Planning or

customer decides to request a loan

Preliminary Screening of a Credit Proposal

Portfolio

Management of Credit

Pricing of loan

Checking of

personal

information of the

borrower.

Documentation

Credit Risk

Grading(CRG)

Sanction letter

Prepared by CRM

Loan documentation

and sending

checklist for DA

Supervision-

Monitoring- Loan

Disbursement.

Loan

disbursement

Analysing of

Financial & cash

flow of customer

Prime bank ltd.

After completing all the necessary steps for sanctioning loans bank will create a

loan account by the name of the party and deposit the money to that account. Bank will

give cheque books to the party and advise them to draw the money and use it as soon as

possible, because whenever the Working Report on Credit Operation & Management of

Prime Bank Ltd. money will transfer to the account and interest will count from that

time

Creditworthiness of the Borrower:

The question that must be dealt with before any other while approving the loan is

whether or not the customer can service the loan-that is, pay out the credit when due,

with a comfortable margin for error. This usually involves a detailed study of six Cs of

the loan application- character, capacity, cash, collateral, conditions, and control. All

must be satisfactory for the loan to be a good one from the lender’s point of view.

Character: Past history of loan repayment, Market reputation, morality, family

background and promptness in repayment.

Capacity: Ability to manage the business, ability to employ the fund in the right way,

ability to overcome unforeseen problems.

Capital: Equity strength, assets and properties.

Collateral: The easy marketability of the property given security.

Conditions: The loan officer and credit analyst must be aware of recent trends in the

borrower’s line of work or industry and how changing economic conditions might

affect the loan.

Control: The last factor in assessing a borrower’s creditworthy status is control which

centres on such questions as whether changes in law and regulation could adversely

affect the borrower and whether the loan request meets the bank’s and the regulatory

authorities primes for loan quality.

As this six C’s analysis is now a traditional method there is another method to

understand the creditworthiness of the customer called Credit Risk Grading (CRG) a

method which is seriously followed by Prime Bank Limited. It involves calculation to

predict if the loan will be profitable or not.

Computation of CRG (Credit Risk Grading):

Step 1: Identify all the Principal Risk Components Step 2: Allocate weightages to Principal Risk Components

Step 3: Establish the Key Parameters Step 4: Assign weightages to each of the key parameters. Step 5: Input data to arrive at the score on the key parameters

Step 6: Arrive at the Credit Risk Grading based on total score obtained.

Prime bank ltd.

Principal Risk Components Key Parameters: Weight:

Financial Risk……………………..….…………………..……... 50%

Leverage 15% Liquidity 15%

Profitability 15% Coverage 5%

Business/Industry Risk…………………………………………… 18%

Size of Business 5% Age of Business 3%

Business Outlook 3% Industry growth 3%

Market Competition 2% Entry/Exit Barriers 2%

Management Risk ………………………………………………... 12%

Experience 5% Succession 4%

Team Work 3% Security Risk…………..…………………………………………...10%

Security coverage 4%

Collateral coverage 4% Support 2%

Relationship Risk………………………..………………………....10%

Account conduct 5% Utilization of limit 2%

Compliance of covenants 2% Personal deposit 1%

No Risk Grading Short Name Score (%)

1 Superior SUP 100 Cash Covered, Government Guarantee an Int’l 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 Sub-standard SS 45-54

7 Doubtful DF 35-44

8 Bad BL Below 35

Prime bank ltd.

CAMELS Rating:

Under the CAMELS rating the criterion for the performance of all the commercial

banks includes capital adequacy, asset’s quality, management, earning capacity,

liquidity and sensitivity to market risk. Soundness of a bank measured on a scale of 1

(Strong) to 5 (Unsatisfactory). Banks with a rating of 1 are considered most strong;

banks with a rating of 2 are considered satisfactory, and those with rating of 3, 4 or 5

are considered fair, marginal and unsatisfactory.

Prime Bank according to the Camels rating report published in the Weekly Industry on

the 10th of July, 2011 is rated 1 and among the strong or A-class banks Prime bank ltd.

Holds the top position.

Strong or A-class bank:

Prime bank ltd.

Shahjalal Islami Bank ltd.

Commercial Bank of Ceylon

State bank of India

Standard Charterd Bank (according to reportbd.com, 2007 result)

Documentation Of Loan Agreement:

Section 3 of Evidence Act, 1872 states: Documentation means any matter

expressed or described upon any substance by means of letters, figures or marks or by

more than one of those means intended to be used for the purpose of recording that

matter. Simply, documents mean any written record which serves as evidence in respect

of transaction. Depending on three factors, such as Legal status of the borrower, Type

of the securities and Type of loan, necessary documents are obtained.

Charge Documents: Following charge documents are compulsory while giving loans.

Letter of guarantee: This is a document given by the proprietor, directors or the third

party in favour of the principal debtor. The beneficiary of this document is the bank.

Surety is bound to pay the guaranteed amount if such situation arises.

Counter guarantee: This is a document given by the proprietor, directors or the third

party in favour of the principal debtor. The beneficiary of this document is the bank.

Surety is bound to pay the guaranteed amount if such situation arises.

Letter of recall the loan: This letter is given to the bank by the borrower, giving the

bank the right of recalling the loan amount at any time if the borrower fails to repay any

one of the instalments and the borrower cannot protest such recalling.

Prime bank ltd.

Letter of continuity: By this letter, the borrower agrees that the promissory note given

by the bank will act as security for the repayment of the ultimate balance or sum

remaining unpaid on account of the overdraft or advance.

Letter of revival: By this letter, the borrower agrees that he will be liable to bank for

payment of the promissory note with interest in respect of all present and future

indebtedness liabilities secured thereby which promissory note is to remain in force

with all relative securities, agreements and obligations.

Joint promissory note: This promissory note is given to the bank by the borrower if

the borrowers are more than one person.

Single promissory note: The borrower to the bank gives this promissory note if the

borrower is a single person.

Letter of undertaking: This document is given to the banker by the borrower

acknowledging the right to cancel the facility at any time with or without intimation to

the borrower.

Loan disbursement letter: By this letter, the borrower request to disburse the loan

sanctioned in his favour by the bank. All the persons, in whose names the account is

opened, should sign the letter.

Charge over bonds or of shares etc.: It is a document given by the borrower to the

banker declaring that the stocks, shares, debentures, securities and investments which

are now deposited to the bank and which may from time to time be deposited by the

borrower shall stand charged and hypothecated to bank as security for the payment to

bank on demand of the balance of the loan amount and of any other indebtedness and

liability to the bank of any kind whether mature or accruing and whether incurred alone

or jointly with others and whether as principal or surety including all interest document,

commission, expenses, charges and costs incurred by the bank in relation any such

indebtedness or liability.

Letter of lien against fixed deposit receipt: By this letter, the borrower gives the right

to the bank to hold the Fixed Deposit Receipt (FDR) if the borrower fails to repay or

adjust the loan on demand or discharge the liabilities to bank. In this letter, FDR

number, issuing branch, name of the favouring person and amount are writer.

Letter of authority to en-cash FDR: By this letter, the borrower gives the right to

bank to encash the FDR in case of need. Here the amount and address of the bank of

issue and the signature of the holders are given.

Memorandum of deposit of title deeds: It is a deed that is necessary in case of

mortgage by deposit of title deed or equitable mortgage. Here the mortgagor agrees that

he has deposited necessary documents of the property to the bank.

Prime bank ltd.

Hypothecation of goods to secure a demand cash credit or overdraft or loan account:

Here the amount of loan, interest, and the name of the borrowers are written. Here the

bank and the borrowers agree on the following terms: Security, Balance due to the

Bank, Surplus, and Borrowers not to the encumber or parts of the goods, Inspection,

Sale, Margin, Repayment, Sale of goods,

Deficiency, Insurance, Statement of account, Continuing security, Saving, Change of

borrowers and notices, Interest rate.

Guarantee by third party: Sometimes third party guarantee is needed for allowing

loan.

Here third party gives the guarantee that of the principal debtor fails to repay the loan,

and then the guarantor will be bound to repay the loan to bank.

Hypothecation of vehicle: This document is necessary in case of transport loan. Here

the borrower hypothecated the vehicle to the bank. In case of failure of repay the loan,

bank will sell the vehicle to collect the money.

Information About the loan Customers:

The bank relies principally on outside information to assess the character, financial

position, and collateral of a loan customer. Such an analysis begins with a review of

information supplied by the borrower in the loan application. The bank may contact

other lenders to determine their experiences with this customer regarding the following

information:

• Were all scheduled payments in previous loan agreements made on time?

• Were deposit balances kept at high enough levels?

• How much was borrowed previously and how well were those earlier loans handled?

• Is there any evidence of slow or delinquent payments?

• Has the customer ever declared bankruptcy?

Sources of Information about the Loan customers:

• Physical Investigations

• Customer financial statements

• Experience of other lenders with this customer

• Customer Annual Report

Prime bank ltd.

• Local or regional credit bureaus

• Local Newspapers

• Local chamber of commerce.

Loan Classification-Provisioning:

1. Classification: Classification of loan is mandatory for all scheduled commercial

bank. Prime Bank classifies loan in four categories

These are –

SMA (Special Mention Account): If the loan remains overdue for 3 months and above

Substandard: If the loan remains overdue for 6 months and above

Doubtful: If the loan remains overdue for 9 months and above

Bad or Loss: If the loans remain overdue for 12 months and above

2. Provisioning: To get real picture of the income, provisioning is made as under-

- 1% for all loans

- 5% for SMA

- 20% for substandard loans

- 50% for Doubtful loans

- 100% for Bad loans

Recovery Policy of the Prime Bank:

First of all PBL try to recover all loans and advances regularly. If any instalment

overdue PBL officers make phone calls to the customers and if it is overdue for two

months they personally go to customers mailing address. In the basis of overdue

instalments PBL categorize provision.

In case of SMA loans determined to have high probability of recovery within 6 months;

recovery efforts to continue on an on-going basis. In case of substandard loans

determined to have moderate probability of recovery within 1 year; review recovery

efforts on a 3 months basis.

Prime bank ltd.

For doubtful loans it determined to have moderate probability of recovery within 1

year; review recovery efforts on a 3 months basis. Loans determined to have low and

remote probability of recovery.

Lastly for those loans have virtually no chance of recovery: charge-off the books.

However in these situations proper approval from the appropriate approving authorities

should be obtained and also shall be guided by Bangladesh Bank instructions and

subject to complete analysis of Banking practice, Legal and tax implication and Status

of each individual credit.

Credit is an utmost important factor for a Bank and core income generating source

as well as it is involved with risk. So, decision regarding credit is very important in all

respect of the Bank. PBL has proper credit management policies that describes what

type of loans protect the Bank’s soundness and also help to meet the needs of the

communities the Bank serves.

PBL should capitalize its present successful credit management system and try to give

better service to its stakeholders in days to come which can ensure its sustainable

growth and development.

Prime bank ltd.

References:

Annual report 2010 Prime bank ltd.: page-09, 21, 62,63, 66, 80-82,89,119

www.reportbd.com/blogs/11/camels-rating-of-banks---bangladesh.html.

www.bis.org/publ/bcbs54.htm

Prime Bank, (“n.d.”) The Bank

www.primebank.com.bd/ the_bank.jsp Investorwords,( “n.d.”) Credit

www.investorwords.com/

PBL, 2005 November. Credit Risk Management Policy.

Prime bank ltd. credit management analysis

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