Analysis of Credit

Management System of
“Janata Bank Limited”
 INTERNSHIP REPORT

ON

“Analysis of Credit Management system of Janata Bank

Limited”
Submitted By

Rony Jackson Cruze

ID: 143-11-4218
BBA- Major in Accounting
Department of Business Administration
Faculty of Business & Economics
Daffodil International University

Supervisor

Sayed Farrukh Ahmed

Assistant Professor
Department of Business Administration
Faculty of Business & Economics
Daffodil International University

Date of Submission: 2018 Date of Submission: 29.07.2018

 Letter of Transmittal

29.07.2018

To
Sayed Farrukh Ahmed
Assistant Professor
Department of Business Administration
Faculty of Business & Economics
Daffodil International University

Subject:Submission of the internship report on „Analysis of Credit Management system of

Janata Bank Ltd (JBL)‟.

Dear Sir;
I am truly pleased to submit my internship report on “Analysis of Credit Management system of
Janata Bank Limited”. This report gave me much knowledge about the Credit Management of
Janata Bank Limited.It is a great achievement for me to work under your guidance, active
supervisionanddirection.

I tried my best to show all the information in this report that I have collected during the
internship period. I wish the report would satisfy your desire and standard. I must mention here
that, I am really glad to you for your continuous attention, valuable supervisionand tireless effort
in preparing this report.

I hope that you will be satisfied with this report. If you have any inquiry, I will be pleased to
answer that. I hope and pray that you would be gracious enough to accord approval to this report.

With best regards sincerely

Yours Sincerely,

______________________

Rony Jackson Cruze

ID: 143-11-4218
 Certificate of Approval

I am pleased to certify that the Internship report on Analysis ofCredit Management system
ofJanata Bank Limited (JBL) conducted by Rony Jackson Cruze bearing ID No: 143-11-4218
of BBA Program, Department of Business Administration has been approved for presentation
and defense. Rony Jackson Cruze worked withJanata Bank Limited (JBL), Farmgate Branch,
Dhaka, as an intern under my supervision.

Rony Jackson Cruze bears a strong moral character and a very pleasing personality. It has indeed
been a great pleasure working with his. I wish his all success in life.

……………………………..

Signature of the Supervisor

Sayed Farrukh Ahmed

Assistant Professor
Department of Business Administration
Faculty of Business & Economics
Daffodil International University
 ACKNOWLEDGEMENT

A large number of people are entitled to my heartfelt gratitude and acknowledgement in

preparing this report. Without their constant support and encouragement, such a thorough
analysis would be a difficult challenge to override.

Firstly, I want to express my gratitude to Almighty God for giving me the strength and the
composure to finish the task within the scheduled time and I also would like to extend my
sincere appreciation and gratitude towards my faculty advisor Sayed Farrukh Ahmed(Assistant
Professor, Daffodil International University)for his incessant guidance and support throughout
the internship period. His insights and constant supervision helped me to get a better
understanding of my report.

Secondly, I must acknowledge Mr. Shahidul islam (Officer of Janata Bank Limited of Farmgate
Cor.) for his continual motivation towards learning. Also, helps me to learn new things. And I
am thankful that he let me into his team, offering so much to learn.

Lastly, I sincere gratitude to all the wonderful people of Daffodil International University (my
teacher, my classmates and others) for supports and understanding. It would be impossible
without their help
 Executive summary

The report is originated in result of my internship, which I have done, as a requirement of BBA
program. This report is done based on my three months internship program in Janata Bank Ltd.
During office Time I never felt vague and ambiguous. The environment of the Janata Bank Ltd.
is fine and friendly. The staffs are specialized in their respective fields, works on their own and
there id supervised from the top management. The Janata Bank Ltd is one of the leading public
Banks operating in Bangladesh. All the aspects of Credit and Risk Management of JBL Like;
regulations activities, rules, credit operation department, approval processes of loan, and also
credit collection department, various product variety and their services and recovery process of
loan etc. have been attached to this report. The objectives of the study have been outlined to
know the different types of credit schemes, lending procedure & approval process, credit
assessment & risk management process, identify problems related to credit management, and
make some recommendations to solve those problems of JBL.I may have made many mistakes
but I believe those recommended points may help the bank to their problem
 TABLE OF CONTENTS

Serial TABLE OF CONTENTS Page No:-

No:-

Chapter One : Introduction

1.1 Introduction 01

1.2 Objectives of the study 02

1.3 Methodology of the study 02-03

1.4 Limitations of the study 04

Chapter: Two

Organization profile of Janata Bank Limited at a glances

2.1 Introduction 04

2.2 Vision of Janata Bank 05

2.3 Mission of Janata Bank 05

2.4 Goals of Janata Bank 05

2.5 Core values 05

2.6 Slogan 05

2.7 Corporate profile 06-07

2.8 Products offered by Janata Bank 07

2.9 Deposits 08

2.10 Loans and advance 08-11

2.11 Special product 11

2.12 Green Banking 12

2.13 Service offered by Janata Bank 12-13

Chapter: Three

Credit Management System of Janata Bank

3.1 Why does Janata Bank provide load and advance to borrower 14

3.2 Objective of the credit management 14

3.3 Sources of credit 14

3.4 Classification of loan 15

3.5 Sound principal of lending 15-16

3.6 Credit worthiness of a borrower 16-17

3.7 Policy guidelines of credit management 17

3.8 Credit assessment 18

3.9. Components required for good credit policy 18

3.10 Process/Steps of credit disbursement 19-20

3.11 Credit risk management 23

3.12 Objectives of credit risk management 23

3.13 Lending Guidelines 23-24

3.14 Credit risk assessment 24-25

3.15 Credit risk grading 25-26

3.17 How to compute credit risk grading of a bank 26-28

3.18 Loan recovery performance of Janata Bank 28-30

3.18 Programs for loan recovery 31

3.19 Recovery forms of credit and advance 32

3.20 Problems in loan recovery 32-34

 Chapter: Four 46

Findings, Recommendations and Conclusion

4.1 Findings 35

4.2 Recommendations 36

4.3 Conclusion 37

References
 Introduction

1.1:Introduction:

“One thing that internship will do is; it will take you out of bookishness and show you how the
business world really is.” At the end of my internship, I realized this.

After the completion of 4 years of academic courses, every student has to go through another
learning process that is “Internship”. For any student, the 3 months of internship is very
important and relevant. Important and relevant in the sense that we just get to know from our
honorable faculties; how do the organizations work and how do they operate, but due to all the
complexities we do not have too many chances to see that by ourselves. Then comes the
internship at the end of the university life. This overall process enables a student from business
background to engage him/herself in the actual business/ work-life. It is an opportunity for a
student to apply all the knowledge gained throughout the 4 years of academic courses and
knowledge.

As a student of Accounting, I always preferred the financial sector as my probable choice for
doing internship. So, I chose Janata Bank Ltd for my internship program.I found a confirmation
letter to join Janata Bank Limited as an intern at 25th February. I took the opportunity to join as
the only intern.

As an intern I had the opportunity to work under the supervision of Shahidul Islam (Officer of
Janata Bank Ltd. Farmgate Corp.). I also worked under one of the different employees. This 3
months period was an in depth showcase of how they manage their credit system.

1
1.2:OBJECTIVES OF THE STUDY:
The main objective of the report “Analysis of Credit Management System of Janat Bank Limited
(JBL)”: FarmgateBranch to fulfill the requirement of BBA program. However, the objective
behind this study is something broader. Objectives of the report are summarized in the following
way-

►To find different types of credit systems of Janata Bank Limited.

►To analyze the loaning process and approval procedure of JBL.

►To assess credit recovery procedure of JBL.

►To find the problems related to credit managing and recommendations to solve those

problems of JBL.

1.3:METHODOLOGY OF THE STUDY:

The process of collecting information in terms of the related issues of the study. It is designed in
a way to accomplish the objectives of the study. The study needs a systematic method from
selection of the topic to final report preparation. The study is done based on the information
extracted from different sources collected by using a definite methodology.

Sources of Data:

A) Primary Sources

▪ Officers of the branch

▪ Clients of the branch

Method of data Collection:

▪ Personal Interview: Face to face talk or conversation and in-depth interview with the
respective officers and clients of the branch.

▪ Personal Observation: Observation of the credit managing activities.

2
 B) Secondary Sources

▪ Annual reports of Janata Bank Ltd.

▪ A book on „Credit Policy and Loaning Guidelines‟ (Revised edition-2006), Published

by JBL.

▪ Manuals of Credit Management of JBL

▪ Published materials and office circulars of JBL

▪ Website of the JBL.

1.4: LIMITATIONS OF THE STUDY:

Throughout this report I have tried to highlight and showcase almost every aspect of my
internship journey. However, due to the limitation of confidentiality issues of Janata Bank Ltd., I
might not have shared all the experiences that I have come across. In conducting the present
study, the following limitation has been faced.
The main constrain of the study was insufficiency of information, which was required for the
study.

 Due to safety and other corporate obligations a number of information the bank employee
can‟t provide to me.

 I could not discussed many aspects in report due to time limitation

 Learning all the tasks within just 90 days is too tough.

 Personnel of the bank didn‟t gave enough time to me because they were very busy, they
could not provide enough time to me.

 Absenceof chance to visit more than one branch.

 The functions and activities of Sonali Bank Ltd. are too vast, so they change their
strategy day by day as a result I couldn‟t collect update information & strategy.

 Due to lack of experience, there is a chance of having some mistake in the report though
best effort has been applied to avoid any kind of mistake.

 Time was not sufficient to make an in depth study on such issue.

3
 History of Janata Bank Limited

2.1: Introduction

Janata Bank Ltd. is one of the largest commercial banks of Bangladesh. It‟s a state government
bank,was founded just after the liberation of Bangladesh. In fact it was a mixture of two banks
namely United Bank Limited and Union Bank Limited. It is a state owned second largest
commercial bank in our country. On 15th November 2007 it was corporatized. It was founded
with a new thought of focused banking serving and expanded economic needs of planned
economic growth of the state. It is one of the topstate owned commercial banks in our country,
Janata bank hasof Tk. 30000 million authorized capital, and Tk. 19140 millionpaid up capital.
On 31 December 2016 total assets of Janata bank was Tk. 778,603.91crore. After 1971, the bank
renamed as Janata Bank. Janata Bank, Ltd. offers commercial banking facilities in Bangladesh. It
offers Internet banking, loan services and program, international banking, retail banking, foreign
remittance, micro enterprise, rural banking and loan program services, special loan, and. It also
offers Funding Information Technology Area, Funding of Industries, and Windows for
SMEsReady Cash, and Finance to Travel Agencies, Finance to Diagnostic Centers. The
Company currently operates 444rural branches, 450 urban branches and 4 overseas branches at
United Arab Emirates. The goal of the bank is to dynamically contribute in the socio- financial
growth of the state by working a commercially sound banking organization, authorizing credit to
worthwhile borrowers, professionally carried and competitively valued, at the same time
defending depositors‟ protecting funds and providing a suitable profit.

4
2.2: Vision of janata Bank
The Vision of Janata bank is to become the successful driving commercial bank in Bangladesh
and to support social, economic growthexpansion of the country.

2.3: The Mission of Janata Bank

The Mission of Janata Bank Limited is to become the successful commercial bank by keeping a
constant growth approach, providing topworth financial products, giving first-rate client facility
through a qualified management team.

2.4: Goals of Janata bank

 Faithful deposit mobilization plan.
 Proper lending risk valuation system.
 System to create worthy advances.
 Staffing, orientation plan and compensation training
 Plan for offering superior customers facility.
 Suitable managing structure, systems, processes and methods.

2.5: Core Values

 We put our clients first.
 We highlight on professional ethics.
 We sustainclass at all levels.
 We have faith in being a liable corporate citizen.
 We say what we have faith in.
 We stand-in participative management.

2.6: SLOGAN:
 Your Committed Partner In Progress

5
2.7: Corporate Profile

Features Values

Name Janata Bank Limited

Genesis The 2nd largest State Owned Commercial Bank in Bangladesh,

Playing pivotal role in overall financial activities of the country.

Established by combining the erstwhile United Bank Limited and Union Bank
Limited under the Banks Nationalization Order in 1972

It was restructured as a limited company in November, 2007.

Registered Janata Bhaban, 110, Motijheel Commercial Area Dhaka - 1000, Bangladesh.
Address

Legal Status Public Limited Company

Chairman Luna Shamsuddoha

CEO & Md. Abdus Salam Azad (F.F.)

Managing
Director

Company Hussain Yeahyea Chowdhury

Secretary

Date of 21st May 2007

Incorporation

Authorized BDT 30,000 Million

Capital

Paid up BDT 19,140 Million

Capital

Face value per share BDT 100 per share

Shareholding 100% Share owned by the Government of Bangladesh

Pattern

Number of 12,182 (As on 31.03.2018)

6
Employees

Banking 31 May 2007

license
obtained from
Bangladesh
Bank

Phone Phone +88 02-9560000, 9566020, 9556245-49, 9565041-45, 9560027-30

SWIFT JANBBDDH

Website www.jb.com.bd

E-mail md@janatabank-bd.com

Number of Offices

SL Name Numbers

01. Divisions of Head Office 10

02. Department of Head Office 44

03. Section of Head Office 07

04. Unit of Head Office 02

05. Division Office 08

06. DGM Headed Area Office 25

07. AGM Headed Area Office 22

08. Chif Executive‟s office(Abu Dhabi) 01

Number of Branches:

Branches in Bangladesh 894

Rural Branches 444

Urban Branches 450

7
Overseas Branches 4

Total Branches : 898

2.8: Products offered by Janata Bank:

Mainly four types of products are by Janata Bank limited and they are:

 Deposits
 Loans and advantages
 Special product
 Green Banking

2.9: Deposits:

 Current Deposit: Janata Bank Limited offers to their customers current deposit facility.
This facility mainly for a business personfor day-to-day business transaction without any
restriction. This current deposit account pays no interest but a customer can withdraw
money from this account when he wants by presenting his account cheque within the
working day.
 Saving Deposits:Janata bank also offer saving deposit facility which can be opened in
any branch of Janata Bank depositing any amount of taka. Saving deposits account holder
can deposit or withdraw any amount during any working day of the bank with prior
notice or without notice.
 Special Notice Deposit:On special notice deposit (SND) account Janata Bank Limited
offers interest to their customer's and gives facility to withdraw money at any time.
 Term Deposit:Anaccount holderof Janata Bank can open Fixed Deposit Account for
different terms in any branch. Everyone can depositmoneyand easilycan make FDR
amount into cash.
 Schemes: JBL offers several deposit schemes following monthly savings plan which is fit
for all classes of individuals.

2.10: Loans and Advances:

Janata Bank Limited mainly focus on Credit is funding business, trade and industrial activities
through an effective distribution system.

8
  SME Banking: The part of Small and Medium Enterprises (SMEs) is vital for overall
economic progressof our country. Janata Bank has a great contribute on this sector.
Janata Bank gives different amount of loan to this sector which help this to develop and
this to increase GDP.
 Export Financing: In our country we have number of export product line and we are
looking ahead to include more products in this line. Our major export products are:
 ECC (HYPO & PLEDGE)
 PACKING CREDIT
 Other Export Finance
 LTR(FC)
 ECC for export Oriented Project
 BMRE for export Oriented Project
 Loan General
 Cash Credit
 Demand Loan
 Advance against Cash Subsidy
 PAD(EDF)
 PAD (GMT)
 Import Financing:

The import products are:

 PAD (Cash)
 LIM
 LTR

Demand Loan

 Working Capital Loan:

 Credit Program for Agro-based Industry/Project
 Working capital for husking mill
 Credit program for Preservation of Potatoes in Cold storage

9
  Other Working Capital
 Rural and Micro Credit Loan:Most of the people of our country lives in the rural areas
and the main source of income comes fromcultivation and agro-business. So JNL opened
their branches in those areas to fulfill the banking needs of those people. JBLinspires the
poor people to make small savings and encourage for lending. JBL also financing on
agricultural production and poverty alleviation programs.
 Specialist Loan Program:Janata Bank also provide special loan for:
 Micro Credit Programs related with the poverty reduction,
 Special credit programs related with employment generation and
 Financing of agro-based industries.
 Agriculture loan Program:
 All kinds of Crops Loan & Cultivation Loan
 Loan for Shripm culture development
 Loan for Irrigation and agricultural equipment
 Loan for Salt production plant
 Dal,spices,oil seeds& mase
 Thrust Sector: Janata bank also provide loan on thrust sector.The Bank has financed a
good-sized amount of fund in the progress of Knit Garments industries, Paper/Board
mills, and Composite textile, spinning mills, Cement manufacturingand other small and
medium enterprises.
 Joint Venture:By following the government investment policies, Janata Bank also
provideloan or financing on joint venture and do foreign investment in Bangladesh.
 Other commercial Loan:
 Transport

 Consumer credit Program: Janata Bank has a strong financing product line for their
customer. This financing products are:
 Credit Card
 Debit Card
 Auto Loan

10
  General House Building Loan
 Staff House Building Loan
 Service Holders Loan
 Doctors Loan
 Cyber Cafe Loan
 Household Commodity Loan
 Building Renovation Loan

2.11: Special Products:

A product for non-resident Bangladeshis

 Special NRB product:

 NRB Gift Cheque
 NRB Escrow A/C
 Continuous Benefit Account
 Advance Benefit Account
 Foreign Currency Account
 NRB Home Loan Scheme
 Credits:
 Advance Benefit Account
 Special deposit product:
 Q-Cash Deposit
 NRB Gift Cheque
 Ghore Ghore Sanchay
 Gift Cheque Scheme
 NRB Escrow A/C
 Continuous Benefit Account
 Foreign Currency Account

11
2.12: Green Banking:

The earth of the world is confronting genuine risk in light of ecological contamination and
climatic change. A fast climatic change is causing negative effects on farming, woods, water
assets, human wellbeing, bio-assorted variety, and so on. Keeping money segment plays out an
imperative part in the economy of a nation. Ventures established by bank back make progression
of the economy, yet at the same time, the ecological contamination have been happened by their
creation, process and related exercises.

2.13: Services offered by Janata Bank:

Personalized Services:

Janata Bank Limited has broadly branch networking system and so they provide personalized
services. Such as:

 Demand Draft
 Telegraphic Transfer
 Mail Transfer
 Pay Order
 Security Deposit Receipt
 Transfer of fund by special arrangement
 Normal transfer
 Electronic transfer through Ready Cash Card
 Locker Service

Online Banking:

The banking system of the world is now digital by the boom of technology. JBL has also stepped
into thisworld. Janata bank implement their banking system on-line base.

12
ATM Service:

JBL is providing to their customers with ATM facilities. This ATM facility is being providing
under the biggest network systemincluded of 28 banks of which 26 are member banks and 2 are
network-sharing banks. Janata bank has 2800 ATMs. That means the customer of Janata bank
can use this facility by using a card at any time.

Utility Services:

Janata bank also providing utility service by collecting various types of utility bills like:

 Gas bill
 Electricity Bill
 Telephone Bill
 Sewerage Bill Collection
 Municipality Holding Tax Collection

Inland Remittance:

JBL has i wide ranging branch networking system and has skilled staffsso they provides quick
and personalized services like:

 Demand Draft
 Telegraphic Transfer
 Mail Transfer
 Pay Order
 Security Deposit Receipt

Other Services:

 Locker Service:JBLoffered locker facility from some selected branches which gives a
completely safe facility for protection of valuable items or documents and other
valuables.
 Issuance of Television License: Only Janata Bank Limited is providing Issuance of
Television Licenseservice in Bangladesh.

13
 Analysis of Credit Managementsystem of
Janata Bank Limited

3.1: Why does Janata bank provide loan and advance to the borrowers?

Basically JBL provides loan and advances to its customers for the following factors-

 To earn interest from the debtors and give the deposits interest back.
 To speed up economic growth by providing dissimilar industrial as well as
agricultural advances.
 To generatework by providing industrial loans.
 To pay the personnel.

3.2: Objective of the credit management:

There are some points behind a written credit management of Janata Bank that are as follows:

 To deliver a guide for giving lend

 Quick response to the client needs.
 Condense the way of giving loan.
 Lessenwork load from top level management.
 To check and stability the operatingaction

3.3: Sources of Credit:

The sources of providing loan of a bank are given below:

 Different types of deposit

 Paid up Capital
 Retain earning
 Loans from Bangladesh Bank and other Bank

14
3.4: Classification of Loans:
Mainly two types of loans:

Secured:
The load which Secured loans are those loans which are protected by an asset or collateral of
some sort. Such as a home or a car, can be used as collateral, and a lien is placed on such item.
Bank will grip the collateral until the loan refund fully from the customer, including interest and
all applicable fees. Other items such asbonds, personal property stocks can be put up to secure a
loan. Different types of secured loans are:

 Loans
 Over Draft
 Cash credit
 Bill purchase

Unsecured:

Unsecured loans are those which are not protected by a collateral or asset. This loan is thereverse
of secured loans and include things like credit card purchases, education loans, or personal
(signature) loans. Lenders take too much risk for this a loan, because there is no chance to
recoverfund in case of default. This loan interest rate is higher.

 TOD
 Clean OD
 Clean loans

3.5: Sound Principles of Lending:

 Principle of Safety: The first Principle of lending is safety. Bank should not sacrificed
their safety for profitability. Bank should ensure that the funds go to the right type of
borrower,thatstay safe and the refund comes in the normal way.
 Principle of Purpose: The Bank should not lend money to their customer for any
purpose that means the purpose should be productive.

15
  Principle of Liquidity: The banker while making advance must see to it that the money
lent is not locked up for a long time because, majority of Bank‟s liabilities are payable
either on demand or after short notice. So the banker should make sure that the loans are
liquid enough to meet the banks liability structure.
 Principle of Security: The security offered by a borrower for aloan is insurance to the
banker. It serves as the safety value for an unforeseen emergency. So one more principle
of good lending is the security of lending. The security accepted by a banker to cover a
bank advance must be suitable, freely marketable, easy to handle and free from any
burden.
 Principle of Profitability: Banks should lending money on reliable and profitable
sources for the profitability, but should careful about safety and liquidity principal cannot
be sacrificed.
 Principle of Diversification:This principal indicate that loan should be as broader as
possible and need to be in conformity. Loan should not be in one specificway/ industry/
activity or one or few borrowers.

3.6: Creditworthiness of a borrower:

Character:

 To define whether the borrower has a liable attitude towards lent funds and whether he
will have every effort to refund what is owed.
 Duty, honesty, serious fortitude, and strongaim to repay loans make up the characters of
the borrower

Capacity:

 Whether clientdemanding loan has the authority to demandfor loan and have the lawful
standing to sign loan contract and documents.

Economic Condition/ Assets:

 Whether debtor has adequate assets to refund the loan.

 Other loans and liabilities of the debtor

16
  Credit history/Credit habit:
 Whether loans lent by the clients previously and how those earlier credits were handled.
 Whether there is any credit default earlier
 Whether legal action has ever been taken against him for recovery of default loan.

Credit Rating:

 Credit Ratings of the borrower by credit rating agencies

3.7: Policy guidelines of Credit Management:

Credit Management Policy of JBL t have been made in accordance with the Policy Guidelines of
Bangladesh Bank‟s. This guidelines made in such a way that the bank can lessen its losses for
payment of estimatedpayment to the shareholders.

Lending guidelines:

The loaningstrategiescontain the following:

 Focus on industry and business sector

 Natures of credit facilities
 Single debtors/ group bounds/ syndication
 Loaning caps
 Depressed business styles

As a minimum, the followings are discouraged:

 Military tools/ armsfunding

 Vastly leveraged businesses
 Funding of notional investments
 Logging, mineral extraction/ mining, or other activity that is
 Decently or globally sensitive
 CIB black list company
 Counter parties in nations subject to UN authorizations
 Loaning to holding corporations.

17
3.8: Credit Assessment:

Credit and risk calculation should be directedformer to the allowing of credits, and at least
yearlyafterward for all services.

Credit Requests should abstracts the risk valuation and contain, as a minimum, the following
details:

 Social threat inputs

 Sum and type of loan (s) wished-for
 Purpose of loans
 Structureof the loan
 Safetypreparation
 Any other threat or problem
 Threatactivates and action plan-condition cautious, etc.

3.9:Components required for a good credit policy:

 Legal consideration:The bank's lawful loaning boundary and different requirements

should be set to avoid unintentionaldamage of banking rules.
 Delegation of authority:Every distinct approved to broaden credit should know exactly
how much and under what conditions he or she may submit the bank's funds. These the
system should be permitted, at least annually, by written resolution of the board of
directors.
 Types of credit extension:The most important parts of a loan is a definition of which
kinds of credits are okay and which type credits are not.
 Pricing:In any benefit persuaded attempt, the cost to be charged for the products or
administrations rendered is of fundamental without it, people have couple of rules for
citing retag or expenses, and the varieties coming about because of human instinct will be
a wellspring of client disappointment.
 Market Area:Bank ought tofound its proper market zone, founded upon, among
additionalstuffs, the size and complexity of its organization its wealthposition, outlining

18
 one‟s market area is perhaps more vital in the lending task than in any other aspect of
banking.
 Loan Standard:This is a meaning of the sorts of credit to be exhausted, wherein the
subjective measures for adequate advances are put forward.
 Credit granting procedures:This subject might be shrouded in partitioned manual, and
generally is in bigger banks. At any rate, it ought not to be ignored in light of the fact that
appropriate methodology are basic in advance building up arrangement and principles.
Without legitimate system for conceding credit and consistent policing to guarantee that
these strategies are careful done, the best considered advance approach won't capacity
and unavoidable, issues will create.

3.10: Process/Steps of credit disbursement:

Credit Processing/Appraisal

Credit Approval/ Sanction

Credit Documentation

Credit Administration

Disbursement

Monitoring and control individual credit

Monitoring the overall credit portfolio

19
 Credit Classification

Managing credit problem/Recovery

Credit Processing/Appraisal:

Credit preparing is where all required data using a loan is social affair and applications are
screened. Credit application structures ought to be adequately point by point to allow social
affair of all data required for credit appraisal at the start.

Credit-approval/Sanction:

A money related establishment must have set up composed rules on the credit endorsement
process and the endorsement experts of people or boards of trustees and in addition the premise
of those choices. Endorsement experts ought to be authorized by the top managerial staff.
Endorsement specialists will cover new credit endorsements, reestablishments of present credits,
and changes in wording and states of already affirmed credits, especially credit rebuilding, which
should all be completely reported and recorded.

Credit Documentation:

Documentation is a basic piece of the credit procedure and is essential for each period of the
Credit cycle, containing credit request, credit investigation, credit endorsement, credit checking,
What's more, and security valuation, and impedance acknowledgment, abandonment of
weakened credit and Acknowledgment of security.

Credit Administration:

Financial organizations must guarantee that their credit portfolio is appropriately controlled, that
is, advance assentions are properly arranged, reestablishment sees are sent methodicallly and

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credit records are consistently refreshed. A foundation may apportion its credit organization
capacity to a different office or to assigned people in credit tasks, contingent upon the size and
multifaceted nature of its credit portfolio

 A financial institute‟s credit managementtask should, as a minimum, ensure thatcredit

records are neatly prepared, cross-indexed, and their subtraction from the premises is not
allowable;
 the debtor has listed the necessary insurance policy in favor of the bank and the
premiums paying on a regular basis;
 credit services are paid only after all the promised terms and situations have been met and
all the essentialforms have been received;
 collateral securitypriceshouldoftenchecked;
 the debtor is making timely refunds on interest, principal and any agreed to fees and
commissions;
 The established strategies and processes as well as relatedacts and guidelines are obeyed
with; and
 On-site assessmentof the debtor‟s business on regularly conducted and imposts
documented.

Disbursement:

Once the credit is endorsed, the client ought to be instructed with respect to the terms and states
of the credit by method for a letter of offer. The copy of this letter ought to be properly marked
and come back to the foundation by the client. The office payment procedure should begin
endless supply of this letter and ought to include, entomb alia, the consummation of customs in
regards to documentation, the enlistment of security, protection cover in the establishment's
support and the confirming of archives by a lawful master. By no means will reserves be
discharged before consistence with pre-dispensing conditions and endorsement by the pertinent
experts in the money related organization.

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Monitoring and Control of Individual Credits:

To defend monetary organizations against potential misfortunes, issue offices should be

recognized early. An appropriate credit checking framework will give the premise to taking brief
remedial activities when cautioning signs point to decay in the monetary soundness of the debtor.
Cases of such cautioning signs incorporate unapproved illustrations, unfulfilled obligations in
capital furthermore, intrigue and decay in the borrower's working condition Financial
establishments must have a framework set up to formally audit the status of the credit and the
money related wellbeing of the borrower at any rate once every year.

Monitoring the Overall Credit Portfolio:

A critical component of sound credit hazard administration is examining what could conceivably
turn out badly with singular credits and the general credit portfolio if conditions/condition in
which borrowers work change essentially. The aftereffects of this investigation should then be 46
| P a g e considered into the evaluation of the sufficiency of provisioning and capital of the
establishment. Such pressure investigation can uncover beforehand undetected territories of
potential credit hazard presentation that could emerge during emergency conceivable situations
that budgetary foundations ought to consider in doing pressure testing include:

 Important monetary or industry division slumps;

 Opposing market-hazard occasions; and
 Unfavorable liquidity situations.

Classification of credit:

It is required for the top managerial staff of a monetary organization to "set up credit chance
administration approach, and credit impedance acknowledgment and estimation arrangement, the
related inward controls, documentation procedures and data frameworks. Credit characterization
process grades singular credits as far as the normal level of recoverability. Monetary
establishments must have set up the procedures and controls to actualize the board endorsed
arrangements, which will, thusly, be as per the proposed rule.

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Managing Problem Credits/Recovery:

A financial institute‟scredit chance approach should obviously set out how issue credits are to be
overseen. The situating of this duty in the credit branch of an organization may rely upon the size
and intricacy of credit tasks. The observing unit will take after all parts of the issue credit,
including restoration of the borrower, rebuilding of credit, checking the estimation of appropriate
guarantee, examination of authoritative records, and managing collector/chief until the point
when the recuperation matters are settled.

3.11: Credit Risk Management:

Credit risk is the risk of loss arising from the disappointment of a borrower, guarantor, partner or
client to meet its monetary commitments to the Bank. The Bank's credit hazard approaches
characterize diverse level hazard parameters under which credit chance is observed and
controlled.

3.12: Objectives of Credit Risk Management:

 Strengthen credit management system

 Reducing Loss
 Optimum Profit
 Formation of ICT based credit management
 Risk Management & Risk grading of borrowers having limit 50.00 lac & above.
 Formation of credit Management considering Globalization, Free market economy,
Decentralization, Middleman free National & international environment.
 Formation of strong credit policy
 Segregation of duties
 Develop risk Management culture

3.13: Lending Guidelines:

 Ensure profitability
 Socio- economic development, poverty alleviation & employment generation
 Credit assessment & risk Grading

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  Segregation of duties
 Allocation of credit budget
 Lending cap
 Prevention of credit centralization & credit diversification
 Competitive rate of interest
 Analysis of nature of credit
 Security
 Decentralization of delegation of business power & proper credit monitoring
 Supervision & Recovery

3.14: Credit Risk Assessment:

A through credit chance evaluation should to be directed before the endorsing of credit offices.
From that point it ought to be done yearly for every relationship. The consequence of this
evaluation will be exhibited in the credit proposition began from the Relationship Manager.

Following risk zones in the credit offer should be addressed and measured before transfer to
Head Office.

i. Borrower Analysis:
 Share holding
 Status
 Education
 Experience
 Success history
 Net worth
 Age etc.

ii. Industry s Analysis:

 Industry Situation/Threat/Vision.
 Threatissuesrelating to the industry.
 Share in the industry/Debtor‟s position

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  Strong point, weakness of the debtormatched to the competitors etc.
iii. Teams Competence
iv. Seas Debt- Supplier/ Buyer Risk Analysis:
v. Demand Supply position
vi. Infrastructural services /Technical feasibilities
vii. Managing Equity Ratio
viii. Seasonality of demand
ix. Analysisfinancial historical:
 Analysis Least 3 years historical financial reports.
 Their Earnings
 Cash flow
 Leverage
 Success / Profitability
 Strong point and dependability of Balance Sheet etc.

3.15: Credit Risk Grading

For credit risk grading there are of 8 categories with Short names and Numbers are provided they
are as follows:

Grading Short Name Number

Superior SUP 1

Good GD 2

Acceptable ACCPT 3

Marginal/Watch list MG/WG 4

Special Mention SM 5

Sub standard SS 6

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Doubtful DF 7

Bad & Loss BL 8

3.16: How to Compute Credit Risk Grading of a Bank:

Step 1: Identify all the principle risk components

Credit Risk for counter party rises from of the following:

 Financial Risk Relationship Risk

 Security Risk
 Management Risk
 Business/ Industry Risk
 Relationship Risk Financial Risk

Every one of the above say key regions requires be assessing and accumulating to touch base at a
general hazard reviewing measure.

Step 2: Allocate weightages to Principal Risk Components

Principal Risk Components: Weight

Financial Risk 50%

Business /Industry Risk 18%

Management Risk 12%

Security Risk 10%

Relationship Risk 10%

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Step 3: Establish the Key Parameters

Principle Risk Component Key Parameters

Financial Risk Leverage, Liquidity, Profitability and Coverage Ratio

Business /Industry Risk Size of Business, Age of Business, Business outlook,

Industry Growth, Competition and Barriers to business

Management Risk Experience, Succession, & team work

Security Risk Security Coverage, Collateral Coverage & Support

Relationship Risk Account Conduct, Utilization of Limit

Step 4: Assign weightages to each of the key parameters:

Once the previously mentioned key.hazard parameters are assessed, dissected and surveyed
legitimately the following stage will be to additionally allot weightege against each key
paramater relying upon its quality and benefits.

Step 5: Input data to arrive at the score on the key parameters:

After the risk recognizable proof and weightege task process (as said over), the subsequent
stages will be to enter genuine score got by the Bank (under audit process) against the key
bounds in the scoree sheet to touch base at the aggregate scores acquired.

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

Number Risk Grading Short Name Score

1 Superior SUP 100% cash covered

Government
guarantee
International Bank
guarantees

2 Good GD 85+

3 Acceptance ACCPT 75-74

4 Marginal/Watch list MG/WL 65-74

5 Special Mentioned SM 55-64

6 Sub-Standard SS 45-54

7 Doubtful DF 35-44

8 Bad & Loss BL <35

3.17: Loan recovery performance of Janata Bank Limited

Scenario or analysis of loan disbursement and recovery status of Janata bank:

Borrower has the duty to repay the loaned money within the specific date which is given by the
bank.If he (borrower) fails to repay the loaned money within the specific period bank will
announce him as a defaulter. After declared the borrower as defaulter bank will recover the

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loaned money by selling borrower securities which was given by the debtor and bank will
freezing his account or make a suit against him.

Loan and advance given by the Janata bank from 2012 to 2016:

BDT in million

Year Amount

2012 305, 339.57

2013 285, 747.65

2014 319, 773.25

2015 349, 861.30

2016 403,037.42

Graphical presentation:

Loan and anvanced

403,037.42
349,861.30
305,339.57 319,773.25
285,747.65

Year2012 Year 2013 Year 2014 Year 2015 Year 2016

BDT in million

Explanation: In the above graph and figure we can see that total loan and advance of Janata bank is
increasing which indicates that Janata bank doing better on loan and advances providing. In 2012 the
amount of loan and advance was decreased than previous year but gradually that increase.

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Loan and advance recover performance of janata bank:

Year Loan and Advance Recover RecoveryRate

given(BDT in Million)

2012 305, 339.57 113,634.43 37.21%

2013 285, 747.65 92,570.64 32.39%

2014 319, 773.25 129,235.19 40.41%

2015 349, 861.30 153,130.26 43.77%

2016 403,037.42 204,013.23 50.62%

2017 459,580.05 239,762.91 52.17%

Graphical presentation of loan and advance recovery rate:

Recovery rate

50.62% 52.17%

43.77%
40.41%
37.21%
32.39%

Year 2012 Year 2013 Year 2014 Year 2015 Year 2016 Year 2017

Recovery rate

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3.18Programs for Loan Recovery
When Janata Bank approvals or authorizations loans and advances to its clienteles, they clearly
state the reimbursement or return pattern in the finance contract. But some credit holders do not
pay their loan in due period or dated. The state-owned and private sector commercial banks have
to face this kind of problems and difficulties. This circumstance is, particularly extreme in Janata
Bank. To overcome from this issue should take specific loan recovery program or necessary
steps.

Recovery Programs taken by JANATA BANK

 To found and start credit observation and observing cell in the bank.
 To re-found the loan authorizing or authorizing and allotting strategy of the bank.
 To approval advance and creditsin contradiction of adequate securities as best as
possible.
 To give more supremacist and controls to the local office or branch manager in credit
administration decision making process.
 To offer a bundle of inducements or incentives to the sound borrowers.
 To give more importance on short term credits and loans.
 To impose limits on advance and loans or credit for sick industries.
 To take lawful actions against defaulter or debtors as best as possible within by the
law of restrictions.

3.19: Recovery FormsofCredit and Advances

Usually JB LTD. authorizations advance and finances to every segment of an economy. Earlier
going into specifics information of recovery performance, we must be acquainted with a few
terms used in recovery performance:

 Payment: Maximum unpaid balance on any date during the reportage period minus
unpaid balancee at the end of the preceding. period.
 Demand for recovery: Unpaid at the end of the reporting period plus recovery during
the coverage period.
 Recovery: Maximum unpaid or unpaid balance on any date during the reportage
period detriment unpaid balance at the end of the recovery period.

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  Outstanding or unpaid: Outstanding or unpaid amount in the ledger at the end of the
reportage period.
 Overdue: Demand or claim for recovery demerit recovery.

3.20:Problems in Loan Recovery

There are a great deal of causes for which the lent and advance rescue of the bank is very
substandard. In most cases, complications may be raised up from approving processes of finance,
inquiry of the task, and analysis of the loans etc. that is, the problem in loan and advance
recovery shows the results of the default method in loan payment. The core causes of poor loan
recapture are classified in four broad types as follow:

A. Problems created by economic environment

The following complicationsstand up from the effect of monetary environment:

1. Shifting in the management form: Moving of managing designs may delay the
recovery of mature loan.
2. Fluctuating in industrial outlines: The state-owned banks from time to time approval
loan to the dropping concern for further progress of the respective segment
3. Action on open market economy: In our nation mostly industries turn out to be sick
and also close their industry on account of developing of open market economy.
4. Speedy growth of commerce: There are several businesses which grow their business
speedily, but the growth is for short time. In the long run, the volume of classified
finance is rise.

B. Problems created by government

The following harms create by govt. or problems are arisen by the government:

1. External force: JB has also met many complications in the loan recovery method as a
part of constant burden from several interested groups.

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 2. Finance or loan to govt. institute: Janata Bank is bound to approval loan and advance
to govt. institution, despite the fact that these are losing anxiety.
3. Legal difficulties: Current instructions and guidelines are inadequate to recover loan. As a
result, debtors or nonpayers can get release easily.
4. Repeated changes in govt. rules and strategies in regard to rescue of finance.

C. Problems created by the bank:

The f ol l owi ng pr obl ems ar e cr eat ed by t he banks:

1. Lack of inquiry of business threat: Before loaning, JB does not properly investigate the
business threat or threat of the debtors and the bank cannot prediction whether the
business will prosper or not.
2. Lack of correct estimate of security or debtassets: In maximum cases, bank flops to define
the worth of security against the lent.

D. Other general causes:

Aside from the particular causes making issues to recover advance, there exists some other
commonreasons which greatly affect making the issues which are looked by the JBL under
investigation in the credit recovery procedure. These are:

1. Early approval and payment of loan to the debtors without appropriate examination of
the scheme by the bank on account of force from lobbying group.
2. Absence estimation of technical e program.
3. Interruption in payment of loan.
4. Loan is not allowable to real businesspersons.
5. Lack of appropriate management.
6. Illiteracy of debtors or debtors.
7. Deleteriousarrogance of debtors to reimburse the loan.
8. Weakening of the value system of the debtors.

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 9. Debtors use.their. loan-money other than.listed project, i.e., if the loan is allowed for
industrial. purpose; they use the money in house construction or purchase of property
for their own purpose.
10. Every so often debtors invest their money outside the nation. Many debtors transfer
loan money to overseas where they deposited this cash in their own account or
something else.
11. Often local debtors are found to be so much forced to funding them loan without
appropriate study due to some unforeseen causes. Since these debtors are proficient of
receiving loan by exercising their impact, they can also escape the payment liability.
12. Problems responsible for non-implementation and overdue execution of project for
which the businesspersons of the project cannot refund the loan. The reasons of
letdown may be:

 Failure to determine the profitable accessibility of the projects

 Time lag between sanction and approving of the projects
 Import of equipment and raw supplies both are the problems of rarity of foreign
exchange.

All of these causes deliberated above are common reasons for problems loan recovery of Janata
Bank. Besides these, there are some exact causes for loan recovery problems met constantly by
Janata Bank. They are as:

 Credits or load are given under false names and enterprise

 Credits are agreed without adequate securities
 Authorization of the loans or advance in surplus of the branch manager‟s command.
 Inappropriate monitoring and management of credit
 Political abuse if loan programs run by the public sector banks
 Lack of appropriate action against willful debtor.
 Sometimes lent money on unreliable project.

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 Findings, Recommendation & Conclusion

4.1: Findings:
 Before allowing loans the bank officials make clear the borrower‟s data, his/her financial
situation, safeties against credits& advances and make investigation on his/her business
and so on.

 Janata Bank Limited is confirmingsatisfactory equity supply of excellence loans through

acceptance of dispute free collateral.

 The loan portfolio of the bank ranges among small and medium enterprises, general
business and industries.

 Janata Bank Limited has been keeping its position in spreading credit to government
bodies, sector companies and private enterprises with a view to executing government
rules.

 The credit approval and paymentprocess is quite long-lasting.

 In some cases, Janata Bank Limited allots loans without adequate security and this is the
abuse of the Bangladesh bank order.

 The table below showing loan disbursement and recovery information of Janata bank
LTD:

Year Loan disbursement Recover

(BDT in Million)

2012 305, 339.57 113,634.43

2013 285, 747.65 92,570.64

2014 319, 773.25 129,235.19

2015 349, 861.30 153,130.26

2016 403,037.42 204,013.23

2017 459,580.05 239,762.91

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Janata Bank Limited holds a standard loan proposal form agreeing to the Bangladesh Bank‟s
policy. But in practice, credit officers do not fill up the offer form appropriately.

4.2: Recommendations:
Most of thebank‟sfailure arises mainly due to bad credits, which arises due to
ineffectivesupervision of the credits and advances group. Based on the estimate of different
features of JBL, the following recommendations have been suggested:

 The bank must emphasize on decreasing the classified and non-performing loans by
intensive efforts
 In the credit division, strict management is essential to avoid loan nonpayers. Bank
official must do consistent visit to the projects.
 JBL need to avoid politically partial lending or project finance should be tested.
 The average number of days necessary for approving and payment of credit against exact
loan proposal should be reduced.
 Strict management must be adapted in case of high risk debtors.
 Credit officers must be skilled enough to recognize the deployed and inaccurate financial
statements.
 Central observing system should be more energetic to keep classified loan to a minimum
level.
 Salary scale should be better to motivate veryfrustrated employees and to decrease
misconduct.
 Vaults security should be increased.
 To attract more credit customers should seek new marketing approach.
 JBL should conduct close observing during validity period of credit.
 Continuous follow-up with nonpaymentdebtors.
Relationship Manager (RM) must findcauses of default of loan non-payment and find out ways
to get the loan recovered.

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4.3: CONCLUSION

Credit policy cannot be isolated from the broader monitory policy of the country. Like any other
section of the monetary policy, credit is very significant for any financial organization as it
generates revenue and gear up economic activities of the country. Since credit has an inherent
risk, therefore appropriateuse of the loans are important to meet the necessities of the borrower.
The loan applied by the debtor must not be employed for unfertile purpose. In this regard, the
Janata Bank Limited must carefully follow the progress of the loan and the way the debtor is
using the funds. In this way the Janata Bank Limited will prevent any fake activities on the part
of the debtor Credit valuation system of Janata Bank Limited is very long-lasting process. It has
been reviewed time to time in response to the respective circular of Bangladesh Bank. Activity of
Janata Bank Limited is composed of business credit division and credit administration. The
credit management system of Janata Bank Limited is more or less active as recovery position of
classified loan is high and classified loan has been decreasing gradually during the year. Janata
Bank always trying to recover their credit policy for reducing loss and exploiting develop the
credit management system.

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References:
 Annual Report of Janata Bank Ltd. 2012-2013
 Annual Report of Janata Bank Ltd. 2011-2012
 Annual Report of Janata Bank Ltd. 2010-2011
 Annual Report of Janata Bank Ltd. 2009-2010
 Bangladesh Bank BCD &BPRD circulars
 Definitions: Investopedia.com
 Bank Management and Financial Services By Peter S. Rose, Seventh Edition
 www.janata bank ltd.
 www.jb.com.bd
 www.google .com

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