Topic: Submission of Internship Report on “An Analysis of Credit Management of Sonali Bank Limited:. Here is the report on “An Analysis of Credit Management of Sonali Bank Limited:. The objective of making this report is to identify the loan products and services, analyze the loan evaluation and explain the loan disbursement and recovery system of Sonali Bank Limited.
The main focus of the Sonali bank is to provide all types of banking services to the doorstep of the people. I have prepared the report based on my three months internship program Sonali Bank Limited, NCTB Branch. The internship supervisor allotted to investigate the loan disbursement and recovery of Sonali Bank.
I feel fortunate to have an opportunity to work in the Loans and Advances Department of Sonali Bank Limited. This study mainly focuses on the disbursement and recovery system of Sonali Bank Limited, NCTB branch. So, the disbursement and recovery system of Sonali Bank Limited, NCTB branch is covered in this report including analysis of the loan, loan related product, risk, risky area, disbursement, recovery and their financial placement.
2.5) Core Values of SBL
Core Values
Chapter- 4
Loan Disbursement and Recovery of Sonali Bank
BCTB Branch
Loan Disbursement and Recovery
Loan
Loan Disbursement
Certain companies use a cash management technique known as "remote cashout" to manipulate the Federal Reserve's check clearing system. When remote payout is done correctly, a company can earn a small amount of additional interest on its deposit accounts.
Loan recovery
Secured Loan
Unsecured Loan
- Continues loan
- Term Loan
- Classified Loan
Loan accounts that can be transacted within a specified limit and have an expiry date for full adjustment will be treated as a continuous loan. These are advances that do not have a fixed repayment schedule but have a date to which they can be renewed if the customers perform satisfactorily. A borrower can borrow money up to a certain limit and cannot withdraw the sanctioned amount at one time.
A term loan is simply a loan from a bank or other financial institution with a specified principal amount (unlike a credit card) and a fixed repayment schedule with a fixed due date, by which the loan must be repaid in full. This loan is taken out where the borrower has an agreed term to repay a loan. While term loans are not exclusive to businesses, the word itself is more commonly associated with business loans.
Daffodil International University 16 Long term – repaid over a (more than 1 year) fixed term and interest rate. Short term micro credits include all micro credits less than Tk.50,000/= and repayable within less than 12 months regardless of name such as non-agricultural credit, subsistence credit. The loan repaid at the request of the bank is treated as a loan on demand.
If any contingent or other liability is converted into forced loans (ie without any prior approval as a regular loan) they will also be treated as demand loans. Such as: Forced credit against imported goods, payment against the document, foreign and domestic purchased invoice, purchased invoice, etc. The loan account is not operating satisfactorily in terms of installments and arrears have occurred.
Substandard
Doubtful
Bad & Loss
- Unclassified Loan
- Secured Overdraft (SOD)
- Cash Credit (CC)
- Small loans
- Industrial Credit
- Commercial Credit
- Consumer loans
- Staff Loan
- House building loans
- SME Loan
Cash Credit (CC) is an arrangement where a banker allows his customer to borrow money up to a certain limit to meet the working capital needs of existing industries. The borrower withdraws cash from his/her CC account and deposits money. He can adjust his loan account. Sonali Bank charges interest based on the daily balance in the account. In a lien agreement, the borrower (lien) must actually or constructively deliver the goods pledged to the lien (Pawnee).
This refers to the lending allowed to small traders; cottage industries, small-scale industries and self-employed persons. The maximum ceiling for this loan is currently tk.5000.00 for small traders and self-employed persons, tk for cottage industries and small scale industries. Such loans are generally productive/development oriented rather than security oriented & that is the way of emphasis in these cases is on the purpose of the advance as well as skill reputation capacity of the borrower.
Sonali Bank is also financing business trade expansion and other commercial campaigns in the country. It covers all services for importers and exporters including various services like cash credit, export cash credit, short term loans, packing credit and foreign and local bill purchase options. The main objective of the scheme is to improve the standard of living of the consumers by providing loans for the purchase of household items such as computer, television, freezer, car and bicycle, air conditioner and refrigerator, furniture, etc.
Different commercial banks offer different types of loans to consumers so that they can enjoy these innovations and they have set a very easy process to repay this money in installments. 'Staff Loans' are available to the staff of Sonali Bank to buy motorcycles and bicycles, for the marriage of their sons or daughters, etc. In such cases, customers must pay a deposit of 30% of the total amount and the remaining amount must be paid back within 2 years.
Sonali Bank Limited emphasizes top priority on SME financing to eliminate poverty by increasing SME loan flow in economically underdeveloped areas and populations. Creation of priority basis SME credit policy for women and underprivileged entrepreneurs, Sonali bank works to improve their socio-economic condition.
Qualitative Judgment
- Principle of Safety
- Principle of Purpose
- Principle of Liquidity
- Principle of Security
- Principle of Profitability
- Principle of Diversification
- Principle of National Interest
The loan is extended without approval from the appropriate authority, it will have to be classified on the basis of qualitative assessment. Loan monitoring involves checking the usage pattern of the disbursed fund to ensure whether it is being used for the right purpose or not. Issuance of legal notice to the defaulting customers and guarantors prior to classification of the loans.
Legal action to be taken after all possible efforts to collect a bank's claims have failed. It is necessary to develop a sound credit principle and modern credit techniques to ensure the success of the credit given by the bank. Therefore, great care must be taken to ensure that the funds go to the right type of borrower, that they are used in a way that they remain safe and that repayment occurs in the normal course.
The Bank must not lend money for any purpose for which the borrowers demand loan, the purpose must be productive. Thus, another important point to be considered by a credit officer before lending is the purpose for which the loan is required and also the resources through which the borrower is expected to repay. The banker, while making advances, must see to it that the money borrowed is not locked up for a long time, because most of the Bank's obligations are payable either on demand or at short notice.
The banker must therefore make sure that the loans are liquid enough to meet the bank's liability structure. The advance should be as broad as possible and should be consistent with the deposit structures. So, the savings of the people mobilized by banks should be distributed to those sectors that need development in the country's planning programme.
To determine whether the borrower has a responsible attitude towards borrowed funds and whether he will make every effort to repay what is owed to him. Responsibility, truthfulness, serious purpose and serious intention to repay loans form the characters of the borrower.
Capacity
Daffodil International University 23 or one or several borrowers, because the misfortunes faced by that particular industry will have a serious negative effect on the bank. The development of banking has reached a stage where a banker has to identify his business with national policies.
Economic Condition/ Assets
Credit history/Credit habit
Credit Rating
- Industry Analysis (Business and Industry Risk)
- Supplier/Buyer Analysis/Market Risk
- Technological Risk
Here, if the amount is with the capability of the Regional Manager (AGM), he can sanction the loan. After approval of the proposal in any of the stage region to the board. This includes borrower's current and past business information, borrower's character and borrower's ethical value.
After getting the HO's approval, the branch issues sanction letter to the borrower. Payout: highest outstanding balance on any date during the reporting period minus outstanding balance at the end of the preceding period. There are many reasons why the loan recovery from the bank is still faulty.
A comprehensive and accurate risk assessment in every Bank loan proposal is mandatory. Personal guarantee of the main partners or directors of the company will be obtained. Is the Loan Manager/Officer satisfied with the borrower's character, ability, integrity and experience.
Any questions regarding the borrower's position in the industry, overall industry issues or competitive forces (demand supply gaps) must be addressed and the borrower's strengths and weaknesses (SWOT analysis) relative to the competition must be identified. Any customer or supplier concentration must be addressed as these may have a significant impact on the borrower's future viability. Has the Borrower's credit rating deteriorated and have you considered the requirement for additional collateral?
As a result, most of the customers are unaware of the variety of loan products of the bank. Sonali Bank Limited distributes loans without adequate security and this is the violation of the Bangladesh Bank order. But the overall economic development of the country they need to diversify their loan in different sectors.
Also, by granting syndicated loans, the bank is contributing to the infrastructural development of the country.
