On
Credit Management System: A Study on
Janata Bank Ltd.
Prepared For:
Md. Siddikur Rahman
Lecturer
Department of Management Studies
Comilla University
Prepared By:
Md. Jafar Iqbal
ID: 1008018
Reg. No: BBA-MGT-400070
Session: 2010-11
An Internship Report
On
ii
Letter of Transmittal
January 21, 2016
Md. Siddikur Rahman
Lecturer
Department of Management Studies
Comilla University, Comilla
Dear Sir,
I am pleased to submit the Internship Report as a part of BBA program. I tried my best to
present this Internship Report on Credit Management System: A Study on Janata Bank
Limited according to your guideline. I tried my best to work sincerely to cover all aspects
regarding the matter. Practical exposure is very essential for orientation with the real worldworking arena. I have learned a sound knowledge and understood on the basic operation of
the bank. Though I faced some limitations to prepare the report due to scarcity of organized
data, time limitation, I have thoroughly enjoyed in preparing this internship report which has
contributed significantly to my understanding on the essentials and importance of practical
knowledge.
All of my efforts will be successful if the report can serve its purpose. I have tried my best to
explain everything related with this report. I am always available for any further queries
regarding this report. I sincerely hope that you will appreciate my effort.
Yours truly,
iii
Students Declaration
I do hereby declare that the internship report entitled Credit Management System: A
Study on Janata Bank Limited is an original report. It or any part of it has not been copied
from any other report. It or any part of it has not been submitted to any other institution or
university for any other degree or diploma.
The entire work has been planned and carried out under the supervision of the honorable
faculty member Md. Siddikur Rahman, Lecturer, Department of Management Studies,
Comilla University.
Yours truly,
..
Md. Jafar Iqbal
ID No: 1008018
Session: 2010-2011
BBA (5th Batch)
Department of Management Studies
Comilla University
iv
Supervisors Certificate
This is to certify that the report presented here has been prepared by Md. Jafar Iqbal,
bearing Id: 1008018, Session: 2010-2011, BBA (5 th Batch) for the submission to the
Department of Management Studies, Comilla University. In the partial fulfillment of the
requirements for the degree of Bachelor of Business Administration (BBA). This report is
suitable for submission.
He has completed the internship program under my supervision. He has always maintained
communication with me and has taken necessary advice. He has prepared the Internship
Report on Credit Management System: A Study on Janata Bank Limited under my
guidance. I wish him all success in life.
.
Md. Siddikur Rahman
Lecturer,
Department of Management studies
Comilla University
Internship Certificate
vi
Acknowledgement
At the very beginning, I would like to express my deepest gratitude to Almighty Allah for
giving me the opportunity with strength and patience to carry on this work. In conducting this
study, I have received generous help from many corners, which I like to mention with
gratitude and great pleasure.
I would like to express my gratitude to my internship supervisor Md. Siddikur Rahman,
Lecturer, Department of Management Studies, Comilla University. His suggestion and
comment have greatly inspired me to prepare the Internship Report successfully.
I express my heartiest respect to Dr. Mohammad Ahsan Ullah, Honorable chairman,
Department of Management Studies, Comilla University for giving me permission for
Internship.
I would also like to express my deep gratitude to Md. Abdul Matin (AGM, Loan&
Advance), Md. Magfar Hasan Bahadur (FAGM) and Md. Abdul Gafur (AGM, Admin).
Indeed I am grateful to the officials of Janata Bank Ltd, Local office, Dhaka. Their support
gave me opportunities to use various documents during my internship period and their
valuable suggestion, advice and extended helping have contributed most.
Lastly, I would like to express my special and cordial thanks to all of my teachers, friends and
many individuals for their enthusiastic encouragements, supports and helps during the
preparation of this report.
Sincerely yours,
vii
Executive Summary
This report is prepared on the basis of my three months practical experience at Janata Bank
Ltd. (Local Office). The internship program has helped me a lot to learn more about the
practical situation of a financial institution. Loans or credits comprise the most important
asset as well as the primary source of earning for the banking institutions. On the other hand,
loan/credit is also the major source of risk for the bank management. A prudent bank
management should always try to make an appropriate balance between its return and risk
involved with the loan portfolio. From this report, I have learned about how Janata Bank
provides and recovers loans and advances. I have also learned about their credit policy
applied for disbursement and recovery of loan and advance. In this report, I have used
mainly secondary data. But I have also used some primary data. During the preparation of
the report, I have faced some problems. The main problems are lack of information and time
limitation.
For the convenience, I have divided the report into five chapters.
In the first chapter, the introductory part has been developed for the proper execution of the
study.
In the second chapter, overview of Janata bank and its local office, where I completed my
internship, has been described.
In the third chapter, I have discussed the theoretical aspects of credit management system.
In the fourth chapter, the credit management system of Janata bank Ltd. has been
described. I have discussed the loans and advances provided by Janata bank, sector wise
credit disbursement and credit recovery policy of the bank.
In the fifth chapter, I have mentioned the findings of the study. I have provided several
recommendations that might be useful for the further development of the credit management
system of the bank. Then I have drawn the conclusion to the report.
viii
TABLE OF CONTENTS
LETTER OF TRANSMITTAL..............................................................................III
STUDENTS DECLARATION.............................................................................IV
SUPERVISORS CERTIFICATE...........................................................................V
INTERNSHIP CERTIFICATE..............................................................................VI
ACKNOWLEDGEMENT...................................................................................VII
EXECUTIVE SUMMARY.................................................................................VIII
ACRONYMS................................................................................................XIII
CHAPTER 1.................................................................................................... 1
INTRODUCTION.............................................................................................. 1
1.1 BACKGROUND OF THE STUDY...........................................................................................2
1.2 ORIGIN OF THE REPORT............................................................................................ 2
1.3 OBJECTIVES OF THE REPORT....................................................................................2
1.3.1 Specific Objectives............................................................................................ 2
1.4 SCOPE OF THE STUDY..............................................................................................3
1.5 METHODOLOGY OF THE STUDY................................................................................3
1.5.1 Data Assortment Procedure..............................................................................3
1.5.2. Data Dispensation & Study..............................................................................4
1.6 LIMITATIONS OF THE STUDY.....................................................................................4
CHAPTER 2.................................................................................................... 5
ORGANIZATIONAL PROFILE.............................................................................5
2.1 HISTORY OF JANATA BANK........................................................................................6
2.2 ORGANIZATIONAL STRUCTURE OF JANATA BANK LTD...............................................7
2.3 CORPORATE PROFILE................................................................................................8
2.3.1 Vision of JBL...................................................................................................... 9
2.3.2 Mission of JBL.................................................................................................... 9
2.4 CORPORATE SLOGAN OF JBL.....................................................................................9
2.5 OBJECTIVES OF JANATA BANK LIMITED......................................................................9
2.6 CORE VALUES OF JANATA BANK LIMITED.................................................................10
2.6.1 Core Strengths................................................................................................10
2.6.2 Core Competencies.........................................................................................10
2.7 ETHICAL PRINCIPLE................................................................................................ 11
2.8 FUNCTIONAL STRUCTURE OF JBL............................................................................11
2.9 BRANCHES OF JANATA BANK LIMITED.....................................................................11
2.10 CORPORATE CREDIT RATING OF JBL......................................................................12
2.11 PRODUCTS OFFERED BY JANATA BANK LTD..........................................................12
2.12 CORPORATE GOVERNANCE...................................................................................13
2.13 CSR ACTIVITIES OF JANATA BANK LIMITED............................................................13
2.14 KEY FINANCIAL HIGHLIGHTS OF JBL......................................................................14
2.15 OVERVIEW OF JANATA BANK, LOCAL OFFICE.........................................................15
2.15.1 Corporate Profile of Local Office, Janata Bank...............................................15
2.15.2 Departments of the Branch...........................................................................16
ix
xi
LIST OF FIGURES
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
LIST OF TABLES
Table
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
xii
Acronyms
xiii
Abbreviation
Full Name
JBL
A/C
Account
CD
Current Deposit
SBA
STD
FDR
JBDS
JBMSS
EDS
DPS
DD
Demand Draft
CIB
CRG
LIM
LTR
PAD
LDBP
SWOT
DL
Doubtful Loan
SME
CSR
LAOS
CHAPTER 1
INTRODUCTION
1|Page
important Industry, the role of banking can hardly be over emphasized. In these
circumstances, it becomes crucial to find out the roles that banks are now playing in the
country and analyze their operational aspects so as to learn the importance of this delicate
financial sector and their overall impacts on our national economy.
The role of banks is far reaching and more penetrating in the economic and fiscal discipline,
trade, commerce, industry, export and import- all carried through the bank. Banks are the
only media through which international trade and commerce emerge and perform entire credit
transactions, both national and international. Banks collect small savings from individual
depositor and create capital for investment. Banks transfer fund from surplus unit to deficit
unit and thus reduce gap between savings and investment and foster economic growth. Banks
provide interest to the depositor at a lower rate, collect interest from the borrower at a higher
rate and the difference between these two is their profit.
However, the main element of the banking business is credit. A bank sometime faces loss
when it cannot collect disbursed credit. So a bank is always under risk about the credit issue.
Therefore, it has been quite essential to know about the credit management system of our
banking industry. This report has been prepared to analyze the credit management system of
Janata Bank Limited, Local Office.
2|Page
3|Page
4|Page
CHAPTER 2
ORGANIZATIONAL
PROFILE
5|Page
6|Page
Chairman
Board of Directors
CEO & Managing Director
Deputy Managing Director
Assistant General Manager
First Assistant General Manager
Senior Executive Officer
Executive Officer
Assistant Executive Officer
Assistant Officer, Grade 1
Assistant Officer, Grade 2
Support Stuff-1
Support Stuff-2
Values
Janata Bank Limited
7|Page
Janata Bank Limited, the 2nd largest State Owned Commercial Bank (SCB)
in Bangladesh, is playing pivotal role in overall financial activities of the
country. The Bank emerged as Janata Bank by combining the erstwhile
United Bank Limited and Union Bank Limited under the Banks
Nationalization Order (Presidents Order- 26) of 1972 and was restructured
Genesis
as a limited company in November, 2007. Since inception in 1972 the Bank
has commendably contributed to the socio-economic development of
Bangladesh and helped structuring solid financial ground of the country as
well. Janata Bank runs its business with 904 branches across the country
including 4 overseas branches in United Arab Emirates.
Registered Address Janata Bhaban, 110, Motijheel Commercial Area Dhaka - 1000, Bangladesh.
Legal Status
Public Limited Company
Chairman
Shaikh Md. Wahid-uz-Zaman
Managing Director
Md. Abdus Salam
& CEO
Company Secretary Md. Mosaddake-Ul-Alam
Date of
21 May 2007
Incorporation
Authorized Capital BDT 30,000 Million
Paid up Capital
BDT 19,140 Million
Face value per
BDT 100 per share
share
Shareholding
100% Share owned by the Government of Bangladesh
Pattern
Number of
14244(As on 01.05.2015)
Employees
Banking license
obtained from
31 May 2007
Bangladesh Bank
Phone
9560000, 9566020, 9556245-49, 9565041-45, 9560027-30
Fax
88-02-9554460, 9553329, 9552078
SWIFT
JANB BD DH
Website
http://jb.com.bd
E-mail
md@janatabank-bd.com
8|Page
9|Page
Making.
Diversification.
10 | P a g e
No. of Branches
Local Office
Special corporate
Corporate-1 Branch
22
Corporate-2 Branch
71
Overseas Branch
04
Grade-1 Branch
201
Grade-2 Branch
221
Grade-3 Branch
272
Grade-4 Branch
111
Total
904
11 | P a g e
12 | P a g e
Services
Financial services (Foreign Remittance)
Financial Services (Inland Remittance
Utility services
ATM
Welfare Services
Service to Government
Other services
Customer Service
13 | P a g e
S/l
Particulars
2014
2013
2012
2011
2010
A.
Total Deposits
516010
478535
409767
361677
286566.84
319773
285747
305339
257801
225732
Import
144556
176671
188284
197285
183744
Export
154079
153252
156525
153758
118515
Foreign Remittance
106677
103982
100089
72285
52640
Non-Interest Income
-----
5145
8134
9357
7283
31766
53202
15040
11827
Operating Profit
1212
14534
15722
12036
Reduction
Advance
3532
4357
3645
5561
10
11.12%
17.16%
5.60%
5.30%
11
59.71%
74.52%
71.28%
78.77%
B.
12
Authorized Capital
30000
20000
20000
20000
20000
13
Paid up Capital
19140
19140
11000
8125
5000
14
Required Capital
35420
33392
31898
30643
22973
15
Capital Kept
-----
34301
11780
31242
23454
16
Capital (Shortfall)/Surplus
1048
908
(20118)
599
481
17
19345
31772
8175
6823
2946
2240
2998
2152
18
Provision Kept
-----
22291
34012
11173
8975
19
Total Assets
629454
586082
511129
440389
345234
20
Earning Assets
496785
461290
434578
376071
293020
of
10683
Classified -----
61.97%
14 | P a g e
21
Total
Contingent 72495
Assets/Liability
(Off
Balance Sheet Items)
99726
112559
151207
106228
22
9551
(16280)
4445
4908
23
----
(3.19%)
1.01%
1.42%
24
8.47%
9.39%
8.04%
7.72%
4.89%
25
Cost of Deposit
7.34%
7.75%
7.24%
5.57%
4.17 %
26
Operating Cost
-----
8731
1.97%
2.23%
2.31%
27
Cost of Fund
8.82%
9.23%
9.21%
7.80%
6.48%
28
12.39%
12.12%
9.84%
8.97 %
29
Interest Spread
4.10%
4.64%
4.88%
4.27%
4.80%
30
Net spread
2.06%
3.16%
2.40%
2.13%
2.50%
31
19.92
86.31
(148.0)
60.45
98.16
32
Current Ratio
-----
1.04
1.03
1.06
1.10
33
Efficiency Ratio
-----
15.86%
15.11%
17.54%
21.61%%
3813
District
Working Days
Dhaka
Sunday - Thursday (Except Holidays)
15 | P a g e
General Manager
Deputy General Manager
Assistant General Manager
Fast Assistant General Manager
Senior Executive Officer
Executive Officer
Assistant Executive officer/Tailor
Staff
Figure 6: Organizational Structure of the Branch
Number of Account
Current
Savings
SND
FDR
DPS
Quantity
2360
14348
130
649
2
16 | P a g e
FC
JBSPS
Loan & Advance
JBDS
SDS
MDS
EDS
MSS
MBS
DBS
MAP
LRSS
Total
13656
16
4779
195
51
0
0
79
0
214
590
0
37,326
Total Deposit
37363110877.29 Tk.
Total Advance
Less interest suspense
Sub Total
Less: loan to BDC
Total Net Advance
66517057765.62 Tk.
3286601482.39 Tk.
63230456283.23 Tk.
0.00
63230456283 Tk.
17 | P a g e
CHAPTER 3
THEORETICAL
DISCUSSION ON CREDIT
MANAGEMENT
3.1 CREDIT
The word credit is derived from the Latin word credo which means - I believe and is
usually defined as the ability to buy with a promise to pay. It consists of actual transfer and
delivery of goods and services in exchange for a promise to pay in future. It is simply the
opposite of debt. Diversification of banking service has accelerated the use of credit in the
expansion of business operation. It is a fundamental precept of banking everywhere that
advances are made to customers in reliance on his promise to pay rather than the security held
by the banker.
18 | P a g e
Interest rate
Security or Collateral
Operating Expense
Legal Considerations
Inflation
Finance Charge
19 | P a g e
Retained earnings
Loans from Bangladesh Bank and other Bank
Among these sources different types of deposits are the main sources.
20 | P a g e
21 | P a g e
22 | P a g e
Credit Risk Grading is the basic module for developing a Credit Risk Management system.
Short Name
Number
Superior
SUP
23 | P a g e
Good
GD
Acceptable
ACCPT
MG/ WL
Special Mention
SM
Sub Standard
SS
Doubtful
DF
BL
24 | P a g e
Although the ultimate responsibilities lay at the highest level in the organization i.e.
the board of directors. Yet the actual drafting shall have to be done by the senior
lending office in consultations with the chief executive officer and with contribution
from senior officers, associates and subordinates.
Obviously the level of origin will vary with the size and structure of the organization.
The matter then referred to the board for approval after careful examination
consideration and discussion.
25 | P a g e
Pricing: In any profit motivated endeavor, the price to be charged for the goods or
services rendered is of paramount without it, individuals have few guidelines for
quoting retag or fees, and the variations resulting from human nature will be a source
of customer dissatisfaction.
Market Area: Each bank should establish its proper market area, based upon, among
other things, the size and sophistication of its organization its capital standpoint,
defining ones market area is probably more important in the lending function than in
any other aspect of banking.
Loan Standard: This is a definition of the types of credit to be expended, wherein the
qualitative standards for acceptable loans are set forth.
Credit Granting procedures: This subject may be covered in separate manual, and
usually is in larger banks. At any rate, it should not be overlooked because proper
procedures are essential in loan establishing policy and standards. Without proper
procedure for granting credit and constant policing to ensure that these procedures are
meticulous carried out, the best conceived loan policy will not function and inevitable,
problems will develop.
26 | P a g e
Scrutinizing
Inspection
Placing the
authority
Approval
Documentation
Evaluation
Disbursement
27 | P a g e
Disbursement: It is the last step of loan sanctioning. If the board seems that the
formalities and information provided by the clients are accurate and reliable, then the
board can disburse the fixed amount of loan for a certain period of time.
AGM,
Recovery
Department
Credit Management
System:
A Study
on Janata Bank Limited
28 | P a g e
Member Secretary
29 | P a g e
3.15.1 Strengths
Large customer base
Strong capital and asset quality
The bank is financially safe
Community involvement
Speedy foreign remittance payment system with Western Union Money Transfer
The Image/Goodwill of the bank is very good
The bank has huge amount of deposit and market potentiality
Regulatory performance is strong and positive
3.15.2 Weaknesses
Lack of technological resources such as computerized banking as well as Internet
banking
Because of manual service, it is more costly and time consuming
Lack of promotional activities
Poor information based website.
There is no specific training institute for JBL employees
The bank has more non-performing assets
Credit providing procedures are very lengthy
3.15.3 Opportunities
Internal conditions those are helpful to achieve organizations objectives. Some opportunities
of the deposit department of JBL are as follows A large number of private banks coming into the market in recent times. In this
competitive environment JBL must expand its product line to enhance its sustainable
competitive advantage
In that product line, they can introduce the ATM to compete with the local and the
foreign bank
30 | P a g e
They can introduce credit card and debit card system for their potential customers. In
addition of those things, JBL can introduce special corporate scheme for the corporate
customer or officer who has an income level higher from the service holder
At the same time, they can introduce scheme or loan for various service holders. In
order to reduce the business risk, JBL has to expand their business portfolio
3.15.4 Threats
Loan defaulter
Political instability of the country
The continuing increase in non-bank competitors offering similar services
A large number of private banks are increasing in Bangladesh day by day by taking
huge capital and skilled human resources
Private Banks provide handsome salary to the employees
Government facilities may be insufficient when the economic condition of the country
becomes unfavorable
31 | P a g e
CHAPTER 4
CREDIT MANAGEMENT
OF JBL
32 | P a g e
branch network spread all over the country. The main objectives of the rural credit policy and
programs of the bank have been designed to cover all segments of rural population whether
skilled or unskilled such as farmers, landless, laborers, women, unemployment educated and
vocational trained youths, weavers, and other rural dwellers and artisan.
A good number of micro credit programs have been launched for poverty reduction
sponsored by the bank on its own and in collaboration with local and foreign agencies.
Emphasize has been given on entrepreneurship development and Gender Equality in the
credit programs. Besides, the bank has also given emphasis on agro-based industries. Most of
the rural and micro credit programs are collateral free. Interest has been fixed up at 10%. To
provide co-operation and necessary counseling to the rural entrepreneurs, bank has opened
Micro Enterprise Wing at Head Office, Regional Office and branch level.
Order [SOD(G)]
Local documentary bills purchased
(LDBP)
Loan general
Demand loan against ship breaking
Payment against documents (pad)
Loan against import merchandise
(LIM)
Loan against trust receipt (LTR)
Forced loan
Packing credit
Lease finance
incentives
Foreign
documentary
purchased (FDBP)
Personal loan
bills
33 | P a g e
Unclassified
(Month)
Substandard
Doubtful
(Month)
Bad
Continues
Loan Demand
Loan
Expiry up to 5
month
6 to 8 month
9 to 11 month
12 month +
Term Loan Up
to 5 years
0 to 5 month
6 to 11 month
12 to 17
month
18 month +
Term Loan
more than 5
years
0 to 11 month
12 to 17 month
18 to 23
month
24 month +
Micro Credit
0 to 11 month
12 to 13 month
36 to 59 moth
60 month+
(MONTH)
(Month)
34 | P a g e
stocks, which practically means nothing. Since the goods always remain in the
physical possession of the borrower, there is much risk to the bank. So, it is granted to
parties of undoubted means with highest integrity. Interest rate is 13%.
Cash Credit (Pledge): Transfer of possession in the judicial sense of essential in the
valid pledge. In case of pledge, the bank acquire the possession of the goods or a right
to hold goods until the repayment for credit with a special right to sell after due notice
to the borrower in the event of non-repayment. Interest rate is 13%.
Consumer Credit Scheme: This scheme is aimed to attract consumers from the
middle and upper middle class population with limited income. The borrower should
have saving or current deposit account with the bank. Minimum 25% of the purchase
cost of the product is to be deposited be the borrower with the bank is equity before
the disbursement of the loan. The rest 75% is to be kept as cash collateral (FDR,
Shanchay Patra etc.) with the bank. Loan amount is disbursed through a/c payee pay
order/demand draft directly to the seller after submission of the indent, deposit of
client equity and completion of documentation formalities.
Loan (General): JBL considers the loans, which are sanctioned for more than one
year as loan (g). Under this facility, an enterprise of financed from the stating to its
finishing, i.e. from installment to its production. JBL offers this facility only to big
industries.
Staff Loan: Bank official from senior officer and above is eligible for this loan. The
maximum amount disbursed is Tk. 50,000/- for a period of 2 years.
House Building Loan: This loan is provided against 100% cash collateral, besides;
the land & building are also mortgaged with the bank. Interest rate is 17% p.a.
Small Loan Scheme: JBL introduced three new small loan scheme are:
I. House Renovation Loan
II. Personal Loan
III.Small Business Loan
Loan against Imported Merchandise (LIM): Advances allowed for retirement of
shipping documents and release of goods imported through L/C taking effective
control over the goods by pledge fall under this type of advance, when the importer
failed to pay the amount payable to the exporter against import L/C, than JBL gives
loan against imported merchandise to the importer. The importer will bear all the
expenses i.e. the godown charge, insurance fees, etc. and the ownership of the goods
is retaining to the bank. Interest rate is 16%.
Loan against Trust Receipt (LTR): Investment allowed for retirement of shipping
documents and release of goods imported through L/C fall under this heard. The
goods are handed over to the importer under trust with the arrangement that sale
Credit Management System: A Study on Janata Bank Limited
35 | P a g e
proceeds should be deposited to liquidate the investments within a given period. This
is also a temporary investment connected with import and knows as post-import
finance and falls under the category Commercial Lending. Interest rate is 16%.
Payment Again Documents (PAD): This facility originates payment of Import bills
on lodgment of CLEAN shipping documents received from FOREIGN correspondent
against Letter of Credit opened on behalf of the customers. This is an obligation
which the bank shall extend strictly on the merit of shipping document and which
must conform to the terms & conditions of LC.
Loan Documentary Bill Purchase (LDBP): Payment made against documents
representing sell of goods to local export oriented industries, which are deemed as
exports, and which are deemed as exports, and which are dominated in local
currency/foreign currency falls under this head. The bill of exchange is held as the
primary security. The client submits the stance bill and the bank discounts it. This
temporarily liability is adjustable from the proceeds off the bill. Interest rate is 10%.
Inland Bill Purchase (IBP): Payment made through purchase of inland bills/cheques
to meet urgent requirement of the customer falls under this type of investment facility.
This temporary investment is adjustable from the proceeds of bills/cheques purchased
for collection. It falls under the category Commercial Landing.
Foreign Bill Purchase (FBP): Payment made to customer through Purchase of
Foreign Currency Cheques/Drafts fall under this head. This temporary investment is
adjustable from the proceeds of the cheque/draft. Foreign Exchange Department deals
with Letter of credit (L/C) operation and foreign remittance. L/C operation divided
into import operation, export operation and inland trade. Janata Bank offers two types
of credit facilities to its customers such as:
I. Funded Credit
II. Non Funded Credit
36 | P a g e
Interest: 10%
Repayment: Loan repayable by installment
B. Short Credit Scheme: This type of credit facility is given to the poor and landless rural
people. The objective of this scheme is to create employment opportunity amongst poor. The
interest is 10%. It is repayable by 52 weekly installments.
C. Co-operative Credit for Rural Poor: This credit is given to the members of Co-operative
Association to create employment to the rural poor co-operators. The Association gives
guarantee. Interest rate is 10%.
Interest
Rate
Collateral Required
Loan limit
37 | P a g e
C.C (Pledge)
15%
Not Compulsory
100000-200000
C.C (Hypothecation)
DO
Do
Do
DO
Bank Deposit
50000-100000
12%
Documents of Assets
No limit
Real Estate(Commercial)
15.5%
Do
Do
Palli Rin
10%
Personal Guarantee
<50000
Service Loan
12%
Check of monthly
<50000
Consumer Credit
13%
Personal Guarantee
<50000
Doctors Loan
10%
Do
<50000
10%
Do
<50000
Pratibondhi Loan
10%
Do
<50000
General Loan
10%
<50000
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banks create a lot of documents, which are required to be signed by the borrowers before the
disbursement of the loan. Of them some are technically called charge documents.
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Securities are of two typesa) Primary Security- Security deposited by the borrower himself to cover the
loan such as FDR, cash, PSS, PSP, easily cashable items.
b) Collateral Security- Any type of security on which the creditor has personal
right of action.
4.7.12 Disbursement
After sanction and completion of all formalities the respective officer disburses the loan. The
officer writes cheque and provides it to the borrower. For this borrower has to open an
account through which he/she can withdraw the money.
2014
2013
Rural credit
18,78,13,00000
16,95,5670000
Export credit
50,40,00,00000
48,85,04,00000
Import credit
46,22,79,00000
50,69,49,60000
Industrial credit
76,43,82,00000
57,53,06,00000
8,93,05,00000
6,87,99,00000
8,41,21,00000
7,98,08,00000
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Textile
19,77,82,00000
18,80,58,00000
Jute
5,69,67,00000
7,56,58,00000
Tannery
5,57,91,00000
5,43,09,00000
Transport
34,01,00000
2,13,93,0000
Others
79,18,91,00000
64,83,88,00000
Total
319,77,32,00,000
285,74,76,50,000
Table 10: Overall Sector wise Loan Disbursement of JBL (Source: Annual Report 2014)
Comment: In the above figure and graph we see that the percentage of Loans in the Textile
Ind. has decreased from 2% because of the high Interest rate. On the other hand, Janata bank
ltd loans process needs long time. On the other hand, the flow of Loans and advances has
increased in case of import credit, Industrial Credit and Rural, ME&SP financing sectors.
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2014
2015
Textile, Garments
22,96,40,000
51,33,61,000
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33,05,76,000
9,47,41,000
50,00,00,000
SME
9,95,50,28,706
Housing Finance
23,84,36,011
Staff loan
185,90,47,198
Tannery
8,00,00,000
Jute
19,50,00,000
Export
4015273207
7,00,00,000
3213241198
Sector
Total Advance
Total CL
2712639000.00
31206487000.00
1446278000.00
263000.00
263000.00
2877952000.00
7406000.00
1048616000.00
1027018000.00
142000.00
142000.00
403957000.00
110081000.00
Transport
566000.00
566000.00
Cold Storage
129068000.00
2769000.00
10
9188434000.00
213370000.00
11
300569000.00
6458000.00
12
2206000.00
2206000.00
13
1747713000.00
12427000.00
14
203859000.00
18276000.00
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15
Trading
261812000.00
5856000.00
16
Import Credit
7152197000.00
84590000.00
17
Export Credit
1288512000.00
186609000.00
18
Others
3782379000.00
1449252000.00
Total
62307371000.00
4573567000.00
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To take legal actions quickly against unsound borrowers as best as possible within the
period specified by the law of limitations.
To avoid political intrusion tactfully.
To sanction loans considering Character. Capital and Capacity.
Recovery rate
Jute
Textile, Garments
Tannery
Tea
Food and Beverage
Chemical and Pharmaceutical
Paper, Printing, Packaging
Staff Housing Building
General Housing Building
Trading
Import credit
Export credit
87%
85%
82%
65%
68%
78%
88%
98%
85%
81%
90%
85%
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project, and investigation of the loans etc. that is, the problem in loan recovery proves the
outcomes of the default process in loan disbursement. The main reasons of poor loan
recovery are categorized in four broad types as follow:
A. Problems created by economic environment: The following problems arise from the
effect of economic environmenti.
ii.
iii.
iv.
B. Problems created by government: The following problems are arisen by the government:
i.
ii.
Legal problems
C. Problems created by the bank: The following problems are created by the banks:
i.
ii.
Besides these, there are some specific reasons for loan recovery problems faced continuously
by Janata Bank Ltd. They are as:
Loans are given under fictitious names and enterprise
Loans are given without sufficient securities
Approval of the loans in excess of the branch managers power
Improper monitoring and supervision of credit
Political misuse if loan programs operated by the public sector banks
Lack of timely action against willful defaulter
Loans are sometimes for economically unsound project
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CHAPTER 5
FINDINGS,
RECOMMENDATIONS
AND CONCLUSION
5.1 FINDINGS
Almost each bank has its own credit policy. Janata bank possesses a standard credit policy. As
the objective of my study is to make remarks on the credit management of Janata Bank Ltd., I
have tried my best to collect data for the study and find out the real scenario. On the basis of
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the data generated during my study, I have summed up my findings here and I think this will
help me to attain those objectives. The findings are as follows:
1. Janata banks primary objective is to contribute in national economy by generating
income and employment.
2. As the bank uses some modern technology such as: SWIFT, BASE, Internet,
Computer, Telex & other electronic devices, hence its service is better than other banks.
3. As a public bank Janata Bank Ltd. is successfully operating its credit activities.
4. Janata Bank Limited distributes loans with sufficient security in most of the cases.
5. JBL has proper guidelines about where to invest. Moreover, it has future plan to
maintain a well-structured portfolio to decrease the possibility of classified loans.
6. Janata Bank normally tries to invest in long term projects like agriculture, industry and
housing that can bring long run profit which are very much essential for economic
growth.
7. JBL is relatively insufficient in processing and executing legal actions against defaulters
for their non-payment of loans and advances within due time.
8. JBL faces problems to recover loans as it executes govt. policies rather than credit
worthiness.
9. Most of the loans that JBL distributes are as cash credit hypothecation and JBL
emphasizes less on demand loan.
10. The procedure of loan approval depends on the Board of Director of Janata Bank Head
Office, but a certain amount is to be approved by the branch credit committee.
11. There are found several programs for recovering loans such as face to face meeting,
loan fair, consulting and so on.
12. At the local office, the rate of loan recovery in each sector is approximately 70% to
75%.
13. JBL faces pressure on loan recovery from the company owners, affiliated with political
parties and also for nepotism of the corporate officials of the bank.
5.2 RECOMMENDATION
Though Janata Bank Ltd. tries to provide the best customer support, it has some lacks
compared to other commercial banks.
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To increase the level of efficiency and effectiveness in banking activities, to innovate newer
services, to provide better credit management and so on, some steps should be adopted by the
bank authority. They are as follows:
1. The credit proposal evaluation process and time should be shortened.
2. JBL should put credit information in CIB more accurately and carefully.
3. The security must be valued properly and constantly monitored so that the value of
mortgage property becomes sufficient to recover the default loans.
4. More and more competent personnel must be recruited to reduce the weakness of credit
management. Competent executives will ensure the reduction of wrong appraisal and
evaluation of projects.
5. Loans should be given to those who have the records of regular payment.
6. Some interactive programs and field investigations are to be conducted to recover the
outstanding balance of the borrowers.
7. Prompt legal actions should be taken against willful loan defaulters.
8. Political intervention should be effectively handled while approving and sanctioning
loans.
9. Sufficient micro credit programs should be ensured to the poor people and the young
entrepreneurs so that they can get the loan easily.
10. Janata Bank should practise modern banking system in each and every activity such as
cash, voucher and so on. It will help to decrease its operating expenses.
11. The bank should offer international credit card, because in modern world the use of
paper currencies is decreasing.
5.3 CONCLUSION
Like any other segment of the economic policy, credit is very important for any financial
institution as it generates profit and gear up economic activities of the country. In other
words, credit is business and it is input in the production process of the country. Since credit
has an inherent risk, proper utilization of the loans are essential to meet the requirements of
the borrower. The loan applied for by the borrower must not be employed for unproductive
sector. In this regard, the Janata Bank Limited must closely monitor the progress of the loan
and the way the borrower is utilizing the funds. In this way the Janata Bank Limited will
deter any fake activities on the part of the borrower.
The success of a bank depends largely on the efficient credit management. A successful credit
management is not only needed for a banks own performance but also it is needed for the
smooth development of an economy. The credit management system of Janata Bank Limited
Credit Management System: A Study on Janata Bank Limited
52 | P a g e
is more or less effective as recovery rate of classified loan is high and classified loan has been
decreasing gradually during the year. They are trying to improve their credit policy for
minimizing loss and maximizing profit and various measures are undertaken to develop the
overall credit management system.
REFERENCES
Books Journals:
Alam, Z. M. & Jaman, M. (2009), Risk Management Practices: A Critical Diagnosis
on some Commercial Banks in Bangladesh, page (1-20).
Khan, Dr Athiur Rahman, Bank Management, A Fund Emphasis, 1st edition,
Brothers publications.
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Peter, S. & Rose, L. (1996), Commercial Bank Management, 9 th Edition, McGrawHill Companies Inc., Boston.
Kothari, C.R. (2004), Research Methodology, Methods and Techniques, 2 nd edition,
New Age International Publishers.
Rayhan, S. J., Ahmed, S. M., Mondal, R. K., Performance Evaluation and
Competitive Analysis of State Owned Commercial Banks in Bangladesh.
Maheshwari, S. N. (2011), Banking Law and Practice, 11th edition.
Zikmund, W. G. (2003), Business Research Method, 7th edition, New Delhi, Prentice
Hall.
Reports:
Manual Document & Brochure of the Branch
Annual Report of Janata Bank Ltd. 2012.
Annual Report of Janata Bank Ltd. 2013.
Annual Report of Janata Bank Ltd. 2014.
Statement Affairs of JBL at Local Office, Dhaka
Credit Manual of JBL
Websites:
http://janatabank-bd.com --------------------------- (December 23, 2015)
http://en.m.wikipedia.org -------------------------- ( December 30, 2015)
www.jb.com.bd/jb/about_us/online_branches ---- (January 05, 2016)
www.janatabank-bd.com/csr/csr.html -------------- (January 07, 2016)
www.yourdictionary.com/swot analysis-------------- (January 14,2016)
APPENDICES
APPENDIX A: QUESTIONNAIRE
I am Md. Jafar Iqbal, a student of Comilla University doing my BBA Internship on
Credit Management System: A study on Janata Bank, Local Office. To prepare this
report, I need your valuable information as well as opinions.
Respondents Name:
Age:
Occupation:
S/l
Very
bad
1
Bad
Average
Good
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Very
good
5
01
02
07
08
09
10
11
12
13
14
15
16
17
03
04
05
06
18
19
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