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One of the main functions of any commercial bank is to take deposit surplus group and invest this fund

to the deficit group. NCCBL is not except in this case. But in the process of lending it has to safeguard the depositors money as well as business of the bank. Therefore proper management supervision and follow-up is very important in lending money recovery process. Lending process: Lending process involves three processes:

Lending process

Pre-approval

Post-approval/predisbursement

Post Disbursement

Pre-approval stage: Virtually the very important supervision of loans starts during pre-sanction stage. At this stage credit investigation is very important as it involves selection of right and qualitative borrowers (which is discussed in the previous chapter). To select the borrower the bank

personally should at first interview the entrepreneur or the director or the person who is going take the loan for the purpose of judging their capability of managing the finance or to run the project skillfully and repaying the loan amount. This depends mainly on integrity, business behavior, reputation, past experience in the particular line of business, financial solvency, quantity of own equity in the business, willingness to repay the loan. Then credit report should be collected from: Credit Information Bureau (CIB) of Bangladesh Bank. Declaration of the party with regard to liability with other banks, financial institutions. Internal sources such as finding out account performance, reputations, track record repayment-capability and intention to pay back the banks money. Feasibility Study: Following aspects are mainly noticed: Managerial aspects: Managerial aspect to handle the business. Honesty, integrity and character of the customer. Technical aspects: Whether the technology is outdated or not or too modern to handle by the firm. Cross- check of the pricing as predetermined in the pro-forma invoice. Check the productivity of the proposed plant and machinery matching with the firms goal. Authentication check for mortgaged property. To check the technological aspects the bank has some enlisted engineering firms. Some of them are M/S Hightech Inspection Co., MSK Inspection Co., S.K. Inspection Co. etc. Legal aspects: Checking the collateral. Whether security is valid or not.

For the business whether the policy is supportive of not. For checking these legal aspects NCC Bank has some enlisted law firms. Some of them are Law and equity, Hasan and Associates, Law and Jurist, Haque and Justice. Financial aspects: Companys operating performance and future earning prospects. Current financial condition. Factors likely to affect in it and the near future. Demand and supply gap of others in the similar industry. Net worth of the directors/entrepreneurs/proprietors. Lending risk analysis. Proper analysis should be done so that so that under finance or over finance is not made. Post approval/pre disbursement stage: At this stage proper documentation and securitization is very important. This is important because of ensuring safety of the credit facility to be extended and enabling the bank to liquidate the loan liability in the event of borrowers default. Proper documentation serve three basic purposes: Borrowers unqualified assent of availing credit facility. Banks legal right is created to the securities deposited as of the loan. In case of default of the borrower to repay, the documents can be placed before court for a decree to realize the dues. Moreover the documents also keep the borrower into a mental pressure that in case of his default, the law of the country will not spare him. Charge Documents: Usual charge documents duty signed by the entrepreneur or authorized person must invariably be obtained prior to disbursement of loans which are as under: Demand Promissory Note (D.P Note). Letter of hypothecation

Letter of Lien. Letter of arrangement. Letter of disbursement. Letter of revival. Letter of continuity. Letter of personal guarantee. Memorandum of deposit. Letter of declaration. In addition letter of acceptance of the terms and conditions signed by the borrower to be obtained. Direct or indirect securities: Direct securities are FDR, other Term Deposit etc in the name of borrower himself and those standing in the name of 3rd party should liened duty discharged. Goods and stocks under pledge/LIM(Loan Against Imported Merchandise): Pledged stock must remain in effective control of the bank and stored in pucca godown providing full security and safety. Quality, quantity and market price of the goods must be verified. The commodities pledged to bank must be readily saleable/have constant demand in the market/should not be perishable in nature. The goods are to be insured covering all risks. Imported goods at landed cost or market price whichever is lower should be considered. Margin requirement should meticulously be followed at the time of taking pledge of goods. Stock report should obtained duty signed by the borrower. Collateral security: Registered mortgage (as per approval terms) should be created: Original Deed. Bia deed. C.S., S.A., R.S. Parcha.

Non- encumbrance certificate. Up dated rent receipt.

High land only under city corporation/municipal area should be considered for mortgage. Low land/agricultural land/land under water should not be accepted for collateral securities. Collaterals valuation should be made correctly.

Creation of charge with register of Joint Stock Company: In case of accommodation against hypothecation of movable property (machinery, stock etc) of limited company, charge (on the assets acquired) must be created with the register of joint stock company within 21 days from the date of documentation and the certificate there of must be maintained with the charge documents. Post disbursement/recovery stage: At this stage following points need to be considered: Whether transaction in the loan account is being done satisfactorily such as turnover is satisfactory. Whether balance in the loan account remains within limit. Whether fund disbursed has been used for the purpose the loan has been approved for. Whether stock reports are achieved and stocks are being examined at a regular interval. Whether stock and D.P. (Drawing Power) register and delivery order properly maintained. Whether personal contacts with the borrower kept on at regular intervals. Whether eager watch is exercised on irregularly of any form on the loan account. Whether the aspects of reveling financial and management position of the borrower are under close watch and observation.

Whether balance confirmation is being obtained from the borrower at regular intervals. Whether benefiting step is being taken so that the loan does not turn time-barred. Whether required statement of advances is sent to the controlling office regularly, timely and correctly with true picture of position of each and every loan. In case the goods are not taken delivery as per stipulation of sanction advice, follow-up should be made. Even after energetic follow-up, if goods/stocks are not taken delivery by the borrower, steps for immediate disposal should be taken before quality deteriorates taking up with the competent authority or Head office.