P R E F A C E P R E F A C E
This
This RRetail etail Banking Banking Credit Credit Policy Policy Manual Manual of of the the Bank Bank is is preparprepared ed in in lineline with the Prudential Guidelines for consumer nancing of Bangladesh Bank with the Prudential Guidelines for consumer nancing of Bangladesh Bank o
on n CCrreeddiit t RRiissk k MMaannaaggeemmeennt t aannd d ffoor r tthhe e gguuiiddaanncce e oof f tthhee Ocers!"ecuti#es in handling a$airs relating to credit in a disciplined Ocers!"ecuti#es in handling a$airs relating to credit in a disciplined wa
wayy% % ThThis is popolilicy cy wiwill ll apapplply y to to alall l BrBrananchches es of of PPririme me BaBank nk &i&imimiteted d inin Ban
Banglagladesdesh h and and rereplaplace ce the the e"e"ististing ing PPoliolicy cy guiguideldelineines s thathat t ha#ha#e e 'ee'eenn issued from time to time though
issued from time to time though circulars%circulars% (t
(t is is #e#ery ry lilikkelely y ththat at ththis is popoliclicy y mamay y haha#e #e lilimimitatatitionons) s) whwhicich h wiwill ll 'e'e rectiedremo#ed in due course% Moreo#er) it will 'e re#ised and updated rectiedremo#ed in due course% Moreo#er) it will 'e re#ised and updated fr
from om timtime e to to timtime% e% *s *s sucsuch) h) sugsuggesgestiotions ns frfrom om BanBank+s k+s !"!"ecuecuti#ti#es es andand Ocers for making further impro#ement are welcome%
Ocers for making further impro#ement are welcome% The
The main main purpose of purpose of this this policy policy is is to to make the make the e"e"ecuti#es ecuti#es and and ocers of ocers of the 'ank con#ersant with the policy and strategy of the Bank regarding the 'ank con#ersant with the policy and strategy of the Bank regarding credit operation and ena'le them to discharge duties and responsi'ilities credit operation and ena'le them to discharge duties and responsi'ilities with condence and constructi#e initiati#e%
with condence and constructi#e initiati#e% The
The concerned concerned !"ecuti#es !"ecuti#es and and Ocers Ocers must must keep keep themsel#es themsel#es fullyfully con#ersant with its contents) which are strictly
con#ersant with its contents) which are strictly Private and Confdential Private and Confdential and must not in any way 'e di#ulged to any person not in the ser#ice of and must not in any way 'e di#ulged to any person not in the ser#ice of the Bank%
the Bank% (n
(n addadditiition on to to the the insinstrutructictions ons concontaitained ned in in thithis s polpolicyicy) ) the the BrBrancanch h (n,(n, chargeManager and Ocers will also 'e guided 'y circulars issued 'y chargeManager and Ocers will also 'e guided 'y circulars issued 'y -ead Oce from time to time%
-ead Oce from time to time%
This Policy is printed in loose,leaf form to facilitate the replacement of any This Policy is printed in loose,leaf form to facilitate the replacement of any page or section due to su'se.uent changes and amendments made at page or section due to su'se.uent changes and amendments made at any stage% /uch amendments on printed sheets will 'e supplied to the any stage% /uch amendments on printed sheets will 'e supplied to the Branches as and when done and should 'e su'stituted accordingly%
Branches as and when done and should 'e su'stituted accordingly%
P
PRRIIMME E BBAANNK K LLIIMMIITTEEDD MM. . SSHHAAHHJJAAHHAANN BHUIYAN BHUIYAN H HEEAAD D OOFFFFIICCEE, , DHDHAAKKAA MMAANNAAGGIINNGG DIRECTOR DIRECTOR 0 0
1.0 Context 1.0 Context
Retail lending is one of the core 'usinesses for Prime Bank &imited and Retail lending is one of the core 'usinesses for Prime Bank &imited and has 'een targeted for signicant further growth% This re1ects the potential has 'een targeted for signicant further growth% This re1ects the potential of retail lending to produce high le#els of economic prot and percei#ed of retail lending to produce high le#els of economic prot and percei#ed demographic trends toward an e"panded middle class and higher income demographic trends toward an e"panded middle class and higher income le#els%
le#els%
*sset .uality is generally e"pected to 'e higher in personal lending than *sset .uality is generally e"pected to 'e higher in personal lending than corporate lending due to a #ariety of
corporate lending due to a #ariety of factors including2factors including2 •
• 3i#ersication of risk3i#ersication of risk •
• /ecurity/ecurity •
• Cultural #aluesCultural #alues •
• The The increasing need increasing need for for indi#iduals to indi#iduals to ha#e ha#e access to access to 'ank'ank credit for the conduct of normal daily acti#ities%
credit for the conduct of normal daily acti#ities%
Prime Bank is a conser#ati#e lender in retail credit as part of its corporate Prime Bank is a conser#ati#e lender in retail credit as part of its corporate philosophy% -owe#er) conser#atism does not mean simply minimi4ing 'ad philosophy% -owe#er) conser#atism does not mean simply minimi4ing 'ad de'ts) 'ut incorporates the concept of lending against accepta'le risks% de'ts) 'ut incorporates the concept of lending against accepta'le risks% The Bank+s
The Bank+s o#erriding goal is o#erriding goal is not only not only to increase total to increase total shareholdshareholder returner return 'ut also to contri'ute to the socio economy 'y impro#ing the life style of 'ut also to contri'ute to the socio economy 'y impro#ing the life style of the limited income segment of the country and that can 'e 'est achie#ed the limited income segment of the country and that can 'e 'est achie#ed optimi4ing prots) rather than 5ust minimi4ing losses% Prot optimi4ation optimi4ing prots) rather than 5ust minimi4ing losses% Prot optimi4ation will follow from2
will follow from2
•
• Good,planning and control of Good,planning and control of appro#al processappro#al process •
• 66elell l ddesesigignened d prproodducucts ts wwitith h apapprprooppririatatelely y ffococuusesedd marketing
marketing •
• The The use use of of statistical statistical techni.ues techni.ues and and decision decision supportsupport systems that permit risks to 'e managed predicta'ly
systems that permit risks to 'e managed predicta'ly •
• GatGatherhering ing highigh h .ua.ualitlity y manmanageagemenment t infinforormatmationion) ) thithis s isis then read and used%
then read and used%
7 7
1.0 Context 1.0 Context
Retail lending is one of the core 'usinesses for Prime Bank &imited and Retail lending is one of the core 'usinesses for Prime Bank &imited and has 'een targeted for signicant further growth% This re1ects the potential has 'een targeted for signicant further growth% This re1ects the potential of retail lending to produce high le#els of economic prot and percei#ed of retail lending to produce high le#els of economic prot and percei#ed demographic trends toward an e"panded middle class and higher income demographic trends toward an e"panded middle class and higher income le#els%
le#els%
*sset .uality is generally e"pected to 'e higher in personal lending than *sset .uality is generally e"pected to 'e higher in personal lending than corporate lending due to a #ariety of
corporate lending due to a #ariety of factors including2factors including2 •
• 3i#ersication of risk3i#ersication of risk •
• /ecurity/ecurity •
• Cultural #aluesCultural #alues •
• The The increasing need increasing need for for indi#iduals to indi#iduals to ha#e ha#e access to access to 'ank'ank credit for the conduct of normal daily acti#ities%
credit for the conduct of normal daily acti#ities%
Prime Bank is a conser#ati#e lender in retail credit as part of its corporate Prime Bank is a conser#ati#e lender in retail credit as part of its corporate philosophy% -owe#er) conser#atism does not mean simply minimi4ing 'ad philosophy% -owe#er) conser#atism does not mean simply minimi4ing 'ad de'ts) 'ut incorporates the concept of lending against accepta'le risks% de'ts) 'ut incorporates the concept of lending against accepta'le risks% The Bank+s
The Bank+s o#erriding goal is o#erriding goal is not only not only to increase total to increase total shareholdshareholder returner return 'ut also to contri'ute to the socio economy 'y impro#ing the life style of 'ut also to contri'ute to the socio economy 'y impro#ing the life style of the limited income segment of the country and that can 'e 'est achie#ed the limited income segment of the country and that can 'e 'est achie#ed optimi4ing prots) rather than 5ust minimi4ing losses% Prot optimi4ation optimi4ing prots) rather than 5ust minimi4ing losses% Prot optimi4ation will follow from2
will follow from2
•
• Good,planning and control of Good,planning and control of appro#al processappro#al process •
• 66elell l ddesesigignened d prproodducucts ts wwitith h apapprprooppririatatelely y ffococuusesedd marketing
marketing •
• The The use use of of statistical statistical techni.ues techni.ues and and decision decision supportsupport systems that permit risks to 'e managed predicta'ly
systems that permit risks to 'e managed predicta'ly •
• GatGatherhering ing highigh h .ua.ualitlity y manmanageagemenment t infinforormatmationion) ) thithis s isis then read and used%
then read and used%
7 7
T
Taking aking the the foregoforegoing ing into into account) account) this this manual manual 8to 8to 'e 'e referreferred red as as RetailRetail Banking Credit Policy Manual9 sets out the general policy parameters for Banking Credit Policy Manual9 sets out the general policy parameters for personal lending% Retail lending in the conte"t of this manual is lending to personal lending% Retail lending in the conte"t of this manual is lending to ind
indi#ii#iduaduals ls in in thetheir ir own own rigright ht and and e"e"clucludes des solsole e prproproprietietor or and and smsmallall 'usiness lending%
'usiness lending%
1. C!e"#t R#$% M&n&'e(ent Po)#*+ 1. C!e"#t R#$% M&n&'e(ent Po)#*+
Credit risk management needs to 'e
Credit risk management needs to 'e a ro'ust process that ena'les a Banka ro'ust process that ena'les a Bank to proacti#ely manage its loan portfolio in order to minimi4e losses and to proacti#ely manage its loan portfolio in order to minimi4e losses and also to earn an accepta'le le#el of return for stakeholders% Gi#en the fast also to earn an accepta'le le#el of return for stakeholders% Gi#en the fast ch
chanangiging ng dydynanamimic c glglo'o'al al ececononomomy y anand d ththe e inincrcreaeasising ng prpresessusurre e of of glo
glo'al'ali4ai4atiotion) n) li'li'eraerali4li4atiation) on) conconsolsolidaidatiotion n and and disdisintinter er memediadiatiotion) n) it it isis essential that Prime Bank has a ro'ust credit risk management policy and essential that Prime Bank has a ro'ust credit risk management policy and procedur
procedures that es that are sensiti#e and are sensiti#e and responsresponsi#e to i#e to these changes%these changes%
T
To o pro#ide pro#ide a a 'oard 'oard guideline guideline for for the the RetRetail ail Credit Credit Operation Operation towardstowards ecient management of the Retail Credit portfolio of the Bank) a clearly ecient management of the Retail Credit portfolio of the Bank) a clearly de
denneded) ) wewellll,p,planlannened) d) cocompmprrehehenensisi#e #e anand d apapprpropopririatate e CrCrededit it RiRisksk Management Policy is
Management Policy is a pre,re.uisite%a pre,re.uisite%
(n the a'o#e 'ackdrop) this policy document has 'een prepared% *nd) it is (n the a'o#e 'ackdrop) this policy document has 'een prepared% *nd) it is here'y named as :
here'y named as :Ret&#) B&n%#n' C!e"#t Po)#*+ Ret&#) B&n%#n' C!e"#t Po)#*+ M&n-&).M&n-&).
1./ P-!o$e 1./ P-!o$e
The
The sole sole purpose purpose of of this this policy policy document document is is to to set set out out yardsticks for yardsticks for andand spell out standard operating procedures for management of retail credit spell out standard operating procedures for management of retail credit risk of the Bank% *s such) it
risk of the Bank% *s such) it specically addresses the following areasspecically addresses the following areas22
•
• !sta'lishing an !sta'lishing an approappropriate credit priate credit risk en#ironmentrisk en#ironment •
• /etting up /etting up a sound credit appro#al processa sound credit appro#al process •
• MaMainintataininining g an an apapprpropopririatate e crcrededit it adadmimininiststraratition on anandd monitoring
monitoring
; ;
Process) and Process) and •
• !nsuring ade.uate controls o#er credit risk% !nsuring ade.uate controls o#er credit risk%
1. S*oe 1. S*oe
This policy
This policy document will document will 'e applica'le 'e applica'le for issues for issues related to related to retail lendingretail lending op
opereratatioion n anand d alalso so to to 'e 'e rreaead d in in cocon5n5ununctctioion n wiwith th ththee C!eC!e"#t "#t R#$R#$% % M&n&
M&n&'e(en'e(ent t Po)#*Po)#*++ wiwith th rresespepect ct to to 'o'oth th didirrecect t anand d inindidirrecect t crcrededitit product
products of s of traditional and (slamic traditional and (slamic 'anking products%'anking products%
1.2 A(en"(ent o3 t4e Po)#*+ 1.2 A(en"(ent o3 t4e Po)#*+
This Retail Banking Cr
This Retail Banking Credit Policy Manualedit Policy Manual will 'e will 'e amended) re#ised) rened)amended) re#ised) rened) read5usted as and when warranted to accommodate the changes in the read5usted as and when warranted to accommodate the changes in the mar
markket et conconditditionion) ) cyccyclic lic aspaspect ect of of the the ecoeconomnomy) y) gogo#er#ernmnment ent polpolicyicy)) industry demand) central 'ank regulation and e"perience of the Bank in industry demand) central 'ank regulation and e"perience of the Bank in managing credit risk% <or this purpose) the Board of 3irectors of the Bank managing credit risk% <or this purpose) the Board of 3irectors of the Bank will re#iew the Retail Banking Credit Policy Manual at least annually and will re#iew the Retail Banking Credit Policy Manual at least annually and make necessary amendment%
make necessary amendment%
1.5 A**e$$ to t4e Po)#*+ 1.5 A**e$$ to t4e Po)#*+
This
This policy policy document document is is categori4ed categori4ed as as a a condential condential one one and and will will 'e'e ocially distri'uted to all e"ecuti#es of the Bank and all ocers working ocially distri'uted to all e"ecuti#es of the Bank and all ocers working in the Corporate Banking and Credit 3i#ision 8comprising of Credit Risk in the Corporate Banking and Credit 3i#ision 8comprising of Credit Risk Management =nit) Credit *dministration =nit and Reco#ery =nit9) Retail Management =nit) Credit *dministration =nit and Reco#ery =nit9) Retail Credit > Credit Card 3i#ision of 'oth Branch and -ead Oce) <oreign Credit > Credit Card 3i#ision of 'oth Branch and -ead Oce) <oreign !"
!"chachange nge 3e3eparpartmtment ent of of BrBrancanches hes and and (nt(nterernatnationional al 3i3i#is#ision ion of of -ea-eadd Oce% *ny'ody other than the a'o#e will ha#e to apply to collect this Oce% *ny'ody other than the a'o#e will ha#e to apply to collect this document to Credit Risk Management =nit of Credit 3i#ision) -ead Oce document to Credit Risk Management =nit of Credit 3i#ision) -ead Oce through proper channel%
through proper channel%
1.6 M&n"&to!+ Re&"#n' o3
1.6 M&n"&to!+ Re&"#n' o3 t4e M&n-&)t4e M&n-&)
? ?
!"ecuti#es and sta$ ocers in#ol#ed the retail lending and cards 'usiness must read the sections rele#ant to their direct responsi'ilities 'efore take o#er of a new 5o') annually thereafter or whate#er shorter periods is determined 'y their managers%
1.7 T4e R#$% M&n&'e(ent C+*)e
The risk management cycle for retail lending consists of si" steps2
• Planning products and Risk Management Controls • *c.uiring *ccounts
• Maintaining *ccount and Managing Credit @uality • Collecting 3elin.uencies
• 6riting o$ 'ad de'ts
• !#aluating performance and rening plans and control
Management o#ersees e#ery step of the process) aided 'y M(/) which is indispensa'le%
.0 Ne8 P!o"-*t A!o9&) P!o*e"-!e
* product is dened as any form of packaged lending or ser#ice o$ering which is designed to meet the re.uirement of a particular market segment without 'eing tailored to indi#idual needs%
This section articulates fundamental policy guidelines for Consumer <inancing% Before launching) for e#ery type of retail lending product) 'ank shall de#elop fully documented product program guidelines% These guidelines shall include o'5ecti#e .uantitati#e parameters for the eligi'ility of the 'orrowers and determining the ma"imum permissi'le limit per 'orrower%
These fundamental guidelines will 'e the key elements that would support the 'ank+s retail credit culture and they will dictate 'ank+s 'eha#ior when dealing with customers and managing lending portfolio of such loans% *ny de#iations from these guidelines must in all cases) will re.uire appro#al from Board of 3irectors appropriate competent authority%
6hile de#eloping Product Program Guidelines 8PPG9 for any product , the following guidelines must 'e included in the PPG documents to ensure that the PPG is co#ering all the aspects of risk and return for the particular product%
PPG Guideline o% 02 Customer /egment
PPG Guideline o% 72 Purpose
PPG Guideline o% ;2 ationality
PPG Guideline o% ?2 *ge &imit , Minimum age 8years9 Ma"imum age 8years9
PPG Guideline o% A2 Minimum (ncome
PPG Guideline o% 2 &oan /i4e
PPG Guideline o% D2 &oan to Price Ratio
PPG Guideline o% E2 /ecurity Collateral
PPG Guideline o% F2 &egal 3ocuments
PPG Guideline o% 02 (nterest Rate
PPG Guideline o% 002 Ma"imum Term of &oan
PPG Guideline o% 072 Repayment Method
PPG Guideline o% 0;2 3is'ursement Mode
PPG Guideline o% 0?2 3is'ursement pre,condition
PPG Guideline o% 0A2 3e't Burden Ratio 83BR H9
PPG Guideline o% 02 Ierication of Personal 3etails and @uotation
PPG Guideline o% 0D2 /u'stantiation of (ncome
* 'asic Product Program Guideline 8PPG9 has 'een de#eloped for ele#en retail,lending products and added in the Aen"#x 1 for ready references% The products are2
• Car &oan
• 3octors+ &oan
• -ousehold 3ura'le &oans • Marriage &oan
• *ny Purpose &oan • !ducation &oan
• -ospitali4ation &oan • /wapna eer
• *d#ance *gainst /alary • Tra#el &oan
• CG Con#ersion &oan
.1 C!e"#t P!#n*#)e$
<undamentally) credit policies and procedures can ne#er suciently capture all the comple"ities of the product% Therefore) the following credit principles are the ultimate reference points for all concerned e"ecuti#es > sta$,making consumer,nancing decisions2
• *ssess the customer+s character for integrity and willingness to repay
• Only lend when the customer has capacity and a'ility to repay • Only e"tend credit if 'ank can suciently understand and
manage the risk
• =se common sense and past e"perience in con5unction with thorough e#aluation and credit analysis%
• 3o not 'ase decisions solely on customer+s reputation) accepted practice) other lender+s risk assessment or the recommendations of other ocers
• Be proacti#e in identifying) managing and communicating credit risk
• Be diligent in ensuring that credit e"posures and acti#ities comply with the re.uirement set out in Product Program Guidelines%
/.0 Int!o"-*t#on
This section pro#ides high le#el policies and guidance for the deli#ery of an e$ecti#e and consistent methodology for the assessment and appro#al of retail credit. The primary factor determining the .uality of the Bank+s credit portfolio is the a'ility of each 'orrower to honor) on timely 'asis) all credit commitments made to the Bank i%e% repayment of loan installments on time% The authori4ed Credit Ocers !"ecuti#es must accurately determine this prior to appro#al% Therefore a thorough credit risk assessment shall 'e conducted prior to the sanction of any credit facilities% 6hile assessing a credit proposal more emphasis shall 'e gi#en on repayment potential of loans out of funds generated from 'orrower+s 'usiness 8cash 1ow9 instead of reali4ation potential of underlying securities%
/.1 P!#n*#)e$
!ach credit assessment must2
0% Be 'ased on the sound ethical practices) which are consistent with all 'anking rules and legislationJ and
7% Be consistent) at a product le#el) with Product Program Guideline 8section
/. A)#*&t#on$
The rst stage of credit assessment and appro#al process is a customer application% The application must pro#ide ade.uate information to ena'le the Bank to assess the credit% *s a minimum) the application must re.uest for sucient information to #erify the e"istence of the indi#idual and to facilitate the collection e$ort) including skip tracing and security checks%
The information in the application must also esta'lish :Kno8 Yo-! C-$to(e! ;KYC<% /pecic information should include2
• Telephone and address contact details • !mployment'usiness details
• (ncome details
• (ncome > !"penditure /tatement • Personal et worth /tatement • Residence details
• Credit references and guarantors details
*ll application must 'e checked for complete information so that initial re#iew of the application ena'les the selection of 'etter proposal for accelerated processing and .uick re1ection of those that do not meet minimum criteria of the product% -owe#er) application should not 'e re5ected purely on the 'asis of incomplete information) if the proposal merits consideration appropriate follow up should 'e initiated% * format of loan application is attached in *ppendi" 7%
/./ Cont&*t Po#nt =e!#>*&t#on
Ierication is a key part of application process% The le#el and #erication details must 'e documented in PPG% Contact Point Ierication shall 'e done for all applicants e"cept for the -igh et 6orth indi#iduals or the customers ha#ing good account relationship with the 'ank% The o'5ecti#e is to conrm the declaredundeclared information of the applicants% CPI includes2
• *pplicant+s Residence) BusinessOce address) phone) status% • Guarantors (nformation Ierication
• Bank /tatement > other (ncome 3ocuments Ierication /. Cont&*t Po#nt =e!#>*&t#on t4!o-'4 T4#!" &!t+;$<
*s the #erication is a critical function of loan application process) it is to 'e managed professionally 'y independent third party agency8s9% This will ena'le the selection of 'etter accounts for accelerated processing and .uick re5ection of those ha#ing negati#e or inade.uate information% <ormat of CPI report attached in Annex-!e /.
Regular e"amination and testing of the third party must 'e in place and the integrity of the #erication report must 'e in place% The ocers in#ol#ed in Retail lending process must #erify the data 'y telephone or personal #isit as appropriate% The percentage of accounts #eried will 'e determined 'y the risk dynamics of a product 'ut must not less than 7H in any case%
3ata must 'e structured to facilitate monitoring at indi#idual agent le#el% @uarterly re#iew meeting with third party agents must 'e held to assess the performance and to discuss forthcoming acti#ities%
/.2 G-&!&ntee
One of the fundamental per.uisites for securing retail lending is to o'tain guarantee accepta'le to the 'ank 'y way of social status and percei#ed creditworthiness% The following must 'e adhered to while o'taining guarantee for securing the loans2
0% o loans shall 'e allowed against the guarantee of an e"isting guarantor of any other loan%
7% !"isting 'orrowers of the 'ank shall not 'e eligi'le to 'ecome Guarantors for any retail loans%
;% o guarantee shall 'e o'tained from the Chairman) Managing 3irector and 3irectors of Corporate facility clients and o'taining such guarantee must 'e referred to the -ead Oce for appro#al%
?% *ll guarantors must 'e cross,referenced through a#aila'le M(/ to ascertain whether the guarantor is an e"isting 'ank customer) or if the guarantor had the past relationship with the 'ank% (f the guarantor has a negati#e credit history and social status or if his nancial standing does not appear to 'e accepta'le) the guarantee should 'e re5ected or referred to the appropriate le#el of authority%
/.5 De "-)#*&t#on *4e*%
*ll appro#ed applications must 'e checked against Banks data'ase to identify whether the applicant is en5oying any other loan in other account apart from the declared loans% (t must also 'e checked that the applicant has a credit card and any payment default is made% This cross, checking is mandatory for Credit Card Retail Credit appro#al% (n such cases the application must 'e re5ected%
/.6 M&#nten&n*e o3 Ne'&t#9e F#)e$
Two negati#e les K one listing the indi#iduals and the other listing the employers , are to 'e maintained to ensure that indi#idual with 'ad history and du'ious integrity and employers of the applicants with high delin.uency rate do not get loan from the Bank%
/.7 A$$e$$(ent Met4o"$
This section outlines the process that will 'e used to assess the lending re.uests% (t is the policy of the Bank to use the method of assessment that pro#ides the highest le#el of control and risk prediction for a particular group of customers% There are two ma5or assessment methods will 'e used for consumer nancing and the order of preference will 'e2
• Credit /coring Matri" • Ludgmental 3ecision
/.7.1 C!e"#t S*o!#n'
Credit scoring is a method used for predicting the creditworthiness of applications% This scoring is 'ased on the concept that applicants will perform in a similar way to e"isting customers with a similar demographic prole% ey items of application information such as occupation) residence status) income details etc are assigned point #alues% The total of these point #alues i%e% nal score represents the repayment pro'a'ility) generally e"pressed as an odd or risk .uote 'etween good or 'ad accounts% Generally the higher the score) the more likely the applicant will not e"perience delin.uency and) con#ersely) the lower the score the more likely the applicant will e"perience delin.uency% * format of Credit /coring Matri" is attached in Aen"#x
/.7. J-"'(ent&) De*#$#on$
*pplications meeting the minimum cut,o$ score and meeting any other credit criteria should 'e further re#iewed for 5udgmental decision% Ludgmental appro#al in#ol#es the assessment of an applicant+s character)
capacity and collateral) which are dened as2
• Character, an applicant+s willingness to meet past o'ligations
• Capacity, an applicant+s willingness to meet current and future o'ligation
• Collateral K the #alue of the items 'eing nanced or collateral 'eing o$ered%
The 5udgmental assessment approach must 'e esta'lished through the de#elopment of credit criteria in line with Product program Guideline% Criteria will #ary from the risk dynamics of a product 'ut should 'e documented and capa'le of audit% The following factors must 'e taken into account while assessing the credit on 5udgmental approach2
• E()o+(ent
The accuracy and sta'ility of an applicant+s stated employmentself employment and income is critical to all credit decisions% Cautions should 'e e"ercised and #erication must 'e conducted on the occupational details%
• Re$#"en*e
*n applicant is re.uired to 'e li#ing at hisher present address for a minimum of one year unless the applicant is an esta'lished 'ank customer holding an account for longer than months% The applicant must pro#ide utility 'ills for #erication%
• De?t B-!"en
Consumer credit products traditionally ha#e incorporated an assessment of the applicant+s de't 'urden 'ased upon the minimum income le#el or ma"imum credit limit esta'lished for the product% The calculation should 'e2
Total monthly !"penses 8TM!9et Total Monthly income 8TM(9
TME N &i#ing !"penses Credit Card Repayments 8including payments to other 'anks9 &oan Repayments 8including payments to other 'anks and payment of current loan applications9
NTMI N Total monthly income 8i%e% /alary'usiness other monthly income e%g% house rent) di#idend etc9, deductions%
/.@ C!e"#t A!o9&) P!o*e$$
*pplications are recei#ed at Credit *ssessment > *ppro#al unit from sales team 'ranches% *pplications are e#aluated assessed 'y Credit *nalysts Managers% The e#aluation process is carried out 'ased on the agreed and standard guidelines for di$erent loans product and the documents checklist as per the product program guideline 8PPG9% The 0?
detailed credit and risk assessment should 'e conducted prior to the appro#ing of any loans% /ales TeamBranches must complete a documentation checklist 8refer Annex-!e 2 Annex-!e 59 to ensure all documents ha#e 'een properly o'tained%
The sales team 'ranch sta$ responsi'le for loan sales as well as the customer relationship) and must 'e held responsi'le to ensure the accuracy of the loan application su'mitted for appro#al% They must 'e familiar with the 'ank+s Retail Credit Policy Manual > Guidelines and should conduct due diligence on new 'orrowers) purpose of the loans and guarantors%
The credit appro#al function is completely separated from the marketing sales function% *ppro#als must 'e e#idenced in writing% *ppro#al records must 'e kept on le with the Credit *pplications%
Credit appro#al should 'e centrali4ed within the Credit function% Regional credit centers shall 'e esta'lished as appropriateJ howe#er) all large loans 8as dened in the PPG9 must 'e appro#ed 'y the -ead of Credit or delegated -ead Oce credit e"ecuti#es% *ny credit proposal that does not comply with this policy) regardless of amount) should 'e referred to -ead Oce for *ppro#al%
To illustrate the process of marketing a loan at the front end till dis'ursement at the Credit *dministration 3epartment) a sample process work1ow chart 8Aen"#x 69 is attached%
.0 De)e'&t#on o3 A!o9&) A-t4o!#t+
Credit appro#al authority to the proper 'ody andor e"ecuti#e is a precondition for ensuring smooth and transparent credit operation in the Bank% /ince inception) credit appro#al authority has 'een delegated to di$erent tiers of 'oth the Board of 3irectors and the Management% *uthorities who en5oy delegation of 'usiness power i%e% credit appro#al authority are as follows2
0% The Board of 3irectors
7% The !"ecuti#e Committee of the Board ;% The Managing 3irector
?% The 3eputy Managing 3irector A% Retail Credit Committee%
.1 P!o*e$$ o3 "e)e'&t#n' &!o9&) &-t4o!#t+
*ll credit appro#al authority will 'e delegated with the proper appro#al of the Board of 3irectors% -enceforth) the Board of 3irectors will re#iew and amendre#ise delegation of credit appro#al authority of di$erent tiers of 'oth the Board of 3irectors and the Management which will 'e treated as the ma"imum indicati#e limit% -owe#er) specic credit appro#al authority will 'e delegated in writing 'y the Board of 3irectors and the Managing 3irector) as the case may 'e) as per the indicati#e ma"imum limit to di$erent 'odye"ecuti#es% (n this process) the Board of 3irectors will rst delegate authority to the !"ecuti#e Committee of
the Board and the Managing 3irector% <urthermore) it will " the ma"imum indicati#e limits for di$erent tiers of the Management 'ased on which the Managing 3irector will delegate authority in writing to the 3eputy Managing 3irector looking after retail credit portfolio) !"ecuti#es working at Retail Banking di#ision) -ead Oce and -ead of Branches considering knowledge) e"perience and credit 5udgment of the concerned e"ecuti#e% *n !"ecuti#e shall not 'e delegated credit appro#al authority only on the 'asis of hisher position% (n other words an e"ecuti#e will not automatically get lending authority 'y #irtue of hisher functional titledesignation% *nd) credit appro#al authority delegated to an e"ecuti#e will not automatically 'e transferred to hisher replacement%
. Re9#$#on o3 C!e"#t A!o9&) A-t4o!#t+
The Board of 3irectors will re#iew enforcement of the delegated authority 'y the !"ecuti#e Committee of the Board and the Managing 3irector at least annually and re#ise the same as and when re.uired% On the other hand) the Managing 3irector will re#iew the enforcement of the delegated credit appro#al authority 'y the !"ecuti#es at least annually and re#ise the same within the indicati#e ma"imum limit appro#ed 'y the Board) if necessary% -owe#er) the Managing 3irector may cease or curtail delegated authority of any !"ecuti#e at any point of time without assigning any reason% *nd) the Managing 3irector will place a report 'efore the Board of 3irectors at least annually regarding enforcement performance of all e"ecuti#es en5oying credit appro#al authority%
./ C!#te!#& 3o! A!o9&) A-t4o!#t+
(t is essential that e"ecuti#es en5oying credit appro#al authority ha#e rele#ant training and e"perience to carry out their responsi'ilities e$ecti#ely% *s a minimum) appro#ing e"ecuti#es should ha#e the followings2
*t least A years e"perience working in corporatecommercial 'anking as a relationship manager or account e"ecuti#e%
Training and e"perience in nancial statement) cash 1ow and risk analysis%
* thorough working knowledge of *ccounting
* good understanding of the local industrymarketing dynamics%
. C!e"#t A!o9&) A-t4o!#t+
Credit appro#al authority may 'e delegated to the following 'ody!"ecuti#e2
0% The Board of 3irectors
7% The !"ecuti#e Committee of the Board ;% 3i$erent tier of the Management
.2 T4e Bo&!" o3 D#!e*to!$
The Board of 3irectors will ha#e the authority to sanction any loan for the amount not e"ceeding the regulatory limit that the Bank can pro#ide to a single customer% Besides) all proposals for wai#er of interest) commission) charges etc and principal must 'e appro#ed 'y the Board of 3irectors% *ny proposal for reduction of rate of interest 'y more than one percent from minimum le#el of appro#ed interest rate 'and must 'e appro#ed 'y the Board%
.5 T4e Exe*-t#9e Co((#ttee o3 t4e Bo&!" 2
The !"ecuti#e Committee of the Board of 3irectors may sanction any loan for the amount not e"ceeding the regulatory limit the Bank can pro#ide to a single customer% -owe#er) it will not ha#e the authority to appro#e any proposal for wai#er of interest) commissionJ charges etc and principal must 'e appro#ed 'y the Board of 3irectors% *ny proposal for reduction of rate of interest 'y one percent or less from the minimum le#el of appro#ed interest rate 'and may 'e appro#ed 'y the !"ecuti#e Committee of the Board% *ny proposal 'eyond the delegated authority of the Managing 3irector will 'e placed 'efore the !"ecuti#e Committee of the Board for appro#al%
.6 T4e M&n&'e(ent
3i$erent tier of the Management may 'e delegated credit appro#al authority to ensure timely disposal of the credit proposals at root le#el% (n the Management) the following e"ecuti#es may 'e delegated credit appro#al authority2
0% The Managing 3irector
7% The 3eputy Managing 3irector super#ising Retail Banking ;% !"ecuti#es working at Retail Banking) -ead Oce
?% !"ecuti#es working as -ead of Branches
N&(e o3 t4e P!o"-*t$ Lo&n )#(#t He&" O*e Ret&#) C!e"#t Co((#ttee De-t+ M&n&'#n' D#!e*to! He&" O*e C!e"#t Co((#ttee
Car &oan 8new9 7% lac ,, =p to 0% lac
=p to 0A% lac Car &oan
8reconditioned9
7% lac ,, =p to E% lac =p to 0A% lac
-ousehold dura'les 8Other items9
A% &ac =p to 7% lac
=p to ;% lac A% lac
3octors &oan 8/pecialist9
0% lac =p to ;% lac
=p to A% lac 0% lac
3octors &oan 8General Practitioner9
A% lac =p to 7% lac
=p to ;% lac A% lac
*d#ance *gainst /alary
;% lac =p to 0% lac
=p to 0%A lac ;% lac
*ny Purpose &oan 0%A lac =p to 0% lac
<ull limit ,, !ducation &oan ;% lac =p to 0% =p to 0%A lac ;% lac
N&(e o3 t4e P!o"-*t$ Lo&n )#(#t He&" O*e Ret&#) C!e"#t Co((#ttee De-t+ M&n&'#n' D#!e*to! He&" O*e C!e"#t Co((#ttee lac Tra#el &oan 7% lac =p to 0% lac
=p to 0%A lac 7% lac Marriage &oan ;% lac =p to 0%
lac
=p to 0%A lac ;% lac -ospitali4ation &oan ;% lac ,, =p to 0%A lac ;% lac CG Con#ersion &oan thousand for indi#idual and 0% lac for corporate 'odies =p to 0% lac ,, ,,
The Board of 3irectors in its 7;Dth meeting held on o#em'er 70) 7A appro#ed the delegation of 'usiness power to the di$erent tiers as follows2
2.0 Int!o"-*t#on
*fter appro#al) Credit Team will send forward the appro#ed applications along with the security and other documents to the Credit *dministration =nit for processing% The Credit *dministration function is critical in ensuring that proper documentation and appro#als are in place prior to the dis'ursement of loan facilities%
=nder Credit *dministration there shall 'e two,su' units) 3ocumentation > @uality Control and &oan *dministration 3ept who will process the document and dis'urse the loan%
2.1C!e"#t Do*-(ent&t#on
Credit 3ocumentation dept is responsi'le2
• To ensure that all security documentation complies with the terms of appro#al%
• To control loan dis'ursements only after all terms and conditions of appro#al ha#e 'een met) and all security documentation as per the checklist of appro#ed PPG is in place%
• To maintain control o#er all security documentation%
• To monitor 'orrower+s compliance with agreed terms and conditions) and general monitoring of account conductperformance%
• =pon performing the a'o#e) 3ocumentation dept will forward the &imit (nsertion (nstruction to the &oan *dministration unit for limit and other information to input into the 'ank+s main system% * format of &imit (nsertion form is attached in *ppendi" E%
2.D#$?-!$e(ent
&oan *dministration dept in head oce regional oce 'ranches will dis'urse the loan amounts under loan facilities only when all security documentation is in place% C(B report is o'tained) as appropriate) and clean% * sample documentation and dis'ursement checklist is attached as *ppendi" F%
2./ C-$to"#&) D-t#e$
&oan dis'ursements and the preparation and storage of security documents shall 'e centrali4ed in the head oce and regional credit
centers% /ecurity documentation is held under strict dual control in locked reproof storage%
2. Co()#&n*e Re-#!e(ent$
• *ll re.uired Bangladesh Bank returns must 'e su'mitted in the correct format in a timely manner%
• Bangladesh Bank circularsregulations shall 'e maintained centrally) and ad#ised to all rele#ant departments and 'raches to ensure compliance%
• *ppointment of all third party ser#ice pro#iders 8#aluers) lawyers) insurers) CPI) Reco#ery *gents etc%9 must 'e appro#ed 'y the Board of directors !"ecuti#e Committee or appropriate competent le#el of authority% The performance of the third party ser#ices must 'e re#iewed on an annual 'asis%
5.0C!e"#t R#$%
The credit risk is managed 'y the Credit *ppro#al > *ssessment unit) which is completely segregated from sales% The following elements contri'ute to the management of credit risks2
The credit risk associated with the products is managed 'y the following2
0% &oans will 'e gi#en only after proper #erication of customer+s static data and after proper assessment > conrmation of income related documents) which will o'5ecti#ely ascertain customer+s repayment capacity%
7% Proposals will 'e assessed 'y independent Credit =nit completely separated from sales%
;% !#ery loan will 'e secured 'y hypothecation o#er the asset nanced) and customer+s authority taken for re,possession of the asset in case of loan loss% <or Car &oan) the #ehicle will 'e registered in 'ank+s name) which will gi#e the 'ank the legal right of re, possession when re.uired%
?% The loan appro#al system is parameter dri#en which will su'stantially eliminate the su'5ecti#e part of the assessment procedure%
A% There will 'e dedicated collection+ force who will ensure timely monitoring of loan repayment and its follow up%
% The Credit > Collection acti#ities will 'e managed centrally and loan appro#al authorities will 'e controlled centrally where the 'ranch managers or sales people will ha#e no in#ol#ement
5.1Oe!&t#on&) R#$%
<or consumer loans) the acti#ities of front line sales and 'ehind,the,scene maintenance and support are clearly segregated% Consumer Credit *dministration =nit will 'e formed%
Credit *dministration =nit will manage the following aspects of the product2
a9 (nputs) appro#als) customer le maintenance%
'9 The Operation 5o's like dis'ursal in the system including raising de'it standing orders and the lodgment and maintenance of securities%
Type a+ 5o's and type '+ 5o's will 'e handled 'y separate teams within Credit *dministration =nit therefore the risk of compromise with loan security documentation will 'e minimal%
(t will ensure uncompromising checks) .uick ser#ice deli#ery) and uncompromising management of credit risks%
5.. M&#nten&n*e o3 Do*-(ent$ Se*-!#t#e$
The applications and other documents related to Consumer loans will 'e held in safe custody 'y &oan *dministration =nit% The physical securities and the security documents will 'e held elsewhere inside re,proof ca'inets under Credit *dministration+s custody% The dual,key system for security placement and retrie#al will ha#e to 'e implemented%
5./ Inte!n&) A-"#t
The Bank+s (nternal *udit > Board *udit Cell will 'e responsi'le with performing audits of all departments% *udits should 'e carried out on a regular or periodically as agreed 'y the Management to assess #arious risks and possi'le weaknesses and to ensure compliance with regulatory guidelines) internal procedures) and Retail &ending Guidelines and Bangladesh Bank re.uirements%
6.0 Int!o"-*t#on
This section lays down the procedures with regard to collections and remedial management retail credit to ensure the e$ecti#e control and monitoring in the reco#ery of funds lent to customers%
6.1 O?e*t#9e
To minimi4e the com'ined collection e"penses) write o$ costs) and reduce the o#erall pro#isions held to minimi4e the 'ad de't charge on the prot and loss account%
6. Mon#to!#n'
* 'ank+s loan portfolio is su'5ect to a continuous process of monitoring% This will 'e achie#ed 'y regular generation of o#er limit and o#erdue
reports) showing where facilities are 'eing e"ceeded and where payments of interest and repayment of principle are late%
6./ Re9#e8
(n order to ascertain the e$ecti#eness of this procedure) the section must 'e re#iewed e#ery after si" months 'y the -ead of Retail Banking or appropriate le#el of authority% *ny modications must 'e appro#ed 'y !C Board of 3irectors%
6.Re*o9e!+
The collection process for personal loans starts when the account holder has failed to meet one or more contractual payment 8(nstallment9% (t therefore 'ecomes the duty of the Collection 3epartment to minimi4e the outstanding delin.uent recei#a'le and credit losses%
This procedure has 'een designed to ena'le the collection sta$ to systematically reco#er the dues and identify pre#ent potential losses) while maintaining a high standard of ser#ice and retaining good relations with the customers% (t is therefore essential and critical) that collection people are familiar with the computeri4ed system) procedures and maintain e$ecti#e liaison with other departments within the 'ank%
6.2Co))e*t#on o?e*t#9e$
• The collector+s responsi'ility will commence from the time an account 'ecomes delin.uent until it is regulari4ed 'y means of payment or closed with full payment amount collected%
• The goal of the collection process is to o'tain payments promptly while minimi4ing collection e"pense and write,o$ costs as well as maintaining the customer+s goodwill 'y a high standard of ser#ice% <or this reason it is important that the collector should endea#or to resol#e the account at the rst time worked%
• Collection also protects the assets of the 'ank% This can 'e achie#ed 'y identifying early signals of delin.uency and thus minimi4ing losses%
• The customers who do not respond to collection e$orts , represent a nancial risk to the institution% The Collector+s role is to collect so that the institution can keep the loan on its 'ooks and does not ha#e to write,o$ charge o$%
6.5 I"ent#>*&t#on &n" &))o*&t#on o3 &**o-nt$
6hen a customer fails to pay the minimum amount due or installment 'y the payment due date) the account is considered in arrears or delin.uent% 6hen accounts are delin.uent) collection procedures are instituted to
regulari4e the accounts without losing the customer+s goodwill whilst ensuring that the 'ank+s interests are protected%
6.6 Co))e*t#on Ste$
To identify and manage arrears) the following aging classication is adopted2
Fo! &)) !o"-*t$ ot4e! t4&n *!e"#t *&!"$ D&+$ P&$t D-e
;DPD<
Co))e*t#on A*t#on
0,0? &etter) <ollow up > Persuasion o#er phone 8*ppendi" 09
0A,7F 0st Reminder letter > /l% o% 0 follows
;,?? 7nd reminder letter /ingle #isit
?A,AF • ;rd reminder letter 8*ppendi" 009 • Group #isit 'y team mem'er • <ollow up o#er phone
• &etters to Guarantor) !mployer) Reference all a'o#e e$ort follows
• 6arning on legal action 'y ne"t 0A days ,EF • Call up loan 8*ppendi" 079
• <inal Reminder > /er#e legal notice • legal proceedings 'egin
• Repossession starts
F and a'o#e • Telephone calls&egal proceedings continue • Collection e$ort continues 'y ocer >
agent
• &etter to di$erent 'anks*ssociation
*s and when an account 'ecome delin.uent collection system works together to achie#e 'usiness o'5ecti#es i%e% reco#ery of the past due installments% *t the 'eginning of the month collection unit has taken the total asset portfolio from the system% Then all ; to 0?F 3P3 account has to 'e identied and allocate those accounts to the indi#idual collectors in Call Center to collect the o#er dues on a set target 'asis% The respecti#e collector has got one month time to reco#er the o#erdue on a target 'ased matri"%
6.7 R#$% G!&"#n' o3 C-$to(e!$
Customers are classied according to creditworthiness to ena'le focused attention on those re.uiring increased super#ision on remedial action%
• Risk Grading also pro#ides the Board and Management to o'tain an o#er#iew of the .uality of the credit portfolio as follows2
• &oan e#aluation and ongoing re#iew
• To measure the credit .uality in a portfolio 'usiness unit • !arly detection of loans showing deteriorating features • !$ecti#e pro'lem loan management
• The Bank+s regulatory reporting and portfolio management strategies are dri#en 'y risk grade%
(n principles) Risk Grading shall 'e assigned to all customers with facilities% The following Risk Grading will 'e assigned 'ased on the degree of delin.uency
De)#n-en*+ C+*)e R#$% G!&"#n' 0% ew *ccount Grade 0
7% <ront !nd Grade 7 ;% Mid Range Grade ; ?% -ard Core Grade ?
• F!ontEn" D" ;1@ D"<
<ront,end is the rst collection 'ucket in which delin.uent accounts are identied and at this stage) the customers are normally contacted 'y phone and letter) which ser#es as a reminder of hisher o'ligation to pay the o#erdue amount to the 'ank%
*ny account) which is past due 'y one day from his payment date) will 'e assigned to respecti#e collectors at the 'eginning of the month and gi#en one month time to reco#er the dues% Telephone call should 'e conducted in a soft and tactful manner in consistency with the customer ser#ice le#el% Collector must always do an in.uiry through the system to conrm if payment has 'een recei#ed 'efore commencing with telephone calling to a#oid causing misunderstanding with the customer%
(nitial telephone contact should 'e directed at the oce% (f the customer cannot 'e contacted) telephone call should then 'e made to the residence telephone num'er% =pon successful contact with a customer) the collector will tactfully in.uire a'out the reason for not paying the minimum payment due% The collector will then proceed to o'tain a promise to pay for the o#erdue installment along with the penal interest%
(f collection letter or statement returned from the customer due to change of address) it is the responsi'ility of the respecti#e collectors to collect the new address and telephone num'er and on some e"tent they could use the e"ternal agency for update the same% The collectors should ask the customer to pro#ide written instruction of address change to the customer ser#ices department and at the same time record the new address and telephone no into the 'anks system
/electi#e letters can 'e issued to customers who are dicult to contact through telephone%
• M#"R&n'e /0 50 D" ;/0 7@""<
Mid,range is the 'ucket in which the account is considered to 'e seriously delin.uent thus collection e$orts must 'e more intensi#e) as the account ;
has threatened our asset% 6hen the front,end delin.uent collection e$ort fails to o'tain installment) the account will automatically age into the ; 3P3 and su'se.uently 3P3 delin.uent categories%
These are accounts) which 1ow down from <ront,end% Collectors must e"ercise a more aggressi#e approach at this stage as the customer has failed to su'mit a payment e#en after <ront,end e$orts% Collection letters also send to the customers reminding the customers to pay the o#erdue within due date%
The Collector must re#iew and analy4e the reason8s9 for delay in payment% =pon successful contact with the customer) the collector must secure a payment date% Constant telephone calls should 'e made to those customers who ha#e gi#en numerous 'roken promises%
/eeking assistance letter to the guarantor or on some e"tent to the employer may 'e an e$ecti#e instrument at this stage%
• H&!"Co!e @0 10 D" ; @01@ D"<
F 3P3 accounts are considered hard,core delin.uency and collection e$orts are to 'e more intensied than ; 3P3 and 3P3 accounts% (nterest to 'e suspended at this stage of delin.uency 8F 3P39%
!"tra telephone calls and letters are mandatory% <inal reminder letter > Guarantee call up letter must 'e sent to the customers and guarantors informing the conse.uences and demanding the payments% (ntensi#e #isits are also conducted on accounts for immediate settlements% Re.uests for wai#er are entertained in case of settlement at one go payment% Re,write can also 'e o$ered in some cases as an e"ception%
6hen reco#ery opportunities are considered good through legal notice) collectors should make recommendations for legal notices if necessary 'ut not as mandatory%
• Re*o9e!+ (&n&'e(ent 120 DPD
The account in0A 3P3 is pro#ided monitored and tracked separately other than the a'o#e delin.uent accounts% * reco#ery management team is dedicated for dealing those accounts till settlement% <acility call up letter must 'e ser#ed to the customer and demanding the total outstanding is the rst initiati#e for this stage% Then legal notice and other legal conse.uence will 'e the ne"t course of action for the reco#ery% !"ternal reco#ery agencies and legal agency are in#ol#ed at this stage% Best possi'le e$ort and pressure will 'e gi#en to the customer as well as to the guarantor for the settlement through using internal collectors as well as e"ternal reco#ery agencies%
6.@P!o"-*t#9#t+ t!&*%#n'
<or producti#ity tracking) analysis from the collectors call sheet is re.uired% The #aria'les for producti#ity tracking are) no of calls made per day) #alid contact) promise to pay) kept promise) 'roken promise etc needs to 'e analy4ed%
A process should be established to share the lessons learned rom the experience o credit losses in order to update the lending guidelines.
6.10 A'en*+ (&n&'e(ent
*ll pro'lems accounts must 'e placed into a dedicated reco#ery management team% The reco#ery portfolio has su' di#ided into #arious collecti'le and non,collecti'le pools of accounts% 3epending upon the si4e of the account 'alance) internal reco#ery e$orts may continue while rest of the portfolio that would 'e assigned to e"ternal agencies including legal agencies to ensure e"pected reco#ery% (n order to reinforce the reco#ery e$ort a separate Call Center must 'e formed under Reco#ery and ;;
Collection unit% The center will 'e managed 'y the contractual sta$ with competiti#e incenti#e scheme
The -ead of Retail Banking would 'e empowered to o$er interest wai#ers for one,time settlement) and installment plans 8not re,writes9 and amnesty o$ers to ma"imi4e reco#ery collections%
On e#ery month the Reco#ery and collections ensure the allocation of the pro#ided accounts to the indi#idual collectors as well as to the e"ternal agencies depending on the prospect of reco#ery to ma"imi4e the collection%
7.0 P!-"ent#&) Re'-)&t#on
Banks shall o'ser#e the prudential guidelines of Bangladesh Bank gi#en at *ppendi" 0A in the matter of classication of Retail Credit portfolio 8irrespecti#e of all consumer 'anking products9 and pro#isioning there, against%
(n addition to the time,'ased criteria prescri'ed in *ppendi" QQ() su'5ecti#e e#aluation of performing and non,performing credit portfolio shall 'e made for risk assessment and) where considered necessary) any account including the performing account will 'e classied% /uch e#aluation shall 'e carried out on the 'asis of credit worthiness of the 'orrower) its cash 1ow) operation of the account) ade.uacy of the security) inclusi#e of its reali4a'le #alue and documentation co#ering the ad#ances%
*part from specic pro#isioning re.uirement as prescri'ed a'o#e) 'anks shall maintain a general reser#e at least e.ui#alent to AH of unclassied consumer nance portfolio as the Bangladesh Bank BPR3 circular no 0D dated 3ecem'er ) 7A%
7.1 SUBMISSION OF RETURNS
Bank shall su'mit the 'orrower,wise annual statements regarding classied loans ad#ances to the Banking (nspection 3epartment%
7. TIMING OF CREATING PRO=ISIONS
Banks shall re#iew) at least on a .uarterly 'asis) the reco#ery of the loans ad#ances portfolio and shall properly document the e#aluations so ;A
made% /hortfall in pro#isioning) if any) determined) as a result of .uarterly assessment shall 'e pro#ided for immediately in their 'ooks of accounts 'y the 'anks on .uarterly 'asis%
7./ P!-"ent#&) Re'-)&t#on 2
RESCHEDULING OF LOAN
Rescheduling of loan will 'e go#erned 'y rules > regulations as prescri'ed 'y Bangladesh Bank from time to time%
7. P!-"ent#&) Re'-)&t#on 5
TRANSFER FACILITIES FROM ONE CATEGORY TO ANOTHER TO A=OID CLASSIFICATION
The 'ank shall not transfer any loan or facility to 'e classied from one category of consumer nance to another to a#oid classication%
7.2 P!-"ent#&) Re'-)&t#on 6
CREDIT INFORMATION BUREAU ;CIB< CLEARANCE
6hile considering proposals for any e"posure) 'anks shall gi#e due weight age to the credit report relating to the 'orrower and his group o'tained from a Credit (nformation Bureau 8C(B9 of Bangladesh Bank% The condition of o'taining C(B report will 'e go#erned 'y rules > regulations as prescri'ed 'y Bangladesh Bank from time to time%
• CHARGE OFFRITE OFF POLICY
*ccounts are considered charged o$ when they are no longer considered :collecti'le or an asset of the Bank% *n account to 'e charged o$ at 7 years past due% 6hen reco#ery from the charge o$ accounts is recei#ed from the de'tors) they are treated as reco#eries%
@.0 Int!o"-*t#on
Management (nformation /ystem8 M(/9 is one of the most important elements of the credit cycle as it pro#ides a feed'ack mechanism on the e$ect of decisions made earlier in the credit cycle and also pro#ides input to product prota'le models%
Bank shall put in place an ecient computer 'ased M(/ for the purpose of consumer nance) which will to e$ecti#ely cater to the needs of consumer nancing portfolio and will 'e 1e"i'le enough to generate necessary information reports used 'y the management for e$ecti#e monitoring the .uality of the portfolio against the esta'lished operating standards and 'udgets% The M(/ is e"pected to generate the following periodical reports during the three stages of credit cycle%
9.1 Approval and initial credit Assessment
(nformation related to the 'ooking and ac.uisition of new accounts%
9.2 Account Maintenance:
• (nformation related to the on,going performance of the portfolio of acti#e accounts% @uarterly product wise prot and loss account duly ad5usted with the pro#ision on account of classied accounts% These prot and loss statements must 'e placed 'efore the Board of 3irector in the immediate ne"t Board Meeting%
9. Collection ! "ecoveries:
• (nformation related to the pro'lem account which includes2
o 3elin.uency reports 8for ;) ) F 0E > ; days and
a'o#e9 on monthly 'asis%
o Reports interrelating delin.uencies with #arious type of
customers of #arious attri'utes of the customers to ena'le the management to take important policy decisions and make appropriate modications in the lending program%
Compliance is the act of complying all e"ternal laws) regulations) guidelines) markets and internal codes of conduct) policies and procedures% The Ocers working in Retail 'anking must 'e fully con#ersant) and comply) with the laws) codes) rules > regulations co#ering their retail 'anking 'usinessJ that any potential pro'lem that arises are promptly resol#ed in a manner which minimi4es any potential damage to the good name and reputation of P!#(e B&n% Lt".
* :Compliance Culture must 'e fostered 'y regular instruction of sta$ on regulatory re.uirements) and the esta'lishment of) and enforcement of) related operating procedures and controls%
(n order to promotion of :good compliance the following ey Business #alues must 'e followed for Retail Banking2
H#'4e$t e!$on&) $t&n"&!" o3 #nte'!#t+
Co((#t(ent to t!-t4 &n" 3&#! "e&)#n'
P-tt#n' t4e B&n%$ #nte!e$t &4e&" o3 t4e #n"#9#"-&)$
Oen)+ e$tee(e" *o((#t(ent to -&)#t+ &n" Co(eten*e
Co((#t(ent to *o()+#n' 8#t4 t4e $#!#t &n" )ette! o3 &)) )&8$
9.# $he Aim o "etail Credit $raining
To esta'lish and maintaining competiti#e ad#antage) the Bank shall in#est in training) de#elopment and education) which contri'ute directly to the achie#ement of 'usiness o'5ecti#es and good lending practices%
F%0 Ret&#) C!e"#t Co-!$e$
The Retail Credit training program will 'e comprised of :core courses ranging from fundamental to ad#anced le#el) supplemented 'y short :skill+ courses%
Core !"ecuti#eOcers Training Courses • <undamental of Personal Credit
• Consumer Credit Management
• *d#anced Retail &ending Management
/kill 6orkshop Program
• Regulatory and &aw Relating to &ending • Retail &ending 6orkshops
• Managing 3e't Collection
• Collection and egotiation 6orkshop • /ales and /er#ice Management
• 6orkshop on Marketing > egotiation /kill
10.0 Se'!e'&t#on o3 D-t#e$
*de.uate segregation of duties is a prere.uisite of an e$ecti#e system of internal control% To 'e ade.uate) segregation must ensure that the following functions are performed 'y persons independent of each other2
• /ales and Marketing K /ales and Branch
• Credit *ssessment and *ppro#al K 'y Credit unit
• Credit 3ocumentation and *dministrations K &oans processing and dis'ursement unit
• Credit Reco#ery K 'y Reco#ery > Collection unit
The credit appro#al team will 'e independent from the sales and 'ranch team who will e#aluate and appro#e the loan% The credit administration under Retail operations team will check and ensure the documentation and dis'urse the loans% This will ensure the 'etter control of the 'ank asset and mitigate the risk of compromise of the duties%
The following chart represents the Retail Banking management structure:
