Report on Credit risk management

Credit Risk Management system of National Bank Limited
1
Internship Report
On
Credit Risk Management System of National Bank Limited
Prepared By:
Name: Nishat Tasnim
ID: 4102028
Batch: 2nd
Major: Finance
Program: Bachelor of Business Administration (BBA)
Supervisor:
Ummahani Akter
Lecturer
Department of Business Administration
Bangladesh Army International University of Science & Technology
(BAIUST)
Date of Submission: 15 July 2020

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Letter of Transmittal
To
Ummahani Akter
Lecturer
Department of Business Administration
Bangladesh Army International University of Science & Technology (BAIUST), Cumilla
Cantonment
Subject: Submission of the report on “Credit Risk Management System Of National Bank
Ltd”.
Dear Mam,
With due respect, I beg to inform you that, I am a student of BBA, (2nd
batch), Department of
Business Administration at Bangladesh Army international university of science & Technology
(BAIUST), Cumilla Cantonment. The report is prepared on the “Credit Risk Management
System of National Bank Ltd”.
I have given my best effort to prepare the report with relevant information that I have collected
from the website of National Bank Ltd and other sources.
I pray and hope that the mistake of the report will be kindly excused. Lastly, I beg your kind
consideration for evaluating this report.
Thank you very much indeed
Sincerely Yours,
Nishat Tasnim
ID – 4102028
BBA (Major in Finance)
2nd
Batch

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Acknowledgement
First I would like to express my gratitude to almighty Allah to give me the strength to complete
the report within a specific time.
I am grateful to my course instructor and supervisor Ummahani Akter, Lecturer of Department
of Business Administration, Bangladesh Army International University of Science &
Technology (BAIUST) for giving me so much valuable advice and guidelines to complete the
report appropriately.
My sincere gratitude goes to all the employees of National Bank Limited, Cumilla Branch for
their help and cordial attitude. My special thanks go to Senior Assistant Vice President, S. M.
Zahirul Haque. I am grateful to Senior Executive Officer kamrunahar Titli for helping me to
understand some basic things of banks.
This report would not be possible without the co-operation of all officers and employees of
National Bank Ltd. So my sincere appreciation goes to the officer, vice president, and other
employees. Finally, I would like to thank all the others whose support makes me able to
complete this report.

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Executive summary
Banks are the most active financial middleman in today’s world. As a bank is a financial
institution it mainly operates to communicate among persons and effectively works as a
protector among them in this age of globalization. Banks face many risks like credit risk,
liquidity risk, reputation risk, and market risk, etc. From these kinds of risks, credit risk is one
of the major risks of them. For saving the bank from these kinds of risks they take some steps
to manage the situation.
This report is based on the Credit Risk Management System and the concentration is given on
the National Bank Limited (Cumilla Branch). In this report, there are used secondary data.
Risk is innate in all aspects of a commercial operation; however, for banks and financial
institutions, credit risk is an essential factor that needs to be managed. It is one of the major
risks which is faced by all banks in Bangladesh. This can be narrated as a potential loss arising
from the failure of a counterparty to perform according to contractual agreement with the bank.
This study mainly tries to find out the credit policy, credit approval process, appeal process,
time requirement, sanction advice, and credit recovery process.
This study also finds that credit risk management needs to be a strong process that qualifies
banks to proactively manage loan portfolios to minimize losses and earn an admissible return
for shareholders.

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Table of Content
Topic Page
Title Page 1
Letter of Transmittal 2
Acknowledgment 3
Executive Summary 4
Table of content 5-6
Chapter 1: Introduction 7
1.0 Introduction 7
1.1 objectives of the Study 7
1.2 Methodology 8
1.3 Rational of the Study 8
1.4 Scope and Limitations 9
1.5 Literature Review 9-10
Chapter 2: Organization Profile 10
2.0 Industry information 10-11
3.0 Company information 12-13
3.1 Vision 13
3.2 Mission 13
3.3 Goal of bank 14
3.4 Management Style 14
3.5 Organization Hierarchy of NBL 14-15
3.6 Products and Services of NBL 15
3.6.1 Credit products 15
3.6.2 Card products 15
3.6.3 Deposit products 15
4.0 Analysis of Financial performance of NBL 2011-2015 16-19
Chapter 3: Credit Risk Management 20
4.1 Credit 20

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4.2 Credit risk 20
4.3 Credit risk management 20
Chapter 4: Credit risk management style of NBL 21
4.4 Credit policy guideline 21
4.4.1 Credit principles in NBL 21
4.4.2 Credit portfolio mix 21
4.5 Credit risk assessment 22
4.5.1 Call report 22
4.5.2 Credit memorandum 22-23
4.6 Credit risk guideline 24
4.7 Credit approval process 24
4.7.1 Appeal process 25
4.7.2 Time Requirement 25
4.7.3 Sanction Advice 25-26
4.8 Credit Risk Management 26
4.8.1 Loan Administration 26
4.8.2 Credit Monitoring 26
4.9 Credit Recovery 27
Chapter 5: Recommendation and Conclusion 27
5.0 Recommendation 27-28
5.1 Conclusion 28
6.0 Reference 28-29

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Chapter One
Introduction
1.0 Introduction:
In the present global economy banking sector of the world contributed a lot. For establishing a
strong banking sector it is required to have good study in banking operation. The economic
policy of nowadays is concerned to obtain the optimum economic condition in a country’s
economy. To achieve the optimum goal of the economy the banking sector and banking
economy play a vital and important role. Banking business depends on effective banks for their
successful running. As a commercial bank NBL has a huge responsibility to ensure effective
and efficient banking operation overall Bangladesh.
The banking sector is inevitable in a modern age and modern society. For the economic
development of a country, it plays a vital role. In the modern age of science and technology,
the banking sector all over the world has been experienced a lot of change due to technological
inventions, deregulation, and globalization. But Bangladesh's banking sector is falling behind
to keep pace with other countries, it adopts the changes. Banks take deposits from the customers
against some interest payments and lend money to borrowers with a different interest rate and
period. There are various types of credit facilities to ensure the safety of depositor’s funds. The
Bank must also hold enough funds to meet the daily needs of the clients.
1.1 Objectives of the Study:
The main objective is to identify the credit risk management system of National Bank Limited.
Specific objectives are as follows:
✓ To gain knowledge about the credit policy guidelines of National Bank Ltd.
✓ To know about the credit assessment and in-depth idea of the credit approval process.
✓ To analyze the performance of loan disbursement of the branch.
✓ To find out some problems on credit risk management of the bank.
✓ To define some suggestions to overcome the problems.

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1.2 Methodology of the study:
Sources of information: In this report, there are used secondary data.
I. Types: The study is narrative in nature. This report has been prepared based on
experience that gathered during the period of internship. I have also obtained
information from the website of the National Bank and its annual report.
II. Design: The study aimed to analyze the overall scenarios of contributions,
potentiality, profitability, and risk of NBL.
III. Sources of Data: For making this report I used here secondary data like- articles,
annual reports of National bank Limited from 2011 to 2015, the website of NBL
and I also collected information from some assignments based on credit risk
management of NBL.
The secondary sources are-
➢ NBL website www.nationalbankbd.com
➢ Annual report 2011to 2015 of National Bank Ltd.
IV. Data collection procedure:
Secondary Data: Secondary data are collected from their annual report and the
website and periodicals published by the Bangladesh Bank, Different publications
regarding Banking functions, operation, and transaction policies.
1.3 Rationale of the Study: The internship program is very helpful to bridge the gap
between theoretical knowledge and practical life knowledge as part of the Bachelor of Business
Administration program. This internship report has been designed to have practical knowledge
about the banking sector through the theoretical understanding. For the integrity of this
internship program, I have been placed in the Bank named “National Bank Limited”.
1.4 Scope and limitations of the study:
This internship is a part of the Business Administration degree that provides an experience of
the job to the students. I was placed at National Bank Limited as an internee for three months
duration. But for the current situation, I only worked there for one week. In this one week, I
got some information about basic things related to banks. During the first week of my

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internship period, I was able to get familiar with the working environment of National Bank
Limited. As I collected information through a secondary source, the study would focus on the
following areas of National Bank Limited: Credit management system of National Bank
Limited, Procedure of different credit facilities and Portfolio management of National Bank
Limited, Organization structures and responsibilities of management.
Limitations of the study:
➢ National Bank Limited is a private bank and they are very protective about their data
as a result it was not possible for the report to get all the data required.
➢ Sometimes the officials had been unable to provide information because of their huge
routine work.
As I worked there only one week so the time is insufficient to know all the activities.
1.5 Literature Review:
According to Evelyn Richard, Marcellina Chijoriga, Erasmus Kaijage and Hakan Boham, They
made a paper on credit risk management which was published in Emerald Insight, 2008. They
want to develop a conceptual model that can be used in understanding the credit risk
management system of Commercial Banks with less developed financial sectors. The study
found that the components of credit risk management system differ CBs operating in a less
developed economy from those in a developed economy. This means that the environment in
which the bank operates is an important consideration for the CRM system to be useful.
Baklouti Ibtissem and Abdelfettah Bouri both of them published a journal on “Credit Risk
Management in Microfinance” in the ACRN Journal Finance and Risk Perspectives 2(1),9-24,
2013. In that journal, they mentioned that microfinance achieved remarkable attention and a
chirr word in policy-makers as well academic researchers mainly when Muhammad Yunus
who is the founder of microcredit got the Noble Prize for peace in 2006. This microfinance
devoted an important interest in the financial world. In this paper, they described the
development of the CRM in microfinance institutions.
Ali Suleiman Alshatti’s research about the effect of credit risk management on financial
performance of Jordanian commercial banks. This research was punished in Investment.

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Management and financial innovations 12(1), 338-345, 2015. This research was about to
examine the effect of CRM on the financial performance of the Jordanian commercial banks
during 2005-2013. In this research two mathematical models have been established to measure
this relationship. This research stated that the credit risk management effects on the financial
performance of the commercial banks as measured by ROA and ROE
Ravi Prakash Sharma Poudel published a journal based on the impact of credit risk
management on the financial performance of Commercial banks in Nepal. This journal
published in the International Journal of arts and commerce 1(5), 9-15, 2012. In this study, he
tried to search for various parameters topical to credit risk management as it affects the
financial performance of banks. This study covered some parameters such as- default rate, cost
per loan assets, and capital adequacy ratio. In this journal, there used a financial report of 31
banks to analyze eleven years (2001-2011) of profitability ratio of default rate, cost per loan
assets, and capital adequacy ratio which was submitted in descriptive, correlation, and
regression to analyze the data. This study expressed that all these parameters have an opposite
impact on banks financial performance.
Chapter two
Organization profile
2.0 Industry Information:
The word ‘Bank’ was derived from the word ‘bench’ as in ancient times Jews used to do
money- lending business by sitting on long benches. In 1668 for the first time, modern banking
was introduced in Stockholm as ‘Savings Pis Bank’. It opened up a new era of banking
activities.
Bank is a financial institution and its primary work is to act as a payment agent for customers
and to borrow and lend money. For receiving, keeping, and lending money a bank is a trusty
institution.

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From many centuries banks have influenced economics and politics. The primary intent of a
bank is to provide loans to trading companies. Banks provided funds to assume business to
purchase inventory and when the goods were sold those funds back with interest.
For many centuries, the banking industry only trade with businesses, not consumers. Banking
services have spread to include services direct to individuals. The government of Bangladesh
formally changed the administration of the territory after the independence of Bangladesh. The
government of Bangladesh publishes a law called Bangladesh Bank Order 1971. Through this
order, the state bank of Pakistan was exposed to be regarded as Bangladesh bank and officers,
branches, and assets. There remain 14 scheduled banks on the date with about 3042 branches
all over the world.
There is some law in banking which are based on a contractual analysis of the relationship
between the bank and the customer. The definition of a bank is given above and now the
definition of customer is any person for whom the bank obeys to operate an account. The law
signify rights and obligations into the relationship as follows:
✓ Between the bank and the customer, the bank account balance is the financial
position. The bank owes the balance to the customer when the account is in credit.
When the account is overstated, the customer owes the balance to the bank.
✓ Without the order from the customer, the bank may not pay from the customer’s
account.
✓ The bank assigns to pay the cheques of the customer’s up to the amount standing to
the credit of the customer’s account.
✓ The bank embark to quickly collect the cheques deposited to the customer’s account
as the customer’s intermediary.
✓ The bank must not express the details of the transactions going through the
customer’s account unless the customer agrees.

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3.0 Company Information:
National Bank has its progressive past, brilliant present, awaited future under processing
project activities. National Bank Limited established as the first private sector bank which is
fully owned by the Bangladeshi entrepreneurs. NBL has been rising as the biggest private
sector Bank overtime after facing many hard times. The members of the board of directors are
creative businessmen of the country. As it is a financial institution, NBL automated all its
branches with computer networks per the challenging commercial demand of time. Besides,
considering its forthcoming future the infrastructure of the bank has been retooled. General
public, entrepreneurs, and businessmen of all classes are expected much more to NBL. At
present they have 145 branches under their branch network. Their efficient and different
approach to seize the opportunities of the market is going on as a successive process to
accommodate new customers by growing and expanding rural, SME financing, and offshore
banking facilities. During 2012 they have opened 10 branches and 5 SME branches.
In the private sector, National Bank Limited was born as the first hundred percent Bangladeshi
owned bank. In the banking area of Bangladesh, the rise of National Bank Limited In the private
sector was an important event. From the very beginning, it was the firm determination of
National Bank Limited to play a vital role in the national economy. They are destined to bring
back the taste of banking service and flavors. They want to serve their customers promptly with
a sense of immolation and dignity. The president of the People’s Republic of Bangladesh
Justice Ahsanuddin Chowdhury founded the bank formally on March 28, 1983. The second
branch of National Bank Limited was opened on 11th
May 1983 at Khatungonj, Chittagong.
Now NBL has been carrying 130 branches and 15 SME branches spread all over the country.
It has marking arrangements with 415 correspondents in 75 countries of the world. It also
located 37 overseas Exchange Companies located in 13 countries. NBL was the first homey
bank to place in agency arrangements with the world-famous Western Union to simplify quick
and safe remittance.
NBL was the first domestic bank that introduce an international Master Card in Bangladesh. In
the meantime, NBL has also introduced a Visa Card and Power Card. This bank also uses the
latest information technology SWIFT and REUTERS.
NBL concentrated on all the key areas that covering capital adequacy, keeping up good asset
quality, good management, satisfactory earning, and liquidity. Over the previous year, it was

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possible to record growth of 175.51 percent with Taka 8,809.40 million pretax profit. The net
profit after tax and provision stayed at Taka 6.860.34 million which was Taka 2,070.47 million
in the prior-year registering a 231.34 percent increase. Total deposit increase to Taka
102,471.83 million which is a 33.37 percent increase over the preceding year.
Now NBL has acquired strength and experience to support the banking needs of foreign
investors. NBL stepped into a new area and opened its Off Shore Banking Unit at Mohakhali
for serving the wage earners and foreign investors.
3.1 Vision:
Here given the vision of National Bank Limited-
➢ Be the best bank in Bangladesh.
➢ Give motivation for savings in the form of direct investments.
➢ Contribution in the socio-economic of Bangladesh.
➢ Through the development of a marketing plan improve service quality and established
relationships with the customers.
3.2 Mission:
By introducing the welfare-oriented banking system they want to establish their banking and
also confirm equity and justice in the field of all economic activities. Through the diversified
investment operations, they want to achieve balanced growth and reasonable development.
Alongside, they are also giving the highest priority in ensuring transparency, accountability,
and enhanced client service as well as to their commitment to serve the society.
3.3 Goal of the Bank:
➢ To become the chief profitable bank.
➢ Maximizing the wealth of the shareholders.
➢ By providing a wide range of services they want to earn a satisfactory rate of return on
investment.

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3.4 Management Style:
Management is the most important resource for any kind of financial and non-financial
organization. For reaching the ultimate goal an organization management provides all the
necessary information to that organization. We all know management means planning,
organizing, leading, and controlling of all the resources of the organization. In National bank
Limited, there are different perspectives of planning, organizing, staffing, directing, and
controlling human resource practices and recruitment ultimately.
3.5 Organization Hierarchy of National Bank Ltd:
Chairman Advisor Board of director
Managing director
Additional managing
director
Assistant (G.M)
Deputy managing
director
Assistant Managing
Deputy General
Manager
General Manager

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3.6 Products and Services of NBL:
3.6.1. Credit Products
➢ House Building
➢ Lease financing
➢ Small Medium Enterprise
➢ Trade Finance
➢ Overdraft
3.6.2. Cards Products
➢ Visa Card
➢ Debit Card
➢ Credit Card
➢ ATM Card
3.6.3. Deposit Products
➢ Foreign Currency Deposit
➢ Monthly Saving Scheme
➢ Current Deposit
➢ Term Deposit
➢ Double Benefit Scheme
➢ Monthly Income Deposit
➢ Saving Deposit
Principle Officer (P.O)
Officer Grade 1
Senior Principle
Officer
Officer grade 2
Assistant Officer (A.O)

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➢ Millionaire Income Scheme
4.0 Analysis of Financial Performance of National Bank Ltd from 2011-
2015:
Figure 1: Profit before tax and provision
In this figure, we can see that the financial performance of National Bank Ltd. There are given
five years of profit before tax and provision of NBL. In 2011 their profit before tax & provision
was 9591.94 but in 2012 it decreased in 3725.20. In 2013 it was 3539.91 and we can see that
in 2014 it increased in 6722.39 and 2015 it was 8260.14.
9591.94
3725.2 3539.91
6722.39
8260.14
0
2000
4000
6000
8000
10000
12000
2011 2012 2013 2014 2015
Profit before tax & provision

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Figure2: Investment in Securities
In this chart there mention the investment of NBL from 2011-2015. In 2011 their investment
was 30334.69 which is lower than 2012 54326.46. In 2013 the investment of NBL was higher
than the previous year which was 56727.52. But in 2014 their investment decline in 54885.52
then the next year 2015 their investment was increase which was 59658.52.
30334.69
54326.46
56827.52 54885.52
59658.52
0
10000
20000
30000
40000
50000
60000
70000
2011 2012 2013 2014 2015
INVESTMENT

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Figure 3: Deposit
In figure above, we can see that there are given the deposit of NBL from the year 2011-2015.
In 2011 the deposit of the bank was 128215.97 and the following years the deposit has
increased up to 222112.91. In 2013 the deposit of the bank was 193642.97 which is much
higher than the previous year. The deposit of the bank shows a positive slope from the year
2011 to 2015.
128215.97
157331.73
193642.97
203296.18
222112.91
0
50000
100000
150000
200000
250000
2011 2012 2013 2014 2015
Deposit

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Figure 4: Shareholders Equity
In this figure, there are given the shareholders equity of NBL from the year 2011-2015. In 2011
the bank’s shareholders equity shows an increase through the year 2011 to 2015. But in 2013
their equity increased 23929.64 but in the next year, it again increased which was 26963.95. In
2015 the shareholder's equity is up to 33557.96 which is higher than the previous year.
21522.57 22347.27 23929.64
26963.95
33557.96
0
5000
10000
15000
20000
25000
30000
35000
40000
2011 2012 2013 2014 2015
Shareholders Equity

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Chapter Three
Credit Risk Management
4.1 Credit:
In banking technical terms, credit means to the loan and advances which are made by the bank
to its borrowers or customers. By the meaning of bank credit, it is a credit by which a person
who has given the necessary security to a bank that has the liberty to draw a definite extent
agreed upon. It is a provision for deferred payment of a loan or purchase. Credit means an
arrangement or commitment to provide a substitute for funds to a borrower.
4.2 Credit Risk:
Risk defined in terms of the inconstancy of possible outcomes from a given investment. If the
outcome is particular and there is no variability, therefore no risk. The other way of meaning
risk is the disclosure to a chance of loss or damage. Risk is the component of the possibility of
loss that exists in any business transaction. Credit risk is the possibility that a borrower or
counterparty will be abortive to meet its obligation inadequacy with agreed terms and
conditions.
4.3 Credit Risk Management:
Credit risk management is a practice at the core of every financial institution. It surrounds all
the activities that affect its risk profile. It engages in identification, measurement, aggregation,
planning, and management as well as monitoring.

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Chapter 4
Credit Risk Management System of National Bank Limited
4.4. Credit Policy guideline:
The credit policy guideline of National Bank Ltd include here-
➢ Credit principles
➢ Credit Portfolio mix
➢ Products and services of NBL
4.4.1 Credit Principles in National Bank Limited:
The credit division of National Bank Limited is conducted by 10 specific credit principles.
They are as follows:
✓ Assess borrower’s nature for reliability and keenness to pay.
✓ Evaluate borrower’s loan settlement capacity.
✓ Expanding action plans for the likelihood of non-payment.
✓ Spreading of credit in satisfactorily controllable risk areas.
✓ Morally perform the credit process.
✓ Be proactive in organizing, administrating, and covering credit risk.
✓ Try to achieve an acceptable equilibrium between risk and reward.
✓ Requirements of NBL must be followed in ensuring the credit exposures and
operation.
4.4.2. Credit Portfolio Mix:
• Trade Finance----------------- 15%
• Industry-Short term working capital----------- 10%
• Retail and SME------------------ 25%
• Project-Finance medium and long term--------- 30%
• Others------------------------------------------------- 20%

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4.5 Credit Risk Assessment:
A comprehensive credit risk appraisal is done and annual reviews are made, before the extent
of loans. A credit memorandum is prepared by the Relationship Manager (RM) which
comprises the findings of such assessment. The RM used to be the owner of the customer
relationship and he/she is held responsible for consenting with all the policies and guidelines
of Bangladesh Bank, bank laws, NBL policies, and guidelines.
The credit assessment procedure can be divided into two segments:
Call report
Credit Memorandum
4.5.1 Call Report:
At the beginning of the relationship, the relationship manager tries to collect more and more
information about the client. Sometimes he/she come to see the business premises to gain an
idea about the financial and operational condition of the prospective client. The branch
manager along with the relationship manager is also connected with the process. The call report
has some basic information about the client such as:
✓ Business
✓ Client’s background
✓ Market share
✓ Reliability
✓ Credit exposure
✓ Existing banking relationship
✓ Credit Requirement
✓ Price of proposed credit facility
4.5.2 Credit memorandum:
If the Head Office carries a positive sign for the call report, then only the branch RM goes for
preparing a CM. In the preparation of CM, there include in-depth analysis of credit risk factors,
critical assessment of the client of the credit policy guideline of the bank. After that, it sent to

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the Head of Marketing to surround the necessary recommendations and to commence the credit
approval process.
The CM generally contains:
✓ The credit risk grading score.
✓ A specific base number and control number for each client.
✓ Rationale behind the loan extension.
✓ The authorization of the approval process.
✓ Lending agreement.
✓ The description of the proposed facility.
✓ Forecasting of earnings from the relationship to be established.
The CM also contains the assessment of the following areas:
Borrower analysis:
The majority of the management team, shareholders, and the group of companies are
assessed. Any issues about the lack of management depth, complex ownership
structure, or intergroup transactions are addressed and risks restrained.
Industry Analysis:
Any issues regarding the borrower’s position in the industry, overall industry
competitive forces are addressed and the strengths and weaknesses of the borrower
relative to its competition are identified.
Buyer Analysis:
Any supplier or customer intentness is addressed, as these could have a significant
impact on the future variability of the borrower.
Historical Financial Analysis:
The historical financial statement of the borrower is presented based on the analysis of
a minimum of 3 years. The reliance is placed on a corporate guarantor, guarantor
financial statements are also analyzed. This analysis address the quality and
sustainability of earnings, cash flow, and the strength of the borrower’s balance sheet.
Account Conduct:
For the remaining borrower, the historic performance in meeting repayment obligations
are assessed.

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4.6 Credit Risk Grading:
Credit risk grading is an important tool for CRM and it helps a bank to understand the various
dimension of risk involved in different credit transactions. National Bank applies the following
credit risk grading matrix as provided by Bangladesh Bank guidelines:
Risk Rating Grade
Superior-low Risk 1
Good- Satisfactory Risk 2
Acceptable- Fair Risk 3
Marginal- Watch list 4
Special Mention 5
Substandard 6
Doubtful and Bad (non-performing) 7
Loss (non-performing) 8
4.7 Credit Approval Process:
In the credit approval process, the bank separates its relationship management/ marketing from
the approving authority. The remaining approval authorities are Head of Branch and Head
Office Credit Committee, Executive Committee of Directors, and Board of Directors. Board of
Directors of the Bank is actively considering for the individual delegation power to the Senior
Level Executives at Head Office instead of Head Office Credit Committee for effective credit
risk management.
A credit facility may not be approved unless a satisfactory presentation package has been
prepared. Former to securing the requisite approval, the authority ensures due diligence that:
➢ An elaborate credit analysis has been completed, to include a written analysis of the
financial condition of the borrower.
➢ The mentioned extension of credit fully meets the standard of purpose and quality.
➢ The bank is in control of all credit information required to properly evaluate the risk
being undertaken.
➢ The Board of Investment Registration permits all regulatory bodies.

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4.7.1 Appeal process:
Some detailed credit may be narrated to the next higher authority for approval. Though, there
should be appeal process beyond the President and Managing Director.
4.7.2 Time Requirement:
At Branch level: Within a maximum of 1-3 days Branch Authority must take decisions
At Head Office: The Head Office Credit Committee should decide within a maximum of:
➢ 3-5 days for a simple type of facility.
➢ 7-15 days for project loan.
➢ 15-30 days for loan syndication.
4.7.3 Sanction Advice:
When the facilities are approved, after that the credit officer of the branch prepares a sanction
advice that is addressed to the client. It is a formal letter that is addressed that to the client it
provides information regarding the amount of the loan, its purpose, tenor, interest, security
details, and insurance coverage.
A piece of sanction advice holds the following information:
✓ Address of the client
✓ Subject
✓ Facility type
✓ Repayment date
✓ Security details
✓ Insurance coverage
✓ General conditions
✓ Specific conditions
✓ Other conditions and covenants
A piece of sanction advice is connected with some necessary legal documents. They are:
✓ Demand promissory note
✓ Letter of agreement
✓ Letter of continuity

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✓ Letter of revival
✓ Letter of disbursement
✓ Letter of guarantee
4.8 Credit Risk Management:
The credit risk management process of National Bank includes the following operations:
➢ Loan Administration
➢ Credit Monitoring
4.8.1 Loan Administration:
Responsibilities that are performed by the loan administration Department are as follows:
• Ensuring all security documentation complies with the terms of approval and is feasible.
• To monitor insurance coverage to ensure appropriate coverage is in place over assets
and is properly assigned to the bank.
• To maintain control over all security documents.
4.8.2 Credit Monitoring:
To reduce the credit losses, monitoring procedures and systems are in place that provide an
easy indication of the descending financial health of a borrower. Credit monitoring process of
NBL are as follows:
• Loan terms and conditions are mentioned, financial statements are received regularly
and The RM team for timely follow-up.
• Past due trade bills, past due principal or interest payments, account excesses, and
breach of loan covenants.
• Corrective action is taken time to address findings of any interest, external, or
regulator audit.

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4.9 Credit Recovery:
The Credit division carries the following recovery-related functions:
➢ Determining work out plan.
➢ Directly managing accounts with sustained deterioration.
➢ Ensuring adequate and timely loan loss provisions that are made based on actual and
expected losses.
➢ Upbringing top management appraised of grade 6 or worse accounts.
Chapter 5
Recommendation and Conclusion
5.0 Recommendation:
National Bank Limited is a second-generation commercial bank of Bangladesh with gracious
operating performance. There are given some recommendations regarding the bank’s
betterment. The recommendations which are given below are not decisions. They are some
suggestions to improve the performance of the bank to satisfy their customers need. The
recommendations are made based on the analysis of their financial performance and other
internal activities of the bank. They are:
➢ The credit risk management system of National Bank Limited is quite commendable.
But they should adopt a credit grading system. All facilities should be assigned a risk
grade.
➢ The responsibilities of the key persons must also be specified.
➢ Credit quality depends on close follow-up and examination of loans. But in NBL the
follow-up and monitoring of loans is not strong enough. The Bank should make proper
and complete documentation before disbursement and ensure proper supervision,
monitoring, and follow-up of each credit.

28
➢ The Banks of Bangladesh have faced a lot of illegal pressure from political persons,
directors, and management of the bank for approval of the loan. The Bank should make
some strong procedures so that they can save the bank from that kind of situation.
➢ The credit sanction procedure of NBL should be made quickly as the competition is
very hard in today’s business world. People do not want to wait for three or four weeks
to get a loan which is even protected by security.
5.1 Conclusion:
The failure of commercial banks occurs mainly due to bad loans, which happened due to
unskilled management of the loans and advances of the portfolio. Therefore banks must be
careful about its lending portfolio and credit policy. National Bank Limited has been capable
to manage its credit portfolio skillfully and kept the classified loan at a very lower rate.
From the discussion of this report, it is clear that credit risk management is a complex and
ongoing process for that reason financial institutions must take serious steps in addressing such
kind of issues. They have to be up to date in following with all required procedures and must
employ obedient people who can deal with these complex matters.
6.0 References:
(2020). Retrieved from Report on Credit Risk Management on National Bank Ltd ...:
https://www.assignmentpoint.com/business/report-on-credit-risk-management-on-
national-bank-ltd.html
(2020). Retrieved from National Bank Limited: https://www.nblbd.com/
Baklouti Ibtissem, A. B. (2013). Credit risk management in microfinance: The conceptual
framework. ACRN journal of Finance and Risk Prespectives 2(1), 9-24.
Poudel, R. P. (2012). The impact of credit risk management on financial performance of
commercial banks in Nepal. International Journal of arts and commerce 1 (5) , 9-15.
Richard, E., Chijoriga, M., Kaijage, E., Peterson, C., & Bohman, H. (2008). Credit risk
management system of a commercial bank in Tanzania. Emerland Insight.

29
su, A., & Alshatti, i. (2015). The effect of credit risk management of financial performance of
the Jordanian commercial banks. Investment management and financial innovation
12(1), 338-345.

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