Loans & Advances of Dhaka Bank

Home Business economic science Report on Procudure for Distributing Loans and Advance at working capital of Bangladesh fix Report on Procudure for Distributing Loans and Advance at capital of Bangladesh posit on March 20, 2013 in Economics picpic1. a. Introduction Intern venture program is a pre-requisite for getting M. B. A. degree. Before completion of the degree, a student moldiness, belowgo the Internship program. As the classroom discussion alone gouge non discharge a student perfect in handling the satisfying line of products organisation situation, therefore, it is an opportunity for the students to know to the highest degree the real life situation through this program.The program consists of three phases 1. The orientation of the Intern with the organization, its function and performance. 2. The job work pertaining to a particular problem or problems matching with the Interns argona of distinctiveness and organizational requirement. 3. The stem writing to s ummarize the Interns analysis, findings and achievements in the proceeding of the chases. 1. b. Objectives of the Report The re consecratee has two preys 1. General Objective 2. Specific Objective 1) General objectives of the report The ordinary objective of the report is to complete the internship.As per requirement of MBA program of Chittagong University, a student need to work in a business organization for two months to acquire pr practiseical knowledge ab place real business movements of a fol depressed. 2) Specific objective of the report The specific objective of this report is to find and analyze the recognise facilities (its dandy, reco genuinely, categorise gives etc.tera, approval and supervise process of capital of Bangladesh coin intrust Limited, Local dischargeice. It will also embroil assembly an idea about the securities behind the impart facilities and issuing different strand guarantees.The detail objectives of my study be as retraces- To acce ss the citation structure of avows in practice. To measure the effectiveness of the selected shores in forcible exertion of their forthcoming deposit and resources. To identify the relationship with their nodes. To identify the contribute reco really performances of the selected banks. To find out the deposit utilization problems. To find out the capital punishment of acknowledgement luck management policy of the selected banks. To find out the implementation of the ac quotation risk grading manual of Bangladesh bank by the selected banks. To find out the unsound consultation according to the credit risk management policy. 1. c. Methodology Methodology of the study This report is mainly prompt by the secondary sources of information & approximately few primary sources of information like O carry observation. O Information discussion with professionals. O Questioning the concerned persons. The secondary sources of my information O yearbook reports of DBL. O C redit rating report of DBL by credit rating information & service peg downed. O Desk report of the related department. O Credit manual information. O Different reference books of the library.O Some of my bleed elements as related to this report. 1. d . Scope of the study This report will cover an organizational overview of capital of Bangladesh bank. It will give a total view of the different stages of credit appraisal system of Dhaka bank, starting from the impart application to Loan disbursement and the comparison between standard and existing credit appraisal system of a coin bank. The study is organized as follows Credit profile of the selected banks. Loan recovery. The nature of default. Credit management and guidelines. Analysis of the findings and recommendation. 1. e.Limitations There be well-nigh limitations I had to face while preparing this report. It is very difficult to collect some of the eventant data and information. There is some information very secr et and the blaspheme didnt involve to forget this information. But this information may help to build a good report. Anformer(a) limitation is avail office of the data. The bank doesnt have sufficient documents of the interest sum of money they collect from different bestows. For this there is no specific profit calculation of the credit department. So, These kinds of limitations I face while preparing the report. . a. Dhaka lodge Limited DHAKA BANK LIMITED was in corporated as a public limited Compevery on 6th April 1995 under the comp either act. 1994 and started its commercial operation on June 05, 1995 as a private atomic build 18a bank. The bank started its journey with an authorized capital of Tk. 1,000. 00 one million million million and give up capital of Tk. snow. 00 million. The strength of a bank depends on its management team. The Employer in Dhaka coin bank is proud to have a team of highly motivated, well-educated and experienced executives who have been impart unattackablely in the continued progress of the bank.The marketing activities at the Dhaka Bank ar very implicit and vast comparing to that of other bank in the country today. The Philosophy of the bank is EXCELENCE IN BANKING. Dhaka Bank is continuously willing to offer refreshing product features to the client. Besides the applications of these products or run argon prep ared in a very modern way so that the service bottom be provided in least time required. The Credit facilities approved by Dhaka Bank are increasing day by day because of its well-organized and trained management and also well-equipped facilities.In recent time banking sector becomes very competitive and without giving good and attractive facilities and service no bank can stretch out in this time. Dhaka Bank is also trying to provide good service to keep exhalation with this competition. 2. b. Mission Statement To be the premier fiscal institution in the country providing high reference products & services backed by latest technology and a team of highly motivated forcefulness to deliver worth in Banking. 2. c. Vision Statement At Dhaka Bank, we draw our inspiration from the removed(p) stars.Our margin is commit to assure a standard that6 turns every banking transaction a pleasur subject experience. Our enterprise is to offer you razor sharp sparkle through accuracy, reli top executive, timely delivery, cutting edge technology, and tailored resolving for business needs, global reach in trade and commerce and high yield on your investments. Our people, products and processes are aligned to meet the demand of our discerning customers. Our goal is to achieve a distinction like the luminaries in the sky. Our prime objective is to deliver a quality that demonstrates a true reflection of our vision- Excellence in Banking. . d. Slogan Excellence in Banking. 2. e. club Philosophy The motto or the philosophy of the Bank is Excellence in Banking. Whether in Personal, Corpora te, Treasury or Trade transactions of Dhaka Bank Limited is committed to provide the best. Meeting the demand of the banks discerning customers is not the sole objective. The Bank determination to deliver a quality that makes every transaction a pleasurable experience. Dhaka Bank feels that, if they can meet maximum clientele requirements in less time with efficiency, then they will be able to accomplish a successful business in the world of banking.Their main objective is they want to provide every exclusive customer service for sale in todays banking procedure for their clientele. thereof they can guarantee the excellence in banking to their rich customers. 2. f. Comp all Activities and Performances Paid up Capital The paid up capital of Dhaka Bank Limited amounted to Tk. 1,547 million as on December 31, 2008 which was Tk. 100 million when the Bank started its operation. The total equity (capital and reserves) of the Bank as on December 31, 2008 stood at Tk. 3125 million. De posits A strong deposit base is critical for success of a bank.During the years the Bank has mobilized a substantial amount in deposits in transactional and savings tarradiddle. The deposit base of the bank continued to register a steady egress and stood at Tk. 48,731 million excluding call as of 31 December 2008 compared to Tk. 41,554 million of the anterior year registered a 17% modernizeth. Investment Dhaka Bank has diversified its investment portfolio through train Financing, Hire Purchase, and Capital Market Operations besides the investment in treasury bills and Prize Bonds. The strain on high quality investment has ensured the bank to maximize its profit.Dhaka Bank Limited is a piece of the Dhaka threadbare transfigure and Chittagong Stock Exchange. A specialized unit of the Bank, the Investment Division manages the Banks portfolio and actively participates in the screen-establish on-line trading of both the Stock Exchanges. Profit Dhaka Bank Limited registered an o perate profit of Tk. 2,010 million in 2008 compared to Tk. 1,183 million in 2007 making a growth of 70%. After all provisions including general provisions on unclassified brings, profit in the first place tax stood at Tk. 1,531 million. Provision for tax for the year 2008 amounted to Tk. 27 million. The terminate profit of the bank as on 31 December 2008 stood at Tk. 704 million compared to previous years Tk. 580 million making growth of 21%. Earning per share (EPS) was Tk. 46. 06 in 2007 compared to Tk. 45. 17 in 2007. Loans and Advances The Bank implemented the system of credit risk assessment and lending procedures by stricter separation of responsibilities between risk assessment, lending decisions and monitoring functions to break the quality and soundness of loan portfolio. The Bank recorded a 17 % growth in advances with a local loans and advances portfolio of Tk. 9,972 million at the end of December 2008 compared to Tk. 34049 million at the end of December 2007. As of 3 1 December 2008, 96. 85 % of the total Banks loan portfolio was regular while all 3. 15 % of the total portfolio was non-performing as compared to 1. 64 % of 2007. Bank made required provision as on 31 December against performing loans as per rate and classification norm provided by Bangladesh Bank (se note-2c). The record book of non-performing loans stood at Tk. 1,258 million in 2008 from Tk. 554 million in 2007. Of the total loan provision of Tk. 04 million, Tk. 465 million was general provision, which was 51 % of total provision. The rest Tk. 439 million was against the classified accounts. 1. Non-performing loan 2. Regular Loan A wide range of business industries and sectors constitutes the Banks advance portfolio. Major sectors where the Bank extended credit include steel and engineering, ship breaking, edible oil, sugar, housing and construction, pharmaceuticals, chemicals, electronic and automobiles, energy and power, service industries, trade finance, personal or consumer credit, leasing etc.The Bank continued to support Small and Medium Enterprises (SME) and expended credit facilities to them through its SME Cell. Sector wise assignation of advances reveals a well-diversified portfolio of the Bank with balance exposure in different sectors. High concentration sectors are material and garment industries with outstanding of Tk. 7,524 million, housing and construction with Tk. 4,093 million, food and allied industries with Tk. 2,949 million and engineering and metal including ship braking with Tk. 1,903 million as at 31 December 2008. node ServiceCustomer is in the core of everything a service-oriented comp any does. Accuracy, reliability, and timely delivery are the key elements of the Dhaka Banks service. Well-qualified and experienced officials always prepared to provide efficient, personalized and quality service man Dhaka Bank Limited. The banks prime objective is to provide high quality product and services to the customers. The bank also per forms according to the needs of its corporate clients and provides a comprehensive range of financial services to national and multinational companies. International Trade & unconnected ExchangeInternational trade constituted the major(ip) business activity conducted by the bank. Dhaka Bank offer a profuse range of trade finance services, namely, Issue, Advising and Confirmation of documentary Credits arranging forward Exchange cover Pre-shipment and post- shipment finance Negotiation and purchase of Export bill Discounting of bills of Exchange, Collection of bills etc. In the year 2008, Dhaka Bank Limited was active in extending services to their valued clients related with import business. As of 31st December 2008 the import volume was Tk. 49,496 million compared to the volume of 2006 for Tk. 6,277 million marking as increase of 7% from the last year. Dhaka Bank Limited experienced sound growth of exporting business in 2007 from 2006. The volume of export business rose to Tk. 31,081 million from Tk. 23,269 million in 2007 display an increase of 34%. Branches Dhaka Bank has aerofoiled already 41 ramifyes in different Cities, Places and areas in Dhaka and also in Chittagong, Sylhet, Narayangonj, Norshingdi and Savar. This shows the banks commitment to provide services to their valued customers through an extensive branch network at all commercially important places across the country.They also have planned to open more branches in the sort coming year. These branches are well decorated and well secured with the new technologies. humans Resources and Training The driving force behind Dhaka Bank has always its employees. The bank recognizes that professional ontogenesis of its people is vital to establishing workers as a provider of quality service. In this regard, the bank have expand its training facilities and set up a full-fledged training institute at SaraTower, Motijheel, Dhaka. Environmental focal point ProgramThe Banks Environmental Management P rogram stipulates adherence with environmental, health and safety regulations and guidelines, refraining from business that impairs the ability of future generations to meet their own needs, assessing an mitigating risks concerning environment, health and safety issues that the bank undertake. Community Service The Bank extends aid to socio-cultural and community development programs. During the years under canvas, the Bank had provided support to a number of community eudaemonia programs. At present Dhaka Bank assist the National Hokey Federation. Technologies, Products and ServicesDhaka Banks products and services are regularly upgraded and realigned to fulfil customer expectation. Their delivery standards are constantly monitored and improved to assure the highest satisfaction. The bank specially emphasizes on the service base on technologies. Because the life became very fast and people want take service within sort time. The consumer-banking sector of the Bank deals with num ber of tasks related to various services. The products that are recently being offered by the bank are as follows names Dhaka Bank provides the Savings Account Current Account Short barrier Deposit Fixed Deposit Receipt etc. or the customers. ATM (Automated Teller Machine) Dhaka Bank ATM Cards enable their valued customers to carry out a variety of banking transactions 24 hours a day. Credit Cards Dhaka Bank Credit Card has earned wide acceptability and re localizeation within a very short time. The Bank has developed the process such that it can deliver the Credit Card within only 7 days against security for unsecured peckers it takes only 10 days. Phone banking Dhaka Bank earpiece banking service allows customers to conduct a variety of transactions by simply making a anticipate from anywhere.Customers can inquire about the balance in their account, check transaction details or take for account statement by fax or e-mail. Locker By this facility customers can put their valu able things such as jewelry items, valuable papers etc. for the safety reason. Consumer Credit Dhaka Bank also provides consumer credit facilities with very attractive terms and conditions. industrial Loan Loans issued for acquire equipment, inventories, plants, payrolls etc. Any Branch Banking By this customers can transact from any branch insight the country.Utility Bill defrayment Customers can pay different utility bill such as phone bill, credit card bill etc. 3. a. Bank Banks are among the nearly important financial institutions in the economy. They are the formula source of credit (loanable fund) for millions of households (individuals and families) and for most local units of government. Moreover, for small businesses ranging from grocery stores to automobile dealers, banks are often the major source of credit to stock the shelves with merchandise or to fill a dealers showroom with new goods.When the business and consumers need financial information and financial plannin g, it is the bankers to whom they turn most frequently for advice and council. 3. b. Types of Bank Loans The banks make a wide variety of loans to a wide variety of customers for many different patterns-from purchasing automobiles and buying new furniture, winning dream vacations and pursuing college education to constructing homes and office buildings. Bank loans may be divided into the following broad categories of loans, delineated by their conclusion 1.Real Estate Loans, which are secured by real property-land, buildings, and other structures- and include short-term loans for construction and land development and acheer-term loans to finance the purchase of bring forthland, residential, and commercial structures etc. 2. pecuniary institution Loans, including credit to banks, restitution companies, finance companies, and other financial institutions. 3. Agricultural Loans, extended to farm and ranch operations to assist in planting and harvesting crops and to support the f eeding and trouble of livestock. 4.Commercial and Industrial Loans, give to business to cover such expenses as purchasing inventories, plant, and equipment, paying taxes, and meeting payrolls and other operating expenses. 5. Loans to Individuals, including credit to finance the purchase of automobiles, homes, appliances and other swop goods to repair and modernize homes, cover the comprise of health check care and other personal expenses, either extended directly to individuals or indirectly through retail dealers. 6. Lease Financing Receivables, where the bank buys equipment or vehicles and leases them to its customers.Among the categories, the largest volume is in the real estate loans. The next largest kinsfolk is commercial and industrial loans. 7. Asset- found Loans, loans secured by a business firms pluss, particularly accounts receivable and inventory. sequence Loans, credits that is repayable in two or more consecutive payments, ordinarily on a monthly or quarterly basis. 9. garner of credits, a legal notice in which a bank or other institution guarantees the credit of one of its customers who is borrowing from another institution. 0. Retail Credit, smaller-denomination loans extended to individuals and families as well as to small business. 11. border loans, credit extended for longer than one year and knowing to fund longer-term business investments, such as the purchase of equipment or the construction of new physical facility. Term Loans are designed to fund long-and medium-term business investments, such as the purchase of equipment or the construction of physical facilities, covering a period longer than one year.Usually the borrowing firm applies for a lump-sum loan based on the budgeted cost of its proposed project and then pledges to repay the loan in a series of installment. 12. working(a) Capital loan, provide businesses with short-run credit, lasting from a few days to about one year. workings Capital Loans are most often use d to fund the purchase of inventories in prescribe to put goods on shelves or to purchase raw materials thus, they come closest to the traditional self-liquidating loan described above.Frequently the working Capital Loan is designed to cover seasonal peaks in the business customers turnout levels and credit needs. 3. c. Credit Analysis The division of the bank responsible for analyzing and making recommendations on the fate of most loan applications is the credit department. This department must satisfactorily answer three major questions regarding each loan applicat 1. Is the Borrower Creditworthy and how know that? The question must be dealt with in the lead any other is whether or not the customer can service the loan- that is, pay out the credit when due, with a comfortable margin for error.This usually involves a detailed study of six aspects of the loan application Character well defined purpose for loan request and a serious intention to repay), Capacity proper autho rity to request for the loan and legal standing to sign a loan system), Cash ability to generate enough silver, in the form of cash light), Collateral enough quality assets to provide adequate support for the loan), Conditions aware borrowers line of work and also economic conditions), and Control All must be satisfactory for the loan to be a good ne from the lenders point of view. 2. Can the loan agreement be properly structured and documented so that the bank and depositors are adequately protected and the customer has a high probability of being able to service the loan without excessive strain? The loan officer is responsible to both the customer and the Banks depositors and stockholders must seek to satisfy the demands off all. This requires, first, the drafting of a loan agreement that meets the borrowers need for funds with a comfortable refund schedule.The borrower must be able to comfortably handle any required loan payments, because the banks success depends fu ndamentally on the success of its customers. If a major borrower gets into trouble because it is unable to service a loan, the bank may find itself in serious trouble as well. So, the banks loan officer must be a financial counselor to customers as well as a conduit for their loan applicants. 3. Can the bank perfect its claim against the assets or earnings of the customer so that, in the event of default, bank funds can be recovered rapidly at low cost and with low risk?While large corporations and other borrowers with impeccable credit ratings often borrow unsecured, with no specific collateral pledged behind their loans except their reputation and ability to generate earnings, most borrowers at one time or another will be asked to pledge some their assets or to personally guarantee the repayment of their loans. Getting a pledge of certain borrower assets as collateral behind a loan really serves two purposes for a lender.If the borrower cannot pay, the pledge of collateral gives the lender the right to seize and sell those assets designated as loan collateral, using the proceeds of the sale to cover what the borrower did not pay back. Secondly, collateralization of a loan gives the lender a psychological advantage over the borrower. Because specific assets may be at the take chances a borrower feels more obligated to work hard to repay his or her loan and avoid losing valuable assets. The most popular assets pledged as collateral for bank loans are- Accounts Receivable, Factoring, Inventory, Real Property, Personal Property, Personal stop up etc. . d. Loan Review Banks today use a variety of different loan analyze procedures nearly all banks follow a few general principles. These include 1) Carrying out reviews of all types of loans on a periodic basis- for example, every 30, 60, or 90 days the largest loans outstanding may be routinely examined, along with a random sample of smaller loans. 2) Structuring the loan review process carefully to make sure th e most important features of each loan are checked. ) Reviewing most frequently the largest loans, because default in these credit agreements could seriously affect the banks own financial conditions. 4) Conducting more frequent reviews of profligate loans, with the frequency of review increasing as the problems surrounding any particular loan increase. 5) Accelerating the loan review schedule if the economy slows down or if the industries in which the bank has made a substantial character of its loans develop significant problems. 3. e. Handling Problem LoansInevitably, despite the safeguards most banks build in their lending programs, some loans on a banks books will become problem loans. Usually this means the borrower has preoccupied one or more promised payments or the collateral pledged behind a loan has declined significantly in value. The process of recovering the banks funds from a problem loan situation- suggests the following key steps 1) Always keeps the goal of loan workouts firmly in mind to maximize the banks chances for the full recovery of its funds. ) The rapid detection and reporting of any problems with a loan are essential time lag often worsens a problem loan situation. 3) Keep the loan workout righteousness separate from the lending function to avoid possible conflicts of interest for the loan offers. 4) Estimate what resources are available to collect the troubled loan. 5) Loan workout personnel should conduct a tax and litigation appear to see if the borrower has other unpaid obligations and many other processes. CREDIT MANAGEMENT POLICY & PROCEDURESIntroduction In general, a banking system aggregates a high number of low value deposits to fund enterprises with a smaller number of high value loans. This intermediation through a well functioning bank helps to achieve some economic benefits for the depositors, the borrowers and above all the economy in the following ways The depositors Higher return put down risk Greater liqu idity The borrowers Availability of fund for all credit worthy borrowers Thus allows to enterprises grow and expand The economy Economic growth is maximized as the banks channels the countrys scare financial resources into those financial opportunities with maximum return Thus profitable enterprises receive funding, grow and expand. Loss making enterprises are refused funding and allowed to go out of the business thus saving the economy from drainage of resources. The bank must allocate loans effectively for achieving these broad objectives of the economy and the pre-requisites are Banks are able to identify reliably those enterprises that can repay their loans. Banks allows loans to those enterprises likely to yield high return and deny loan to those likely to yield low or negative returns. While identifying profitable enterprises, the bank in fact identifies risks of the borrower and business in order to allow loan in the context of its risk return profile. Credit risk ma nagement (CRM) is a dynamic process, which enables banks to proactively manage loan portfolios. Four major areas of CRM are Policy lending guidelines Procedure evaluating viability and abetter _or_ abettor risks of business enterprises. Organizational structure segregation of risk taking and risk approving authority right decision making and accountability A clear understanding of the four areas are crucial for maximising banks earning by carefully evaluating credit risks and attempting to minimize those risks. 4. a. Policy objectives 1) Maximize Banks earning from loan portfolio 2) Improve quality of loan portfolio to maximize earnings by a) To keep non-performing assets below 10% b) Arresting new loans to become classified. ) Utmost emphasis on loan pass is to be presumption in order to improve quality of the loan portfolio. Credit facilities are to be considered solely on viability of business / enterprises / project / undertaking having adequate cash flows to adjust the loans, and management capacity of the borrower to run the business profitably. 4) Evaluate credit risks before muging, which may hamper generation of the projected cash flows of the borrower and might delay or hinder repayment of banks loan. ) Monitoring continuously performances of the financed projects / business / enterprises will be banks main trust for ensuring repayment of the loan, and receiving early warning (EL) for taking timely corrective measures. 6) Price the loans on the basis of loan pricing module of the bank focusing on risk rating of the borrower. 7) Strict adherence to Bangladesh Banks policy guidelines 4. b. Lending guidelines As the very purpose banks credit strategy is to determine the risk appetite of the bank, so banks focus should be to maintain a credit portfolio to keeping in mind of our risk sorb capacity.Thus its strategy will be invigoration loan processing steps including identifying, measuring, containing risks as well as maintaining a balance portfolio through minimizing loan concentration, encouraging loan diversification, expanding product range, streamlining security, insurance etc. as buffer against unexpected cash flow. Types of credit facilities Bank will go for Term financing for new project and BRME of existing projects (Large, Medium, SE) Working capital for industries, trading, services and others (Large, Medium, SE) Import and export pay Lease Finance Consumer Finance Fee Business Islamic mode of finance Single borrower/ Group limits / Large Loans / Syndication The limit for single client / group under one obligor concept will be as under 1. The total credit facilities by a bank to any single person or enterprise or organization of a group shall not any point of time exceed 35% of the banks total capital subject to the condition that the maximum outstanding against fund based financing facilities (fund facilities) shall not exceed 15% of the total capital. 2. Non-funded credit facilities, e. g. etter of credit, guarantee etc. can be extended to a single large borrower. But under no circumstances, the total amount of the funded and non-funded credit facilities shall exceed 35% of banks total capital 3. However, in case of export sector, single borrower limit shall be 50% of the banks total capital. But funded facilities in the form of export credit shall not 15% of the total capital Large loan 1. Loan sanctioned to any individual or enterprise or any organization of a group amounting to 10% or more of banks total capital shall be considered as large loan. 2.The bank shall be able to sanction large loans as per the following limits set against their respective classified loans Rate of net classified loans The highest rate fixed for large loans against banks total loans & advances Up to 5% 56% More than 5% but up to 10% 52% More than 10% but up to 15% 48% More than 15% but up to 20% 44% More than 20% 40% 3. In order to determine the above maximum ceiling for large loan s, all on-funded credit facilities e. g. letter of credit, guarantee etc. shall also be considered to arrive 50% credit equivalent. However the wide amount of non-funded credit facilities shall be included while determining the total credit facilities provided to an individual or an enterprise or an organization or a group. 4. A Public Limited Company, which has 50% or more public share holdings, shall not be considered as an enterprise / organization of any group. 5. In case of credit facilities provided against government guarantees, the aforementioned restrictions shall not apply 6. In the case of loans backed by cash and excusable securities (e. g.FDR), the actual lending facilities shall be determined by deducting the amount of such securities from the outstanding balance of the loans. 7. Banks shall collect the information to the borrowers from Credit Information Bureau (CIB) of Bangladesh Bank before sanctioning, renewing or rescheduling loans to ensure that credit facilitie s are not provided to defaulters. 8. Banks shall perform Lending Risk Analysis (LRA) before sanctioning or renewing large loans. If the rating of an LRA turns to be marginal, a bank shall not sanction large loan, but it can consider renewal of an existing large loan taking into account other favorable conditions and factors. However, if the result of an LRA is unsatisfactory, neither sanction nor renewal of large loans shall be considered. 9.While sanctioning or renewing large loan, a bank shall assess borrowers overall debt repayment capacity taking into consideration the borrowers liabilities with other banks and financial institutions. 10. A bank shall examine its borrowers Cash flow Statement, Audited Balance Sheet, income Statement and other financial statement to make sure that the borrower has the ability to repay the loan. Term Financing and Syndication Like large volume of loan, long term financing is one of the riskiest areas of the bank because of long duration of repayme nt. Long duration casts uncertainties on repayment as variable with which financial and other projections are made very widely in a dynamic global economic scenario.Thus utmost care is to be exercised while considering long term financing Long term relationship with the borrower is prerequisite for considering term financing Due diligence is to be exercised for accessing viability of the projects in terms of Management ability, Market gap, Technical suitability, Financial viability. Information on projects should be adequate and reliable Minimum information for project viability analysis is to be given. Syndication Syndication means joint financing by more than one bank to the same clients against a common security basically, to spread the risk. It also provides a scope for an independent evaluation of risk and focused monitoring by the agent / lead bank.In syndication financing banks also enter into an agreement that one of the lenders may act as Lead Bank, who has to co-ordin ate the activities at various stages of handling the proposal i. e. appraisal, sanction, documentation sharing of the security, disbursement, inspection, follow up, recovery etc. it may also call meetings of syndication members, whenever necessary to finalize any decision reject business types In the context of present economic situation vis-a-vis government policy as well as market scenario, the following industries and lending activities are considered as discouraged Military Equipment / weapon Finance Highly leveraged Transactions Finance of speculative business Logging, Mineral Extraction/ Mining or other activity that is ethically or environmentally sensitive Lending to companies adverted on CIB black list or known defaulters Counter parties in countries subject to UN sanctions Share lending Taking an equity support in borrowers Lending to holding companies Bridge loans relying on equity / debt issuance as a source of repayment Loan facility parameters Size Funded maximum 15% of Banks total capital Funded + Non Funded 1) Shall not exceed 35% of banks total capital 2) uttermost 50% of Banks total capital for export sector. (Funded facility shall also not exceed 15% of banks total capital). Tenor Short term Maximum 12 months Medium Term Maximum 5 years Long Term Maximum 15 yearsMargin To be determined by Banker Customer relationship and nature of business. Security Return of Banks funding to any business is ensured primarily on the cash flow of the business. A smooth flow of cash in the business requires efficient management competence in conducting the business in a given market. However as the market never remain stable owing to various uncontrollable factors, the continuity of well-managed business cash flow is difficult to visualise in the long run. As such to ensure realization of Banks finance in case of any eventuality, other adequate security coverage deemed necessary with a view to protects interest of the bank. General Covenant s Bank shall not extend any credit facility to any defaulter as defined in the bank company act 1991(clean CIB report required. ) The borrower shall have valid Trade license, In case of coalition firm there must be a partnership deed duly notarized / registered. Limited Company must be registered with the Registrar of Joint Stock Company. Directors and other loans will be subordinated to Dhaka Banks loan. Directors loan (if any) will be interest free and no dividend will be declared/paid before full adjustment of Term Loan of Dhaka Bank. The borrower shall submit annual audited/un-audited/projected financial statements regularly where applicable. The borrower shall maintain current ratio of not less than 1. 5 times.. The borrower shall obtain and maintain in full force and effect all Government of Bangladesh (GOB) authorizations, licenses and permits required to implement and operate Borrowers business. The borrower shall maintain all insurance as detailed in Loan Documents. The borrower shall maintain satisfactory swing/turnover of the limit in case of continuous loans/advance. The borrower shall pay all fees , duties , taxes etc, that are due to the Government of Bangladesh (except where waivers or deferrals have been granted by Government of Bangladesh) when due. The borrower shall not create any charge, mortgage or any encumbrances of any other security interest over any of its assets without the prior written consent of the Bank. The borrower shall not avail any credit facility from other source without the prior written consent of the bank. The borrower shall not make any amendment/alteration in the Companys Memorandum & Articles of Association without obtaining prior approval of Dhaka Bank Ltd in writing. The borrower shall not furnish any corporate guarantee to other firm/company without Banks permission. Events of failure Bank will have the right to call back the Loan/Advance in the event of default under the following circumstances Fai lure to repay Breach of Covenants of the loan agreement. Bankruptcy or liquidation or insolvency event affecting the Borrower. Occurrence of a material adverse change in the financial position of the Borrower. Any change in GOB directives, which in the opinion of the Lenders would prejudice the Borrowers ability to meet the financial obligations in respect of this facility, Any security interest over any asset of the Borrower becomes enforceable or any execution or distress is levied against or any person is authorise to or does take possession of the whole or any part of the assets or undertakings. Facility refreshful Charge Documents %3 L/C LTR BG TL CC Hypo/CC Pledge (Key Stock to Bank) 1. Promissory raze1. Promissory Note 1. Promissory Note 1. Promissory Note 1. Promissory Note 2. Letter of 2. Letter of Undertaking 2. Letter of Undertaking 2. Letter of Undertaking 2.Letter of Undertaking Undertaking 3. A/C Balance 3. A/C Balance tick 3. A/C Balance hinderan ce 3. A/C Balance confirmation 3. A/C Balance confirmation Slip confirmation Slip Slip Slip Slip 4. Letter of 4. Letter of Continuity 4. Letter of Continuity 4. Letter of Continuity 4. Letter of Continuity Continuity