An Internship Report

On
“Credit Management Practices of Sonali Bank Ltd:
BISE Branch, Cumilla”

An Internship report submitted to the course instructor as a partial

fulfillment of the requirements of the BBA Program.

Supervised By:
Sanjib Sutra Dhar
Assistant Professor
Department of Accounting
University of Chittagong.

Submitted By:
Sadia Ahmed
ID No: 15301119
Program: BBA
Session: 2014-2015
Department of Accounting
University of Chittagong

Submission date: November 15, 2020

 LETTER OF SUBMISSION

November 15, 2020

To
Sanjib Sutra Dhar
Assistant Professor
Department of Accounting
University of Chittagong.

Subject-Submission of Internship Report

Dear Sir,
This is to inform you that I am submitting internship report on “Credit Management
Practices of Sonali Bank Limited; BISE Branch, Cumilla.”

I have put in my best efforts to make this report a success. However, I admit that this report
could have been a more superior one, if it had not been my first time to conduct such a
comparative study. However, this has obviously been a great source of learning for me to
conduct similar research studies in future.

I would like to express my sincere gratitude to you for your guidance and suggestions in
preparing the report. I will be happy to provide any further explanation regarding this
research report if necessary.

Thanking You
Sincerely yours,

_____________
(Sadia Ahmed)
ID No: 15301119
Program: BBA
Session: 2014-2015
Department of Accounting
University of Chittagong

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INTERNSHIP CERTIFICATE

Page | III
 PREFACE

Nowadays, banking activities become so easy to get and customize. Risk management
activities also become smoother than before.

As a part of course curriculum, each student of BBA, University of Chittagong has to

accomplish a project work, which is preparing an internship report. In order to face the
challenges of the new millennium and to be prepared for this, this type of activities is very
fruitful for us.

This is an intern report on “Credit Management Practices of Sonali Bank Ltd; BISE
Branch.” Internship program is an integral part of BBA program which provides the
opportunity to learn credit management activities practically. It enables us to evaluate and
understand the practical application of all the terms and techniques that we have studied
during our course work.

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 ACKNOWLEDGEMENT

At the beginning I am very much grateful to the Almighty Allah for giving me the strength to
complete the report properly. Without his diving blessings, it would never be possible for me
to complete both internship period and this internship report successfully.

A special thanks and gratitude goes to my internship supervisor, Mr. Sanjib Sutra Dhar.
Without his valuable supervision and direction, it would not have been possible to complete
this report.

Then I would like to express my heartfelt gratitude to Sonali Bank Limited, BISE branch for
giving me a chance to complete my internship program at their branch, allowing me to gather
information and helping me in every possible way in preparing the internship report. My
endless thanks go to Mr. Mohammad Abdul Mannan, Branch In charge, for being patient and
supportive during my internship program. I was blessed to have an instructor like Mr.
Mohammad Abdul Mannan. Without his support, I would not be able to gain knowledge
about the credit management procedures and provide information in this report. I am also
grateful to the Assistant Officers for helping me throughout the preparation of the report. All
the officers of the branch had been very helpful and they made my internship period more
enjoyable and eventful one. Finally my sincere gratitude goes to Chittagong University
Authority for arranging this internship program for students. It really makes students capable
of doing official tasks before entering the corporate world.

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 EXECUTIVE SUMMARY

The Banking sector is always considered one of the most fundamental sectors for the
economy to be able to function. In this economic era, In order to attain development in
industrial and commercial division, there should be a sound banking system to support not
only the economy but also the society.
This report aims toward providing an overview on Credit Policies, Credit Department, Risk
Procedures and Management & Performance Analysis of Sonali Bank Ltd. While preparing
this report it has been tried to reveal the insights of the Credit Department, Risk Management
& Performance Analysis of the bank a few recommendations and suggestions were also
prescribed based on the observation and findings.

The first section of this report consists of an introductory part which has been developed for
the proper execution of the entire report.
The report is categorized into 8 chapters. In the beginning of the report, the background and
origin of the report are discussed. After the introductory part, the historical background of
Sonali Bank Limited has been specified.
Furthermore, in that part the general business exercises of the bank have been included.
Chain of commands, products and services of the bank constrained has additionally been said
in that part.
Thirdly, there comes the main part of the report that starts with financing policy. Here,
interest rate policy, security policy, debt-equity followed by the bank is discussed broadly.
Further, it additionally demonstrates securities charged by bank in different loans and
advances.
After discussing policies regarding credit, a whole procedure followed in credit is discussed
i.e., financing procedure. This part of the report discusses about borrower section, project
viability study, documentation and disbursement procedures, inspection and follow up
procedures.
Then the performance of Sonali Bank Ltd, BISE Branch has been shown by some graphs and
charts.
Finally, from the reporter’s perception, a few shortcomings of the credit approaches of the
bank are focused out.

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 CONTENTS PAGE
NUMBER
Letter of Submission II
Internship Certificate III
Preface IV
Acknowledgement V
Executive Summary VI
CHAPTER 1: INTRODUCTION
1.1 Prelude 2
1.2 Objective of the study 2
1.3 Methodology of the study 2
1.4 Limitation of the study 3

CHAPTER 2: OVERVIEW OF THE COMPANY

2.1 Company overview 4
2.2 Vision , Mission and Strategic Priorities of the bank 5
2.3 Corporate Profile 5
2.4 Organizational Hierarchy 8
2.5 Product and Services of Sonali Bank 9

CHAPTER 3 : FINANCING POLICY

3.1.1 Interest Rate Policy 12
3.1.2 Key policy on interest rate: Given by Bangladesh Bank 12
3.1.3 Policy on determining interest rate : Sonali Bank Limited 12
3.1.4 Interest rate for lending: Sonali Bank Limited 13

3.2 Security Policy 14

3.2.1 Mode of Charging Security 14
3.2.2 Security Policy by Sonali Bank Limited 16
3.2.3 Security Charged by Sonali Bank Limited Against Various Loans and 16
Advances

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3.3 Credit Period 17
3.4 Gestation Period and Time Frame for Disbursement 17
3.5 The LTD Ratio 18
CHAPTER 4 : FINANCING PROCEDURE
4.1 Procedures of Sanctioning Loans 20
4.2 Credit Proposal and Sanction Advise 21
4.3 Steps involved in Credit Processing 22
4.4 Credit Risk Grading 23
4.5 CIB Reporting 23
4.6 Documentation 23
4.7 Credit Review 24
CHAPTER 5: LOAN CLASSIFICATION
5.1 Default Credit 26
5.2 Indication of Default Credit 26
5.3 Steps to follow to handle Classification 26
5.4 Recovery Probability and Efforts by Sonali Bank Limited 27

5.5 Recovery Attempts by SBL 28

5.6 Recovery Performance of Sonali Bank Limited 29

CHAPTER 6: CREDIT REPORT

6.1 CIB Report 32
6.2 Statement of Government, Financial Institutions and Big Sectors 32

6.3 Cash and Quasi Cash Statement 32

6.4 SME Monthly Report 32

6.5 SME Quarterly Report 32

6.6 Loan Classification and Provision Report 32

6.7 Classification of Advances Report 34

CHAPTER 7: CREDIT OPERATIONS AND PERFORMANCE OF SONALI BANK

LIMITED- BISE BRANCH

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7.1 Business Elements Analysis of Sonali Bank Limited 35
7.2 Deposit Mix Comparison of the Branch 36
7.3 Key Performance Ratios 37

CHAPTER 8: FINDINGS, RECOMMENDATIONS AND CONCLUSION

8.1 Findings 40
8.2 Recommendations 40
8.3 Conclusion 41

References 41

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1.1 Prelude

Credit is a broad term that has many different meanings in the financial world. It is generally
defined as a contractual agreement in which a borrower receives something of value now and
agrees to repay the lender at a later date - generally with interest. There are many different
forms of credit. The most common are car loans, mortgages, signature loans, and lines of
credit. Essentially, when the bank lends to a consumer, it credits money to the borrower who
must pay it back at a future date. Credit is the most important part of the economy. It leads to
an increase in spending, thus increasing income levels in the economy. This, in turn, leads to
higher GDP and thereby faster productivity growth .If credit is used to purchase productive
resources, it helps in economic growth and adds to income. Credit for that leads to the
creation of debt cycles.

1.2 Objective of the Study

General Objectives: To explore and evaluate the performance of Credit Management

Practices of Sonali Bank Limited; BISE branch.

Specific Objectives:

• To highlight of the policy, procedures and guidelines in sanctioning credit.

• To identify the credit schemes of the sample branch: BISE branch.
• To measure and evaluate the performance of the sample branch with regard to credit.
• To detect the problems relating to the credit of BISE branch.
• To provide some policy guidelines to overcome the problems.

1.3 Methodology of the Study

a) Data:

The report is descriptive in nature. The report would be based on a detailed discussion on
Credit Management of Sonali Bank Limited.

Sources of primary data:

• Practical desk work

• Conversations with officers and manager
• Personal observation
• Relevant files and reports study as provided by manager

Sources of secondary data:

• Annual reports of the bank

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 • Online data from Sonali Bank Limited’s website
• Materials provided by credit officer
• Instructions and Circulars from Bangladesh Bank’s website

c) Data Analysis and Presentation

Collected information has been processed and complied with the aid of Microsoft Word,
Microsoft Excel and other related software. Necessary tables have been prepared on the basis
of collected data and various graphs and charts have been applied to analyses on the basis of
classified information. Detailed explanation and analysis have also been incorporated in the
report.

d) Sample

Sonali Bank Limited, BISE branch

1.4 Limitations of the Study

Though there was a lot of cooperation from the officers and manager, there were some
difficulties during the study:

• The big constraint of the study was insufficiency of information

• Due to the COVID19 pandemic, it was hard to collect data physically.
• There was inadequacy in secondary data collection
• I am not occupied in a desk. So, I need to see the procedures manually or sitting far
from the system.
• Due to lack of experience, there may be some faults in the report though maximum
efforts have been given to avoid any kind of mistake

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2.1 Historical Background of Sonali Bank Ltd.

Sonali Bank Limited is known as a commercial bank. Like all commercial banks SONALI
BANK LIMITED’s core business is obtaining deposit and providing loans. It is a financial
institution providing services for businesses, organizations and individuals. Service includes
offering different types of deposit account such as current deposit accounts, saving deposit
accounts and other scheme accounts as well as giving out loans to businesses and individuals.

Soon after independence of the country Sonali Bank emerged as the largest and leading
Nationalized Commercial Bank by proclamation of the Banks' Nationalization Order 1972
(Presidential Order-26) liquidating the then National Bank of Pakistan, Premier Bank and
Bank of Bhwalpur. As a fully state owned institution, the bank had been discharging its
nation-building responsibilities by undertaking government entrusted different socio-
economic schemes as well as money market activities of its own volition, covering all
spheres of the economy.
The bank has been converted to a Public Limited Company with 100% ownership of the
government and started functioning as Sonali Bank Limited from November 15, 2007 taking
over all assets, liabilities and business of Sonali Bank. After corporatization, the management
of the bank has been given required autonomy to make the bank competitive & to run its
business effectively.

Branches of SBL:
Total No of Branches 1225 (Local 1223, Foreign 2)
No of Regional Offices 16
No of Principal Offices 46
No of G.M. Offices 11

Subsidiaries of SBL:
1) Sonali Exchange Company Incorporated (SECI) having 10 (Ten) branches in
USA.
2) Sonali Investment Limited (Merchant Banking) having 4 (Four) branches at
Motijheel, Paltan, Uttara, Mirpur in Dhaka and 1 (One) branch in Khulna,
Bangladesh.
Associates of SBL:

1) Sonali Bank (UK) Limited having 2 (Two) branches in UK.

2) Sonali Polaris FT Limited
2.2 Vision, Mission and Strategic Priorities

Vision:
Socially committed leading banking institution with global presence.
Mission:
Dedicated to extend a whole range of quality products that support divergent needs of people
aiming at enriching their lives, creating value for the stakeholders and contributing towards
socio-economic development of the country.

Slogan:
Your trusted partner in innovative banking.

Award and Recognition of SBL of 2019:

Title Authority
Annual Performance Agreement Award (1st Ministry of Finance
Position)

ICMAB Best Corporate Award 2019(1st Institute of Cost and Management

Position) Accountants of Bangladesh

Bangladesh bank Remittance Award (3rd Bangladesh Bank

Position)

2.3 Corporate Profile

Contents Description

Name Sonali Bank Limited

Date of Incorporation 03 June, 2007
Head Office Sonali Bank Limited Head Office 35-42,44
Motijheel C/A Dhaka -1000. Bangladesh
Website https://www.sonalibank.com.bd/
Legal Status A public limited company
SWIFT Code BSONBDDH
Area of Branch 1225
Authorized Capital Taka 6000.00 Crore
Paid up Capital Taka 4530.00 Crore
Chairman Mr. Ziaul Hasan Siddiqui
CEO and MD Mr. Md. Ataur Rahman Prodhan
Company Secretary Mr. Tauhidul Islam

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 Directors Mr. A.K.M Kamrul Islam, FCA, FCS
Mr. Ishtiaque Ahmed Chowdhury
Dr. Daulatunnaher Khanam
Mr. Md. Mofazzal Husain
Mr. Molla Abdul Wadud
Table 2.1: Corporate Profile of SONALI BANK LIMITED

The Target Market

The target customers of SONALI BANK LIMITED are:
• Individual persons (people of all social classes and genders living in both rural and urban
areas of Bangladesh.)
• Sole proprietorship, private limited company, public limited company and partnership firms
• Cooperative societies
• Non Government Organizations

Functions of SBL
Sonali Bank performs many functions. It satisfies the financial needs of the sectors such as
agriculture, industry, trade, communication etc. It plays a very significant role in the process
of achieving economic social success. The functions performed by this Bank more
customers- centered and these functions are becoming wider. Playing chart the functions of
Sonali Bank Limited.

Primary Functions:
• Sonali Bank Limited accepts various types of deposits from public especially from its clients,
including savings accounts deposits, recurring account deposits, and fixed deposits.
• Sonali Bank Limited provides loan and advances of various forms, including an overdraft
facility, cash credit, bill discounting, money at call etc. The bank also provides demand and
term loans to all type of clients against proper security
• Credit creation is a most significant function of Sonali Bank Limited. While sanctioning a
loan to a customer, Sonali Bank Limited does not provide cash to the borrower. Instead,
Sonali Bank Limited opens a deposit account from which the borrower can withdraw money.
In other words, while sanctioning a loan, they automatically create deposit credit creation
from loan. Along with primary functions, Sonali Bank Limited performs several secondary
functions including many agency functions or general utility functions.

Agency Functions:
• To collect and clear cheques, dividend, and interest warrant
• To make payment of rent, insurance premium etc
• To deal in foreign exchange transactions
• To purchase and sale security
• To act as trustee, attorney, correspondent and executor
• To accept tax proceeds and tax return

Utility Functions:
• To provide money transfer facility
• To issue traveler's cheques
• To accept various bills for payment
• To provide Merchant and agent banking facility

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2.4 Organizational Hierarchy

Board of Directors

CEO and Managing

Director

Deputy Managing Deputy Managing Deputy Managing

Director 1 Director 2 Director 3

General Manager General Manager

Head Office (7) ai FieldOffice (7)

Deputy General Deputy General

Managers Managers
at Divisional Head at Divisional Head
(Head Office) (Field Office)

Assistant General Assistant General

Managers Managers
( Head Office) ( Field Office)

Executive SO,SEO,EO Executive SO,SEO,EO

(Head Office) (Field Office)

Other Staffs Other Staffs

(Head Office) (Field Office)

Figure 2.1: Organizational hierarchy

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2.5 Products and Services of SBL

a) Regular Deposit Schemes:

Name of the Schemes Rate of

Interest
Savings Account 3.50%
Current Account N/A
Short Notice Deposits (SND) 3.50%-
4.00%
Foreign Exchange Account N/A
Monthly Saving Schemes(MSS) 8.00%
Table 2.3: Regular Deposit Schemes

b) Fixed Deposit Schemes:

Name of the Fixed Deposit Schemes Rate of

Interest
FDR-3 Months-6 Months 6.00%
FDR-6 Months- 1 Year 6.00%
FDR-1 Year- 2 Year 6.00%
FDR-1 Year- 2 Year 6.00%
Table 2.4: Fixed Deposit Schemes

c) Monthly Saving Schemes:

Monthly Amount Given Amount Given Amount Given Amount Given

Installment After 3 Years After 5 Years After 8 Years After 10 Years
(TK) (TK) (TK) (TK)
500 20615 37,575 68,955 94,625
1,000 41,230 57,150 1,37,910 1,89,250
Table 2.5: Monthly Saving Schemes

d) Millionaire (10,00,000 ) Savings Schemes:

Maturity Period Monthly deposit / Installment

3 24,650
5 13,650
10 5,520
12 4,210
15 2,950
20 1,750
Table 2.6: Millionaire Savings Schemes

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e) Loan and Advances

General Advances:
 Cash Credit: General Hypothecation
 Cash Credit: General Pledge
 Demand Loan
 Overdrafts
 Small loans
 SME loans
 Staff loans
 House Building loans (General and staffs)
 Lease Finance
 Probashi Karma-Shangsthan Rin Prokalpa
 Terms Loan to Freedom Fighters
 Foreign Education Loan Programme
 Mid-term loans
 Business loans
 Export Financing
 Loan against trust receipt

Rural Credit
❖ Loan Under Sonali Bank Agro-Based Industrial Cr. Schemes
❖ Working Capital to Agro-Based Industries-Hypo
❖ Working Capital to Agro-Based Industries- Pledge
❖ Agriculture Credit
❖ Micro Credit

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 ❖ 3.1.1 Interest Rate Policy

Generally Sonali Bank Limited follows Bangladesh Bank guidelines (updated circular) on
setting interest for different loans and advances. Besides, the bank has some of its own policy
regarding interest rate. In the board meeting, boards of directors take decisions regarding the
percentage of interest. There is no fixed interest rate policy, it changes from time to time
based on the circumstances like A/D ratio, nature of lending, amount of lending, type of
borrowers, profitability etc. According to Bangladesh Bank guidelines, banks are free to
charge their deposit and lending rate, however in recent days; Bangladesh Bank advises
banks to cut their interest rate into a single digit. Moreover banks are also advised to limit the
difference between the lending rate and weighted average rate of lending interest on deposit
within lower single digit in different sectors other than high risk consumer credit and SME
loans.

3.1.2 Key Policies On Interest Rate: Given By Bangladesh Bank

• Bank banks can change their deposit and lending rate once a year
• Case of fixed term loan and continuous loan( CC pledge, hypo, SOD); interest rate will be
calculated on the basis of product of the day and balance, but interest rate must be charged on
quarterly basis
• Banks can charge penal interest rate
• The loan account for consumer financing and SME will be repaired according to equal
monthly installment (EMI)
• Banks are allowed to differentiate interest rate up to maximum 3% considering comparative
risk elements involved among borrowers in same landing category. With progressive
deregulation of interest, banks been advised to announce the mid-rate of the limit(if any) for
different sectors and they may charge interest 1.5% more or less than the announced rate on
the basis of the comparative credit risk
• In case, the maximum interest rate has been fixed by Bangladesh bank, bank will report their
own maximum cap
• for continuous and fixed term loans, interest rate is charged on 31/03/XXXX , 30/06/XXXX,
30/09/XXXX and 31/12/XXXX

3.1.3 SBL’s Policy On Determining Interest Rate

Based on the cost of fund, the interest rate is determined.

Cost of fund = Cost of capital + Interest on deposit
But due to the single digit interest policy, SBL is trying to reshape its interest rate policy.
• To generate a good spread, banks charges interest rate
• Interest rate is determined based on the risk of the project, A/D ratio, profitability etc.

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3.1.4 Interest Rate For Lending

Category of Loan and Advances Interest rate

Agriculture loan 4-9%
Prime Customers 9%
Non Bank Financial Institutes 9%
Syndicate /Club Finance 9%

Loan Against FDR:

For Sonali Bank Limited’s FDR FDR rate+3%
For other bank’s FDR 9%
Commercial Loans:
CC hypo 9%
CC Pledge 9%
SOD 9%
SME- CC (hypo) and others 9%
LTR/PAD other than food items 9%
Term Loans:
Large and Medium Scale industries 9%
Small scale enterprise (Secured) 9%
Small Scale Enterprise (Unsecured ) 9%
House Building Loans :
Residential 9%
Commercial 9%
Transport loans:
Private use 9%
Commercial use 9%
Forced / Demand Loans 9%
Lease financing 9%
Loans against special schemes 9%
Export loans 7%
Trade finance for rice, wheat, edible oil, pulse, peas, onion, dates and 9%
sugar
Bill Purchase 9%
Land Against Share (SODS) 9%
Consumer Credit Schemes (CCS) 9%
Special Loan for Service Holder (SLSH):
For rental clients 9%
For Sonali Bank Limited officials 9%
Credit Card 14%
Irregular and overdue loan Normal rate+2%
Table 3.1: Sonali Bank Limited’s interest rate for lending
Source: https://www.bb.org.bd/fnansys/interestlending.php

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3.2 Security Policy

3.2.1 Mode of Charging Security

Security means things/ deposit as a guarantee of an undertaking or loan to be forfeited in case

of default. While giving loan to the borrowers, Sonali Bank Limited takes security for
ensuring that the lent amount will be returned by the borrowers. The bank has some security
policy of its own as follows:

Mode of charging
Security

Non-Personal Personal
Security Security

Primary Collateral
Security Security

Lien Indirect

Pledge Direct

Hypothecation

Figure 3.1: Mode of charging Security by Sonali Bank Limited

Primary security:
Where an asset acquired by the borrower under a loan is offered to the lenders as security for
the financial amount then that asset is called as primary security. In simple terms, it is the
thing that is being financed.
a) Lien: a lien is the right of a creditor in possessions of goods, securities or any
other assets belonging to the date debtor to retain them until the debt is
repaired. (Contract Act 1872, Section 170). Lien is the right of the banker to
retain goods of the borrower until the loan is repaired. The banker's lien is

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 general lien. A Banker can retain all securities in his position till all claims
against the concerned person is satisfied
b) Pledge: Pledge is the including stocks and share as well as documents of title
to goods such as railway receipts, bills of lending, dock warrants etc duly
attested in bank’s favor.
c) Hypothecation: Hypothecation is the charge against property for an amount
of debt where neither ownership nor possession in passed to the creditor.
Though the borrower is in actual physical possession, but the constructive
possession remains with the bank as per the dead of hypothecation.

Collateral Security:
When the lender (bank) feels that the security provided borrower is not sufficient or it may be
difficult to recover the dues smoothly, then lender may ask for additional security to be
provided by the borrower himself or by others on behalf of the borrow.
Assignment: Assignment means transfer of any existing or future right, property or debt by
one person to another person. The person who assigns the property is called assignor and the
person whom it is to be transferred is called assignee.
Set Off: Set off means the total or partial merging of a claim of one person against another is
counter claim by the later against the former. Set off arises when a debtor or his creditor
wishes to arrive at the net figure owing between them when separate accounts or debts are
involved.

Security types Property Involved

Pledge Movable Property ( Goods, stocks, shares,
debentures etc)
Hypothecation Movable Property 9 Raw materials, stocks in
a godown, showroom motor vehicles etc)
Mortgage Immovable Property ( Land, building ,
Factory etc)
Lien FDR, DPS, Sanvhay Patra, ICB Unit
Certificate ,Wage Earners Bonds etc)
Assignment Insurance policy, Money due from govt. dept,
work order etc
Table 3.2 Security and assets relationship

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3.2.2 Security Policy of SBL

✓ Primary securities are to be acceptable, marketable and legal. Slow items, perishable
goods, goods having limited expiry, prohibited and unprofitable items etc are not
acceptable as primary security.
✓ Priority is given on security with quality standard and better acceptability.
✓ Security with recent valuation is taken
✓ Sonali Bank Limited values the assets at a forced value which is 20% less than the fair
value.
✓ For pledged loan, equivalent collateral is taken.
✓ I case of pledged loan, there should be legal contractual agreement for rent.

3.2.3 Security Charged by SBL Against Various Loans and Advances

Types of Credit Security Charged

Cash Credit (CC) Primary : Hypothecation of goods in trade
Hypo, pledge duly insured
Collateral : Mortgage of land and building or
any financial obligation
Secured Overdraft (SOD) Primary : Lien on any type of financial
obligation
Overdraft(OD) Primary: hypothecation of book debt
Collateral : Mortgage of landed property
Export CC Export L/C of firm contract
Project loan Primary: Plant and Machinery
Collateral :Land and building
SME loan Primary: Personal guarantee, hypothecation
of machinery and equipment
House Building loan Land and building in the form of Mortgage
O/D (Export) Export L/C documents/bills
Loan against trust receipt Hypothecation or pledge of stock in trade,
goods produced and merchandise.
Payment Against Documents (PAD) Hypothecation or pledge of stock in trade,
goods produced and merchandise.
Loan against imported goods Pledge of imported goods
Women Entrepreneurship loan Personal guarantee of borrower, third party
guarantee, present assets of the project and
future earned assets as hypothecation.
Table 3.3: Security Charged by Sonali Bank Limited against various loans and advances

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3.3 Credit Period

Sonali Bank Limited provides loans to its clients for a number of periods. It provides loans
according to the purposes of the loans too. Here is a list of the credit and credit period:

Name of the loan Credit Period Purposes

CC (hypo) 12 Months Providing working capital
CC (Pledge) 12 Months To finance pledged inventory
SOD 12 Months To finance business
operations or any other
purposes
Overdraft 12 Months General Purposes
Payment Agreement 21 days Advance against L/C forced
Document (PAD) loan
Packing Credit 120 days To finance against export
order pre-shipment finance
PAD- Export 90 days To purchase foreign currency
for import / export purposes
Foreign bill purchased As per L/C terms To purchase export
documents against sight
export L/C
Women Entrepreneurship 3 years To provide assistance for
Loan developing an
entrepreneurship by women
Term loan 12-36 Months Specific Purposes
Agriculture Equipment Loan 36 Months To purchase Equipment by
farmers
Consumer Credit 12 Months To buy some luxury items.
Table 3.4: Credit Period

3.4 Gestation Period and Time Frame for Decision

By gestation period, we mean the loan processing time. After getting a loan application and
different documents and checklists, Bank analysis the documents, loan applications and CIB
report the applicants.

Branch office: The branch office takes 7 days maximum to make the decision.
Corporate office: Authority of the corporate office will take decisions within maximum 10
days and will send it to head office for approval.
Time frame for decision: Any requirement for further information regarding a particular
credit proposal is communicated within 7 days from the date of receiving the proposal. Any
decision regarding approval of a query free credit proposal is communicated to the branch
within 15 days from the date of receiving proposal.

3.5 The LTD Ratio

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3.5 A/D Ratio

All the functions of a modern Bank, lending is the most important. About 80% of the revenue
of the commercial banks comes from interest and discounts, that is to say, income derived
from credit and advances including bills discount and bills purchase. Credit and advances
comprise a large portion of bank's total assets and form the backbone of the bank's structure.

Advance-to-Deposit ratio means loans (advances) as a percentage of deposits. A ratio of

100% or less shows that the bank is funding all its loans from deposits rather than rely on
wholesale funding (funding from the capital market or other banks). It is also called LTD
ratio (Loan to Deposit).
It is calculated by: LTD= total loans/ total deposits

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4.1 Procedures of Sanctioning Credit

Client Applicaton

1) CIB Report Stock Report

CRG Reporting Visit report

Income Tax
Statement

Credit proposal

Head Office
Approval

Sanction Letter

Accepted Sanction
Letter

Security Ensurance

Documentation

Loan Disbursement

Figure 4.1 Procedures of sanctioning credit

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 a. At first client should apply for credit facility through credit application form and
should provide trade license, memorandum and article of association, form X,
schedule X, latest Income Tax statement, stock report, latest financial statement,
company information, client list and other information which is needed for the
particular cases.
b. The client officer make detailed analysis with the information, visit the client's
business and if the deal seems profitable for the bank the officer prepares a Credit
proposal according to the clients credit need and send it to the credit risk department
of head office
c. After detailed analysis, assessment and approval through high officials to the board
meeting and sanctioned through consent of the board of directors. After that the
approval of credit facility is sent to the branch.
d. The credit officer then prepares two copies of sanction letter and sends it to the client.
if the conditions are accepted, the client sends back one copy of sanction letter.
e. After that, the credit officer makes appropriate security arrangements and finish
documentation through the direction of lawyer and the consent of clients, and if
needed through the help of registry office in case of mortgage, hypothecation, general
power of attorney etc
f. After all the procedures, when the credit officer feels satisfied with the client's
financial position, their security and documentation, he/she creates loan account and
disburse the loan.

4.2 Credit Proposals and Sanction Advise

The credit application has to follow some rules .These are given below:

a) Every branch has to obtain credit application from the bank's prescribed form.
b) The form must be signed by the proprietor/ partners /directors (as the case may
be).Signature of the application to be verified in conformity with account opening
form.
c) It is to be ensured that all the columns of application form are properly filled in;
particulars and information are complete and correct.
d) All required documents mentioned in the application form are submitted.
e) Branches have to prepare a proposal in favor of client by highlighting the security;
financial statement to make the credit facility offered of the client is approved.
f) Branch has to enclose a CRG statement which is complex Matrix prepared to find out
the financial position of the client is acceptable or not. If the matrix shows the score
75 or above then the client is credible to provide credit facility.
g) Branch will outright reject the proposals, which are restricted by Bangladesh bank and
in conflict with head office guidelines.
h) branch in-charge will have to visit the business site of the client
i) Branch will verify the particulars furnished in the application and ascertain
customer’s honesty, integrity and business dealing, through other sources too.
j) Brach will obtain credit report of borrowers and its sisters concerned from the credit
information bureau of Bangladesh Bank. They may also obtain credit report from
local banks and financial and credit institutions.

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 k) Branch will have to prepare appraisal report for all credit proposals. In appraising
advance proposal, branch manager must follow principles of good lending.

4.3 Steps involved in Credit Processing

Best steps involved in credit processing are given below:

a) Application for Loan

Applicants apply for the loan in the prescribed form of bank. The purpose of this form is to
eliminate the unwanted borrowers at the first sight and select those who have the potential to
utilize the credit and pay it back in due time.

b) Getting credit information

Then bank collections credit information about the borrower from the following sources:
• report from the credit information bureau (CIB) of Bangladesh Bank
• personal investigation
• confidential report from other banks/ head office/ branches/ Chamber of Commerce

c) Scrutinizing and investigation

Bank then starts examination that whether the loan applied for is complying with its lending
policy. If comply then it examines the documents submitted and the credit worthiness
analysis i.e., analysis of financial condition of the loan applicant is very important. Bank goes
for Credit Risk Grading (CRG) which is introduced by Bangladesh Bank in 2003. If this
analysis reflects favorable condition and document submitted for the loan appear to be
satisfactory, the bank goes for further actions.

d) Existing process of handling loans:

The process of sanctioning loan is as follows:
The C's of good and bad loan:
The branch manager of Sonali Bank Limited try to judge the client based on some criteria.
These criteria are called C's of good and bad loans. These C's are described below.

i. Character: The outcome of analysis the character is to have our own idea about the
integrity, experience and business sense of the borrower.
ii. Capital: For identifying the capital invested in the business, the manager sees the
financial statements of the business of clients.
iii. Capacity: Capacity of the borrower's in running the business is highly emphasized in
the time of selecting a good borrower.
iv. Collateral: The bank makes sure that there is a “Second way out” of a credit, but does
not allow that to drive the credit decision.
v. Conditions: Understanding the business and economic conditions can change often
the loan is made
vi. Carelessness: Remember that documentation, follow up and consistence in
monitoring is essential to high quality loan portfolios.
vii. Contingencies: The manager makes sure that he understands the risks , particularly
the downside possibilities and that he structures and process the loan consistently with
that understanding

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viii. Credit Query: The loans and advances department gets a form filled up by the party
seeking a lot of information.

4.4 Credit Risk Grading (CRG)

CRG is an important tool for credit risk management as it helps the banks and financial
institutions to understand various dimension of risk involved in different credit transactions.
This is a vital system to take decisions both at the pre-sanction stage as well as post-sanction
stage.

Categories of credit risk

Category Code
Superior (SUP)-1
Good (GD)- 2
Acceptable (ACCPT)-3
Marginal / Watch List (MG/WL)-4
Special Mention (SM)-5
Substandard (SS)-6
Doubtful (DF)-7
Bad and Loss (BL)-8
Table 4.1 Categories of Credit risk

4.5 CIB Reporting

Credit Information Bureau (CIB) means to verify the information provided by client before
loan disbursement to know about the liability position of the prospective borrower.
Information is gathered from Bangladesh Bank. CIB reporting is also done for the existing
customer in every 6 months and for large borrowers in every 2 months.

4.6 Documentation
Document is the acknowledgement of the parties concerned their involvement in that credit/
transactions. It is the acknowledgement of debt and confirmation to repay from the part of a
borrower//mortgagor/ owner of the security, to be liable in the court of law and can be
enforced by the court of law. A property-structured credit agreement must also protect the
bank and those it represents. Principally its depositors and stockholders- by imposing certain
restrictions on the borrower’s activities, when these activities have a chance to threaten the
recovery of the bank funds. The process of recovering the banks funds-- when and where the
bank can take actions to get its fund returned-also must be carefully spelled out in a credit
agreement.

a) From whom documents to be obtained?

Documents to be obtained from the following –
• Borrower
• Holder of the instrument (FDR, Shares etc)

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 • Owner of the property
• The authorized person in official authority.

b) Steps of documentation:
Generally there are four steps:
i. Obtaining documents or instrument from the borrower / Guarantor / Mortgagor
ii. Execution
iii. Stamping (Stamp duty rate enclosed )
iv. Registration

c) Charge Documents:
Charge documents are generally prescribed in printed forms used by bank against credit to be
executed by the borrower. For all types of credit, there is some common charge documents,
these are:
• Promissory Note: It is a document which ensures that the client promises to
pay the money along with the interest of the loan to the bank authority.
• Loan Disbursement Letter: The document is considered as the request or
application to disburse the loan or behalf of the client.
• Account Balance Confirmation Slip : It is the document which confirms the
amount of money the client has agreed upon to borrow
• Letter of Continuity: The document is a promise by the client to continue to
repayment of the loan with the interest and it is considered as the liability to
pay the installment in every month and in a continuous basis.

Depending on the nature of credit, nature of security, nature of constitutes, some

other addition documents are required.

4.7 Credit Review

While banks today use a variety of different credit review procedures, nearly all
banks follow a few general principles.
• Carrying out reviews of all types of credit on a periodic bass- for example,
every 30,60 or 9 days, the largest credit outstanding may be routinely
examined, along with a random sample of smaller credits.
• Structuring the credit review process carefully to make sure that the most
important features of each credit are checked.
• Reviewing most frequently the largest credit because default in this credit
agreement could seriously affect the banks financial conditions.
• Conducting more frequent reviews of troubled credit, with the increasing
frequency of review, as the problems surrounding any particular credit
increase.
• Accelerating the credit review schedule if the economy slows down or if
the industries in which the bank has made a sustained substantial portion
of its credits develop significant problems.

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 5.1 Default Credit

Inevitably, despite the safeguards most banks built in their lending programs, some credits on
a bank book will become problem credits. Usually this means a credit has declined
significantly in value.

5.2 Indication of Default Credit:

▪ Unusual or unexplained delay in receiving financial reports and payments are in

communicating with Bank personnel.
▪ Non-payment of interest or principal or both on due dates for past Dues beyond a
responsible period or recurring past dues.
▪ In case of overdraft, no movement in the account beyond a reasonable period
▪ A deterioration in financial condition of the client as gathered from client’s latest
financial statement.
▪ Shortfall in collateral coverage, particularly if the collateral was a key factor in the
decision making
▪ Death or withdrawal of key management personnel
▪ Company filing for bankruptcy or voluntary dissolutions
▪ For business credits, any sudden change in method used by the borrowing firm to
account for depreciation, make pension plan contributions, value inventories account
for taxes or recognize income
▪ For business credits, restructuring outstanding debt or eliminating dividends or
experiencing a change in the customer's credit rating.

5.3 Steps to Follow to Handle Classification

The measures that the credit department has taken to handle the default credit are:
✓ Rechecking the accounts for all outstanding, including any outstanding in allied or
sister company or in owner's or partners' or director's personal names
✓ Thoroughly reviewing loan documentation to confirm "we have what we need",
documents are in proper form, properly executed and current.
✓ Taking current market value of the securities according to liquidation basis and taking
a closer look at the asset and liability to determine who has the prior right on those
assets.

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 ✓ If guarantors are involved, looking closely at the net worth statement and sending
demand notice.
✓ Once the account is classified sub-standard, credit line is frozen by the bank.
Following guidelines are strictly observed for treatment of unpaid interest in classified
accounts:

❖ If interest overdue by more than 180 days, the outstanding is classified as

substandard-Non earning or doubtful, if not already so classified.
❖ If any loan is classified sub standard or doubtful, interest charged on this is not treated
as income. All such interest is credited to interest suspense account or any other
account specially designed for this purpose by Bangladesh Bank.
❖ When loan is classified as bad or loss, charging of interest thereafter is suspended
from the date of bad and loss classification. A contingent entry is taken up for the
interest being suspended, which is reversed back as actual liability at the time of suit
being field for recovery.
❖ A properly conducted overdraft facility is considered earning as long as outstanding
with interest debited to the account remain within approved and valid limit.
❖ Sometimes, substandard loans are restructured with the stipulation that as part of the
rescheduling, accrued unpaid interest be capitalized.

5.4 Recovery Probability and Efforts by SBL

Probability Efforts
Loan determined to have high probability of Recovery efforts to continue on an on-going
recovery within 6 months basis
Loan determined to have moderated Review recovery efforts on a 3 month basis
probability of recovery within 1 year
Loan determined to have low and remote Review recovery efforts on a 6 month basis
probability of recovery
Loan determined to have virtually no chance Charge-off the books.
of recovery

However, in this situation, proper approval is taken from the appropriate approving authority
and the guidelines of Bangladesh Bank are followed.
One of the important things is to getting rationalizing the amount and the cost of recovering
process. The cost includes:
• Employee man-hour
• Legal Expenses
• Charge of any external collection agency if used.

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5.5 Recovery Attempts by SBL

The term recovery refers to the collection of over dues and is recovered on an installment
basis depending on the nature of the business. SBL follows a common guideline in
recovering its overdue loan. Here is this:
Legal :
a) Reminder Notice: When the bank can assume that the loans can be default, it follows
up through telephone calls or by visiting the customer’s home or business office. The
bank gives written notices to the borrower informing him/her about the due
installment and requesting him/her to clear the dues. If the borrower is found to be
avoiding calls from the bank intentionally, then the bank moves ahead with the
repossession in case of secured loans and legal proceedings of recoveries in case of
Unsecured loans.
b) Repossession of the Mortgaged Property: In case of secured loans, the bank
repossesses the property to recover the dues of the lender without hurting the
borrower’s dignity in any form. The recovery process involves the repossession,
valuation of the asset and realization of the outstanding amount by way of sale of the
asset. The repossession is done only after the final notice is sent to the borrower and
the process is done by keeping all legal formalities in mind.
c) Valuation and Sale of Property: Valuation of the property is done by all legal
means and in a transparent manner. In case of a secured loan like loan against
property, home loan or mortgage, the value approved by the valuer of the company is
conveyed to the borrower before proceeding further for the sale. The Bank holds the
right to recover any due amount even after the sale of the property. Any excess
amount is returned to the borrower after clearing all the expenses.
d) Borrower’s Opportunity to Take Back the Security: The repossession of the
secured asset is done only for the purpose to recover the due amount from the
borrower. As per the agreement, the bank will willingly handover the possession to
the borrower before finalizing any sale transaction of the property. With the genuine
reason for the inability to repay the installments within the scheduled time frame, the
lender may consider to handover the property within 7 days after receiving the
installments. This is only done if the lender is convinced with the arrangements and
the borrower ensures to repay the remaining amount in equal installments in the
future.
Non Legal:
a) Payment Holiday: Sometimes the borrower requests the bank to provide him/her for
an EMI holiday for a few months. SBL considers this type of situation and provides
payment holiday; though a little penalty is charged.
b) Reduction in EMI: If the borrower is struggling with the EMI burden and wants a
considerable reduction in monthly outflow, the borrower can anytime request the bank
to increase the loan tenor. For this, the borrower has to pay a higher amount of
interest. c)
c) Restructure of Loan: If the borrower is unable to maintain the terms and conditions,
he/she requests to relax these. This helps the borrower to avail of reduced charges,
lower interest rates, increased loan tenor, etc.

Page | 24
 d) One Time Settlement of Loan: This option arises when the borrower is unable to
pay the loan to an extent where the interest charges are higher than the principal
amount. When the borrower is not in the condition to pay the loan amount, he is
allowed to settle the loan account by paying a one-time payment.

5.6 Recovery Performance of SBL

Each year the Bangladesh Bank signs memorandums of understanding (MOUs) with all state-
owned banks giving specific target for loan recovery. Sonali Bank Limited now has the third
largest loan portfolio. On the other hand, it occupies the second position of defaulted loans
among the scheduled banks of Bangladesh. It has missed the recovery target in the year
2019.Here is some comparative facts about the recovery performance of this bank for the
year 2018 and 2019:
o Of the branches of Sonali Bank, 14 out of 15 including the head office missed the
recovery target. Only the Rangpur general manager's office achieved Tk 164.16 crore
loan recovery targets.
o In 2019, the recovery target of Sonali Bank Ltd was 6,645 crore, but it managed to
recover only Tk 820.35 crore, which is only 7.73%
o It regularized 2,377.1 crore which made the total recovery amount Tk 3,197.45, only
48.12% of its target set by the finance ministry.
o The overall loan recovery of the bank has also dropped by 13.01 percent or Tk 477.55
crore in 2019 compared with its Tk 3,675.72 crore defaulted loan recovery in the year
2018.
o The measures, however, appear to have been ineffective since the central bank has
never taken any punitive measure for failing to achieve the targets, the central bank
official said.
o Sonali Bank could not meet the loan write off target by a great margin. The bank
managed to settle cases for only Tk 44.6 crore against the Tk 710 crore were on the
line. So far, it has written off loans worth Tk 7,094 crore from its ledger.
o The amount of defaulted loans in Sonali Bank is 29.27% of the entity's outstanding
loans.

7000

6000

5000

4000 Loan Recovered (Cash)

3000 Loan Recovery Target

Loan Regularized
2000

1000

0
2019

Page | 25
Figure 5.1 Loan recovery performance of the year 2019

loan recovery performance

2018 VS 2019
3800
3600
3400
3200 loan Recovered

3000
2800
2018 2019

Figure 5.2 loan recovery performance 2018 vs 2019

800
700
600
500
400
300 Loan Write off Target
200 Actual Recovery
100
0
Loan Write off
Performance
for 2019

Figure 5.3 Loan Write of Performance for the year 2019

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The main reports which are prepared by the credit Department and submitted to head office
on monthly or quarterly basis are described below:

6.1 CIB Report

In every month, a CIB report is sent to Bangladesh Bank from the credit Department mainly
describing each and every borrower's liability and credit status with the branch.

6.2 Statement of Government, Financial Institutions and Big Sectors

Monthly statement of loans of government sector / autonomous and semi autonomous bodies/
public Non-financial Corporation/ local authorities / Non-banking depository Corporations-
public/other financial intermediaries - public (except deposit money banks) / insurance
companies and pension-funds-public with the branch is sent to Bangladesh Bank each and
every month. This statement depicts the amount of funded and non-funded loan and the status
of the loans of a particular entity.

6.3 Cash and Quasi Cash Statement

It's a statement which is sent to Bangladesh Bank every month depicting the status of
collateral security of each and every borrower of credit

6.4 SME Monthly Report

In every month, credit Department generates monthly report of SME depicting the SME
credit client’s funded and non-funded limit and their outstanding and overdue loan position
both individually and in total.

6.5 SME Quarterly Report

In every quarter, credit Department generates sector wise quarterly SME report depicting the
SME credit client’s funded and non-funded limit and their outstanding loan position both
individually and in total.

6.6 Loan Classification and Provision (CL) Report

This report is generated every quarter depicting the branch loan classification and provision
status. It has mainly 6 parts:
Part 1: It describes sector wise calculation of credit clients outstanding loan position,
provisioning requirements and interest on suspense account both individual and in total.

Part 2: It describes detail calculation of credit clients outstanding loan position, provisioning
requirements and interest on suspense account who have taken continuous loans from the
branch both individual and in total
Part 3: It describes detail calculation of credit clients outstanding loan position, provisioning
requirements and interest on suspense account who have taken demand loans from the branch
Page | 27
both individual and in total
Part 4: It describes detail calculation of credit clients outstanding loan position, provisioning
requirements and interest on suspense account who have taken term loan up to 5 years from
the branch both individual and in total
Part 5: It describes detail calculation of credit clients outstanding loan position, provisioning
requirements and interest on suspense account who have taken term loan of more than 5 years
from the branch both individual and in total.
Part 6: It describes total calculation of the loans provided to the staff of Sonali Bank Limited
from the branch.

6.7 Classification of Advances (SBS-3) Report

This is a quarterly report which gives clear understanding about the amount of outstanding
classified loan according to sector, purposes, security and stage of classification.
Some other reports are also sent from credit Department to the head Office on execution of an
event, monthly and quarterly basis.

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7.1 Business Elements Analysis of Year 2015-2019

Particulars 2019 2018 2017 2016 2015

(Taka in (Taka in (Taka in (Taka in (Taka in
crore) crore) crore) crore) crore)
Deposits 275.56 251.88 221.25 205.55 197.91
Loans and 185.39 177.44 146.89 105.67 144.56
Advances
Operating 6.50 5.83 5.05 4.61 4.38
Profit
Import 3.74 3.50 3.12 3.02 2.68
Export 1.07 0.19 0.57 0.85 0.00
Remittance 0.72 0.30 0.41 0.43 0.31
Recovery 0.01 - - - -
Classified loan 5.81 1.21 0.10 0.09 -
Table 7.1 performance of SONALI BANK LIMITED -BISE Branch
Source: Branch reports

300

250

200

150 Deposits
Loans

100

50

0
2019 2018 2017 2016 2015

Figure 7.1 Deposits and Loan Comparison (In crore taka)

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 7

Operating Profit
3

0
2014 2015 2016 2017 2018 2019 2020

Figure 7.2 flow of operating profit

7.2 Deposit Mix Comparison of the Branch for year 2016-2019

Particulars 2016 2017 2018 2019

Taka % Taka % Taka % Taka %

in crore in in in
crore crore crore
No cost 5.51 2.68% 4.23 1.99% 13.80 5.48% 9.16 2.96%
deposit
( CD, Bills
Payable)
Low cost 57.66 28.05% 107.36 48.48% 151.23 60.04% 94.23 34.23%
deposit
( Savings
and SND)
High cost 142.34 69.25% 109.59 49.53% 86.85 34.48% 173.08 62.81%
deposit
(FDR and
DPS)
Total 205.55 100% 221.25 100% 251.88 100% 275.56 100%
deposit
Table 7.2 Deposit mix comparison

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 Deposit Mix Comparison
200
180
160
140
120
No cost deposit
100
Low cost deposit
80
High cost deposit
60
40
20
0
2016 2017 2018 2019

Figure 7.3 Deposit mix comparison

7.3 Key Performance Ratios of the Branch

Particulars 2016 2017 2018 2019

No. of deposit 4063 4592 5558 6492
accounts
Yield on 11.37% 12.51% 12.66% 13.47%
advance (%)
Cost of deposit 6.66% 5.42% 5.55% 3.84%
(%)
Spread (%) 4.71% 7.09% 7.11% 9.63%
Operating cost 1.34% 1.94% 2.32% 2.99%
(%)
Cost of fund (%) 7.99% 7.36% 7.87% 6.83%
Table 7.3 Key Performance Ratios

Page | 31
 16.00%

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2016 2017 2018 2019

Cost of Deposit Yeild on Advance

Figure 7.4 Comparison between Cost of Deposit and yield on Advance

Spread
12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2016 2017 2018 2019

Spread

Figure 7.5 Flow of spread

The spread is going upward smoothly which represents that the credit performance of the
branch is good enough.

Page | 32
8.1 Findings

Every bank has its own credit procedures and management structure. Bank understudy
processes a standard credit procedure. Yet, while working as an internee, I found some
findings in the credit department and management as a whole.
The branch has many clients who take agent services rather than loan and advances;
this is one of the reasons why it is losing the chance to earn more from loans.
Every year, loan disbursement is increasing rapidly but according to that loan
recovery is not increasing.
They don’t concentrate on loan and advances services & don’t visit to the customer
place if needed.
The spread of the branch for last 4 years are going upward very smoothly which
indicates the branch’s efficiency
The single digit interest rate policy of Bangladesh Bank has affected much on this
bank too. It had to review all of its regular conventional interest rate and adjust with
the new ones.
There is lack of experienced and expert manpower in the loan and advance
department as well as the whole branch. If any of the employees is absent, it becomes
difficult to handle the activity.
The sanctioning procedure are lengthy and time consuming
It does not provide attention to export oriented business. Thus it is losing a big
opportunity.

8.2 Recommendation

✓ Special attention should be given to SONALI BANK LIMITED -BISE branch in

export loan as it does not provide much loan on export. But there are lots of
businessmen in the locality who are related with export. So, it should be ensured.
✓ The loan disbursement should be diversified into some other sectors. By diversifying,
it may earn more profit and may reduce the risk of classification of loan
✓ Monitoring and supervision of clients should be strengthened and branch should set
regular scheduled visit to prevent diversion of loan funds, help customers with
needful suggestions those are facing some business management problems
✓ Emphasize on time to time visits to the client's place of business with the goal that
they can gather the advance.
✓ New credit culture needs to be developed in place of default culture. Efforts to be
taken as soon as possible to safeguard the interest of banking sector.
✓ Disbursement is to be made according to the predetermined implementation schedule.
Availability of funds should be such that right amount is available at the right time
and within estimated costs. Any delay in disbursement is to avoided.
✓ The principal branch should decentralize the right of choosing clients

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 8.3 Conclusion
It goes without saying that Credit Policy cannot be isolated from the broader monetary policy
of a country. Like any other segments of the economic policy, credit is very important for any
financial institution as it generates profit and economic activities of the country. In other
words, credit is the input of production process of the economy. Since credit has an inherent
risk, therefore proper utilization of the loan is essential to meet the requirements of the
borrowers.
The learning of the report refers to the fact that individuals are concert conscious of loan
amenities in our country but they are not fully alert of the facilities or structures of the loan
procedures, guidelines and principles, mainly in case of individual or user loan.
Credit Division of Sonali Bank Limited needs some improvement. If it becomes succeed to
do this, it will achieve success in the long run.

References

1) Annual reports of Sonali Bank Limited for the year 2017,2018 and 2019
2) https://www.sonalibank.com.bd/index.php
3) Training manual for officials of the bank
4) Credit policy of Sonali Bank Limited
5) https://www.entrepreneur.com/encyclopedia/credit-policy
6) https://www.focus-economics.com/economic-indicator/policy-interest-rate
7) http://www.bangladesh-bank.org/
8) http://www.managementstudyguide.com

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