Internship Report

Credit Management of Janata Bank Limited; A study on Narinda

Branch

Md. Kamrul Hasan

ID: B140202101
Session: 2014-2015
BBA-10th Batch

Department of Management Studies

Faculty of Business Studies
Jagannath University

February, 2019
Internship Report

Credit Management of Janata Bank Limited; A study on Narinda

Branch

Md. Kamrul Hasan

ID: B140202101
Session: 2014-2015
BBA-10th Batch

Supervisor
Md. Rashedul Hoque
Assistant Professor

Department of Management Studies

Faculty of Business Studies
Jagannath University

February, 2019
 Supervisor’ Forwarding

………………………..
Md. Rashedul Hoque
Assistant professor
Department of Management Studies
Faculty of Business Studies
Jagannath University
 Declaration

I am Md. Kamrul Hasan, student of Bachelor of Business Administration (BBA), at

Jagannath University, declaring that, this internship report on the topic of credit management
of Janata Bank has only been prepared for the fulfillment as the partial requirement of BBA.
It has not been prepared for any other purpose, reward or presentation.

………………………..
Md. Kamrul Hasan
ID: B140202101
Section-A, 10th Batch

………………….......
Date
 Acknowledgement

As a student of BBA Program, Internship is one of the most important partial requirements of
the total courses BBA program. In this regard I would like to thank all the faculties Jagannath
University who helps me to finish my courses.
This is a synopsis of my recent study on Credit Management of Janata Bank Limited as a part
of the internship program. At the beginning I want to remember almighty Allah for giving me
the opportunity, strength to do this work smoothly & blessings for our success.
I would like to thank my honorable supervisor, Md. Rashedul Hoque, Assistant Professor,
Department of Management Studies, Jagannath University for helping me to prepare the
report. I will remain indebted to him for the valuable suggestions and the time he has given in
supervising my work on report.
I was placed in Narinda Road Branch of Janata Bank limited to work as an intern. The
members of Janata Bank Limited management were very co-operative and helpful. They
helped me through providing various data, guidance and direction. I am grateful to the
Manager of Janata Bank Limited for his cooperation and necessary support.
I am also grateful to all other employees of the branch for their support and assistance. I
humbly appreciated the patience of the entire individual at Janata Bank Limited who spent
their time in making me adapt quickly to the environment of the bank.

………………………….
Md. Kamrul Hasan
ID: B140202101
Section-A, 10th Batch

Department of Management Studies

Faculty of Business Studies

Jagannath University
 Executive Summary

This report is prepared on the basis of my one and half month’s practical experience at
Narinda Road branch, Janata Bank Limited. I started my internship at 29 November by
joining the bank as an internee. I work in different desk under responsible employee of the
desk in the bank. There are two employees whose are concern about loan programs. One is
responsible for all loan programs and another person is responsible for only SME loan
programs. As my internship report topic is Credit Management of Janata Bank Limited. I
focus on credit department of Narinda Road branch.
The internship program helps me to learn more about the practical situation of a financial
institution. Loans or credits comprise the most important asset as well as the primary source
of earning for the banking institutions. On the other hand, loan/credit is also the major source
of risk for the bank management. A prudent bank management should always try to make an
appropriate balance between its return and risk involved with the loan portfolio. From this
report, I have learn about how Janata Bank provide loan and advance and how they recovery
loan and advance. I have also learned about their credit policy applying for disbursement and
recovery of loan and advance. In this report, I have used mainly secondary data. But I have
also used some primary data. During the preparation of this, I have faced some problem. The
main problems are lack of information and time limitation.
This internship program gives a chance to understand corporate life and helps to cope with
environment of an organization. Here I gather some valuable experience and get familiar with
some corporate personnel and understand how they react in different problems and solve
problems. I also have idea about every practices run by Narinda Road branch.
 Table of Contents
Page no.
1.0-1.8 Chapter-1: Introduction 1-4
1.1 Origin of the Report 2
1.2 Background of the Study 2
1.3 Objectives of the Study 2
1.4 Methodology 3
1.5 Limitations of the Report 3
1.6 My Working Area 4
2.0-2.6 Chapter-2: Overview of Janata Bank Limited 5-11
2.1 Introduction of Janata Bank Limited 6
2.2 Vision 6
2.3 Mission 6
2.4 Board of Directors 7
2.5 Products of Janata Bank 8
2.5.1 Deposits 9
2.5.2 Loans and advances 9
2.5.3 Special products 10
2.6 Services of Janata Bank 10-11
3.0-3.6 Chapter-3: Credit Management of Janata Bank 12-21
3.1 Credit 13
3.2 Credit Management 13
3.3 Principles of Sound Lending 13
3.4 Process of Credit Sanction in Janata Bank 15
3.4.1 Loan Application Form 15
3.4.2 Necessary Documents 16
3.4.3 Other Documents 26
3.5 Loan distributed to different sectors 17
3.6 Different Loan Program of Janata Bank 18-21
4.0-4.3 Chaper-4: Discussions and Learnings 22-32
4.1 Financial Analysis 23
4.1.1 Percentage of Classified Loans & Advances 23
4.1.2 Asset Utilization Ratio 24
4.1.3 Credit - Deposit Ratio 24
4.1.4 Comparison between Cost Of Fund &Yield On Loan And 25
Advances
4.1.5 Comparison between Cost of Deposit & Yield on Loan and 26
Advances
4.1.6 Equity Multiplier Ratio 27
4.1.7 Percentage of Loans and Advances with Investment 28
4.1.8 Provision of Loans & Advance 29

4.2 SWOT Analysis 30

4.3 Findings 31-32

5.0-5.2 Recommendations and Conclusions 33-35

5.1 Recommendation 34
5.2 Conclusion 35
References 36
 List of Tables
SL No. Contents Page No.
Table-2.1 The Profile of Janata Bank Limited 7
Table-2.2 The Name of Board of Directors 8
Table-3.1 Amount of Loan Distributed by Sectors 17
Table-3.2 Agricultural Loan Programs 18
Table-3.3 Loan for Large and Medium Enterprises 18
Table-3.4 Working Capital Loan Programs 19
Table-3.5 Import Loan Programs 19
Table-3.6 The Term Loan for Micro and Cottage Industries 20
Table-3.7 The Other Loan Programs 20
Table-4.1 The Scenario of Classified Loan 23
Table-4.2 The Calculation of Asset Utilization Ratio 24
Table-4.3 The Credit Deposit Ratio 25
Table-4.4 The Position of JBL 26
Table-4.5 The Scenario of JBL 27
Table-4.6 Equity Multiplier Ratio 27
Table-4.7 Investment in Portion with Loan and Advances 29
Table-4.8 The Provision of Loan and Advances 30
Chapter-01
Introduction

1
1.1Origin of the Report
Internship is one of the important periods of BBA program. Internship provides a chance to
understand official works of an organization. It introduces students with corporate life. It
provides a unique opportunity to see the reality of business during student life, which enables
them to building confidence and working knowledge in advance of the start of their career.
To fulfill this requirement every university of business arrange a program of internship. It
also provides a chance to research about one sector of the organization and submit a report. I
started my internship at Janata Bank Limited at 29 November 2019.

1.2 Background of the Study

It has become essential for every person to have some idea on the bank and banking
procedure. As our educational system predominantly text based, inclusion of practical
orientation program is an exception to the norm. From practical knowledge, we will be able
to know real life situations and start a career with some practical experience. Bachelor of
Business Administration is a professional course. The course is designed with an excellent
combination of practical and theoretical aspects. To complete BBA, certain times are
preserved for internship.
As a student of BBA, internship is an academic requirement. For internship every student is
required to work in a selected institution to enhance ones practical knowledge and
experiences. For the requirement of my course I was assigned to Janata Bank Limited,
Narinda Road Branch for my internship. In this situation I was assigned to prepare report on
Credit Management of Janata Bank Limited.
Basically, this report is highlighted Credit management of the bank, Structure, Analysis,
Present status, Performance of JBL, Own Experience, Recommendation and Conclusion.

1.3 Objectives of the Study

The primary objective of the study is to analyze the Credit Management system and
performances of Janata Bank Limited and to fulfill the requirement of internship report.

Specific Objectives:
 To get enough knowledge about General banking activities of JBL.
 To Know about Central bank requirements for the commercial banks on Loan and
Advances
2
  To analyze the Credit Management statement of JBL by using some statistical
measures
 To find out the internal system & actual Loan and advances process of JBL
 To point out the major findings of the report & provide some valuable
recommendations based on them.
 To gather knowledge about the transactions of different departments of the bank.

1.4 Methodology
Methodology refers the process of collecting data. To prepare a report gathering data is very
important. The information was collected from both primary and secondary sources of data.
Regarding the information required was collected within the organization from the Corporate
Division of Janata Bank limited. There are two types of data:
A. Primary Data:
 I attentively attain every task was given to me in the bank.
 I tried to understand psychology of respected employees of the bank in
different situation.
 I directly negotiate with the employees.
 I work in different sectors of the Narinda Road Branch of Janata Bank.
B. Secondary Data:
 Search and analysis official site of Janata Bank.
 Evaluate other reports on credit management
 Analysis annual reports of Janata Bank from 2013 to 2017
 Papers and Journals of central bank relating to credit management system.

1.5 Limitations of the Report:

There are some limitation exists in the report.
 The main constrain of the study was insufficiency of information, which was required
for the study. There are various information the bank employee can’t provide due to
security and other corporate obligations.
 Due to time limitation many of the aspects could not be discussed in the present
report. Learning all the functions within just 45 days is really tough.
 Since the bank personnel were very busy, they could not provide enough time to me.
 Lack of opportunity to visit more than one branch.

3
  Lack of experience to make report.
 Lack of practical experience.

1.6 My Working Area

Account Opening:
At first I was asked to work in General Banking and the assigned department was Account
opening. It is a very interesting department because different types of customers were opened
different types of account. Mainly three types of Accounts are opened here, Current Account,
different types of deposit Account and Fixed account. Recently Janata Bank Limited has
started School Banking. It seems more interesting to me. I was often used to fill up the
account opening form.

Foreign Remittance Department:

Foreign remittance department provides facility to receive money send from foreign.
Customer provides their national ID card and phone number as proof. Janata Bank can collect
money from different global money transfer companies like western union.

SME Banking:
I work in SME banking in the Narinda Road Branch, Janata Bank Limited. In 2018,
Bangladesh Bank wants to provide 177000 million to the farmers. Farmers can open account
within 10 taka.

Cash Collection Department:

This is a very restricted department in a Bank. Everybody does not allow going there.
Sometime I was checking the cash voucher. And I also check all other voucher of daily
transaction.

4
 Chapter-02
Overview of Janata Bank Limited

5
2.1 Introduction of Janata Bank Limited
Janata Bank Limited is one of the biggest commercial banks of the country. It’s a state owned
bank that was formed just after liberation of Bangladesh. In fact it was a combination of two
smaller banks namely United Bank Limited and Union Bank Limited. Janata Bank Limited
welcomes you to explore the world of progressive Banking in Bangladesh. It is a state owned
second largest commercial bank and is catering the need of the mass business people. It was
corporatized on 15th November 2007. Janata Bank Limited was born with a new concept of
purposeful banking sub serving the growing and diversified financial needs of planned
economic development of the country. Janata Bank Limited, one of the state owned
commercial banks in Bangladesh, has an authorized capital of Tk. 30000 million, paid up
capital of Tk. 19140 million, reserve of Tk.17234 million.
Immediately after the emergence of Bangladesh in 1971, the United Bank Limited and
Union Bank Limited were renamed as Janata Bank. On 15th November, 2007 the bank has
been corporatized and renamed as Janata Bank Limited (Bangladesh Bank, 2017). Janata
Bank, Ltd. is a Bangladesh-based Company that provides commercial banking services. The
Company offers Internet banking, credit facilities and program, retail and personal banking,
foreign remittance, international banking, micro enterprise and special credit, rural banking
and credit program services. It also offers Financing Information Technology Sector,
Financing of Industries, Ready Cash, and Windows for SMEs, Loan to Travel Agencies,
Loan to Diagnostic Centers, NRB Escrow Account and NRB Gift Cheque products.
The Company currently operates through 910 branches including 4 overseas branches at
United Arab Emirates. The goal of the bank is to actively participate in the socio- economic
development of the nation by operating a commercially sound banking organization,
providing credit to viable borrowers, efficiently delivered and competitively priced,
simultaneously protecting depositors’ funds and providing a satisfactory return on equity to
the owners.

2.2 Vision
The Vision is to become the effective largest commercial bank in Bangladesh to support
socio economic development of the country and to be a leading bank in South Asia.

2.3 Mission
The Mission of Janata Bank Limited will be an effective commercial bank by maintaining a
stable growth strategy, delivering high quality financial products, providing excellent
6
customer service through an experienced management team and ensuring good corporate
governance in every step of banking network.

Some basic information about Janata Bank:

Contents values
Name Janata Bank Limited
Registered Address Janata Bhaban, 110, Motijheel Commercial Area Dhaka - 1000,
Bangladesh.
Legal Status Public Limited Company
Chairman Luna Shamsuddoha
Managing Director & Md. Abdus Salam
CEO
Company Secretary Hussain Yeahyea Chowdhury
Date of Incorporation 21 May 2007
Authorized Capital BDT 30,000 Million
Paid up Capital BDT 23,140 Million
Face value per share BDT 100 per share
Shareholding Pattern 100% Share owned by the Government of Bangladesh
Number of Employees 11,858 (As on 30.11.2018)
Banking license obtained 31 May 2007
from Bangladesh Bank
Table-2.1: Profile of Janata Bank Limited

2.4 Board of Directors

According to the approval of Bangladesh Bank and to the section 95 of the Articles of
Associations, the members of Board of Directors are determined maximum 13 persons. At
present the number of Board of Directors including the CEO & MD of Janata Bank Ltd is 10
(Janatabank-bd.com, 2018). After being corporatized, the Board has become active and
applied more autonomous power to run the bank effectively than before. According to the
Bangladesh Securities & Exchange Commission, the members of the Board of Directors are
independent. They all are nominated by the Government and the proprietor of one share of
the bank. Their shares are less than 1% of the paid up share.

7
Name Designation
Luna Shamsuddoha Chairman
Mr. Manik Chandra Dey Director
Khondker Sabera Islam Director
Mr. Md. Mofazzal Husain Director
Mr. Masih Malik Chowdhury, Director
FCA
Mr. A.K. Fazlul Ahad Director
Mrs. Luna Shamsuddoha Director
Mrs. Selima Ahmad Director
Mr. Mohammad Abul Kashem Director
Mr. Md. Abdus Salam CEO and Director
Table-2.2: The Name of Board of Directors

2.5 Products of Janata Bank

Mainly 3 types of products are by Janata Bank.
A. Deposits
B. Loans and advantages
C. Special product

2.5.1 Deposits
i. Current Deposit: Janata Bank Limited offers customers current deposit facility for
day-to-day business transaction without any restriction. This deposit account pays no
interest but a customer can withdraw money from this account when he wants by
presenting his account cheque over counter during any working day. This type of
account may be opened in the name of individual or firms. This account suits best for
business man or business firm.
ii. Saving Deposits: Savings Bank Account can be opened in any branch of Janata Bank
depositing any amount of taka by any Bangladeshi citizen in the name of an
individual or a group of individuals which can be operated singly or jointly. Account
holder can deposit or withdraw any amount during any working day with prior notice
or without notice.

8
 iii. Special Notice Deposit: Janata Bank Limited offers interest on customer's special
notice deposit account and gives facility to withdraw money at any time.
iv. Term Deposit: A depositor can open Fixed Deposit Account for different terms with
any branch of Janata Bank easily. Any individual or a group of individuals can go to
any branch, fill a prescribed form, depositing cash or easily cashable instrument of
FDR amount and a Fixed Deposit Receipt will be issued by the Bank on behalf of the
applicant (Bullivant, 2016).
v. Schemes: Under this scheme Janata Bank offers various deposit schemes following
monthly savings plan suitable for all classes of people and continue depositing to
complete the respective tenor.

2.5.2 Loans and advances

i. Commercial loans
ii. Agriculture / Rural Credit
iii. Land Mortgage loans
iv. Rural Transportation loans
v. Self-loans
vi. Specialized loan programs
vii. Large and Medium-Term loans to industry
viii. Agro-based Projects / Industries-Term loans
ix. Term / Project loans for priority industries
x. Term Loans to Small and Cottage industry
xi. Working Capital loan
xii. Import Trade loans
xiii. Export Trade loans
xiv. Service Holder loans
xv. Consumers Credits
xvi. Financing in Computer Software and Information Technology industry
xvii. Cyber cafe loans
xviii. Women entrepreneur loan
xix. Employment loans for rural Women's
xx. Nursery, Forestry and Horticulture cultivation loan
xxi. Loans for Disabled persons

9
 xxii. Loans for Farming Goats
xxiii. Loans for Leather Goods exporting
xxiv. Kakara loans for farming
xxv. Loans for the cultivation of Flowers
xxvi. Doctors loan
xxvii. Financing in Green Banking

2.5.3 Special products

i. Special NRB (Nonresident Bangladeshi) Product:
 NRB Gift Cheque
 NRB Escrow A/C
 Continuous Benefit Account
 Advance Benefit Account
 Foreign Currency Account
 NRB Home Loan Scheme

ii. Credits:
 Advance Benefit Account
iii. Special Deposit Product:
 Q-Cash Deposit
 NRB Gift Cheque
 Ghore Ghore Sanchay
 Gift Cheque Scheme
 Continuous Benefit Account

2.6 Services of Janata Bank

A. Personalized Services:
Janata Bank Limited with its widely speeded branch network and skilled personnel provides
prompt and personalized services like issuing:
 Demand Draft
 Telegraphic Transfer
 Mail Transfer
 Pay Order
 Security Deposit Receipt

10
  Transfer of fund by special arrangement
 Normal transfer
 Electronic transfer through Ready Cash Card
 Locker Service

B. ATM Service:
Janata Bank offers ATM facility with debit and credit cards for the customers. Features of
their cards:
 Connected with NPSB (National Payment Switch Bangladesh).
 Running under the largest network of Bangladesh.
 Card holder can use any ATM & POS (Point of Sales) within Bangladesh.
 Mobile phone recharge & Online Tax payment facility is available.
 Minimum fees and charges.
 SMS alert service is available.
 No hidden cost.
C. Utility Bills:
Bills Collection
 Gas bills of Titas, Bakhrabad and Jalalabad Gas Transmission and Distribution
Companies.
 Electricity bills of Dhaka Electricity Supply Authority, Dhaka Electricity Company,
Bangladesh Power Development Board and Rural Electrificatio n Board.
 Telephone bills of Telegraph and Telephone Board.
 Water/Sewerage bills of Water and Sewerage Authority.
 Municipal holding tax of City Corporation/Municipalities.
 A pilot scheme is underway to provide personalized services to our clients.
Payments Made on Behalf of Government to:
 Non- Govt. teachers’ salaries
 Girl Students scholarship/stipend & Primary Student Stipend.
 Army pension
 Widows , divorcees and destitute Women Allowances
 Old-age Allowances
 Food procurement Bills

11
 Chapter-03
Credit Management of Janata Bank

12
3.1 Credit
The word credit is derived from the Latin word credo which means I believe and is usually
defined as the ability to buy with a promise to pay. It consists of actual transfer and delivery
of goods and services in exchange for a promise to pay in future. It is simply the opposite of
debt. Diversification of banking service has accelerated the use of credit in the expansion of
business operation. It is a fundamental precept of banking everywhere that advances are made
to customers in reliance on his promise to pay rather than the security held by the banker.
Loans or credits comprise the most important asset as well as the primary source of earning
for the banking institutions. On the other hand, loan/credit is also the major source of risk for
the bank management. A prudent bank management should always try to make an appropriate
balance between its return and risk involved with the loan portfolio. Credit appraisal process
is the tool, which helps the bank to predict the risk and return on the proposed project for
credit disbursement. To get a clear idea about credit appraisal process we need to know the
key factors of credit appraisal procedures.

3.2 Credit Management

Commercial Bank performs various responsibilities now a day. Providing Loans and
Advances is one of the main duties among them. Basically credit is the institutional
arrangement of lending funds mainly to the traders and industrial entrepreneurs by the
banking company. The major portion of bank’s funds is employed by various ways of loans
and advances, which is the most profitable employment of its funds. The major part of bank
income is earned from interest and discount on the funds so lent. The job in this department
starts from the application made by the client; approve the same, which is disbursed to
customers (Edwards, 1980).

3.3 Principles of Sound Lending

Every branches or disbursement unit of loan and advances of Janata Bank Limited follows
some principles for sound lending which are as follows:
Safety:
Safety first is the guiding principles of Janata Bank Limited. Bank is in the business to make
money. Like any other banks, Janata Bank mainly uses depositor’s money as a means of its
earnings, but safety is never sacrificed for profitability. The money of the depositors being

13
repayable on demand or after a short notice, determines the capacity of the bank as to the
period for which he can safely lend it out without any uncalculated risk. So it is the declared
principle of Janata Bank Limited to make such advance which is expected to come back in
the normal course, that is, bank may not have to resort legal action or to sell the securities to
liquidate the advance.

Liquidity:
Janata Bank stresses on the liquidity of the advance it makes. Liquidity means the availability
of the Bank Funds on short notice. The liquidity of an advance means its repayment on
demand on due date or after a short notice. The loans stand fair chances of repayment
according to the repayment schedule. Otherwise the liquidity position of the bank will be
endangered. Liquidity also signifies that the assets should be saleable without any loss. Even
in the case of fully secured advances, if it is feared from the very beginning that advances
would only be recovered by selling the securities, it is not considered a good advances. It
must always therefore will be ensured that the advance will be repaid from sources other than
the securities pledged (Fletcher, 1996). Keeping this in view, Janata Bank always prefers to
lending to working capital and trading loan.

Purpose:
As a prudent banker, Janata Bank does not want to through money in the water. So before
granting loans to the borrower, it thinks twice on what purpose it is lending. Whether the
purpose for which the loan is being granted is in line with the guidelines and directions of the
Central Bank of the country.

Profitability:
Banking is essentially a business which aims at earnings a good profit. No business
organization can run successfully, without profit. If the banks cannot earn profit, it will not be
in a position to pay the depositor’s due in time. Bank has also to meet its establishment and
other charges or expenses. Interest earned by a bank on its advances is the main source of its
income. The difference between the interest received on advances and the interest paid on
deposits constitutes the major portion of the banker’s income. Profitability is a measurement
of efficiency and ultimately its success or failure. So, profitability is the ability to earn a
profit.

14
National Interest:
Janata Bank plays a significant role in the economic development of our country. As a fully
state-owned Bank, we generally lend in the sectors if the purpose of the advance is for overall
national development plans necessitating flow of credit to priority sector in the large national
interest. Sometimes, the need of the borrower may be considered so essential for the benefit
of the national economy that despite heavy risks involved the advance is granted. For
example: Agricultural loan. We have to disburse it for the national interest, not for profit.
Because the interest we receive on this type of loan is far below the cost of fund. Yet we have
to disburse it for ensuring the optimum level of food production.

3.4 Process of Credit Sanction in Janata Bank

3.4.1 Loan Application Form
The Janata Bank seeks information form the application form:
 Customer’s business experience
 Amount of assets and liabilities
 History of business
 Name of advance sought
 Period of advance
 Source of repayment
 Analysis of financial statement
 Analysis of past Transaction made with the bank
 Credit Information Bureau (CIB) report
After collecting information, bank analysis this information and assess as the acceptability of
credit of the applicant. For the secured loan, bank gives priority to the security that has the
following features:
 Marketability of the security
 Price stability
 Consistency
 Durability
 Position of the property
The conditions, which are maintained in the branch in the branch for issuing loans are:
 Name and address of the borrowers
 Nature of debt

15
  Amount of debt
 Primary deposit
 Terms of loan
 Margin
 Interest rate
 Special conditions

3.4.2 Necessary Documents

In case of the issuance of loan, some documents must be presented to ensure the validity of
the client about the contract he/she is going to make with the loan. The bank wants to make
sure that we are lending the loan to right person or organization from whom/which it is
possible to recover the amount disbursed.
The instrument which are necessary for issuing debt:
 Letter of continuity
 Letter of arrangement
 Letter of disbursement
 Statement of monitoring signed by manager Memorandum of deposit title dead
 Power of attorney in case of failure to repay debt. Guarantee of owner of property
 A passport size photograph

3.4.3 Other Documents

Documents common to all sorts of loans and advances specified below:
 Demand Promissory Note:
DP Note is an unconditional written promise made by the borrower to the Bank to
repay the amount of loans/advances at a fixed or determinable future date along with
interest at a stated rate.
 Letter of Arrangement:
The borrower acknowledges the Bank’s right to cancel the facility allowed at any time
without assigning any reason and with or without prior notice.
 Letter of Continuity:
The borrower undertakes to remain liable on the DP Note and other loan
documentation even if the liabilities are fully or partially adjusted during the credit
facility and even through the account may show credit balance from time to time.

16
 Letter of Revival:
The document refers to the law of limitation whereby documents become time barred
after 3 years from the date of execution. The period of limitation within which a sent
for recovery of the overdue loans/advances to be filed the ordinary period of 3 years
from the date on which the facility was extended. The limitation period for mortgage
is 12 years beginning on the date of the mortgaged deed. The borrower through Letter
of Revival confirms having precluded enforcement of limitation law and also
confirms to remain liable on Promissory Note and other documents executed
notwithstanding the law.
 Legal Documents:
 Memorandum and Articles of Association (Limited Company),
 Registered Partnership Deed (Partnership Firm)
 Trade License
 Board resolution covering corporate borrowing power and execution of
security documents (Limited Company)

3.5 Loan distributed to different sectors:

Sectors 2017(BDT 2016(BDT 2015(BDT

in million) in million) in million)
Rural credit 20,439.39 18781.30 16955.67
Export finance 57414.10 50400.00 48850.40
Import finance 40,458.80 46,227.90 50,694.96
Industrial credit 98,235.70 76,438.20 57,530.60
Sugar & Food 10,786.60 8,930.50 6,879.90
(industrial & trade)
Steel & Engineering 9,296.90 8,412.10 7,980.80
Textile (industry 19,752.70 19,778.20 18,805.80
& trade)
Jute (industry & 10,185.00 5,696.70 7,565.80
trade)
Tannery (industry 10,225.00 5,579.10 5,430.90
& Trade)

17
Transport 416.13 340.10 213.93
Others 72,650.97 79,189.10 64,838.89
Total 349,861.30 319,773.20 285,747.65
Table-3.1: Amount of loans distributed by sectors

3.6 Different Loan Program of Janata Bank

Janata Bank provides loan in different sectors in different credit program. Investment is very
essential for development of economy and infrastructure of Bangladesh. Janata Bank is
concern about their liability as a government owned bank. There are all programs run by
Janata Bank for providing loan (Google.com, 2019).
Agriculture Loans:
Agriculture sector is the most earning for Bangladesh. Almost 85% people are directly or
indirectly related to agriculture sector. Moreover, farmers are not solvent in Bangladesh they
have not enough money to bear the expense of irrigation and cultivation.

Agriculture Loan program Interest rate

All kinds of grain / corn, sugarcane cultivation (common areas), fish 10%
farming and shrimp farming, the current cow / buffalo purchase and
animal husbandry, poultry, bananas, betel baraj
Shrimp farming loans 10%
1. All irrigation equipment, agricultural machinery 10%
2. Production of salt 4%
Pulses, spices, oil seeds and corn 4%
Poverty alleviation 10%
Specialized loan programs 8%-10%
Rural credit 10%
Table-3.2: Agricultural Loan Program

Term Loan for Large and Medium Industries:

Term Loan for Large and Medium Industries loan Interest rate Note
programs
Dairy, poultry, fish, hatchery 13% Loan should be
upward than 3.00

18
 crore
Agro-based industries-term / project loans 13%
Term priority sector / project loans 13%
Term export industry / project loans 13%
Potato cold storage for preservation 13%
Other large and medium-term loans sector 13%
Leasing in favor of the company's debt 13%
Table-3.3: Loan for Large and Medium Enterprises

Working Capital Loan:

Working capital loan programs Interest rate
Working capital loans for jute industry 13%
Haskim mills working capital loan 13%
Save potatoes in cold storage 13%
Other working capital loans 13%
Working capital loans for jute industry 13%
Table-3.4: Working Capital Loan

Green banking:
Green Banking, as defined by Institute for Development and Research Technology, is an
umbrella term referring to practices and guidelines that make banks sustainable in economic,
environment, and social dimensions. It aims to make banking processes and the use of IT and
physical infrastructure as efficient and effective as possible, with zero or minimal impact on
the environment (Janata Bank limited 2013). The purpose of green banking is reducing brick
kilns and establishing solar, biogas, waste treatment plants. Interest rate is 13%.
Import Loans:
Import loan programs Interest rate
PAD (cash) 13%
LTR 13%
all types of import demand loans 13%
Table-3.5: Import Loan Programs

Term Loan for Micro and Cottage Industries:

Term Loan programs for Micro and Cottage Industries Interest rate

19
Milk production / cow and poultry farms, semi-intensive shrimp, fish 13%
and other small industries to set up farms, etc. (highest 3 crore)
Small and Cottage Industries loan 13%
Weaving loan 13%
Buffalo production loan program ( interest rate can be change) 13%
Table-3.6: The Term Loan for Micro and Cottage Industries

Others loans
Other loan programs Interest rate
Service industry 13%

Miscellaneous 13%
Special economic area (SEZ) interest rates on loans 5%
Home renovation loans 13%
Diagnostic Business 13%
Travel agencies 13%
Jute business 13%
US aided commercial loan project 13%
Urban commercial building 13%
Construction of residential houses in urban areas 13%
JBDBS Interest Rate + 2%

Loan against fixed deposit Interest Rate of Account +

2%
Loan against Medical Deposit Scheme Interest Rate of Account +
2%
Loan against Education Deposit Scheme Interest Rate of Account +
2%
JBDS Interest Rate of Account +
2%
Food Ministry (including the collection of domestic food crops) 13%
Loan against wage honors 13%
Brick kilns 13%
Transport 13%
BADC/BRTC 13%

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Loan against FDR Interest Rate of FDR + 2%
Loan against FDR of other banks Loan against FDR + 4%
Loan against National Investment Bond, ICB units, insurance 13%
policies, shares, debentures
Work order 13%
Loan against JBMMS (4 and 6 year) Interest Rate of Account +
2%
Loan against Janata Bank Retirement Savings Scheme Interest Rate of Account +
2%
Loan against Retirement Savings Scheme Interest Rate of Account +
2%
Loan against Janata Bank monthly profit scheme Interest Rate of Account +
2%
Loan against Non-resident pension scheme Interest Rate of Account +
2%
Table-3.7: The Other Loan Programs

21
 Chapter-04
Discussions and Learnings

22
4.1 Financial Analysis
4.1.1 Percentage of Classified Loans & Advances
Classified loan refers to any bank loan that is in danger of default. Classified loans have
unpaid interest and principal outstanding, and it is unclear whether the bank will be able to
recoup the loan proceeds from the borrower. Banks usually categorize such loans as
adversely classified assets on their books (Janata Bank limited, 2015).
The scenario of Janata Bank classified loan is as below:
(In million BDT)
Particular 2017 2016 2015 2014 2013

Loans and advances 285,747.65 305339.6 257801 225732.2 166359.5

Classified loans & 31,766.86 53,201.69 15,040.00 11,827.00 14,037.00
advances (Non-
performing loans)
Percentage of NPLs to 11.12% 17.42% 5.83% 5.24% 8.44%
total loans and advances
Table-4.1: The Scenario of Janata Bank Classified Loan

Graphical presentation:

350000

300000

250000

200000 Loans and advances

150000 Classified loans & advances

(Non-performing loans)

100000

50000

0
1 2 3 4 5
:
Fig: JBL’s Classified Loan and Advances

23
Interpretation:
From the graph, we can see that as the amount of Loans and Advances increase the amount of
NPL also increase but the percentage of NPL to total loan is almost same. In the year 2014
we notice that the percentage of NPL to total loan increase three time then the previous. At
the year 2015, this percentage decrease in a large extent, never the less this percentage is not
satisfactory. Still it is two-time more than one year before. The percentage needs to decrees
as before, if possible lower than that.

4.1.2 Asset Utilization Ratio

The asset utilization ratio calculates the total revenue earned for every dollar of assets a
company owns. For example, with an asset utilization ratio of 52%, a company earned $.52
for each dollar of assets held by the company. Increasing asset utilization means the company
is being more efficient with each dollar of assets it has. This ratio is frequently used to
compare a company's efficiency over time.

Asset Utilization = Revenue / Average Total Assets

Calculation of asset utilization ratio of Janata Bank:

(In million BDT)
Particular 2017 2016 2015 2014 2013
Revenue 55,071.85 49,515.63 40,635.53 30,613.92 24,074.10
Total Assets 586,082.98 511,129.41 446,111.42 345,234.00 294,727.00
Asset Utilization Ratio 10.04% 10.35% 10.27% 9.58% --------
Table-4.2: The Calculation of Asset Utilization Ratio of JBL

Interpretation:
From the above table we can see that, Janata Bank Limited asset utilization ratio is very low.
It shows that Janata Bank Limited asset producing only 10% return. The growth of Janata
Bank Limited asset utilization ratio is very low. It is almost same in the last few years.

4.1.3 Credit - Deposit Ratio

Credit deposit ratio also known as the LTD ratio (Loan to deposit), is a ratio between the
banks total loan and total deposits (Janata Bank limited, 2014). If the ratio is lower than 1, the
bank relied on its own deposits to make loans to its customers, without any outside
borrowing. If, on the other hand, the ratio is greater than 1, the bank borrowed money which

24
it reloaded at higher rates, rather than relying entirely on its own deposits. Banks may not be
earning an optimal return if the ratio is too low. If the ratio is too high, the banks might not
have enough liquidity to cover any unforeseen funding requirements or economic crises. It is
a commonly used statistics for assessing a bank's liquidity.
Credit Deposit Ratio: Credit Deposit Ratio is_
Total Loans & advance/Total Deposit

Janata Bank credit deposit ratio is given below:

(In million BDT)
particular 2017 2016 2015 2014 2013
Total Loans 285,747.65 305,339.57 257,801.03 225,732.21 166,359.48
& advance
Total 478,535.57 409,767.01 361,676.69 286,566.84 246,175.04
Deposit
Credit- .5971 .7452 .7128 .7877 .6758
deposit ratio
Table-4.3: The Credit Deposit Ratio of JBL

Interpretation:
In all of the year Janata Bank credit Deposit ratio is less than 1. Which means Janata Bank
relied on its own deposits to make loans to its customers, without any outside borrowing. It
also shows that the banks might have enough liquidity to cover any unforeseen funding
requirements or economic crises.

4.1.4 Comparison between Cost of Fund &Yield on Loan and Advances

The interest rate paid by financial institutions for the funds that they deploy in their business.
The cost of funds is one of the most important input costs for a financial institution, since a
lower cost will generate better returns when the funds are deployed in the form of short-term
and long-term loans to borrowers. The spread between the cost of funds and the interest rate
charged to borrowers represents one of the main sources of profit for most financial
institutions.
For lenders such as Banks and Credit unions, cost of funds is determined by the interest rate
paid to depositors on financial products including savings accounts and time deposits.

25
Although the term cost of funds usually refers to financial institutions, most corporations that
rely on borrowing are impacted by the costs they must incur to gain access to capital. The
spread between cost of fund and yield on loans and advances show the profitability of the
bank. If the spread is positive, it means the bank is profitable. The higher the spread the more
profitable the bank is.

The position of Janata Bank:

Particular 2017 2016 2015 2014 2013
Yield on 12.39% 12.12% 9.84% 8.97% 8.96%
loans and
advances
Cost of fund 9.23% 8.76% 7.80% 6.48% 6.30%
Spread 3.16% 3.36% 2.04% 2.49% 2.66%
Table-4.4: The Position of Janata Bank

Interpretation:
It shows a positive gap between cost of funds and yield on loans and advances. Though it has
some ups and down, it the last two year the bank enjoying most profitability.

4.1.5 Comparison between Cost of Deposit & Yield on Loan and Advances
Cost of deposit refers to the interest rate paid by the banks to its depositor in various term
including short-term, long term, and middle term. In this situation, bank has to pay high rate
of interest against long term deposit comparatively short term deposit and middle term
deposit.
Yield on loans and advances is the interest rate financial institution earn by investing their
fund in different term loans including short term long term etc.
This comparison shows the actual financial comparison between cost of deposit & yield on
loan and advances. This is comparison is so much important for any commercial bank like
Janata Bank Limited. Here we see the comparison between cost of deposit & yield of loan
and advances of Janata Bank Limited.

The scenario of Janata Bank Limited:

Particular 2017 2016 2015 2014 2013

26
Yield on 12.39% 12.12% 9.84% 8.97% 8.96%
loans and
advances
Cost of 7.75% 7.02% 5.57% 4.17% 4.58%
Deposit
Spread 4.64% 5.10% 4.27% 4.80% 4.38%
Table-4.5: The Scenario of JBL

Interpretation:
It also shows a positive gap. Which means the Bank is in a profitable situation. One important
thing is noticed that there are irregular ups and downs in the gap. We can see that the bank
enjoying lower profitability then the previous year.

4.1.6 Equity Multiplier Ratio

The ratio of a company’s total assets to its stockholder’s equity. The equity multiplier is a
measurement of a company’s financial leverage. Companies finance the purchase of assets
either through equity or debt, so a high equity multiplier indicates that a larger portion of
asset financing is being done through debt. The multiplier is variation of the debt ratio. The
equity multiplier is a ratio used to analyze a company's debt and equity financing strategy. A
higher ratio means that more assets were funding by debt than by equity. In other words,
investors funded fewer assets than by creditors. When a firm's assets are primarily funded by
debt, the firm is considered to be highly leveraged and more risky for investors and creditors.
This also means that current investors actually own less of the company assets than current
creditors. Lower multiplier ratios are always considered more conservative and more
favorable than higher ratios because companies with lower ratios are less dependent on debt
financing and don't have high debt servicing costs.
The multiplier ratio is also used in the DuPont analysis to illustrate how leverage affects a
firm's return on equity. Higher multiplier ratios tend to deliver higher returns on equity
according to the DuPont analysis. And Lower multiplier ratios tend to deliver higher returns
on equity according to the DuPont.
Equity Multiplier Ratio: Total Assets/Total Stockholder Equity
Janata Bank’s Equity Multiplier Ratio is given below :( In million BDT)
Particular 2017 2016 2015 2014 2013

27
Total Assets 586,082.98 511,129.41 446,111.42 345,233.92 294,727.15
Total 37,116.20 17,476.66 34,069.20 20,390.32 14,924.74
stockholder
Equity
Equity 15.79 29.25 13.09 16.93 19.75
Multiplier
Table-4.6: Janata Bank’s Equity Multiplier Ratio

Graphical presentation:

Equity Multiplier
35

30

25

20

15 Equity Multiplier

10

0
0 1 2 3 4 5 6

Fig: Equity Multiplier Ratio

4.1.7 Percentage of Loans and Advances with Investment

An asset or item that is purchased with the hope that it will generate income or appreciate in
the future. In an economic sense, an investment is the purchase of goods that are not
consumed today but are used in the future to create wealth. In finance, an investment is a
monetary asset purchased with the idea that the asset will provide income in the future or
appreciate and be sold at a higher price.
In finance, a loan is a debt provided by one entity (organization or individual) to another
entity at an interest rate, and evidenced by a note which specifies, among other things, the
principal amount, interest rate, and date of repayment. A loan entails the rearrangement of the
subject asset for a period of time, between the lender and the borrower.

28
Janata Bank’s investment in proportion with loans and advance:
(In million BDT)
particular 2017 2016 2015 2014 20113
Investment 193,269.66 108,342.04 95,257.29 57,514.00 72,533.20
Loans and 285,747.65 305,339.57 257,801.03 225,732.21 166,359.48
advance
Percentage 67.64% 35.48% 36.95% 25.48% 43.60%
Table-4.7: Janata Bank’s Investment in Portion with Loan and Advances

Graphical presentation:

350000

300000

250000

200000
Loans and Advance
150000 Investment

100000

50000

0
1 2 3 4 5

Fig: Investment Portion with Loan and Advances

Interpretation:
Both loan and advance is part of bank portfolio. Banks management decides the amount of
loan and investment in according their strategy. From the table we can see that in 2017
investment is almost 70% of total loan, on the other hand in previous years this percentage is
below 50%.

4.1.8 Provision of Loans & Advance

Provision of loans and advances is the amount, which is kept to offset the loss of classified
loans and advances. There is no specific amount up to which it will be maintained.
Management maintains this balance by assumption or from previous experience.

29
Janata Bank’s provision for loans and advance:
(In million BDT)
particular 2017 2016 2015 2014 2013
Loans and 285,747.65 305,339.57 257,801.03 225,732.21 166,359.48
advance
Total 22,291.78 34,012.05 11,173.07 8,975.26 8,748.40
Provision
percentage 7.8% 11.14% 4.33% 4% 5.26%
Table-4.8: The Provision for Loan and Advances

4.2 SWOT Analysis

SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture (Olson and Hallman,
1925). It involves specifying the objective of the business venture or project and identifying
the internal and external factors that are favorable and unfavorable to achieving that
objective.
S = Strengths – Attributes helpful for achieving the objective.
W = Weaknesses – Attributes harmful for achieving the objective.
O = Opportunities – External conditions that are helpful for achieving the
objective.
T = Threats – External conditions that may harm the business’s performance.

The SWOT Analysis of Janata Bank is presented in below:

Strengths:
 Name recognition within the community.
 Large customer base.
 Management knowledge of industry.
 Strong capital and asset quality.
 Regulatory performance is strong and positive.
 Attractive Location.
Weaknesses:
 Lack of technological resources as well as Internet banking.
 Lack of knowledge of customer profile.

30
  Insufficient focus on quality customer service and mortgage banking.
 Overall market share needs to grow Opportunities.
Opportunities:
 Increase market share through growth of loan portfolio.
 Enhanced business development in all product areas and promotion of those products.
 Strategic marketing towards customers of large banks.
 Attracting candidates for acquisition over the next few years.
 Potential market for internet banking.
Threats:
 Strong community bank competition.
 Lack of appeal to younger, Student, affluent potential customers.
 Political instability of the country.
 Lack of flexibility to adapt to any change.

4.3 Learnings
Every bank has its own credit procedure. The Janata Bank limited possesses a standard credit
procedure (Investopedia, 2017). As the objective of my report is to make a comment on the
credit risk management of Janata Bank limited, I tried my best to collect data for the report
and find out the reality. Based on the data generated during my internship period I have
summed up my Learnings here and I think this will help me to achieve my objectives.
 The bank follows the overall credit assessment and risk grading process according to the
rules of Bangladesh Bank in a somewhat manner.
 With a view to implementing government policies, JBL has been maintaining its position
in extending credit to government bodies, sector corporations and private enterprises. But
in practice credit officers do not fill up the proposal form properly. Most of the cases,
they use assumption rather than exact figure. This practice might end up with bad or
classified one.
 JBL distribute loans without sufficient security in some cases. This is violation of the
Bangladesh bank order.
 Sometime the document verification is done after loan sanctioning the loan.
 There is shortage of manpower and lack of proper training for the employees in credit
section.

31
 The credit proposal evaluation process is lengthy .Therefore, sometimes valuable clients
are lost.
 The website of JBL does not contain all required information about loan and advance.
 In many cases bank face the problem of recovery because the credit officer fails to value
collateral property. Proper valuation means collateral will exactly cover the risk of bad
loan. Officials must do it with due care.

32
 Chapter-05
Recommendations and Conclusions

33
5.1 Recommendations
To improve the risk management culture further, Janata Bank Limited should adopt some of
the industry’s best practices that are not practiced currently. These are:
 Continuous monitoring of the customer should be conducted so that loan cannot be
classified.
 The bank should emphasis more on loan diversification like loans on different
promising sectors and newly invented thrust sectors in the economy.
 Political intervention should be avoided while approving and sanctioning loan.
 Every day the business environment is changing and so the risk. So the bank should
be developed as a dynamic organization to adapt with the changing circumstances.
 All the loan documentations have to done honestly. The bank should concentrate
more on proper documentation of all types of loans to make the department
trustworthy & healthy.
 The documents supporting the security against the loan have to be verified properly
by the bank before sanctioning the loan.
 An Early Alert Account system should be introduced to have adequate monitoring,
supervision or close attention by management
 There should be a Recovery Unit to manage directly the account with sustained
deterioration. To encourage Recovery Unit, incentive program may also be introduced
 Janata Bank limited should provide short-term scheme like Micro credit for poor
people.
 It may be a fair deal if the high-risk borrowers and the low risk borrowers should not
have to pay the same interest rate. Interest rate could be arranged according to the sum
they borrow
 JBL should built separate loan recovery division if it happen then their classified loan
amount will reduce.
 JBL should give the competitive interest rate, so that the clients are not shifting their
accounts to other bank
 The amount of non-performing loan should be reduced by analysis proper evaluation
of loan proposal and monitoring.

34
Conclusions
Bank is financial intermediary on which people rely on. Banks take deposit at a cost and lend
at a higher rate to cover its operational expenses and make some profit. If in this process, the
loans are stuck-up then the entire process becomes jeopardized which brings chaos for the
clients and bank. So it’s very much needed that banks keep their services clear to hold on to
their reputation.
However, as one of the leading commercial banks, JBL is playing an important role in its area
of business in mobilizing financial resources through deposit collection and loan distribution.
It helps creating and maintaining a calm business environment in the economy. JBL is
operating branches all over the country as well as overseas. The process may involve their
services, products or their promises towards their clients.
Due to my internship program in JBL, I have analyzed the total Deposit Position, Account
wise Deposit Position different key indicators of the branch and many other services. In
analyzing the data provided by the Bank, it is seen that the Deposit Position of the Branch is
good. If increase the efficiency of its employees and staffs then it would be much easier to
deal with people within short time which would help them to increase their clients as well. It
has been serving millions of people around the world since 1971, employing thousands of
people. It proves that JBL has the capability to enrich their services and attract people with
their products.

35
References
Bangladesh Bank. (2018). [online] Available at: https://www.bb.org.bd/ [Accessed 17 Mar.
2017].

Bullivant, G. (2016). Credit management. 1st ed. London: Routledge.

Edwards, H. (1980). Credit management. 1st ed. Toronto: Coles.

Fletcher, I. (1996). Credit management. 1st ed. London: British Chambers of Commerce.

Investopedia.(2017). UK Home | Investopedia. [online] Available at:

http://www.investopedia.com/ [Accessed 17 Mar. 2017].

Janata Bank limited, (2015). Janata Bank limited annual report. Dhaka: Janata Bank
limited, p.http://jb.com.bd/about_us/annual_report.

Janata Bank limited, (2016). Annual Report Janata Bank limited. Dhaka: Janata Bank
limited, p.http://jb.com.bd/about_us/annual_report.

Janatabank-bd.com. (2017).Janata Bank Limited. [online] Available at:

http://www.janatabank-bd.com/ [Accessed 17 Mar. 2017].

Olson, E. and Hallman, J. (1925).Credit management. 1st ed. New York: Ronald Press Co.

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