2. To The Presentation on,
Credit Management Practices of
Bangladesh Development
Bank Limited

3. Definitions
The loans and advances made by the bank to its customers or borrowers.
Supervision of the bank’s philosophy, standards, and guidelines that its
employees must observe in granting or refusing a loan request

4. Introducing
BANGLADESH DEVELOPMENT BANK LIMITED

7. Name : Bangladesh Development Bank, a state-owned commercial
Bank (formed through merger of Bangladesh Shilpa Bank &
Bangladesh Shilpa Rin Sangstha)
Legal Status : Public Limited Company
Date of incorporation : November 16, 2009
Banking License
obtained
: November 19, 2009 issued by Bangladesh Bank
Vendors’ Agreement
Signed
: December 31, 2009 between the Government and Board of
Directors of BDBL nominated by the Government.
Formal Inauguration : January 03, 2010
Registered Office : BDBL Bhaban, 8, Rajuk Avenue, Dhaka-1000
Authorized Capital : Tk.10000 million
Paid Up Capital : Tk. 4000 million
Reserve (As on
01.01.2010)
: Tk. 2270 million
Total Assets (As on
01.01.2010)
: Tk. 16747 million
Total Human Resource : 781
Number of Zonal Office : 3
Number of Branch
Office
: 17
Membership : Dhaka Stock Exchange & Chittagong Stock Exchange Ltd.
Web Site : www.bdbl.com.bd

8. BDBL Lending Philosophy
 Permitted & Restricted Lending
 Uniform Credit Standard & Approval Process
 Define Responsibilities
 Specify terms of Maturity, Collateral, Risk and Return etc.
 Profit Generation
 Outlining Legal Procedures
 Minimizing Lending Risk
 Building up a Balanced Portfolio

9. A. Industry and Business Segment Focus
• Industrial Loan
• Public Private Partnership (PPP) Project
• Small and Medium Enterprise (SME) Financing
• Trade and Commerce
• Consumer Credit
• Lease Financing
• Real Estate Financing
• Agro-based ventures
Guidelines of Lending Policy

10. B. Green Banking
 Transition to resource efficient Industries
 Transition to low-carbon Industries
 Impact on environmental sensitive sectors
Guidelines of Lending Policy

11. C. Types of Loan Facilities
(a)
Term
Loan
Project
Loan
Small
Business
Loan
House
Loan
Personal
Loan
Lease
Finance
Transport
Loan
Guidelines of Lending Policy
(b)
Working
Capital
Cash Credit
(Hypothecation)
Cash Credit
(Pledge)
Secured
Advances
(General)
Secured
Advances
(Financial
Obligation)

12. Guidelines of Lending Policy
C. Types of Loan Facilities
(c)
Foreign
Trade
Finance
Export Cash
Credit
Packing Credit
Purchase of
Documentary
Bills
Payment
Against
Documents
Loan Against
Imported
Merchandise
Loan Against
Trust Receipt

13. CREDIT EXPOSURE TO SINGLE
BORROWER/ GROUP LIMIT
1. - FOR IMPROVING RISK MANAGEMENT THROUGH RESTRICTION
2. - TO FIX LIMIT ON LARGE CREDIT EXPOSURE

14. LENDING BUDGET
Proper Allocation of Annual Budget is made to
maintain a Balanced Portfolio Mix.

15. DISCOURAGED
BUSINESS/ INDUSTRIAL SECTOR
 Highly Leveraged Transactions
 Finance of Speculative Investments
 Lending to companies which are CIB black listed or known defaulters
 Counterparties in countries subject to UN sanctions
 Lending to Holding Companies
 Bridge Loans relying on equity, etc. as a source of repayment.

16. THRUST SECTORS
A credit policy will be successful until there is a
predetermined target BDBL has their target to acquire the
following markets by providing loan and advances.
Trade Finance Solar energy generation
Working Capital Bio-gas plant
Lease Finance Automatic brick manufacturing
Agriculture Eco-friendly projects
Agro-Based Industry Computer Software & IT/Date export
Natural Resources Work order finance favoring contractors
Small and Cottage Industry Export oriented industries
CNG station Construction Materials
Tourism Paper and paper product
Electronics Power sector
Construction Urban housing
Export oriented garments Chemical, Pharmaceutical products

17. LOAN PORTFOLIO MANAGEMENT
Loan Review
Problem
Situations
Faced by BDBL
Loan Workout
by BDBL

18. -Review on a periodical basis
-Record of borrowers payments
-Quality & condition of collateral
-Completeness of documentation
-Evaluation of situation
-Assessment of loan program
-Accelerating the loan review schedule

19. ProblemSituations
Unusual delays in receiving
documents.
Changes in methods:
depreciation.
Restructuring in of dividends,
credit rating.
Changes in stock’s price.
An over-eager owner
Questionable start date
An ostentatious business name
Unexpectedly robust financial
statements
Atypical trade references
Trade references all from one
industry
Business principals involved in
other failed or fraudulent
enterprises
Net losses in more than one
year.
Changes in capital structures,
liquidity or activity level.
Deviation of actual sales from
projected sales.
Unexpected changes in
deposits balanced maintained
by the customers.

20. Firmly in mind: full recovery of funds.
Examine the largest loans outstanding routinely.
Rapid detection and reporting.
Workout responsibilities should be different from lending policies of BDBL.
Workout specialists should confer the troubled customer quickly.
Estimation of available resources to collect the troubled loan
Tax and litigation search.
Quickly, competence and integrity of management.
Consideration of all possible alternatives.
Loan Workout

21. GUIDING PRINCIPLES OF LOAN FACILITY
i. Evaluate the tenure of loans and advances.
ii. Determine the size of loan facilities.
iii. Execute Security Documents.
iv. Properly insure of Inventory/Stocks.
v. Valuation of Property.

22. CROSS BORDER RISK
• JUDICIOUS OF PRODUCT RELATIVE RISK.
• OBTAINING THE CREDIT REPORT AND CONFIDENTIAL OPINION.
• AVOIDING COUNTRIES BURNED WITH DEBTS.
• OBTAINED THE INSURANCE AND OTHER COVERAGE
• BDBL WILL NEED TO BE CAUTIOUS WHILE CONSIDERING INSURANCE.

23. Loan Approval Process
Loan Proposal/Application
Processing of Proposal
Sanction of Loan

24. Loan Proposal/Application
Before receiving any credit proposal, the
following particulars will have to be examined
with due care for their incorporation:
Name of Product
Proposal
Service
Entrepreneur
Sponsors

25. Processing of Proposal
Full attention on the following issues:
 Selection of project land.
 Right selection of entrepreneurs and their ability.
 Entrepreneur’s image and track record including financial strength.
 Appropriateness of technology and machinery.
 Scope of marketability in free market economy.
 Over all Viability.

26. Credit Worthiness
6C’sofBanking
Character
Cash
Capacity
Condition
Control
Collateral

27. Capability to mobilize working capital:
 Satisfy BDBL’s availability of working capital
 Need to assess working capital requirement
Sufficiency/Credit exposure:
 Financed only if there is full coverage for its
financing total capital cost including sponsors’
equity and the Bank’s investment
Leverage:
 working capital requirement of a project will be
separately assessed
 Debt-equity ratio for business entities should
not exceed the ratio of 60:40

28. Security:
• Security documents relating to ownership of assets must be
verified
• Coverage of the Bank’s exposure, by acceptable tangible
assets, shall not any time be less than 1.5 times of the
principal exposure.
• Property/assets of any Trust will not be acceptable as security
against loan
• Revaluation of assets done in 5 years interval
• Extended collateral security for the projects risky in nature
• Movable properties will not be considered as collateral
security.
• Security arrangements may also be made based on Bank-Client
relationship
Landed properties acceptable as collateral security:
• Well-identified land and landed property may be accepted as security
• Third party collateral may be accepted

29. Verification/ valuation of security:
• will be verified and valued by an enlisted valuer/
surveyor
• Loans up to Tk.30.00 lack will rest with Bank officials
at branch level.
Credit Committee:
Unless otherwise specified, Managing Director or
the senior most General Manager at Head Office
will preside over the Committee meeting
Chairman
All General Managers at Head Office Member
Managing Director will nominate a secretary to the
committee from amongst the officers nit below the
rank of Principal Officer
Secretary

30. Sanction of Loans
• After a thorough examination will be placed before the appropriate
authority with recommendation of the Credit Committee
• All loans and advances sanctioned shall comply with –
 Bank’s Memorandum and Article of Association
 Banking companies Act in 1991
 Bangladesh Bank’s instructions
• Loan shall be sanctioned following certain terms & conditions –
 Before signing loan agreement
 Before 1st disbursement of loan or opening of L/C
 Re-imbursement of capital expenditure will be considered
 Approval must be signed by approving authority
 Database must be maintained both at Head office and Braches.
Any credit proposal that does not come with the credit guidelines must
be referred to the managing director or board of directors

31. LOAN TRACKING THROUGH ADMINISTRATION
AND MONITORING CHART
• Monitoring and review of all accounts
• Monitoring of delinquent accounts
The scope of credit administration function basically
will include the following chart:
Documentation. Disbursement
Compliance Credit monitoring
Credit recovery Early warning signals analysis.

32. Documentation of loans
• Starts just after the sanction of loan
• BDBL maintains a standard set of documentation forms and formats
Disbursement
• Ensure the documentation formalities.
• Sponsor’s investment would be assessed by BDBL inspection team.
• Insurance policies covering risk- depending on the nature of project is
to be obtained.
Compliance Requirements:
• As per Bangladesh Bank’s guidelines, all requirements would be
submitted in a correct format in a timely manner.
• All approved service providers’ performance be reviewed on an
annual basis.

33. Credit Monitoring after Implementation
• To minimize investment losses monitoring procedures
and systems should be placed to indicate the financial
health of a borrower.
• BDBL’s IT systems must produce this information for
Head Office as well as for branches for review.
 Past due principal or interest payments
 Past due trade bills
 Account excesses, and breach of loan covenants.
 Loan terms and conditions
 Timely correction actions should be taken.
 Borrowers’ loan facilities are reviewed at least
annually

34. Credit Recovery
-Is a dynamic process.
The Recovery Unit’s primary functions at Head office or Branch are to:
 Recovery Strategy
 Pursue all options to maximize recovery
Early Warning Signals Analysis
 Early Warning Signals (EWS) indicate risk or potential weakness of an
exposure requiring monitoring, supervision, or close attention by the
management.
 Early identification and prompt reporting of deteriorating credit
sings done to insure swift action to protect the Bank’s interest.

35. Internal Audit
• Audit shall be carried out annually
• Shall ensure compliance with credit policy,
procedural guidelines, regulatory guidelines and
Bangladesh Bank requirement.
Credit Rating by outside agencies
• Required for large loans

36. CREDIT RISK MANAGEMENT
The bank will follow core risk management guidelines
according to the instructions of Bangladesh Bank.
Credit Risk Management
Foreign Exchange Risk Management
Asset-Liability Management
Internal Control and Compliance management
Money Laundering Management
CORE
RISK

37. RECOMMENDATIONS
for
BDBL

38. Recognize Potential Frauds
Avoid Underestimating How Much Existing
Customers Contribute to Bad Debt
Proper Allocation of Time and Money on Credit
Evaluations
Taking Full Advantage of Technology
Ignore ‘Getting Caught Off-guard by
Bankruptcies’