Internship Report on ‘Credit Risk Management of BRAC Bank Limited’

ACKNOWLEDGEMENT 

First and foremost, I would like to express my deep gratitude to the almighty Allah for helping me to complete the report within the due time and without any major tribulations. I would like to express heartiest gratitude to my academic supervisor Mr. Md. Alamgir Hossen for his important suggestions, excellent guidelines and supervisions for preparing this internship report on “Credit Risk Management of BRAC Bank Limited”. I would also like to express my heartiest gratitude to Mr. Md. Golam Mawla, CSM, Moghbazar Branch, BRAC Bank Limited for his kind concern and consideration regarding my academic requirements as my external supervisor.Also I express special gratitude to all the other employees of Moghbazar branch of BRAC Bank Limited who have shared their knowledge regarding banking with me.

EXECUTIVE SUMMARY BRAC 

Bank Limited is a scheduled commercial bank in Bangladesh. This is one of the leading private commercial banks which is established under the banking companies Act 1991, the bank began its operation on 4th July,2001 with a primary objective of offering all types of commercial banking services mostly emphasizing on promoting small and medium entrepreneurs all over the country. At present BRAC Bank Limited has 151 branches, over 300 ATM Booths, 405 SME Unit Offices, 1,800 remittance delivery points and 8,306 human resources. This report is the fulfillment of the requirement for the evaluation process of the internship program.The main purpose of the report is to have an overall idea about function and process of credit risk management, analyzing tools and techniques used to evaluate credit proposal, analyzing steps taken to recover Bank‟s bad portfolio of BRAC Bank Limited. Lending is one of the main functions of a bank. The objective of Credit Risk management of BRAC Bank Limited is to minimize the risk and maximize banks risk adjusted rate of return by assuming and maintaining credit exposure within the acceptable parameters. The Credit Risk Management department is responsible for upholding the integrity of the Bank‟s risk/return profile. Credit Risk Management Department of BRAC Bank Limited conducted their functions by six wings. Wholesale Credit, Retail Underwriting and SME underwriting- these three wings of Credit Risk Management assess and approve the loan for the respective customers. Central Collection Unit collects the credit. Special Asset Management wings help the bank to recover Bank‟s bad portfolio. For credit approval, the Bank has a team who approve the credit. Different tools and techniques are being used to evaluate a credit proposal. Retail Credit, Cards Credit, Authorization and Fraud Control, Central Verification Unit (CVU) are related with retail underwriting. Credit Collection Unit of BRAC Bank Limited collects credit based on the level of delinquencies of credit. Special Asset Management wings help the Bank to recover bad portfolio by taking different types of steps. To understand the performance of the present credit risk management process, the year by year ratio of loans which are grouped on basis of classification rules in the total loan and advances has analyzed. From the performance analysis, it is found that the collection of Standard Loan decline in year 2009 because of the national and global economic situation which reflects a low ratio of Standard Loan to total loans and advances which is 89.99%. As a result, the balance of SMA, Sub standard, Doubtful and Bad/Loss loan increases in year 2009. Since 2009, national as well as global economy started to fallen in a dangerous phase of slowing growth and rising risk. But with the right initiatives taken by the top management of BRAC Bank Limited i.e. establishment of regional Credit Risk Management Centers, introduction of new wing called Special Asset Management & Credit Inspection, since the following year 2010 the situation has become normal which reflects the economy Bangladesh where economy starts back to upward growth phase from the impact of global recession. Beside this in year 2010, the Bank also achieves a better loan recovery performance which reflects by an 8.73% ratio of loan Recovery to total write off loans and advances which continues in year 2011.
Although BRAC Bank Limited is successfully operating credit risk management, the Bank should improve in some areas which will take help the Bank to become the leader of banking sector.

1.0 Introduction of Report 
1.1 Introduction: 
Risk is the element of uncertainty or possibility of loss that prevail in any business transaction in any place, in any mode and at any time. In the financial arena, enterprise risks can be broadly categorized as Credit Risk, Operational Risk, Market Risk and Other Risk. Credit risk is the possibility that a borrower or counter party will fail to meet agreed obligations. Globally, more than 50% of total risk elements in Banks and Financial Institution (FI) s are credit risk alone. Thus managing credit risk for efficient management of a FI has gradually become the most crucial task. Credit risk management encompasses identification, measurement, matching mitigations, monitoring and control of the credit risk exposures. As a leading bank of Bangladesh, BRAC Bank Limited has a fully functioning department to perform the crucial task of Credit Risk Management (CRM).

1.2 Origin of the Report: 
To complete BBA Program in Institute of Business Administration, Jahangirnagar University, a student requires completing an Internship Program of three months attachment with an organization followed by writing a report at the final and 8th semester of BBA program. This report is the fulfillment of the requirement for the evaluation process of the internship program. This report titled „Credit Risk Management of BRAC Bank Limited‟ is conducted on the basis of my practical experience of three months long internship at Moghbazar Branch of BRAC Bank Limited. After consultation with my faculty supervisor Mr. Md. Alamgir Hossen Lecturer, Institute of Business Administration, Jahangirnagar University and under the direction of my organizational supervisor Mr. Md. Golam Mawla, Customer Service Manager, Moghbazar Branch, BRAC Bank Limited, I have prepared this internship report with the mentioned topic.

 1.3 Rational of the Report:
Bangladesh is one of the developing countries in the world. The economy of the country has a lot left to be desired and there are lots of scopes for massive improvement. In an economy like this, banking sector can play a vital role to improve the overall socio-economic condition of the country. The banks by playing the role of an intermediary can mobilize the excess fund of surplus sectors to provide necessary finance to those sectors which are needed to promote for the sound development of the economy. As the banks provide finance or lending to its counter parts, there arises a risk of credit risk, which is the possibility that a borrower or counter party will fail to meet its obligations in accordance with agreed terms. Even at present, this problem is haunting many banks and poses a major threat towards their sound performing. So it‟s very important to have an effective and sound credit risk management system in place which will help the bank mitigate its risk factors and carry out successful financing service or lending. With that issue in mind, the topic „Credit Risk Management of BRAC Bank Limited‟ has been undertaken as topic for my internship report.

1.4 Objective of the Report: 
The report is prepared on the „Credit Risk Management of BRAC Bank Limited‟ with the thought of getting in depth of the credit risk management approval and collection for different kinds of credit and collection procedures of default loan.
Broad Objective: The broad objective of report is to evaluate the total Credit Risk Management (CRM) process of BRAC Bank Limited.

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