How Process for A loan or Assignment on Loan Processing system

CONTACT POINT VERIFICATION CERTIFICATE

Submission Time:  N/A                                                                     Submission Date: 11/12/2006

Manager

SME Banking Division

Eastern  Bank Ltd.

We confirm that we have verified the following information and have come to the following findings:

Name of the Borrower: Zahir Enterprise  

Name of the SME Centre: Sonargaon Road, Dhaka.

Business Details		Verified & Found to be Authentic
Office Name:	Zahir Enterprise	Yes              No
Office Address:	101, Rayer Bazar ,( Opposite of Al -Arafa Mosque market ) Dhaka	Yes              No
Office Telephone No:	01718990464	Yes              No
Total years in Business	2	Yes              No
Personal Details (1)
Proprietor’s  Name	Md. Zahirul Islam	Yes              No
Current Residence Address:	193 ,Chata Mosjid Lane ( 2nd Floor,Left side ), Rayer Bazar, Dhaka	Yes              No
Residence Tel No:	01718712951	Yes              No
Permanent Address:	Vill. Charbhairabi, P.O. Charbhairabi,     P. S. Haimchar, District. Chandpur	Yes              No
Contact Person at Permanent Address:	N/A	Yes              No
Tel. No. (If any):	N/A	Yes              No
Personal Details (2)
Partner’s/ Director’s Name:	N/A
Current Residence Address:	N/A	Yes              No
Residence Tel No:	N/A	Yes              No
Permanent Address:	N/A	Yes              No
Contact Person at Permanent Address:	N/A	Yes              No
Tel. No. (If any):	N/A	Yes              No
Guarantor’s Details (1)
Guarantor’s Name:	Parvin Islam	Yes              No
Residence Address:	193 ,Chata Mosjid Lane ( 2nd Floor, Left side), Rayer Bazar, Dhaka	Yes              No
Residence Tel No:	01718712951	Yes              No
Office Address:	N/A	Yes              No
Office Phone No:	N/A	Yes              No
Relationship with the Borrower	Wife	Yes              No

Guarantor’s Details (2)
Guarantor’s Name:	Md. Edris	Yes              No
Residence Address:	189/2, South Zatra Bari ( 2nd Floor, Left Side), Jele Para, Nabi Nagar, Dhaka	Yes              No
Residence Tel No:	01712603797, 01714455239	Yes              No
Office Address:	Rangdhanu Partical Point, 473, Mirhajir Bagh ,Ghuntighar, P.S. Shampur, Dhaka-1204	Yes              No
Office Phone No:	7419165, 01714455239	Yes              No
Relationship with the Borrower	Business Friend	Yes              No

Trade License Verification:
Address of Municipality	N/A	Yes              No

Photograph Verification:
Photograph of the Applicant	Yes              No
Photograph of the 1st Guarantor	Yes              No

Photograph of the 2nd Guarantor

Yes              No

Remarks:

___________________________________________

Authorized Signature with Name, Designation & Seal

Information Provided By:

__________                     __________________                    ___________________________ Loan Officer                      Relationship Manager                     Business Development Manager (Signature with Name) Forwarding Date:                                                                      Forwarding Time:

Bank Statement Verification Report

Date:   11/12/2006                                                                                     Time:

Name of Bank & Branch:	United Commercial Bank Limited(UCBL), Elephant Road Branch & Islami Bank Bangladesh Limited(IBBL), Dhanmondi Branch, Sat masjid Road, Dhaka-1209
Manager(UCBL): Manager(IBBL):
Dealing officer(UCBL): Dealing officer(IBBL):
Phone no(UCBL): Phone no(IBBL):
Remarks:   ___________________________________________   Authorized Signature with Name, Designation & Seal

Information Provided By:

__________                     __________________                    ___________________________ Loan Officer                      Relationship Manager                     Business Development Manager (Signature with Name) Forwarding Date:                                                                      Forwarding Time:

Other Income Verification Report

Date: 4/10/2006                                                                                       Time:

Rental Income:

Name of the Land Lord:			Istiaq  Ahmed	Yes              No
Address:			Mahmudia Manzil , Apartment No. 4B , 4th Floor, 6/1, New Eskaton , Gaus Nagar , Dhaka.	Yes              No
No. of Tenant		Rent per unit	Total Rent Amount
1.	1	BDT 21000	BDT 21000	Yes              No
2.	N/A			Yes              No
3.	N/A			Yes              No
	Total

Others: N/A

Source of Income		Amount
1.	Name: Wit International	N/A	Yes              No
	Address
2.	Name: Elegance Marketing & Distribution	N/A	Yes              No
	Address:
	Total	N/A

Remarks:

(Note: Pls. mention the amount if differs from the declared amount as above)

___________________________________________

Authorized Signature with Name, Designation & Seal

Information Provided By:

__________                     __________________                    ___________________________ Loan Officer                      Relationship Manager                     Business Development Manager (Signature with Name) Forwarding Date:                                                                      Forwarding Time:

2.11. CREDIT Risk Management Department

All sorts of Credit facilities need to be approved by the Credit Risk Management (CRM) department. This department monitors the risk aspects of the various credit facilities and the clients and then decides whether to allow a particular client to avail the credit facilities. Its objective is to ensure better management of asset relationships. This department has made significant progress in upgrading the asset portfolio of the bank by booking high quality accounts. Other functions include introducing new monitoring standards, periodical portfolio review, credit approval guidelines and initiating the process to establish a separate Credit Administration Unit to ensure greater control. This brought better management of assets.

The primary objective of this division is to evaluate the credit worthiness and debt payment capability of present loan customers and loan applicants. Respective branches for an approval send all advance proposals from the prospective borrowers from the Head office. This department initiates the advance proposal of the branch. It keeps track of credit portfolio by obtaining regular information from branch. Its sets price for credits and ensure affecting it at branches. This department also monitors the various loan accounts of the branches and prepares various statements for Bangladesh Bank.

In EBL credit division is divided into two parts.  They are credit administration and credit risk management. Credit marketing is under credit risk management.

2.12. CREDIT ADMINISTRATION DEPARTMENT

Credit administration department is responsible for preparing the documents related to loans and performing the tasks related to credit approval. They are directly involved in disbursing and booking of transactions of any approved loan.

Functions:

• Scrutinizing and ensuring that all necessary papers are received by the bank
• Monitoring of the inspection reports on an interval basis
• Scrutinize the value of the collateral and monitor the value
• Appraisal of collaterals done by third party e.g. Tangible properties (real estate)
• Supervise the loan disbursing process (e.g. Limit load) etc.

Credit administration department consists of  three parts:

·                     Credit Administration

·                     Loan Monitoring

·                     Documentation

Credit Administration:

This part of credit administration department is mainly concerned with the post-approval functions of the division. They aspects that are critically tracked and monitored are

·                     Credit expiry

·                     Past dues

·                     Excess over limit

·                     Document deficiency

·                     Reporting

Loan Monitoring:

The important aspects of this part are:

·                     Follow approval terms

·                     Proper disbursement

·                     Monitor interest payments

·                     Monitor principal repayment

·                     Balance with general ledger

Documentation:  

The important functions of this part of the credit administration division are:

·                     Look at sanction terms

·                     Proper loan document

·                     Fill up loan documentation checklist

·                     Obtain client sign off

·                     Filing with the Registered Joint Stock Corporation (RJSC)

·                     Registered mortgage deed execution

Analysis on SME Loan Processing system of EBL:

4.9. Business Process of Loan Proposal (Loan processing system in brief):

Loan processing is undoubtedly the most important process for any financial institution because loans and advances comprise the major asset bases for any financial institution. Since they are the major revenue-generating source, every bank should take great care to perform the steps of the loan processing system efficiently. In our paper, we are dealing with the Business Process related to the Loan Processing System of the Eastern Bank Limited.  Typically Eastern Bank Limited makes three types of loans to their customers. These are:

§  Corporate Loans;

§  Small Medium Enterprise (SME) Loans; &

§  Personal/Consumer Loans.

All the phases of the loan processing system under these above loan categories are almost same with some little modification. In our report, we will deal with the Small Medium Enterprise (SME) Loan Processing System. The specific business process of the loan processing system under the Small Medium Enterprise (SME) Loans is briefly discussed below with regard to the Eastern Bank Limited:

A loan processing system always starts with communicating (building relationship with customers) the customer. This task may be done in 2 ways. Firstly, client himself or herself can come along to the bank to seek loan. Secondly, loan officer can go to the potential customers to whom making loans will be profitable. The latter process is known as loan marketing and now practiced by almost every bank.

In the second phase, the Loan Officer does an interview with the potential borrower. This interview is taken to obtain information about the customer’s financial condition, why does he or she need loan, the previous credit history of the potential customer, etc. This is done for primarily screening out the client or borrower. The Loan Officer either rejects or approves the client. If loan application is rejected, the loan process ends. If the loan application is accepted, then the third phase starts.

In the third phase, two types of activities are performed:

• Credit Investigation Bureau (CIB) Undertaking; &
• Contact Point Verification.

• In CIB Undertaking, the Credit Investigation Bureau of Bangladesh Bank is requested to provide necessary credit information regarding the prospective borrower. This information is related to the borrower’s previous credit history, whether he or she serviced the debt carefully, whether he or she defaulted in any loan before, etc. In CIB report, the customer’s risk status is revealed.

If the customer is fall under the “Classified” status, there is no reason to approve loan. But customers, who fall under the “Standard” class, are eligible for getting loan. For the second group of customers, the following stage named “Customer Site Visit” is done.

Under this “Customer Site Visit” stage, the information already given by the customer is justified. The Loan Officer physically visit the customer business site to see whether there is any discrepancy between actual and given information. If the Loan Officer finds any discrepancy, the loan proposal is rejected on the ground of ethics (Breach of Trust). If the Loan Officer does not found any distortion in information, he or she is getting prepared to ready the loan proposal.

Under the proposal preparation, Credit Memorandum (CM) is prepared. In the Credit Memorandum, the following information is attached:

a)      Name & address of the Applicant;

b)      Management and legal status;

c)      Management evaluation, Risk and Mitigates;

d)     Industry/Line of Business;

e)      Major competitors;

f)       CIB report;

g)      Status of the Borrower with competitor Banks;

h)       Group Report;

i)        Relationship history, profitability, and accounting strategy;

j)        Financial evaluation;

k)      Analysis of sources of repayment;

l)        Financial security, collateral;

m)    Borrower/Obligor Risk Grading;

n)      Issues/Exceptions related to documents, securities and terms/conditions.

This Credit Memorandum (CM) is then sent to Credit Risk Management (CRM) department. In this stage, CRM makes necessary queries from the Loan Officer. After scrutinizing every  single information provided, CRM either rejects or accepts the proposal. If proposal is approved, CRM sent Sanction Letter (SL) to the applicant and demand some legal and financial documents named “Charge Documents”. Charge Documents include the following:

1. Demand Promissory Note
2. Letter of continuity
3. Revival Form –I
4. Revival Form-II
5. Balance Confirmation Form
6. Form L (Hypothecation of book debts and Receivables
7. Letter of hypothecation of stocks and goods.
8. Letter of hypothecation of machinery (If any)
9. Personal letter of guarantee
10. Memorandum of deposits of cheque
11. Letter of Disbursement etc.

The applicant needs to fill up that SL and enclose the necessary information needed by the CRM.

If CRM approves the application, it is sent to the Credit Administration. Credit Administration after fully justifying the application, places a limit on loan that will be provided to customers.

Then an account is  opened by the applicant and loan is disbursed.

The next stage “Monthly payments monitoring” is not being connected to the loan processing system directly but yet considered important for renewing the loan facility.

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