Final OCP Report
Final OCP Report
Final OCP Report
Supervised By:
Assistant Professor
Department of Business Administration
Md Hafij Ullah
_______________________
Signature of Supervisor
Department of Business Administration Faculty of Business Studies INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG
1.0: INTRODUCTION
Banking system occupies an important place in a nations economy. A banking institution is indispensable in a modern society. It plays a pivotal role in the economic development of a country. The banking sector channels resources through deposit mobilization and providing credit for different business ventures. At new millennium the definitions of banking has been changed. Now banks are performing more vital role in the society in than before. Due to globalization and technical innovation banking business has become very competitive. The share of deposits of nationalized commercial banks in total deposits which was 89% in 1980 gradually declined over the years to reach the level of 36% in 2009. Simultaneously, private commercial banks which were responsible for only 18% of deposits in 1985 this share increased gradually over the years to constitute about two third of the total deposits. When I was assigned to prepare an OCP Report on my own interest I have chosen this sector because of its crucial role in development of our economy. I became more involve through my OCP on Prime Bank Limited. I have found that although there are many studies involving individual banking activities there are few study about the comparative study among the banks. It is now time to start a review among the forth generations banks and their competitive position. In my report I intend to make a comparative study among the forth generation banks banking activities.
1.4 Methodology
Basically secondary data was used in the research. Secondary data was collected from annual report and publication of the prime bank, Statistical book, literatures, books and international publications and websites. It is a descriptive research and it is also known as desk research. 1.4.1 Research Design The research design is descriptive research from the view point of function and nature of data. From the view point of research place, it is a desk as well as a field research and finally from the viewpoint of objective it is a Basic research.
Comparative Analysis on Retail Credit in Context of Prime Bank Limited 1.4.2 Data Collection The financial figures were collected from the Prime Bank Limited Laldighi Branch database as well as from the periodical financial statements of the Bank. Among secondary data sources the most remarkable is the annual report of the bank. 1.4.2.1 Primary data I have collected primary data by interviewing employees of prime Bank Ltd. Primary data were derived throughout the employees of the organization. Clarifications of issues came from different concerned officials of prime Bank Ltd. I have collected primary data in the following way Face to face dialogue with employees Informal conference and conversation. 1.4.2.2 Secondary data I have used diffident types of secondary data in my research. Sources of secondary data are as follows: Annual reports Prospectus Publications CIB reports The Bank's internal records. 1.4.3 Data Analysis The collected data have then processed analyzed and the findings thereof have laid the basis of procedure analysis, comparison on the basis of internal and external different criteria.
Comparative Analysis on Retail Credit in Context of Prime Bank Limited PBL also honored by SAFA (South Asian Federation of Accountants) Bronze award in region for its published accounts in 2007. For the first time any Bangladeshi bank has achieved this feat.
Comparative Analysis on Retail Credit in Context of Prime Bank Limited 2.7.2 Loan Services Loans and advances have primarily been divided into two major groups: Fixed term loan These are the loans made by the Bank with fixed repayment schedules. Fixed term loans are categorized into three based upon its tenure which is defined as follows: Short term : up to 12 months Medium term : More than 12 and up to 36 months Long term : More than 36 months Continuing Loans These are the loans having no fixed repayment schedule but have an expiry date at which it is renewable on satisfactory performance of the customer. Furthermore all categories of loans are accommodated under the 7 prime sectors which are as under: a. Agriculture b. Term Loan to Large & Medium Scale Industry c. Term Loans to Small and Medium Enterprise(SME) d. Working Capital e. Export Credit f. Commercial Lending g. Others 2.7.3 Other Services The bank firmly believes that technology based product and services will play significant role in the performance of the bank as people are getting more conscious about their service they receive from a bank. For delivering faster service the bank has introduced online banking service. The bank has introduced other products and services to serve the ever-changing market. These are: SWIFT services L/C Delivery Services Locker Services Merchant Banking Services ATM services
The Loans and Advances cover following core areas: Corporate Loan, House Loan, SME, Retail Credit and Credit Card.
Comparative Analysis on Retail Credit in Context of Prime Bank Limited consumes or it also means one who uses article produced. Credit comes from the Latin word Credo meaning I believe. When one borrows money, the loan is based upon confidence in the future solvency of the person and in his repaying the loan as per agreement. Consumer Credit Scheme is a new concept in Bangladesh and it proves the consumers equity participation. First, Islami Bank Bangladesh Ltd. and then Prime Bank Ltd. introduced this scheme for developing the standard of living of fixed income group and middle class people. Under consumer Credit Scheme the credit is provided for household durables and utility products goods like Car, Pick-up, Motor Cycle, Personal Computer, Televisions, and Refrigerator water Cooler, Furniture and Fixture, Crockery and Cutlery, Sewing Machine, Air Conditioner etc. 4.3.1 Objectives of Consumer Credit Scheme Every scheme is covered through some objectives, which is prepared in line with the corporate goal, mission and vision. The objectives of introducing consumer credit scheme by banks are considered to be as followsTo bring our credit services to a wide range of customers. To provide financial assistance to the limited income group towards buying utility products. To help the professionals in raising their standard of living. To participate in the socioeconomic development of the country. To fulfill the dream whatever they want to buy, can afford. To sell our services to a wide range of customers and increase our Consumer Credit Scheme portfolio. To provide financial assistance to the limited income group for buying household durables and utility products. To provide investment facility to the depositors of the bank. To develop small capitalist or industrialist. To build up strong communication to a wider range of customer through provide loan. To enhance job opportunities through credit facilities.
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Interest Rate: Repayment method: Disbursement mode: Other Charges: Penalty Charge: Stamp Charge: Early Settlement: Criteria for application: Monthly Income: Security:
17% Monthly equal installment Pay order directly issued in the name of respective company of purchase. 1% on the loan amount or Tk. 1000 whichever is higher+15%VAT 2% of the installment overdue Tk. 475 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Tk. 15,000 for salaried individuals Tk. 20,000 for businessman
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avail loan against their FDR or any other savings instruments up to 90% of the loan amount. The loan limit, down payment, risk fund, service charge and period of loans are given below: Table 5.2: Features of Car Loan
Sanctioning Authority Name of the Item Loan Limit Down Payment Risk Fund Service Charge Ternor Retail Banking Head Office
HO/Branch Credit New Vehicle Tk 20 10% Lac Recondition Vehicle Bus/Truck for Tk 20 10% Lac Tk 20 10% Lac Nil 1% 5 Years Any Limits would be Nil 1% 5 Years Tk. 10 Lac Tk 20 Lac Nil 1% 5 Years Tk. 10 Lac Tk 20 Lac
Interest Rate: Repayment method: Disbursement mode: Other Charges: Penalty Charge: Stamp Charge: Early Settlement: Criteria for application: Monthly Income:
Security:
15% Monthly equal installment Pay order directly issued in the name of respective car company. 1% on the loan amount or Tk. 1000 whichever is higher+15%VAT 2% of the installment overdue Tk. 475 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Tk. 20,000 for salaried individuals Tk. 40,000 for businessman
Two Personal guarantee Undated cheques Registration of the Vehicle in the name of the bank.
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HO/Branch Credit General Practitioner MBBS/BDS Specialized Doctor Tk. 10 10% Lac Nil 1% 5 Years Tk. 5 Lac Full Limit Tk. Lac 5 10% Nil 1% 4 Years Tk. 3 Lac Full Limit
Interest Rate: Repayment method: Disbursement mode: Other Charges: Penalty Charge : Stamp Charge : Early Settlement : Criteria for application:
17% Monthly equal installment Clients savings account or sometimes cash disbursement. 1% on the loan amount or Tk. 1000 whichever is higher+15%VAT 2% of the installment overdue Tk. 470 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Income Tk. 15,000 for salaried individuals Income Tk. 25,000 for businessman
Security: Two Personal gaurantee Undated cheques The ownership of Medical equipments to be purchased must be hypothecated to the bank under hire purchase mood.
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The loan limit, down payment, risk fund, service charge and period of loans are given below: Table 5.4: Features of Advance against Salary
Sanctioning Authority Load Limit Down Payment Risk Fund Service Charge Period of Loan Retail Banking Head Office
HO/Branch Credit Salaried Person Tk. Lac 3 Nil 0 1% 2 Years Tk. Lac 1.50 Full Limit
Note: Risk Fund is nil who has salary account with us. Interest Rate: Repayment method: Disbursement mode: Other Charges: Penalty Charge: Stamp Charge: Early Settlement: Criteria for application: 17% Monthly equal installment Clients savings account or sometimes cash disbursement. 1% on the loan amount or Tk. 1000 whichever is higher+15%VAT 2% of the installment overdue Tk. 320 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan.
Note: Risk Fund is nil who has salary account with us. Interest Rate: Repayment method: 17% Monthly equal installment
Comparative Analysis on Retail Credit in Context of Prime Bank Limited Disbursement mode: Other Charges: Penalty Charge: Stamp Charge: Early Settlement: Criteria for application: Monthly Income:
Clients savings account or sometimes cash disbursement. 1% on the loan amount or Tk. 1000 whichever is higher+15%VAT 2% of the installment overdue Tk. 475 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Tk. 10,000 for salaried individuals Tk. 25,000 for businessman
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Security: Two Personal gaurantee Undated cheques Lien on Service benefit of the concerned employee from the employer
HO/Branch Credit Salaried Person/ Businessman Tk. Lac 3 10% 1% 1% 2 Years Tk. Lac 1.50 Full Limit
Note: Risk Fund is nil who has salary account with us. Interest Rate: Repayment method: Disbursement mode: Other Charges: Penalty Charge: Stamp Charge: Early Settlement: Criteria for application: Monthly Income: 17% Monthly equal installment Clients savings account or sometimes cash disbursement. 1% on the loan amount or Tk. 1000 whichever is higher+15%VAT 2% of the installment overdue Tk. 475 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Tk. 10,000 for salaried individuals Tk. 20,000 for businessman
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HO/Branch Credit Salaried Person/ Businessman Tk. Lac 2 10% 1% 1% 3 Years Tk. Lac 1.50 Full Limit
Interest Rate: Repayment method: Disbursement mode: Other Charges: Penalty Charge: Stamp Charge: Early Settlement: Criteria for application: Monthly Income:
17% Monthly equal installment Clients savings account or sometimes cash disbursement. 1% on the loan amount or Tk. 1000 whichever is higher+15%VAT 2% of the installment overdue Tk. 320 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Tk. 12,000 for salaried individuals and Tk. 25,000 for
businessmen(For rented people) Tk. 10,000 for salaried individuals and Tk. 15,000 for businessmen( for those who are residing in his/her own or family residence) Tk. 10,000 for Govt., Semi-Govt and autonomous bodies employees.
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HO/Branch Credit Salaried Person/ Businessman Tk. Lac 3 10% 1% 1% 3 Years Tk. Lac 1.50 Full Limit
Interest Rate: Repayment method: Disbursement mode: Other Charges: Penalty Charge: Stamp Charge: Early Settlement: Criteria for application: Monthly Income: Security:
17% Monthly equal installment Clients savings account or sometimes cash disbursement 1% on the loan amount or Tk. 1000 whichever is higher+15%VAT 2% of the installment overdue Tk. 320 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Tk. 15,000 for salaried individuals Tk. 20,000 for businessman
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the Thousand
1000 or years
1000 or years
Interest Rate: Repayment method: Disbursement mode: Penalty Charge: Stamp Charge: Early Settlement: Criteria for application: Monthly Income: Security:
17% Monthly equal installment In the form of pay-order 2% of the installment overdue Tk. 475 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Tk. 15,000 for salaried individuals Tk. 20,000 for businessman
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Interest Rate: Repayment method: Disbursement mode: Penalty Charge: Stamp Charge: Early Settlement: Criteria for application: Monthly Income: Security:
15% Monthly equal installment Clients savings account .In case of salaried individuals,
sometimes cash disbursement may happen.
2% of the installment overdue Tk. 320 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Tk. 10,000 for salaried individuals Tk. 20,000 for businessman
Personal guarantee from an individual having means, standing and social status acceptable to the bank and another from his/her family 24 (twenty four) post dated cheques Letter of Assurance from the Employer / Authority. For any retail loan application, Tk. 50 is taken as a fee.
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6.0 CREDIT ASSESSMENT, APPROVAL AND DISBURSEMENT PROCEDURE 6.1 Credit Assessment
The prior condition for any credit disbursement is to critically assess and approve the credit proposal that is the client selection and assessment. In case of retail credit it should be done more crucially as retail lending is one of the types of unsecured individual lending without collateral. The primary factor determining the quality of the Banks credit portfolio is the ability of each borrower to honor, on timely basis, all credit commitments made to the Bank that is, repayment of loan installment on time. In PBL, more emphasis is given on repayment potential of loans out of funds generated from borrowers business (cash flow) instead of realization potential of underlying securities while assessing a retail credit proposal. Following are the steps that are maintained in PBL for assessing any retail credit proposal.
6.1.1 Application
The first stage of retail credit assessment and approval process is a client application that contains the following information: Telephone and address / contact details Employment/business details Income Details Income and Expenditure Statement Personal Net worth Statement Residence details Credit references and guarantors details Basically, branches receive the client application with other required papers necessary for different retail loans.
Comparative Analysis on Retail Credit in Context of Prime Bank Limited relationship with Bank. The objective of this process is to check the declared/undeclared information of the applicants. CPV includes: Applicants Residence, business/office address, phone, status varification Guarantors Information Verification Bank statement and other income documents verification. In most of the times, CPV is done by branch managers. CPV is done by third party agency also to enable the client selection of better accounts for accelerated processing and quick rejection of those having negative/inadequate information. Retail credit officers then verify data collected by third part.
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6.1.3 Guarantee
One of the fundamental perquisites for securing retail credit is to obtain guarantee acceptable to the bank by way of social status and perceived creditworthiness. Retail credit officers at branch level check the guarantors information very carefully. In case of guarantors, following are the rules that are maintained: Existing guarantor of any other loan of the bank will not be accepted as other guarantor for other loans. Any existing borrowers will not be taken into account as a guarantor for any other loan. Guarantee from the Chairman, Managing Director and Directors of Corporate facility clients and obtaining will be allowed after the prior approval of Head Office. All guarantors will be verified whether they have any relationship with banks earlier with either positive or negative status.
Comparative Analysis on Retail Credit in Context of Prime Bank Limited Within the time of the CIB returned back to the branch, the retail credit officers of the branch make a credit proposal for further assessment and approval. CIB reports are requested for any amount equivalent to Tk. 50,000 and above that. After returning the CIB information, the credit proposal along with documents is sent to Retail Credit Head Office (RHO).Up to this point at branch level, almost seven to ten days are required for processing.
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Comparative Analysis on Retail Credit in Context of Prime Bank Limited The Success of any credit largely depends on its efficient administration. A bank has to undertake different policy prescription to manage the credit in line of the set objectives. Banks always monitor the performance of the loan so that the rate of default is less. This chapter concentrates on the various aspects of consumer credit provided by Bank. Consumer credit scheme is small and medium term loan. This credit is sanctioned for one to five years period. For the small size and three years period of loan, every branch of the Bank has the authority to sanction the loan. But the branches have some loan limit to provide the scheme in different goods. The Bank maintains some policies and guidelines to sanction the credit. Every branch of the Bank has a credit committee in order to facilitate quick sanction of loan under the scheme. The credit committee is constituted of in each of the designated branches with the following Executive/Officer: Credit Committee Branch Manager 2nd Officer
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Credit In Charge
CCS In Charge At first, the sanctioning of loan, the customer will approach to Consumer Credit In-Charge for getting the loan Under Consumer Credit Scheme. If the Consumer Credit Scheme incharge thinks that he or she is eligible for the credit then they get the opportunity for application of loan. After that, the Consumer Credit Scheme in-charge presents the application to Credit Committee of the respective branch. If the committee approves that the customer is eligible for the loan then the customer will submit the necessary documents to that Committee. After submission of the documents the credit committee will examine the documents and consumer credit scheme in change will go for physical inspection, as to whether the information is wrong or right that he or she is written on the application form. If all the information is correct then the credit committee sanctions the loan under this scheme. But if the loan amount exceeds the loan then the credit committee sends the necessary documents and information to
Comparative Analysis on Retail Credit in Context of Prime Bank Limited the Consumer Credit Division, at the Head Office of the bank. Then the credit division decides that the will be sanctioned or not. The sanctioning mechanism is shown in the following diagram: Customer CCS in-charge Credit Committee Head Office (if branch credit limit exceeds)
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Chart 6.1 Process Flow Chart of Retail Loan Processing of Prime Bank Limited
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(Taka in Crore)
PARTICULARS Total Credit Total Retail Credit Contribution to Total Credit 2009 8866 662 7.46% 2008 7057 451 6.39% 2007 5381 274 5.09%
Total Credit
10000
9000 8000 7000 Taka in Crore 6000 5000 4000 3000 2000 1000 0 2007
8866
7057 5381
274
2008
451
2009
662
Chart 7.1: Retail Credit Disbursement of PBL Findings From the annual reports of PBL, some facts and figures are found regarding retail credit. According to these annual reports, in 2007, the total amount of credit disbursed was Tk. 5381 Cr. in which consumer credit counted with a 5.09% of that amount. In 2008, the credit portfolio was maintained by PBL of Tk 7057 Cr. in which, consumer credit scheme (CCS) accounted for only 6.39% of total credit disbursed in different sectors.
Comparative Analysis on Retail Credit in Context of Prime Bank Limited In 2009, though 7.4% of total credit was invested in terms of retail credit, PBL continued its spotlight on retail credit. In view of the growth potentials, separate division was created at the beginning of the year 2009 for managing the retail business following credit portfolio was standing with PBL with different lending sectors.
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Growth Rate
46.78%
64.59%
37%
Growth Rate
80% 60% 40% 20% 37% 64.59% 46.78%
Chart 7.2: Growth Rate of Retail Credit of PBL in last 3 years Findings In 2007 total disbursement was 274 crore which increased from 200crore, the growth rate was 37%. In 2008 total disbursement was 451 crore which increased from 274crore, the growth rate was 64.59%. In this year, a number of products were developed and existing products were re-launched with better pricing structure and repayment period. And the made their sales team very effective and provide huge investment on advertisement. In 2009 total disbursement was 662 crore which increased from 451 crore, the growth rate was 46.78%.
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1000
800 600 400 200 0 2007
717
2008
2009
Chart 7.3: Credit Disbursement of PBL in last 3 years Findings: As per the above percentages of retail credit or Consumer Credit Scheme (CCS) in total credit portfolio, the main income that this sector generates it the interest income. In 2007, the total interest revenue generated by different credit sectors was Tk 717 Cr. in which, CCS alone was responsible for income of Tk. 25 Cr. 3.84% income is generated in 2007 Again, in 2008, the total interest revenue from different sector was Tk. 909 Cr. wherein, Tk. 52 Cr. was gained by CCS. 5.57% income is generated in 2008 though in 2008 disbursement growth was highest. In the year 2009, total interest revenue earned was Tk.1085 Cr. and Tk. 83 Cr. was from CCS. 7.65% income is generated in 2009. Growth rate was not more than previous year in 2009 but income generation rate was highest.
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BETWEEN
PBLS
CCS
DISBURSEMENT
AND
8.1 Year Wise Disbursement Amount and Recovery Percentage of CCS Loans of Prime Bank Limited: (Last 5 years)
Table 8.1: Retail Credit Disbursement of PBL Year 2005 2006 2007 2008 2009 Total Disbursement Amount 182 219 274 451 662 (Taka in Crore) Recovery % 93.02% 95.75% 96.55% 95.80% 97.30%
Disbursment Amount
700 600 451 274 662 500 400 300 200 100 0 182 219
Taka in Crore
2005
2006
2007
2008
2009
Chart 8.1: Retail Credit Disbursement of PBL in last Five years Findings: From the graph above we can see that the trend of the disbursement amount of CCS Loan is increasing year to year. This indicates the healthier position of the Bank in the commercial market. In 2008, the disbursement is increased much more than the previous year at a highest rate (64.59%) in last five years, because of the very effective sales team and huge advertisement campaign. And in 2009 the disbursement amount was increased in a highest amount.
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Recovery %
98.00% 97.00% 96.00% 95.00%
94.00%
93.02%
93.00% 92.00% 91.00% 90.00%
2005
2006
2007
2008
2009
Chart 8.2: Retail Credit Recovery of PBL in last 5 years Findings: From the above graph we can see that the trend of the recovery% of CCS Loan is increasing in 2005-2007. This at a first glance indicates the good position of the Bank in the commercial market. But in 2008 recovery% was fall. It is because in 2008, PBL changed their retail credit policy which attracts more customers. So in 2008 the growth of disbursement was increased vey much that is 64.59%. PBL disbursed huge loan but they could not recover well. 2008 PBL faced a problem in recovery percentage because they apply new procedure of loan disbursement. This affected in their recovery rate because of lack of attention in this sector. But in 2009 they overcome this problem nicely. In 2009 the disbursement amount of PBL was increasing at a good amount as well as they recovery % was also satisfactory.
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9.1 The Disbursement Amount and Recovery% of five Different Bank including Prime Bank Limited (PBL) at Year 2007:
Table 9.1: The Disbursement Amount and Recovery% in 2007 (Taka in Crore) Diff. Bank PBL DBL BRAC HSBC SCB Disbursement amount 274 Recovery % 210 370 355 300
Disbursement Amount
400 350 300 Tk in Crore 250 200 150 100 50 0 PBL DBL BRAC HSBC SCB 274 210 370 355 300
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Recovery %
99.00% 98.50% 98.00% 97.50% 97.00% 96.50% 96.00% 95.50% 95.00% 94.50% 98.75% 97.50% 97% 96.55% 96.00%
PBL
DBL
BRAC
HSBC
SCB
Chart 9.2: Recovery % of five Banks in 2007 Findings The total disbursement amount of PBL & DBL is Low. Because they have started their CCS from after the others. At 2007, the highest amount of disbursement was done by HSBC and Medium amount of disbursement was done by BRAC and SCB. BRAC has introduced Consumer Credit Scheme in a new way. They promote their different scheme in news paper TV media etc. This reflects in their disbursement. Recovery % of BRAC, SCB and HSBC is good. But comparatively DBL and PBL was not good. So, in 2007 the performance of PBL was not satisfactory from the point of disbursement as well as recovery
9.2 The Disbursement Amount and Recovery% of five Different Bank including Prime Bank Limited (PBL) at Year 2008:
Table 9.2: The Disbursement Amount and Recovery% 2008 (Taka in Crore)
DBL 330
SCB 410
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Disbursement Amount
600 500 Tk in Crore 400 300 200 100 0 PBL DBL BRAC HSBC SCB 451 330 490 440 410
Recovery %
100.00% 99.00% 98.00% 97.00% 96.00% 95.00% 94.00% 93.00% PBL DBL BRAC HSBC SCB 96.10% 95.50% 99.50% 98.20% 97.50%
Chart 9.4: Recovery % of five Banks in 2008 Findings At 2008, the highest amount of disbursement was done by BRAC and lowest amount of disbursement was done by DBL. HSBC is not very far from BRAC. Recovery % of BRAC is the Best and SCB & HSBC is good. But comparatively DBL and PBL is not good. In 2008 PBLs disbursement was increased much more than previous year. And PBL come to a strong position than previous year. But they did not focused on recovery so the recovery was reduced in this year So, in 2008 the performance of PBL was satisfactory in term of disbursement
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9.3 The Disbursement Amount and Recovery% of five Different Bank including Prime Bank Limited (PBL) at Year 2009:
Table 9.3: The Disbursement Amount and Recovery% in 2009 (Taka in Crore)
Diff. Bank
PBL
DBL 560
BRAC 620
Disbursement Amount
680 660 640 Taka in Crore 620 600 580 560 540 560 620
662
660
610
520
500 PBL DBL BRAC HSBC SCB
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Recovery %
100.00% 99.00% 98.00% 97.00% 96.00% 95.00% 94.00% 93.00%
99.50% 98% 96.55% 95.50% 97.50%
PBL
DBL
BRAC
HSBC
SCB
Chart 9.6: Retail Credit Recovery% of five Banks in 2009 Findings At 2009, the highest amount of disbursement was done by PBL and lowest amount of disbursement was done by DBL. BRAC is as usual in the highest position. HSBC is not very far from BRAC. SCB is almost as previous year. Its also the highest amount disbursed by PBL. In this year PBL gave attention in recovery sector thats why their recovery % was increased than the previous year Recovery % of BRAC is the Best and PBL, SCB and HSBC is good. But comparatively DBL is not good. So, in 2009 the performance of PBL was good.
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10.2 Prospects
From the above study and competitive analysis on Prime Bank, the prospects that are found are following: Diversified Product Portfolio PBL currently has diversified product portfolio. From the above comparison, it can be easily observed that, the other immediate major competitors like HSBC and SCB have only three to four types of product and with these products, they are trying to capture middle-class, upper middle class and upper class peoples personal credit need. But Prime Bank has separate cells for separate client segments which is one of the important aspects of PBL. This is one of the crucial prospects for PBL to proceed with retail credit further. Lower interest rate and related cost It can be said confidently from the above comparison that, PBL has the lowest interest rate in terms of all retail credit products among its competitors which is an opportunity for it to attract new clients. Again, in terms of processing fee, stamp charge and early settlement cost, wherein its other competitors are taking higher amount and charges for early settlement, PBL charges the lowest amount and allows its client for early settlement at free of cost, which is convenient for clients. Lower credit amount and credit cycle In some retail products, PBL offers different lowest amount and time interval as a minimum which is also a convenience for the clients of a developing country like Bangladesh. In Bangladesh, most of the fixed income earning people have income range within Tk. 20,00035,000.For them to avail an amount of retail credit for more than Tk. 10,000-12,000 to fulfill personal needs is almost impossible. Lower tenor of credit lessens the burden from clients and inspires them to take more credit which is currently offered by PBL. Protection against defaulter As PBL asks for CIB for any amount of TK. 50,000 and above, it protects PBL of holding default clients and secures the income generated by retail credit.
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11.0 RECOMMENDATIONS
There are some charges for the loan disbursement like Risk fund that should be reduced & definitely refundable after the repayment of the installments. Rate of interest should be reduced. Instead of 2 peoples security 3 people security would more secured the loan recovery. There should be special incentives for those of the regular payer. Loan disbursement procedure should be within 2 day after the application of the CCS. Recovery of the loan by the monthly installment should be done through the automated adjusted installment software by the banks. Interest rate differential should be there to encourage a group of people. The equal monthly installment chart should be enrolled to the brochure according to the various loan amounts. Individually every branch should be provided a target for selling the CCS loan & the top most sellers would be rewarded by the monetary benefits that would encourage the employers. Workshop on CCS loan should be arranged for initiating new ideas between the concerned officer & Retail credit division to initiate new concepts & ideas to compete with other banks. At least 2 loans fair should be arranged to sell the large amount of loans & the special waiver should be offered at that time. Various festivals loan (Eid, Puja) should be provided for the different people. During the period of festival loans loan-processing fees should be nil & interest rate waiver should be offered to sell the large amount. Proper communication through the publicity should be there to encourage all kind of CCS facilities. Total marketing team should be prompt enough to initiate the large number of customers every month.
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12.0 CONCLUSION
Bank is a functional institution that relates to money matter. For a country, it keeps an important factor. As an intermediary between the supplier and demand, Prime Bank Ltd. plays a deep role. From the aforesaid topic & my point of origin to work in Prime Bank Limited, I can say that I really enjoyed my OCP period at Prime Bank Limited, Laldighi East Branchs General Banking Department, Retail Credit Department, Foreign Exchange Department form the very first day. I am confident that this OCP program at Prime Bank Limited, Laldighi East Branch, Chittagong will definitely help me to realize my further career in the job market. A COMPARATIVE ANALYSIS ON PRIME BANK RETAIL CREDIT is not so sufficient to measure and express perfectly within this short time of my OCP period. But it is a great opportunity for me to get use to with the operational environment of micro credit of Prime Bank Limited. I have tried my soul to incorporate the research report with necessary relevant information in my OCP report. Though there are some lacking in the operational activities of CCS loan facilities but overall performance of consumer credit scheme are formidable to fight with other private sector banks. To ensure promising future it should develop its wide areas to socio-economic development of the society. We pray and hope that Prime Bank Limited will provide various kinds of service and schemes to welfare of the society.
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13.0 REFERENCES
Bangladesh Bank (2004).Prudential Regulations for Consumer Financing. Clark, T., Dick, A., Hirtle, B., Stiroh, K., & Williams, R.(2007).The Role of retail in U.S Banking Industry.Journal of Econmic Policy Review, 1-18. Gopinath, S. (2005, May).Retail Banking-Opportunities and Challenges. Paper presented at the IBA-banking Frontier International Conference, Mumbai, India. Math, B. (2005, December).Future Growth Drivers-Retail versus Corporate. Papers presented at a seminar at MDI, India. Ministry of Finance. (2006).The Activities of Banks and Financial Institutions, 20052006. Publication No. 329 EX-1400, Dhaka, Bangladesh Government Press. Stiroh, J.(2004).Diversification in Banking. Journal of Money, Credit and Banking, 39(1), 49-81. Westerfield, R.B. (1998) Effect of Consumer Credit on the Business Cycle. Journals of the American Academy of Political and Social Science, 196, 99-110.