Adaptation, Implementation, Success & Failure of Retail Banking Products of Jamuna Bank Ltd
Executive Summary This report is on “Adaptation, Implementation, Success & Failure of Retail Banking Products of Jamuna Bank Ltd.�. This report intends to meet the objectives of giving a detailed description of retail banking services and prouducts offered by Jamuna Bank Limited , being accustomed with the management policy and processes regarding the retail banking operation of JBL, identify the reasons behind the success and failure of retail banking products
of Jamuna Bank Ltd and giving recommend ation for ways and means to make the retail banking products more popular and solve problems regarding retail banking operation of
Jamuna Bank Limited. Jamuna Bank Ltd. started its operation from 3rd June 2001 under the Banking Company Act 1991. The authorized capital of the Bank is Tk.1600.00 million and paid up capital Tk.390.00 million, as of June 30, 2009 Paid up capital of the Bank is raised to Tk.1313.26 million. At present the Bank has 49 branches and 5 SME service centre. The Bank is a full service Commercial Bank and has a strong capital base, with low non- performing loans. The mission of the bank is to become a leading banking institution and to play a pivotal role in the development of the country. The Bank aims to continue expanding Branch network to reach wide spectrum of customers across the country and serve by offering products and services backed by latest technologies. Retail banking refers to banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth. Jamuna Bank Ltd. There are four types of Retail Banking Products of JBL under the retail loan category. These are i) Consumer Credit Scheme (CCS) , ii) Auto Loan, iii) Any Purpose Loan and iv) Salary Loan. The maximum interest rate on retail loan is 17% p.a. Though this interest rate is much competitive but it has failed to gain competitive advantage compared with other local and foreign commercial banks. Jamuna Bank Ltd. is far behind in retail loan disbursement compared to the other banks, but in 2009 it has achieved considerable growth in
retail loan disbursement, though retail loan as percentage of total loan portfolio has not considerably increased. Jamuna Bank disbursed only Tk. 72.84 million retail loan in 2009 whereas Brac Bank Ltd. disbursed Tk. 10672.62 million and Prime Bank Limited disbursed Tk. 5190.12 million. Due to diversified retail loan products of other banks, faster loan processing and activities of sales team they are gaining competitive advantage. It is observed that
1. INTRODUCTION 1.1 Origin of the Report This internship report on “Adaptation, implementation, success and failure of Retail Banking products in Jamuna Bank Ltd.
is prepared to fulfill the partial
requirement of the internship program as full credit subject of the EMBA program, Faculty of Business Studies, University of Dhaka. This report is the outcome of my job experience as Probationary Officer in the credit department of Jamuna Bank Limited, Mirpur Branch. While working in the bank as a Probationary Officer for the last seven months the opportunity to processing the credit proposal for the retail banking products on account of different customers and to go through the procedural guidelines, approval process, credit administration, risk management, collection and remedial management of retail banking operation and products of the bank.
1.2 Objective of the Study The primary objective of the study is: •
To fulfill the partial requirement of the internship program as a full credit subject of the EMBA program.
•
To have exposure to the retail banking production and its products of Jamuna Bank Limited.
•
To discuss the retail banking services offered by Jamuna Bank Limited.
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To be accustomed with the management policy or process regarding the retail banking operation of JBL.
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To identify the reasons behind the success and failure of retail banking products of Jamuna Bank Ltd.
•
To recommend ways and means to solve problems regarding banking operation of Jamuna Bank Limited.
1.3 Methodology This report is based mainly on first hand experience and observations that experienced while working in the credit department of Jamuna Bank Ltd., Mirpur Branch . Data required for this report were collected from the Product Program Guideline of Retail Banking Division, Head Office, Jamuna Bank Ltd., different retail credit proposals on account of customers and annual report of Jamuna bank Ltd.. Apart from these, helpful information was collected from online resources. To analyze the performance of Jamuna bank limited different statistical and financial tools such as ratio analysis, growth analysis were done. So, this report is prepared by two sources •
Primary Sources.
•
Secondary Sources.
Primary Sources: Basically this type of Sources included conversation and queries with the Executives/Officers of Retail Banking Division, Head Office, JBL, Dhaka. Secondary Sources: Secondary data were collected in the following ways: •
Data gathered within the organization itself
•
Product Program Guideline for Retail Banking
•
Data gathered from Texts
•
Internet sources.
•
General reports
•
Annual reports
•
Official documents
1.4 Data collection Approach Primary data was collected in the Survey Research approach. A questionnaire was used to collect primary data for the study. The questionnaire contained open-end questions.
1.5 Sampling Technique For sampling unit the chosen some officers of Jamuna Bank Ltd, Brac Bank Ltd. and Prime Bank Ltd. To design Sample Size two Officers from the Retail Banking Division, Head Office, JBL, one Officer from Prime Bank Ltd., Mirpur Branch and one Officer from Brac Bank Ltd., Mirpur Branch were chosen. Sampling Procedure was non-probability sampling 1.6 Analyzing the Information The collected information has been coded according to the need of presentation in the report. The data have been analyzed using computer software like (MS EXCEL). The report has been prepared based on the data and remarks and recommendations have been posted. In the next-to-last step in this report preparation, it was tried to extract potential findings from the collected data and information.
1.7 Scope & Limitation In this report I have tried to use, as much as information possible but in some cases the information were not enough. Lacking of some essential footnotes hampered our work in some steps. The area of banking operating is very large. had been working in this bank as a “Probationary Officer� about seven months. During the probationary period of 1 year to cover all the desks as part of job rotation. The working in the credit department for the last two months. This time is not enough to understand all the banking functions of credit operation, especially retail banking. Moreover, sanction of retail loan and other approval process is done by Retail Banking Division, Head Office. So faced some problems when collect information as working in Branch level. Sufficient books, publications and figures were not available. If this limitation were not been there, the report would have been more useful. In spite of limitation got some facility to complete my internship report. The employees working in the Retail Banking Division, Head Office helped me lot. They gave me all essential data and conversation with. The university internship supervisor also helped me a lot. He gave guidelines how to prepare report more attractively and perfectly. 2. Company Information
2.1 About JBL, the Bank
Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 with its head office at Printers Building (2nd floor and 8th floor), 5, Rajuk Avenue, Dhaka-1000. The Bank started its operation from 3rd June 2001. Jamuna Bank Limited is a highly capitalized new generation Bank started its operation with an authorized capital of Tk.1600.00 million and paid up capital of Tk.390.00 million, as of June 30, 2009 Paid up capital of the Bank raised to Tk.1313.26 million. The number of branches raised to 49 (forty nine) and 5 SME service centre as on December 31, 2009. JBL undertakes all type of banking transactions to support the development of trade and commerce in the country. JBL’s services are also available for the entrepreneurs to set up new ventures and BMRE for industrial units. The Bank gives special emphasis on Export, Import, Trade Finance, SME Finance, Retail Credit and Finance to Women Entrepreneurs. To provide clientele services in respect of International Trade it has established wide correspondent banking relationship with local and foreign banks covering major trade and financial centres at home and abroad
2.2 Mission of JBLION To become a leading banking institution and to play a pivotal role in the development of the country. 2.3 Vision of JBL The Bank is committed to satisfying diverse needs of its customers through an collection of products at a competitive price by using appropriate technology and providing timely service so that a sustainable growth, reasonable return and contribution to the development of the country can be ensured with a motivated and professional work-force.
2.4 Corporate Slogan of JBL You’re Partner for Growth
2.5 Sponsors of JBL The sponsors of Jamuna Bank Limited are successful leading entrepreneurs of the country having stakes in different segments of the national economy. They are eminent industrialist and businessman having wide business reputation both at home and abroad. 2.6 Management of JBL JBL is managed by highly professional people. The present Managing Director of the Bank is a forward looking senior banker having decades of experience and multi discipline of knowledge to his credit both at home and abroad. Is supported by an educated and skilled professional team with diversified experience in finance and banking. The management of the bank constantly focuses on the understanding and anticipating customers’ needs and offer solution thereof. Jamuna Bank Limited has already achieved tremendous progress with in a short period of its operation. The Bank is already ranked as one of the quality service providers and known for its reputation. 2.7 Objectives of JBL •
To earn and maintain CAMEL rating strong.
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To establish relationship banking and service quality through development of Strategic Marketing Plan.
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To remain one of the best banks in Bangladesh in terms of profitability and asset quality.
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To introduce fully automated systems through integration of Information Technology.
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To ensure an adequate rate of return on investment.
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To keep risk position at an acceptable range (including any off balance sheet risks)
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To maintain adequate liquidity to meet maturity obligations and commitments.
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To maintain a healthy growth of business with desired image.
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To maintain adequate control systems and transparency in procedures.
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To develop and retain a quality work force through an effective Human Resources Management System.
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To ensue optimum utilization of all available resources.
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To pursue an effective system of Management by ensuring compliance to ethical norms, transparency and accountability at all levels.
2.8 Strategies of JBL •
To manage and operate the bank in the most efficient manner to enhance financial performance and to control cost of fund.
•
To strive for customer satisfaction through quality control and delivery of timely services.
•
To identify customers credits and other banking needs and monitor their perception towards our performance in meeting those requirements.
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To revive and update policies, procedures and practices to enhance the ability to extend better services to customers.
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To train and develop all employees and provide them adequate resources so that customers’ needs can be responsibly addressed.
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To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to all employees in a timely fashion.
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To cultivate a working environment that fosters positive motivation for improved performance.
•
To diversify portfolio both in the retail and wholesale market.
2.9 Organ gram of JBL Chairman Chief Advisor
Board of Directors Managing Director Additional MD
Deputy MD Senior Executive Vice President
Executive Vice President
Senior Vice President
Executive Vice President
Senior Vice President Vice President Senior Assistant Vice President Assistant Vice President
Executive Vice President
Senior Vice President
First Assistant Vice President
Jr. Assistant Vice President Senior Executive officer Executive officer First executive officer Probationary Officer Officer Junior Officer
2.10 Corporate Governance Board of Directors The Board of Directors consists of 17 members elected from the sponsors. The Board of Directors is supreme body of the Bank. Executive Committee All routine matters beyond the delegated powers of management are decided upon by or routed through the “Executive Committee, subject to ratification by the Board of Directors. Audit Committee In line with the guidelines of Bangladesh Bank, a three-member Audit Committee of the Board of Directors been formed to assists the Board in matters related to Audit and Internal Control System of the Bank. Chairman Sakhawat, Abu Khair Mohammad Vice Chairman Md. Ismail Hossain Siraji Directors Al-haj M. A. Khayer
Engr. A. K. M. Mosharraf Hussain Engr. Md. Atiqur Rahman Golam Dastagir Gazi (Bir Protik) Fazlur Rahman Al-Haj Nur Mohammed Md. Tajul Islam Al-Haj Md. Rezaul Karim Ansari Md. Belal Hossain Md. Mahmudul Hoque Md. Sirajul Islam Varosha Farhad Ahmed Akand Kanutosh Majumder Shaheen Mahmud Gazi Golam Murtoza A. S. M. Abdul Halim, Independent Director, represents Dhaka Insurance Limited
Deputy Managing Director M. A. Salam Md. Alauddin Al-Azad Company Secretary Malik Muntasir Reza
3. Retail Banking Operation of Jamuna Bank Ltd. 3.1 What is Retail Banking? Retail banking refers to banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth. It is a banking services offered to the general public. In contrast with Wholesale Banking or corporate banking, retail banking is a high volume business with many service providers competing for market share.
3.1 Difference between Core Banking & Retail Banking Often retail banking is referred to as "non commercial banking" which would be common checking accounts and consumer loans. Where as "core banking" is often the very solid business accounts and commercial loans. It is referred to, as 'core' because it is a core or central to the banks business. Few banks survive from just retail banking services, they need those core business accounts that are perhaps more stable than retail business. The exact term usage may also be based on the part of the country one lives in as is often the case with our language. 3.2 Retail Banking in Bangladesh
Retail banking has gained notable popularity over the last five years and is increasing day by day on the back of rising trend of middle class people and access of banking services to the urban people. Specifically consumer loan for meeting up the demand of people to adapt to the new lifestyle of middle class and higher middle class people has gained much popularity. Several commercial banks – both local and foreign- have come forward to meet up this demand with diversified and multifarious retail banking services like car loan, consumer loan for purchase of household appliance, loan against salary; credit card etc has gained much popularity. For this purpose the commercial banks has concentrated in increasing their retail loan portfolio.
3.3 Retail Banking Products of JBL Types of Retail Loan in JBL There are four type of retail loan in JBL: 1. Consumer Credit Scheme (CCS) 2. Auto Loan – Against Car Registration 3. Any Purpose Loan – Against Security 4. Salary Loan 3.3.1 Consumer Credit Scheme (CCS) •
CCS-1: Customer Segment
i) Permanent/confirmed service holder of Govt., Semi-Govt., Autonomous organizations, Banks, Insurance Companies, Public Limited Companies, Multinational Companies, NGOs. ii) Employees of Private Limited Companies, acceptable to the bank, covered by guarantee of another employee of equal or higher grade. iii) Teachers of Universities, Colleges & Schools (Affiliated). iv) Professional persons like Doctors, Engineers, Chartered Accountants, and Architects. v) All regular Employees of Jamuna Bank Limited. (Service life will be minimum 6 month as permanent employee of Jamuna Bank Ltd.) vi)Employees of Jamuna Bank Ltd must submit a guarantee of another confirmed equal or higher grade employee of Jamuna Bank. vii) Loan life shall not exceed 36 months or unexpired service period of salaried customers. viii) Bank at its discretion may also extend facility to any customer not mentioned above.
ix) Job security of a salaried applicant for such credit will be taken into consideration while processing his/her case for consumer credit. Non Target Customer: (1) Defense officials (2) Police (3) Lawyers (4) Public figure & media Personalities (5) Journalists (6) Travel Agents & C&F agents (7) Mariners (8) Employee of non reputed Proprietorship/Partnership firms (9) Politically affiliated personalities and (10) Negative listed individuals. •
CCS-2: Purpose
The purpose of consumer financing is to purchase the following Articles: •
Consumer durable.
•
Household Items
•
Any other item not covered above but acceptable to the bank.
•
CCS-3: Nationality
Bangladeshi by Birth. •
CCS-4: Age Limit 1.
Minimum age 21 years / Maximum age 60 years
2.
But loan tenor shall not exceed 63 years of age .
3.
Loan tenor shall not exceed remaining service life of salaried person.
•
CCS-5: Minimum Income
Net Income should be at least Tk. 15,000/- per month (exempted for JBL employees). The Customer must have sufficient net cash flow to repay the loan installments. •
CCS-6: Loan Size
For Jamuna Bank employee -
12 times basic but maximum Tk. 3.00 lac
For the client
maximum Tk. 3.00 lac
•
-
CCS-7 : Loan to Price Ratio
For Jamuna Bank employee -
80%
For the client
60%
•
-
CCS-8: Security/ Collateral •
Post dated cheques favouring the Bank for all installments both for customers and JBL employees.
•
Hypothecation/ Lien / Registration / Mortgage of customer procured item, as feasible depending on the type of asset.
•
Hypothecation/ Lien / Registration / Mortgage of any other asset, acceptable to the bank, as feasible depending on the type of asset.
•
Personal guarantee of the client and his spouse (if any)
•
Guarantee of a Person/Company/Institution acceptable to the Bank.(Guarantor shall be equal to or more creditworthy then the Principal applicant)
•
Lien on Salary and service benefit of the customer duly confirmed by his employer on JBL standard format.
•
Copy of Telephone bill/WASA bill/Municipality holding tax receipt.
o CCS-9: Legal/Charge/other Documents •
Acceptance of sanction terms.
•
Usual charge documents.
•
Salary Certificate from the Employer, if salaried and bank account statement.
•
Letter of Lien on Salary and service benefit of the customer from his employer on JBL standard format.
•
The Sale Receipt of goods in the name of the borrower.
•
An undertaking in Bank’s prescribed form to pay monthly installments regularly.
•
Employer’s certificate in the JBL standard format to the effect that the client is in the permanent service of the organization, if service holder.
•
Letter of Authority to take repossession and sell the goods/item/asset purchased/procured under JBL financing.
•
Letter of lien on monthly payment and service benefit of salaried customer.
•
Letter of Hypothecation/ Letter of Lien / Registration/ Mortgage deed of procured asset/any other asset, acceptable to the bank, as feasible depending on the type of the asset.
•
CCS-10: Interest Rate
For Jamuna Bank employee -
11% p.a.
For the client
-
17% p.a.
For overdue
-
4% penal interest.
•
CCS-11: Maximum Term of Loan
For Jamuna Bank employee- Maximum 3 years. For the client
-
Maximum 3 years.
CCS-12: Repayment Method •
By equated monthly installments.
•
Payment starts from the month following the month of disbursement.
•
Payment has to be made within 10th day of every month.
•
Tk.500.00 shall be charged as penalty for each bounced cheque.
•
Default in payment of consecutive 2(two) installment shall constrain the bank to take legal measure.
•
Resignation/Termination of any salaried person from present employment shall make the loan immediately repayable.
•
The full value of the limit shall also be repayable on demand, if the bank assumes that, (1) the customer has lost his repaying capacity, (2) the customer may lose his repaying capacity, (3) the customer’s conduct with the bank does not remain at a satisfactory level and (4) any other uncontrollable factor which may constrain the bank for calling up the loan.
•
CCS-13: Disbursement pre-condition
•
Standard account opening and properly filled in KYC.
•
Fulfillment of Documentation and clean CIB report.
•
Deposit of equity money and bank charges.
•
Contact point verification and income verification by the branch nominated
and
head office accepted official(s)/agency.
•
CCS-14: Disbursement Mode
1. Bank’s sanctioned amount shall be disbursed through Payment Order/ Bank Draft directly to the supplier/seller. 2. In case employees of JBL, loan amount shall be directly credited to the borrower’s account against quotation. •
CCS-15: Debt Burden Ratio (DBR %)
Primarily 30% of monthly take home salary/ monthly net income.
•
CCS-16: Verification of Personal Details and Quotation
Branch administration shall verify the personal details, contact point, Gross Monthly Income and quotation/supply order/ indent and the supplier. •
CCS-17: Other charges
Type of Charge Service Charge Risk Fund(Non-refundable) Application Fee Other Charges
JBL Employee N/A N/A N/A At actual
Customers 1% 1-2% Tk. 100.00 At actual
3.3.2Auto Loan – Against Car Registration • i)
Auto Loan-1: Customer Segment Permanent/confirmed service holder of Govt., Semi-Govt., Autonomous organizations, Banks, Insurance Companies, Public Limited Companies, Multinational Companies, NGOs.
ii)
Employees of Private Limited Companies, acceptable to the bank, covered by guarantee of another employee of equal or higher grade.
iii) Teachers of Universities, Colleges & Schools (Affiliated). iv)
Professional persons like Doctors, Engineers, Chartered Accountants, and Architects.
v)
All regular Employees of Jamuna Bank Limited. (Service life will minimum 1 year as permanent employee of Jamuna Bank Ltd.)
vi)
Employees of Jamuna Bank Ltd must submit a guarantee of another confirmed equal or higher grade employee of Jamuna Bank.
vii) Loan life shall not exceed 60 months or unexpired service period of salaried customers. viii) Bank at its discretion may also extend facility to any customer not mentioned above. ix)
Job security of a salaried applicant for such credit will be taken into consideration while processing his/her case.
Non Target Customer: (1) Defense officials (2) Police (3) Lawyers (4) Public figure & media Personalities (5) Journalists (6) Travel Agents & C&F agents (7) Mariners (8) Employee of non reputed Proprietorship/Partnership firms (9) Politically affiliated personalities and (10) Negative listed individuals.
•
AUTO LOAN-2: Purpose
To procures brand new/unregistered Personal Transport, of age not more than 5 years, for use in lawful purpose.
•
AUTO LOAN -3: Nationality
Bangladeshi by Birth.
•
AUTO LOAN -4: Age Limit
1.
Minimum age 25 years / Maximum age 54 years
2.
but loan tenor shall not exceed 59 years of age.
3.
Loan tenor shall not exceed unexpired service life of salaried person.
•
AUTO LOAN -5: Minimum Income
Net Income should be at least Tk. 40,000/- per month. (to be substantiated by evidence) The Customer must have sufficient net cash flow to repay the loan installments. •
AUTO LOAN -6: Size
For the client •
-
Minimum 5.00 lac Maximum Tk. 20.00 lac
AUTO LOAN -7 : Loan to Price Ratio
For the client
-
70%
JBL employee
-
80% (Price of the vehicle to be verified by the bank).
•
AUTO LOAN -8: Security/ Collateral •
Post dated cheques favouring the Bank for all installments
•
Registration of the vehicle in the name of the bank.
•
Hypothecation/ Lien / Registration / Mortgage of any other asset, acceptable to the bank, as feasible depending on the type of asset.
•
Personal guarantee of the client and his spouse (if any)
•
Letter of authority of the borrower/user for repossession and sell the vehicle by bank, in case of default of 3 consecutive installments.
•
Guarantee of a Person/Company/Institution acceptable to the Bank.(Guarantor shall be equal to or more creditworthy than the Principal applicant)
•
Lien on Salary and service benefit of the customer duly confirmed by his employer on JBL standard format, if applicable.
•
Comprehensive 1st party insurance coverage favouring the bank from a reputed Insurance Company.
o AUTO LOAN-9: Legal/Charge/other Documents •
Acceptance of sanction terms.
•
Usual charge documents & JBL standard Lease agreement.
•
Salary Certificate from the Employer, if salaried and bank account statement.
•
Letter of Lien on Salary and service benefit of the customer(if service holder) from his employer on JBL standard format.
•
A copy of the customer paid utility bill.
•
An undertaking in Bank’s prescribed form to pay monthly installments regularly.
•
Employer’s certificate in the JBL standard format to the effect that the client is in the permanent service of the organization(if service holder).
•
Letter of Authority to take repossession and sell the goods/item/asset purchased/ procured under JBL financing.
•
Letter of lien on monthly payment & service benefit of salaried customer.
•
Letter of Hypothecation/ Letter of Lien / Registration/ Mortgage deed of procured asset/any other asset, acceptable to the bank, as feasible depending on the type of the asset.
•
Irrevocable Letter of authority to take possession of and sell Hypothecated/ under Lien / Registered / Mortgaged/ procured asset/any other asset, acceptable to the bank, as feasible depending on the type of the asset.
•
AUTO LOAN-10: Interest Rate
For the client
-
16%
For JBL Employee
-
15%
For overdue
-
Penal interest 4%
•
AUTO LOAN-11: Maximum Term of Loan
For the client
-
3-5 years, within service life(for salaried)
For JBL Employee
-
3-6 years
•
AUTO LOAN-12: Repayment Method
•
By equated monthly installments.
•
Payment starts from the month following the month of disbursement.
•
Payment has to be made within 10th day of every month.
•
Tk.500.00 shall be charged as penalty for each bounced cheque.
•
Default in payment of consecutive 3(three) installment shall constrain the bank to take legal measure.
•
Resignation/Termination of any salaried person from present employment shall make the loan immediately repayable.
•
The full value of the limit shall also be repayable on demand, if the bank assumes that, (1) the customer has lost his repaying capacity, (2) the customer may lose his repaying capacity, (3) the customer’s conduct with the bank does not remain at a satisfactory level and (4) any other uncontrollable factor which may constrain the bank for calling up the loan.
o AUTO LOAN -13: Disbursement pre-condition •
Standard account opening and properly filled in KYC.
•
Fulfillment of Documentation and clean CIB report.
•
Deposit of equity money and bank charges.
•
Contact point verification and income verification by the branch nominated
and
head office accepted official(s)/agency.
•
AUTO LOAN -14: Disbursement Mode
Bank’s sanctioned amount shall be disbursed through Payment Order/ Bank Draft directly to the supplier/seller upon receipt of registration and insurance coverage. •
AUTO LOAN -15: Debt Burden Ratio (DBR %)
Primarily 30% of monthly take home salary/ monthly net income.
•
AUTO LOAN -16: Verification of Personal Details and Quotation Branch administration shall verify the personal details, contact point, Gross Monthly Income quotation/supply order/ indent and the supplier.
AUTO LOAN -17: Other charges Type of Charge Service Charge Risk Fund (Non-refundable) Application Fee Other Charges
JBL Employee N/A N/A N/A At actual
3.3.3 Any purpose Loan-Against Security •
Any Purpose Loan-1: Customer Segment
Customers 1% 1-2% Tk. 100.00 At actual
and
i) Permanent/confirmed service holder of Govt., Semi-Govt., Autonomous organizations, Banks, Insurance Companies, Public Limited Companies, Multinational Companies, NGOs. ii) Employees of Private Limited Companies, acceptable to the bank, covered by guarantee of another employee of equal or higher grade. iii) Teachers of Universities, Colleges & Schools (Affiliated). iv) Professional persons like Doctors, Engineers, Chartered Accountants, and Architects. v) All regular Employees of Jamuna Bank Limited. (Service life will minimum 1 year as permanent employee of Jamuna Bank Ltd.) vi)Employees of Jamuna Bank Ltd must submit a guarantee of another confirmed equal or higher grade employee of Jamuna Bank. vii) Loan life shall not exceed 60 months or unexpired service period of salaried customers. viii) Bank at its discretion may also extend facility to any customer not mentioned above. ix) Job security of a salaried applicant for such credit will be taken into consideration while processing his/her case.
Non Target Customer: (1) Lawyers (2) Public figure & media Personalities (3) Journalists (4) Politically affiliated personalities and (5) Negative listed individuals.
•
Any Purpose Loan -2: Purpose
A- Any purpose of the customer, B- but Relationship Manager shall obtain the purpose, for the sake of lawful use of banks fund. •
Any Purpose Loan -3: Nationality
Bangladeshi by Birth. •
Any Purpose Loan 4: Age Limit 1.
Minimum age 25 years / Maximum age 54 years
2.
But loan tenor shall not exceed 59 years of age.
3. •
Loan tenor shall not exceed remaining service life of salaried person.
Any Purpose Loan -5: Minimum Income
Net Income should be at least Tk. 15,000/- per month. The Customer must have sufficient net cash flow to repay the loan installments. •
Any Purpose Loan -6: Size
For the client •
-
Minimum 2.00 lac Maximum Tk. 50.00 lac
Any Purpose Loan -7 : Loan to Price Ratio
Not applicable o Any Purpose Loan -8: Security/ Collateral •
Post dated cheques favouring the Bank for all installments
•
Registered mortgage/ registration of asset in the name of the bank.
•
Hypothecation/ Lien / Registration / Mortgage of any other asset, acceptable to the bank, as feasible depending on the type of asset.
•
Personal guarantee of the client and his spouse (if any)
•
Lien on Salary and service benefit of the customer duly confirmed by his employer on JBL standard format, if applicable.
•
Comprehensive 1st party insurance coverage of asset favouring the bank, if applicable.
o Any Purpose Loan -9: Legal/Charge/other Documents •
Acceptance of sanction terms.
•
Usual charge documents.
•
Salary Certificate from the Employer, if salaried and bank statement.
•
Letter of Lien on Salary and service benefit of the customer(if service holder) from his employer on JBL standard format.
•
An undertaking in Bank’s prescribed form to pay monthly installments regularly.
•
Employer’s certificate in the JBL standard format to the effect that the client is in the permanent service of the organization(if service holder).
•
Letter of Authority to take repossession and sell the goods/item/asset purchased/procured/offered under JBL financing.
•
Letter of Hypothecation/ Letter of Lien / Registration/ Mortgage deed of procured asset/any other asset, acceptable to the bank, as feasible depending on the type of the asset.
•
Irrevocable Letter of authority to take possession of and sell Hypothecated/ under Lien / Registered / Mortgaged/ procured asset/any other asset, acceptable to the bank, as feasible depending on the type of the asset, if applicable.
o Any Purpose Loan -10: Interest Rate For the client
-
16% p.a. (monthly rest)
For overdue
-
Penal interest @ 4%
o Any Purpose Loan -11: Maximum Term of Loan For the client
-
maximum 5 (Five) years.
In suitable case the loan period may be relaxed. o Any Purpose Loan -12: Repayment Method •
By equated monthly installments.
•
Payment starts from the month following the month of disbursement.
•
Payment has to be made within 10th day of every month.
•
Tk.500.00 shall be charged as penalty for each bounced cheque.
•
Default in payment of consecutive 2(two) installment shall constrain the bank to take legal measure.
•
Resignation/Termination of any salaried person from present employment shall make the loan immediately repayable.
•
The full value of the limit shall also be repayable on demand, if the bank assumes that, (1) the customer has lost his repaying capacity, (2) the customer may lose his repaying capacity, (3) the customer’s conduct with the bank does not remain at a satisfactory level and (4) any other uncontrollable factor which may constrains the bank for calling up the loan.
•
Any Purpose Loan -13: Disbursement pre-condition
o Standard account opening and properly filled in KYC. o Fulfillment of Documentation and clean CIB report. o Completed registration/mortgage formalities. o Deposit of equity money and bank charges. o Contact point verification and income verification by the branch nominated and head office accepted official(s)/agency.
•
Any Purpose Loan -14: Disbursement Mode 1. Bank’s sanctioned amount shall be disbursed directly to the customers account with Jamuna Bank Ltd.
•
Any Purpose Loan -15: Debt Burden Ratio (DBR %)
Primarily 30% of monthly take home salary/ monthly net income.
•
Any Purpose Loan -16: Verification of Personal Details and Quotation
Branch administration shall verify the personal details, contact point, Gross Monthly Income and quotation/supply order/ indent and the supplier. •
Any Purpose Loan -17: Other charges Type of Charge Service Charge Risk Fund (Non-refundable) Application Fee Other Charges
JBL Employee N/A N/A N/A At actual
Customers 1% maximum Tk.5000.00 1-2% Tk. 100.00 At actual
3.3.4 Salary Loan – Lien on Salary •
Salary Loan-1: Customer Segment
i) Permanent/confirmed service holder of Govt., Semi-Govt., Autonomous organizations, Banks, Insurance Companies, Public Limited Companies, Multinational Companies, NGOs.
ii) Employees of Private Limited Companies, acceptable to the bank, covered by guarantee of another emploee of equal or higher status/grade iii) Teachers of Universities, Colleges & Schools (Affiliated). vii) Loan life shall not exceed 36 months or unexpired service period of salaried customers. viii) Bank at its discretion may extend facility to any customer not mentioned above. ix) Job security of a salaried applicant for such credit will be taken into consideration while processing his/her case. Non Target Customer: Negative listed individuals. •
Salary Loan -2: Purpose
A- Any purpose of the customer/Lifestyle Loan, B- but Relationship Manager shall obtain the purpose, for the sake of lawful use of banks fund. •
Salary Loan -3: Nationality
Bangladeshi by Birth. •
•
Salary Loan -4: Age Limit 1.
Minimum age 21 years / Maximum age 54 years
2.
but loan tenor shall not exceed 59 years of age .
3.
Loan tenor shall not exceed remaining service life of salaried person.
Salary Loan -5: Minimum Income
Net Income should be at least Tk. 15,000/- per month. The Customer must have sufficient net cash flow to repay the loan installments.
•
Salary Loan -6: Size
For the client
-
Minimum 1.00 lac Maximum Tk. 5.00 lac Or 12 times gross salary, which ever is lower.
•
Salary Loan-7 : Loan to Price Ratio
Not applicable •
Salary Loan -8: Security/ Collateral •
Post dated cheques favouring the Bank for all installments
•
Hypothecation/ Lien / Registration / Mortgage of any other asset, acceptable to the bank, as feasible depending on the type of asset, if applicable.
•
Personal guarantee of the client and his spouse (if any)
•
Lien on Salary and service benefit of the customer and consent to pay to JBL on demand to adjust the loan from his employer on JBL standard format, duly confirmed by the appropriate authority & verified by the branch manager.
•
Guarantee of a Person/Company/Institution acceptable to the Bank.(Guarantor shall be equal to or more creditworthy then the Principal applicant).
o Salary Loan -9: Legal/Charge/other Documents •
Acceptance of sanction terms.
•
Usual charge documents.
•
Salary Certificate from the Employer, if salaried and bank account statement.
•
Letter of Lien on Salary and service benefit of the customer from his employer on JBL standard format.
•
A copy of the customer paid utility bill.
•
An undertaking in Bank’s prescribed form to pay monthly installments regularly.
•
Employer’s certificate in the JBL standard format to the effect that the client is in the permanent service of the organization(if service holder).
•
Letter of Authority to take repossession and sell the goods/item/asset purchased/procured/offered under financing from JBL, if applicable.
•
Letter of Hypothecation/ Letter of Lien / Registration/ Mortgage deed of procured asset/any other asset, acceptable to the bank, as feasible depending on the type of the asset, if applicable.
•
Irrevocable Letter of authority to take possession of and sell Hypothecated/ under Lien / Registered / Mortgaged/ procured asset/any other asset, acceptable to the bank, as feasible depending on the type of the asset, if applicable.
•
Salary Loan -10: Interest Rate
For the client
-
16% p.a. (monthly rest)
For overdue •
-
Penal interst @ 4%
Salary Loan -11: Maximum Term of Loan
For the client
-
maximum 3 (Three) years.
o Salary Loan -12: Repayment Method •
By equated monthly installments.
•
Payment starts from the month following the month of disbursement.
•
Payment has to be made within 10th day of every month.
•
Tk.500.00 shall be charged as penalty for each bounced cheque.
•
Default in payment of consecutive 2(two) installment shall constrain the bank to take legal measure.
•
Resignation/Termination of any salaried person from present employment shall make the loan immediately repayable.
•
The full value of the limit shall also be repayable on demand, if the bank assumes that, (1) the customer has lost his repaying capacity, (2) the customer may lose his repaying capacity, (3) the customer’s conduct with the bank does not remain at a satisfactory level and (4) any other uncontrollable factor which may constrains the bank for calling up the loan.
o Salary Loan -13: Disbursement pre-condition •
Standard account opening and properly filled in KYC.
•
Fulfillment of Documentation and clean CIB report.
•
Completed registration/mortgage formalities.
•
Deposit of equity money and bank charges.
•
Contact point verification and income verification by the branch nominated
and
head office accepted official(s)/agency. o Salary Loan-14: Disbursement Mode Bank’s sanctioned amount shall be disbursed directly to the customers account with Jamuna Bank Ltd. o Salary Loan-15: Debt Burden Ratio (DBR %)
Primarily 30% of monthly take home salary/ monthly net income.
o Salary
Loan-16:
Verification
of
Personal
Details
and
Quotation(if
applicable) Branch administration shall verify the personal details, contact point, Gross Monthly Income and quotation/supply order/ indent and the supplier. o Salary Loan-17: Other charges Type of Charge Service Charge Risk Fund (Non-refundable) Application Fee Other Charges
JBL Employee N/A N/A N/A At actual
Customers 1% maximum Tk.5,000.00 1-2% Tk. 100.00 At actual
3.4 Segregation of Duties for Retail Banking Organizational Structure (Head Office) M D D M D /A M D R e t a il B a n k in g R is k M a n a g e m e n t & P o ilc y
Approval Authority
R e l a t io n s h ip M anagem ent
:
A d m in s t ra t io n & V e r if i c a t i o n
C o lle c t io n
The Managing Director.
Risk Management & Policy: It will scrutinize the proposal, apply required risk mitigation method/condition(s) and shall arrange necessary approval from required level upon being satisfied with the proposal. Members of the Approval & Policy unit of Retail Banking Division must have at least the following qualification:
•
At least 5 years experience working in Branch as a relationship manager.
•
Training and experience in financial statement, cash flow and risk analysis.
•
A good working knowledge of Accounting.
•
A good understanding of the local market.
Relationship Management Unit: Shall maintain relationship with the branches/ SME Centres / contractual people, other relevant external agencies/companies/ institutions. Shall conduct detail analysis of the proposal and place for approval to risk management and policy unit. Administration & Verification Unit: shall authorized disbursement after proper verification of all relevant facts, records, person, and institutions. Advice branch verification & Administration recommend policy/correction/rectification/amendment to Risk management unit. Collection Unit: shall be responsible for overall recovery of the portfolio. Prepare action program, execute proper loan servicing, advice branch monitoring and recovery, ensure recovery at desired level and recommend policy/correction/rectification/amendment to Risk Management unit. 3.5 Relationship Management /Service Delivery Point of Retail Banking •
by the branches.
•
by SME Centres
•
by contract people at HO, retail baking division/branches/SME centres, as and when such people are recruited
•
all of them are referred to as Relationship Management(RM)/Service Delivery Point(SDP)
3.6 Organizational Structure (Branch/SDP) for Retail Banking Operation
B ra n c h /S D P R e t a il B a n k in g R e l a t io n s h ip M anagem ent
A d m in i s t r a t i o n & V e r i f ic a t i o n
C o lle c t io n
**At branch/SDP level no single person can play two roles, branch managers, SME Centre Heads shall confirm Head Office, Retail Banking Division & Human Resource Division, assignment/change/ of such person on the day the matter takes effect. Branch Relationship Management: shall act as Representative of Head Office, Retail Banking Division, and Relationship Management. Shall maintain relationship with the customers, other relevant external agencies/companies/ institutions. Shall conduct analysis of the application and forward to Head Office, Retail Banking Division for approval upon verification by the branch Verification & Administration. Branch Administration & Verification: Shall verify customers, need, application of fund, contact point, Gross monthly income, stability of income source. Shall obtain documentation/securities, disburse the loan after having necessary approval, and act as representative of Head Office, Retail Banking Division, Administration & verification. Shall ensure proper storage of security/charge/other documents through branch custodians with entry in safe-in safe-out register. Shall prepare report and submit to the appropriate authority in a timely manner. Branch Collection: shall be responsible for overall recovery of the portfolio of the branch. Prepare action program, execute proper loan servicing, and ensure recovery at desired level and act as representative of Head Office, Retail Banking Division, and Collection Unit. 3.7 Retail Credit Approval Procedure
Credit Approval Authority: The Managing Director. Retail Credit Applications-Minimum Requirement •
Completed standard application form.
•
Quotation/Indent/Estimate of the Supplier/seller.
•
Gross monthly income calculation and relevant certificate(s)/documents.
•
Quotation, Supplier, Product, contact point verification report.
•
Voter ID, TIN, Employee ID (for salaried people).
•
Any other qualifying factors.
•
Net worth statement of applicant and guarantor.
•
All the above document of joint/co-applicant.
Exception approval authority SL No 01 02 03 04 05
Loan Parameter Customer Segment Age Limit Minimum Income Loan to Price Ratio Security/ Collateral/
Variation allowable Any 2 Years 20% 10%
06 07 08
Legal Documents Interest Rate Tenor Repayment Method
09 10 11 12
sum Substantiation of Income Flexible Debt Burden Ration 5% Fees/charges/costs/penalty Any amount Loan Size 10%
Approval authority Retail Credit Committee Retail Credit Committee Retail Credit Committee MD MD
1-2% MD 2 years MD Monthly/quarterly/lump- MD Retail Credit Committee MD MD MD
Approval Process After receipt of the application, primary assessment is made, proper verification is conducted and the application along with other relevant documents is forwarded to head office Retail Banking Division for approval. Branch-RM ⇔ RBD-RM ⇔ RBD-Verficaction⇔RBD-Risk ⇔ Approval Authority Approval/Decline
Query After approval, Retail Banking Division sends / forwards the approved applications along with other document to the Branch/SDP Documentation Process Branch-RM ⇔Branch-Admin⇔ Documentation ⇔ RBD-Admin ⇔ Safe Custody Querry Customer request Approved loan application along with other document is held in custody. Security Instruments/Documents is obtained and held in safe custody under dual signature. Disbursement Process Relationship Manager ⇔ Branch-Admin ⇔ RBD-Admin ⇔ Disbursement Querry/Review Customer request After completion of documentation Branch/SDP request disbursement authority from RBD, who will authorize disbursement upon satisfaction? Monitoring & Recovery Process Customers ⇔Branch-RM⇔ RBD-Monitoring ⇔ RBD-Risk Querry/Review Monitoring/Review of Classified accounts Branch-Admin/ICC ⇔RBD-Recovery ⇔ Action Plan⇔ Branch-Recovery ⇔ Customer Querry/Review Duplication check: All approved applications are checked against Banks database to identify whether the applicant is enjoying any other loan in other account apart from the declared
loans. It is also checked whether the applicant has made any payment default in the past with our bank or with other bank. In such cases the application may be rejected. CIB Report Clean CIB report is sought for all customers and is reviewed before disbursement of credit facilities. Adverse CIB report constrain the bank from sanctioning/disbursing any credit facility. Maintenance of Negative File Negative file –1: List of individual having default record and/or bad credit history. Negative file –2: List of Institution/company having bad credit record, default record default in meeting its obligation as guarantor. Are maintained locally at branch and globally at Head Office. Compliance Requirements All Bangladesh Bank returns are submitted in the correct format in a timely manner. Bangladesh Bank circulars/regulations are maintained centrally, and advised to all relevant departments to ensure compliance. 3.8 Credit Risk Associated with Retail Banking of JBL The credit risk associated with the products is managed by 5(five) levels of screening and recommendation: 1. Firstly, completion of application by branch relationship management 2. Secondly, verification of information by branch-Retail Admin. 3. Thirdly, analysis of credit by RM at RBD 4. Fourthly, risk mitigation by Risk and Policy unit at RBD 5. Lastly, mitigation and approval of credit by appropriate sanctioning authority.
3.9 Contact Point Verification/Identification Contact Point Verification is done for all applicants except for the High Net worth (HNW) individuals or customers having account relationship with bank. The external CPV includes verification of address, financial, professional, guarantor, supplier and other information in JBL standard format (annexure-II). All verifications are done to seek/verify/confirm the declared/undeclared information of the applicant. Branch/SDP officials diligently conducts the verification.
3.10 Gross Monthly Income (GMI) determination: In calculating Gross Monthly Income the applicants (1) salary income (2) rent Income (3) Joint applicant Income (4) income from Investment (5) income of Proprietorship Business (6) income from Private Limited Company and/or other form of income comes under consideration. Primary: 30% of Gross monthly income is allowed as Loan Installments. Extended: GMI
15000-29,999
30,000-49,999
50,000-99,999
1,00,000+
Max. DBR
30%
35%
40%
50%
GMI: Gross Monthly Income DBR: Debt Burden Ration DBR =
[ { Existing Loan EMIs + 3%( Proposed Credit Limits)} / Monthly Income] x 100
Cash Coverage Criteria As facility against cash coverage is less risky, a certain remission of pricing and requirement is accommodated for cash covered facilities. Coverage JBL/ other schedule bank’s fixed deposit, Scheme Deposits, WES earners Development bond shall come under consideration of cash coverage criteria.
The following remission of charges and requirement is allowed by Head Office for eligible borrowers: Covenants Waiver of Guarantee Loan to Price Interest rate cut Risk fund cut
100% cash coverage Third party guarantee 100% 1.00% 1.00%
75% Cash Coverage No waiver
50% Cash Coverage No waiver
25% Cash Coverage No waiver
90% 0.75% 0.75%
80% 0.50% 0.50%
70% 0.25% 0.25%
Analysis & Findings 4.0 Analysis For analysis of the performance of Jamuna Bank Ltd. in retail banking operation we will take comparison with Brac Bank Limited and Prime Bank Limited. 4.1 Total Loan Disbursement during the Last Five Years All the three banks- Jamuna Bank Ltd., Brac Bank Ltd. & Prime Bank Ltd. has increased their assets in the form of loans and advances over the years as we find in the following table and graph: 2009 Jamuna Bank Ltd.
36857.70
(Figure in Tk. Million) 2006 2005
2008
2007
21036.86
16617.45
12796.63
11011.83
52676.71
32446.12
19557.16
11791.31
75602.50
57781.99
45010.21
31916.11
(As on 30 June’09)
Brac Bank ltd.
521344.12 (as on September 30’09)
Prime Bank Ltd.
Figure: 1-Total Loan Disbursement
80000.00 70000.00 60000.00 50000.00 Tk. in million 40000.00 30000.00 20000.00 10000.00 0.00
Jamuna Bank Ltd. Brac Bank Ltd. Prime Bank Ltd. 2008
2007
2006
Year
2005
4.2 Total Retail Loan Disbursement during the Last Five Years Jamuna Bank Ltd. is far behind in retail loan disbursement compared to the other two banks, but in 2009 it has achieved considerable growth in retail loan disbursement as we find from the following table &graph. 2009 Jamuna Bank Ltd. Brac Bank ltd. Prime Bank Ltd.
2008
72.84 10627.62 5190.12
(Figure in Tk. Million) 2006 2005
2007
35.55 9661.48 4513.50
32.48 8971.08 2747.04
35.97 5384.07 1355.75
39.67 1055.40 983.80
Figure:2- Total Retail Loan Disbursement 12000 10000 8000 Tk. in million
6000
Jamuna Bank Ltd.
4000
Brac Bank Ltd.
2000
Prime Bank Ltd.
0
2009 2008 2007 2006 2005 Year
4.3 Retail Loan as Percentage of Total Loan Portfolio Jamuna Bank Ltd.’s retail loan as percentage of total loan portfolio is very meager compared to the other two banks. Loans (General), Cash Credit, Overdraft and Loan against imported merchandise is the larger portion of their loan portfolio. Jamuna Bank Ltd. Brac Bank ltd. Prime Bank Ltd.
2008 0.16% 18.34% 5.96%
2007 0.19% 27.64% 4.75%
2006 0.28% 27.53% 3.01%
2005 0.36% 8.96% 3.08%
Figure:3-Retail Loan as Percentage of Total Loan Portfolio 30.00 25.00 20.00 Percentage 15.00
Jamuna Bank Ltd.
10.00
Brac Bank Ltd.
5.00
Prime Bank Ltd.
0.00
2008
2007
2006
2005
Year
4.4 Recovery Rate of Retail Loan Though JBL’s retail loan portfolio is very small its recovery rate is outstanding due to its credit monitoring and supervision.
Jamuna Bank Ltd. Brac Bank ltd. Prime Bank Ltd.
2009
2008
2007
97.85% 97.05% 97.85%
97.75% 97.20% 97.85%
2006
97.60% 97.30% 97.80%
97.40% 97.25% 97.75%
2005 97.25% 97.40% 97.65%
4.5 Average Rate of Interest on Retail Loan JBL’s average rate of interest is much lower compared to the other two banks. In JBL maximum rate of interest is 17% p.a. whereas in Brac Bank Ltd. it is 20% p.a. Rate of Interest 16% - 17% 16% - 20% 16% - 18%
Jamuna Bank Ltd. Brac Bank ltd. Prime Bank Ltd. 4.6 Service Charge & Processing Fee on Retail Loan Jamuna Bank Ltd. Brac Bank ltd. Prime Bank Ltd.
Service Charge & Processing Fee 1% - 2% 1% - 2% 1% - 2%
4.7 Findings a) Number of retail loan products is less diversified in case of JBL compared to Brac Bank Ltd. and Prime Bank Ltd.. From the above statistics and analysis we find that
total number of retail loan product in JBL is 4, whereas it is 5 for Brac Bank and 10 for Prime Bank Ltd. b) Growth in disbursement of retail loan in case of JBL is very slow compared to Brac Bank and Prime Bank Ltd. c) Interest rate on retail loan is lower in JBL compared to Brac Bank and Prime Bank Ltd. d) Retail loan as percentage of total loan portfolio is very small in case of JBL compared to Brac Bank and Prime Bank Ltd. e) Due to diversified retail loan products Prime Bank Ltd. and Brac Bank gains competitive advantage. f) Due to faster processing of retail loan Brac Bank and Prime Bank Ltd. disbursed more retail loan compared to JBL. g) JBL falls behind in retail loan growth due to their lack of concentration in product advertisement and sales team. h) Though JBL’s retail loan portfolio is very small its monitoring and supervision activities is very strong which is evident from their percentage of loan recovery.