INTERNSHIP REPORT
ON
TERM LOAN AND CLASSIFIED
TERM LOAN OF BASIC BANK LTD.
INTERNSHIP
REPORT ON
TERM LOAN AND CLASSIFIED TERM LOAN OF BASIC BANK LTD.
Submitted
to:
The Chairperson
Internship & Placement
Institute of Business
Administration
University of Dhaka
Institute of Business
Administration
University of Dhaka
December 26, 2001.
December 26, 2001
Mr.
Mahjabeen Ahmed
The
Chairperson
Internship
and Placement
Institute of Business
Administration
University of Dhaka
Dear
Chairperson:
Here is the internship Report
titled “ Term Loan and Classified Term Loan of BASIC Bank Ltd.” is being
submitted to you which is a prerequisite for obtaining my MBA degree.
12-Week of internship program
provided me with an exposure to the overall working environment and a very
important experience on studying and analyzing papers of term loan financed
projects of BASIC Bank Ltd.
I have enjoyed a lot during my
internship program through understanding details of the above mentioned study
and also at preparing this report.
I hope that this report will meet
your requirement. I would be glad to furnish any further clarification in this
regard, if needed.
Sincerely,
(Md. Mohidur Rahman)
Roll:
38, 33rd Batch (Day)
MBA
Program
Acknowledgements
First and foremost, I would like to express
my gratitude to my faculty supervisor Mr. Dr. M. Shamsul Haque, Professor, Institute of Business
Administration, University
of Dhaka, for his
continuous guidance and support regarding this report.
I would like to convey my deepest
appreciation to a number of officers of BASIC Bank Ltd. for their cooperation
and generous help. My organizational supervisor, Mr. Md. Mosaddiqur Rahman,
General Manager, always extended logistic support in my project work.
I would like to thank the
officials of BIBM, Sonali Bank, Agrani Bank, Janata Bank, Rupali Bank,
Bangladesh Bank, and the like, who provided me with a good number of related
books, annual reports, and papers that helped me a lot to prepare this report.
Executive Summary
This study examines the term loan status of
BASIC Bank. It also examines classified term loan and a comparative study of
BASIC Bank Ltd. with other 4 (four) Nationalized Commercial Banks (NCBs) such
as Sonali Bank, Rupali Bank, Janata Bank and Agrani Bank. There are very few
banks in our country that create demand for term loan and meet those. Though
every bank is to provide term loan, but in fact most of them deal with derived
demand. For industrialization of any economy, term loan is very much essential.
Earlier the NCBs had met the most demand of term loan and still they are the
main suppliers of term loans. But due to various reasons NCBs have experienced
a huge classified term loan. At this stage BASIC Bank Ltd. was established as
the policy makers of the country felt the urgency for a bank in the private
sector for financing Small Scale Industries (SSIs). This Bank started its
operation from 21st of January, 1989. This Bank is 100% owned by the
Government but managed by independent management.
On 30th June, 2001 BASIC Bank Ltd. had total
outstanding amounted Tk. 52056.22 lac. On the same date the bank had
outstanding in term loan amounted Tk. 9938.82 lac and up to 30th
June, 2001 it had 208 individual accounts where term loan was provided. Out of
208 projects, 53 had overdue. These 208 projects are divided under 13 sectors.
Out of these sectors textile is the largest sector. It has 63 projects. 2nd
largest sector is service industries
sector that had 47 projects. Then comes engineering, chemical &
allied industries and food & allied
sector have 29 projects, 24 projects and 19 projects respectively. The study
reveals that loan size and overdue has been negatively correlated and
correlation is –08. Though this relation is not enough strong, it can deduced
that in BASIC Bank Ltd. large sized loan has performed better in terms of
overdue.
|
S/No
|
Name
of Sectors
|
Hundred
Taka contributes per month overdue (Tk)
|
No. of Companies (who has
overdue)
|
Remarks
|
|
1
|
Textile
|
0.54
|
17
|
|
|
2
|
Engineering
|
1.16
|
7
|
|
|
3
|
Chem, Phar, & Allied Ind.
|
0.52
|
9
|
|
|
4
|
Service Ind.
|
0.66
|
7
|
|
|
5
|
Misc. Ind.
|
0.42
|
2
|
|
|
6
|
Food & Allied Ind.
|
0.93
|
2
|
|
|
7
|
Paper, Board, Prn, Pub & Pack
|
1.17
|
5
|
|
|
8
|
Glass, Crimc & other non-metal pr.
|
0.25
|
1
|
|
|
9.
|
Electrical & electronics Ind
|
0.80
|
1
|
|
|
10
|
Tannery, Leather & Allied Ind.
|
0.95
|
1
|
|
|
11
|
ESP
|
0.42
|
1
|
|
Table Executive Summary-1: contribution to overdue of every sector
From the above table, the study reveals that
chemical, pharma & allied industries sector, textile sector and service
industries sector has lowest overdue per hundred taka. From the above
statistics, it can be derived that textile sector had performed better in terms
over due.
Correlation of disbursed amount and overdue
of various sectors show those all eccept miscellaneous industries sector bear
negative correlation. Among those food & allied sector bears the highest
and is –0.19. Textile sector bears-0.10. Chemical, Pharma & Allied Inds
bears –050. Paper, Board, Printing, Publications & Packaging sector bears
–0.17 and Service Industries sector is-0.018. It means that the more amounts is
invested in food & allied sector the less will be the overdue. So it can be
derived that it is comparatively safe to investment in food & allied
sector, Paper, Board, Printing, Publications & Packaging sector bears-0.17
and Textile sector. Others are ignored as, the correlation is not strong.
|
S/
No
|
Name
of Bank
|
Year
|
Total
outstanding
|
Term
loan Outstanding
|
Term
loan unclassified
|
Term
loan classified
|
% of
Term Loan outstanding to total outstanding
|
% of
Term Loan classified to total outstanding
|
Remarks
|
|
1
|
BASIC
Bank
|
June,
2001
|
5,205,622.00
|
993,882.00
|
943,285.00
|
50,597.00
|
19.09%
|
0.9%
|
|
|
2
|
2000
|
4,618,731.00
|
903,296,.00
|
879,214.00
|
24,082.00
|
19.56%
|
0.52%
|
|
|
3
|
1999
|
3,960,113.00
|
608,961.00
|
592.464.00
|
16,497.00
|
15.38%
|
0.42%
|
|
Table: Executive Summary-2: Classified loan of BASIC Bank Ltd.
This also reveals that on 31st December 2000
the bank had provided 19.56% of total loan as term loan. Out of this only 0.52%
term loan was classified. Again on 30th June 2001 it had provided 19.09% of total
loan as term loan. On the same date out of this term loan only 0.97% term loan
was classified. This study shows the successful performance of the bank. At the
same time the percentage of classified loan is in increasing trend.
During recent years when the NCBs are
experiencing huge classified loan, BASIC bank Ltd. is an exception. As a blend
of development and commercial banking, BASIC Bank Ltd provides their clients
with a full range of services to help them grow their assets and net worth.
Steady growth in client base and in its high retention rate since bank’s
inception testifies to the immense confidence it reposes to its services. Its
diversified products, both liability and assets side, particularly a wide range
of lending products special importance is given to individual clients through
providing personalized services. In fact, individuals matter in this Bank. This
motto has been followed for development of clientele as well as human resources
of this Bank. Coping with the connection with its clients, the regulatory
authorities, the share holders (Government of Bangladesh), other banks and
financial institutions.
Contents
Page
no.
Executive summery V
Part-1
Organization
part
1.1 Company profile of BASIC Bank Ltd. 2
1.2 Organizational structure 3
1.3 Corporate strategy 5
1.4 Organizational goals 5
1.5 Functions 5
1.6 Approaches 6
1.7 Lending criteria 7
1.8 BASIC Bank Ltd. at a glance 8
Part-II
Project
part
2.1
Introduction
2.1.1 Origin of the study 18
2.1.2 Problem statement 18
2.1.3 Importance of the problem 18
2.1.4 Objectives 18
2.1.5 Scope 19
2.1.6 Methodology 19
2.1.7 Limitations 20
2.1.8 Use of the report 20
2.2 Term Loan : Analysis 21
2.2.1 Relationship of overdue with loan size:
sector wise 23
2.2.2 Sub- Sector wise Investment 32
2.3 Classified Term Loan: Analysis
2.3.1 Loan Classification 41
2.3.2 Comparison of Classified Term Loan 48
2.4
conclusion
2.4.1 Findings 50
2.4.2 Recommendations 58
2.4.3 Concluding remarks 61
ORGANIZATION
PART
1.1 Company
Profile
The Bank of Small Industries and Commerce
Bangladesh Limited (BASIC Bank Ltd) is a banking company registered under the “
Companies Act 1913”. It was incorporated under the Act on 2nd of
August, 1988. The Bank started its operation form 21st of January,
1989. It is governed by the Banking Companies Act 1991. The Bank was
established as the policy makers of the country felt the urgency for a bank in
the private sector for financing Small Scale Industries (SSIs)
At the
outset, the Bank started as a joint venture enterprise of the BCC Foundation
with 70% shares Government of Bangladesh with the remaining 30% shares. The BCC
Foundation being nonfunctional following
the closure of the BCCI, the Government of Bangladesh took over 100% ownership
of the bank on 4th
June 1992. Thus the Bank is state owned. However, the Bank is not
nationalized, it operates like a private bank as before.
Adjudged
as one of the soundest bank in Bangladesh, BASIC Bank Ltd is unique in its
objectives. It is a blend of development and commercial banking functions. 50%
of its loanable funds requires to be invested in small and cottage industries
sector.
Steady
growth in client base and in their high retention rate since bank’s inception
testify to the immense confidence they repose to its services. Diversified
products, both liability and assets side, particularly a wide range of lending
products related to development of small scale industries and micro enterprises,
and commercial and trading activities attract entrepreneurs from varied
economic fields. Along with promotions of products special importance is given
to individual clients through providing personalized services. In fact,
individuals matter in this Bank. This motto has been followed for development
of clientele as well as human resources of the Bank.
CAPITAL
POSITION
Authorized capital Tk. 500 million
Paid up
capital Tk. 300 million
Total
reserve up to 31.12.2002: Tk. 397.77 million
The Bank
is requested to transfer 20 percent of its net profit before tax to Capital
Fund as per the Banking Companies Act 1991.
1.2
Organizational Structure
To
achieve its organizational goals, the Bank conducts its operations in
accordance with the major policy guidelines laid down by the Board of
Directors, the highest policy making body. the management looks after the day
to day operation of the Bank.
A.
BOARD OF DIRECTORS
As stated earlier the Government holds 100
percent ownership of the Bank. All the Directors of the Board are appointed by
the Government of Bangladesh. The Secretary of the Ministry of Industries is
the chairman of the Bank. Directors of the Bank are high Government and Central
Bank executives.
The Managing Director is an ex-officio member
of the Board of Directors. There are at present 7 Directors including the
Managing Director.
B.
MANAGEMENT
The Managing Director heads the management.
He is assisted by the two General Managers and Departmental Heads in the Head
office. BASIC is different in respect of hierarchical structure from other
banks in that it is much more vertically integrated as far as reporting to the
chief Executive is concerned. The Branch Managers of the Bank report directly
to the Managing Director and, for functional purposes, to the heads of
Departments. Consequently, quick decision making in disposal of cases is
ensured.
Bank of Small Industries and Commerce
Bangladesh Limited
A State-owned Scheduled Bank
BASIC Bank Ltd - Address
Registered
Office:
Bana
Shilpa Bhaban
73
Motijheel Commercial Area
Dhaka-1000,
Bangladesh
Telephone:
9563068, 9563069, 9559279, 9559273 (PABX)
Head
Office:
Sena
Kalyan Bhaban (6th Floor)
195
Motijheel Commercial Area
Dhaka-1000,
Bangladesh
Telephone:
9564830, 9567910, 9568190 (PABX)
Date of Incorporation: 2nd
August 2000
Formal Inauguration: 21st
January 2001.
