Internship report on Evaluation of Credit Management and Credit Risk Grading: A Study on Jamuna Bank Limited

The present Internship Report “An Evaluation of Credit Management and Credit Risk Grading”- A study on Jamuna Bank Limited has been prepared under the dynamic supervision of Lecturer Md. Kazi Raihan Uddin, Department of Management studies, University of Dhaka. The period of internship lasted for 45 days.
Credit is the most fundamental issue in our banking sector. Default culture is the most common phenomenon in the banking sector of Bangladesh. Like other Govt. banks, private banks also suffer from this problem. But, the Credit Management in Jamuna Bank is relatively sound compared to all other similar banks operating in the country.

Although the amount of classified loans in Jamuna Bank is less than that of other banks, it still remains a concern for the management because of its increasing trend during the last three years. One of the major causes of classified loans in Jamuna Bank is the unwillingness of the borrowers to repay loans in the backdrop of political unrest of the country. Other causes include high rate of interest, entrepreneur’s inability to market their products, lack of proper supervision by the bank officials, sickness of industries due to loss of competitiveness in price with the similar imported products, lengthy bureaucratic procedures of the other govt. agencies etc.

Since the process of recovery of classified loan involves lengthy legal procedures, the percentage of recovery of such loans is very low. Jamuna Bank therefore emphasizes on persuasion rather than going for legal action in order to recover its classified loans. Bank considers the practical aspects of the projects being sick and extends further finance or reschedules the repayment period.

Jamuna Bank should therefore establish a review process to examine the changing circumstances of borrowers to determine the position of loans. The bank should also keep in touch with any changes in the management structure of borrower organizations, changes in industry trend and changes in overall economy of the country.

Before sanctioning a loan, the Bank should make survey on customers, suppliers and competitors. Regular visits to borrower’s places and close monitoring of the activities of the borrowers are more useful than having meetings in the bank.

The report in this context is finalized to fulfill the requirement of the project paper of Bachelor of Business Administration from the Department of management, Faculty of Business Studies, University of Dhaka. In this report I try to highlight the Credit Risk Grading and Credit Risk Management of Jamuna Bank Limited. Risk is inherent in all aspects of commercial operation. However for Banks and Financial Institutions, Credit risk is an essential factor that needs to be managed. Credit risk is the possibility that a borrower will fail to meet its obligation in accordance with agreed terms. Credit risk, therefore, arises from the Bank’s dealings with or lending to corporate, individual and other Banks or financial institutions.
In this report I incorporated Credit risk Grading analysis and the technique of measuring the Credit risk Grading and the Credit Risk management of Jamuna Bank Ltd. The purpose of this document is to improve risk management culture, establish minimum standard for segregation of duties and responsibilities relating to Credit Operation of the Bank.