Published on June 13, 2016
1. Welcome to Our Presentation
2. Presentation of Credit Management Presented to Mohammed Zahed Hossain Senior Lecturer Dept. of Business Administration Leading University, Sylhet
3. Credit Operation process of United Commercial Bank Limited (UCBL)
4. Credit Objectives of UCBL Extends credit facilities at competitive price with prudence and efficiency Encourage loans and advances to income generating activities and thereby creates employment opportunity and help to improve standard of living. Prioritizes welfare oriented banking service Attaches importance to consumer credit, loans to small businessmen, festival loan, personal loan for salaried persons and any purpose loan.
5. General Guidelines of UCBL The Bank will prefer trade financing in the short term (up to 12 months) self liquidating cash flow supported and collateralized trade transactions. The Bank will consider lending short-term working capital finance to well establish entities The Bank will selectively, on a case-by-case basis, carefully approve term loans The Bank will, on a case-to-case basis, approve disclosed participations in syndications. The Bank will consider financing construction contractors.
6. Types of Credit of UCBL Loan & Advance Term Loan Continuous Loan Demand Loan Continuous Loan Over Draft (OD) Secured OD Temporary OD Cash Credit (CC) CC Hypothecati on CC pledge
7. Credit Approval Process of UCBL Guided by some basic principles: Prepared a concise and objective assessment of risks regarding lending money to the potential borrower by the Relationship Management Team or Corporate Division, Head Office. A credit proposal may be defined as: • Initial Credit Proposal • Annual Credit Proposal • Interim Credit Proposal Credit Proposal Identification Number Each borrower would have a unique Loan Identification Number The identification number will consist of three parts: • Three digit Branch Code, •Four digit Unique Serial Number and •Four digit Year
8. Credit Approval Process of UCBL (Contd.) Time Frame for Decision Further information regarding a particular credit proposal shall have to be communicated in writing to the customer within 5 days from the date of submission . Decision of declining a credit application shall have to be communicated to the customer by the Relationship Team within 15 days from the date of receiving all information from the customer. Reporting Approvals Credit Executives at Branch level should report all credit facilities sanctioned by him/her during the month in the prescribed form Review of Approval The Head of CRMD will review at least 10% of total approval of an individual executive
9. Revision of Credit Decision Any credit proposal declined by Credit Risk Management Division may be placed before next higher authority for reassessment/review Compliance to Regulation Any credit approval/sanction shall be subject to the compliance of Bank’s Credit Policy as well as banking regulations Credit Committee Corporate Banking Division place Credit proposals after preliminary evaluation and making necessary adjustment before the Credit Committee Credit Risk Review Department of CRMD will place their observation before the Credit Committee concerning risk assessment on different aspects of the proposal Form Branch Credit Committee to review the Credit proposal which fall under the delegated power of Branch incumbent Credit Approval Process of UCBL (Contd.)
10. Steps in Credit Approval Process Step 1 Collect & fill Credit Application form by the customer Submits the filled in credit form along with required papers to the relationship officer of Branch/Corporate Division, Head Office/website Step 2 Relationship Officer scrutinizes the credit application form Make a preliminary assessment on creditworthiness of the potential borrower A refusal letter to be sent if found not credit worthy Relationship Officer will forward the application to the concerned RM if proposal is found acceptable
11. Step 3 RM along with RO visits potential clients’ business premise physically RM negotiates about the structure of the proposed credit RM assess the value of the security to be offered and prepared valuation report RM summarizes all these information in the pre-sanction inspection Report/Call Report/Visit Report & send to Corporate Division, Head Office RO collects ‘CIM Inquiry Form’ from the customer & send it to CAD of Head office Step 4 Head of Corporate Division or assigned executives assess credit proposal and may contact with RM or directly to the customer for any query Head of Corporate Division communicates their decision to the RM in fine. Steps in Credit Approval Process (Contd.)
12. Step 5 CAD on receipt of the request letter from the branch will send CIM Inquiry Form to BB CAD will also send CIB report immediately by email/courier service to the concerned RO Everything may be closed if adverse CIB report is received & thus a letter of regrets would be sent to the customer Step 6 If clean CIB report is received, RO originates a formal credit proposal in prescribed format with recommendations of the RM The proposal is to be sent to the Corporate Banking Division, Head Office & a copy to the Credit Risk Review Department of CRMD. Steps in Credit Approval Process (Contd.)
13. Step 7 Corporate Banking Division, Head Office after modifying place the proposal with recommendation of Head before Credit Committee. Head of Credit Risk Review Department of CRMD or his delegated authority may report his observation in writing/verbally before credit committee Credit Committee will analyze the proposal & if found viable recommend for approval to the appropriate authority. Corporate Banking Division will prepare Memo mitigating the weakness/risk factors and incorporating suggestion of the Credit Risk Review Department as well as Credit Committee. On receipt of memo Head of Credit Risk Review Department will distribute to credit officer to review, scrutinize and analyze and back to Head. Step 8 Steps in Credit Approval Process (Contd.)
14. If the final memo is acceptable, among other things consideration it will be recommended by CRMD for approval if the proposal exceeds Managing Director’s delegated authority, s/he recommends it to the Executive Committee of Board of Directors/full BoD. if the facility is approved by the appropriate approval authority, Corporate Banking Division will send the copy of approval memo to CRMD Credit Risk Review Department issues Sanction advice to the Branch along with a documentation checklist spells out indicators before disbursement Step 9 Steps in Credit Approval Process (Contd.)
15. Sanction Letter to the customer to be issued under dual signatures from the originating Branch. Step 10 Preferably, Relationship Manager and Credit Administration Officer of the Branch should sign on the Sanction Letter. Steps in Credit Approval Process (Contd.)
16. Disbursement Process To minimize the risk Relationship Department and Disbursement Authority shall be separate from each other. Separation of Authority each type of advances requires a different set of documents all the terms and condition and securities are written and signed by the borrower specifies rights and liabilities of both the banker and the borrower Separation of Authority Signing Documentation Check List Deferral of Documentation Disbursement Authority
17. Credit Monitoring Process Following are sequential steps for controlling and monitoring of the loan pursued by the credit department of UCBL Controlling & Monitoring Reporting & Communication Reminder Formal Letters Telephone Meet with Client Social Pressure Legal Notice Legal Actions
18. THANK YOU!