Project Report

On
“Credit Risk Management and Performance analysis of
Janata Bank Limited”

i
 PROJECT REPORT

On

“Credit Risk Management and Performance Analysis of Janata bank

Limited”

Supervisor

Shakila Aziz, CFA

Assistant Professor- Finance
School of Business & Economics
United International University

Submitted By

Md Tuhin Molla
ID: 111 131 173
BBA
Major in Finance

United International University

ii
 LETTER OF TRANSMITTAL

May 15, 2018

To
Shakila Aziz
Ass. Professor- Finance
School of Business & Economics
United international University
Subject: Submission Project Report.

Dear Madam,

I am truly delighted to submit my project report on “Credit Risk Management Policy and
Performance Analysis of Janata Bank Limited.” I have picked up what I think about the
maximum absolute information available. This report gave me the anticipation to have a concise
knowledge about the Credit management policy and performance analysis of Janata bank
limited. It is a massive accomplishment to work under your active supervision, attention and
guidance.

I attempt my best to include all the information that I have accumulated during preparing my
project report. I wish this report would complete your prospect and standard. I must reference
here that, I am highly thankful to you for your valuable supervision, energetic effort and gradual
attempt in preparing this report.

I, honestly hope that you will be pleased with this report. I hope and pray that you would be
magnificent enough to approval this project report.

Sincerely yours,

_________________
Md Tuhin Molla
ID: 111 131 173
BBA program

iii
 ACKNOWLEDGEMENT

As a student of BBA program, Project submission is one of the most significant requirements of
the entire courses BBA program. In this concern I would like to thank all the faculties’ united
international university who helps me to accomplish my courses.

This is a summarization of my recent study on credit management policy and performance

analysis of Janata bank limited as a part of my project. At the beginning I want to keep in mind
almighty Allah for giving me the chance, strength to do this project work easily and blessings for
our prosperity.

I would like to thank my respectable madam Shakila Aziz, Faculty of School of Business and
Economics, United International University, for assistance me to prepare the report. I will stay
indebted to her for the valuable suggestions & the time she has given inspecting my work on
report.

Finally, My sincere thanks to all the amazing people of UIU (my teachers, my classmates and
others) for support and understanding. It would be not possible without their help.

iv
 Executive summary

The report is produced in consequence of my project, which I have accomplished as a necessity

of my BBA program. This report is accomplished based on my personal experience about Janata
Bank Limited.

The Janata Bank Limited is a state-owned commercial bank is one of the prominent public bank
of Bangladesh. All the appearance of Credit Risk Management of Janata Bank Limited like;
rules, regulations activities, policy, strategy, approval process of loan, credit function dept. and
also credit accumulation dept. various product variety and their aptitude and recovery procedure
of different shape of loan etc. have been represent to this report.

However, I have performed lots of financial calculations, perceive their financial reports and
from my operating knowledge & experience I also accumulate competency about their
administrative process of managing different issue. After making the whole report, I had
prepared some findings concerning about the Credit Management Policy and Performance
Analysis of Janata Bank Limited. As an inexperienced person I may have created numerous
mistakes in those findings, but however I felt from my point of view, I only clear out those.
Founded on this those findings, I recommended some points which may assistance the bank to
eradicate their much shortcomings.

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 Table of Content

CHAPTER (1): Literature Review on Credit management of JBL

Serial no Particulars Page no

1 Literature Review 1-3

CHAPTER (2): Objective & Methodology of the Study

Serial no Particulars Page no
2.2 Background of the study 4-5
2.2 Origin of the study 5
2.3 Objective of the study 5
2.4 Methodology 6
2.5 Sources of data/ Information 6
2.6 Rationale & Scope of the report 7
2.7 Limitation of the report 7-8
CHAPTER (3): Organizational Profile of Janata Bank Limited
Serial no Particulars Page no
3.1 History of Janata Bank Limited 9-10
3.2 Corporate Vision and Mission 10
3.3 Management of Janata Bank Limited 11
3.4 Janata Bank at a glance 11
3.5 Products offer by Janata Bank 12
3.6 Services offered by Janata bank 12

CHAPTER (4): Credit Risk Management of Janata Bank Limited

Serial no Particulars Page no
4.1 Introduction 13-14
4.2 Credit Risk Management of Janata Bank Limited 14-16
4.3 Creditworthiness of a borrower 17
4.4 Essential component of a sound credit policy 18
4.5 Process / Steps of credit disbursement 18-19

CHAPTER (5): Credit Performance of Janata Bank Limited

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Serial no Particulars Page no
5.1 Credit Risk Grading: 20-22
5.2 Recovery performance of Janata Bank Limited 23
5.3 SWOT Analysis of Janata Bank Limited 24

CHAPTER (6): Financial performance

Serial no Particular Page no
6 Financial Performance of Janata Bank: 25-32

CHAPTER (7): Performance analysis of Janata Bank Limited

Serial no Particular Page no

7 Performance analysis of Janata Bank Limited 33-42

CHAPTER (8): Findings, Recommendations and Conclusion

Serial no particular Page no

8 Findings, Recommendations and Conclusion 43-45

CHAPTER (9): References and Bibliography

Serial no Particular Page no

9 References 46-47

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 CHAPTER (1)

Literature Review on Credit management of JBL.

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1. Literature Review:
The meaning of Janata is people. This is a growing and dynamic Bank. Janata Bank Limited has
been started its journey namely public Limited Company on May21, 2007. The bank has made
over the business of Janata Bank issued as a Nationalized Commercial Bank in 1972, imitating to
Bangladesh Bank in according to concern a counterman agreement between the Ministry of
Finance of the wing of Janata bank and board of directors on direction of Janata Bank limited.
Reviewing the literature of Credit Risk Management of Janata Bank Limited. By conducting or
studying many scholarly articles, books, government report, web, searching and relevant topic
available in net or paper on particular topic. Here given the proper review of credit risk and their
possible solution on risk aversion policy. Risk it seems to me the mean of expected outcome.
Risk can be classified in many way. Financial risk raise duo to possible losses within financial
markets because the movement of financial variables (Jorion & Sarkis, 1996). Nevertheless,
some risk cannot be wiped out it must be taken by the bank. These risk are taken because of the
bank learned and deal with them tom get reward certainly. The main purpose of Financial
Institution is to maximize the profit and shareholder value by giving several financial services
principally by managing credit risks (Khan and Ahmed, 2001) Risk management process along
with the bank has introduced principal of huge risk subtle way to capital adequacy. Most
important cause for construct a sharp Credit Risk Management policy. Managers need to be
reliable to measuring the risk to estimate the potential size of actual losses. They required a
mechanisms to guide position and create incentives for proper risk taker (Pyle, 1997).Risk
management deals Alam and Masukjjaman: Risk management Practices: A Critical Diagnosis
17.

Journal of Business and Technology (Dhaka)

Credit Risk is the probability that a borrower or opposite party will unable to meet agreed
liability. As leading bank of Bangladesh, Janata Bank Limited has a fully worked or operate as a
proper way to fulfill authentic task of Credit Risk Management (CRM).

(Rajagopal, 1996) built an endeavor to overview the bank risk management and point out a
model for the purpose of credit risk assessment of the borrower. He also said that good risk
management is good banking, which ultimately guidance to profitable progress of the institution.
An accurate approach to identify the risk, Control and Measurement will protection the interests

2
of banking institution as a long run. (Froot and Stein, 1998) said that credit risk management
with the help of operative loan and sell loans maintain more risky loans. (Treacy & Carey,
1998) examine that credit risk rating mechanism in banks by comparing internal rating system
and related rating agency observance. They introduce 79 Raad Mozib Lalon: Credit risk
Management (CRM) exercise in commercial bank of Bangladesh: A study of Janata banks
internal system support in leading credit risk, profitability and product pricing policy. (Bagchi,
2003) examine that credit risk management of a bank involve several risk option those are
Identification risk, measurement, control, monitoring and also risk audit as a primary thought of
credit risk management. The author conclude that the proper or accurate credit risk architecture
can manage the success of credit risk management policy of a bank like JBL can follow. Khan,
A. R. (2008) interpret that credit risk is one of the essential for any commercial bank. Credit risk
actually arise non representation by a borrower. (Rose and Peter S. 2001) explore that credit
risk arise from the larger loan is the most clear source of credit risk of a bank. Banks are progress
moving toward for the reason of increase credit in several financial tools that are create credit
risks.

Janata bank Limited is the promoter to accept any recent tools, model and policy initiate by
central bank. Following the guideline by Bangladesh bank, JBL first among the SCBs, founded a
Risk management unit. JBL also have six several management committee to address primary risk
management functions like, assessment, identification, measurement and removal of risks.
(Annual report-2016).

Annalise the current knowledge of Risk analysis culture by assessing the risk, Janata Bank
Limited has fostered several risk manual and different order issued to manage the issue of risk
management. (Website article of Janata bank ltd.).

To sum up as a moving forward financial institution of Bangladesh Janata Bank Limited is

performing its operation in a pleasant way. Although the bank face more and more problem, they
can dealt with it in experience way by using some strategy and policy making. A very expertise
and technically advance CRM department is working with their full potentiality and capacity to
analyze and assessing the risk reduction. So as far as Janata Bank Limited has proved itself as a
successful organization in measuring risk in a proper way.

3
 CHAPTER (2)

Objective & Methodology of the Study

4
5
2.1 Background of the study:

Then main purpose of the report is to analyze the Credit Management Policy and Performance
Analysis of Janata Bank Limited. According to me the credit management policy of JBL, the
study actually conducted mainly collecting and based on secondary data. A sort of information
also been collected from discussion and observing with the help of an officers of the bank. It’s an
inevitable for a student to have some idea about bank and banking activity process. The Bachelor
of Business Administration (BBA) is professional course. From my point of view as a student of
BBA program, project submission is an academic requirement. By selecting a particular topic of
a particular institution to gain ones practical knowledge and experience. For the requirement of
my course I actually prepare this project report on credit management policy and performance
analysis of JBL. Originally this report best part is Credit policy and practice, CRM of the bank,
strategy, structure, Analysis, performance, Own experience, Recommendation and conclusion.

2.2 Origin of the study:

After completing the BBA program requirement to prepare a project is a combination of practical
and theoretical experience whether a student involve himself in the field where he should get the
sample opportunity to apply their knowledge, which allow them confidently start their career.
To fulfill this requirement the university arrange this project program. Here a student can get the
opportunity to prove himself by applying their theoretical knowledge which he earned and gain
from class lecture, reading books, journals, case study solving, workshop, attending seminar,
doing project work so on . On the whole this project is prepared on analysis of credit
management policy of Janata Bank Limited.

2.3 Objective of the study:

Primary objective:

 To analyze the credit Management Policy of Janata Bank Limited.

Specific objective:

 To know enough knowledge about banking activities of Janata Bank Limited.

 To know or mention the procedure maintained by both bank and the client whether
processing and receiving deposit.
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  To know the major problem of the bank meeting to manage banking activity.
 To analyze the credit management statement process of Janata Bank Limited.
 To know about the internal system and loan advances procedure of JBL.
 To exhibit the main findings of the report and give some recommendation direction on
them.

2.4 Methodology:

Methodology mention or refer to the necessary part of the study and the procedure of collecting
information and identify it in position of the relevant issues of the study. A system involve in a
process or strategy in which several stage or steps of collecting data and information are narrated
and techniques are defined. It is actually planned in a way so that it achieve the main purpose of
the study.

2.5 Sources of data/ Information:

For the purpose of preparing report, basically I have collected data from both primary and
secondary sources.

Primary sources:

From my point of view primary sources of information is collect from involve in conversation,
meeting and interview with one of the officers of the Janata Bank Limited. I also collect data
information from observing the bank financial status.

Secondary sources:

On the other hand secondary sources of information are collected from general report, Basic idea
about JBL website searching, Annual report of Janata Bank Limited (2012 to 2016), Journals,
Articles, periodicals, bank manual, and Project profile, several selected books and publications.

Analysis of data:

There are mainly two approaches has been used in this report-

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Conceptual approach:

A theoretical concept is given or represent in this report to deliver an insight to the different
information regarding about the financial functions. A background of Janata Bank Limited is
given to simplify understanding making of this report. It appears that a sort of single part also
discussed in this report such as one can get easily understand the experimental section.

Empirical approach:

The information is accumulate or collected directly from the sources and interpret with the help
of Janata bank limited. On the other hand I have use some Ratio analysis tools for the purpose of
analyze the performance of Janata Bank Limited.

2.6 Rationale & Scope of the report:

Rationale:

The three type of scheduled commercial bank are operation in our economy. These three are
nationalized Commercial Bank, Local Private and International Private Commercial. Janata Bank
Limited has reveal a new revolution in the field of banking area, they offer several kind of
banking for example Investment, General and Foreign exchange Banking system. That’s why I
have studied on this particular topic “Credit Management Policy of Janata Bank Limited”.
Because of making this report is an important part of the BBA program. Completing the required
project task by the student’s ones also desired successfully end up their BBA degree. This
actually gives the opportunity to the students to link between theoretical and practical
knowledge. That is why I have prepared this report.

Scope: In my point of view, The Project repot covers the in total task performed by Janata bank
limited. These are general banking, loan and advances and performance of bank total activity.

2.7 Limitation of the report:

Although I have given maximum attempt to prepare this report but there have some limitation of
the study.

 The main problem of the study was shortage of information. Due to security issue the
bank employee cannot provide proper information which was required for the report.

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 This type of project report making is very costly.
 On the other hand due to time limitation cant discussed the topic elaborately.
 Deficiency of resources and experience is also impede the study.

9
 CHAPTER (3):

Organizational Profile of Janata Bank Limited

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3.1 History of Janata Bank Limited:

Janata Bank Limited is one of the largest commercial banks of the country. It is a state owned
bank that was established just after liberation war of Bangladesh. In fact it was a composed of
two smaller bank namely united bank limited and Union bank limited. Janata bank limited
welcome you to pursue the world of dynamic banking in Bangladesh. It is a state owned (second
biggest commercial bank) bank and is creating the need of widespread business people. Janata
bank limited has been corporatized as a public limited company on 15 November 2007. Janata
bank origin with a new concept of banking serving the dynamic and diversified financial needs
of economic development of the country.

Janata Bank Limited is one of the state owned commercial bank in Bangladesh, it has an
approved capital of Tk. 2000 million paid up capital of Tk. 11000.00 million, reserve Tk. 17234
million the total asset of the bank is Tk. 508567 million. It has been corporatized as name of
Janata Bank Limited.

Janata bank Limited is a Bangladesh based company that issue commercial banking services.
The bank offers internet banking credit services, retail and private banking, foreign exchange,
special credit, rural banking and credit program facilities and so on. The company recently
operate 872 branches involving 4 overseas branches at UAE.

The goal or purpose of the bank is to actively join in the socio economic improvement of the
nation by running a commercially sound banking system, issued credit to borrowers, efficiently
convey and competitively priced and protect depositors reserve by giving acceptable return on
equity to owners.

3.2 Corporate Vision and Mission:

The vision is to become the effective biggest commercial bank in Bangladesh to assistance
socio-economic progress of the country and to be prominent bank in south Asia.

The Mission of Janata bank Limited will be an competent commercial bank by maintaining
constant growth policy, providing high quality financial products, providing outstanding
customer service through an skilled management team and make sure good corporate governance
in every stage of banking network.

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3.3 Management of Janata Bank Limited:

The administration of the bank is vested on a Board of Directors, matter to overall supervision
and direction on strategy matters by the Board which is established in terms of Bangladesh bank
(Nationalization) order 1972. Board of directors, constituted by seven members, has authority to
establish, operate and accomplish its activities on commercial consideration within the board
strategy of the government. There are Directors appointed by the government. However, other
members of the board as well as MD are also Government appointed out of that at least there
have the practice in the field of Finance, Banking, Trade, Commerce, Industry and Agriculture.

3.4 Janata Bank at a glance:

Features Values
Name Janata bank Limited
Genesis Corporatized on 15th November 2007
Registered Address Janata Bhaban, 110 Motijheel Area Dhaka- 1000
Legal Status Public limited Company
Chairmen Luna Shamsuddoha
Managing Director & CEO Md Abdus Salam Azad
Company Secretary Md Mosaddake-Ul Alam
Date of Incorporation 21 May 2007
Authorized capital BDT. 30,000.00 million
Paid up capital BDT. 19,140.00 million
Operating Profit BDT. 10,683.00 million
Face value per share BDT. 100 per share
Share 100% share owned by government of Bangladesh
No. Employees 14,151(2015)
License obtained 31 may 2007
Phone 956000, 956020, 9556245-49
Fax 88-02-9554460
Website [Link]
E-mail md@[Link]

3.5 Products offer by Janata Bank:

Mainly four types of products offered by Janata Bank. These are-

 Deposits: Current deposit, saving deposits, term deposits.

 Loan and advances: SME Banking, export financing, import financing, working capital
loan.
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  Special product: Special NRB product, credits and Q- cash deposit.
 Green banking.

3.6 Services offered by Janata bank:

 Personalized services
 Online banking
 ATM services
 Utility services
 Inland remittance
 Government service
 Other service like: locker service & Issuance of Television service.

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 CHAPTER (4)

Credit Risk Management of Janata Bank Limited

14
4.1 Introduction:

The Commercial bank accomplish several responsibility day by day. To give loans and advances
is one of the main functions among of them. Generally credit is the institutional consent or array
of lending funds mainly to the traders and industrial entrepreneurs by the banking company. The
main portion of bank income earned from interest and discount on the fund so lent.

Credit Risk Management:

The Janata Bank Limited is allow or giving credit facility beside of its attainable funds, JBL
has conduct this credit facility very efficiently and effectively. An efficient credit management
policy construct and cover the pre/post sanction activity. Credit management is significant as it
help the bank and all kind of financial institution to realize several risk engaged in different
transactions.

At the pre sanction stage the credit management support the authority to whether lend or not to
lend, loan price and concerned about credit facility. At another sanction they can decide review
of renewal. Such as considering the importance of credit risk, it appear the banking system to
cordially promote credit management system o JBL. Basically measuring credit risk an
institution exactly consider three issues:

 Default probability,
 Credit exposure,
 Recovery rate

4.2 Credit Risk Management of Janata Bank Limited:

Credit Risk is the risk of losses which grow from the failure of a borrower, issuer, to meet their
financial agreement to the bank. The Bank’s credit risk strategy refer several level of risk
parameter for the purpose of credit risk is monitored and controlled.

Credit disclosure are control by the system of extent internal risk grading. This process applies to
all credit exposure, exchange exposure and some are rising up from securities trade customers.

15
The Bank’s credit committee run by Deputy managing director, credit division reviews the
creditworthy issuer those whom bank provides credit. Credit risk is controlled by assuring
completely collateralized with proper higher margin.

Objectives of Credit Risk Management:

 To strengthen credit management policy

 Maximum profit
 Reduce losses
 Structure of strong credit policy.
 Improve or developed risk management culture

Process of Credit Risk Management:

Credit management system of any commercial bank must follow in consistency the rules and
guidelines of Bangladesh. Credit management of JBL must follow some process and criteria so
that the bank can reduce its losses. The main objective of this process is to give directive
guideline for the purpose of managing and establish the management culture of the institution.

Credit policy

Policy involve prominent course of action. Janata Bank Limited has its own criteria and policy to
deliver credit, however provide credit is always a matter of applying common sense and
experience. A safe credit policy and criteria can generate the maximum profitability of then
bank.

Objective of Credit Policy:

There are several objectives behind written credit risk management of Janata Bank Limited.

 To provide a guideline for giving loan.

 Quick response to customer need and satisfaction.
 Shorten process of provide loan.
 Minimize the size of work from top level of management.
 To check and measure the operational activity.
 Delegation of authority work top level of management.

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Lending Guidelines:

 Socio economic improvement, poverty remission and employment creation.

 To assure profitability
 Credit assessment and risk grading
 Placement of budget credit.
 Hostility rate of interest.
 Security, Supervision and delegation.

Credit Risk Assessment:

Credit risk assessment should be arrangement preceding to sanctioning credit facility. The output
of this assessment shall be submitted in credit proposal created for the relationship manager. The
relationship manager can handle or keep good accuracy whole credit approval. The relationship
manager must be known about bank lending procedure and follow the criteria of know your
customer for efficiently meeting the need.

Sources of credit:

The different kind of sources provide loan of a bank these are as follows:

 Paid up capital
 Several form of deposit
 Loan from Bangladesh Bank and other bank
 Retain earning.

Among this all sources Janata bank limited actually follow this source. On the other hand bank
cannot use other type of loan. If they use the sources they may face lot of problem.

Sound principle of lending:

It is important to promote a sound lending process at Janata bank limited to ensure the
performance of minimize the credit risk as much as possible. Several important guideline of
sound lending process are followed by Janata bank limited these are given below:

Principle of purpose:

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The bank did not lend money for any kind of purpose if a borrower demand for the loan, the
purpose must be accurate or not thus followed by credit officer.

Principle of safety:

In the process of sound lending principles the Janata bank first check out their safety first, the
bank also ensure that the loan or funds should go to the right person or borrower.

Principle of liquidity:

The bank while lending advance keep ensure that the lent money is not locked up for long time.
So the banker should ensure that the loan are liquid enough to accomplish the liability structure.

Principle of security:

Another security sound principles is received by a banker to cover the all kind of liability as
much as possible.

Principle of profitability:

The commercial bank like Janata bank also gain fund from the shareholder. The earnings from
the dividend is the only source of profitability.

Principle of natural interest:

The improvement of banking industry has important activity to play in the economic promotion
of a country.

4.3 Creditworthiness of a borrower:

The Janata bank limited whosever provide loan they follow several criteria whether the borrower
is credit worthy or not.

Character: To find out whether the borrower is responsible to repay funds whether it’s
time to repayment.
Capacity: Whether transaction occur between the customer and the authority they need
to have some legal agreement and documents.
Asset: The borrower need sufficient asset to meet the repay loan.

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Credit history: to check out the customer whether if he borrow before, does any default
happen before or taking any action against him.
Credit rating: Credit rating of borrowers by Credit rating agencies of
Bangladesh( CRAB)

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4.4 Essential component of a sound credit policy:

The following area should be hiding in any extensive statement of credit policy and Janata Bank
Limited’s also cover these area.

Legal consideration: Banks lawful lending limit or other obedience should avoid
careless violation of banking system.
Delegation of authority: Exactly how concerned about the banks fund the authority
should be approved.
Credit extension: The most important part of a loan depiction of which loans are capable
or not.
Pricing: In the other hand to gain prompt effort the price is charged for the purpose of
prime guidelines for fees.
Market area: Every bank should developed it actual market area for the purpose of to
run lending function smoothly.
Credit granting procedure: The exact procedures are essential in loan forming policy
and strategy. These process of granting credit policy carried out the best suspect of loan
policy.

4.5 Process/Steps of credit disbursement:

Several types of credit disbursement is followed by Janata bank limited these are as:

Credit processing/ Appraisal

Credit approval/ Sanction

Credit documentation

Credit Administration

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 Disbursement

Monitoring and control Individual credit

Monitoring the overall credit portfolio

Credit Classification

Managing credit problem/ Recovery

Credit processing / Appraisal:

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 CHAPTER (5)

Credit Performance of Janata Bank Limited

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5.1 Credit Risk Grading:

Credit risk is the initial financial risk in the banking custom. Analyzing and assessing credit risk
is necessary first move in 1993. On the other hand Credit Risk grading process of Banking sector
in Bangladesh under caption “Lending Risk Analysis”. Credit risk grading is a progressive
method and different models are followed in different organization for measuring credit risk. An
efficient credit risk grading method needed in banking sector of Bangladesh to make risk grading
strategy make easier to implement. Credit risk grading is a significant tools for credit risk
management and it helps Bank to measure risk involve in credit transaction.

Definition of Credit risk: The Credit Risk Grading (CRG) is the basic module for growing a
credit risk management process. The credit risk grading matrix approve application of identical
standard to ensure a common standard pathway to evaluate the quality of credit portfolio as a
whole.

Number and short name of grading uses in CRG:

Bangladesh bank has prepared risk grading duty for Banks for loan amount 1.00 crore and above.
Janata bank limited also followed the proposed eight categories CRG model these are as follows:

Number Grading Short name

1 Superior SUP
2 Good GD
3 Acceptable ACCPT
4 Marginal/ Watch list MG/WG
5 Special Mention SM
6 Sub Standard SS
7 Doubtful DF
8 Bad and Loss BL

Compute credit Risk Grading of Janata Bank Limited:

According to significance of risk outline the following risk component is evaluating. These
weight of main risk components with percentage of weight are:

Principal risk components Weight

Financial risk 50%
Business/Industry risk 18%

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 Management risk 12%
Security risk 10%
Relationship risk 10%

Establish the key parameters:

Risk component Key parameter

Financial risk Liquidity, leverage, profitability & coverage
ratio
Business/ Industry risk Business outlook, size of business, age of the
business, industry accrual, competition &
obstacle of business
Management risk Experience, legacy and team work
Security risk Security coverage, collateral coverage and
support
Relationship risk Account conduct, utilization of limit

Credit Risk Grading based on total score obtained:

The following Credit Risk Grade matrix construct 100% weight founded on total scored gained
by contract or another legal procedure.

Number Risk grading Short name Score

1 Superior SUP 100%
2 Good GD 85+
3 Acceptance ACCPT 75-84
4 Marginal/watch list MG/WL 65-74
5 Special mentioned SM 55-64
6 Sub standard SS 45-54
7 Doubtful DF 35-44
8 Bad & losses BL <35

5.2 Recovery performance of Janata Bank Limited:

Janata Bank Limited was very much conscious and take charge about recovery and diminishing
of the loan. Because of recovery purpose the bank established huge action plan that’s why
savings deposit of the bank increased huge amount of BDT 4,070.66 million to BDT 93,526.88
million by year 2013. The growth rate also increased by 4.55 percent.

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Recovery program taken by Janata bank limited:

 To set up credit observation and monitoring cell in the bank

 To re- structure loan approve and distributing strategy of the bank
 To approve loans and advances in opposition to enough securities as better as possible
 To provide more package or incentives to the sound borrowers

Problems in Loan Recovery:

There are lot of reason behind the loan recovery of a bank is extremely imperfect. In maximum
cases the problems may be occurred from approving procedure of the loan, take care of the
project, oversee the loans. The main reason of poor loan recovery are classify into four extensive
types as follows:

Problem created by economic environment: Changes of management styles may

lateness the recovery of mature loan. Operation of market economy and quick expansion
of business.
Problem created by government: Janata bank Limited also faced maximum problem in
loan recovery process as a pressure from several interested group, loan given to
government firm, insufficient of legal appearance of loan recovery.
Problem created by the bank: Deficiency analysis of business risk whether lending
Janata Bank Ltd. Does not accurately analysis the business risk of defaulter and bank
cannot forecast wherever business will succeed or fail. The bank unable to describe value
of security against the loan. The lack of proper valuation the bank cannot recover the loan
with sale of mortgage.

5.3 SWOT Analysis of Janata Bank Limited

SWOT analysis:

SWOT analysis is a design exercise in which manager mark out organizational strength,
weakness, opportunities and threats. The SWOT analysis of Janata Bank Limited are
considered below:

Strength:

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  Strong foundation in reserve
 Sufficient foundation in equity
 Potential liquidity position.
 Lower cost of fund.

Weakness:

 There is no appropriate money market and for that idle fund cannot be take advantage in
the market.
 Deficiency of exact rules and regulations for the monitoring of the bank.
 Deficiency of modern money market mechanism or instrument.

Opportunities:

 Opportunities to construct investment mechanism.

 Growing awareness of Banking.
 Being massive big bank it can provide huge investment.
 Being a risk free organization people initiate to deposit in Janata Bank.

Threats:

 Farther new Commercial Banking service are come onward to run their business
operation. So raise of the competition in market is large threat for public deposit.
 Market pressure for lower the profit / interest rate.

26
 CHAPTER (6)

Financial performance

27
6. Financial Performance of Janata Bank:

Deposit: At December 2007 to 2016 the deposit of bank was associated at the end of the
previous year foremost to year over year growth of 26.21 percent. This growth rate remarkable
achievement, considering the contrary economic development of global economy. In the
dominant market utilization of deposits has become very inexpensive and costly. The Bank has
placed particular emphasis on securing of low cost fund.

Loans and Advances: The loan and advances of the bank itemized an inspiring growth during
the year 2007-2016. The total loan and advances compared at the end of earlier year viewing a
growth 14.21 percent. The advance portfolio of the bank is sound expanded and covers breaking
a wide range of small and medium enterprise, business and industries including agro based, agro
processing ship scrapping, steel and engineering, paper & paper products, chemicals,
construction, real state and loan below consumer credit schemes, numerous trading businesses.

It is the responsibility of the recovery department of bank to recover the landed fund within the
specified time and if the borrower fails to repay the money within in the said period Bank will
announce him as a defaulter and recover the fund by selling the securities given by the borrower
or by freezing his account or make a suit against him.

The total Deposits and total outstanding Loans and advances of Janata Bank from 2007 to 2016
are given below.

BDT in Crore

Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Deposits 19863 22133 24617 28656 36167 40977 47854 51601 56891 64182
Loan 12120 14467 16635 22573 25780 30534 28575 31977 34986 40304
and
Advance
s
Sources: Annual Report of Janata Bank Limited.

In the above table figure we see that the total deposit and Loan & advances of Janata Bank
Limited from 2007 to 2016 is increasing inclination that indicates better performance in
providing loan and advances. In the total loan and advances of Janata Bank limited 25% to 30%

28
Loan is industrial sector loan Industrial sector of Janata bank consists of Jute industries Tannery
industries, textile industries, Agro industries and industrial credit etc.

Sector wise Loans and Advances:

Janata Bank Ltd. Is involved in extending long, medium and short term loans to numerous
economic sector in the country. As a Janata Bank Limited extends its credit programs all over the
economy sector such as agriculture credit program, industrial credit program, and commercial
financing, the banks try to accomplish significant profit from its processes and also recover the
economic conditions of the country.

Taka BDT in million

Sl. Name of sector 2012 2011 +/(-) +/(-)

TK. %
1 Jute sector 9367 8909 458 5.51
2 Textile Ind. & Trade 11075 11325 (250) 2.20
3 Steel & engineering 2218 1515 703 46.40
4 Food & Allied 4692 3903 789 20.22
5 Export Credit 19082 1555 3533 22.72
6 Import Credit 32705 32511 194 0.60
7 Industrial Credit 22373 17161 5212 30.37
8 Rural, ME&SP. Financing 12855 11496 1359 11.82
9 Housing 2361 2490 (128) 5.14
10 Others 49629 39820 9809 24.17
Grand total 166359 144678 21681
Source: Annual Report of Janata Bank.

Comment: In the above figure we can see that the percentage of loans in the Textile Ind. has
reduced from 2%. Because of the high interest rate. On the other hand Janata Bank Limited loans
procedure need long time. On the other hand, the movement of loans and advances increased in
case of import credit, Industrial credit and Rural, ME&SP Financing sectors.

Geographical area-wise Loans and Advances:

The overview of Geographical area-wise Loans and advances of Janata bank Limited is given
below:

29
BDT in Million

Region 2008 2009 2010 2011 2012 2013 2014 2015 2016
Dhaka 8914 9488 10153 11509 12413 13115 14058 15578 169651
3 9 7 6 7 0 9 3
Chittagong 1500 1662 17750 21772 22693 25331 26114 28115 31301
5 9
Khulna 8533 8577 10516 12720 13991 15124 16124 17693 19208
Rajshahi 8789 9830 11531 12984 13851 15223 16559 17220 19850
Sylhet 838 888 944 1092 1102 1269 1350 1431 1547
Barisal 1136 1158 1290 1433 1562 1663 1795 1821 1985
Outside 750 990 1110 1262 1321 1450 1526 1647 1895
Banglades
h
Performance of Industry sector

Credit (Division Wise):

Division Dhaka Chittagong Sylhet Barisal Khulna Rajshahi Outside

Bangladesh
Percentag 64.46% 25.39% 4.84% 1.58% 2.13% 1.42% 0.18%
e

Credit Division-Wise
70.00%

60.00%

50.00%

40.00%

64.46%
30.00%

20.00%

25.39%
10.00%

4.84% 1.58% 2.13%

0.00% 1.42% 0.18%
Dhaka Chittagong Sylhet Barisal Khulna Rajshahi Outside
Bangladesh

Comments: From the table and chart/graph, we see that the movement of loan and advances of
Janata Bank is viewing an increasing style from 2008 to 2016. It specifies a better performance

30
in extending credit facilities. Bank disburses Loans more in Dhaka region than other areas and
loans recovered in average 35%.

Credit (Industry-Wise):

Graphical representation of Loan and advances given to industrial sector by Janata Bank Ltd.

Credit (Industry-Wise) Agriculture

Jute
Others AgricultureJute Textile
11% 5% 1% RMG
service ind.
Pharmaceuticals
4% steel & Engineering
2%
Transport Ship scraping
3% Textile Edible oil
energy & power 30%
6% Cement
Food & oil laid products
paper & packing
Construction Construction
5% energy & power
paper & packing
2% Transport
Pharmaceuticals
Food & oil laid products
8% Leather
Cement
Edible oil RMG service ind.
Ship
1% scraping
1%3% steel & Engineering 13% Others
5%

Loan Disbursement, Recovery & Classification of Industrial sector of Janata Bank Ltd. From
2008 to 2016 according to various sector wise is given loan we actually find out some selected
sectors actual recovery which is given below:

Textile Ind. Sector:

Figure BDT in Crore

Year Loan Disbursement Classified Actual Recovery

2008 372.72 133.52 101.16
2009 369.95 141.78 130.15
2010 439.60 211.16 112.68
2011 443.21 217.17 118.51
2012 446.91 225.35 122.25
2013 462.31 229.36 126.95
2014 459.59 236.85 131.44
2015 464.45 239.56 135.28
2016 467.21 244.54 138.30
Source: From Janata Bank’s document

31
Graphical representation:

Textile Sector
700

600

126.95 131.44 135.28 138.3

500 112.68 118.51 122.25

101.16 130.15
400

300

439.6 443.21 446.91 462.31 459.59 464.45 467.21

200 372.72 369.95

100

0
2008 2009 2010 2011 2012 2013 2014 2015 2016

Loan Disbursement Actual Recovery

Comment: In the above figure we see that the Loan disbursement and actual recovery on
industrial credit on Janata Bank is increasing at a decreasing rate from over the year.

Jute Ind. Sector:

Figure BDT in Crore

Year Loan Disbursement Actual Recovery

2008 469.95 130.26
2009 543.35 235.19
2010 790.31 570.64
2011 801.02 634.43
2012 935.20 745.25
2013 1035.40 802.30
2014 1098.31 895.65
2015 1156.80 915.21
2016 1245.50 995.70

Graphical Representation:

32
 Jute Sector
1400

1200 1245.5
1156.8
1098.31
1000 1035.4
995.7
935.2 915.21
800 895.65
790.31 801.02 802.3
745.25
600 634.43
543.35 570.64
400 469.95

200 235.19
130.26
0
2008 2009 2010 2011 2012 2013 2014 2015 2016

Loan Disbursement Actual Recovery

Comment: In the above figure we see that the loan recovery on industrial credit of Janata Bank is upward
increasing rate from over the year, which indicates better performance in industrial loan recovery. The
main reason of this better performance of Janata Bank is that the bank uses LRA format before providing
industrial loan.

Table of Rural, Micro and Special Program Financing:

Sl. Name of product No. of loanee Disbursement Actual recovery

1 Crop loan program 346525 5765.20 2582.23
2 Agriculture & irrigation 229 13.90 10.01
equipment
3 Fisheries & shrimp culture 321 130.30 90
4 Cyber café loan 13 1.70 .95
5 Credit for forestry 750 16.90 12.04
6 Credit program of employee 78368 1907.20 1653.2
7 Financing women entrepreneur 267 43.94 35.64
8 Financing farming 11371 77.70 67.4
9 Gharoa project 3812 74.80 61.25
10 Doctor loan 66 12.96 9
11 Small business 160 14.63 11.79
12 Credit for disabled people 113 1.59 .80
13 Consumer credit 1070 45.80 41.8
14 Agro-based industry 1567 540.91 517.24
15 Others 140699 4225.30 3788

Comments: In the above mention year from 2008 to 2016 there is no bad loan losses. Rural, Micro and
Special program recover at most all loans.

33
Scenario of Doubtful and bad loan of Janata Bank Ltd:

Debt which considered doubtful and bad of Janata Bank from 2009-2011

Year 2015 2014 2013

Total Amount - 893500000 702500000

In the above reference figure we can see that the Debt that is well-thought-out doubtful and bad of Janata
bank on total loan disbursement since over the year. There no doubtful and bad loan in 2015. So it is clear
to use of LRA format in industrial credit default risk is less and recovery rate is well but in the other
sector’s recovery is also worthy enough.

CHAPTER (7)
34
Performance analysis of Janata Bank Limited

35
7. Performance analysis of Janata Bank Limited
Introduction:

Bank today are facing great pressure to perform to meet the objective of their stock holder,
employees, depositors and borrowing customers, while somehow keeping government regulators
satisfied that the bank policies, loan and investments are sound. The banks main purpose is to
maximizing the value of the shareholder wealth invested at the firm at an acceptable level of risk.

To evaluate the banks performance financial statements, particularly banks performance must be
directed toward specific objective. A fair evaluation of any banks performance should start by
evaluating whether it has been able to achieve the objectives its management and shareholders
have chosen. To evaluate the performance of Janata bank Limited some ratios are calculating
given below from 2013 to 2017 and after that compare it with South East Bank Ltd.

Return on Equity:

Among the most important ratio measures of bank profitability used today are following:

Return on Equity (ROE) = Net income after taxes/ Total equity capital.

Year 2013 2014 2015 2016 2017 SEBL(2017)

ROE 30.09% 9.66% 11.44% 5.22% 5.23% 16.2%
Interpretations:

 The return on Equity (ROE) of Janata Bank Limited over the year is very satisfactory.
 Return on Equity of Janata Bank in 2017 is far better than that of 2016.
 The return on Equity (ROE) of Janata bank is lower than SEBL.

Graphical Representation of ROE from 2013 to 2017:

ROE
35.00%

30.09%
30.00%

25.00%

20.00%

15.00%

11.44%
10.00% 9.66%

5.00% 5.22% 5.23%

0.00%
2013 2014 2015 2016 2017

36
 Chart Title
10.00%

9.00%
9.06%
8.00%

7.00%

6.00%

5.00% 5.23%
4.00%

3.00%

2.00%

1.00%

0.00%
JBL (ROE) SEBL (ROE)

Return on Asset:

ROA is primarily an indicator of managerial efficiency, it indicates how capably the

management of the bank has been converting the institution of assets into net earnings. The ratio
of the bank’s net after tax income divided by its total equity capital.

Return on Asset (ROA) = Net income after tax / Total asset.

Year 2013 2014 2015 2016 2017 SEBL(2017)

ROA 1.42% 0.61% 0.70% 0.33% 0.33% 0.88%
Interpretation:

 ROA gives an indication of capital intensity of the company, which will depend on the
industry; companies require large initial investments will generally have lower return on
assets.
 The ROA of Janata Bank in 2017 and 2016 also remain same.
 ROA of SEBL is slightly better than Janata Bank Limited.

ROA
1.60%

1.42%
1.40%

1.20%

1.00%

0.80%
0.70%
0.60% 0.61%

0.40%
0.33% 0.33%
0.20%

0.00%
2013 2014 2015 2016 2017

37
 Chart Title
1.00%

0.90%
0.88%
0.80%

0.70%

0.60%

0.50%

0.40%

0.30% 0.33%

0.20%

0.10%

0.00%
ROA( JBL) ROA(SEBL)

Net Interest Margin:

Net interest Margin = (interest income from loans security investment)-(interest expense on
deposits and other debt issue) / Total asset.

Year 2013 2014 2015 2016 2017 SEBL(2017)

Net Interest 1.8% 2.61% 2.53% 1.78% .47% .89%
Margin
Interpretations:

 Net interest margin in 2017 is very close to zero.

 From the financial report of Janata Bank it can be said that the net interest margin in year
2016 was so far better than year 2017.
 SEBL net interest margin is better than Janata Bank Ltd.

Net Interest Margin

3.00%

2.61%
2.50% 2.53%

2.00%
1.80% 1.78%

1.50%

1.00%

0.50% 0.47%

0.00%
2013 2014 2015 2016 2017

38
 Chart Title
1.00%

0.90%
0.89%
0.80%

0.70%

0.60%

0.50%
0.47%
0.40%

0.30%

0.20%

0.10%

0.00%
JBL(NIM) SEBL(NIM)

Net Non Interest Margin:

Net non-interest margin = Noninterest revenue – noninterest expense / Total asset.

Year 2013 2014 2015 2016 2017 SEBL(2017)

Net (.51%) (.0058%) .25% .0034% (.61%) Unavailable
Noninterest
Data
Expense
Interpretation:

 In 2017 net non-interest margin is negative.

 In 2016 it was little bit better than 2017 for the purpose of positive figure.
 The non-interest margin of SEBL is very much satisfactory than Janata bank.

Graphical representation of Net non-interest margin from 2013 to 2017:

Net Noninterest Expense

0.30%
0.25%
0.20%

0.10%

0.00% -0.01% 0.00%

2013 2014 2015 2016 2017
-0.10%

-0.20%

-0.30%

-0.40%

-0.50%
-0.51%

-0.60% -0.61%

-0.70%

39
Net Bank operating Margin:

Net bank operating margin = (Total operating revenue) – Total operating expense) / Total asset.

Year 2013 2014 2015 2016 2017 SEBL(2017)

Net Bank 2.91% 3.49% 3.52% 2.84% 2.07% 3.03%
Operating
Margin
Interpretation:

 In the year of 2017 net operating margin is basically lower among all the previous year.
 The net operating margin of Janata Bank limited is also higher in previous year, so profit
earned by Janata bank was also higher in previous year.
 The net bank operating margin of SEBL satisfactory than Janata Bank.

Graphical representation of net bank operating margin from 2013-2017:

Net Bank Operating Margin

4.00%

3.50% 3.49% 3.52%

3.00%
2.91% 2.84%
2.50%

2.00% 2.07%

1.50%

1.00%

0.50%

0.00%
2013 2014 2015 2016 2017

Chart Title
3.50%

3.00%
3.03%

2.50%

2.00% 2.07%

1.50%

1.00%

0.50%

0.00%
JBL(NBOM) SEBL(NBOM)

Earnings per Share (EPS):

40
Earnings per share = Net income after tax / Common equity shares outstanding.

Year 2013 2014 2015 2016 2017 SEBL(2017)

EPS 86.31% 19.92% 25.12% 13.61% 14.04% 3.86%
Interpretations:

 Earnings per share are positive for the shareholders.

 The earnings per share of Janata Bank Ltd. in year 2017 are higher than previous year,
which indicates the better performance of this bank is in 2017.

Graphical representation of EPS from 2013 to 2017:

EPS
100.00%

90.00%
86.31%
80.00%

70.00%

60.00%

50.00%

40.00%

30.00%
25.12%
20.00% 19.92%
13.61% 14.04%
10.00%

0.00%
2013 2014 2015 2016 2017

Chart Title
16.00%

14.00%
14.04%
12.00%

10.00%

8.00%

6.00%

4.00%
3.86%
2.00%

0.00%
JBL(EPS) SEBL(EPS)

Net Profit margin:

41
Net profit margin = Net income after taxes / Total operating revenue.

Year 2013 2014 2015 2016 2017 SEBL(2017)

Net profit 11.64% 16.03% 10.93% (30.86%) 17.37% 12.55%
margin
Interpretations:

 Net profit margin is far better than all the previous year.
 Net profit margin is 17.37% in 2017 where the previous year’s net profit margin was
negative figure.
 Net profit margin of Janata bank is higher than SEBL is more about 5% less.

Graphical representation of net operating margin from 2013-2017:

Net profit margin

30.00%

20.00%
16.03% 17.37%
11.64% 10.93%
10.00%

0.00%
2013 2014 2015 2016 2017

-10.00%

-20.00%

-30.00% -30.86%

-40.00%

Chart Title
20.00%

18.00%
17.37%
16.00%

14.00%

12.00% 12.55%
10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
JBL(NPM) SEBL(NPM)

Asset Utilization:

42
Asset Utilization = Total operating revenues / Total asset.

Year 2013 2014 2015 2016 2017 SEBL(2017)

Asset 8.19% 8.87% 9.10% 9.69% 9.39% 12.18%
Utilization
Interpretations:

 Asset utilization ratio is not enough good in 2017.

 In 2017 the ratio lower than the previous year which indicates asset are not properly used
in previous year.
 The asset utilization ratio of SEBL is actually higher than Janata Bank Ltd.

Graphical representation of Asset utilization ratio from 2013-2017:

Asset Utilization
10.00%

9.69%
9.50%
9.39%

9.10%
9.00%
8.87%

8.50%

8.19%
8.00%

7.50%

7.00%
2013 2014 2015 2016 2017

Chart Title
14.00%

12.00%
12.18%

10.00%
9.39%
8.00%

6.00%

4.00%

2.00%

0.00%
JBL(AU) SEBL(AU)

Efficiency Ratio:

43
 Efficiency ratio = Total operating expenses / Total operating revenues.

Year 2013 2014 2015 2016 2017 SEBL(2017)

Efficiency 15.81% 15.11% 17.55% 21.61% 21.26% 45.11%
Ratio
Interpretations:

 Efficiency ratio is not so good

 In 2017 the efficiency ratio is slightly fall than previous year.
 Efficiency ratio is higher of SEBL.

Graphical representation of efficiency ratio from 2013-20217:

Efficiency Ratio
25.00%

21.61% 21.26%
20.00%

17.55%
15.81%
15.00% 15.11%

10.00%

5.00%

0.00%
2013 2014 2015 2016 2017

Chart Title
50.00%

45.00%
45.11%
40.00%

35.00%

30.00%

25.00%

20.00% 21.26%
15.00%

10.00%

5.00%

0.00%
JBL(ER) SEBL(ER)

From above analysis, we can conclude that the performance of Janata Bank Limited is getting
better day by day.

44
 CHAPTER (8)

Findings, Recommendations and Conclusion

45
Findings of the Report:

Janata bank limited empower a standard credit process. As the purpose of my report is to make
an explanation on the credit risk management of Janata Bank Limited. I attempt my best effort to
accumulate data for the report and search out the fact. I have compiled my findings here and I
consider this will assistance me to achieve my purpose.

 The JBL follow the in total Credit measurement and risk grading system following to the
law of Bangladesh bank.
 To implementing government strategies, Janata Bank Limited has been preserving its
place in covered by credit to government bodies, corporations and private business.
 Janata bank limited allocate loans without adequate security in some cases. This is
breaking rule of Bangladesh bank order.
 Sometimes the document proof is accomplished after sanctioning the loan.
 The credit offering judgment process is very long that’s why sometimes worthy clients
are lost.
 The website of Janata bank Limited does not hold all necessary information about loan
and advances.

Recommendations:

To enhance the risk management culture moreover, Janata Bank Limited should accept some
best exercises. These are:

 Continuous controlling of the customer should be directed so that loan cannot be

classified.
 The bank should importance further on diversification loan on several promising sectors
and newly originate in the economy.
 Political intervention should be keep away from while verify and sanctioning the loan.
 Day by day the business conditions is transformed, so the bank also grow as a dynamic
organization to cop up with situation.
 All the loan procedure have done honestly.
 The documents carry the security opposed to the loan have to confirm rightly by bank
before sanctioning the loan.

46
  A quick alert account policy should be indicate to have sufficient supervision and
intimate look by management.
 To inspire recovery unit incentive program may also be initiated.
 Janata Bank Limited issue short-term process like credit for poor borrower.
 Janata bank limited provide competitive interest rate, so that client are move their account
to other bank.
 The quantity of non-performing loan should be shrunk by experiment proper assessment
of loan monitoring.

Conclusion:

I have studied so far about the several aspect of Credit Management Policy of Janata Bank
Limited. For my report, I have chosen Janata Bank. Janata bank limited performance a
significant role in the field of banking sector as well as in our economy. The prosperity of a bank
rely on primarily on the efficient credit management. An effective credit management is not only
necessity for a bank’s own performance but also demand for the pleasant development of an
economy. In any technique of economic improvement, therefore it is necessary to emphasize the
assessment of a sound and well mobilized credit management policy from the outlook view point
of both resources compactness and proficient allocation of funds. The Bank also issue general
banking service facility, which present an important provision to that locality. Janata bank
Limited is playing a significant role in the banking sector and in the payment method in
Bangladesh.

47
 CHAPTER (9)

References and Bibliography

48
9. References:

 Annual Report of Janata bank Ltd. 2016

 Annual Report of Janata bank Ltd. 2015
 Annual Report of Janata bank Ltd. 2014
 Annual Report of Janata bank Ltd. 2013
 Annual Report of Janata bank Ltd. 2012
 Annual Report of Janata Bank Ltd. 2007-2016
 Definitions: [Link]
 Bank Management and Financial Services by Peter S. Rose, Seventh Edition.
 [Link] bank ltd.
 [Link] .com
 Several booklets from Janata bank Limited.
 Several newsletters from Janata Bank Limited.
 Credit risk grading manual, published by Bangladesh bank.
 Banking credit risk management manual.
 Credit policy guide- Guidelines for Credit Risk Management of JBL.

49