1.1 Origin of the Report

Masters of Business Administration (MBA) Course requires a three months attachment with an organization followed by a report assigned by the supervisor in the organization and endorsed by the faculty advisor. As I am already working for Dhaka Bank Limited (DBL), I took the opportunity to do my internship in my own organization. My organizational supervisor Mr. Syed Abdul Quader, Senior Assistant Vice President and Manager of Islampur Branch asked me to conduct a study on Comparative Analysis between Bangladesh Bank’s Best practices guidelines and Dhaka Bank Limited existing credit policy.  My faculty supervisor Mr. Shama-e-zaheer, lecturer of Institute of Business Administration, University of Dhaka, also approved the topic and authorized me to prepare this report as part of the fulfillment of internship requirement.

1.2 Background of the Report

Last year Bangladesh Bank undertook a project to review the global best practices in the banking sector and examines in the possibility of introducing these in the banking industry of Bangladesh. Four 'Focus Groups' were formed with participation from Nationalized Commercial Banks, Private Commercial Banks & Foreign Banks with representatives from the Bangladesh Bank as team coordinators to look into the practices of the best performing banks both at home and abroad. These focus groups identified and selected five core risk areas and produce a document that would be a basic risk management model for each of the five 'core' risk areas of banking. The five core risk areas are as follows-

a) Credit Risks;
b) Asset and Liability/Balance Sheet Risks;
c) Foreign Exchange Risks;
d) Internal Control and Compliance Risks; and
e) Money Laundering Risks.

Bangladesh Bank in one of it’s circular (BRPD Circular no.17) advised the commercial banks of Bangladesh to put in place an effective risk management system by December, 2003 based on the guidelines sent to them.

I am working in the Credit Department of Dhaka Bank Limited, Islampur Branch. In this report, I will try to make a comparative analysis between Bangladesh Bank’s suggested best practices guideline for managing credit risk and Dhaka Bank Limited existing credit policy .

1.3 Objective of the Report

The study has been undertaken with the following objectives:
 To analysis the pros and cons of the conventional ideas about credit operation of a Bank.
 To have better orientation on credit management activities specially credit policy and practices, credit appraisal, credit-processing steps, credit management, financing in various sector and recovery, loan classification method and practices of DHAKA Bank Limited (DBL).
 To compare the existing credit policy of Dhaka bank limited with that of best practices guideline given by Bangladesh Bank, the central bank of Bangladesh.
 To identify and suggest scopes of improvement in credit management of DBL.
 To get an overall idea about the performance of DHAKA Bank Ltd.
 To fulfill the requirement of the internship program under MBA program

1.4 Scope of the Report

The study would focus on the following areas of DHAKA Bank Limited.
 Credit appraisal system of DHAKA Bank Limited.
 Procedure for different credit facilities.
 Portfolio (of Loan or advances) management of DHAKA Bank Limited.
 Organization structures and responsibilities of management.
Each of the above areas would be critically analyzed in order to determine the efficiency of DBL’s Credit appraisal and Management system.

1.5 Sources of Information

Information collected to furnish this report is both from primary and secondary in nature. The secondary information was collected from the different publication, and books. For collecting books and periodicals I have used the following library:

IBA Library
BIBM Library
Bangladesh Bank Library

1.6 Methodology of the Report

The following methodology will be followed for the study:
Both primary and secondary data sources will be used to generate this report. Primary data sources are scheduled survey, informal discussion with professionals and observation while working in different desks. The secondary data sources are annual reports, manuals, and brochures of Dhaka Bank limited and different publications of Bangladesh Bank.
To identify the implementation, supervision, monitoring and repayment practice- interview with the employee and extensive study of the existing file was and practical case observation were done.

1.7 Limitation of the Report

This report will only consider credit risks of Dhaka Bank limited. It will not cover

 Asset and liability/ balance sheet risk.
 Foreign Exchange Risk
 Internal control And compliance risk
 Money laundering Risk.

1.8 Report Organization

This report is divided in five sections. The following section is the organization part i.e. this section will give an overview of Dhaka Bank Limited. In section iii, Credit management policy and practice of DBL is critically analysed followed by Bangladesh Bank’s Best practice guideline for credit management in section iv. Section v deals with findings and recommendations.

2.0 AN OVERVIEW OF DHAKA BANL LIMITED (DBL)

Dhaka Bank Limited is the leading private sector bank in Bangladesh offering full range of Personal, Corporate, International Trade, Foreign Exchange, Lease Finance and Capital Market Services. Dhaka Bank Limited is the preferred choice in banking for friendly and personalized services, cutting edge technology, tailored solutions for business needs, global reach in trade and commerce and high yield on investments, assuring Excellence in Banking Services.

2.1 Background of Dhaka Bank Limited

Dhaka Bank Limited is a scheduled bank that was incorporated under the Companies Act 1994, started its operation on July 1995 with a target to play the vital role on the socio-economic development of the country. Aiming at offering commercial banking service to the customers’ door around the country, the Dhaka Bank limited established 20 branches up-to this year. This organization achieved customers’ confidence immediately after its establishment.

Within this short time the bank has been successful in positioning itself as progressive and dynamic financial institution in the country. This is now widely acclaimed by the business community, from small entrepreneur to big merchant and conglomerates, including top rated corporate and foreign investors, for modern and innovative ideas and financial solution.

2.2 Capital Base

Authorized Capital:   BDT 1000.00 million.
Paid up Capital     :   BDT 531.07 million (as on 31.12.2003)

2.3 Mission Statement

To be the premier financial institution in the country providing high quality products and services backed by latest technology and a team of highly motivated personnel to deliver Excellence in Banking.

2.4 Slogan

Excellence in Banking

2.5 Motto

The Bank will be a confluence of the following three interests:
    Of the Bank           : Profit Maximization and Sustained Growth.
   Of the Customer     : Maximum Benefit and Satisfaction.
   Of the Society         : Maximization of Welfare.

2.6 Objectives

 Be one of the best banks of Bangladesh.
 Achieve excellence in customer service next to none and superior to all competitors.
 Cater to all differentiated segments of Retail and Wholesale Customers.
 Be a high quality distributor of product and services.
 Use state-of the art technology in all spheres of banking.

2.7 Values

• Customer focus
• Integrity
• Team Work
• Respect for individual
• Quality
• Responsible citizenship

2.8 Workforce

Total number of employees stood at 568 as on December 31, 2003.

2.9 Branches
 
Dhaka Bank limited has 19 conventional Branches and 2 Islamic Banking Branches. Among total of 21 Branches, 13 branches are located in Dhaka City, 4 branches are located in Chittagong. The other 4 branches are located in Sylhet, Narsingdi, Narayangonj, Sirajgonj each. The registered office (Head Office) of Dhaka Bank Limited is at Biman Bhavan, 100 Motijheel C/A, Dhaka-1000.

2.10 Management Information System

Since its journey as commercial Bank in 1995 Dhaka Bank Limited has been laying great emphasis on the use of improved technology. It has gone to online operation system since 2003. And the new Banking Software Flexcube is under process of installation. As a result  the bank will able to give the services of international standards.

2.11 Correspondent Relationship

The Bank established correspondent relationships with a number of foreign banks, namely American Express Bank, Bank of Tokyo, Standard Chartered bank, Mashreq Bank, Hong Kong Shanghai Banking Corporation, CITI Bank NA-New York and AB Bank Ltd. The Bank is maintaining foreign exchange accounts in New York, Tokyo, Calcutta, and London. The bank has set up letter of credit on behalf of its valued customers using its correspondents as advising and reimbursing Banks. The Bank maintains a need based correspondent relationship policy, which is gradually expanding. The number of Foreign Correspondents is 406.

2.12 Organization Structure

2.13 Departments of DBL

If the jobs are not organized considering their interrelationship and are not allocated in a particular department it would be very difficult to control the system effectively. If the departmentation are not fitted for the particular works there would be haphazard situation and the performance of a particular department would not be measured. Dhaka Bank Limited has does this work very well. Different departments of DBL are as follows:

 Human Resources Division
 Personal banking Division 
 Treasury Division
 Operations Division
 Computer and Information Technology Division
 Credit Division
 Finance & Accounts Division
 Financial Institution Division
 Audit & Risk Management Division

2.14 Human Resources Management of DBL

Dhaka Bank Limited recognizes that a productive and motivated work force is a prerequisite to leadership with it’s customers, it’s shareholders and in the market it serves. Dhaka bank treat every employee with dignity and respect in a supportive environment of trust and openness where people of different backgrounds can reach their full potential.

The bank’s human resources policy emphasize on providing job satisfaction, growth opportunities, and due recognition of superior performance. A good working environment reflects and promotes a high level of loyalty and commitment from the employees. Realizing this Dhaka Bank limited has placed the utmost importance on continuous development of its human resources, identify the strength and weakness of the employee to assess the individual training needs, they are sent for training for self-development. To orient, enhance the banking knowledge of the employees Dhaka Bank Training Institute (DBTI) organizes both in-house and external training.

	2003	2002
Human Resources	803	602
Training Expenses	Tk.19,08,894/	Tk.15,79,443/

The remuneration is very competitive in comparison with industry average. Beside these the recruitment procedure is comprehensive.

2.15 Product and Services

The product and services that are currently available are given below:

2.15.1 Depository Product

Dhaka Bank Limited is now offering different types product for mobilizing the savings of the general people.

Deposit Product
Current Deposit
Saving deposit Account
STD Account
Fixed Deposit
Excel Account
Foreign Currency Deposit Account
NFCD Non Resident Foreign Currency Account

2.15.2 Interest Rate paid to different Deposit liabilities:

Serial	Application	Up-to Tk. 50 Lac	50 Lac & above
1	FDR  for 1 months	5.50%	5.50%
2	FDR  for 3 months	8.25%	8.50%
3	FDR  for 6 months	8.50%	8.75%
4	FDR  above 1 year	8.75%	9.00%
5	STD Account	4.50%	4.50%
6	Savings Account	6.00%	6.00%

2.15.3 Loan Product

The Dhaka bank is offering the following loan and advance product to the client for financing different purpose that fulfill the requirements of the bank and have good return to the investment as well as satisfy the client. The loan and advance products are:

Personal Loan Scheme
Lease Finance
Term Loan
Small & Medium Enterprise loan
Working Capital Financing
Import Financing
Export Financing
Syndicate Loan
Industrial Financing

2.15.4 Personal Banking Products

• ATM Card Service
• Credit Card Services
• Excel Account for Executives

2.16 Financial Performance of DBL

The Dhaka Bank Limited is one of the most successful private sector commercial bank in our country, though it started its operation only nine years back. It has achieved the trust of the general people and made reasonable contribution to the economy of the country by helping the people investing allowing credit facility.

2.16.1 Profit

Dhaka Bank Limited registered a operating profit of Tk. 509.60 million as of 31 December, 2003.Provision for tax for the year amounted to Tk. 240.61 million with a net profit of Tk. 269.01 million compared to

2.16.2 Capital

Dhaka Bank Limited commenced its operation with an authorized capital of Tk. 1,000.00 million with paid up capital of Tk. 100.00 million.
The paid up capital of the bank amounted to 531.07 million as on December 31, 2003. The total equity (capital & reserve) of the bank as on December Stood at Tk. 1209.97 million. The Capital Adequacy Ratio is 10.88% as on December 31, 2003which exceed the stipulated requirements for banks in Bangladesh.

 2.16.3 Deposits

As of December 2003 Total deposits of the bank stood at Tk. 16850.83 million excluding call as against Tk. 14964.01 million excluding call of the previous year.

Table 2: Deposit of DBL  Tk in million

Year	Deposit
2002	14960
2003	16850

2.16.4 Loan and Advances

The Bank recorded a 14.94% growth in advances with a total loans and advances portfolio of Tk. 12886.68 million at the end of December 2003 compared to Tk. 11.211.39 million in 2002.

Dhaka Bank is making loan and advances in different areas. The bank continues to explore and diversify its loan distribution with the objective of efficient use of resources and take utmost precaution to safeguard it. DBL also participated in a syndicated loan.

Table 4: Loans & Advances of DBL Tk in million

Year	Loans & Advances
2002	11210
2003	12880

2.16.5 International Trade

International Trade is an important constituent of the business portfolio of the bank. The import value stood at Tk. 19079.40 million in 2003 with a growth of 2.05% over the volume of 18696.70 million in 2002. On the other hand, export increased by 12.90% in the year 2003. Total export volume of the bank amounted to 6900.60 million in 2003 compared to Tk. 6110.20 million in the previous year.

2.16.6 Investment Banking:

Lease finance, Hire purchase and Capital Market Operation besides investment in Treasury Bills and Prize Bonds constitute the investment basket of DBL. The investment portfolio made up of Government Securities and Shares and Debentures of different listed companies stood at Tk. 2046.10 million in 2003 indexing a 4.91% increase over Tk. 1950.28 million in the previous year.

DHAKA BANK AT A GLANCE: 1999-2003

Financial Highlights.                                                                                                 ( Figures in million Taka )