3.18.4 Documentation and Execution of facilities:

 

 

3.18.4.1 Credit / Lending is incomplete without

proper documentation.

Improper documentation can be really frustrating in times of trouble with the client.

 

3.18.4.2 Examples of documents to take particularly take care of.

 

Sanction Letter and Acceptance by client, Correspondence with Credit Administrator/ Lawyer,

Security documents ‑(Lien ,hypothecation, etc.).

Undertakings by client,

Legal documents (loan agreements, indemnification's, application for facilities, partnership deed, Memo & Article of Associations, registrations with ministry, licenses, specialized authorizations, etc.),

Amendments to any documents,

Ensure safe custody of the documents, etc.

Any terms and conditions should not left as just acceptance of sanction letter, it should be put down in noting through

Undertakings, explanation letters, etc.

 

3.18.4.3 Follow through.

Follow‑up of clients facilities movements are integral part of relationship management. Examples of points to follow may be as under:

STRL:

Swings of total outstanding.

Look out for larger than usual debits / credits.

Look out for cheque returns.

Reason for such should be obtained and documented.

Fixed Loans:

Relationship officer should maintain his/ her own schedule of dates when payment is due.

Look out for any deferrals, reasons should be documented, proper approval should be obtained and filed. .

Should determine need /justification and obtain proper approval mfor any change in installment amounts if approached by client.

 

Bills, L/Cs:

Check for unusual items. Short profit making tendency in experimental trade beside regular line of business often put the operational cycle of clients in jeopardy.

Larger L/Cs than usual should be looked at carefully, often it may result in stock pileup.

Change in frequently in extension and retirement of TR may be indicative.

Cancellation of L/Cs may indicate prDBLem in procurement on the exporter's part/ or fund shortage of funds on the client's part.

Usage of LBD should be monitored

 

3.18.5 Review/ Renewal:

 

 

3.18.5.1 On going.

Relationship client is to be reviewed as an on going process.

Client should be contacted on need as well as on routine basis.

3.18.5.2 Annual review.

Dhaka a year (or interi 

Performance of the client must be thoroughly reviewed to justify continuation of relationship.

Up to date financial statements, fresh credit reports from other banks, statistics of utilization of facilities with own and other banks should be reviewed, facilities requirement should also be reviewed and like wise renewed/ (canceled if necessary)

 

3.18.6 Socio-economic:

 

A very important job of the relationship officer is to follow up and maintain information on the client, the business/ industry environment, politico‑economic developments within the country of operations as well as globally to look out for early signals of emergence of problems. The following may be some guidance for such follow up:

 

1. Financial:

Adverse tern in sales and/ or profit,

Deviation from planned/ forecasted results, Interim losses, Decline/    appreciation in returns,

                                                          Lowering of liquidity,

                                                             Unusual / Lager overdrafts, larger swings,

                                                               Other cash income (amount and timing),

                                                               Deviation from usual borrowing circle,

                                                               Qualified Auditors' comments,

                                                                  Diversion of fund,

                                                                  Delay in submission of financial information.

Breaches in terms and conditions of finance, etc.

2. Business

Unplanned divestiture of funds,

                                                              Over‑trading,

                                                              Cash drain to subsidiaries,

                                                                Fall in market share,

                                                                Involvement in litigation by client,

                                                                Unplanned failure to invest in capital expenditure or R&D,

                                                                Over reliance on single product, or customer, etc.

 

3. Management

Key management departure,

                                                                  Key man's long sickness, accidents,

                                                                  High personnel attrition (particularly in management),

                                                                  Too high optimism, excessive life style, usually such attitudes are

                                                                  Displayed in deep crisis.,

                                                                  Inefficient staff remain un‑removed, etc.

4. Industry

Excess capacity/ supply,

                                                                  Deregulation (causing rise in competition),

                                                                  Change in market norms/ trading patterns,

                                                                  Fast change in technology,

                                                                  Week existence within the industry (in such situation clients tend to cover against weaknesses by making large funds available to the company),

                                                                  Market rumors (though must not be taken as facts, deserve due attention as quite often these are early indications of trouble)

 

5. External

Observation of stock market up‑down,

                                                                  Changing finance market (rise and fall in base rate of central bank, treasury bond issue by govt. or major financing company, etc. within country of operations or abroad)

                                                                  Trade inquiry feed back on client,

                                                                  Change in lender group,

                                                                  Devaluation of company stocks,

                                                                  Dependency on stronger currency import,

                                                                  Adverse regulatory, political, economic changes.

 

 

 3.18.7    Overall Portfolio Management:

 

The term means managing total exposure on different clients, in different industries of product or service, enjoying different types of facilities. The management may take into consideration the following

 

3.18.7.1 Market shares of different clients within Dhaka industry, sizes of different industries within country of operation.

 

 

 

 

 

 

 

 

 

 

 

 

 

Relationship personnel should have fair idea of the market sizes in the country of operations at least. He/ she should follow the strategy of the senior management to maintain total exposure on each industry within limit defined by such strategy.

 

Exposure on individual client should also be planed.

 

Quality of portfolio should also be determined by classification policy and should try to improve it.

 

Cross financing clients within the portfolio may result in higher control.

 

Change in strategy /policy of portfolio should be executed by increase or decrease of exposure in specified fields.