3.6 Credit Ratification Authority of DBL:

Credit decisions are heart of all credit works. Generally branch manager and the credit in-charge of a branch are held responsible for appraising of a loan proposal. The customer request for credit limit and the credit officer prepares a credit memo and send it to the head office, credit division. After taking all the relevant information from the branch the head office credit division sent the credit memo to the credit committee. Credit committee of DBL is comprised of Managing Director and other top-level executives, that is, DMDs and EVPs. If credit committee is convinced about the merit of the proposal then it is sent the broad of directors. The board is final authority to approve or decline a proposal. The whole process takes a month or more.  In DBL broad meeting occurs once in every week.

3.7 Credit Evaluation Principles

Some principles or standards of lending are maintained in approving loans in order to keep credit risk to a minimum level as well as for successful banking business. The main principles of lending are given below:

3.7.1 Liquidity:

Liquidity means the availability of bank funds on short notice. The liquidity of an advance means it repayment on demand on due date or after a short notice. Therefore, the banks must have to maintain sufficient liquidity to repay its depositors and trade off between the liquidity and profitability is must.

3.7.2 Safety:

Safety means the assurance of repayment of distributed loans. Bank is in business to make money but safety should never be sacrificed for profitability, To ensure the safety of loan. The borrower should be chosen carefully. He should be a person of good character & capacity as well as bank must have to maintain eligible number of security from borrower.

3.7.3 Profitability:

Banking is a business aiming at earning a good profit. The difference between the interest received on advances and the interest paid on deposit constitutes a major portion of the bank income, Besides, foreign exchange business is also highly remunerative. The bank will not enter into a transaction unless a fair return from it is assured.

3.7.3 Intent:

Banks sanction loans for productive purpose. No advances will be made by bank for unproductive purposes though the borrower may be free from all risks.

3.7.4 Security:
 
The security offered for an advance is an insurance to fall bank upon incases of need. Security serves as a safety value for an unexpected emergency. Since risk factors are involved, security coverage has to be taken before a lending.

3.7.5 National interest:

Banking industry has significant roll to play in the economic development of a country. The bank would lend if the purpose of the advances can contribute more to the overall economic development of the country.

3.8 Pre-disbursement Compliance

When the credit proposal are approved the credit officer must have to be ensured that the disbursement of the credit facilities must comply with the directions written in the credit policy and circular made by time to time along with checking all the following terms and conditions.

 The officer of Loan Administration must collect the acceptance of the customer’s of the terms and conditions on the duplicate copy of the sanctioned advice.

 They will thoroughly examine and ensure that the subject credit facility does not contradict to any law, rules and regulation of the country, Bangladesh Bank and

 Deed of the Mortgage and power of the Attorney to be drafted and executed under the Supervision of the Bank’s Legal Advisor.

 Lawyers certificate to the effect that all the legal formalities (Equitable/ Registered Mortgaged) has been properly created on the land and building in favor of the bank & bank has acquired the effective title of the property.

 Registered power of attorney has been collected form the borrower (contractor) assigning the work order favoring the DBL and the power of attorney has been registered with the work order given agency and they have agreed that they will issue all the cheques favoring DBL.

 The legal documents of the vehicle have been obtained.

 Collection of the satisfaction certificate in respect of all the documents both legal and banking from the lawyer.

 Entry has been made in the Safe -in  and Safe-out register and the documents are preserved.

After being satisfied all the above terms and conditions the credit in-charge will disburse the loan amount to the client.

3.9 Documentation of the Loan:

Documentation is obtaining such agreement where all the terms and condition and securities are written and signed by the borrower. It specifies rights and liabilities of both the banker and the borrower. In documentation each type of advances requires a different set of documents. It also differs with the nature of securities. The documents should be stamped according to the stamp Act. There are no hard and fast rules of documentation and it varies from bank to bank. Generally, the documents are taken in the case of a secured advance by DBL:

i. Demand promissory note: Here the borrower promises to pay the loan as and when demand by bank to repay the loan.

ii. Letter of arrangement.

iii. Letter of continuity.

iv. Letter of hypothecation of goods and capital machinery.

v. Stock report: This report is used for OD and CC. In this report, information about the quality and quantity of goods hypothecated is furnished.

vi. Memorandum of deposit of title deed of property duly signed by the owners of the property with resolution of Board of Directors of the company owning the landed.

vii. Personal guarantee of the owners of the property.

viii. Guarantee of all the directors of the company.

ix. Resolution of the board of directors to borrow fund to execute documents and completes other formalities

x. Form no. XVII/XIX for filling charges with the register of joint stock companies under relevant section.

xi. Letter of Revival

xii. Letter of lien for advance against FDR.