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Introduction

View with images and chartsCredit Management of Prime Bank Ltd

Overview of Prime Bank LimitedPrime Bank LimitedPrime Bank Limited is a scheduled commercial Bank under private sector established within the ambit of Bank Company Act, 1991 and was incorporated as a Public Limited Company under Companies Act, 1994 on February 12, 1995. The Bank started commercial banking operations from April 17, 1995 with the inauguration of the Banks Motijheel Branch at 119-120, Motijheel Commercial Area. A huge public response has enabled the Bank to keep up the plan of expanding its network. Within a span of fifteen years the bank has been able to deliver services to its customers through seventy one branches. In terms of profitability the bank has outperformed its peer banks. . Prime Bank Ltd remained market leader in terms of deposits and loans among the conventional commercial banks.

The bank has consistently turned over good returns on Assets and Capital. During the year 2008, the bank has posted an operating profit of tk. 3847 million. Its authorized capital is 10000 million and paid up capital is 2844 million. Deposits of the Bank increased by a growth rate of 24.83% during the year. Loan and advances, which are well diversified, have grown by 30.29% and foreign trade business grew by 33% during the year. The banks current capital adequacy ratio of 10.88% is in the market. In spite of complex business environment and default culture, quantum of non performing loan ratio is 1.76% which much below the industry average

Prime Bank Ltd. offers all kinds of Commercial, Corporate and Personal Banking services covering all segments of society within the framework of Banking Company Act and rules and regulations laid down by our central bank. Diversification of products and services include Corporate Banking, Retail Banking and Consumer Banking right from industry to agriculture, and real state to software.

Prime Bank Ltd., since its beginning has attached more importance in technology integration. In order to retain competitive edge, investment in technology is always a top agenda and under constant focus. Keeping the network within a reasonable limit, its strategy is to serve the customers through capacity building across multi delivery channels. The Bank is better placed and poised to take customers through fast changing times and enable them compete more effectively in the market they operate.Mission and vision of Prime Bank LimitedThe efforts of Prime bank Limited are focused on delivery of quality service in all areas of banking activities with the aim to add to increased value to shareholders investment and offer highest possible benefits to the customers.

Mission:

Continuous improvement in the business policies and procedures.

Cost reduction through integration of technology at all level.

Vision:

To be the best Private Commercial Bank in Bangladesh in terms of

efficiency

capital adequacy

asset quality

sound management, and

Profitability having strong liquidity

Field of operation

PBL, being one of the best financial intermediaries in the country, blended its operations in conventional banking, Islamic banking and investment banking. The blending has been done with the objective of diversifying the operations for catering to the needs of the customers of the different strata of the society from one viewpoint and for having sustainable growth in profitability and business with the least possible risk. The banks operations were diversified into the following areas of activities as a dynamic financial intermediary.

Conventional Banking Operation

Islamic Banking Operation

Lease Finance Operation

Merchant Banking

Retail Banking

In order to carry out the above operations PBL has set up the following divisions, departments and units in its Head Office:

a. Corporate/Relationship Operation Department

b. Credit Risk Management Department

c. Credit Administration department

d. Credit Monitoring and Recovery Department

e. Export Finance Division

f. Small & Medium Enterprise (SME) Credit Cell

g. Credit Operation & Management Unit

h. International Division

i. Card Division

j. Retail Credit Division

k. Merchant Banking & Investment Division

l. Islamic Banking

m. Treasury Division

n. Leasing Unit

o. Card Division

p. Retail Credit Division

q. Islamic Banking Division

r. Merchant Banking & Investment Division

Managerial Hierarchy

Financial Highlights of last five years

(In Million tk.)

Particulars20042005200620072008

Authorized Capital10001000100010004000

Paid-up Capital50060070010001400

Deposits13259.8716481.6020483.2328069.2436022.46

Loans and advances9074.9412686.8516492.2223219.6731916.11

Net Profit before tax after provision705.09696.84769.911064.241200.83

Current ratio1.0610.880.970.88

Debt equity ratio7%7%7%7%6.45%

Import3674740303526397061740303

Export1950228882418015131628882

Remittance21403688150501590522669

Nonperforming loans (NPLs)352.73308.21367.157771322.6

% of NPLs to total loans and advances1.52%0.96%0.82%1.35%1.76%

Earnings per share (Taka)96.659.7337.5543.7140.59

Capital Adequacy Ratio17.50%12.43%11.90%11.50%10.88%

No of Branches3641506170

No of employees8941024117214001550

From the table we can see that Prime banks net profit has increased from 705.09 million taka to 1200.83 million taka from 2004 to 2008. In 2004 there were only thirty six branches of Prime Bank, by 2008 number of branches increased to seventy.

TYPES OF CREDIT FACILITIES OF PBL

CREDIT CATEGORIES BY TENURE

Loans and advances may primarily be divided into two groups:

a)Fixed term loan: These are the advances made by the Bank with fixed repayment schedules. The term of loan are defined as follows:

Short Term:Up to 12 months

Medium Term:More than 12 and up to 36 months

Long Term:More than 36 months

b)Continuing Credits: Theses are the advances having no fixed repayment schedule, but have an expiry date at which it is renewable on satisfactory performance.

Depending on the various nature of financing, all the lending activities have been brought under the following major heads:

LOAN (GENERAL)

Short, medium & long term loans allowed to individual/firm/industries for a specific purpose and for a definite period and generally repayable by installments fall under this head. This type of lending is mainly allowed to accommodate financing under the categories of Large & Medium Scale Industry and Small & Cottage Industry. Very often term financing for Agriculture & Others are also included here.

OVERDRAFTS, DEMAND LOANS AND CASH CREDITS

Overdrafts and demand loans are granted mostly to private individuals & firms. So far as the operation of accounts is concerned, there is little difference between a Cash Credit and Overdraft as in both these cases banks place at the disposal of the borrowers a certain limit for certain period and interest is charged quarterly on the outstanding daily balance. The borrower enjoys the convenience of drawing as and when necessary and repaying the amounts thus overdrawn as and when he is in funds.

In the case of a demand loan, however, the drawing is only made at the time advance is sanctioned/disbursed and thereafter no further drawings are allowed, but debits are raised only in respect of interest and other charges till the entire loan is liquidated by partial or on lump sum repayment. On demand Loans interest is charged on daily balance periodically- usually on quarterly basis.

CASH CREDIT (HYPO)

Credits allowed to individuals/firms for trading as well as wholesale purpose or to industries to meet the working capital requirements against hypothecation of goods as primary security fall under this type of lending. It is a continuing credit. It is allowed under the categories of Commercial Lending when the borrower is other than an industry and Working Capital when the client is an industry.

CASH CREDIT (PLEDGE)

Financial accommodations provided to individuals/firms for trading as well as wholesaling or to industries for working capital against pledge of goods as primary security fall under this head of advance. It is also a continuous credit and is allowed under the categories of Commercial Lending and Working Capital.

SOD (Financial Obligation)

Advances allowed to individuals/firms against financial obligations (i.e., Lien on FDR/PSP/BSP/ Insurance Policy/Share etc.). This may be or may not be a Continuous Credit.

SOD (GENERAL)

Advances allowed to individuals/firms against stocks and business reputation of the firm. This may/may not be a Continuous Credit.

SOD (OTHERS)

Advances allowed against assignment of Work Order for execution of contractual works fall under this head. This advance is generally allowed for a definite period and specific purpose. It is not a continuous creditLEASE FINANCING

Lease financing is one of the most convenient sources of acquiring capital machinery and equipment whereby a client is given the opportunity to have an exclusive right to use an asset usually for an agreed upon period of time against payment of rent. It is a term financing repayable in installments.

HIRE PURCHASE

Hire purchase is a type of installment credit under which the hire purchaser agrees to take the goods on hire at a stated rental, which

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