Title: Credit Risk Management

Statement of the problem: Credit risk analysis is one of the basic to risk management
and control, as it is the risk factor inherent in many bank businesses as the quality of
credit is critical to sound banking Loans comprise the most important asset as well as
the primary source of earning for the banking financial institutions. On the other hand,
this (loan) is also the major source of risk for the bank management. A prudent bank
management should always try to make an appropriate balance between its return and
risk involved with the loan portfolio. An unregulated banking financial institution might
be fraught with unmanageable risks for the purpose of maximizing its potential return.
In such a situation, the banking financial institutions might find itself in serious
financial distress instead of improving its financial health. Consequently, not only the
depositors but also the general shareholders will be deprived of their money from the
bank. The deterioration of loan quality will also affect the intermediation efficiency of
the financial institutions and thus the economic growth process of the country. This
establishes the fact that banks should provide increasing emphasis on various analytical
tools and techniques for screening proposals and loan decision taking. Credit Risk
Management is one of the new management and operational tools for improving the
operational efficiency of nationalized and private sector commercial banks, initiated by
Financial Sector Reform Program (FSRP) in 1993. It focus on international changes to
the lending process to improve the loan portfolio of banks. FSRP team has designed a
new system to assess credit risk called Lending Risk Analysis (LRA) Manual.
Bangladesh Bank has made it mandatory for commercial banks to exercise it for large
scales loan. Proper credit analysis helped to minimize loan losses by identifying
risk/weakness in either prospective or existing loan relationship

Objective

Broad Objective: The broad objective is to focus on the present scenario in the credit risk
management process of BASIC Bank Limited.

Specific Objective: The specific objectives of the study are as follows:

To identify the tools of credit risk management of BASIC Bank Ltd.

To determine the credit mechanism of BASIC Bank Ltd.

To findout the problem regarding credit mechanism of BASIC Bank Ltd.

Rationale of the Study: Bangladesh is one of the underdeveloped countries in the world.
The economy of the country has a lot left to be desired and there are lots of scopes for
massive improvement. In an economy like this, banking sector can play a vital role to
improve the overall social-economic condition of the country. The banks by playing the
role of an intermediary can mobilize the excess fund of surplus sectors to provide
necessary finance, to those sectors, which are needed to promote for the sound
development of the economy. As the banks provide finance or lending to its counter parts,
there arises a risk of credit risk which is the possibility that a borrower or counter party
will fail to meet its obligations in accordance with agreed terms. So its very important to
have a effective and sound credit risk management system in place which will help the
bank mitigate its risk factors and carry out successful financing service or lending.

Scope of the report:

My study will be covered Loans and Advanced Department. The scope of the report was
to find the financial aspect of the operation of the bank specially focused on the
feasibility study and practical market issues about new ventures and operational
procedures of credit management in Financial Institutions. The target is to give e
comprehensive understand about the credit risk management setup in banks and how they
are dealt with by various means at the present and also how to improve them.

Methodology:

Selection of the study area: My study area is the Loans and Advanced Department of
the BASIC Bank Ltd.
Sample information: Focused group discussion.
Sampling Techniques: Focused group discussion with officer, employee and
institutional clients of BASIC Bank Ltd.
Source of information:

Primary Sources are:

1.

Discussion with officials of commercials and industrial credit department of

BASIC Bank, Gulshan Branch

2. Face to face conversation with the Institutional clients.

Secondary Sources are:

Annual Reports of BASIC Bank

Other published documents of Bangladesh Bank.

Website of BASIC Bank Ltd.

Implementation: BASIC Bank Limited is the organization on which the study will be
conducted and this specific title of the study (Credit Risk Management) Md. Saiful Islam
a student of City University with major in Marketing will be the principal researcher of
the study in the whole work the researcher himself will collect in tabulated data for
prepared the final Report. Dr. Mihir Kumar Roy Professor School of Business City
University will provide all Academic guideline in complete the study.
Budget Plan: the study will be completed within this Budget.
Data collection
Printing Report (4 copies)
Binding Cost
Internet Browsing
Total

350
1200
100
100
Tk.1750

Time Schedule
The research will be conduct systematically and step by step. The work schedule to
complete the research project is stated in the Gantt chart in below. Some of the primary
steps are already done and the major steps are to be conducted.

Steps
Week 1-2
Topic evaluation &
Determining objectives
Submission of Proposal &
Approval of proposal

Week 2-4

Week 4-6

Week 6-8

Week 8-10

Week 10-12

conversation with officers

Data collection
Data process& analysis
Draft report preparation &
Report Presentation

Limitations
Though I have given utmost effort to prepare this paper but there are some limitations of
the study. They are as follows1. This paper has focused on the most sensitive part of the organization i.e. loan and
advance. So the bank authority hesitated to disclose important information to maintain
business secrecy.
2. Only 3 months time is not enough to complete such a study in a lucid manner.
3. The whole report was prepared on the Gulshan Branch of BASIC Bank and so it
doesnt focus the true picture of the Credit Risk Management scenario of the whole
banking sector in the country.
4. Credit Risk Management is a new concept that is still not implemented in the bank
properly and thats why to get a full in depth knowledge about the issue was restricted to
some extent