400 Questions
What percentage of capital should the CLR's for NPLs be approved by the MD/CEO?
25%
What is the purpose of introducing an incentive program for RU?
To encourage RU to bring down the NPLs
What is the last resort to recover credit from a defaulted borrower?
Taking legal action
What is the role of RM in the credit operations process?
To discuss with clients and receive requests for credit
What is the purpose of Credit Risk Grading (CRG)?
To evaluate the creditworthiness of the borrower
What is the role of CAD in the credit operations process?
To collect CIB reports and issue offer letters
What happens to substandard (SS) or worse accounts?
They are transferred to RU
What is the purpose of the Early Alert Process?
To identify potential NPLs
What is the primary goal of analyzing the aggregate demand of a proposed product or service?
To forecast future demand of the product
What is the purpose of analyzing the company's external or macro-environment?
To assess the competitive forces in the industry
What is the primary objective of industry analysis?
To identify the main sources of competitive forces
What is the key analytical tool used in industry analysis?
Porter's five forces model of competition
What is one of the factors considered in analyzing the market?
Consumer behavior and intentions
What is one of the components of the company's internal or micro-environment?
Resource strengths and weaknesses
What is the purpose of estimating the project's market share?
To determine the project's competitiveness in the market
What is one of the aspects of marketing analysis?
Analyzing the structure of the competition
What was introduced in 2011 to minimize environmental risk?
Guideline for environment risk management
What is the purpose of the environmental due diligence checklist?
To measure environmental risk
What should banks do with high rated projects according to the ERM guideline?
Place them to the Board for approval
Why do banks need to establish a database of NPLs due to environmental reasons?
To report annually
What is the frequency of reporting required by the ERM guideline?
Annually
What aspect of a project is very important for assessing its feasibility?
Marketing
What is the purpose of evaluating technical feasibility of a project?
To identify potential technical issues
Why is socio-economic aspect considered while assessing the viability of a project?
To determine the project's impact on the community
What is the primary output of the project?
Solar Panel
What is the main competitive strength of Bangladesh in producing solar power?
Abundant sunlight
What is one of the government policies supporting the project?
Installation of solar system to avail new electric line
What is the project pioneering in?
Supplying solar panels commercially
What is one of the opportunities for the project?
Huge area of the country is still uncovered from electric supply
What is one of the benefits of the project?
Providing eco-friendly and hazard free power at a competitive price
What is essential for the project's success?
Marketing strategy and awareness of the people
What type of project is M/s.Beneco Solar Energy Ltd.?
Non-traditional project
What is the total cost of goods manufactured in 2019?
1112,000
What is the closing stock of finished goods in 2018?
40,000
What is the raw materials used in 2017?
598,000
What is the cost of goods sold in 2017?
965,000
What is the opening stock of work-in-process in 2018?
12,000
What is the manufacturing cost in 2019?
496,000
What is the cost of goods available for sales in 2018?
1032,000
What is the closing stock of raw materials in 2019?
10,000
What percentage of the total assets of all commercial banks of Bangladesh is comprised of loans and advances?
65 percent
What is the significant revenue generating source of banks?
Credit
What is the primary objective of managing credit portfolio?
To achieve a balance between risk and return
What is the primary goal of disbursing quality credit to all types of business and segments of the population?
To promote economic development
What is the single most potentially devastating risk that arises from the loan portfolio of banks?
Risk of non-payment by borrowers
What is essential for maintaining a good credit portfolio?
A well-defined credit policy
Why is it important for banks to have a well-defined credit policy?
To minimize risk and ensure a good credit portfolio
What is the primary objective of banks in their lending activities?
To promote economic development
What is the total demand for oil consumption in the country?
18 lac MT
What is the production capacity of M/s. Emerald Oil Industries Ltd.?
15,000 MT/year
What are the advantages of rice bran oil over its substitute products?
Nutritionally superior, more micronutrients
Who are the target customers for the project?
Rural and urban residential and commercial users, food processing industrial sector
What is the brand name under which the project's products are manufactured and supplied?
Spondon
What is the purpose of Cash Flow from Operations?
To measure the cash inflows and outflows related to a company's core operations
What is the project's plan for its products in the near future?
To export its products abroad
What is an example of Cash Inflows in Cash Flow from Operations?
From sale of goods and services
What is the current use of rice bran?
It has little or no use
What does the project help the nation achieve?
Self-dependence in edible oil production
What is Cash Flow from Investing?
The cash inflows and outflows related to acquiring and disposing of long-term assets and investments
What is an example of Cash Outflows in Cash Flow from Investing?
To purchase fixed assets
What is the purpose of Cash Flow from Financing?
To obtain cash from issuing debt and borrowing, repaying the amounts borrowed, and providing returns to shareholders
What are the three main categories of cash flows?
Operating, Investing, and Financing
What is an example of Cash Outflows in Cash Flow from Operations?
To pay suppliers for inventory
What is the purpose of analyzing Cash Flow statements?
To assess the company's ability to generate cash and pay its debts
What does a higher value of Days Inventory Outstanding (DIO) indicate?
The business is not taking advantage of the credit period provided by creditors.
What does a lower Sales to Total Assets ratio indicate?
The business is not using its assets efficiently to generate sales.
What is the Rule of Thumb for the Current Ratio?
Higher is better.
What does a Quick Ratio of 1:1 indicate?
The company is liquid and can pay its debts.
What is the purpose of the Current Ratio?
To measure a company's liquidity.
What does a higher value of Inventory in Days indicate?
The inventory is taking a long time to sell.
What is the purpose of the Quick Ratio?
To measure a company's liquidity.
What does a higher value of Sales to Total Assets indicate?
The business is using its assets efficiently.
What is the total cost of goods available for sales in 2019?
1112,000
What is the closing stock of finished goods in 2019?
40,000
What is the raw materials used in 2019?
575,000
What is the cost of production/ manufacturing cost in 2018?
1032,000
What is the opening stock of raw materials in 2019?
11,000
What is the cost of goods sold in 2019?
1072,000
What is the closing stock of work-in-process in 2019?
10,000
What is the manufacturing cost in 2017?
954,000
What is a major challenge for a bank in disbursing quality loans?
Selecting good and right borrowers
What has changed the banking business environment significantly?
Mobile banking and online banking platforms
Why is it important for banks to have a strong credit culture?
To minimize the risk of loan defaults
What is a key aspect of managing a quality loan portfolio?
Dealing with all stages of the credit cycle professionally
What is a recent trend in the banking industry?
Expansion of financial services to women entrepreneurs
What is a major factor contributing to the increasing competition in the banking industry?
Entrance of new banks in the credit market
What is a key objective of banks in managing their credit portfolio?
To minimize the risk of loan defaults
What is a result of the expansion of financial services in recent times?
Rapid expansion of financial services
What dimension of financial health is primarily important to a short-term creditor, such as a bank?
Liquidity
What do financial statements provide information about?
The company's past performance and future financial position
What is the purpose of financial statement analysis?
To obtain useful information about a company's financial health
What is the primary concern of a long-term creditor, such as a bondholder?
Profitability and solvency
What is the primary interest of stockholders when assessing a company's financial health?
Profitability and solvency
What do financial statements reveal about a company's past performance?
The company's management decisions and their consequences
What is the primary objective of financial statement analysis?
To obtain useful information about a company's financial health
What is the primary focus of financial statement analysis?
Analyzing a company's past performance and current financial position
What is the purpose of credit planning at the regional or branch level?
To adhere to head office policy guidelines and analyze the regional economy
What is divided into different sub-sectors in credit planning?
Major sectors of the economy
What is an example of a major sector in credit planning?
Agriculture
What is the purpose of determining the command area of a region or branch?
To understand the regional economy
What is Table 2.1 in the study material?
An indicative planning sheet for credit planning
What is the purpose of finding out the major sectors of the economy in credit planning?
To understand the regional economy and divide it into sub-sectors
What is an example of a sub-sector in credit planning?
Cultivators
What is the role of the regional/zonal office in credit planning?
To prepare supplementary policy guidelines
What do growth ratios, such as sales growth and assets growth, measure?
A company's survival
What is the formula for calculating sales growth?
[CY.S - PY.S) / PY.S] × 100
What does a higher value of net sales growth indicate?
The company is performing better than previous years or industry average
What is the rule of thumb for total liabilities growth?
Lower is better
What does profitability ratio indicate?
The efficiency of a unit in generating surplus
What is compared in profitability ratio?
Profit to sales and total assets
What is the purpose of growth ratios?
To evaluate if a company will survive
What does a higher value of net worth growth indicate?
The company is performing better than previous years or industry average
What is the estimated total cost of the project according to the entrepreneur?
Tk.9 crore
What is the annual production capacity of the company?
1,00,000 ton thread
What is the price per ton of thread?
Tk.300
What is the annual operating cost excluding depreciation?
Tk.5,00,000
What is the interest paid on the previous loan taken from a local bank?
Tk.50,000
What will be the value of the equipment that can be sold at the termination of the project?
Tk.1 crore
What is the recovery of working capital possible at the termination of the project?
Tk.1 crore
What is the tax rate on the company's income?
40%
What is the primary interest of a short-term creditor, such as a bank, when evaluating a borrower's financial health?
Liquidity of the borrower
What do financial statements provide information about?
The company's past performance and current financial position
What is the purpose of financial statement analysis?
To evaluate the company's financial health and identify trends
What do long-term creditors, such as bondholders, look at when evaluating a company's financial health?
Profitability and solvency
What is the purpose of analyzing financial statements?
To evaluate the company's financial health and identify trends
What is the primary purpose of financial ratios in financial analysis?
To identify financial strengths and weaknesses of a firm
What do growth ratios, such as sales growth and assets growth, measure in financial analysis?
A company's potentiality and performance
What is the benefit of using ratio analysis in financial analysis?
It helps to identify areas of financial strength and weakness
What is the relationship between two financial statement items expressed in a ratio?
A mathematical relationship between two figures
Why is it important to evaluate a company's financial performance using ratio analysis?
To identify areas of financial strength and weakness
What is the primary objective of a loan proposal?
To provide a comprehensive understanding of the business and its creditworthiness
What should a loan proposal effectively address?
All credit risks and provide a comprehensive understanding of the business
What questions should one constantly ask himself while writing a loan proposal?
What, Why, and How
What is the purpose of a loan proposal?
To act as a proxy for a credit submission within the financial institution
What should a loan proposal contain?
A comprehensive overview of the business, including purpose, background, and financial analysis
What is a key benefit of QVC's 1st mover advantage in manufacturing the product?
Establishment of a supply chain, leading to import substitution
What is a critical success factor for QVC in maintaining strong liaison with customers and suppliers?
Personal commitment of the sponsor
What is the primary advantage of QVC's manufacturing process?
Environmentally friendly manufacturing process
What is a major opportunity for QVC in the near future?
Horizontal and vertical expansion of the project
What is the current trend in the demand for QVC's products?
Increasing demand
What is the main purpose of financial appraisal?
To assess the financial soundness of a project
What does SWOT analysis represent?
Strengths, Weaknesses, Opportunities, and Threats
What is the purpose of industry analysis?
To analyze the company's external environment
What is the primary purpose of financial statement analysis?
To provide information about a company's financial health
What is the primary objective of managing credit portfolio?
To minimize risk and maximize returns
What has led to increased competition in the banking industry?
Entry of new banks in the credit market
What is a major challenge for a bank in disbursing quality loans?
Selecting the right borrowers
What has changed the banking business environment and given it a new shape?
Mobile banking and online banking platforms
What is the primary goal of disbursing quality credit to all types of business and segments of the population?
Financial inclusion
What has expanded rapidly in recent times in the banking industry?
Financial services
What is a key aspect of managing a quality loan portfolio?
All of the above
What has remodeled the banking business operation, particularly credit operation?
Sharecropper financing, school banking, and green banking
What is the primary concern of banks when introducing new financial products?
Revenue generation
What is the focus of banks in addition to financial inclusion?
SME banking services
What is a major sector in the banking industry that has seen significant changes?
Credit operations
What is considered by the bank before finalizing the loan structure?
Socio-economic aspect of the project
What is determined after the bank considers the socio-economic aspect of the project?
Loan structure, price, tenure, and nature
At what point are the loan structure, price, tenure, and nature finalized?
When both parties agree
What is analyzed based on historical and projected data?
Financial analysis
What happens if the bank is satisfied with all aspects of the applicant?
Documentation and disbursement begin
What is the primary purpose of Internal Credit Risk Rating System (ICRRs)?
To provide a framework for measuring and assessing borrowers' credit risk
What is the primary focus of credit risk assessment and decision making in banks?
Assessing the creditworthiness of borrowers based on their financial condition
What is one of the core functions of Internal Credit Risk Rating System?
To assess the quality of individual borrower
What is the role of RM in the credit operations process?
To recommend loan applications for approval
In case of loan syndication, what do participatory banks do besides the lead bank?
They perform their own independent assessment and review
What should be used when the borrower is in multiple lines of business?
The sector that generates the highest revenue
Who has the authority to sanction/approve loans?
All of the above
What is the key reference for credit risk assessment and decision making in banks?
Internal Credit Risk Rating (ICRR)
What happens if the right sector or industry is not selected in Internal Credit Risk Rating System?
The rating will not reflect the unique characteristics of the particular sector or industry
What is the purpose of Internal Credit Risk Rating System?
To assess the quality of individual borrower
What should the bank do as a last resort to recover the credit from a defaulted borrower?
Take legal action
What is the purpose of the Credit Risk Grading (CRG) in the credit appraisal process?
To evaluate the creditworthiness of the borrower
What should be done with substandard (SS) or worse accounts?
Transfer them to the Recovery Unit (RU)
What is the purpose of the Early Alert Process in credit operations?
To identify potential defaults
What should be done with the approved loan proposal?
Send it to the Credit Administration for disbursement
What is the primary goal of a bank in the credit selection process?
To select good borrowers for loan repayment
What is the purpose of credit investigation in credit risk management?
To prevent bad credit by selecting good borrowers
What is the consequence of sanctioning a bad credit according to the text?
It will not serve the purpose of the bank
What is the relationship between preventive measures and curative measures in credit risk management?
Preventive measures are less expensive than curative measures
What is the outcome of a successful discussion between the banker and the customer?
The customer is asked to apply for credit in a prescribed format
Who is responsible for classifying accounts and maintaining required provisions according to the credit policy?
RM
What is the primary responsibility of the Recovery Unit (RU) in a bank?
To determine recovery strategy for NPLs
Who approves the Classified Loan Review Report (CLR) for NPLs up to a certain percentage of the bank's capital?
Head of Credit
What happens to substandard (SS) or worse accounts?
They are assigned to an Account Manager within the RU
What is the primary objective of the Recovery Unit (RU) in managing NPLs?
To maximize recovery and ensure adequate provisioning
What is the primary role of the Credit Committee/CRM in a bank?
To sanction and disburse the budgeted amount prudently
What is the purpose of the procedural guidelines in a bank's credit operations?
To indicate the list and sequence of several activities associated with credit operations
Who acts as a primary bank contact with a borrower in a bank?
Relationship Management (RM)
What is the outcome of the credit operations in a bank?
Adjustment and/or recovery of loan
What is the basis of the procedural guidelines in a bank's credit operations?
All of the above
What is the primary purpose of the environmental due diligence checklist?
To measure the environmental risk of a project
What is the requirement of banks according to the ERM guideline?
To maintain a database of NPLs due to environmental reasons
What is the role of the Board in the ERM guideline?
To approve high rated projects
What is the trend of rated projects over the years?
Increasing
Why is environmental risk rating important from a credit management point of view?
It helps in minimizing environmental risk
What is the purpose of the Guideline for Environment Risk Management introduced in 2011?
To minimize environmental risk
What is the frequency of reporting environmental risks according to the ERM guideline?
Annually
What is the primary responsibility of banks in the ERM guideline?
To measure environmental risk
What is the requirement of banks regarding high rated projects according to the ERM guideline?
To place them to the Board for approval
What is the importance of environmental risk management in green banking policy?
To minimize environmental risk
What is the primary reason behind the borrower's failure to repay the loan installments?
Lack of sufficient cash generation
What action has the Bangladesh Bank (BB) directed the bank to take against the officers involved in re-scheduling the loan?
Take immediate disciplinary action
What is the current status of the sweater unit of the project?
Not operational
What amount of BMRE loan was disbursed on 09.02.2004 for proper balancing the project?
Tk. 45.118 million
What is the scheduled repayment period of the loan amount of Tk. 41.795 million?
11 years
What is the primary purpose of credit investigation in the credit operations process?
To ensure loan repayment by selecting good borrowers
What is the consequence of sanctioning a bad credit according to the text?
It is even better not to sanction any credit
What is the primary focus of the relationship manager (RM) in the credit operations process?
To ensure that the proposed credit is from the expected business segment
Why is credit investigation considered a preventive measure in the credit operations process?
It is a cost-effective measure to prevent bad loans
What is the primary objective of selecting good borrowers in the credit operations process?
To ensure loan repayment
What is the term used to describe the borrower when assessing credit on a consolidated or group basis?
Obligor
Who is responsible for classifying the accounts and maintaining required provisions as per credit policy?
Relationship Manager
What is the purpose of the Internal Credit Risk Rating System (ICRRs) in credit risk management?
To analyze a borrower's creditworthiness based on various factors
Who performs independent assessment, analysis, and review of terms of the syndicate loan in loan syndication?
Both the lead bank and participatory banks
What is the primary responsibility of the Recovery Unit (RU)?
To determine recovery strategy and pursue all options to maximize recovery
What is the key reference for credit risk assessment and decision making in the Internal Credit Risk Rating System?
Internal Credit Risk Rating (ICRR)
Who approves the Classified Loan Review Report (CLR) for NPLs up to a certain percentage of the bank's capital?
Head of Credit
What is the dynamic process that the management of Non-Performing Loan (NPL) must be?
Dynamic
What is the primary benefit of using the Internal Credit Risk Rating System in credit risk management?
To provide a granular, objective, transparent, consistent framework for credit risk assessment
Who serves as the primary customer contact after the account is downgraded to substandard or worse?
Account Manager within the RU
What is the primary purpose of Internal Credit Risk Rating System in banks?
To assess the quality of individual borrower to help the banks to determine the quality of the credit portfolio
What is the authority to sanction/approve loans delegated to by the Managing Director (MD)/Chief Executive Officer (CEO) and Board of Directors (BOD)?
Senior credit executives
What should be used in ICRRS if the borrower is in multiple lines of business and no particular line of business can be singled out?
Other industry- if manufacturing or other service- if service
What is the primary responsibility of the Recovery Unit (RU) in a bank?
To monitor and recover NPLs
What is the primary purpose of credit approval in banks?
To assess the creditworthiness of the borrower
What is the last resort to recover credit from a defaulted borrower?
Taking legal action against the borrower
What is the primary objective of credit recovery in banks?
To recover the defaulted loans
What happens to substandard (SS) or worse accounts?
They are sent to the Recovery Unit (RU)
What is the purpose of introducing incentive programs in credit recovery?
To encourage the Recovery Unit to recover NPLs
Who approves CLR’s for NPLs above 25% of capital?
The MD/CEO
What was the primary reason for the bank's failure to recover the credit from Mr. Monir?
Mr. Monir's false information at the time of loan application
What was the outcome of the bank's efforts to reach Rahela at her mobile number and resident address?
The bank was unable to reach Rahela at her mobile number and resident address
What was the reason for Mr. Monir's inability to make payments towards the loan?
He had passed away, and Rahela was not willing to take responsibility
What was the response of Rahela when the bank sent a legal notice to her permanent address?
She denied any involvement in the loan and refused to pay
What was the mistake made by Mr. Monir during the loan application process?
He provided false information about his identity and address
What was the outcome of the bank's investigation regarding Mr. Monir's identity?
His identity was found to be fake, and his real name was Mr. Mazharul Islam Mahtab
What was the reason for the bank's failure to recover the credit from Mr. Monir?
Mr. Monir's false information at the time of loan application
What was the role of Rahela in the loan application process?
She was the supplementary card holder
What was the outcome of the bank's efforts to recover the credit from Mr. Monir?
The bank was unable to recover any amount of the loan
What was the significance of the voter ID card in the recovery process?
It was used to verify the permanent address of Rahela
What is the primary responsibility of the RM in credit monitoring?
Classifying accounts and maintaining required provisions
Who is responsible for approving the Classified Loan Review Report (CLR) for NPLs up to a certain percentage of the bank's capital?
Head of Credit
What is the primary focus of the Recovery Unit (RU) in managing NPLs?
Pursuing all options to maximize recovery
What is the primary responsibility of the account manager in the Recovery Unit (RU)?
Coordinating and administering the action plan
What is the primary goal of the Recovery Unit (RU) in managing NPLs?
To maximize recovery and ensure adequate provisioning
What is the purpose of transferring substandard (SS) or worse accounts from RM to RU?
To monitor and recover the credit more effectively
What is the primary objective of the incentive program that the bank may introduce for RUs?
To bring down the NPLs and recover credits more efficiently
What is the last step in the credit recovery process?
Taking legal action against the defaulted borrower
What is the primary goal of the bank's credit operations process?
To minimize credit risk and maximize recovery
What is the responsibility of the RU in the credit operations process?
To monitor and recover substandard (SS) or worse accounts
What is the primary objective of a bank in the lending process?
To ensure that the credit is sanctioned to a good borrower
What is the primary benefit of credit investigation in the credit operations process?
It is a preventive measure to ensure loan repayment
What is the consequence of not selecting good borrowers in the credit operations process?
The bank will face difficulties in recovering the loan
Why is it important for a bank to ensure that the credit is sanctioned to a good borrower?
Because it is a preventive measure to ensure loan repayment
What is the primary focus of a bank in the credit operations process?
To ensure that the credit is sanctioned to a good borrower
What was the primary reason for the loan account being rescheduled around thirteen times starting from December, 2001?
The borrower's project was running on a sub-contract basis and generating insufficient cash.
What action did the BB direct the bank to take against the officers involved in rescheduling the loan?
Take disciplinary action against the officers involved in rescheduling the loan.
What was the amount of the loan that was sanctioned in favor of Rahman Knitting and Yarn Processing Ltd. in 1992?
Tk. 41.795 million
What was the purpose of the BMRE loan of Tk. 45.118 million disbursed on 09.02.2004?
To balance the project properly.
What is the current status of the sweater unit of the project?
It is not operational and has been shut down.
What is the primary purpose of Internal Credit Risk Rating System?
To assess the quality of individual borrower
What should be selected if the borrower is in multiple lines of business and no particular line of business can be singled out?
Other industry - if manufacturing or other service - if service
Who has the authority to sanction/approve loans?
Senior credit executives by the Managing Director/CEO and Board of Directors
What is the purpose of Internal Credit Risk Rating System in credit risk management?
To be used for individual credit selection and credit pricing
What is the core function of Internal Credit Risk Rating System?
To calibrate the characteristics of different sectors and industries in one single model
What was the primary reason for the failure to recover the credit from Mr. Monir?
Mr. Monir provided false information during the loan application process
What was the outcome of the bank's investigation regarding Mr. Monir's identity?
Mr. Monir's identity was confirmed as M.I Mahtab
What was the role of Rahela in the loan application process?
She was the supplementary card holder
What was the reason for the bank's failure to reach Rahela?
She had provided a false address and mobile number
What was the outcome of the legal notice sent to Rahela's permanent address?
She denied any involvement in the loan
What was the reason for the bank's inability to recover the credit from Mr. Monir?
Mr. Monir had provided false information during the loan application process
What is the primary challenge faced by banks in recovering credits from fraudulent customers?
Provision of false information by the customer
What is the key lesson learned from the case of Mr. Monir?
The importance of verifying customer information
What is the consequence of a bank's failure to recover credits from customers?
Non-Performing Loans (NPLs) and financial losses
What is the primary objective of a bank's credit recovery process?
To minimize NPLs and financial losses
What is the term used to describe the borrower when assessing credit on a consolidated or group basis?
Obligor
What is the key reference for credit risk assessment and decision making in the Internal Credit Risk Rating System?
Internal Credit Risk Rating (ICRR)
What is the primary purpose of the Internal Credit Risk Rating System?
To provide a granular, objective, transparent, consistent framework for the measurement and assessment of borrowers’ credit risk
Who performs independent assessment, analysis, and review of terms of the syndicate loan in loan syndication?
Participatory banks
What is the purpose of the appraisal in credit operations?
To recommend the application for approval to the appropriate authority
What is the term used to describe the borrower when assessing credit on a consolidated or group basis?
Obligor
What is the primary responsibility of the Recovery Unit (RU) in managing Non-Performing Loans (NPLs)?
To determine recovery strategy and pursue all options to maximize recovery
Who performs independent assessment, analysis, and review of terms of the syndicate loan in loan syndication?
Participatory banks
Who is responsible for coordinating and administering the action plan for NPLs?
The Account Manager within the RU
What is the primary objective of managing credit portfolio?
To minimize credit risk
What should be reviewed regularly in the management of Non-Performing Loans (NPLs)?
The strategy and associated provisions
What is the primary focus of credit risk assessment and decision making in banks?
To analyze the borrower's repayment ability
Who approves the Classified Loan Review Report (CLR) for NPLs up to a certain percentage of the bank's capital?
The Head of Credit
What is the purpose of Internal Credit Risk Rating System (ICRRs) in credit risk management?
To provide a granular, objective, transparent, consistent framework for the measurement and assessment of borrowers' credit risk
What is the purpose of the Classified Loan Review Report (CLR)?
To review all documents and meet the customer
What is the primary goal of a bank's credit operations process?
To ensure good credit only
Why is credit investigation as a preventive measure required in the credit operations process?
To prevent bad credits and ensure good credit quality
What is the consequence of not selecting good borrowers in the credit operations process?
The bank will have a bad credit portfolio
Why is it important for a bank to ensure that the credit is sanctioned to a good borrower?
To reduce the risk of loan default
What is the primary benefit of credit investigation in the credit operations process?
To prevent bad credits and ensure good credit quality
What action did the BB direct the bank to take against the officers involved in rescheduling the loan?
To take immediate disciplinary action
What is the current status of the sweater unit of the project?
It is currently not running
How many times was the loan account rescheduled starting from December, 2001?
Thirteen times
Why is the borrower unable to repay the loan installment?
Due to insufficient cash generation
What was the total amount of loan sanctioned in favor of Rahman Knitting and Yarn Processing Ltd?
Tk. 41.795 million
What is the last resort to recover credit from a defaulted borrower?
Taking legal action
What happens to substandard (SS) or worse accounts?
They are transferred from RM to RU
What percentage of capital should CLR's for NPLs be approved by the MD/CEO?
Above 25% of capital
What is the role of RU in credit operations?
To take legal action against defaulted borrowers
What is the primary objective of the Internal Credit Risk Rating System in credit risk management?
To assess the quality of individual borrower to help the banks to determine the quality of the credit portfolio.
Why may a bank introduce an incentive program?
To encourage RUs to bring down NPLs
What happens if the right sector or industry is not selected in the Internal Credit Risk Rating System?
The rating will not reflect the unique characteristics of the particular sector or industry.
Who has the authority to sanction/approve loans?
The Managing Director (MD)/Chief Executive Officer (CEO) and Board of Directors (BOD)
What should be done if a borrower is in multiple lines of business?
The sector should be used assessing the line of business generating the highest portion of the revenue &/or profit.
What is the primary responsibility of the senior credit executives?
To sanction/approve loans.
What was the reason for stopping payment after Mr. Monir's death?
Payment was stopped fully against credit cards & personal loan
Why was Rahela's mobile number not reachable by the recovery team?
The number was incorrect
What was the outcome of the legal notice sent to Rahela's permanent address?
Rahela communicated with the bank and denied any involvement
Why did Mr. Monir provide false information in the loan application?
To hide his true identity
What was the original name of Mr. Monir?
Mazharul Islam Mahtab
What was the main reason for the failure in recovery efforts?
Mr. Monir's false information
What was Rahela's occupation?
Politician
Why did the bank send a legal notice to Rahela's permanent address?
To recover the debt
What was the result of the investigation by the recovery team?
Mr. Monir's false information was revealed
What was the reason for the failure in the credit recovery process?
Mr. Monir's false information
What is the primary responsibility of the Credit Administration Department (CAD)?
To ensure compliance with terms and conditions of loan approval
What is the next step after the customer agrees to the terms and conditions in the offer letter?
Loan documentation check
What does the Credit Administration Department (CAD) ensure before disbursing the loan amount?
That all terms and conditions of approval have been met
What is the role of the Relation Manager (RM) in the loan process?
To send loan proposals to CAD and RMU
What does the Credit Administration Department (CAD) maintain control over?
All security documentations
What is the primary responsibility of the Credit Administration in the credit operations process?
Collection of CIB report for RM
What happens to substandard (SS) or worse accounts in the credit operations process?
They are transferred to the Recovery Unit
What is the primary role of the Approval Authority in the credit operations process?
Approval of credit by Branch/Credit Committee/CEO/Executive Committee/BoD
What is the purpose of sending a sanctioned advice/offer letter to the client in the credit operations process?
To inform the client of the loan approval
What is the recommended course of action for the Recovery Unit (RU) when dealing with defaulted borrowers?
Taking pre-legal measures to recover the credit
What is the primary objective of a banker in credit administration?
To select good borrowers and ensure repayment of loans
What is the purpose of credit investigation in credit administration?
To identify and prevent bad loans
Why is it important to ensure that proposed credit is from an expected business segment or sector?
To ensure that the credit is for a permissible purpose
What is the consequence of sanctioning a bad credit?
Bad debts and losses for the bank
What is the relationship between preventive and curative measures in credit administration?
Curative measures are always costlier than preventive measures
Who is responsible for identifying early alert accounts and reporting them to CRM?
Relationship Manager (RM)
What is the primary focus of the Recovery Unit (RU) in managing NPLs?
To maximize recovery of NPLs
Who approves the Classified Loan Review Report (CLR) for NPLs exceeding a certain percentage of the bank's capital?
MD/CEO
What is the primary responsibility of the Account Manager in the Recovery Unit (RU)?
To coordinate and administer the action plan
What is the purpose of the Classified Loan Review Report (CLR)?
To review and analyze NPLs
What is the primary source of earning and cash flow of a bank?
Credit
What can be a consequence of credit failure in a bank?
Bank failure
How many chapters are there in the manual on Advance Level Credit for NCC Bank Limited?
12
What is the focus of Chapter 9 in the manual?
Credit Administration
What is the primary concern of a bank in credit operations?
Ensuring credit is sanctioned to a good borrower
What is the main objective of credit planning in a bank?
To minimize credit risk
What is the importance of credit administration in a bank?
To manage credit risk
What is the significance of credit risk rating in a bank?
To determine creditworthiness
What is the primary function of credit administration in a bank?
To manage credit risk
What is the purpose of credit recovery in a bank?
To recover bad loans
What is the primary purpose of the Internal Credit Risk Rating System?
To assess the quality of the credit portfolio
What happens if the right sector or industry is not selected in the Internal Credit Risk Rating System?
The rating will not reflect the unique characteristics of the particular sector or industry
Who has the authority to sanction/approve loans?
Managing Director (MD)/Chief Executive Officer (CEO)
What should be used when assessing the line of business generating the highest portion of the revenue and/or profit?
The sector or industry should be used
What should be used if no particular line of business can be singled out?
The ICRRS should be conducted using 'other industry- if manufacturing' or 'other service-if service'
What is the purpose of preparing a credit budget by the head office?
To indicate the amount of credit to be sanctioned and disbursed in different areas, categories, products, and sectors
What is the role of the Credit Committee/CRM in the head office?
To sanction and disburse the budgeted amount prudently
What is the primary role of Relationship Management (RM) in credit operations?
To act as a primary bank contact with a borrower
What is the typical organizational structure of credit operations in banks?
Either centralized or decentralized
What is the purpose of procedural guidelines in credit operations?
To outline the sequence of activities associated with credit operation
What is the primary responsibility of the Credit Administration Department?
To ensure compliance with the terms of approval and security documentations
What happens after the customer agrees to the terms and conditions in the offer letter?
The RM completes the Loan Documentation Check List and forwards it to CAD
What is the main purpose of the Credit Administration Department's monitoring activities?
To ensure the borrower's compliance with the loan covenants and terms
What is the role of the Relation Manager in the credit operations process?
To complete the Loan Documentation Check List and forward it to CAD
What is the significance of the Loan Documentation Check List in the credit operations process?
It is a checklist used by the RM to ensure all documentation is in place
What is the primary purpose of a banker's credit investigation?
To ensure the selection of good borrowers and prevent bad credit
What is the banker's main concern before sanctioning credit?
Being certain about the repayment of the loan
What is the significance of preventive measures in credit risk management?
They are less expensive than curative measures
What is the primary objective of a bank in the lending process?
To create good credit
What is the role of the Relationship Manager (RM) in the credit operations process?
To scrutinize the loan application and collect required information
Who is responsible for classifying accounts and maintaining required provisions according to the credit policy?
Relation Manager (RM)
What is the primary responsibility of the Recovery Unit (RU) in managing Non-Performing Loans (NPLs)?
Determining recovery strategy and pursuing all options to maximize recovery
What happens to substandard (SS) or worse accounts in the credit operations process?
They are assigned to an account manager within the RU for recovery
Who approves the Classified Loan Review Report (CLR) for NPLs up to a certain percentage of the bank's capital?
Head of Credit
What is the primary responsibility of the Relation Manager (RM) in the early alert process?
Identifying early alert accounts and reporting to CRM
What is the primary objective of the Approval function in the credit operations process?
To analyze the loan proposition and assess the borrower's creditworthiness
What is the role of the Credit Administration Department (CAD) in the credit operations process?
To ensure compliance with lending guidelines and perform custodial duties
What is the purpose of the Early Alert Process in the credit operations process?
To provide early warning signs of potential credit risk and enable proactive measures
What is the role of the Relationship Manager (RM) in the credit operations process?
To discuss and receive credit requests from clients and scrutinize submitted information
What is the primary focus of the Recovery Unit (RU) in managing Non-Performing Loans (NPLs)?
To take legal action against defaulted borrowers as a last resort
What is the primary purpose of Internal Credit Risk Rating System in credit risk management?
To assess the quality of individual borrower to help the banks to determine the quality of the credit portfolio
What should be done if the borrower is in multiple lines of business and no particular line of business can be singled out?
The ICRRS should be conducted using 'other industry- if manufacturing' or 'other service-if service'
Who has the authority to sanction/approve loans?
Senior credit executives
What is the primary objective of Internal Credit Risk Rating System in credit portfolio management?
To facilitate the portfolio management activities
What is the primary purpose of the Internal Credit Risk Rating System in credit selection?
To select good borrowers
What is the primary purpose of a bank's credit committee/CRM?
To review every aspect of a loan proposal before sanctioning
What is the relationship between a bank's credit policy and its credit operations?
The credit policy is reflected in the procedural guidelines for credit operations
What is the role of Relationship Management (RM) in credit operations?
To act as the primary bank contact with borrowers
What is the purpose of a bank's procedural guidelines in credit operations?
To outline the sequence of activities associated with credit operations
How are credit operations structured in a bank?
Either centralized or decentralized
What is the primary objective of credit planning in a bank?
To minimize credit risk exposure and maximize returns
What is the role of Credit Administration in the credit operations process?
To monitor and manage the loan portfolio
What is the primary focus of credit risk assessment and decision making in banks?
To minimize credit risk exposure and maximize returns
What is the primary objective of the Internal Credit Risk Rating System in credit risk management?
To minimize credit risk exposure and maximize returns
What is the primary responsibility of the Relation Manager in the credit operations process?
To assess the creditworthiness of borrowers
What is the primary purpose of the Classified Loan Review Report (CLR)?
To identify and classify non-performing loans
What is the primary objective of the Credit Risk Grading system?
To evaluate the creditworthiness of borrowers
What is the primary focus of the Recovery Unit (RU) in managing NPLs?
To recover non-performing loans
What is the primary objective of credit administration in a bank?
To monitor and manage the loan portfolio
What is the primary purpose of credit risk management in banks?
To minimize credit risk exposure and maximize returns
Learn about the roles and responsibilities of credit operations, including non-performing loans, risk management, and credit recovery strategies. Understand the importance of credit risk management and how it impacts a bank's capital.
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