Credit Risk Management in Uttara Bank

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Chapter – One


1. Preclude

Credit is an arrangement whereby bank acting at the request and on the instructions of a customer or on its own behalf to make a payment to or to the order of a third party or is to accept and pay bills of exchange drawn by the beneficiary. In an economy banks play the role of an intermediary that channels resources from the surplus group to the deficit group. So obviously one of the core functions of Commercial banks is to sanction Credit facility to it’s customers as per requirement. UTTARA BANK LTD. Bank’s Mission is to actively participate in the growth and expansion of our national economy by providing Credit to various customers in most efficient way of delivery and at a competitive price.

Risk is inherent in all aspects of a commercial operation; however for Banks and financial institutions, credit risk is an essential factor that needs to be managed. Credit risk is the possibility that a borrower or counter party may fail to meet its obligations in accordance with agreed terms. Credit risk therefore, arises from the bank’s dealings with or lending to corporate, individuals and other banks or financial institutions.

In general, a banking system aggregates a high number of low value deposits to fund enterprises with a smaller number of high value loans. This intermediation through a well functioning bank helps to achieve some economic benefits for the depositors, the borrowers and above all -- the economy. The Bank must allocate loans effectively for achieving these broad objectives of the Economy. While identifying profitable enterprises, the Bank – in fact -- identifies risks of the borrower and business in order to allow loan in the context of

its risk–return profile. In other words, Banks are in the business of risk taking; as such risk management is viewed as a core function of banking.

As a financial enterprise, the prime objective of UTTARA BANK LTD. Bank is to maximize stakeholders’ value (share holders, depositors, borrowers, employees and the public). The loan portfolio of the Bank is the primary source of earnings. But it may also be Bank’s greatest concern for survival and sustainable growth in an ever-changing environment.

1 The Objectives of the Report

The objectives of the report are as follows:-
1. General objective:
➢ To study the credit management of UBL
2. Specific objectives:
➢ To know the credit procedure of UBL.
➢ To evaluate the factors affecting the credit risks associated with lending. ➢ To know the supervision monitoring and recovery of loan. ➢ To know the various types of loans in UBL.
➢ To know the way of loan sanctioning to various parties. ➢ To assess with the techniques of lending for giving loan to the client’s. ➢ To make some suggestions about credit approval of various types of loan and monitoring process.

1.3 Methodology of the study

I have conducted this research based on exploratory research method .I have given special attention on my personal observation for data collection during my working days in the branch. Also, I interviewed with the UBL officers for getting more information at the time of their leisure.

Sample Design: Convenience method of sampling has been used to prepare this report.

Target population: A population of 25 people includes 12 employees and 13 clients.

Sample Size: A sample of 5 employees and 7 clients selected on the basis of availability of data..

Data Analysis: Analysis of data has been made both on statistical table and graphical presentation. It includes theoretical details about the topic. SWOT analysis is also done in this report.

This study aims to analyze the credit management of commercial Banks in the context of Uttara Bank Limited. While preparing the report, I have taken information from two major Sources:

1. Primary Sources:
The major sources of primary data...
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