1.1 Background of the study:
Credit Risk Grading is an important tool for credit risk management as it helps a Bank to understand various dimensions of risk involved in different credit transactions. Credit Risk Grading Manual of Bangladesh Bank was circulated by Bangladesh Bank vide BRPD Circular No. 18 dated December 11, 2005 on Implementation of Credit Risk Grading Manual which is primarily in use for assessing the credit risk grading before a bank lend to its borrowing clients.
Since the nature of business as well as leverage level of Banks is different from that of other borrowing clients, the need for a separate Credit Risk Grading Manual has been felt. Keeping this in mind and with a view to properly risk rate a Bank in order to set up counter party limits for providing credit products extended by one bank to another Bank this Credit Risk Grading Manual for the Bank has been produced.
The Credit Risk Grading Manual developed for a Bank shall be an effective tool to help a Bank to take a sound decision in analyzing credit risk on another bank and to set up a credit limit for money market and other business operations.
According to Bangladesh Bank “Credit Risk Grading Manual” I have decided to prepare a report on “Evaluation of Credit Assessment & Risk grading management on Dutch Bangla Bank Ltd”.
1.2 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. Even at present, this problem is haunting many banks and poses a major threat towards their sound performing. So it’s very important to have an 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. With that issue in mind, the topic “Credit Risk Management” has been undertaken as my topic for project report.
1.3 Statement of the Problems:
To make the consequence more specific we have focused different sectors. Those are: • What are the most important assessment criteria
• How grading are done based on assessment
• To analyze the Credit flow of DBBL
• To evaluate the overall credit management system of DBBL • Functions and use of Credit Risk Grading in DBBL
1.4 Scope and Delimitation of the Study:
Through this survey following people will be benefited
• Financial institutions
1.5 Objectives of the Study:
The report is prepared on the “Evaluation of Credit Assessment & Risk grading management” of Dutch-Bangla Bank with the thought of getting in depth of the credit Assessment criteria and understands its importance.
The broad objective is to know about the credit assessment and risk grading process.
• To have better orientation on credit management activities specially credit policy and practices, credit appraisal, credit-processing steps, credit management of Dutch Bangla Bank Limited (DBBL). • To familiarize with the credit management in the Banking arena and to grasp an idea about bank involvement in credit management system • Evaluation of credit risk.
• Lending Procedure of Dutch Bangla Bank Ltd
1.6 Methodology of the Study:
• The following methodology will be followed for the study based on observation and interpretation. Data sources are scheduled survey,...