Professional Documents
Culture Documents
IN CONTEXT OF
PRIME BANK LIMITED IN BANGLADESH
By
Kashfia Nehereen
ID: 0310001
_________________________________
By
Kashfia Nehereen
ID: 0310001
Dear Sir,
With due respect, I, Kashfia Nehereen, ID: 0310001, would like to inform you that, it is a
great pleasure for me to submit the report on “The Problems and Prospects of Retail Credit in
context of Prime Bank Limited in Bangladesh”, as a requirement for BBA 499 program. While
conducting the report, I have gathered lots of knowledge about retail credit and many unknown
facts, problems and prospects of retail or consumer lending on second generation banks like
Prime Bank, Eastern Bank, Dhaka Bank and National Credit and Commerce Bank.
Therefore, I firmly believe that, this report will be able to meet your approval. I would
genuinely appreciate to make further corrections where it seems necessary by you. Your kind
Sincerely Yours
…………………….
Kashfia Nehereen
ID: 0310001
Acknowledgement
At the very beginning, I would like to express my sincere gratitude to Allah, who has given me
the chance to complete my internship report in a very comfortable manner. My gratitude and
thanks goes to my respected supervisor Mr.Samir Mainuddin, Lecturer, School of Business, who
co-operated me all through the times for completing my internship report. I want to mention my
special gratitude and thank to Dr.S.U. Ahmed, Assistant Professor, School of Business, without
report successfully. I have conducted my report on” The Problems and Prospects of Retail Credit
in context of Prime Bank Limited in Bangladesh” for which, I want to express special thanks to
all the employees of SBC Tower branch of Prime Bank. I am also acknowledging the co-
operation and support that I received from the Retail Credit Head Office of Prime Bank. I want to
mention special thanks to Mr.Shahjahan Bhuiyan, Managing Director of Prime Bank Limited for
allowing me to do my internship in this bank. I also want to mention two names who’s all over
inspiration and guidelines were there during my internship period for completing my report.
Those are
There is no doubt that, because of their help, I, as an inexperienced person was able to
accomplish the report. These persons gave me their valuable time whenever I needed their help.
This report is so a blessing of the individuals who gave the valuable information of their banks
other than Prime Bank. Lastly, I would like to express my special honor to Mr.Nadim Jahangir,
Acknowledgement
Executive Summary
1.0 Introduction 1
1.3 Objectives 2
1.4 Methodology 3
1.5 Limitations 3
3.1 Vision 6
3.2 Mission 7
4.4.11Swapna Neer 25
4.5.1.1 Application 27
4.5.1.3 Guarantee 28
9.0 Recommendation 64
10.0 Conclusion 65
LIST OF TABLES
banks 58
In the new competitive business era, Private banking sector is getting more competitive in
Bangladesh. Besides this, as the number of salaried individuals are increasing day by day, they
are also becoming more aware about the utilization of their money while fulfilling their personal
needs. To consider these needs of people, Prime Bank Limited has recently emphasized more on
“Retail credit” or “Consumer Credit” Therefore, to find out the possibility of establishing the
leading position of Prime Bank in terms of retail credit, this report has been conducted to find out
the problems and prospects of Prime Bank retail credit. In this report, the total credit portfolio of
Prime Bank has been shown that indicated a positive growing trend in the retail credit amount
disbursed. Again, in terms of interest income, retail credit is also accounting an increasing trend.
One of the crucial parts of this report is that, Prime Bank Retail Credit has been compared with
other three similar second generation bank like Eastern Bank, Dhaka Bank and National Credit
and Commerce Bank in some aspects to understand the current position in the market. The retail
credit disbursement procedure is also described. From the comparison with three second
generation banks, some problems and prospects are found in Prime Bank Retail Credit. The most
important prospects of Prime Bank Retail credit are that, it has diversified product portfolio and
lowest rates in different charges of retail credit which is the strength of Prime Bank to proceed
further in retail credit business. Again, Prime Bank has a few problem regarding target client
segments and promotional activities that should be rectified.Overall, there are huge opportunities
for Prime Bank to develop and enter in retail credit market with a massive amount of investment
as this is one of the ways for risk diversification. In recent banking business, modern countries
are focusing more and more on retail credit to shuffle their past ideas about investing in corporate
credit. If Prime Bank desires to keep in balance of its reputation compared to other well-reputed
private commercial banks, it should consider more of its credit business on Retail Credit
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 1
1. Introduction
Banking concept has been evolved since the rapid development of Information Technology.
Nowadays almost all over the world, retail-banking concept is a well-orchestrated name which
has indeed added a new feather to the gamete of banking lexicon. The primary activities of any
bank is to collect deposit and invest in different areas to earn profit.Besided this, the asset value
maximization of the shareholders and maintaining strong clientele are another two important
duties for any bank. To maintain these, Prime Bank Limited (PBL) has reached a vast amount of
Tk. 54, 724 million balances during 2006 with a 52% growth rate over the year 2005(Annual
Report, 2006).This large amount has been invested in different purpose to provide industry loan,
export-import finance, commercial lending, house-building finance and others. From the very
beginning, the credit exposure of PBL has been focused on commercial lending that is
international trade Finance, domestic trade finance, contractor/supply finance etc.But from the
annual report (2006) of PBL, it has been revealed that out of total classified loan of Tk. 651.58
lac in transport sector, Tk.648.44 lac was in the name of Cab Ex. Ltd, a corporate borrower. One
of the prudent conditions of ensuring profit is to minimize risk. Such defaults by one of the
corporate clients and the adverse effect of political situation at the end of 2006 have made the
bank management to rethink about its existing credit portfolio with an emphasis on retail credit.
According to Math (2005), demand and credit cycle in retail credit is less volatile than that of
corporate credit. He also mentioned that, credit risk can be well diversified through retail credit as
loan amounts are relatively small. Because of wide spread interest rate, revenue can be higher
since clients are too fragmented to bargain effectively. The loan portfolio of PBL has been
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 2
increased by Tk. 1303.72 Cr. from Tk 3193.38 Cr. at the end of 2005 to Tk 4497.10 Cr. at the end
of 2006 registering 40.82% growth over the previous years. But the bank management has
recently felt the need to expand its credit facility on retail credit sector which is almost
unattended by bank till now. During the year 2006, only3.65% of total credit portfolio went to
finance retail credit or consumer credit. Day by day, the fixed income earning population is
increasing in number and therefore, the market for retail credit is expanding with large
Again according to Clark et al. (2007), at the bank level, the principle attraction of retail
credit lending seems to be the belief that, its revenues are stable and thus can offset volatility of
non-retail business. As PBL management is emphasizing its focus on retail credit, this study aims
to investigate the feasibility of expanding the retail credit operation in PBL. More specifically,
this study wants to explore the problems and prospects of retail credit in context of Prime Bank
Limited in Bangladesh.
1.3 Objectives
The main objective of this study is to explore the problems and prospects of retail credit in
• the current position of PBL in comparison with three other similar second generation
1.4 Methodology
• Though there is no established definition for second generation banks, it has been
assumed for many years that, the banks that were established and started their banking
activities in the first half of twentieth century are called second generation bank. According
to a yearly publication of Ministry of Finance (2006), there are four second generation
banks named as, Eastern Bank Limited (EBL), National credit and Commerce Bank Limited
(NCCBL), Prime Bank Limited (PBL) and Dhaka Bank Limited (DBL).All of these banks
This study is mainly focused on Prime Bank Limited and to compare different aspects of
retail credit of PBL, three other second generation banks are selected. As PBL is one of the
second generation banks, therefore, other second generation banks will be appropriate for
• For completing the study, both primary and secondary data sources are utilized. For
primary data sources, self-developed questionnaire has been used which is given to the
appendix. For secondary data sources, annual reports of PBL, EBL, DBL and NCCBL for
2004, 2005 and 2006, different credit policies etc. are used. Also, the retail credit
1.5 Limitations
Although it has been tried on the level best to make this report based on facts and complete
information available, there are some limitations that are inevitable. They are following:
• There was a time limitation as three months internship period is not enough to study on
• Because of being private limited companies, PBL, EBL, DBL and NCCBL keep some
information restricted like the amount of classified loan. For this reason, classified loan
Time Activities
July 19- July 31, 2007 Introduction, Literature Review and overview of Prime
Bank
August 5- August 17, 2007 Primary data collection from Eastern Bank, Dhaka Bank
strategic key tools of risk diversification. Retail credit lending is one kind of services that banks
provide to individuals with a cluster of products through branches, internet and other channels
According to Gopinath (2005), retail credit is, however, quite broad in nature - it refers to the
different retail credit products that commercial banks provide to individual customers.
Retail credit is becoming an increasingly complex concept to define. The operation of providing
retail credit is called retail lending or retail credit financing. While” pure” retail credit is generally
conceived to be the provision of mass market lending services to private individuals, it has been
expanded over the years to include in many cases services provided to small- and medium sized
business people. Again, retail or consumer credit refers to the debts (credits) of consumers
involved in procuring consumer goods for the consumption of themselves and their families
(Westerfield, 1998).Stiroh (2004) has described retail lending as “hotter than Vindaloo”,
considering the fact that, “Vindaloo” the Indian-English innovative curry available in the
restaurants of London is very hot and spicy. It seems that, retail lending is perceived to be the in-
thing in today’s world of banking. He has also mentioned that today's retail lending sector is
characterized by three basic characteristics: multiple products (home loan, car loan, vacation loan,
travel loan etc), multiple channels of distribution (call centre, branch, internet and multiple
customer groups (consumer, small and corporate business people for daily needs).
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 6
Prime Bank Limited, a scheduled bank, was incorporated under the Companies Act 1994,
and started its operation on April 17, 1995 with the target of playing the vital role in the socio-
economic development of the country as well as earning profit. It was registered as a banking
company under the Bank Company Act 1991 from the Bangladesh Bank on February 12, 1995.
The bank started making profit from the year of its inception. The first Managing Director, Mr.
Lutfar Rahman Sarkar, Ex-Governor, Bangladesh Bank, provided required leadership for a newly
established bank.
Prime Bank Limited is a second - generation private commercial bank has been working for
stimulating trade and commerce, accelerating the pace of industrialization, boosting up export,
creating employment opportunity, alleviating poverty, raising standard of living of the people etc
and thereby contributing to the sustainable development of the country. At present, the bank has a
network of 54 (fifty four) branches with around 1500 employees stationed in both rural and urban
areas of the country. Since inception, the Bank has been making significant profit every year and
positioning itself as second highest profit-making bank in the country for last five consecutive
years. This has been possible due to significant growth of the bank. This has also been possible
3.1 Vision
adequacy, asset quality, sound management and profitability having strong liquidity.
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 7
3.2 Mission
I. To build Prime bank limited into an efficient, market driven, customer focused
To have sustained growth, broaden and improved range of products and services in all areas
of banking activities with the aim to add increased value to shareholders investment and offer
To become most caring Bank- by providing the most courteous and efficient service in every
area of business.
By assuming the role as a socially responsible corporate entity in a tangible manner through
The bank serves its huge clientele with a variety of services apart from the traditional ones. Its
continual improvement and introduction of new products and services has given it an edge over
the competitors.
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 8
The bank provides the following depository services and collects a huge amount of its
Loans and advances have primarily been divided into two major groups:
These are the loans made by the Bank with fixed repayment schedules. Fixed term loans are
categorized into three based upon its tenure which is defined as follows:
b) Continuing Loans
These are the loans having no fixed repayment schedule but have an expiry date at which it is
Furthermore all categories of loans are accommodated under the 7 prime sectors which are as
under:
1) Agriculture
4) Working Capital
5) Export Credit
6) Commercial Lending
7) Others
Depending on the various nature of financing, all credit facilities have been brought under two
major groups: (a) Funded Credit and (b) Non-funded credit. Under non-funded credit, there is
basically two major products namely letter of Credit and Letter of Guarantee. Under Funded
Credit, The bank offers the following services to the client to meet the demand as well as making
9. Lease Financing
10. Consumer Credit Scheme (CCS)
11. SOD (Financial Obligation)
12. SOD (General)
13. SOD (Work Order)
14. SOD (Export)
15. PAD
16. LIM
17. LTR
18. IBP
19. Export Cash Credit (ECC)
20. Packing Credit (P.C.)
21. FDBP
22. IDBP
23. FBP
24. Prime Bank Master and Visa Credit card
The bank firmly believes that technology based product and services will play significant role in
the performance of the bank as people are getting more conscious about their service they receive
from a bank.For delivering faster service the bank has introduced online banking service. The
bank has introduced other products and services to serve the ever-changing market. These are—
I. SWIFT services
V. ATM services
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 11
The Prime Bank Limited started to provide retail credit informally from the year 1999 as a
part of its core business. It was then one of the negligible parts of total credit and advance and
was provided to few number of individuals under the name of “Others” sector. From 2005, PBL
started to expand its retail credit activities far more than the previous years as a part of risk
diversification strategy. Since then, retail credit has been targeted for significant further growth.
Till 2004, retail or consumer credit was in a scattered position, though it had some portion
over the total credit disbursed. From the annual reports of PBL, some facts and figures are found
regarding retail credit. According to these annual reports, in 2004, the total amount of credit
disbursed was Tk. 2321.96Cr. in which consumer credit counted with a 2.91% of that amount.
Again in 2005, the growth rate of PBL consumer financing was 79.10% over the year 2004.
In 2005, the credit portfolio was maintained by PBL of Tk. 3193.38 Cr. in which, consumer
credit scheme (CCS) accounted for only 3.79% of total credit disbursed in different sectors.
The year 2005 grasped the highest investment in commercial purposes as 26.17% of total credit
With the continuation of focusing further expansion, in 2006, PBL achieved 35.49% growth
in retail credit business over the year 2005.A number of products were developed and existing
products were re-launched with better pricing structure and repayment period.
In 2006, though only 3.65% of total credit was invested in terms of retail credit, PBL
continued its spotlight on retail credit. In view of the growth potentials, separate division was
created at the beginning of the year 2006 for managing the retail business following credit
Figure 1 shows a comparative scenario of the credit amount disbursed in different sectors
during 2004-2006 time periods. In figure 1, CCS indicated “Consumer Credit Scheme” or retail
credit.
20.00% 2005
15.00% 2006
10.00%
5.00%
0.00%
L
e
S
l
M
i
s
ita
gr
B
nc
SM
er
L&
in
H
A
C
ap
na
th
nd
O
C
Fi
Le
ng
rt
al
po
ki
ci
or
Ex
er
W
m
om
Sectors
C
Figure 1
The growth trend of retail credit disbursed in the period 2004-2006 can be shown therefore by
the figure 2.Among these three years, the highest percentages of retail credit of total credit was
disbursed during 2005.
4.00%
3.50% 3.79%
3.65%
3.00%
Figures in %
2.50% 2.91%
2.00%
1.50%
1.00%
0.50%
0.00%
2004 2005 2006
Years
Figure 2
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 13
portfolio, the main income that this sector generates it the interest income. In 2004, the total
interest revenue generated by different credit sectors was Tk 264.09 Cr. in which, CCS alone was
responsible for income of Tk. 11.09 Cr..Again, in 2005, the total interest revenue from different
sector was Tk. 344.55 Cr. wherein, Tk. 14.29 Cr. was gained by CCS.In the year 2006, total
interest revenue earned was Tk.519.88 Cr. and Tk. 21.94 Cr. was from CCS.
The following figure 3 shows the interest income growth as a percentage of total interest
income in 2004-2006 years period. According to figure 3, year 2006 generated higher interest
income as a percentage of total interest income. Though, in 2005, more percentage of total credit
was disbursed in retail, interest income was the lowest in percentage of total interest income
6.00%
5.50%
5.00% 4.22%
4.20% 4.15%
4.50%
Figuresin%
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
2004 2005 2006
Ye ars
Figure 3
4.3 Target Clients
Any Bangladeshi individual who has the capacity to repay loan is allowed to apply for PBL
retail credit. In specific terms, the salaried executives of multinational companies, officials of
middle to large size local corporations, government officials, officials working in semi-
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 14
government, autonomous and reputed NGOs, international aid agencies and UN bodies, any tax
paying businessmen of repute and self-employed tax-paying individual having a reliable source
Prime Bank Limited is one of the fast growing banks in terms of satisfying individual clients’
need. For the clients’ convenience, Prime Bank has offered 11 types of retail credit products.
• Car loan
• Doctor’s Loan
• Marriage Loan
• Education Loan
• Travel Loan
• Hospitalization Loan
• Swapna Neer
machine, computers and other household furniture for personal use, any individual can apply for
this loan.
family, rental payments, trips abroad, purchasing of different household items etc., any
individual can get this type of loan. The features of the loan are following:
and Chittagong, any individual can get this loan under the following criteria:
is offered to individuals.
years), constructing new house and taking over of house-building loans from other banks/non
To apply for any of the above retail loan of PBL, a client needs his/her photographs, copy of
passport/ID card, last one year’s bank statement, copy of TIN, trade license(for businessmen),
One of the special criteria of retail credit or consumer credit is that, it is an unsecured loan as
Besides these, following legal documents are needed to get any retail credit from PBL.
• Duly filled in loan application form with terms and condition signed
• Letter of Set-Off
• Letter of offer with full terms and conditions stated therein and duly accepted.
The prior condition for any credit disbursement is to critically assess and approve the credit
proposal that is the client selection and assessment. In case of retail credit it should be done more
crucially as retail lending is one of the types of unsecured individual lending without collateral.
The primary factor determining the quality of the Bank’s credit portfolio is the ability of each
borrower to honor, on timely basis, all credit commitments made to the Bank that is, repayment
In PBL, more emphasis is given on repayment potential of loans out of funds generated from
borrower’s business (cash flow) instead of realization potential of underlying securities while
assessing a retail credit proposal. Following are the steps that are maintained in PBL for assessing
4.5.1.1 Application
The first stage of retail credit assessment and approval process is a client application that
• Employment/business details
• Income Details
• Residence details
Basically, branches receive the client application with other required papers necessary for
Verification is a key part of application process. Contact point verification is done for all
applicants except for the High Net Worth individuals or the clients having good account
relationship with Bank. The objective of this process is to check the declared/undeclared
In most of the times, CPV is done by branch managers. CPV is done by third party agency
also to enable the client selection of better accounts for accelerated processing and quick rejection
of those having negative/inadequate information. Retail credit officers then verify data collected
by third part.
4.5.1.3 Guarantee
One of the fundamental perquisites for securing retail credit is to obtain guarantee acceptable
to the bank by way of social status and perceived creditworthiness. Retail credit officers at branch
level check the guarantors’ information very carefully. In case of guarantors, following are the
• Existing guarantor of any other loan of the bank will not be accepted as other
• Any existing borrowers will not be taken into account as a guarantor for any other
loan.
• Guarantee from the Chairman, Managing Director and Directors of Corporate facility
clients and obtaining will be allowed after the prior approval of Head Office.
• All guarantors will be verified whether they have any relationship with banks earlier
All approved applicants are checked against Bank’s database to identify whether the applicant
is enjoying any other loan in other accounts part from the declared loans. Whether the client has
any other loan with any other bank is also important to know for client selection. In this case, CIB
Within the time of the CIB returned back to the branch, the retail credit officers of the branch
make a credit proposal for further assessment and approval.CIB reports are requested for any
amount equivalent to Tk. 50,000 and above that. After returning the CIB information , the credit
proposal along with documents is sent to Retail Credit Head Office (RHO).Up to this point at
branch level, almost seven to ten days are required for processing.
The first step is known as “Credit Scoring” which is done to predict the creditworthiness of
applications. A prior designed excel sheet is there to score in point values of some important
aspects of clients such as occupation, residence status, income details etc.The total of these point
values in 100 points represents the repayment probability of that particular client. The higher the
The second step is known as “Judgmental Decision”. Application meeting the minimum cut-
off score and meeting other criteria is further reviewed for judgmental decision. After credit-
scoring method is completed, all the credit proposals are presented in the board meeting for
approval. The judgmental approval involves the assessment of an applicant’s character, capacity
and collateral.
There is a credit approval authority to finally decide whether the retail loan should be
After presenting the credit proposals, the authority critically analyze the aspects and after that,
the authority finally decides about the retail credit sanction. The members of the authority have
some individual delegation power of retail credit, which is limited by Tk. amount. Up to this
After the credit proposal has been approved, the credit officers of Retail Head Office check
whether all the security components are collected properly. If all requirements are there,
documentation and arrangements are prepared for credit sanction. A sanction advice for every
particular retail credit is sent to the branches for final disbursement. This branch level
Branches, after getting the sanction advice, make a signing event with agreed terms and
conditions between bank and individual client. After that, credit is disbursed to the client’s
savings account. The total process requires fifteen, in special cases, twenty days from receiving
Without completion of any of these steps including credit assessment, approval and proper
documentation, no retail credit will be disbursed .The total process started from application
received at branch level up to credit disbursement can be shown in a diagram which is common
for all Private Commercial Banks who offer retail credit. This diagram along with the whole
Application filled
up with required No
papers correctly?
Yes
Branch send credit proposal with
application &papers to Head Office
of Retail (RHO)
Credit No
approved?
Yes
Application sent to credit dep. for
arrangement of credit sanction &
disbursement procedure.
Documents No
in order?
Yes
4829, 6461 and 5696 respectively. The growth trend of clients can be shown by the following
figure 5.
Years
Figure 5
According to the above figure 5, among these three years, the curve line shows the upper pick
point in 2005.From 2004 to 2005, the line shows positive trend wherein, from 2005 to 2006, the
line shows a negative trend. That is, in the period 2004-2006, highest number of clients was is
2005.
• Around eighty number of Direct Sales Agents (DST) who reaches from door to door to
5.0 Retail Credit Practices in Eastern Bank Limited (EBL), Dhaka Bank Limited
(DBL) and National Credit and Commerce Bank Limited (NCCBL)
5.1 Retail Credit Practice in Eastern Bank Limited (EBL)
Eastern Bank Limited (EBL) is one of the second generation private commercial banks with
25 online branches across major cities in Bangladesh. It offers full range of commercial banking
products and services to the corporate, mid-market and retail segments. It started to provide retail
credit informally from the year 2001, but from the year 2004, EBL has its own separate retail
credit segments. EBL defines retail credit as any loan sanctioned to any individual which is based
Eastern Bank has comprehensive range of financial products including corporate deposit
accounts, syndicated finance, export-import financing, working capital and other finance,
infrastructure finance, cash management services etc. In the year 2004, 2005 and 2006, the total
amounts of credit disbursed were Tk 149.69 Cr 54 Cr., and 259.74Cr. respectively. In these
amounts, Tk. 62.43 Cr., 170.82 Cr., 315.19 Cr were in retail credit sectors. The percentages of
retail credit in total credit disbursed were 4.17%, 9.62% and 12.13% respectively. As we can see
in the following graph, in the year 2004, commercial trading was the major focus as highest
percentages of credit was disbursed in that sector whereas retail credit, construction and
With the time passes by, as according to the figure 6, the year 2005 and 2006 concurred
special focus on retail credit. In the following figure 6, the dark black area represents the portion
Figure 6
Therefore, the following figure 7 shows the growth trend in retail credit disbursement by
EBL.The percentages of retail credit disbursed in total credit in 2004, 2005 and 2006 were 4.67%,
15.00%
Figures in %
10.00%
12.13%
9.62%
5.00% 4.17%
0.00%
2004 2005 2006
Years
Figure 7
Thus, it can be commented that, there was a positive growing trend in retail credit
disbursement in EBL.
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 35
In the year 2004, 2005 and 2006, the total interest revenue earned were Tk. 162.83 Cr.,
206.17Cr, and 282.93 Cr respectively among which retail credit sector counted for Tk. 11.86 Cr.,
25.00% 21.01%
20.00%
Figures in %
15.00%
15.73%
10.00%
5.00% 7.28%
0.00%
2004 2005 2006
Ye ars
Figure 8
As per the above figure 8, it can be seen that, retail credit generated almost 8% of total
interest revenue earned in 2004.With the continuation of a growing trend, the year 2005 and 2006
accounted for almost 15% and 21% of total interest revenue respectively on that two years earned
by retail credit.
and consultants, salaries employees of Govt. or Semi-Govt. organizations and also well reputed
multinational companies, credit worth business person (sole proprietor, partner or directors) are
the target clients for EBL retail credit. Basically, lawyer, defense people and journalists are
The products that are treated as retail credit in EBL are following
For any individual purpose like house renovation, interior decoration, marriage and other
Same as Prime Bank, to apply for any of the above retail loan of EBL, a client needs his/her
photographs, copy of passport/ID card, last one year’s bank statement, copy of TIN, trade
Besides these, following legal documents are needed to get any retail loan from EBL.
• Duly filled in loan application form with terms and condition signed
• Letter of Guarantee
• Letter of Set-Off
• Letter of offer with full terms and conditions stated therein and duly accepted.
As all Private Commercial Banks are bound to follow the “Bangladesh Bank Prudential
Regulations for Consumer Financing 2004”, according to this manual, all retail credit offering
banks go through the processes started from client’s credit application receive up to the final
disbursement as described in above for Prime Bank Limited along with the diagram on page 31 of
this report.
In case of Eastern Bank Limited (EBL), the retail credit disbursement process is as same as
Prime Bank Limited for the above reason. But, instead of sending sanction advice to the
branches, EBL Retail Head Office, by its own, disburse all the retail credits after approval. This
type of disbursement is called “Centralized Disbursement” .Also, EBL has passed a circular in its
board meeting in which it is written that, in accordance with “EBL PDC Policy”, in case of ‘De
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 41
Duplication Checking” steps, CIB report will not be sought up to Tk 5.00 lac loan. With the
compliance of this circular, though the total retail credit disbursement process is centralized that
is controlled by EBL Retail Head Office; it takes only five to seven days to disburse most of the
During the year 2004, 2005 and 2006, the numbers of clients in different retail credit were
4963, 9489 and 8960 respectively that are shown with the following graph including the growth
trend. Though there was a positive growth in 2005 over the year 2004, 2006 shows a less positive
10000
8000 9489
6000
4963
4000
2000
0
2004 2005 2006
Years
Figure 9
EBL has taken the following steps in promoting its retail credit products.
• Print media is also used for publishing different features of EBL Retail Loan
As one of the second generation banks, established in the year 1995, Dhaka Bank Limited
(DBL) started its journey towards retail credit in the year 2001 but its activities on retail credit
has been focused in the year 2004 when many other similar banks started to invest in retail credit.
At the end of the year 2005, DBL has established its separate retail credit division.DBL defines
retail credit or mostly known as “Consumer financing” as any financing allowed to individuals for
During the year 2004, the total credit amount disbursed in different sectors was Tk. 1653.88
Cr. in which retail credit accounted for only 3.64% that is Tk.60.33 Cr. was disbursed on retail
credit.
Again, in the year 2005, Tk. 2337.25 Cr. was disbursed in different sector in which retail
credit investment was Tk. 91.75 Cr. that is, 3.92% of total credit disbursed. In this year “Others”
With a little bit incremental amount, in 2006, retail credit counted for 4.97% of total
Figures in %
60%
50% Construction
40% Transport
30%
Food
20%
RMG
10%
0%
Pharmaceuticals
2004 2005 2006
Agri
Years
Figure 10
In the above figure 10, dark black area is representing the portion of retail credit disbursed in
total amount in the year 2004, 2005 and 2006.As per the above figure 10, the retail credit has
been shown an incremental portion of the amount disbursed in theses three years.
Therefore, the following figure 11 shows the positive growth trend in retail credit
disbursement. In the figure 11,it can be observed that, there was more than one percent growth
4.00%
3.00%
2.00%
1.00%
0.00%
2004 2005 2006
Years
Figure 11
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 44
which retail credit interest revenue was Tk. 6.82Cr. that is 3.39% of total interest income.
Similarly, in 2005, total interest revenue of DBL was Tk. 344.55 Cr. in which only Tk. 4.89 Cr
was earned by retail credit and in 2006 there was a bit acceleration in interest income earned by
retail credit which was 2.02% of total interest revenue of Tk. 434.17 Cr.
3.50% 3.39%
3.00%
Figuresin%
2.50%
2.00% 1.69%
1.50% 2.02%
1.00%
0.50%
0.00%
2004 2005 2006
Ye ar s
Figure 12
The above figure 12 shows the interest income growth trend with a curve line. According to
figure 12, it can be commented that, among these three years, year 2005 got lowest income by
Salaried individuals of Govt. Semi-Govt. organization and also any other well reputed private
organizations, business people, self- employed personnel etc are the target clients of DBL.
¾ Car Loan
¾ Vacation Loan
Besides other fees, CIB fee of Tk 100 for the loan amount of Tk 2lac and above and
To apply for any of the above retail loan of DBL, a client needs his/her photographs, copy of
passport/ID card, last one year’s bank statement, copy of TIN, trade license(for businessmen),
Besides these, following legal documents are needed to get any retail loan from DBL.
• Duly filled in loan application form with terms and condition signed
• Letter of Guarantee
• Letter of Set-Off
• Irrevocable Letter of Authority to repossess the vehicle (for car loan) etc.
Consumer Financing 2004 for the process started from client’s credit application receive up to the
final disbursement as described in above for Prime Bank Limited along with the diagram on page
31 of this report. But, unlike PBL, retail credits are disbursed directly for the Head Office rather
In addition, (DBL) has passed a circular in its board meeting in which it is written that, in
accordance with “DBL PDC Policy”, in case of ‘De Duplication Checking” steps, CIB report will
not be sought up to Tk 2.00 lac loan. The total retail credit disbursement process of DBL is
centralized that is controlled by DBL Retail Head Office; it takes 21 working days to disburse
During the year 2004, 2005 and 2006, the numbers of clients in different retail credit were
4311, 4894 and 5443 respectively. The following figure 13 shows a positive growth trend in retail
credit in terms of clients. As per figure 13, the number of clients in the period 2004-2006 have
increased slowly.
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 50
6000
Figures in Numbers
5000
4000 5443
4311 4894
3000
2000
1000
0
2004 2005 2006
Years
Figure 13
5.2.7 Promotional Activities
• Display media
• Print Media
• Billboard
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 51
5.3 Retail Credit Practices in National Credit and Commerce Bank Limited (NCCBL)
National Credit and Commerce Bank (NCCBL) is another second generation private bank
established in the year 1993.It started financing retail credit formally from the year 2003 with a
very limited product portfolio. Financing individuals of mainly middle-class salaried employees
The year 2004 got total amount of Tk.1521.12 Cr. as total credit disbursement. Within this
amount, Tk. 25.05 Cr. was in purpose of retail credit. The highest investment in 2004 was in
different types of business sector as we can see in the following graph. In figure 14, the dark
black area represents the amount of retail credit disbursement.As per figure 14,among these three
years of retail credit disbursement, year 2005 got highest amount. Construction sector got a
70% Retail
Figures in %
60% Transport
50%
Water Works
40%
30% Constructio
n
20% Industry
10%
Agri
0%
2004 2005 Years 2006
Figure 14
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 52
Therefore, figure 15 is showing the investment trend in retail credit. The curve in this graph
4.50%
4.00%
3.50% 4.03%
Figures in %
3.00%
2.50% 3.30%
2.00%
1.50% 1.64%
1.00%
0.50%
0.00%
2004 2005 2006
Years
Figure 15
5.3.2 Income Generation by Retail Credit
The total interest income earned by different sectors during the year 2004, 2005 and 2006
were Tk. 160.14 Cr., 207.25 Cr., and 302.33 Cr. respectively. In these amounts, Tk. 1.72 Cr., 4.34
Cr., and 10.35 Cr., were generated by retail credit. The following graph shows the positive
4.00%
Figures in %
3.00%
3.42%
2.00%
2.09%
1.00%
1.07%
0.00%
2004 2005 2006
Years
Figure 16
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 53
companies and other financial institutions, school, college, university teachers, owners of
To apply for any of the above retail loan of NCCBL, a client needs his/her photographs,
copy of passport/ID card, last one year’s bank statement, copy of TIN, trade license(for
Besides these, following legal documents are needed to get any retail loan from NCCBL.
• Duly filled in loan application form with terms and condition signed
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 56
• Letter of Guarantee
1587, 2756 and 3561 respectively. The figure 17 shows an overall positive growth trend in terms
3000 3561
2500
2756
2000
1500
1587
1000
500
0
2004 2005 2006
Years
Figure 17
5.3.6 Credit Assessment, Approval and Disbursement process
Similar to other private commercial banks offering retail credit, NCCBL also follows the
Bank, the retail credit disbursement process of NCCBL is also decentralized that is, credit is
disbursed from branch level. The total days required from receiving client’s application to loan
NCCBL conducts its promotional activities for retail credit through print media (paper
advertisement).
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 57
6.0 Comparative Analysis of Retail Credit Status of PBL with EBL, DBL
and NCCBL
The amount disbursed in retail credit in the three consecutive years in Prime Bank, Eastern
Bank Dhaka Bank and National Credit and Commerce Bank can be shown in table 24.
Table 24: Comparison of retail credit disbursed among four banks Figures in Cr.
Banks Years
2004 2005 Growth 2006 Growth over
over 2004 2005
PBL 67.65 121.16 79.09% 164.16 35.49%
EBL 62.43 170.82 173.62% 315.19 84.51%
DBL 60.33 91.75 52.08% 169.30 84.52%
NCCBL 25.05 82.86 230.77% 98.41 18.77%
Sources of Data: Annual Reports of PBL, EBL, DBL, and NCCBL
According to the above table, though PBL has highest amount disbursement in retail credit, EBL
had the highest amount in the next two consecutive years.
products of retail credit of four banks are given in the following table 25.
Table 25: Comparison of retail credit interest income among for banks Figures in Cr.
Banks Years
2004 2005 Growth 2006 Growth over
over 2004 2005
PBL 11.09 14.29 28.85% 21.94 53.53%
EBL 11.86 32.45 173.60% 59.80 84.28%
DBL 6.82 4.89 -28.30% 8.77 79.34%
NCCBL 1.72 4.34 152.33% 10.35 138.48%
Sources of Data: Annual Reports of PBL, EBL, DBL, NCCBL
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 58
According to the above table, it can be easily observed that, EBL has always highest amount
of interest income in the three consecutive years among these four banks. The second highest
bank was Prime Bank in terms of interest income.
Table 26: Comparison of number of clients in retail credit among four banks
Banks Years
2004 2005 2006
PBL 4829 6461 5696
EBL 4963 9489 8960
DBL 4311 4894 5443
NCCBL 1587 2756 3561
Sources of data: Primary (Questionnaire)
Table 27: Comparison of retail credit products offered among four banks
Sl. PBL EBL DBL NCCBL
1. Car Loan Car Loan Car Loan House
Renovation
Loan
2. Any Purpose Loan Jibandhara or Personal or Any Personal or
Any Purpose Purpose Loan Any Purpose
Loan Loan
3. Household Durables Loan Executive Loan Vacation Loan
4. Doctor’s Loan Utshabs or Home Loan
Vacation Loan
5. Marriage Loan
6. Education Loan
7. Loan against Salary
8. Travel Loan
9. Hospitalization Loan
10. CNG Conversion Loan
11. Swapna Neer
There is only one type of product that is similar among PBL, EBL, DBL and NCCBL which
is “Personal Loan or Any Purpose Loan”. The comparative features of this loan among four
Table 28: Comparative Features of Any Purpose Loan among four banks
Features Banks
PBL EBL DBL NCCBL
Loan amount(min) Tk. 10,000 Tk. 50,000 or Tk. 25,000 Tk. 20,000
10-12 times of
gross salary
Loan amount(max) Tk. 3,00,000 Tk. 10,00,000 Tk. 5,00,000 Tk. 1,00,000
Rate of Interest 16% 21% 18% 17%
Tenor 1-3 years 1-5 years 1-4 years 6 months -1
year
Criteria(Age limit) 25-65 years at the 22-60 years at 21-60 at the time 20-50 at the
time of maturity of the time of of maturity time of maturity
loan maturity
Down Payment 10% of total 30% of total N/A N/A
amount amount
Repayment Method Monthly equal Monthly equal Monthly equal Monthly equal
installment installment installment installment
Days needed for 15-20 days 5-7 days 21 days 10-12 days
disbursement
Disbursement Mood Clients’ savings Clients’ savings Clients’ savings Clients’ savings
account, sometimes account. In most account account,
cash for salaried of the times sometimes cash
person cash. for salaried
person
Disbursement Decentralized Centralized Centralized Decentralized
System
Other 1% on loan amount 1.5% on the loan 1.5% of the loan 1% on loan
Charges(Processing or Tk. 1000 amount amount amount
Fee) whichever is +15%VAT
higher+15%VAT
on that amount
Risk Fund 1% on loan amount N/A N/A 1% on loan
amount
Penalty 2% 3% 4% 1% or Tk 100
Charge(Amount on whichever is
installment lower
overdue)
Stamp Charge Tk. 320 Tk. 600 Tk. 740 Tk. 400
Early Settlement Any time at free of Any time, 2%( At any time with At any time at
with cost on total cost before 12 2.5% cost free of cost
outstanding amount months), 1% (12
months and
above)
No. of Guarantors Two persons One person Two persons One person
Mostly preferred Salaried Individuals Salaried Salaried Salaried
client Self-Employed Individuals Individuals individuals
person Self-employed Self-employed
person person
Businessmen. Businessmen
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 60
According to table 28, it can be commented that, EBL and DBL, two major competitors of
PBL have already targeted different classes of people in the society.EBL is already enjoying
larger market share in terms of both disbursed amount and interest income.DBL has targeted
greater segments and trying to come upfront with other attractive features and promotional
In the following table 29, the medium of promotional activities are shown for four banks.
According to the above table 29, EBL has a complete promotional activities compared with other
problems are found in Prime Bank Retail Credit, which is given below:
businessmen. Again, salaried individuals are getting preference in terms of retail credit.
Though the numbers of fixed income earning people are increasing day by day, there is an
existing large segment of business people of different types in Bangladesh who needs
retail loan frequently rather than salaried individuals. Also, the self-professionals related
to the legal activities and media are not there in the target clients segment. This narrow
focus on target clients is reducing the market share of PBL in retail lending.
For the compliance of prudential guidelines of Bangladesh Bank, 2004, PBL asks for CIB
report for an amount of TK. 50,000 and more. As it takes six to seven days for CIB to be
returned back to the branches, almost 15-20 working days are needed by PBL to disburse
retail credit.
Now days, people are too busy to spend longer time for having a smaller amount of
loan for their personal need. For this longer assessment process that is widening the time
interval between a loan application reception and loan disbursement has resulted less
The retail credit disbursement process of Prime Bank is decentralized which is also a
barrier for it to take steps for more expansion in retail credit. As the credits sanctioned are
disbursed from branch level, most of the employees of credit department in branches are
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 62
engaged with disbursement related activities in most of the times which hampers the
PBL has currently direct sales agent (DSA) and paper advertisement only this two
medium for frequent promotional activities in retail credit. Sometimes it arranges fair for
retail credit. In the present time perspective, multimedia activities have expanded in such
a way that, larger number of people watch television and listen in radios rather than
reading newspaper. People are also attracted by colorful billboards in the road.PBL has
taken no steps for promotional activities up to now in display media and so on which can
also be a cause for having lesser market share than the competitors.
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 63
are following:
PBL currently has diversified product portfolio. From the above comparison, it can be
easily observed that, the other immediate major competitors like Eastern Bank, Dhaka
Bank have only three to four types of product and with these products, they are trying to
capture middle-class, upper middle class and upper class people’s personal credit need.
But Prime Bank has separate cells for separate client segments which is one of the
important aspects of PBL.This is one of the crucial prospects for PBL to proceed with
It can be said confidently from the above comparison that, PBL has the lowest interest
rate in terms of all retail credit products among its competitors which is an opportunity for
Again, in terms of processing fee, stamp charge and early settlement cost, wherein its
other competitors are taking higher amount and charges for early settlement, PBL charges
the lowest amount and allows its client for early settlement at free of cost, which is
In some retail products, PBL offers different lowest amount and time interval as a
minimum which is also a convenience for the clients of a developing country like
Bangladesh. In Bangladesh, most of the fixed income earning people have income range
within Tk. 20,000-35,000.For them to avail an amount of retail credit for more than Tk.
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 64
10,000-12,000 to fulfill personal needs is almost impossible. Lower tenor of credit lessens
the burden from clients and inspires them to take more credit which is currently offered by
PBL.
As PBL asks for CIB for any amount of TK. 50,000 and above, it protects PBL of
holding default clients and secures the income generated by retail credit.
9.0 Recommendation
With the consideration of the above whole study especially the problems and prospects, I
• The defense people, lawyers and journalists are not in the current target clients’ list of
PBL, who if were in target segments of PBL, could add more wings in market share and
interest income also. As there are already more diversified retail credit products, PBL
should rethink about its target client segment and if possible, should include defense
people, lawyers and journalists that can easily fit with that products.PBL should consider
especially of businesspersons.
• PBL management should take care of its IT development. If there is an online system
between Retail Credit Head Office (RHO) and branches, the applications along with
necessary documents will be able to be transferred in short time and with less costs for
assessment into the RHO.It will also reduce the disbursement time interval and PBL will
• PBL has currently decentralized retail credit disbursement system which is requiring more
time for even any small amount of loan. In this case, PBL should develop a central
database system which will enable the RHO of PBL to disburse any amount of retail
credit directly from Head Office. It will not only reduce the loan disbursement time
The Problems and Prospects of Retail Credit in context of Prime Bank limited in Bangladesh 65
interval but also helps branches of PBL to be more retail client oriented. This central
database system will also enable RHO to identify any retail client of any branch at any
time, which will ensure highest level of monitoring and quality control.
advertisement, creating billboard, recruiting more sales agents and arranging retail loan
10.0 Conclusion
Retail lending has been a spectacular innovation in the private commercial banking sector in
recent years. The growth of retail lending, especially, in a developing country’s economy, is
environment, financial market reform, and several micro-level demand and supply side factors.
In today’s Bangladesh, banks, especially, the private commercial banks consistently point to
the stability of revenue and profit as the most important feature of retail lending and a key
motivation for the recent interest. In particular, retail stability is seen as valuable for commercial
banks seeking to offset the volatility of riskier business lines, such as trading and other capital-
market activities. While retail lending offers phenomenal opportunities for growth, the challenges
are equally daunting. How far the PBL retail banking will be able to exist in retail banking
industry in future will depend upon the capacity building of the banks to meet the challenges and
From the above analysis and comparison, it has been proved that, Prime Bank though has
some problems, yet it has lots of opportunities to carry on its retail lending business. Diversified
product portfolio, lower rate of charges etc is the favorable features of PBL for clients. If, Prime
Bank follows the above recommendations, to cope up its problem, Prime Bank will be able to
ABBREVIATED TERMS
Cr. =Crore
Clark, T., Dick, A., Hirtle, B., Stiroh, K., & Williams, R.(2007).The Role of retail in U.S Banking
Stiroh, J.(2004).Diversification in Banking. Journal of Money, Credit and Banking, 39(1), 49-81.
Westerfield, R.B. (1998) Effect of Consumer Credit on the Business Cycle. Journals of the
General Information:
Name: _________________________________________
Title: _________________________________________
Organization: _________________________________________
Specific Information:
1. How does your Bank define retail/consumer credit?
---------------------------------------------------------------
2. When your Bank formally started offering Retail Loan?
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3. Who are the target customers of your retail loan products?
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4. What are the retail loan products of your bank? (Please provide the brochures for having
the features of the products)
5. What is the eligibility to apply for the loans (product wise)?
Name of the Eligibility criteria
product
7. Please provide the Tk. amount of retail credit and the amount of total credit disbursed.
Year 2004 Year 2005 Year 2006
Retail Total Retail Credit Total Credit Retail Credit Total Credit
Credit Credit
Thank You