3. Cash Flow Statement. The following ratio analyses are undertaken in the financial spread sheet: 1. Current Ratio 2. Quick Ratio 3. Receivable Turnover Ratio 4. Inventory Turnover Ratio 5. Accounts Payable Turnover Ratio 6. Sales to Working Capital 7. Debt to Equity 8. Sales to Fixed Ratio KYC Policy Know Your Customer (KYC) policy is one of the criteria to evaluate the risk of credit. Know Your Customer (KYC) policy means that that the bank authority should preferred customer to provide loans. Know Your Customer (KYC) is helping to evaluate the credit worthiness of customers. The division of the bank responsible for analyzing and making recommendations on the fate of most loan applications is the credit department. 4.2.6 General Procedure of Credit Evaluation Credit Evaluation Process: 1) A loan procedure starts with a loan application from a client who must have an account with the Bank. At first branch receives application from client for a loan facility. In the application, client mentions what type of credit facility he/she wants form the bank including his personal information and business information. Branch Manager or regarding Officer in-charge of credit department conducts the initial interview with the customer. Mutual Trust Bank Ltd. maintains the following form: Application for advances (For individual and firms). 2) After receiving the loan application form, the bank sends a letter to Bangladesh Bank for obtaining a credit inquiry report of the customer. This report is called CIB (Credit information Bureau) report. This report is usually collected if the loan amount exceeds Tk. 50 thousand. An internship report on “Credit Policy and Operations of Mutual Trust Bank Limited” 44
3) If Bangladesh Bank sends positive CIB report on that particular borrower and if the Bank thinks that the prospective borrower will be a good one, the bank will inspect the documents. 4) In case of Corporate Client, Financial documents of the company of last three to five years. If the company is new then projected financial data are required. 5) Personal net worth of the borrower/borrowers. 6) In this stage, the Bank will look whether the documents are properly filled up and signed. Credit in charge of the relevant branch is responsible to know about the ins and outs of the client’s business through discussing with him. 7) Bank officially inspects the project for which the loan is applied. Project’s existence, distance from bank office, viability, monitoring cost and possibilities are examined. 8) Any loan proposal needs to be evaluated on the basis of financial information provided by the applicant. Credit Risk Grading (CRG) is a technique by which the risk of the loan is calculated. Banker must analyze CRG when loan application is above 1 corer. Experienced people of Credit department in Mutual Trust Bank Ltd. do this grading. It is a ranking whose total score are 100. Among this score, 50% is for Financial Risk, 18% for Business or Industry Risk, 12% for Management Risk, 10% for Security Risk and remaining 10% for Relation Risk.
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