APLICACIÓN DE LA NORMATIVA SEGÚN LLOYD'S REGISTER (LR)

After accounts department I spend my forth week in credits department Mr. Hamayoun Rasool Malhee is the head of the CAD department credit administration department. In credit department Mr. Usman and Mr. Muhammad Ali deals with SME’s and corporate department Mr. Faisal deals with home loan and also assists Muhammad Ali. Mr. Usman Anwer deals with monthly return and Guarantees. Mr. Shahzad Naseem deals with Agri finance, so my mail focus on SMEs Mr. Malhee helps me a lot and told all the answers of my question and also helps in my learning.

The credit department plays a key role in a bank it earns considerate income in form of mark up on its advances enjoyed in this department very well.

The credit department has been sub-divided into two sections

• Credit Marketing

• Credit administration & Monitoring 2.8.1. CREDIT MARKETING:

Credit marketing is the most important department of the bank that actually finds the ways to utilize the deposit that are beneficial for the bank and generate income for the bank. The credit marketing department consists of two sections

• SME’s

• Corporate

2.8.1.1. SME [small and medium enterprise]

In this section, we grant the loan to the small businesses, which fall in the category of SME. According to Prudential Regulations of SME:

SME means an entity, ideally not public limited company, which does not employ more than 250 persons (if it is manufacturing / services concern) and 50 persons (if it is trading concern) and also fulfills the following criteria of either ‘a’ and ‘c’ or’ b’ and ‘c’ as relevant:

a) A trading service concern with total assets at cost excluding land and building upto Rs. 50 million.

b) A manufacturing concern with total assets at cost excluding land and building upto RS 100 million.

c) Any concern (trading, service or manufacturing)

with net sales not exceeding Rs. 300 million as per latest financial statements.

d) An individual, if he or she meets the above criteria, can also be categorized as an SME.⁹

Here the sale or turnover is normally up to three million and the number of employees is fifty for service organization and 250 for manufacturing organization.

2.8.1.2. CORPORATE

The corporate section gives loan to industries and different companies according to worth of the company.

2.8.1.3. LOAN LIMIT

Branch is allowed to extend the credit from minimum of 500,000 to maximum of 5,000,000. The Area office can extend the limit up to 10,000,000 and above this limit the branch has to get approval from Head Office.

2.8.1.4. WORKING OF CREDIT MARKETING CREDIT LINES

The bank offers following credit lines to its worthy customer.

• Funded Facility

• Non Funded Facility 2.8.1.5. FUNDED FACILITY

Funded lines are those in which bank directly issues cash to its customers and it consist of the following lines:

• Current Finance /Running Finance (CF)

• Term Finance (TF)

• Local Bill Purchase

• Foreign Bill Purchase

• Finance against Foreign Bills(FAFB)

• Finance against Packing Credit I, II (FAPC)

• Finance against Imported Merchandise (FIM)

• Finance against Trust Receipts (FATR) 2.8.1.6. NON-FUNDED FACILITY

Non-Funded lines are those in which bank does not give cash to its customers, rather it gives guarantee to the creditors of its customers.

These lines consist of the following:

• Letter of Credit [that can be Usance or Sight

• Letter of guarantee

2.8.1.7. PRINCIPLE OF LENDING

• Know your customer

• Purpose of facility

• Profitability

• Sources of repayments

• Security( Collateral)

2.8.1.8. GOLDEN PRINCIPLE OF LENDING

The following points are considering the Golden Principles for lending:

• Short term loan

• Secured

• Self-Liquidation

2.8.1.9. DOCUMENTS REQUIRED

2.8.1.9.1. FOR SOLE PROPRIETOR AND PARTNERSHIP

• BBFS (Borrower’s Basic Facts Sheet)

• Copy of ID card

• Partnership deed

• Collateral Documents

• Tax Return

• Bank Statement for the last six months 2.8.1.9.2. FOR THE COMPANY BORROWER

In addition to above document the following documents are required.

• Memorandum of Association

• Article of Association

• Form 29

• IT Form 30

• Valuation of property being offered as collateral

• Collateral documents

• Request letter

• Previously owned property to assess net worth 2.8.1.10. TYPE OF BORROWERS

2.8.1.11. INDIVIDUALS It consists of the following:

• Existing account holder

• Staff members

• Close relatives of the staff members

• Employee of other banks 2.8.1.12. BUSINESS ACCOUNT

• Sole proprietor ship

• Partner ship

• Limited company 2.8.1.13. OTHERS

• Clubs and association

• Federal, provisional and local govt. bodies

• Traders

• Contractors and construction companies

• Transport, storage, warehousing

• Property dealers

2.8.1.14. INTERNAL DOCUMENTS

It is also the responsibility of the credit marketing department to search for the potential customers by visiting the business institutions and the individual business people. When a customer applies for credit, the credit marketing department verifies his credit worthiness, ensures that all the required documents are provided, and after being satisfied, it refers the case to the branch credit committee for approval. Also the department prepares the case history and the required internal documents of the applicant.

2.8.1.15. CREDIT LINE PROPOSAL

In this document the department mentions all the important information about the client and prepares the proposal for the loan. CLP has 8 Sections

• Customer information

• Rational justification and consideration 2.8.1.16. TYPES OF PROPOSAL

There are three types of proposals:

New

Here the client applies for loan for the first time.

Revision

In this type of Proposal the client requests the bank that he wants to make certain changes in the credit limit.

Renewal

In this the client request for the same limit after expiring the date of previous one

In case of limit change or amount change the expiry date is changed but in case of markup change the expiry date doesn’t change.

2.8.1.17. CATEGORIZATION OF SECURITY

Category A involves tangible and releasable security (lien). Whereas, Category B involves non tangible and realizable security (personal guarantee, corporate guarantee) 2.8.1.18. COMPOSITE CREDIT LINE APPRAISAL

In this regard, the bank checks the credit worthiness of the borrower and analyzes the borrower on different aspects, gives different rating to each and on the basis of rating gives recommendations to the authority. It consists of following sections:

• Grade

• Risk index level

• Condition

• Trends

• Aggregate score

Grade - In this section, we give different grades to different credit limits.

Risk Index Level - In this section, we assign different points associated with different level of risk e.g. 1 to lowest risk and 10 to highest one.

Condition - In this section, we mention what is the condition of the business on the basis of different factors e.g. excellent to the strong condition and poor to weakest condition.

Trends - In this section, we tell about the financial position of the firm.

Aggregate Score - On the basis of above we give aggregate score to the different

So, in this way we recommend the authority either to accept or reject the proposal.

2.8.1.19. APPRAISAL OF CREDIT PROPOSAL

• The constitution of borrower and his nationality

• The liquidity and reliability of the borrower

• History of borrower relationship with the bank

• Status report from the borrower previous /other banks

• Management structure of the borrower

• Nature of the business

• The borrower financial position

• Financial analysis

• Feasibility analysis

• Project analysis

• The profitability transaction with the bank

• Repayment ability

• The security offered

• Documentation for considering credit facility

• Visit report

• Status report (CIB report)

• Credit line proposal (CLP)

• Financial statements

• Stock inspection report

• Credit file

• Among all theses document the most important is the CIB report that show the actual worth and past loan data of customer. CIB (Credit Information Bureau) depicts the following:

• Outstanding liability (funded or non funded)

• Overdue

• Recovery during the month

• Amount under litigation

• Write offs

• Number f time rescheduling

• Outstanding liabilities (post due90 days due 360 days) 2.8.1.20. DURATION BASED CLASSIFICATION OF LOANS Credit loan can be classified as.

Short Term - Covering a period of one year.

Medium Term - Covering a period of two to three years.

Long Term - Covering a period of more than three years.

2.8.1.21. MONITORING

Monitoring is required on the loan issued by the bank and it is different for long term and short term mostly it is of two types, monitoring by means of practical visit and by means of analyses of financial statement. Here in head office, sanctioning of big loan are made as branches have limited power to issue loan.

2.8.1.22. SECURITIES /COLLATERAL

In document AVISO IMPORTANTE: (página 91-107)