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projected then the credit officers take the following measures:

 Meet the owner and discuss to identify the reason.

 Analyze the business strategy regarding the price, quality, and competitors.  Whether the amount disbursed was used properly

 Whether the management has given its full effort in managing the business. No banker wants the loan to be turned into bad; at least they are not bad at the time they are made. However, banks find that invariably a small portion of the loan become delinquent and eventually must be written off. The loan review process is a crucial tool in reducing losses and in monitoring loan quality. It consists of a periodic audit of the ongoing performance of some or all of the active loans in a bank's loan portfolio. Other than its basic objective of reducing loan losses, some intermediate objectives of the loan review of RUPALI Bank are as follows:

 To detect actual or potential bad loans as early as possible.  To ensure that the loan policy is followed.

 To inform management and the board of directors about the overall

condition of the loan and advance portfolio.

At the time of loan review RUPALI Bank follows the Bangladesh bank guidelines and its credit policy set by the board of directors. The frequency of the review of individual loans is determined by the size and quality of the loan; large and poor loan is reviewed frequently than others.

All the schedule banks in Bangladesh are required to submit the loan review report and the state of the loan portfolio to the Bangladesh Bank credit cell. For maintaining this schedule RUPALI has set forth a due date for its all branches to send the loan review report to Industrial Credit Division, The concerned officer sends the report to the Bangladesh

Bank Credit department. The schedule is given below: Reporting schedule

Loan Amount Review Period Reporting Time

TkO.1 to I million Quarterly By next month 30th _day

Tk I to 10 million Quarterly By next month 30th _day

More than Tk 10 million Monthly By next month 30th _day Source: ICMCD, Head Office

It is the responsibility of the Manager to monitor the over all profile and risk aspect of the credit portfolio in accordance with the criteria set down in the Bank Credit Policy. Such monitoring shall be evidenced from the comments of the Manager in monthly Call/Visit Report and be kept in the Credit File with a copy to the Head Office. This Review shall be formally performed at intervals prescribed by Head Office but it is the responsibility of the Manger to ensure at all times that the credit portfolio meets the standard set forth by the Bank.

5.11 Taking Precaution/Legal Action against Delinquent Clients

When a problem loan is detected the responsible loan officer takes the corrective action and tries to minimize the loan losses by allowing different facilities to the client. The steps followed by RUPALI Bank to manage the delinquent clients are:

Persuasion

This is the first step practiced at RUPALI Bank to mange the problem loan. This step involves:

 Open discussion with the borrower about the problem he is facing.

 Discussion with third party to find out the underlying reasons.

 Issuing "First Reminder" letter to inform the due date and due installments.

 If the party doesn't response issuing "2nd Reminder" and then "3rd Reminder" letter.

Negotiation:

If the persuasion failed, the loan officer negotiates a plan of action with the borrower to save both the bank and the borrower from possible loss. This calls for certain sacrifices on the part of the bank and borrower in their mutual interest. The plan of action in RUPALI Bank consists of the following:

 Revise loan agreement

 Concession of interest (if the client is difficult to manage)

 Rescheduling of the loan and giving installment facility to repay the overdue amount beside the regular installment.

Litigation

If the client fails to repay the loan even after rescheduling the loan, RUPALI Bank goes for taking legal action against the delinquent client to recover the loan. The branch manager sends a letter to the head office credit department informing the borrower's reluctance to repay the loan. Following measures are taken:

 Filing case against the client

 Assigning the loan officer for assisting the lawyer.

Loan sanctioning, disbursement and documentation are the key job that has to be performed very carefully. A marginal mistake in any stage of the same could jeopardize the banks interest. To avoid the said mistakes and to ensure better credit management some steps should be taken which has elaborately discussed earlier. The procedures followed in RUPALI Bank limited for sanction, disbursement and documentation is time tested. But continuous up gradation is also required to make the process error less. Proper communication and cooperation among the Head Office and Branch officials could help a lot on the said. As such any problems regarding the same should be discussed, exchanged and communicated to all involved.

Chapter-06