An Overview of Prime Bank Banking System (Part-2) - Assignment Point
An Overview of Prime Bank Banking System (Part-2)
Subject: Economics, Finance | Topics: ,

CONSUMER CREDIT SCHEMES OF PRIME BANK LIMITED

3.1 INTRODUCTION:

Prime bank is committed to play a vital role in overall socio economy development of our country. As per its commitment, it launched “consumer Credit Scheme” in the year 1995 to enhance the living standard of the people of limited and fixed income group.

Prime Bank tries to establish the concept of “Relationship Banking”. It treats clients as its “financial Partner” and always intends to be a friend of rainy days by means of proving financing assistance in those days. It provides financing for the following purposes.

†  To purchase different home appliances

†  To purchase equipment for medical services

†  To purchase motor vehicles

†  To meet up emergency or sudden needs

†  To arrange Wedding ceremony

†  To enjoy vacation

†  To bear edu8cational expenses of children

†  To convert the vehicle engine into CNG.

3.2 OBJECTIVE OF THE SCHEME:

Prime Bank Limited started the Consumer Credit Scheme program with a view to fulfill its benevolent institutional objectives through financing the middle class limited income group.

†    To ensure the credit facility to the both middle class Limited income group and upper class income group.

†    To improve the living standard of limited income group through financing in purchasing necessary goods.

†    To participate in the socio-economic development of the country.

3.3 ELIGIBILITY OF THE CUSTOMER:

Any interested person within the range of 25 to 60 and having a permanent job or the permanent employees of the following organization can apply for the CCS loan of Prime Bank.

†    Government Organizations.

†    Semi-Government and Autonomous Bodies.

†    Banks, Insurances Companies or any other financial institutions.

†    Armed Forces, B.D.R, Police and Ansar.

†    Private Organizations having corporate structure.

†    Teachers of Universities, Colleges and Schools.

†    Permanent employees of locally established and renounced Public Limited Companies.

†    Permanent employees of Multinational Companies.

†    Permanent employees of Bank acceptable companies

†    Professionals such as Doctors, Engineers, Lawyers, Architects, Chartered Accountants, Journalists, and self employed person etc.

3.4 DISCOURAGE LIST OF THE CUSTOMER:

The following are the people who should be discouraged in extending credit facilities under this scheme:

†    The employees of frequently transferable services.

†    The employees of enterprises which are not of good reputation.

†    Employees having take home salary less than taka 10,000 per month.

3.5 PRODUCTS OF PRIME BANK LIMITED:

The products of Prime Bank with their financing items under CCS loan are given below:

Household Durable Loan: Motor Cycle, Personal Computer, Photocopier, Fax machine, Small PABX system, Television, Mobile Phone set, Refrigerator, Audio-video equipment, Other home electric appliances, Furniture and any other household items.

Car Loan: Car, Jeep, Station Jeep, Pick up Van, Cover Van, Bus, Truck, Abulance and any other vehicle for own use.

Doctors Loan: For the Doctors only.

Advance Against Salary: Any qualified person

Education Loan: For Study purpose only

Travel Loan: For traveling purpose,

Wedding loan: For wedding only.

CNG Conversion Loan: To convert into CNG

Any Purpose Loan: For emergency need

Hospitalization Loan: For treatment in hospital

3.6 CREDIT LIMIT, PERiOD OF LOAN, DOWN PAYMENT:

Under CCS program of Prime Bank Limited a borrower can get maximum of taka 40,00,000 and minimum taka 10,000. The down payment is 10% of the loan for each product.

3.7 INTEREST AND OTHER CHARGES:

The interest rate is 15% for the all products. And Prime Bank charges 1% service charge and 1% risk fund for all products other than for Car loan, Doctor’s loan, Advance against salary and CNG Conversion loan.

3.8 APPLICATION PTOCDURE:

The intending client will have to apply for the credit in Bank’s printed application form, which is available in respective Branch on payment of Taka 10 only. Customers will submit the application form dully filed-in with 2(two) photograph and signed along with quotation for purchase of desired article or any other relevant documents.

The customers’ name/other name(s) including nickname, if any should be mentioned in every loan application.

3.9 PROCESSING OF APPLICATION:

On proper scrutiny of the application, branch will inform the initial decision (acceptable for processing /decline) to the applicant within 3(three) working days from the date of receiving application.

Applicant will submit the above dully filed-in with the following additional papers.

†    Salary certificate for service holders.

†    Trade license and TIN Certificate (if any) for businessperson.

†    TIN Certificate of applicants for vehicle loan (compulsory)

†    Bank statement of last six month.

†    Attested photocopies of current tax receipt, electric bill etc & lease agreement (if any) when the source of income is house rent as a land lord.

Branch will inspect the given information with respect to eligibility, feasibility and security. After completion of all necessary formalities, Branch shall disburse the loan or refuse the proposal within 7(seven) working days from receiving the additional papers. Price of the items (Down payment + loan amount) should be given to the respective supplier through Payment order (PO) after completion of necessary documentation.

3.10 DOCUMENTS:

For execution of CCS loan, Bank usually uses two types’ documents. One is application from and other one is charge document. Details of these documents are given below.

Application Form:

The contents of application form for CCS loan of different banks are almost the same and these are as follows.

  • Personal Details of Applicant (s): The applicant’s personal information is written down here.
  • Employment Details: In this section, applicant has to specify the details about his employment (Name of the Company where he belongs, designation, years of service, salary etc.)
  • Loan Details: Amount of Loan, Period, Interest, Equity, Mode of Repayment, Security and Other charges are to be mentioned.
  • Financial Details: Total assets, Total liabilities, Monthly income, Monthly expenses and all other financial details of the applicant have to be mentioned.
  • Particulars of Guarantors: Details of Guarantors with their Job details are to be stated here.
  • Quotation: Quotation contains the details descriptions of the goods, brand, model, size, manufacturer, price and details of supplier.
  • Letter of assurance: This is the assurance of the working organization of the client to pay the installment on behalf of the client in case of the client fails to repay.
  • Declaration: This the declaration of the borrower that all the information regarding the quotation of goods is correct and s/he agrees with all terms and conditions of the Bank.
  • Certification of the organization: In this section the working organization will certify that the borrower is the employee of the organization.
  • Photograph: Two copies of photograph are required for each client.

Charge Documents:

Charge documents are set for documents that contain different rules, terms and conditions. If the borrower of CCS loan agrees with all tese terms and conditions regarding the loan s/he needs to sign all the documents. If any disagreements or irregularity occurs in future, these documents will be exercised to suit against the borrower.

Before the disbursement of CCS loan, the following documents must be signed by clients.

The stamps needed for these documents are paid by the clients.

  • Letter of Guarantee: This letter of guarantee is two sided. One is borrower side guarantee and another one is guarantor side guarantee. Borrower side guarantee consists of agreement of all terms and conditions of Bank as well as assurance of proper repayment of installment. Guarantor side guarantee is the undertaking by the guarantor to pay the installments is case of failure of the client.
  • Letter of Hypothecation: It signifies that the goods/items are hypothecated to the Bank.
  • Demand Promissory Note: It is the promise of borrower to pay on demand to the Bank the overdue or total outstanding if necessary.
  • Letter of Installment:In this documents borrower promise to pay all regular and irregular installments in due tme.
  • Letter of Disbursement:This is the declaration of disbursement of Loan to the borrower.
  • Letter of agreement: This is the agreement that the borrower is bound to pay all dues together with all other charges and the borrower gives the bank the authority to discharge the agreements any time due to the fault in borrower side.
  • Letter of Authority: This is the letter the borrower gives the Bank the Authority to debit the account if necessary.

3.11 MODE OF REPAYMENT:

Repayment of loans including accrued interest will be made by equal monthly installments, which will start from the following month of the disbursement of loan. Before disbursement of loan, the customer will deposit crossed cheque covering the total number of monthly installments in favor of Bank which will have to be presented for collection on the due date. Installment will be paid within 7th day of each month. However, prepayment is allowed.

3.12 OTHER CONITIONS:

  • Customer will bear the license fee, registration fee, insurance charge etc, if any, in respect of the articles.
  • Customer will bear the expenses for necessary repair and maintenance of the articles during the period loan.
  • After delivery for the articles, the respective customer shall remain responsible if the articles are broken, stolen or damaged. The articles shall be used by the customer with optimum care, caution and prudence and he will be liable for compensation or replacement etc. for any damaged caused due to this negligence, carelessness and inefficient handling. In the event of the articles being lost or totally damaged and become irreparable due to his negligence, careless ness and inefficient handling, he will be liable to adjust Bank’s due i.e. outstanding principal, interest and other charges on demand.
  • Customer will inform the Bank of any Change of his address immediately after the change.
  • The articles shall remain in sole control and custody of the customer who will not let out, lend, resell or transfer the possession or rights of the same to a third party under any circumstances.
  • Customer will keep available all the articles supplied to him for inspection by the Bank officials or supervising agency as and when required.
  • Default in payment of 3(three) consecutive installments shall render the customer liable to handover the articles of the Bank.
  • In case of loan for purchase of Car loan, the registration of the vehicle loan shall be made in the sole name of the Bank/joint name of the Bank and the customer until full adjustment of the loan.
  • The Registration, Blue book, Tax token, Fitness Certificate, etc for vehicles must always be kept up to date at the cost of the customer.
  • The vehicles must be covered by comprehensive insurance policy to be taken by the customer on his own expenses.
  • No additional amount will be paid by bank for repairing or any other purpose for which credit was allowed.

3.13 JUDGEMENT PROCESS OF CREDIT PROPOSAL UNDER THE CCS:

Loan and Advances are the main form of asset of a bank. I is very crucial for any bank because it generates the greatest part of revenue for a bank. Within the total credit portfolio consumer credit is the most popular form of credit because it is easily recoverable. To disburse the loan, the credit officer has to verify the potential borrower’s income, expenditure pattern, type of service etc to select the appropriate borrower. The factors which are considered in this process are stated below:

Borrower’s income:

It is the vital factor for selecting a borrower. To gather required information in his regard, the borrower is requested to allow the credit officer to verify the following subject matters:

  •   Place of employment
  •   The stated Salary
  •   The continuity of Existing job
  •   Income from part time employment
  •   Spouse’s income
  •   Income from rentals
  •   Dividend or interest
  •   Children’s support

Besides these the credit officer also verifies borrower’s income from the TIN certificate, tax return and salary statement etc.

Estimated Housing Expenses:

The credit officer tries to evaluate the expenditure pattern as well as monthly living expenditure with the help of the following information:

  •   Children’s educational expenses
  •   House rent
  •   Interest payment on previous borrowing
  •   Interest payment for the loan which is under consideration

Location:

The location of the borrower is an important factor for selecting any borrower. If the location of the borrower is far from the bank, the physical communication becomes though for the bank. So bank likes to provide loan to those who stay near to the bank’s branch.

Assessment of credit History:

The credit officer evaluates the credit history of a potential borrower with the help of the CIB report and with the inquiry of his or her Business community.

Social Status:

Social status of a borrower is to be verified from the following information:

  •   Ownership of a car
  •   Ownership of a House in the metropolitan area
  •   Holding a land phone in residence
  •   Holding a passport, TIN certificate
  •   Membership of a first club
  •   Marital status

Guarantors status:

Under the CCS, credit is offered by taking personal guarantors from a third party. The guarantor will be liable for the default of loan. So guarantor’s designation, type of job, monthly salary, period of service, office address, and the consent of the guarantors regarding the matters are evaluated.

3.14 MONITORING AND RECOVERY:

The credit under this scheme is fully supervised and as such, the success of the scheme depends on proper and persistent supervision, follow up, persuasion and monitoring of the credits by the Branches. Branches shall maintain proper records of the applications received, loan sanctioned, disbursement and recovery made. It is worthwhile to mention here that optimum recovery can be ensured by developing relationship with the customers and the beneficiaries and maintaining supervision thereon without filing any suit/case. The mechanism of supervision and monitoring are as follows:

†    Regular checking of the balance of the clients account

†    Regular communication with the defaulting customer and guarantors physically/over telephone.

†    Issuance of letter to customers immediately after dishonor of cheque.

†    Issuance of letter to defaulting customers and respective guarantors.

†    Contacting the employers of the defaulting customers (after there overdue installments)

†    Issuance of legal notice to the customers and guarantors prior classification of loans.

†    Issuance of application/greeting letter  to the regular customers.

†    Periodical visit to the customer to maintain relationship and supervision of supplied goods/items.

†    Legal actions to be taken after all possible efforts to recover the Bank’s dues have in vain.

3.15 STEPS AGAINST DEFAULTERS:

If a borrower fails to pay 3(three) installments consecutively s/he consider as a defaulter. Prime Bank Limited usually follows the following guidelines for treatment of its overdue installments.

†    Telephone contact

†    Cheque bounce Letter

†    Overdue recover Letter

†    Letter of guarantors

†    Letter to authority

†    Legal notice to borrower and guarantor

†    Suit notice

3.16 LOAN AMORTIZATION:

Prime Bank uses the most common loan amortization method that is “Capital Recovery Method”. Under this method constant monthly payment is calculated on an original loan amount at affixed interest for a given term.

Example:

Loan Amount: BDT 100,000 (PV)

Interest rate: 15%(r)

Number of Installments (montly): 24

So monthly install will be: PV/*MPVIFA@15%,  24months)

So Monthly installment: 100,000/20.62423451=BDT 4848.66/Month

*MPVIFA=Monthly Present Value Annuity Factor.

Amortization Schedule:

Month(1)BeginningBalance(2)Monthly Interest(3)=(2)*(.15/12)Monthly Payment(4)MonthlyAmortization(5)=(4)-(3)Balance(6)=(2)-(5)
1100,00012504848.663598.6696,401.34
296,401.341205.024848.663643.6592,757.69
392,757.691159.474848.663689.1989,068.49
489,068.491113.364848.663735.3185,333.18

Table 1: Amortization schedule

3.17 PREPAYMENT

Customer can repay the loan before the maturity of the loan. Prime usually welcomes the early payment of loan and no prepayment penalty is to be charged. Prime bank always try to avoid classified loan even at a cost of losing profit and receiving risk just to maintain its credit history and good CAMEL rating.

3.18 DIFFERENT CREDIT SCHEMES OF PBL

Any Purpose Loan 
This scheme is to meet the emergency need for fund by fixed income group of salaried person in Govt./Semi govt. /Autonomous bodies/ Multinational Co./ Banks/Insurance/Financial Inst./Educational Inst. with confirmed 3-years service ahead. Letter of introduction including name, fathers name, designation, date of birth, date of joining, place of posting, date of last promotion, date of retirement, basic salary, total emolument, take home salary etc. will be required. This scheme is only for service holder.
Loan Limit and Period of Loans

Type of Customer

Loan Limit

Duration of the Loan

Salaried Person

Tk. 1,50,000

2-yrs

Required Documents

01.

Employer Certificate

03.

Bank Account Statement of last six months

02.

Photocopy of Tin Certificate, if any

04.

Photocopy of Passport, Telephone(T&T) Bill, if any
Security

01.

Undated Cheques

02.

Lien on Service benefit of the concerned employee from the employer
Advance Against Salary
This scheme is for salaried Bangladeshi person in Govt./Semi govt. /Autonomous bodies/ Multinational Co. / Banks / Insurance / Financial Inst. / Educational Inst. with confirmed 3-years service ahead. A Letter of introduction including name, fathers name, designation, date of birth, date of joining, place of posting, date of last promotion, date of retirement, basic salary, total emolument, total in PF, take home salary etc. will be required. Loan limit is 8 times of gross salary who have Salary A/C with us and 6 times of gross salary who have not Salary A/C with us subject to highest Tk. 3.00 lac.
Loan Limit and Period of Loans

Type of Customer

Loan Limit

Duration of the Loan

Salaried Person

Tk. 3,00,000

2-yrs

Required Documents

01.

Employer Certificate

03.

Bank Account Statement of last six months

02.

Photocopy of Tin Certificate, if any

04.

Photocopy of Passport, Telephone(T&T) Bill, if any
 Security

01.

Undated Cheques

02.

Lien on Service benefit of the concerned employee from the employer
Car Loan
Car Loan will be sanctioned against Registration of the Vehicle in the name of the Bank.  Instead of down payment, the Customers shall have option to avail loan against their FDR or any other savings instruments up to 90% of the loan amount.
Eligible Items / Articles

01.

Car

05.

Pick up Van

02.

Jeep

06.

Cover Van

03.

Station Wagon

07.

Bus / Truck for Corporate Bodies (own use)

04.

Any other vehicles for own use

08.

Ambulance for Corporate Bodies / Medical Professionals
Loan Limit and Period of Loans

Name of the Item

Loan Limit

Duration of the Loan

New Vehicle

Tk. 40,00,000

5-yrs

Recondition Vehicle

Tk. 15,00,000

4-yrs

Bus / Truck for Corporate Bodies for own use only

Tk. 40,00,000

5-yrs

Required Documents

01.

Employer Certificate for Service Holders

04.

Bank Account Statement of last six months

02.

Photocopy of Trade License for Businessmen

05.

Photocopy of Passport, Telephone(T&T) Bill, if any

03.

Photocopy of Tin Certificate, if any
Security

01.

Undated Cheques

02.

Registration of the vehicle in the name of the Bank
CNG Conversion Loan
This scheme is to meet the funds requirement for CNG conversion of vehicles for those who are salaried person in Govt./Semi govt. /Autonomous bodies/ Multinational Co./Banks/Insurance/Financial Inst./Educational Inst. with confirmed 3-years service ahead, businessman having adequate cash flow and corporate Bodies.
 Loan Limit and Period of Loans

Type of Customer

Loan Limit

Duration of the Loan

Owner / Valid user of the vehicle

Tk. 60,000

1.5-yrs

Corporate Bodies

Tk. 1,00,000

1.5-yrs

Required Documents

01.

Employer Certificate for Service Holders

05.

Photocopy of Passport, Telephone(T&T) Bill, if any

02.

Photocopy of Trade License for Businessmen

06.

Photocopy of the Blue Book etc.

03.

Photocopy of Tin Certificate, if any

07.

Photocopy of the registration of the Vehicle

04.

Bank Account Statement of last six months
 Security

01.

One or two personal guarantee from family member (effective member i.e. spouse / father / mother / brother / earning son, Corporate guarantee in the case of Company or as the case may be acceptable in the bank).

02.

Undated cheques in favor of the Bank covering the whole amount
Doctors Loan
Any Bangladesh citizen who is a graduate in Medical Science / Dentist / Eye / Allopathic / General Practioners desiring to set up chamber, medical store with necessary medical equipments and to become self-employed have the opportunity to take this loan.
    

Loan Limit and Period of Loans

Type of Customer

Loan Limit

Duration of the Loan

General Practitioner MBBS/BDS/

Tk. 5,00,000

4-yrs

Specialized Doctor

Tk. 10,00,000

5-yrs

Required Documents 

01.

Employer Certificate for Service Holders

04.

Photocopy of Passport, Telephone(T&T) Bill, if any

02.

Photocopy of Tin Certificate, if any

05.

Attested Photocopy of the Certificates of the last degree and BMA membership certificate

03.

Bank Account Statement of last six months
Security 

01.

The ownership of medical equipments to be purchased must be hypothecated to the Bank under hire purchase mode

02.

Two personal guarantee

03.

Undated cheques
Hospitalization Loan 
Hospitalization loan will be provided for treatment purpose or surgery where hospitalization is necessary. The loan shall be available for the salaried person, i.e., employee of the Govt. Organizations / Semi-Government Organizations / Autonomous Bodies / Multinational Companies / Banks / Insurance Companies / Educational Institutions / Corporate Bodies.
Loan Limit and Period of Loans

Type of Customer

Loan Limit

Duration of the Loan

Salaried Person

Tk. 5,00,000

2-yrs

 Required Documents

01.

Employer Certificate

02.

Photocopy of Tin Certificate, if any

03.

Photocopy of Passport, Telephone(T&T) Bill, if any
Security

01.

Personal guarantee from an individual having means, standing and social status acceptable to the bank and another from his/her family

02.

Undated cheques in favor of the Bank covering the whole amount

03.

Letter of Assurance from the Employer / Authority.
Household Durable Loan 
Household durable loan is sanctioned against guarantee of third parties acceptable to the bank or pledge of FDR, Saving instrument of Banks and assignment of salary where applicable.
Eligible Items / Articles

01.

Motor Cycle

07.

Refrigerator

02.

Personal Computer

08.

Audio-Video Equipment

03.

Photocopier / Fax Machine

09.

Other Home Electric Appliance

04.

Small PABX System

10.

Furniture

05.

Television

11.

Any Other Household Durables

06.

Mobile Phone Set
 Loan Limit and Period of Loans

 

Name of the Item

Loan Limit

Duration of the Loan

Motor Cycle

Tk. 1,00,000

2-yrs

PC/Lap Top

Tk. 1,00,000

2-yrs

Photocopier/Fax

Tk. 1,00,000

2-yrs

Other Item/Furniture

Tk. 5,00,000

3-yrs

Required Documents

01.

Employer Certificate for Service Holders

04.

Bank Account Statement of last six months

02.

Photocopy of Trade License for Businessmen

05.

Photocopy of Passport, Telephone(T&T) Bill, if any
Security

01.

Two Personal Guarantee

02.

Undated Cheques
Marriage Loan 
This scheme is to meet  the fund requirement  for marriage  purpose of salaried person in Govt./Semi govt. /Autonomous bodies/ Multinational Co./Banks/Insurance/Financial Inst./Educational Inst. with confirmed 3-years service ahead and  businessman having adequate cash flow.
Loan Limit and Period of Loans

Type of Customer

Loan Limit

Duration of the Loan

Salaried Person

Tk. 3,00,000

3-yrs

 Required Documents

01.

Employer Certificate for Service Holders

04.

Bank Account Statement of last six months

02.

Photocopy of Trade License for Businessmen

05.

Photocopy of Passport, Telephone(T&T) Bill, if any

03.

Photocopy of Tin Certificate, if any

06.

Evidence thereof
Security

01.

Undated Cheques

02.

Two personal guarantee
Travel Loan 
This scheme is for meeting fund for travel purpose of salaried person in Govt./Semi govt. /Autonomous bodies/ Multinational Co./Banks/Insurance/Financial Inst./Educational Inst. with confirmed 3-years service ahead and businessman having adequate cash flow.
Loan Limit and Period of Loans

Type of Customer

Loan Limit

Duration of the Loan

Salaried Person/ Businessman

Tk. 2,00,000

3-yrs

Required Documents

01.

Employer Certificate for Service Holders

04.

Bank Account Statement of last six months

02.

Photocopy of Trade License for Businessmen

05.

Photocopy of Passport, Telephone(T&T) Bill, if any

03.

Photocopy of Tin Certificate, if any

06.

Evidence thereof

 

 

 

 

 

 

 

 

More parts of this post-
An Overview of Prime Bank Banking System (Part-1)

An Overview of Prime Bank Banking System (Part-2)

An Overview of Prime Bank Banking System (Part-3)

An Overview of Prime Bank Banking System (Part-4)

 

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