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BRAC Bank Limited

UNSECURED PERSONAL LOAN

(UPL)

PRODUCT PROGRAM

BRAC BANK LIMITED Bangladesh

Unsecured Personal Loan Product Program


Rafat\PPG\UPL

BRAC Bank Limited

1. PRODUCT DEVELOPMENT DOCUMENT APPROVAL SHEET Product Name Unsecured Personal Loan (UPL) is a terminating facility offered by Banks Retail Banking Division to individual salaried or self-employed people living in the cities / towns where the Bank has its operations. It is a clean or unsecured loan in the sense that there is no cash security (like Govt Savings Certificates or Fixed Deposits etc) taken against the loan. Only security is: a) Letter of Introduction from employer; or b) Transfer of monthly salary and assignment of Terminal Benefits; or c) Personal Guarantee taken from specific section of people. This is an any purpose loan which means the applicant does not have to declare the purpose for which he / she is taking the loan, hence there will be no hypothecation over the asset to be purchased. The credit risk of the product is covered by a process of strict selection of prospective borrower and the company he/she is working for. Next Review Date August 2004 Business Unit Retail Banking Division Targeted Peak Outstanding Over Next 12 Months Unsecured Personal Loan: BDT 10 crore

1.1 Participants in the Approval Process of the PPG: Name / Designation Signature Mohd. Rafat Ullah Khan Head of Credit Saifuddin M Naser Head of Distribution Naushad Hussain Head of Sales Amzad Hossain Head of Internal Control, Compliance & Organizational Development Kaiser Tamiz Amin Chief Operations Officer Imran Rahman Deputy Managing Director
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Date

BRAC Bank Limited

M Ehsanul Haque Managing Director

Unsecured Personal Loan Product Program


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BRAC Bank Limited

2. CREDIT PRINCIPLES THAT GOVERN UNSECUERD PERSONAL LOAN These fundamental guidelines have been established specifically for Unsecured Personal Loan (UPL) in order to provide a structure around which lending decisions must be based. They are the key elements supporting banks credit culture with regard to unsecured loans; and they will dictate our behavior when dealing with customers and managing lending portfolio of such loans. We believe credit policies and procedures can never sufficiently capture all the complexities of Unsecured Personal Loan (UPL). Therefore, the following credit principles are the ultimate reference points for all BRAC Bank staff making lending decisions about UPL: 1. Assess the customers character for integrity, ability and willingness to repay 2. Only lend to the customer who belongs to a fixed income group 3. Only lend to the staff of widely known and highly reputed companies having an unquestionable business track record 4. Only lend to the staff of such companies which have professional career advancement platform for its people 5. Assess carefully the integrity and loan repayment capacity of the guarantor 6. Plan for the possibility of default 7. Use common sense and past experience in conjunction with thorough evaluation and credit analysis. Do not base decisions solely on customers reputation, accepted practice, other lenders risk assessment or the recommendations of other officers 8. Behave ethically in all credit activities 9. Be proactive in identifying, managing and communicating credit risk 10.Be diligent in ensuring that credit exposures and activities comply with the requirement set out in this Product Program 3. EXECUTIVE SUMMARY This product program is being presented as an annual renewal in accordance with the Credit Policy of BRAC bank. The following provides a short description of the revised PPG for Unsecured Personal Loan: TYPE A - Salaried MNCs and LLCs staff : A personal loan scheme offered to the salaried employees of reputed multinational and large local corporate bodies. The purpose of the loan can be purchase of tangible assets and / or spending on intangibles of diverse kinds. No security is offered by the customer other than the usual DP notes etc. A Letter of Introduction is taken from the employer confirming the applicants salary, length of service, designation etc. Minimum total length of service required is 2.0 years.
Unsecured Personal Loan Product Program
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BRAC Bank Limited

Applicant can take up to 8 times of his net monthly salary, not violating the Debt Burden Ratio of 35%. TYPE B - Salaried mid-range company staff: A personal loan scheme offered to the salaried employees of medium sized or mid-range local companies such as reputed schools, pathology labs, hospitals, restaurants, hotels, newspapers, airlines, travel agencies, real estate developers of repute, insurance companies, NGOs, aid agencies, UN bodies, reputed trading firms and business establishments and Government Employees etc. The purpose of the loan can be purchase of tangible assets and / or spending on intangibles of diverse kinds. Security offered are Undertaking for transfer of monthly salary and assignment of Terminal Benefits. Personal Guarantee of spouse/parents are required. A Letter of Introduction is taken from the employer confirming the applicants salary, length of service, designation etc. Minimum total length of service required is 3 years. Applicant can take up to 6 times of his net monthly salary, not violating the Debt Burden Ratio of 35%. In case of Banks and Govt employees, since salary transfer is not possible, loan will be given against Personal Guarantees (minimum 2). Any confirmed Govt Employee can take the loan irrespective of the length of service. However, ideally the loan amount should not exceed the current balance of applicants Terminal Benefits with applicants employer. 3.1 OBJECTIVES AND FUTURE GOALS Briefly, our current objectives and business strategies for Installment Loans are as follows: While our business focus would be securing growth through selling Cash Secured Facilities (like Secured Overdraft & Secured Loans) mainly, the UPL growth will also be pursued with extra emphasis being placed on identification of prospective employees of banks approved multi-national and local corporate firms; and also the identification of good and viable guarantors for the loan. As a new bank, we shall focus on continuously bringing in new companies under our approved list in order to market the product widely. We shall focus on capitalizing the advantage of less competition from our competitor banks over this product. Currently some local private banks have similar products like Standard Chartered & HSBC Group has similar product and the market demand for such a loan product is obviously high. Our aim is to be the # 1 bank in terms of providing this facility to eligible customers. We shall focus on credit quality and risk management. This will include our
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aim of maintaining the overall delinquency ratio (30+ dpd) at below 1% and overall net bad debt ratio at below 1% for the next year. We shall run seasonal promotional campaigns to create market awareness and to boost sales. We believe, special offerings of a campaign attract substantial market attention and it is a very effective measure to fight the competition. We shall strive to bring our product offering at par with or better than the competition after close assessment of risk and reward on a continuous basis.

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BRAC Bank Limited

4. UNSECURED PERSONAL LOAN PRODUCT TYPES AND PARAMETERS PRODUCT TITLE UNSECURED PERSONAL LOAN Credit Criteria Permissible Deviations Customer Segment Employees of reputed MNCs and large local corporates - Employees of medium sized or mid-range local companies such as reputed schools, pathology labs, hospitals, restaurants, hotels, newspapers, airlines, travel agencies, realestate developers of repute, insurance companies, NGOs, aid agencies, UN bodies, reputed trading firms and business establishments and all other salaried employees including Government Employees etc Purpose Miscellaneous personal financial requirements. The customer has to declare the purpose of the loan but submission of supporting document is not mandatory. Purposes may be as follows: House renovation Marriages in the family Advance rental payments Hospitalisation or other emergency medical needs Trips abroad Purchase of miscellaneous household appliances Purchase of Personal Computers Purchase of refrigerators Purchase of audio-video equipment Purchase of furniture Nationality Bangladeshi only Location Customer must reside, at the time of writing the loan, within the city or town areas where the Bank has its operation. As a proof customers address, he has to submit the copy of latest phone/utility bill/other bank statement age 25 Regular Criteria

Minimum (years) Maximum age Up to 60 (years) at loan maturity Minimum - Minimum total service length of 2.0 years May be relaxed in Service / length special cases by the (Type A) of business depending - Minimum total service length of 3 years DMD
Unsecured Personal Loan Product Program
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BRAC Bank Limited

Credit Criteria

Minimum Income BDT) Minimum Loan BDT 50,000 Size Maximum Loan TYPE A: up to 8 times net salary. Not violating Maximum Loan Size the Debt Burden Ratio of 35% and loan limit of amount may be BDT3.0 lac enhanced by DMD depending upon the TYPE B: up to 6 times net salary. Not violating merits of the the Debt Burden Ratio of 35% and loan limit of proposal. BDT3.0 lac Security Type A: Requirement Letter of Introduction from the employer (as per our format) Complete Loan Document For tangible assets letter of Hypothecation Personal Guarantee of Spouse/Parents Bank Statement Personal Net-Worth Statement Post dated cheques eqv. to 6 monthly installment One undated blank cheque (for future default covering) Type B: Letter of Introduction Complete Loan Document Letter of undertaking for salary and Terminal Benefits assignment Personal Guarantee of Spouse/Parents & Other individuals Bank Statement Personal Net-Worth Statement Post dated cheques eqv. to 6 monthly installment One undated blank cheque (for future default covering) In case of Banks and Govt employees, since salary transfer is not possible, loan will be given against Personal Guarantees (minimum 2).

Permissible Deviations (Type B) upon business - Govt Employees must be confirmed on job justifications (Type B) Minimum monthly income of BDT 10,000 for all (Net categories

Regular Criteria

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Credit Criteria Guarantor who?

Regular Criteria

Permissible Deviations Individuals with ranks equivalent to Senior Assistant Secretary or higher would qualify as guarantor Bank Officials (equivalent to SPO of NCBs, AVP/Branch Manager of Local and Foreign banks) and Departmental Head of Multinational Company and/or established Loacl Corporate. Guarantors must be posted within city.

Minimum 6 months of satisfactory banking relationship Banking Record with BRAC Bank Criteria Or 12 months of satisfactory banking relationship with other bank Interest Rate Type A: 17% p.a. Tenor Repayment Method Disbursement Mode Type B: 18% p.a. Minimum 12 months/24 months &/or maximum 36 months Equal Monthly Installments via Standing Order -

By making credit to customers Savings/Current account in BRAC Bank First Generally, one month after the date of Repayment customers availing the loan. May be earlier if Date customer wants. Additional Loan - Subject to customers continuing to meet the Debt Burden Ratio requirements - Also subject to performance in existing loan for at least half of its tenor Debt Burden A maximum of 35% for all category based on Ratio (DBR %) Net Monthly Income Loan Processing 1% of the loan amount, minimum BDT 500 Fee Penal Charges 4% p.a. on the arrears amount or minimum May be waived / BDT 100 per month whichever is higher. lowered by DMD depending upon relationship & other merits. Early A BDT 500 flat fees Settlement Charges Loan re- 1% of the original loan amount, minimum BDT May be waived / scheduling 500 whichever is higher lowered in special
Unsecured Personal Loan Product Program
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BRAC Bank Limited

Credit Criteria

Permissible Deviations charges cases by the DMD depending upon business justifications Verification of Banks nominated agency will verify the Personal Details addresses both present and permanent, all telephone numbers of borrower, guarantor, referee, employment/occupational details, invoice etc. This will be a physical verification in all cases. After the verification is done, the agency will submit a report on their findings in the prescribed form. The report will be kept attached to the borrowers loan file. Substantiation Following as appropriate: of Income - Salary Certificate / Salary Slip - Bank Statements - Income Tax returns of last period - Any other document that may stand as a proof of income Telephone Telephone at borrowers office and residence requirement at or a mobile telephone owned by the borrower residence Present Address Borrower must reside for at least 6 month in the same address. Address of Details (address, Phone No., relationship etc) of close relative two close relatives required Loan in name of Allowed only if Personal Guarantee is provided housewife with by the husband or loan is taken in joint names no income of of husband and wife. (only for Type-A client) her own Though specific disclosure of need is not a mandatory requirement on Restrictions on customers part, no facilities can be granted for purposes that are purpose of the legally in contradiction with the law of the land. It is therefore facility advisable that the dealing officer knows the purpose of the facility and records the same.

Regular Criteria

TARGET MARKET The target market for Personal Loans comprises of the following target segments:
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Salaried individuals working with established corporate entities, Airlines,


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Development Assistance Organisations, Educational institutes etc. Salaried individuals working with Government of Bangladesh (GOB)

LOCATION Within the city of our branch COMPANY APPROVAL The enlistment of companies is continuing with support from corporate presentation, media insertions, direct marketing initiatives, branch merchandising, one-on-one meetings. Attached is some approved Type-A companies, which may be revised from time to time. RISK MANAGEMENT CREDIT RISK The Credit Risk is managed by Credit Division, which is independent of Sales. The following elements on tribute to the management of Credit Risks:

Repayment ability and intention of the borrower- The primary factor of consideration in granting a loan will be the Debt-Burden Ratio of the borrower. The Debt-Burden ratio is calculated on the basis of the net monthly income of the customers. Installments are collected automatically by the system on credit of the amount through standing orders. While the product is targeted at two distinct market segments the risk is mitigated to some extent by the fact that these customers will have to have minimum service length of 2.0 years and at least six months of satisfactory banking relationship with BRAC Bank or twelve months of satisfactory banking relationship with another bank. In case of Type B category customer we will take personal guarantee from acceptable individuals. Full set of charge document for the value of the facility shall also be procured.

Termination/Resignation of borrower- In case of termination or resignation of the borrower from the service the shortfall (if any) is addressed directly with the borrower. This is addressed by the fact that we propose to have the employee's End of Service Benefits to the Bank, and for others personal guarantees from reliable, steady, solvent individuals will also be obtained. In cases where these securities cannot be obtained, our collection and recovery procedures are designed to deal

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BRAC Bank Limited

with these eventualities and restrict losses arising from such cases to a minimum. .

Geographic location- The coverage of the product will be restricted to the cities where we have branch representation: Dhaka, Chittagong and Sylhet. Deviations- Deviations from the Credit Criteria have been defined and will be subject to strict monitoring. Exposure per Customer: Exposure per customer is capped on the basis of income and maximum loan size. MIS is maintained:

On Portfolio Mix (to identify concentrations) On Delinquency -to identify and manage Credit losses Feedback from MIS is useful in revising Credit Criteria if delinquency or credit losses in specific companies/age groups or for certain types of deviations show an adverse trend. Specimen signatures of authorised signatories for each approved company are maintained on record. All signatures from company letters are verified against records. Authorisation for standing instruction to deduct the EMI amount from the customers deposit account are obtained. Up-to date data on an individual's credit worthiness or past defaults is very difficult to come by. There are, however, be a number of credit checks built into the approval process to verify all the information presented by an individual and to tally it with data from available reports. In the case of salaried corporate executives of Type B customer, the risk is mitigated to a certain extent by the assignment of End of Service Benefits (EOSB) to the Bank, or through the third party guarantee. With the changes proposed we would lend out to individuals who are either our customers or are maintaining satisfactory account relationship with another reputed bank for at least 12 months. Our collection and recovery procedures are designed to deal with any eventualities that may arise and restrict any resultant losses within acceptable limits.

INTEREST RATE RISK

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The tenor range for our proposed personal finance products is 12-36 months with an average tenor of 24 months. We propose to have a floating interest rate for the product, subject to review and change at any time. POLITICAL AND ECONOMIC RISK POLITICAL RISK INTERNAL The political situation in Bangladesh continues to remain confrontational among tile major parties. There is frustration that the political leadership, both in power and those in opposition, have been unable to work together to end the impasse created by the public sectors extreme inertia and weak capacity. There is also some uncertainty about the direction of economic policy and showdown in the pace of economic reforms in recent years. EXTERNAL Relationship with neighbouring countries is fairly good at present. Risk of external threats can be considered to be negligible. OPERATIONAL RISK APPROVAL AND DISBURSAL Loan applications are processed for approval according to criteria established in tile Product Programme Guide. Account solicitation, approvals and disbursement are all independent of each other. Input, approval and disbursement sanction authorities are as per the Operation Manual. SAFEGUARDING OF DOCUMENTS All signed customer documentation are maintained by the centralised Loan Administration Deaprtment in fire resistance filing cabinets inside the strong room under dual control. All documents have been vetted by the Bank's legal counsel. OPERA TING PROCEDURES, RECONClLIATION AND REPORTING The Operating Procedures, work flows, reconciliation checks, controls as well as MIS and reporting are being detailed in the Operation Manual. These should be done by Loan Administration department.

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BRAC Bank Limited

RISK OF APPLICATION FRAUD AND ITS MITIGANTS While we are obtaining the necessary documents to ensure accuracy information provided by the applicant on the application form, there is a risk of fraud. To mitigate this, the following checks are carried out: Verification of signature against authorised signatories for a particular company in the case of corporate employees

The status of the signatories are updated regularly Letter of undertaking are obtained from the employer Telephone verification of residence address as well as employment address. Monitoring of loan portfolio outstanding on a regular basis

ACCOUNTING PROCEDURES i) Revenue Recognition

Interest Income Interest accrues on the daily outstanding. The accrued interest, however, is debited to the loan account at quarterly intervals. The loan accounts are credited at monthly/quarterly intervals with Equated Monthly Instalments (EMIs) collected from the borrowers (principal plus interest). Fee Income The processing fee 1% of the loan amount with a minimum of BDT 500 collected up front and credited to P&L immediately. Early settlement charges levied for accounts being settled pre-maturely and is charged at a flat rate of BDT 500. ii) Expenses Legal Charges: This represents costs incurred in any legal action taken against any defaulting accounts, including costs of legal notices, repossessions, court action etc. 5. Corporate Undertaking / Corporate Guarantee

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a) An acceptable form of security when issued by banks approved Multinational and Large Local Corporates. b) By Corporate Guarantee we mean that the company irrevocably guarantees to pay to the Bank the current loan outstanding in case of borrowers repayment default or borrowers resignation or termination of services from the company. c) By Corporate Undertaking we mean that the company undertakes to regularly deposit the salary of the concerned borrower-employee into his/her account in the Bank and also undertakes to surrender his/her terminal benefits to the Bank in case of repayment default or his/her resignation or termination of services from the company. d) The procedures for accepting Corporate undertakings / guarantees are to be as per the bilateral agreements signed between respective organizations and the Bank. 6. RESTRICTIONS ABOUT PERSONAL GUARANTEE

a) Staff members of the Bank are not allowed to offer any Personal Guarantee against any loan. b) When a Personal Guarantee is taken, the guarantors Net-Worth Statement to be obtained and assessed properly to ascertain his/her ability to stand as a guarantor for the loan. 7. PRODUCT DOCUMENTATION 1. Customers current Personal Net-Worth Statement (as per prescribed format) to be obtained for all cases. 2. Proof of income to be obtained as detailed. 3. Clearance certificate from the out-sourced agent with regard to verification of address and other personal details and Software checking from defaulter list of outsource agency to be obtained. 4. Demand Promissory Note to be obtained. 5. Letter of Hypothecation to be obtained in cases when the purpose is purchase of any tangibles. 6. Letter of set-off in respect of deposits / credit balances / margin deposits to be obtained. 7. Copy of customers request letter to his/her company to issue Letter of Undertaking/ Corporate Guarantee (when security is Corporate Undertaking / Corporate Guarantee) to be obtained. 8. Original copy of Corporate Undertaking/Corporate Guarantee duly signed by authorized personnel of the corporate body to be obtained. 9. Original or certified copy of Companys Board Resolution for issuing of Corporate Undertaking or Corporate Guarantee to be obtained (where necessary). 10.When Personal Guarantee is given as additional security, the current Statement of
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BRAC Bank Limited

Personal Net-Worth of the guarantor to be obtained. 11.Personal Guarantee form to be obtained from the guarantor 12.Letter of Agreement detailing all terms and conditions of the facility duly accepted by customer to be obtained. 8. FEE AND CHARGES INCOME CHART The charges table for products under unsecured Personal Loans is as flows: Charge Type Upfront fee / commission Early Settlement Charge Re-scheduling charge Penal Interest / fees Unsecured Personal Loan 1% of loan, min Tk 500 Flat Tk 500 1% of loan, min Tk 1000 4% on arrears, min Tk 100 per month

As the above table shows, there is an immense scope of fees, commission and charges earning from Unsecured Personal Loan. In fact, income from fees / commission / charges will add up to some 20 25% of gross interest income out of this product. 10. WORK FLOW The full Work Flows of Unsecured Personal Loan product will be as follows: Flow 1: Loan application with income documents, price quotation plus signed security papers (inside & outside of loan book) received by DSEs or Branch staff from customer All application, income documents, price quotation screened by Sales Officers who perform an initial credit check. Okay ones forwarded to Head of Sales/Head of Distribution Head of Sales/Head of Distribution recommend the proposal and send it to Credit Division Assessment done by Credit Analysts Side by side, the Verification of Personal Data undertaken by out-sourced agents Credit Analysts recommends and forward the application to approver Proposal goes to Head of Credit / DMD/ or the Board as appropriate for approval If approved and clearance obtained from out-sourced agents, customer is informed by DSEs Flow 2: Customer is informed by DSEs to come to the branch to collect money from the account or to collect pay-order as appropriate
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BRAC Bank Limited

Branch Manager handovers the Banking Arrangement Letter to the borrower explaining all the terms & conditions of the facility Sales Officer records point for the sale against individual DSEs performance record sheet Flow 3: Officer Loan Administration carefully checks security documentation, and other necessary documents to ascertain that every required document is in order and nothing is pending If so, Officer Loan Administration books the loan in system and credits customers deposit account Same Officer forwards the set of documents to the Head of Loan Administration Department of security lodgment and system cross check Authorised Officers of Loan Administration Department check if everything is inputted correctly in the system by Officer Loan Administration Authorised Officers of Loan Administration Department then lodges securities in MBS and stores those in fire proof cabinet under dual key control Loan Administration Department realizes monthly installment Any change in the above Work Flows must be approved by DMD/COO

11. COLLECTION & RECOVERY 11.1 Delinquency Definitions for Unsecured Personal Loans Failure to repay the installment on due date makes an Unsecured Personal Loan delinquent. The delinquency levels for this particular type, its collection process and provisions are based on days-past-due (dpd) calculations i.e. the number of days loan installment is missed by the customer. 11.2 The CCU will operate under the following guideline principles: Whenever a loan instalment falls overdue in Dhaka city, CCU will take up the matter and utmost efforts to collect the overdue instalment. In this regard, Branch managers/Head of Sales will co-operate CCU team as and when requested. The branches outside the Dhaka City are responsible for the collection activities. Branch Manager outsides the Dhaka City will have to monitor each and every retail client on regular basis. Branches will send their collection activity report on weekly basis to Loan Administration Department with a CC to Head of Credit.
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BRAC Bank Limited

A Workflow chart is given below for guideline to all concerned:

11.3 Collection Steps by Central collection Unit (CCU) and Delinquency / Provision status
Collection Steps by Central Collection Unit (CCU) and Delinquency / Provision status: Sl. No. 1. 2. 3. 4. No. of Overdue Installment 0<ATE<=1 1<ATE<=1.5 1.5<ATE<=2 2<ATE<=3 Action to be taken - Letter to be dispatched - 1st Reminder letter - Follow up over phone - 2nd Reminder letter - Single Visit - Sl. No. 2 follows -3rd Reminder letter with CC to Guarantor -Group visit by CCU team member -Letters to employer, reference & all above effort follows -Total loan call up -Total loan call up to Guarantor -Final reminder specifying for legal action after 15 days. -Other collection efforts continues -Serve Legal notice -Letter to different Banks/Association & -Other collection efforts continues

5.

3<ATE

6.

After 3.5 ATE

** Provisions to be made as per central banks rule. A conservative principle may be applied in this case. How CCU perform his job: 1. 2. 3. 4. 5. Maintain daily note after making contact with them. Follow up on the date the clients commitment to repay Maintain individual file for 3 ATE & above defaulter Generating reminder letter system (in-built) & mail them. Provide various reports to the management.

11.4 Reschedulement of Repayment reschedulement is a one-time-chance only. An account cannot be rescheduled twice. No reschedulement is allowed without an initial down payment of at least 30% of the total current overdue / arrear amount of the account A concessional interest rate may be charged due to the financial difficulties of the customer. The rate however must be above the average cost of fund rate of the bank as at that date
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A formal request letter by the client is mandatory An extended term may be offered in line with customers ability to pay. Substantiation of customers current income is mandatory for any reschedulement A rescheduled loan may be upgraded A rescheduled loan can be managed by Recovery Agents side by side of banks collection staff.

11.5 Forced Sale of Item Financed By The Bank This option should be considered when appropriate. Given the practical problems involved in making this effort, officer is to exercise caution and take assistance of Banks lawyer while proceeding on forced sale. An account where forced sale is planned is to be downgraded. It may appear necessary to give consideration to writing off the residual balance after realization of some amount through forced sale of financed asset. Officer will try to convince the customer to come into a reschedulement arrangement for payment of the same residual amount before writing off decision is taken. 11.6 Compromise Settlement In deciding whether a compromise settlement will be made or not, the longer term advantages and disadvantages must be considered. The attraction of an expeditious settlement that provides less than full recovery must be measured against the prospects for enhanced recovery (and increased uncertainty of recovery) that may result from a longer-term strategy. Generally, depending upon complexity of account management for each account, it is better to opt for an expeditious compromise settlement. Since it is highly likely that full payment of principal and contractually due interest will not be made within the originally contracted term by the high risk or impaired asset customer, officer is advised to explore the possibility of a fast compromise settlement in all cases. While making a compromise settlement deal, officer is to ensure that no theoretical loss is incurred. By theoretical loss we mean a loss that arises from giving waiver to any portion of principal amount and / or any portion of contractually due interest (accrued up to the day the settlement is made). 11.7 Write-off of bad debts A write off is necessary to remove from the Banks books credit risks assets which are considered to be irrecoverable from the borrower, guarantor or any other potential recovery source. Full Write Off

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Officers delegated a discretion to write off bad debts may exercise their discretion to write off the full amount of the customers borrowings subject to: All tangible security having bee realised, and All avenues of recovery having been adequately explored such that the full amount of the debt is clearly irrecoverable, and Maximum effort is already put to convinced the customer out of court to fully or partially settle the debt by selling the asset financed by the Bank

Partial Write-Off Officers delegated a discretion to write off bad debts may exercise their discretion to write-off a portion of the customers borrowings subject to all known sources of repayment being insufficient to: Pay an acceptable market rate of interest (or any other interest rate agreed under a troubled loan reschedulement) on the total amount of the borrowings; and Amortize repayment of the total borrowings over a reasonable period

This would entail all avenues of recovery having been adequately explored and an assessment being made that: Reasonable steps have been taken to realize all tangible security Maximum potential recovery is clearly established by reference to current market values; and The shortfall to be written off is clearly identified as being irrecoverable.

11.8 Monitoring and legal persuasion after a debt is written off A debt once written off fully or partially does not mean that the Bank will not continue to monitor the case in the Court of Law or follow up directly with the customer in the hope of any possible recovery in the future. Depending upon the justifications behind a particular write-off, decision has to be taken by relevant officer as to which debt will still be pursued and which will not. Generally, there will be no future persuasion when the Bank has granted some waiver of interest only (i.e. bank has received full principal and full contractual interest from customer). But persuasion for a writtenoff case will be considered seriously if the Bank had to write-off substantial portion of principal or substantial portion of contractually due interest or both.

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