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Literature Review
Definition of Bank bank
What is Credit?
What is Bank Credit?
What is Credit Management?
How the Banks manage Credit?
Credit rating and measurement
What risks are found after credit?

DEFINITION OF 'BANK'
A financial institution licensed as a receiver of deposits. There are two types of banks:
commercial/retail banks and investment banks. In most countries, banks are regulated by the
national government or central bank.
Commercial banks are mainly concerned with managing withdrawals and deposits as well as
supplying short-term loans to individuals and small businesses. Consumers primarily use these
banks for basic checking and savings accounts, certificates of deposit and sometimes for home
mortgages. Investment banks focus on providing services such as underwriting and corporate
reorganization to institutional clients.
While many banks have both a brick-and-mortar and online presence, some banks have only an
online presence. Online-only banks often offer consumers higher interest rates and lower fees.
Convenience, interest rates and fees are the driving factors in consumers' decisions of which
bank to do business with. As an alternative to banks, consumers can opt to use a credit union.
Uttara bank is a type of commercial bank in Bangladesh which is performing its banking activity
for long times. Time by Time it has developed its services and activities. It has credit facility as
well as investment and some other facilities like Locker facility, Account holding facility, money
transfer facility and so on.

DEFINITION OF 'CREDIT'
A contractual agreement in which a borrower receives something of value now and agrees to
repay the lender at some date in the future, generally with interest. The term also refers to the
borrowing capacity of an individual or company.
An accounting entry that either decreases assets or increases liabilities and equity on the
company's balance sheet. On the company's income statement, a debit will reduce net income,
while a credit will increase net income.The amount of money available to be borrowed by an
individual or a company is referred to as credit because it must be paid back to the lender at
some point in the future. For example, when you make a purchase at your local mall with your
VISA card it is considered a form of credit because you are buying goods with the understanding
that you'll need to pay for them later.
For example, on a company's balance sheet, a debit will increase the inventory account (an asset)
if the company buys merchandise for resale on credit. On the other hand, a credit will increase
the company's accounts payable (a liability).

DEFINITION OF 'BANK CREDIT'

The amount of credit available to a company or individual from the banking system. It is the
aggregate of the amount of funds financial institutions are willing to provide to an individual or
organization.
A company or individual's bank credit depends on both the borrower's capacity to repay and the
overall amount of credit available in the banking system. Bank credit for individuals expanded
enormously over the past 50 years, as consumers grew accustomed to having several credit cards.
Some observers were predicting that the financial crisis in 2008 could mean a return to those
earlier years, when credit, although relatively cheap, was difficult to obtain, especially for those
with poor credit histories.
What is credit management?
Credit management is the process for controlling and collecting payments from your customers.
A good credit management system will help you reduce the amount of capital tied up with
debtors (people who owe you money) and minimizese your exposure to bad debts. Good credit
management is vital to your cash flow. It is possible to be profitable on paper and but lack the
cash to continue operating your business .
It is A function performed within a company to improve and control credit policies that will lead
to increased revenues and lower risk including increasing collections, reducing credit costs,
extending more credit to creditworthy customers, and developing competitive credit terms.
How the Banks manage Credit?

Credit risk is the potential for loss due to the failure of a counterparty to meet its
obligations to pay the Group in accordance with agreed terms. Credit exposures arise
from both the banking and trading books.
Credit risk is managed through a framework that sets out policies and procedures
covering the measurement and management of credit risk. There is a clear segregation of
duties between transaction originators in the businesses and approvers in the Risk
function. All credit exposure limits are approved within a defined credit approval

authority framework. The Group manages its credit exposures following the principle of
diversification across products, geographies, client and customer segments.
A mature credit risk management framework determines to a great extent the
strength of banking system in general and financial performance of a bank in
particular. Evaluation of maturity of CRM framework however, suffers from a lack of
reliable measure for this purpose. The CRM index for commercial banks, as
proposed here attempts to provide a quantitative measure of management
practices based on predefined benchmark practices that CRM efforts should aim to
develop and follow. Based on the computation of the CRM index scores for thirtythree commercial banks in India, an attempt has been made to validate the index
by relating their CRM index scores with their nonperforming advances ratios.