Internship Report - Sudan

8/12/2019 Internship Report - Sudan

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AnInternshipReportonFunctioningofCreditAdministrationandSupport(CAS)Departmentof

NabilBankLimited

BySudan Raj Shrestha

PU Regd. No: 2003-2-03-0118

A Report Submitted to

Faculty of Management

Apex College

In partial fulfillment of the requirement for the course of

Bachelor of Business Administration (BBA)

Baneshwor1stApril, 2007


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Apex College

Approval Sheet

The Internship Project Report Submitted by

Sudan Raj Shrestha

I/We certify that I/We have read this document and in my/our

opinion, it is satisfactory in scope and quality as an internship

project report in partial fulfillment for the undergraduate course

(BBA Program) held at the Apex College, Pokhara University.

Signature of Supervisor

Apex College


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I

Acknowledgement

My outmost gratitude goes to Pokhara University for including Internship Program

of 3 credit hours in our course. This internship program has helped me to gain

practical exposure of credit administration department of banking system.

I am also thankful to Apex College for providing useful guidelines during the

internship period. I express my gratitude to Mr. Santosh Thapa and other lecturers of

the college for their cooperation to complete report of this volume.

My outmost gratitude also goes to Mr. Krishna Gopal Manandhar, head of Credit

Administration and Support (CAS) department for providing me an internship

opportunity in the department. I am also very thankful to Mr. Jaya Krishna Shrestha,

incharge of CAS department and other employees of the department for theirimmense cooperation and support during the internship period.

I express my gratitude to all my friends and other who have assisted me in

completion of this project. Last but not the least, my immense gratitude goes to my

parents for their inspiration and support.


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II

Executive Summary

This an internship report on Credit Administration and Support (CAS) department of

Nabil Bank Limited, Kantipath submitted to Apex College for the partial fulfillment

of the requirement of Bachelor of Business Administration. The internship period

was around 8 weeks. This report is mainly divided into three sections: General

Description of the Organization, Specific Study of Function (Job Assigned) and

Internship Program Feedback.

The first section, as name suggests, i.e. General Description of the organization

mainly describes about evolution of Nabil Bank, its ownership structure, its

organizational structure, product and services and the performance of the bank.

After Nepalese banking sector was open for private sector with the amendment of

Commercial Bank Act in 1984, Dubai Bank Ltd. of UAE came forward to establish

first joint bank in Nepal, namely Nepal Arab Bank Limited. At the time of

establishment, 50% of total shares were owned by Dubai Bank Ltd., 20% by public

companies and the rest by general public. Later name of the bank was changed to

Nabil Bank Limited on January 1, 2002 as there was no more stake of Arabians. At

present, NB International Ltd. holds 50% of the total shares of the bank, Rastriya

Banijya Bank holds 10%, Nepal Stock Exchange holds 0.33% and general public

holds .76%. In pursuit of the mission Banker of the 1st choice, the bank has

adopted a set of values in form of CRISP. CRISP stands for Customer Oriented,

Result Oriented, Innovative, Synergetic and Professional. For accomplishment of its

mission, the bank has designed various services for its customers that are grouped

into few categories: loan, trade finance, deposit, remittance, cards and ATM, e-

banking, clean bills and others. With efficient and effective delivery as well as

designing of new services to its customers, the bank is able to improve its

performance. The improvement in the performance of the bank is reflected by the

decrement in the percentage of non-performing of credit to around 1% as comparedto earlier 17%. Similarly, Bank was able to maintain its core capital above the

statutory requirement. In addition, Bank was able to increase its profit after tax in

past five years as well as it was able to increase its number of employees which

implies that the Banks operation is expanding.


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III

The second section of the report, i.e. specific study of function (job assigned) deals

with the various activities or the jobs that were performed as an intern in the CAS

department of Nabil Bank Limited, Kantipath. CAS department support in

administration part while Business Bank and Privilege Bank brings customers for

various facilities of the Bank, i.e. it maintain the records of documents for various

facilities, carries out frequent inspections of the borrowers and sets the limit of the

maximum amount that a borrower can withdraw in electronic database Finacle

Core. In addition, the department is also responsible for keeping the records of

borrowers in Credit Information System of Credit Information Bureau (CIB).

One of the job responsibilities assigned was maintaining and updating the records in

Credit Information System of Credit information Bureau. It maintains creditors

records which usually consist of the information about the borrower who may be

individual or organization, the ownership structure of the borrower, its sister

concerns, undivided family members, the authorized person, guarantor of such

borrower and the information about the security kept as collateral or pledge by

borrower. This information basically helps to analyze credit worthiness of

borrowers.

The second job responsibilities were ensuring proper documentation against the

various types of loans. Different set of documents are kept for different facilities.

Such documents can be broadly divided into two categories: standard and non-

standard documents. The main purpose of these documents is to protect the bank in

case of failure of repayment by the borrowers. The third function was maintaining

records of Account Maintenance Input (AMI). AMI is required for maintaining

Nabils database in Finacle Core.

The fourth function carried out is updating the valuation records of properties kept

as collateral by the borrowers. The valuation is usually done to find out whether

value of the property mortgaged can cover the loan amount so that in case of defaultof a borrower, the bank can raise its loan amount by auctioning the property

mortgaged. The fifth function is ensuring all type of securities have the adequate

insurance coverage.


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IV

The sixth function is consolidating and verifying borrower list of different branches

into a single file. In addition verification is done for each entry. The consolidation

was done because the bank centralized its credit operation in Kantipath branch.

Another function was providing borrower information sought by CIB and various

other banks. Lastly, the employees of the bank were assisted in their day to day

activities.

The third section of this report is Internship Feedback Program. This section

includes my opinions towards five different questions. This section mainly includes

my opinions toward my college courses relevancy in the actual job market,

importance of internship, and recommendations for my college. There are a few

recommendations I have made but the most important one is for my college to be a

little bit proactive and try to train its students in there area of choice in internship.

Apex College should make an effort to arrange for training its students for their

respective potential organizations working.


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Table of ContentACKNOWLEDGEMENT I

EXECUTIVE SUMMARY II

SECTION A GENERAL DESCRIPTION OF THE ORGANIZATION 1

1 BACKGROUND OF ORGANIZATION 1

1.1 Organizational Profile 1

1.2 Ownership Structure of Nabil Bank 4

2 MISSION AND VALUES 5

3 ORGANIZATIONAL STRUCTURE 6

4 PRODUCTS AND SERVICES 8

5 ORGANIZATIONS PERFORMANCE PROFILE 10

5.1 SWOT Analysis of Nabil Bank. 10

5.1.1 Strengths 10

5.1.2 Weakness 11

5.1.3 Opportunity 12

5.1.4 Threats 13

5.2 Analysis of Organizational Performance Indicators 16

5.2.1 Analyzing No. of Staffs 16

5.2.2 Non performing Credit 17

5.2.3 Pass Loan 17

5.2.4 Sub-standard Loan 17

5.2.5 Doubtful 17

5.2.6 Loss 17

5.2.7 Capital Fund 18

5.2.8 Deposits, Loan & Advances 19

5.2.9 Profit after Tax 20

SECTION B SPECIFIC STUDY OF THE FUNCTION (JOB ASSIGNED) 22

6 INTRODUCTION TO THE JOB PERFORMED 23

7 FUNCTION,RESPONSIBILITY AND WORKING SYSTEM OF CAS 23

8 JOB ASSIGNED DURING INTERNSHIP 25

8.1 Credit Information Bureau 258.2 Ensuring proper documentation against the various types of loans 34

8.2.1 Standard Documents 34

8.2.1.1 Promissory Note 34

8.2.1.2 Sanction Letter (Letter of Agreement) 34

8.2.1.3 Assignment of Account Receivables 35

8.2.1.4 Power of Attorney 35

8.2.1.5 Letter of Continuity 35


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List of FiguresFigure 1: Ownership Structure 4

Figure 2: Organizational Chart 7

Figure 3: Loan disbursement & Recovery 24

Figure 4: Credit Information System 26

Figure 5: Borrower Information 27

Figure 6: Entity Information Sheet 28

Figure 7: Concern Information Sheet 29

Figure 8: Undivided Family Information Sheet 30

Figure 9: Authorized Person Information Sheet 31

Figure 10: Guarantor Information Sheet 32

Figure 11: Security Information Sheet 34

Figure 12: Account Maintenance Input 42

Figure 13: Valuation Records 42

Figure 14: Insurance Coverage Records 43Figure 15: List of Borrowers 44

List of ChartsChart 1: No. of Staffs 16

Chart 2: Non Performing Credit / Total Credit 18

Chart 3: Capital Fund 19

Chart 4: Deposits, Loans & Advances 19

Chart 5: Profit After Tax 20


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List of Abbreviation

1 AMI Account Maintenance Input

2 ATM Automatic Teller Machine

3 BOD Board of Directors

4 CAS Credit Administration & Support

5 CEO Chief Executive Officer

6 CRISP Customer Oriented, Result Oriented, Innovative, Synergetic & Professional

7 CIB Credit Information Bureau

8 CIS Credit Information System

9 CTL Card Tech Limited

10 LC Letter of Credit

11 NBL Nepal Bank Limited12 NRB Nepal Rastra Bank

13 RBB Rastriya Banijya Bank

14 SCBL Standard Chartered Bank Limited

15 TR Loan Trust Receipt Loan

16 VPN Virtual Private Network


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1

Section A

General Description

of the

Organization


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Section A: General Description of the Organization 1

1. Background of OrganizationWhen Nepal felt the need of trade liberalization, commercial bank act of 1974 was

amended in 1984 with a provision for private sector and foreign investors to open

commercial banks in Nepal. As a result Dubai Bank Ltd. of UAE came forward toestablish the first joint venture bank in Nepal. Consequently Nepal Arab Bank Ltd.

was established in 12 July 1984 with 50% shareholding of Dubai Bank Ltd., 20%

shareholding by public companies and 30% shareholding by general public. Later

Dubai Bank Ltd. was merged with Emirates Bank Ltd. which sold its shares of Nabil

to National Bank of Bangladesh in 1994. National Bank of Bangladesh also sold its

share to NB International Limited of Ireland in 2000. Finally, as there was no more

stakes of the Arabians, the name of Nepal Arab Bank Ltd. was changed to Nabil

Bank Ltd. on January 1, 2002.

At the time of establishment, the authorized capital of Nabil Bank Ltd. was Rs. 60

million and paid up capital was Rs. 30 million. At present the authorized capital of

the bank is Rs. 500 million and paid up capital is Rs. 491.65 million. The Net worth

of the bank is 1481.68 million. The market capitalization of its share value as at 23

March, 2005 is Rs. 6539 million. The bank has already distributed dividend of Rs.

1588 million over the 20 years of its history.

1.1 Organizational ProfileIn the initial period, Nabil Bank Ltd. commenced its business recruiting 30 staffs at

Durbarmarga branch. Nabil bank presently employs 372 permanent staffs and some

60 contract staffs in its 15 branches and two counters.

Nabil bank got the glory to introduce modern banking in Nepal and brought the

monopoly of two state-owned commercial banks to an end. People were caught in

surprise to see bank approaching business houses and persons; reversing the age old

tradition of businessman knocking the door of bank. Success of Nabil bank Ltd.enticed several joint venture banks like Nepal Indosuez Bank Ltd. (2042-11-16),

NGBL (2043-10-16) Himalayan Bank Ltd. (2049-10-05) and many others followed

subsequently.

At the time of inception the bank initiated business with basic services like accepting

deposits and loan extension. Nabil bank, being the market leader in the banking


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industry has innovated and introduced many financial products. Nabil was the first

to use Computer for financial transactions, it introduced Consortium financing in

Nepal. Nabil was the first in Credit Card (USD and NPR) issuance and acquiring.

Among the joint venture and private banks established after 1984, Nabil became the

first to implement voluntary retirement scheme also. Some 46 employees were

retired at the cost of Rs. 31.41 million through this scheme with the expectation of

adding new energy to the bank.

Bank has launched Visa Electronic debit card which can be used in any ATM

machines (free in Nabils ATM) and it can also be used in POS terminals to buy

goods as well. Nabil has already installed 11 units of ATMs in various branches and

places like Kantipath, Lalitpur, New Road, Thamel, Jorpati, Pokhara, Biratnagar,

Dharan, Butwal and Phora Darbar. 2 units are in the pipeline to be installed. This

will facilitate the customers in terms of cash withdrawal around the Kingdom.

Nabil Bank is about to initiate Internet banking and Tele-banking shortly. This will

facilitate and enable customers in terms of payment, enquiry and transfer and

provide instructions in their account. The hazard of traveling to the bank for every

transaction will be eliminated and this will advance Nabil to a world class bank

having easy access from any part of the world.

The organization structure of the bank has changed recently; bank is in the process

to centralize most of the departmental works unit wise. This is mainly to have

specialization in every field. Bank has established Personal Lending Unit at its

Lalitpur branch with the objective of focusing on consumer financing only such as

home loan, auto loan, personal loan etc. Privilege Banking Unit has been established

to provide service excellence to its high value customers. Business Banking Unit has

been established with a team of expert credit analysts with the purpose of analyzing

and screening business viability, technical competency, market demand, and

managerial ability of the business unit. Bank is about to bring its NationalProcessing Unit at Maharajgunj branch in operation shortly. This will centralize all

the operations such as Account opening/closing, Cheques issuance, Inward and

Outward remittance etc. Bank has created a Special Cell Unit for the management of

NPA only. Bank is in the course of centralizing its trade finance operations also in

Kantipath branch. Bank has completed the centralization process from its valley


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branches and the departments outside valley is expected to be centralized within this

Chaitra.

Nabil bank has a separate card division to perform and monitor all card related

transactions. Nabil bank got the opportunity to be the first bank to introduce credit

card in Nepal by securing the membership of Master Card. Bank has recently

introduced an upgraded version of Card Tech Ltd. (CTL) a UK based leader in

Payment Industry. By the implementation of this prime system it gives service

advantage on the issuing and acquiring of the card business. Though the card

division initiated with master card only it has a range of products to accept and offer

at present. All sorts of credit cards are accepted and bank provides Master Card (in

NPR and USD), Visa Card and Visa Electron Debit Card. The Nepalese Rupee card

can be used in India also. People having foreign currency account can obtain dollar

credit card. If people traveling abroad wishes to have a dollar credit card, they can

avail it to the amount eligible against their passport facility.

The various financial products and facilities bank has in offer are Import LC, Export

LC, Guarantee, Remittance, Export/Import Loan, Working Capital and Consumer

Financing etc. Expeditious methods like Swift, Telex, Courier, are used to deliver

messages and documents. Discount LC is established to facilitate the customer to

meet its cash crunches. Refinance against export LC is provided. Forward contract

was brought in practice since the inception of LC transaction by the bank. Being the

agent of the customers Nabil has been handling Clean and Documentary Collection

and execution of Standing Instructions are made. Nabil has 15 branches and 2

counters in the kingdom and around 190 corresponding relations around the globe.

This network has assisted to deliver the service with efficiency in minimum time

period. Any transaction can be processed within a short period of time. In addition to

this Nabil has drawing arrangements with around 47 countries. Major corresponding

banks are Amex, City, Dresdner, Tokyo Mitsubishi, SCBL, HSBC, UBAF, EBIL,

ICICI and ABN Amro.

Nabil bank has introduced Anupam Bachat Yojana to encourage general public on

savings by offering multiple benefits like higher interest rates, life insurance, prize

money through lottery scheme etc. People having ABY account in the bank are

levied only 50% charges on facilities like purchase of TC, Fund transfer and various


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other facilities. Nabil has initiated a large number of retail banking products such as

Auto Loan, Home Loan, Educational Loan, Personal Loan, Employment Loan etc.

The banks latest product in offer is Mortgage Loan offered by Business bank at

Kantipath, which ranges from Rs. 5 million to Rs. 20 million. A registered business

firm is not required for this loan.

The main assets that Nabil possess is the confidence of the public, highly qualified

and expert manpower, a very highly experienced management team, the recently

introduced world class software technology, a strong financial condition, which

helped to win the bankers award hosting it to the position of Bank of The Year

2004 The slogan of the bank has remained as Your bank At Your Service. The

focus of the bank is to be, The Bank of 1stchoice.

1.2 Ownership Structure of Nabil BankAt present NB International Ltd. holds 50% of the banks share, Rastriya Beema

Sansthan holds 9.67%, NIDC holds 10%, Nepal Stock Exchange Ltd. holds 0.33%

and the General Public hold 30%. Among the general public, Mrs. Sarika Chaudhary

holds 0.76%, Mr. Nirwan Kumar Chaudhary holds 0.76%, Mr. Binod Kumar

Chaudhary holds 0.56% and Princess Prerna Shah holds 0.59%.

Figure 1: Ownership Structure


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2. Mission and ValuesThe main mission of Nabil Bank is to be the Bank of the 1st Choice. In pursuit of

this mission Nabil Bank has adopted a set of values in form of CRISP.

CRISP stands for a.) Customer Focused b.) Resulted Oriented, c.) Innovative

d.), Synergisticand e.) Professional. Though the word itself is self explanatory it

can be elaborated as follows:

a) Customer Focused: Banks are established with the sole objective of renderingservice. Banks do not have any tangible products to sell than the service. So our

success lies on satisfying and delighting the customers. Customer Focus is the

main objective which when realized, automatically fulfills other objectives.

Customers are the consumers of our various financial products hence utmost care

and focus must be given to ensure that they are satisfied. Unless the customers

are satisfied and delighted by our service the existence of our bank will come in

question. Hence, to ensure a healthy and perennial life of our organization

Customer Focus should be one of the mottos of our bank.

b) Result Oriented: Every Organization comes into existence only with somegoals and objectives. To meet the goals and objectives of the organization, all the

employees must be committed to obtain the results. The employees must be

Result Oriented; then only shall the goals and objectives of the Organization

fulfilled. The final goal of an organization becomes Net worth maximization;

hence, we all must contribute towards achievement of this goal.

c) Innovative: New ways and new techniques is to be introduced by the employeesso that the organizational objectives can be achieved with ease. All staffs must

endeavor to be Innovative which will be beneficial for goal achievement of the

organization.

d) Synergistic: Group efforts are very important in achieving organizational goals.If it takes a week for a single person to complete a single task, it will take only 3

days to complete the same work and if one more manpower is added, and if one

more further added it will be finished within a day. Here, we can see the

economy in man power expenditure and at the same time the service is delivered

at the fastest time period possible. The customer is satisfied and at the same time


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there was advantage to Organization also in terms of manpower expenditure.

This is synergistic.

e) Professional: Ethics is a part of humanity, employees as mentioned above arehere to serve people but with the objective of achieving organizational goal.

Organizational goal is to earn profit by satisfying customers. So in the course of

delivering service staffs must exercise their energy with professionalism.

3. Organizational StructureOrganizational chart of Nabil Bank shows that the top most position in the

organization is occupied by Board of Directors. Under the BOD consists of five

positions and departments which are Company Secretariat, PPP Committee, Chief

Executive Officer (CEO), Credit Committee and Audit Committee.

CEO usually controls three departments: Business: Business Generation, Supporting

Units and Credit. Business Generation is usually concerned with selling different

products and services of the bank to its customers. Business Generation has

following departments: Business Bank, Privilege Bank, Personal Lending Unit,

Cards, Business Development (Remittance), and Treasury and Correspondent

Banking.

The main function of Supporting Units is to support the overall operations of the

bank and has following departments: Operations, Legal, Information Technology,

Administration, Human Resource and Finance and Planning. Operations control

departments like National Processing Centre, Central Trade Operations, Branch

Operations and HO operations.

The Credit is usually concerned with the approval of various types of loans and its

recovery. It has following departments: Approval, Administration and Recovery.

Similarly Audit Committee controls Audit & Inspection and Compliance

departments.

There is also coordination among various departments which is shown in the chart

with dotted lines.


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Section A: General Description of the Organization

Figure 2: Organizational Chart

Board of Directors

Company Secretariat PPP Committee CEO Credit Committee

Business

GenerationSupport Units Credit

Operations

National Processing

Centre

Central Trade

Operations

BranchO erations

HO Operations

Legal

Business Bank

Privilege Bank

PersonalLendin Unit

Cards

Business

Development(Remittance)

Treasury &

Correspondent

Banking

Finance &

Plannin

Human

Resource

InformationTechnolo

Administration

Approval

(BB/PL & Cards)

Administration

Recovery


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4. Products and ServicesNabil Bank has been providing various services to its customers and it has been

continuously increasing their variety. Such products and services are as follows:

1. Loan Working Capital Fixed Capital Import Bills Discounting facility Under Suppliers Credit Export Loan Hire Purchase Project Finance Consortium / Syndication Loan Mortgage Loan Loan Against Deposit & Govt. Securities Housing Finance Auto Finance Nabil Property Personal Finance

2. Trade Finance Import LC Export LC Forward Contract Bid Bond Performance Bond Counter Guarantee Advance Payment Guarantee Shipping Indemnity

3. Deposit Current Call Time Normal Savings Provident Fund Retirement Fund

4. Remittance SWIFT Transfer Western Union E-Remittance (Qatar, Doha) Traveler's Cheque Bank Draft Mail Transfer Manager's Check Anywhere Branch Banking


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5. Cards & ATMs MasterCard Local MasterCard International VISA Local Diners Card For Travel (Against Passport Facility) VISA Electron / ATM Card Nabil Prepaid Card Acquiring Business

6. E-Banking NabilNet NabilTele

7. Clean Bills Clearing Bills Purchase Bills Collection

8. Others U.S. Visa Fee Safe Deposit Locker Balance Certificate Advance Payment Certificate


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5. Organizations Performance ProfileNabil bank celebrated its 20th anniversary followed by the title Bank Of The Year

2004 gaining the advantage of being included in list of A+ rated banks published

by the Bankers of England. It was based on the strength of the financial statement of

the bank; the investments made in manpower and recently introduced world class

higher ended banking software. Hence, I am trying to analyze the performance of

Nabil bank on two broad bases, viz,

SWOT Analysis Organizational Performance Indicators Analysis

5.1 SWOT Analysis of Nabil Bank.Though Nabil is the pioneer in the banking industry it has not remained free from

weaknesses also. Hence, endeavor is made to summarize the Strengths and

Weakness and the Opportunities and Threats felt at present.

5.1.1 Strengths1) Nabil Bank was the first joint venture bank in Nepal. It became successful to win

the confidence of the public and opened an avenue for many other banks to

venture here. For this reason Nabil remains historically a market leader in the

banking industry of our country.

2) Nabil bank was the one to introduce the marketing concept in banking industryof Nepal. It started to knock the doors of business houses and endeavored to

learn their business so the trust and bond between the business community and

Nabil bank became even stronger. When a business house starts a business their

most favored bank to be approached becomes Nabil bank.

3) Nabil bank has got the most efficient manpower in the industry which is provedby its achievement and growth made so far. Due to this advantage, with

minimum manpower, Nabil has been able to produce larger volume of work.

This has minimized the administrative cost of the bank.

4) Nabil has 15 branches and 2 counters in the kingdom and around 190corresponding relations around the globe. This network has assisted to deliver

the service with efficiency in minimum time period. Any transaction can be

processed within a short period of time. In addition to this Nabil has drawing


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arrangements with around 47 countries. Major corresponding banks are Amex,

City, Dresdner, Tokyo Mitsubishi, SCBL, HSBC, UBAF, EBIL, ICICI and ABN

Amro.

5) The Net worth of Nabil bank has increased by 49.50 times in mere 20 years timeframe. This can be labeled as an outstanding achievement. This has given

enough confidence among the shareholders as their venture is yielding a very

high growth rate.

6) Nabil bank has introduced a sophisticated world-class software systemglobalizing the entire branches within the country with one central control and

enabling all the branches to transact with any branch of the country. Due to this,

the customers having an account in one branch can avail any required facility

from any other branch.

7) Nabil bank has been able to maintain capital adequacy ratio higher than thestandard NRB requirement.

8) Long term deposit constitutes the major portion of Deposit mix of Nabil bank.This is theoretically better for long term financing.

9) Nabil bank has contributed in the upliftment of Nepalese economy. Theshareholders, the customers and staffs are satisfied by the performance of the

bank.

10)Nabil has its own training center to add and update technical skills for thebusiness.

11)Nabil has the largest network of ATM all over the country.5.1.2 Weakness1) Much of the personnel policies are frequently changed at the vested interest of

some few staff which has caused great deal of frustration among the genuine

staff; this can be detrimental to the organization in the long run.

2) The promoters of the bank seem more interested in temporarily holding than onlong term operation of the organization. This can be sensed from the banks

investment in land and building.


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3) Nabil bank still seems to focus on profit maximization concept than on wealthmaximization concept. Profit maximization is a traditional concept.

4) Employee turnover seems pretty high in Nabil Bank. This has exposed NabilBank towards the risk of its secrets being divulged to the competitor banks. This

has also barred Nabil benefit from the experience curve effect.

5) The major portion of Deposit mix of the bank is interest bearing deposits.Therefore the major percentage of income is spent in maintaining these deposits.

6) In the current volatile situation, focus on fee based income could be a betteroption than concentrate on exposure based income. The income from

Investment, Commission and Discount and Exchange Income of SCBL is higher

than Nabils.

7) Nabil bank, being the pioneer bank, should have been the leader in introducingany new products but clearly the bank has followed others path in introducing

any new product.

8) Bank lacks the strategic marketing concept. Though Nabil is a pioneer bank, ithas failed to capture high valued customers which yields major portion of FCY

income, fee income and interest income.

9) Banks lacks good H/R policies. Bank has failed to place the right person at theright place. Staffs having the capacity to yield 100% in credit are thrushed in

operation and vice versa. The ultimate output differs which is a loss to the bank

in an indirect way.

10)At present the staff expenses have increased to a considerable amount. This canbe a symptom of overstaffing also. If so bank must curb out the redundant staff

at the earliest.

5.1.3 Opportunity1) Manpower: NRB has instructed banks to invest with or without any collateral or

guarantee to those going abroad for employment. Nabil Bank must either accept

collateral and invest in this sector or request foreign employer company to

provide guarantee to ensure that the payment will directly be made to our bank.

2) Hydro Electricity: The huge imbalance between the demand and supply ofenergy evidences the space for the development of this industry. So far


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electricity has been catering less than 2% of total energy consumption of the

country. Nabil can venture in this sector.

3) Communication Industry: There is ample opportunity for the development ofcommunication industry in the country. There is still plenty of space for the

growth of this sector which is illustrated by the fact that there are still 321200

applications in the waiting list of Nepal Telecom for additional lines. Hence,

Nabil bank can capitalize this sector for investments.

4) Cigarettes and Beverages: Demand of such consumer item depends on qualityand not the price. Some enterprises are managing to export even today in this

chaotic business situation. This proves that if the entrepreneurs remain quality

conscious; the international market will be available. Nabil Bank must not

hesitate to consider the chances of the product to reach international markets.

5) Retail Loan / Consumer Financing: In developed countries 40 to 50 percent oflending portfolio of banks consists of consumer financing but it occupies less

than 10 percent in the Nepalese context. Nabil has recently focused on consumer

financing. For exposure based income, this sector can prove to be a backbone of

Nabil.

6) Remittance Business: The fact that more than Rs. 100 billion is entering ourcountry has enticed all the banks, including Nabil, to venture in this sector. With

all the means of Nabil, a larger network can be made to extend the service.

5.1.4 Threats1) Nabil bank needs to recognize the need to establish closer ties with its customers

in order to prevent them walking away to the financial service suppliers offering

lower interest rates on loan or mortgage. The bank has introduced centralization

policy of various departments. This brings a distance between the customer and

the bank.

2) The banks existence will be counted on the ability to deliver the right product atthe right time through the right channel and right price in this buyer driven

market. Customers are really very demanding nowadays. Hence, Nabils sincere

effort should be to provide maximum benefits in minimum time.


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3) Banks like RBB and NBL has a very large network, they gain superiority interms of branch network. Hence, time has come for Nabil to decide on for

strategic alliance to be at vantage point in terms of remittance business or else

these banks with larger network can whish the business away from Nabil.

4) The banks diehard approach to chase away the unproductive customers byraising the entire range of charges can prove to be harmful in this vulnerable

economic situation. Retention of these customers may be more beneficial than to

shed them; for there is always a possibility of converting them to productive

customers by innovation.

5) Competitors are resorting to unhealthy means such as lowering interest rate tothe possible extent. This can affect Nabils profitability in the coming days.

6) Countrys political situation is fluctuating frequently; this type of volatility andbring down many more industries, which will expose banks to high risk.

7) Some directives of NRB regarding Loan Depreciation Provision and Blacklistingare not in commensuration with the present prevailing situation. After

downgrading a particular unit or individual, other sister concerns or related firms

having 10 percent share holding by the individual or unit, requires to be

downgraded as well despite having sound financial health. In this situation,

banks must maintain Loan Loss Provision equally for all the firms also. This not

only decreases the profitability of the bank but unnecessarily inflates the NPA

very high.

8) The directed credit program of Nepal Rastra Bank has compelled the banks todisburse in Priority and Deprived Sector a certain percent of LDO (4% in

Priority and 3% in Deprived) without any willingness on the part of commercial

banks. Such forceful imposition cannot bear any desired fruit intended by NRB

as commercial banks seem eager to pay penalty instead of venturing in Priority

Sector due to the fear of loosing the entire exposure. So, such requirements do

not seem to be appropriate with the current national and international market

situation.

9) In one hand, NRB encouraged commercial banks for investments in share capitalof Rural Development Banks, Rural Micro Finance Development Center and

other Development Banks, which were established with an objective to extend


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credit to deprived sector under the directive credit program; but on the other

hand, banks were instructed to dispose off all investments in the share capital of

other financial institutes within Ashad 2061. The banks failing to sell their share

were required to maintain 100 percent provision on such amounts invested in

others share capital. This hampers the banks profitability.

10)The present inflation rate is 8.5 percent and the interest rate in savings isapproximately 3.5 percent, which is lower than the inflation rate. This

discourages savings in one side and encourages people to spend or deposit their

money across the border. In the long run, this can invite long term harm to the

bank.

Now, after analyzing the overall SWOT of Nabil bank, we can see that the external

environment of full of investment opportunities. Nepal is a developing country and

as like any other developing country, it is also going through various development

processes like infrastructure development such as development of road, buildings,

bridges, and etc. energy source development such as Hydro-electricity generation by

constructing dams, electricity generation by Windmills, etc. Nabil is one of the top

banks in the country having huge capital and huge deposits. So, Nabil is definitely

capable of investing in such sectors.

There is one more advantage for Nepalese banks. In past, few business houses, who

issued shares to public, committed fraud and manipulated public money. So,

nowadays public is very cautious while investing on such business houses. Public

would rather deposit their money in banks than invest on any business houses. This

has forced business houses to borrow loan from banks.

Therefore, it is very clear that Nabil has ample opportunities to invest upon and

plenty of strength to fight off any threats and capitalize on the available

opportunities. Based upon the above SWOT analysis, we can draw conclusion that

Nabil bank has abundant growth opportunity and sufficient strength to carry itself

forward on the path of growth.


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5.2 Analysis of Organizational Performance IndicatorsWe can analyze performance of an organization in a variety of ways however I will

use only few of the possible alternatives. Such alternatives are

Analysis of No. of Staffs Non-performing Credit Capital Fund Deposit, Loans & Advances Profit After Tax

5.2.1 Analyzing No. of StaffsWhether an organization is expanding or shrinking is also reflected by the number of

employees working there. Number of staff usually increases in a growing

organization. Total number of staff working in Nabil bank is shown in the graph

below.

388382

326

372

426

200

250

300

350

400

450

No.ofStaff

00/01 01/02 02/03 03/04 04/05

Fiscal Year

Total Staff

Total Staff

Chart 1: No. of Staffs

The number of staff during the fiscal year 2000/2001 was 388. The number

decreased to 326 in the fiscal year 2002/2003. But after the fiscal year 2002/2003,

the bank was able to increase its employees up to 372 in fiscal year 2003/2004 and

426 in fiscal year 2004/2005. This usually shows that the bank is requiring more

number of staff every year to support its operations. The obvious reason might be


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that the bank is introducing new types of products such as Nabil Bachat, GMAT,

TOEFL processing fee, home loans, education loan, etc.

5.2.2 Non performing CreditCredit or loans that a bank provides can be usually divided into following types.

5.2.3 Pass LoanLoans and advances whose principal amount is not past due and past due for a

period up to 3 months fall in the pass loans.

5.2.4 Sub-standard LoanAll loans expired by 3 months but which has not crossed 6 months fall in this

category.

5.2.5 DoubtfulAll loans expired by 6 months but which has not crossed 1 year fall in this category.

5.2.6 LossAll loans expired by 1 year as well as advances which have thin possibility of

recovery is also included in this category.

The pass loans are also called Performing Loans whereas loans that fall in sub-

standard, doubtful and loss are called non-performing loans. So the position of non

performing loans provided by the bank also shows its performance in terms of

whether the bank was able to recover its loans and advances. The position of non-

performing credit of Nabil Bank is shown in the graph below.

The graph shows that the percentage of non-performing credit in the total credit is

decreasing. During the fiscal year 2000/20001 percentage of non-performing credit

in the total credit is around 16%. The bank was able to decrease this percentage to

around 7% in the fiscal year 2001/2002. In the same way Nabil Bank was able to

decrease this percentage to around 1% in the year 2004/2005. This shows that the

bank has been able to distinguish good loans and bad loans. It can be also inferred

that Nabil Bank provides credit only after in depth analysis of borrowers. In

addition, the graph below also reflects that the bank has been able to recover the

loans and advances that it has provided to its borrowers.


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0

2

4

6

8

10

12

14

16

18

00/01 01/02 02/03 03/04 04/05

Fiscal Year

Non-performingCredit/TotalC

redit

(%)

Chart 2: Non Performing Credit / Total Credit

5.2.7 Capital FundThe Core capital of the Bank stands at Rs. 1.61 billion and total capital fund

including Supplementary capital of Rs. 0.16 billion stands at Rs.1.77 billion as on 15

July 2005, on of the highest in the domestic banking sector. This capital base reflectsthe Banks sound financial stability. The capital adequacy ratio of 11.35% (Core

capital) and 12.44% (Total Capital) exceeds the statutory requirement by 5.58% and

1.44% respectively. The Bank has also started taking initiative in implementing the

Basel II standards.

The following graph depicts the growth of the Banks capital over the past 4 years.

The graph shows that the bank was able to increase its core capital in the past 4

years whereas the supplementary capital shows decreasing trend.


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return on average assets and return on equity is 3.06% and 35% respectively in FY

2004/05. These ratios are above international standard and one of the highest in the

domestic industry.

Now, on the basis of all above analysis it is safe to say that Nabil Bank is in the

growing trend and future of Nabil bank seems bright indeed.


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Section B: Specific Study of the Function (Job Assigned) 23

6. Introduction to the Job PerformedNabil Bank is one of the biggest banks in Nepal. It has a very organized structure of

work flow design and staffs adequate number of employees to effectively and

smoothly continue its operation. As interns, I could only just assist Nabil employees.I didnt have adequate amount of knowledge to really be of any assist to them. Even

in that situation Nabil employees were very cordial and supportive. They believed in

our abilities and demonstrated their confidence by letting us do some of very

sensitive and important works. Such activities shall be explained below.

The main drawback in my internship period was that I didnt have the opportunity to

rotate through various departments. I spent whole of my internship in Credit

Administration and Support (CAS) only. This meant I could not gain any practical

and real life knowledge about the activities of other departments of bank. But this

wasnt totally a bad thing because it allowed me to gain a more in depth knowledge

on the activities of CAS department of Nabil Bank. Actually, this is much better

than gaining superficial knowledge on various departments.

7. Function, Responsibility and Working System of CASProbably, CAS is the most important department for Nabil Bank. Activities carried

out CAS usually determine the future stability and safety of bank. This is because as

every bank, Nabil also earns its revenue from loan interest. In this context, if bank

loans to every Tom, Dick & Harry and if bank cannot recover the loan amount then

whole existence of bank will be in question. CAS studies about the pay back

capacity of its borrower and then decides if the borrower is worthy to be granted the

loan or not. Genuine borrower are source of revenue where as defaulter are source of

loss to bank. CAS tries to differentiate between such genuine borrowers and

defaulter by studying their financial status.

Any mistake by CAS could be detrimental to Nabil Bank. If CAS labels a probable

fraud, whose main intention is to trick and deceive bank, as a genuine borrower then

bank is in risk of suffering a loss. On the other hand, if CAS categorizes a genuine

borrower as a probable defaulter, then bank losses an opportunity to earn revenue. In

any case, a simple mistake by CAS is directly reflected in Financial Statement of

Bank.


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Anybody who wishes to borrower loan first has to communicate with either with

Business Bank or Privilege Bank department of Nabil Bank. Such department

analyzes the proposal and if it considers the proposal to be a viable one then it

collects required documents and forwards them to CAS.

Figure 3: Loan disbursement & Recovery

Main activities of CAS start when it receives documents from Business/Privilege

bank department. CAS evaluates such documents checks reliability of such

documents and makes sure that all required documents are obtained. CAS, if finds

the proposal to be feasible, then sets a limit of the maximum loan amount and then

forwards it to Loan department of Nabil Bank. Loan Department grants approval for

loan there after a current account of the borrower is opened from where borrower

can withdraw required amount.

CAS maintains all the documents related to its customers and continuously updates

such records. CAS frequently conducts investigation to ensure the correct utilization

of the loan amount. During such investigation, it also checks conditions of

mortgaged or hypothecated property. If CAS finds use of loaned amount in activities

other than specified in their agreement then it disqualifies the borrower and heads

for the process of recovery.

Recovery is the difficult part of the lending process. Some customers may turn out to

be defaulters. In such condition, bank has on other option than to claim its

ownership over the collateral mortgaged. Therefore, bank is very careful while

granting loan so that it doesnt have to face the threat of Non Performing Loan1.

1Loans and Advances whose principal amount are not past due or past due for a period of up to 3

months fall in the category of Performing Loan and those above 3 months past due fall in category ofNon Performing Loan.

Loan Application Interview Site Visit Credit Analysis

DocumentationLoan CommitteeLoan ApprovalDocument

Analysis

Disbursement Monitor & Evaluation Recovery


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the Virtual Private Network2 (VPN). The financial institutions are required to fill the

database of the CIB. Usually, they are required to submit information of the

borrower within 15 days of loan disbursement.

One of the most important jobs responsibilities for interns was maintaining and

updating CIB information on the provided database. The database provided by CIB

is called Credit Information System.

Figure 4: Credit Information System

Credit information system or CIS contains 7 different sheets requiring different

information. Those 7 sheets are:

1) Borrower2) Entity3) Concern4) Undivided Family5) Authorized Person6) Guarantor7) Securities

2A Virtual Private Network is a secure network that uses the internet as its main backbone network,

but relies on the firewalls and other security features of its internet and intranet connections and those

of participating organizations.A firewall, usually a router or a dedicated server, serves as a gate keeper system that protects a

companies intranet and other computer networks form intrusion by providing a filter and safe

transfer point for access to an from the internet and other networks.


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1) BorrowerAny body borrowing loan from bank is called borrower. Borrower can be a person

or organization. The main intention of this sheet is to gather as much information

about borrower as possible. This information is the most significant information CIS

contains.

A large number of people are borrowing loan from financial institutions. Quite,

often a lot of people have similar name. Often there will be more than one borrower

with same name. This could lead to confusion so, CIB need to treat each individual

borrower as a separate entity. CIS has come over this problem by assigning each

borrower with a separate code number.

This sheet contains information such as

Loan Sanction Date Name of Borrower, if it is an organization, type of the organization, e.g. Sole

trading, Partnership, Company, etc.

Figure 5: Borrower Information

Nature of Business, e.g. Manufacturing, Service, Trading, etc. Address of Borrowers


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In case of an individual borrower: Name of Father, Grand-Father, Spouse,Citizenship No., its Issuance Date, and District.

In case borrower is an organization: Firm Registration No., Date of Issuance,and District.

The Borrower information sheet contains information about borrower only but CIB

and other Financial Institutions usually need more information. CIS has other sheets

to cater to such different informational need. Next sheet CIS contains is Entity.

2) EntityMost of the clients borrowing loan from banks are business enterprises. A business

enterprise may be owned by a single owner or it could be a partnership firm or it

could even be a company. This sheet mainly defines the ownership structure of the

borrower.

This sheet provides detailed information about the owners of such enterprise. The

provided information mainly consists of:

Name of Share Holders, their positions and share percentage. Their Address

Figure 6: Entity Information Sheet


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Their Citizenship Registration No., Issuance Date, and District. Name of their Father, Grand-Father, Spouse.

Borrowing Clients can also be individuals borrowing to acquire a house,

automobiles, and for different other purposes. In such case, individuals information

is feed into the sheet.

3) ConcernMany business enterprise clients have sister concerns which are owned by relatives

of the owner of the borrowing firm. Such sister concerns could already have

borrowed loan from financial institutions. As per NRB directive, One Obligor Group

Policy, an organization along with its sister concerns are allowed to borrow only a

certain limit of fund. So, information about such sister concern is very important

form legal framework.

The Concern sheet is CIS provides information about sister concerns thus making

it easier to prevent organizations and their sister concerns from crossing that limit.

This sheet contains information such as:

Name of Sister Concern(s)

Figure 7: Concern Information Sheet


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Address Ownership structure (Share Percentage) Entity Structure

4) Undivided FamilyAs per NRB directive, One Obligor Group Policy, family members are also

restricted from borrowing loan beyond the assigned limit, especially if the family is

undivided.

CIS has a whole sheet dedicated for this type of information. The sheet Undivided

Family serves for exact this purpose. In this sheet, information about all the

members of the undivided family is mentioned.

This sheet contains information such as:

Name of the family member Address

Figure 8: Undivided Family Information Sheet

Relation with borrower or client.


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6) GuarantorBanks in our country are still inculcated with conservative style of operation. They

always want to be in the safe side. In addition to other securities such mortgaged

properties and collaterals, they also demand for guarantor. Guarantor is a person

who pledges to fulfill somebody elses obligation should that person fail to do so.

Guarantors are those persons who provide assurance to bank that in case of default

of the borrower(s), they could be held responsible for compensating the loan

amount.

So, information of such guarantors is of vital importance to bank. They always try to

collect as much information about the guarantor as possible. Information such as the

financial condition of the guarantor, type of career, ability to pay the borrowed

amount back, etc is also checked.

This sheet of CIS stores information about such guarantor(s) in following format:

Name of the Guarantor(s) Their Address

Figure 10: Guarantor Information Sheet

Their Citizenship Registration No., Issuance Date, and District. Name of their Father, Grand-Father, Spouse.


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7) SecurityThe last and the most important sheet CIS carries is this sheet bearing information

about securities. Securities are properties that bank can claim in case borrowers

default on its obligation. Securities are measures taken as a precaution against

deceive or sabotage. Bank may hold security in various forms such as mortgaged

land or building or both, hypothecation3, pledge4, etc.

This sheet contains a lot of information. This information is segregated in two

different sections. The first section is dedicated for details about security.

Information is presented as:

Type of Security Value of Security Pledged date Owners name Plot no. Location

The second section lays out information about valuator. Valuators are specialists

who have the required skill to evaluate the authentic market value of pledged

security. E.g. Civil Engineers are suitable valuators if the security is land, building,

etc; Mechanical Engineers are suitable valuator if security is automobiles. Though

indirectly, valuator play an important role in recovery of borrowed amount. So,

information about valuator is stored as:

Type of the valuator Name of the valuator(s) Their Address Their Citizenship Registration No. Name of their Father, Grand-Father, Spouse.

3Hypothecation is nothing than an extended idea of pledge. Hypothecation is the act in which

properties or goods are pledged for an amount of debt but neither ownership nor possession ofproperty is passed to the creditor (bank).4Pledge is an act of mortgaging some property as a security for borrowing loan or for performing a

promise.


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Figure 11: Security Information Sheet

8.2 Ensuring proper documentation against the various types ofloans

When loans and advances are provided to the customers, various types of documents

are executed as a safeguard measure in case the customer fails to repay the loan

amount or the interest on due date. There are various types of documents which

serve different purposes and are mainly categorized into two type namely standard

documents and non standard documents. The documents and their purposes are

given below:

8.2.1 Standard DocumentsStandard documents are pre-printed forms, which are obtained by the bank from all

its borrowing customers and needs filling the details on the blank.

8.2.1.1 Promissory NoteThis is a document containing a promise signed by the borrower to pay the amount

of loan when demanded by the bank along with interest at specified rate.

8.2.1.2 Sanction Letter (Letter of Agreement)It is a letter issued to the customer mentioning all lines of credit along with terms

and conditions with interest rates, charges, commissions, margin etc. It evidences

Customers acknowledgement of being advised lines of credit and execution of

documents and additionally acknowledges the authority of the bank to cancel any or


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all credit lines along with the undertaking to pay outstanding balances, interest and

charges till the time of credit cancellation.

8.2.1.3 Assignment of Account ReceivablesAssignment means transfer of an existing or future right on property or a debt by the

borrower to the banker through which the bank gets authority and right to recover

title and interest from borrowers debtors. This document also denotes the

borrowers acceptance not to sell, transfer title or rights of such bills and accounts

receivables to any other parties.

8.2.1.4 Power of AttorneyThis document is a sequel to the document Assignment of Account Receivables.

The borrower appoints the bank as the attorney for the specified facility and assigns

the bank the right to collect fund due to the borrower by any of its debtors through

this document.

8.2.1.5 Letter of ContinuityThrough this document through which the borrower declares that the property given

as a security will continue to secure the advance which may create or fluctuate by

way of debit of account from time to time.

8.2.1.6 General Letter of HypothecationThis document specifically declares the banks equitable charge on the security. In

other words it is an agreement by the borrower permitting the bank to sell or seize

the collateral (inventories, fixed assets) pledged to secure the loan, in case of failure

to honor their obligations at maturity.

8.2.1.7 Supplementary AgreementsThe securities pledged to the bank are specified in this document and it forms the

integral part of the letter of hypothecation.

8.2.1.8 Subordination AgreementA third party who has provided loan to the borrowing unit executes this document. If

the borrower has obtained funding from other parties besides the bank (directors

loan, its subsidiary firms, other institution like bank/ finance companies), it is an

undertaking from such third party lenders to the lending bank not to collect or


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enforce an indebtedness on the borrower till lending banks loan is fully paid. Bank

must execute this agreement to create prior claim over the creditor.

8.2.1.9 General Letter of Trust ReceiptGeneral Letter of Trust Receipt is an acknowledgement of receipt of the document

by the client and permits the bank to maintain a legal lien over the goods covered by

the Bill of Lading under the condition that the bank could legally take possession of

the goods and the proceeds of the sale if the account party does not repay the bank.

8.2.1.10Letter of GuaranteeDirectors, president or a person related to the company who has high reputation and

financial standing in the market is asked to execute this document as an additional

security to oblige towards the banks loan.

When advances are made on hypothecation basis, banks normally demand a

guarantee from the family member of the borrower and if it is a company, from its

directors and other parties with substantial means.

A personal guarantee is taken as a secondary security. It is in fact a contract to

perform the promise or discharge the liability of a third person in case of his default.

Guarantee can be categorized into specific guarantee (where only a single

transaction is covered) and continuing guarantee (which covers a series of

transactions). A continuing guarantee secures the loan though the amount may

fluctuate from time to time.

8.2.1.11Cross GuaranteeA Cross guarantee is taken as a secondary security. It is a contract to perform the

promise or discharge the liability of a sister concern in case of the firms default.

Normally when there is a group lending and there is the possibility of facility being

interchanged by sister concerns, in such situation it would be advisable to take cross

guarantee of sister concerns.

8.2.1.12Letter of IndemnityAn indemnity letter is a promise made by one party to save the other from any losses

due to his own conduct or by the conduct of someone else.


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8.2.1.13Wealth StatementWealth statement is a document mentioning the entire property details of the

personal guarantors. It is obtained to examine the financial strength of individual

who provides personal guarantee against banks loan.

8.2.1.14General Counter GuaranteeWhen a customer is provided credit facility for issuance of guarantee or indemnity,

through this document the customer undertakes to indemnify and keep the bank

harmless from any liability arising thereof and authorize the bank to debit their

account or undertake to reimburse any amount the bank has paid or may incur

against the guarantee issued on their behalf.

8.2.1.15Letter of Set offThe bank at times gives funding against pledge of instruments such as Time

Deposits, National Savings Bond or by holding fund in Provident Fund account or

FCY account. Through these documents the customer assigns the right to the bank to

liquidate and settle its dues from proceeds of the pledged instrument or such held

amount in case the borrower does not pay his/her obligation on the due date.

8.2.1.16Bill Purchase AgreementThe bank purchase/discounts/negotiates or provides advance money to its customers

against negotiable instruments. Through this document the customer undertakes to

indemnify the bank against all cost and charges incurred in connection with the said

transaction and repayment of full amount so forwarded along with other incurred

cost in case of dishonor.

8.2.2 Non Standard DocumentsThese are documents which are generally prepared as per the requirement of the

bank incorporating details of all credits being forwarded by it to the customer and

indicates of securities through which it will cover itself in case of dishonor by the

customer.

8.2.2.1 Loan DeedThis is a non registered security document executed by the borrower giving evidence

of its acceptance of the bank loan sanctioned. It establishes the borrowers


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acceptance to pay interest, charges and commission against the facilities it shall avail

from the bank. The details of the facilities including loan amount, rate of interest,

charges to be paid, and the time for loan repayment are all given. The details of

additional collateral secured to the bank are also clearly stated in this document.

8.2.2.2 Mortgage DeedThe instrument by which the transfer of an interest in specific immovable property

for the security of money advanced is called mortgage deed. This is a registered

document and executed at the land revenue office in favor of the bank.

The banks legal department or the legal advisor drafts mortgage deed. The

document clearly mentions the terms and conditions on which the money is being

advanced or the credit facility is being provided. It mentions the mortgagor,

mortgagee, the borrowing unit, the amount and type of facility offered by the bank,

also the coverage that the deed gives in case of additional loan provided to the

borrower in the future. Mortgage deed is registered at the land revenue office and

must be attested by at least two witnesses.

8.2.2.3 Pari Passu ChargeThe term is usually used in the case of consortium lending. In consortium lending, a

number of banks or financial institutions join hands together to lend to a single

borrower in an agreed ratio, against some common securities. The securities are

charged to all the participating banks with or without any reference like first charge

or second charge.

8.2.2.4 Board Resolution of BorrowerEvery private or public limited company must be first authorized by its board for

establishing borrowing relationship with the bank and through this paper normally

also appoints officials who are authorized to negotiate with the bank and for

operation of the sanctioned loan. For all companies without a Board Resolution to

Borrow other legal documents cannot be enforced for any loan recovery by a bank.

A certified copy of resolution passed at a meeting of the board of directors of the

company, authorizing the advance, stating the terms and conditions thereof, such as

limit, security, margin, rate of interest etc. should be obtained. The resolution should

also state the names of the directors, managing directors or officers who are


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authorized to execute the documents on behalf of the company. It is only when the

documents are executed on behalf of the company in terms of the resolution that the

company is bound thereby.

8.3 Check List approach to DocumentationAll above mentioned documents are not required for all types of loans. Depending

on the types of loans, different set of documents are kept. Documents required for

various types of loans are as follows.

8.3.1 Letter of CreditLetter of Credit means a letter written by one bank of financial institution to another

bank or financial institution authorizing the latter to accept cheques, drafts, or bills

of exchange of any specified person within the limit of amount specified therein.

The documents required for LC is as follows:

1) LC application (Bi. Bi. Ni.3) signed by authorized signatory duly signed.8.3.2 GuaranteeThe documents required for guarantee are as follows:

1) Guarantee Application2)

General Counter Guarantee

8.3.3 Term LoanBankers lend some portion of fund for fairly long period of time to industries and

agriculture against the security of fixed assets. Term loan are normally given for the

purchase of assets. Thus this type of loan is paid in installments ranging from 2

years to 15 years.

The documents required for term loan are as follows:

1) Promissory Note2) Mortgage Deed3) Insurance for Fixed Assets4) General Letter of Hypothecation with Supplementary Agreement


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8.3.4 Trust Receipt LoanTrust Receipt Loan is provided to importers against the import LC established by the

bank to make payment for the goods arrived through the LC. Each TR loan is treated

as a specific time loan having maturity date, i.e. 30, 60, 90 days.

The documents required for TR loan are as follows:

1) General Letter of Trust Receipt2) Promissory Note

8.3.5 Overdraft/ Demand Loan/ Time LoanIn case of overdraft, a limit is assigned in the current account of customers up to

which customer can withdraw from his account. An overdraft account is fluctuating

type of account and therefore, the customer can deposit when he has money and

withdraw when he required. The customers can withdraw and deposit as many times

as he desires provided the total debit amount does not exceed the credit limit

assigned.

Demand loan is working loan provided not more than a year. It is revolving type of

loan, which once is settled is reinstated by the settled amount. This means customers

can settle and withdraw as many times as he pleases within the expiry period of the

loan.

Time loan is also working capital loan given for the period of less than one year and

has fixed maturity period. Time loan can be one time specific (the borrower is not

allowed to withdraw once settled) and revolving (once the loan is settled further

drawing is allowed within the validity of the limit).

The documents required for above mentioned loan are as follows:

1) Promissory Note2) General Letter of Hypothecation with Supplementary Agreement3) Assignment of Account Receivables with Power of Attorney4) Insurance of stocks covering various risks


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Other additional documents required for all types of limit are as follows:

1) Letter of Continuity2) Board Resolution of Borrower ( Only for Pvt. Ltd. and Pubic Ltd.

Companies)

3) Loan Deed4) Insurance of Fixed Assets (mortgage property) covering various risks such as

Earthquake, Lightening, Fire, Burglary, etc.

5) Mortgage Deed for additional collateral6) Letter of Agreement or sanction letter7) Subordination Agreement8) Personal Guarantee of Directors or Cross Guarantee of Sister Concerns.

8.4 Account Maintenance InputOne of the functions of the credit administration and Support (CAS) department is to

limit of the maximum amount that the borrower can withdraw from the bank. A

borrower can withdraw amount from the account only after the CAS and loan

department sets the limit of the maximum amount that the borrower can withdraw in

its electronic database Finacle Core. Account Maintenance Slip is mainly filled by

this department to maintain records of the limits of the borrowers that it has entered

into Finacle Core.

Account Maintenance Input slip mainly consists of information like type of the limit

such as overdraft facility, term loan, etc, amount of such limit and expiry date of

such limit. This slip after being filled and approved by the incharge or head of the

department is kept in the files so that it can be referred in future easily. The

information of such slip is entered into Finacle Core by one of the staff of the

department. So, one of the responsibilities given by the department during the

internship period is to fill Account Maintenance Slip.


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Figure 12: Account Maintenance Input

8.5 Updating of Various documentsOne of the regular activities, I carried out, as an intern, was constant updating of

various documents that were maintained by CAS. List of Borrowers, Valuation

record of collateral (mortgaged properties), etc are among few document databases

maintained by CAS. I was given the responsibility to update them and also verify

the whole database from top to bottom. Such documents were:

Valuation Records Insurance Coverage Records List of Borrowers

8.5.1 Valuation RecordsValuation records table is a database containing details about the mortgaged

collateral. It contains information such as owner of the property, type and location of

collateral, its fair market and distress value, name of the valuator and valuation date,

etc.

S.N

o Client

Property

Owner Location

Plot

No.

Type of

Collateral

Distress

Value

Fair Market

Value Valuator

Valuation

Date Remark

1 XYZ Co. Ltd. Mr. ABC Maru 150 Land 1,000,000 1,500,000 Er. MNO 8/6/2006

Building 1,500,000 1,500,000

Total 2,500,000 3,000,000

Figure 13: Valuation Records

Valuation records table is especially useful to keep track of the distress value of the

mortgaged property. Distress value is a government allotted rate which is discounted


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than fair market rate. Even when property has to be hurriedly sold, usually the

distress value can be recovered. So, Bank can rest assured that even when borrower

goes default, bank can at least recover the distress value of the collateral. Such

recovery usually takes place by auctioning the mortgaged property.

8.5.2 Insurance Coverage RecordsIn order to be in a safer side, bank demands its borrower to insure the mortgaged

collateral. Customers are also required to continuously update its insurance

coverage. Apart from mortgaged collateral, customers of auto-loan or other types of

financing are also required to insure the financed property. Hypothecated stocks or

working capitals are also needed to be insured and all such insurance are needed to

be updated periodically. Bank also keep a close watch on expiry date of all such

assets and reminds its customer to renew such coverage by paying its insurancepremium. Insurance coverage record comes in handy in these cases.

S.

NoClient Name Insurance Coverage

Insured

Property

Insured

AmountExpiry Date

Relationship

OfficerRemark

1 XYZ Co. Ltd Earthquake, Riot,

FireBuilding 2,000,000 12/1/2007 Mr. NBL

Figure 14: Insurance Coverage Records

Insurance coverage record is a file containing information about the type of insured

property, type of insurance coverage, insured amount and insurance expiry date.

Initially, CAS staff sorted the list and then found out about those policies which had

expired or are about expire in a months time. Later, I automated it so that they dont

have to keep sorting and differentiating. All they needed do was just press a button

and the record was automatically separated into two different groups one

containing information about only the expired policies, another group showed

policies which were about to expire in a months time.

Insurance coverage records are useful to check expiry date of insurance policy and

also to ensure all types of securities have adequate insurance coverage.

8.5.3 List of BorrowersList of borrowers is another type of database that CAS staffs use to store information

about its clients. It is a database containing information about the borrowing firms,


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45

Section C

Internship

Program

Feedback


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Section C: Internship Program Feedback 46

9. Internship Program Feedback9.1To what extent was the knowledge you had acquired in the course relevant

and useful to you in the context of the job or function you placed in?

Every body gradually acquires knowledge, from various sources, through the

passage of time. One of the major sources is the educational institutions he/she is

enrolled to. Everybody tries to use such acquired knowledge in every possible

contexts. Nothing was different in my case as well. I was able to use many aspects

of my course acquired knowledge for successful completion of the assigned jobs and

duties during my internship period.

Computer related knowledge was the most useful skill for all. It helped me to

automate a variety of complex series of tasks which the bank personnel considered

tedious and time consuming.

Knowledge gained from our core subjects like Management, Finance, Human

Resource Management, Account, Marketing, etc. has helped me understand various

technical terminologies (jargons) and duty related fundamental issues. Subjects like

Human Resource Management, Organizational Behavior, etc. have also influenced

my behavior while approaching any client or senior officers.

9.2What were the components of the job you were very comfortable with?I was assigned to Credit Administration and Support (CAS) department of Nabil

Bank where my major responsibility was to verify and update various records and

occasional report generation. I was very much comfortable with all such

responsibilities. I was equally at ease to adapt to the working environment and the

reporting relationships which invariably made me feel that I was a part of that

organization.

9.3What components of the job were difficult to perform and new to you?Practical way of doing things is very different from theoretical knowledge one can

gain from college lecture. When I really took my first steps in the practical job life, I

was bewildered by the difference. After going through the early hiccups of learning

curve, I did not find any difficult component in the assigned duties and

responsibilities.


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Section C: Internship Program Feedback 47

9.4What were the practical learning experiences for you from this program?The internship program provided me the insight of the practical working

environment. I was able to relate the theoretical knowledge gained from college,

with the assigned work within the organization. It also provided the platform to

understand concepts of different managerial aspects; such as working conditions,

hierarchy of authority, delegation of responsibilities, functions at different hierarchy

and their importance, etc.

9.5What improvements do you suggest in the course contents and theirteaching, and the internship program itself?

The first and foremost problem a fresh intern faces is the adaptation to the working

environment. I believe almost all interns will have to spend at least two weeks to

know the style of operation the organization follows. Interns have to start theirduties and responsibilities, even before they actually grasp the above knowledge.

This leads to depleted performance from the intern.

My suggestion to our college is to conduct a small training course and few lectures

defining the overview of the possible organization. This will prepare students to

quickly overcome the learning curve difficulties and they will be able to work more

effectively and efficiently from the day one.

Duration of internship program is too short for proper evaluation of the actual

abilities, qualities and attributes of related intern. This invariably results in the

erroneous evaluation of the intern. So, either duration of the internship program

should be increased or, attributes which cannot be judged within 6-8 weeks period

should be eliminated from the evaluation report. Also attributes demanding

subjective judgment should be eliminate as different supervisor are subject to

evaluating same level of attribute at different grades.


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Bibliography 48

Bibliography

1) Bhattarai, R. & Bhattarai, M. (2005). Fundamentals of Financial Management:Theory and Practice. Kathmandu: Buddha Academic Publishers and

Distributors Pvt. Ltd.

2) Chokhal, A. (2005).An Internship Report on Functions of Treasury Departmentat Kumari Bank Limited. Unpublished Internship report, Apex College

Library, Pokhara University.

3) Cooper D. R. & Schindler P. S. (2000). Business Research Methods.New Delhi:Tata McGraw Hill.

4) Jayaram, S. B. T. (2003). An Internship Project at Credit Department of NepalBangladesh Finance and Leasing Company Limited. Unpublished Internship

report, Apex College Library, Pokhara University.

5) Nabil Bank Limited. (2005). 21stAnnual Report 2004/05. Kathmandu: NBL.6) Nabil Bank Ltd. [online] (cited 2006 November 15). Available:

.

7) OBrien, J. A. (2004). Management Information System (6th ed). New Delhi:Tata McGraw Hill Publishing Company Ltd.

8) Rana, P. (2005). An Internship Report of Nepal Investment Bank Ltd.Unpublished Internship report, Apex College Library, Pokhara University.

9) Shah, M. K. (2006).An Internship Report on Nabil Bank Limited. UnpublishedInternship report, Apex College Library, Pokhara University.

10)Shrestha, M. S. (2006). Fundamentals of Banking. Kathmandu: BuddhaAcademic Publishers and Distributors Pvt. Ltd.

11)Wolf H. K. & Pant, P. R. (2005). Social Science Research and Thesis Writing(4

th

ed). Kathmandu: Buddha Academic Publishers and Distributors Pvt. Ltd.

12)Shrestha, R.P. (2003). Legal Environment of Business (3rd ed). Kathmandu:M.K. Books.


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Annexure 50

Management Team

Mr. Anil Shah Chief Executive Officer

Credit

Mr. Amrit Charan Shrestha Country Head CreditMr. Krishna Gopal Manandhar Head Credit Operation and Support

Mr. Anil Khanal Head Business Bank, Credit

Ms. Neena Thapa Sr. Analyst, Business Bank Credit

Mr. Yagya Sharma Head Personal Credit

Business Banking

Mr. Deepak Shrestha Senior Relationship Manager

Mr. Dripu Dhoj Adhikary Senior Relationship Manager

Mr. Ramesh Lohani Relationship Manager, Kathmandu

Mr. Gyneshwor Acharya Branch/Relationship Manager, Birgunj

Mrs. Namita Dixit Relationship Manager, Kathmandu

Mr. Krishna Dutta Bhattarai Relationship Manager, Biratnagar

Mr. Babu Ratna Bajracharya Relationship Manager, Butwal

Mr. Sanjay Nepal Relationship Manager, Kathmandu

Privilege Banking

Mrs. Barsha Shrestha Head Privilege Bank

Mr. Deepok Chhetry Relationship Manager

Mr. Bikash Mishra Relationship Manager

Personal Lending

Mrs. Raveena Joshi Head Personal Lending

Card Division

Mr. Binaya Kumar Regmi Head Card Division

Mr. Praveen Raj Pokharel Manager Card Marketing

Treasury & Correspondent Banking

Mrs. Anupama Khunjeli Head Treasury and Correspondent Banking


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Annexure 51

Operations

Mr. Rajendra Bahadur Malla Head Operations

Ms. Neelam Tuladhar Head National Processing Centre, Maharajgunj

Mr. Bishnu Acharya Head General Administration

Mr. Mohan Subba Head Central Trade Operations

Mr. Yugesh Lal Bijukche Manager Operations

Mr. Kanhaiya Lal Rajwant Manager Compliance

Mr. Prakash Babu Pant Manager Biratnagar

Mr. Pradeep Mishra Manager Lalitpur

Mr. Saroj Pyakuryal Manager Pokhara

Mrs. Anita

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