Course Code: ACCT 4102; Course Title: Credit & Risk Management

12th Batch-2020
Question No 1.
a) Define credit and briefly discuss the various form of funded and non-funded bank credit in
Bangladesh.08

Credit is the ability to borrow money or access goods or services with the understanding that you'll pay later.
Credit derived from the Latin word “credo” means “I believe”, and is usually defined as the ability to buy with
a promise to pay, or the ability to obtain title to, and receive goods for enjoyment in the present although
payment is deferred to a future date.

It is a liability for the borrower and an asset for its lender.

Credit

Funded Non-Funded

a.L/C, DC
a.Term loan
b.Bank guarantee
b.Micro credit
c.Working capital
d.Demand loan
e.Other special programs:

i. Funded facilities: Funded Facilities are the loan where the bank or other financial institution provides real
cash (not a commitment) to their client.
a. Term/ time/ fixed loan: A term loan is a loan from a bank for a specific amount that has a specified
repayment schedule and a fixed or floating interest rate.

i. the entire amount is disbursed in one or several phases by debiting the loan account.
ii. Repayment of the loan can be made either in one or more than one installment.
iii. Amounts repaid cannot be redrawn.
iv. Interest is calculated ON the outstanding balance.
v. Types of term loan-
i. Short-term loans: A loan with a repayment period, usually one year are sanctioned
mostly to meet seasonal working capital needs, particularly seasonal agricultural
activities.
ii. Long-term loans: 3 to 10 years, are sanctioned for the acquisition of capital goods for
the development of the manufacturing/processing industry as well as agriculture.
b. Micro credit: Microcredit means the form of small loans with no collateral, is issued to nontraditional
borrowers such as the poor in rural or undeveloped areas.

c. Working capital loan: A working capital loan is a loan that is taken to finance a company's everyday
operations. These loans are not used to buy long-term assets or investments and are, instead, used to provide
the working capital that covers a company's short-term operational needs.

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 1) Overdraft: It represents permission to overdraw a current account up to a sanctioned limit.
Sometimes overdraft is allowed without any security for a very short period.
2) Cash Credit: Cash credit is an account operated almost like an overdraft facility in a current
deposit account, except that a separate account is opened and the account in general, cannot be in
credit balance. It can be in debt and nil balance. The cash credit limit is sanctioned for a specific
period, usually a year or shorter period.
3) Loan Against Imported Merchandise (LIM): It is a facility provided by the bank to the importers
who are in shortage of fund to retire the import bills and thus to clear the goods from the port
authority. In other words, it may be referred as an advance made to the importers for clearance
the imported merchandise.
4) Loan against Trust Receipt (LTR): Loan Against Trust Receipt (LTR) is a short-term loan
provides to the importer to settle the payment of imported goods. The title of the goods is held by
the bank until the importer settle the payment but the buyer can take possession of the goods on
trust for resale before paying the bank on LATR due date.
5) Export Cash Credit (ECC): Export Cash Credit is allowed as a cash credit against the
hypothecation of raw materials for processing goods for export. The advance is usually adjusted
from the export proceeds.
6) Packing Credit (P.C): Packing credit is essentially a short-term advance granted by a bank to an
exporter for assisting him to buy, process, manufacture, pack, and ship the goods.

d. Demand loan: A demand loan is a type of loan that has low interest and no repayment plan. The parties
agree to it with the understanding that the borrower will pay back the money whenever the lender asks for
it. For example-Bank Overdraft.

e. Other special programs loan: The loan that are issued for special purpose. For example-Employee
Separation Program (ESP), Black Bengal Goat Rearing Credit Guarantee Scheme

ii. Non-funded Facilities: Funded Facilities are the loan where the bank or other financial institution
provides a commitment (not real cash) to their client.
a. L/C: A Letter of Credit (LC) is a commitment that guarantees the buyer's payment to the sellers. It is
issued by a bank and ensures timely and full payment to the seller. If the buyer is unable to make
such a payment, the bank covers the full or the remaining amount on behalf of the buyer.
b. Bank guarantee: The bank guarantee means that the lender will ensure that the liabilities of a debtor
will be met. In other words, if the debtor fails to settle a debt, the bank will cover it. A bank
guarantee enables the customer (or debtor) to acquire goods, buy equipment, or draw down a loan.

i. Bid bond: A bid bond provides a guarantee that a winning bidder will take up the contract as
per the terms at which they bid. It is a guarantee for a winning the bidder, provide to the
project owner to ensure that if you fail to honor the terms of the bid, the owner will be
compensated.
ii. Performance Guarantee (PG): To assure payment to the beneficiary, the guaranteed amount in
the event the supplier/seller has not! or insufficiently fulfilled his contractual obligations.
Stipulated in the contract, usually, the amount varies from 5% to 20% of the value of the
contract.
iii. Advance Payment Guarantee (APG): As per terms of payment for the major sales, the buyer
usually pays an installment for purchase of raw materials and the cost of production.
iv. Bill of lading Guarantee
v. Custom Guarantee
vi. Counter Guarantee: It is an irrevocable undertaking of the instructing party to the guarantor to
compensate at the event.

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b) Shortly explain the various forms of Islamic mode of investment in Bangladesh. 07

1. Bai Mechanism 2. Share Mechanism 3. Ijara Mechanism

a. Bai- Murabaha a. Mudaraba a. Hire Purchase Under

b. Bai- Muajjal b. Musharaka Shirkatul Melk
c. Bai- Salam b. Ijarah
d. Istishna’a

Bai Mechanism

a. Bai-Murabaha (Contract Sale on Profit) :(পপপপপপপপ পপপপ পপপপ পপপপপপ-পপপপপপপ

পপপপ পপপপ নগদ পপপপপ হয় )

“Bai-Murabaha” means a sale on an agreed-upon profit. Bai-Murabaha may be defined as a contract between
a Buyer and a Seller under which the Seller sells certain specific goods permissible under Islamic Shariah and
the Law of the land to the buyer at a cost plus an agreed profit payable today or on some date in the future in
lump-sum or by installments. The profit may be either a fixed sum or based on a percentage of the price of the
goods.

b. Bai-Muajjal (Sale on Credit): (পপপপপপপপ পপপপ পপপপপপ পপপপপপ)

“Bai-Muajjal” means a sale for which payment is made at a future fixed date or within a fixed period. In
short, it is a sale on Credit. The Bai-Muajjal may be defined as a contract between a buyer and a seller under
which the seller sells certain specific goods (permissible under Shariah and the law of the country) to the
buyer at an agreed fixed price payable at a certain fixed future date in a lump sum or fixed installments.

c. Bai- Salam (Advance Payment) (পপপপ পপপপপ পপপপ পপপপপপপপ পপপপ পপপপপপ
পপপপপ )

“Bai- Salam” means advance sale and purchase. Bai-Salam may be defined as a contract between a buyer
and a seller under which the seller sells in advance the certain commodity/products (permissible under
Islamic Shariah and the law of the land) to the buyer at an agreed price payable on the execution of the said
contract and the commodity/products are delivered to the buyer as per specification, size, quality, quantity at
a future time in a particular place.

d. Istishna’a (manufactured/produce and sale) (পপপপ পপপপপ পপপপ পপপপ পপপপ পপপপপপ ও
পপপপপপ পপপ পপপপপ)

Istishna'a is a contract between a manufacturer/seller and a buyer under which the manufacturer/seller sells
the specific product(s) after having manufactured (permissible under Islamic Shariah and Law of the
Country) after haying manufactured at an agreed price payable in advance or by godowns within a fixed
period or on/within a fixed future date based on the order placed by the buyer.

Share Mechanism (Partnership)

a. Mudaraba (Investment made by the entrepreneur/ finance trusteeship) ( পপপপপপ পপপপ ও পপপপ
পপপপ পপপপ)

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Mudaraba is a partnership in profit whereby one party provides capital and the other party provides skill and
labour. The first party is called the “Sahib-Al-Maal” and the latter is referred to as the “Mudarib”. Any
profits accrued are shared between the two parties on a pre-agreed basis, while capital loss is exclusively
borne by the partner providing the capital.

b. Musharaka (Partnership based investment /equity partnership) (পপপ-জপপপপ পপপপ)

Musharaka refers to a joint partnership where two or more persons combine either their capital or labor,
forming a business in which all partners share the profit according to a specific ratio, while the loss is shared
according to the ratio of the contribution.

Ijara Mechanism

i) Shirkatul Melk:(পপপপপপপপপপপপ পপপপ পপপ পপপপপপপপপ পপপপ পপপপপপ পপপ

পপপপপপপপ পপপপপ পপপপ)
‘Shirkat’ means partnership. Shirkatul Melk means share in ownership. When two or more persons
supply equity, purchase an asset and own the same jointly and share the benefit as per agreement and
loss in proportion to their respective equity, the contact is called Shirkatul Melk. In the case of Hire
Purchase under Shirkatul Melk, IBBL purchases assets to be leased out, jointly with a client under
equity participation, own the same, and share benefit jointly till the full ownership is transferred to
the client.
ii) Ijara: The term Ijara has been derived from the Arabic words “Air” and “Ujrat” which means
consideration, return, wages or rent. This is the exchange value or consideration, return, wages, rent
of service f an asset. Ijara has been defined as a contract between two parties, the Hiree and Hirer
where the Hirer enjoys or reaps a specific service or benefit against a specified consideration or rent
from the asset owned by the Hiree. It is a hire agreement under which the Hiree to a Hirer against
fixed rent or rentals hires out a certain asset for a specified period.
iii) Sale: This is a sale contract between a buyer and a seller under which the ownership of certain goods
or assets is transferred by the seller to the buyer against an agreed upon price paid / to be paid by the
buyer.
iv) Qard hassan ( পপপ পপপপপ) is a loan extended on a goodwill basis, mainly for welfare purposes.
The borrower need only pay back the amount they borrowed, with no interest. On principle, Islam
does not allow interest.
Question No 2.
a) Define credit management and depict the flowchart of credit management.03

credit management is the process of accomplishing various tasks relating to deciding grant or not granting
credit to others, determination of terms and conditions, proper documentation, frequent monitoring and
reviewing the performance of borrowers, and taking necessary steps to ensure smooth recovery of credit which
ensure profit maximization of the bank.
Flow Chart of Credit Management
Credit Management
01. Strategic plan for target markets (setting target, prospective borrower, types of loan)
02. Credit policy Formulation- (Internal Regulation/Guideline of overall credit management)
03. Initiation, Client request (Application), Relationship marketing (Loan Officer promotes for issuing loan))
04. Client interview (Face to Face Conversation between client and loan officer)
05. Credit investigation (verification of client information)
06. Credit analysis (Purpose of loan, Business condition, Management Figures, Credit rating)
07. Credit Analysis Report (Summary of findings in credit Analysis)

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 08. Credit Approval (Based on Report decision taking whether granting loan)
09. Credit Structuring, Pricing, Repayment
10. Credit Negotiation (Tenor, Pricing, Repayment, Covenants, Security, and others)
11. Documentation (original mortgage document, blank check, nominee)
12. Credit Disbursement (fund transfer to client account)
13. Internal Audit (To ensure regulatory compliance)
14. Credit monitoring and Review (Frequent communication with client)
15. Handling Problem Credit (rescheduling, time extending)
16. Recovery of Credit
b) Credit officers’ attitude towards credit has been changed over the years. Explain the changing
attitudes of credit officers? 03

Over time, for the rapid and tremendous growth of industry and commerce, Credit officers’ attitude towards
credit has been changed with changing status and qualifications for credit management.

Overtime, Personal relationship has been lost as expansion of commerce. Higher degree and more experienced
personnel are needed for tackling credit. Improved sources of credit information; better accounting methods,
redefinition of the techniques of financial statement analysis recognized the professional character of credit
work. Scientific approaches are being used for analyzing credit that require automated computation through
computer.
However, Kreps et al. divide this changing attitude of a credit manager in three ways namely:
1) The protective attitude: it is primarily concerned for the bank’s protection,
2) The constructive attitude: it is concerned about intelligent and exacting analysis by which a
salient trend is brought out and future events are prophesied with greater accuracy,
3) The creative attitude: It includes informing the customer of these trends and helping him to
avoid unfavorable contingencies.
c) Define credit officer and exhibit the credit officer's decision-making process.04

“A Credit officer is an individual working on behalf of a bank and empowered to decide whether or not to
lend to bank customers at some determined interest rate”

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Credit officers’ decision-making activity can be compared with the production and accounting processes. Each of these
systems is characterized by specific inputs, a process, and output. The following figure exhibits the production,
accounting, and lending credit officer’s decision-making process:

d)Credit policy is the anchor of credit. It directs the credit activities of a bank. State the components
of a standard credit policy.05

Credit management in the bank lending aims to measure and control the risk exposure and to achieve maximum profits
by limiting exposure to defaults that is default rate.
Gupta (1995) recommended thirteen aspects for a standard lending policy. The aspects are:
(1) Corporate mission statement,
(2) Analysis of the present credit portfolio,
(3) Broad objectives of the policy,
(4) Preferred area of lending,
(5) Discouraged areas of lending,
(6) Strategies to achieve the above objectives,
(7) Exposure limits,
(8) Liquid gap analysis,
(9) Spread management,
(10) Credit expansion policy,
(11) Combating the growing menace of NPA’s
(12) Industry wise specialization, and
(13) Pricing strategy.
Question No 3.
a) What do you mean by loan documentation? What ideas one should keep in mind to improve loan
documentation? 05

Loan Documentation means the Credit Agreement, any amendments, supplements, accessions, waivers to the
Credit Agreement and all guarantee, security, mortgage intercreditor and restructuring documentation
relating to the Credit Agreement.”

Brown suggested some good ideas to improve loan documentation and these are -
(1) Hire experts from outside the bank to work on documentation,
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(2) Sign all notes by borrowers and at least by two credit officers,
(3) Loan document should be typed by one secretary and it must be signed by him, then one can easily identify
who is accountable for type,
(4) Double-check the documents to ensure that it contains the entire necessary signatures,
(5) Document appraisals (মূলয ্ ায়ন), title searches for real estate secured loans.
(6) Using File borrowing authorization form,
(7) Record real estate and commercial collateral from UCC,
(8) Maintain records on insurance,
(9) Maintain financial statements of borrowers and guarantors,
(10) Arrange loan files in logical order
(11) Attach to each file what should be a dwindling (কমাতে হতে) list of document exceptions in need of
correction.
b) Write the principles of effective loan review operation suggested by Wood. 05

Wood (2003) suggested the following 10(ten) elements for an effective loan review operation:
1) Avoid the gotcha (বুঝতে পারা) approach in words and actions,
2) Communicate in timely way. Do not spring surprises, touch base with the involved parties, and get the full
story,
3) Give credit where credit is due; acknowledge when the line initiates action.
4) Use the team approach. Ask “How can we fix this?” versus “How did this get broken?”
5) Avoid sharp and prickly adjectives,
6) Keep materiality in mind: “Nice to have” versus “need to have”; and underwriting oversight on an isolated
basis should not be a cause for a public humiliation; an issue on a $10,000 loan probably is not an important
issue on a $10 million loan,
7) Avoid jumping to conclusions, especially when you have not discussed the issue with all parties involved,
8) Recognize signals you may be giving; don’t start out with “we are right and you are wrong” body language
and verbal cues. After all, you may be wrong. Listen at least as much as you talk,
9) Make sure your constituents know that you recognize risk grading is as much art as it may be science and
that you are equally open to upgrading as downgrading, and
10) If it does not make sense, it is probably wrong.

c) Make a comparison between the Credit Risk Grading Model (CRGM) and Internal Credit Risk Rating
(ICRR) and comments on it. 05

4. a) Explain the classification and provisioning rules as per BRPD Circular.08

b) Briefly Discuss the rules regarding rescheduling of loans according to the BRPD Circular. 04

c) "Islami Bank performs its CSR by the way of Quard-e-Hasannah."-Is it true? Explain. 03

Question No 5.
a) What is Credit Analysis? Explain 11 C's in credit analysis. 10

Credit analysis is the process whereby both quantifiable and subjective factors are evaluated simultaneously
and judged.

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The main task of credit analysts is to judge the prospective borrowers’ ability and willingness to pay the
obligation as stated in the loan agreement. The end objective of credit analysis is to minimize loan losses and
non-performing loans.

Scholarly literature has developed some basic components of credit analysis which we term as “Cs of credit”.
Here is a brief description of the principal Cs of credit:

1. Character: character refers to the client’s willingness and determination to meet loan obligations.
character is an inner quality that is exhibited by such qualities as integrity, stability and honesty.
2. Capital: Capital represents the funds available to operate a business
3. Capacity: Management ability to generate enough cash to satisfy all obligations
4. Collateral: It means the security of loan viz mortgage. Collateral is the secondary sources of repayment
5. Consequences: It refers the result of loan purpose.
6. Cashflow
7. Condition: It refers the borrower’s future financial condition.
8. Current information
9. Customer relationship
10. Corporate life cycle has been developed: There are three stages of corporate life cycle viz. “growth”
“mature” and decline stage
11. Economic Condition: Aggregate countries economic condition.
b) What do you mean by credit report? Explain the different types of the credit report. 0 3

Credit report is a statement contains details about the past credit history of a prospective borrower which are
found in credit analysis.

Credit reports are of two types According to formation:

1. basic reports: Basic reports are the reports that have not been analyzed before. It is prepared for first time
which may need later update.
2. update reports: It is an updated form of basic report that have significant changes, events, and data
subsequent to the time period covered in the basic report.

Credit reports are of three types according to length

1. full report: Full reports are the most detailed and most complete credit analysis.
2. partial report: Partial reports are written when there is little information, unconfirmed data, or
volatile performance.
3. credit memo: Credit memos are written to answer specific questions or resolve particular problem
c) What are the questions that are important for credit officers to confirm the purpose of credit as per
Lucas?
Lucas suggested that a credit officer should inquire about the questions:
(1) Is the loan a productive one?
(2) Does the loan replace other creditors? and why?
(3) Will the borrower and the bank benefit on both short term and long-term basis? How is it in each case?
Question No 6.
a) Define credit Interview and Investigation? Differentiate between interview and investigation.05

Credit interview refers face to face conversation between client and loan officer for deciding whether to
accept or reject credit application for further process.

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Credit investigation is the process of acquiring enough information from different sources to determine the
loan applicant’s willingness and capacity to service the proposed loan. Credit Investigation is a verification
of client’s information with the collected information gathered in step 3(initiation) and 4 (client investigation).

Difference between interview and investigation-

Base Interview Investigation
Definition Interview enables credit officer to Investigation is the process of acquiring
obtain enough data and under enough information from difference
standing ensure that the loan can sources to determine the loan application
be collected willingness and capacity to service
proposed loan.
Meaning Face to face interrogation Study of acquiring enough information
from different sources.
Nature More objective More Subjective
Time Needs comparatively short time Needs comparatively long time
Consumption
Merit Possible to check psychology, It is a theoretical part that do not discover
behavior and personality of some inherent perspective.
prospective person.
Cost More costly Less Costly

b) "Kreps identified some important steps of credit investigation". What are they? Explain. 05
Kreps et al. (1973, 124-125) identified the following steps of credit investigation:

first step is to decide what questions justify the work of obtaining answers.
Second, the credit officer should determine who is best suited to handle credit investigation.
Third, what are the probable sources of information?

c) Define credit monitoring and review. Write the objectives and advantages of monitoring and
review. 05

credit monitoring and review is a continuous process of frequent communication to see borrower’s business
condition & growth and provide advisory service to the borrowers at the time of adverse situation in
order to maintain the quality of loan portfolio and to achieve target profit of the bank.
The main objective of monitoring and review is to evaluate the capability of the borrower to repay
credit obligation. It helps to create a strong inter-personal relationship between borrower and lender. Thus,
borrowers are motivated to think that bank and borrowers are partners with the common goal of having the
business prosper.
11th Batch-2019

1. a) Define credit and briefly explain the various form of funded and non-funded credit of conventional banks
in Bangladesh. 06

b) Write short notes on (i) Bai-Musharaka and (ii) Bai-Muazzal form of investment of Islamic banking in
Bangladesh. 03

c) What do you mean by credit management? Depict and analyze the flow chart of credit management. 06

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2. a) Once upon a time credit officers were solely concerned to protect their bank’s fund. Now the attitude of
credit officers has changed. Explain the changing attitudes of credit officers. 03

b) Define credit officers and exhibit the credit officer's decision-making process. 06

c) Credit policy is an anchor for a bank from which a boat swings with wind and tide. Justify the statement
with regards to the components of a standard credit policy. 06

3. a) A loan interview helps a credit officer in various ways. What are the goals of the loan interview? 03

b) A credit investigator should have some knowledge in several basic fields. What is the basic knowledge a
credit investor should have? 04

c) Explain the sources of information from where a credit officer can get information to judge the
creditworthiness of borrowers. 08

4. a) Define credit analysis. Exhibit and analysis the steps in the optimal approach of 05 credit officer's
financial analysis.

b) List the C's of credit and explain what credit officer should look to judge the

(i)Character, (ii) Capacity, (iii) Capital, and (iv) Collateral of the loan applicant. 08

c) Explain the corporate life cycle. 02

5. a) Define credit monitoring and review. Discuss the objectives of credit monitoring and review.03

b) Briefly discuss the causes of the problem loan.05

c) Discuss the ways the commercial bank can handle problem loans.07

6. a) What do you mean by CRG? Mention the name and the types of grades used in CRG. Mention the
features of the superior loan. 03

b) Write the Objective criteria of loan classification. State the conditions for eligible collateral. 06

c) Mention, in brief, the guidelines and down payments rules for rescheduling. What are the conditions for a
new loan facility after rescheduling? 06

10th batch-2018

1. a) Define credit and briefly discuss the various form of short-term funded and non-funded bank credit in
Bangladesh. 09

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b) Write short notes on (i) Mudaraba (ii) Bai-Murabaha and (iii) Ijarah mode of investments of Islamic
banking in Bangladesh. 06

2. a) What do you mean by credit management? Depict the flowchart of credit management. 04

b) Define credit policy. Mention the components of standard credit policy.04

c)Define credit officer and exhibit the credit officer's decision-making process.04

d)Discuss why relationship marketing is important for banks in Bangladesh.03

3. a) Define loan interview. Differentiate between interview and investigation. 04

b) Discuss the appropriate sources of credit information. 04

c) What do you mean by credit analysis? List and discuss 11 C’s in Credit analysis.07

4. a) What do you mean by loan documentation? What ideas should be kept in mind to improve loan
documentation? 04

b) Write the principles of effective loan review operation suggested by Wood. 04

c) "Before turn into problem loan, we observe some symptoms that the loan will turn into problem
loan." What are the symptoms? 04

Literature has identified the followings as the sign of problem loans:

(1) Lack of profitability, (2) High/rising leverage, (3) Low/decreasing liquidity, (4) Low collection of
accounts receivables, (5) Slow turn of inventory, (6) Weak/decreasing equity, (7) Increase in accounts
payable, (8) Loans to officers and stockholders, (9) Fraudulent of financial information, (10) Delinquency
or other default, (11) Failure to provide information, (12) Family and marital problems, (13) Rapid business
expansion, (14) Changes in management, (15) Change in accountants, (16) Declining sales, (17) Change
in product mix, (18) Loss of key employees, (19) Collateral problems, (20) Large/Rising insider
transactions, (21) Changes in accounting methods or auditors, (22) Re-negotiations of loan covenants, (23)
Cancellation of insurance, (24) Investment in non-related venture, (25) Judgments and tax liens, (26)
Concentrations, and (27) Changes in customer mix.

d) State the loan rescheduling policy of Bangladesh Bank. 03

5. a) Discuss credit monitoring, and review. What matters should banks include in their loan review
program according to Ruth? 05
A credit officer will regularly monitor the loan and will provide advisory service to the borrowers at
the time of adverse situation in order to maintain the quality of loan portfolio and to achieve target
profit of the bank.
matters should banks include in their loan review program according to Ruth are-

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(1) A periodic review of all or selected loans to ensure that they are consistent with bank loan policy, documentation
requirements, profitability requirements, and so forth;
(2) A grading of loan quality as measured by key indicators; and

(3) External and internal audit that consider not only the quality of banks portfolio, but may also encompass the
entire lending function from bank loan policy on down.

b) Write the objective criteria in brief for loan classification. State the conditions for eligible collateral. 06

c) Discuss the ways of handling problem loans in commercial banks in Bangladesh. 04

6. a) What do you mean by feasibility study? State the main components of financial feasibility and
management feasibility. 04

b) "There is various loan classification form (CL) a bank needs to submit to the Bangladesh Bank." Depict
these CL forms with provision rates. 04

c) Write short notes on (i) CAMEL and (ii) BASEL-3. 03d) In the Credit Risk Grading (CRG) manual
we calculate some risks. State the name of these risks with their relative weight in CRG. 04

9th batch-2017

1. a) What do you mean by credit? Discuss different types of credit as per Bangladesh Bank (BB) classification
with appropriate examples. 06

b) State the conceptual difference between traditional banding credit and Islamic banking investment. 03

c) Briefly explain various modes of investment of Islamic banks in Bangladesh. 06

2. a) What is credit policy? Mention the components of a standard credit policy recommended by Gupta. 06

b) Explain the credit officer's decision-making process. 04

c) Define credit investigation and explain the various qualities of a credit investigator. 05

3. a) What do you mean by credit analysis? List 11C's of credit analysis. 03

b) State the indicators that credit officers should consider in judging the repayment capacity of borrowers. 03

c) Discuss why cash flow is an important issue for credit analysis. List the sources of generating cash for
repayment of the loan? 03

d) What is a credit analysis report? Discuss different types of the credit analysis report. 03

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e) "The attitudes of credit officers are changing over time." Do you agree? Give 03 reasons in support of your
answer.

4. a) Define credit monitoring and review. Write down the objectives of credit monitoring and review. 03

b) Explain shortly credit structuring with appropriate examples. 03

c) Write down the principles of effective loan review suggested by Wood. 09

5. a) Define problem loans and identify the causes of the problem loan. 06

b) State the early signs of a problem loan. 04

c) Point out the guidelines for the commercial banks in handling problem loans. 05

6. a) What do you mean by CRG? Mention the name of grades used in CRG. 03

b) Write the objective criteria in brief for loan classification. State the conditions for eligible collateral. 06

c) Mention, in brief, the guidelines and down payments rules for loan rescheduling.
State the conditions for the new loan facility after rescheduling? 06

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7th Batch-2015

1. a. What do you mean by Credit? Briefly explain the types of credit.

b. Explain in brief the types of investment from the view point of Islamic Banking System,

c. Explain the terms 'Hire Purchase Under Sirkatul Melk' and 'Quard-E-Hasana.

2. a. What do you mean by credit management? Depict the flow chart of credit management

b. Explain the changing attitudes of a credit officer.

c. Define credit Officer and exhibit the credit officer's decision-making process.

3. a. Define credit policy and list the components of a standard credit policy.

b. Define loan interview. Whal are the goals or loan interview?

c. Define credit investigation and state the qualifications of credit investigator.

d) Lisl he information usually supplied by credit application.

4. a) Define credit analysis. Exhibit and analysis the stems in optimal approach of credit officer’s analysis.

b) State the indicators credit officers should look to judge the repayment capacity of borrower.

c) What factors should credit officer to confirm the capital adequacy of the borrowers.

d) Explain the corporate life cycle.

5. a) What do you mean by loan documentation? What ideas one should be kept in mind to improve loan
documentation?

b) During loan interview, a loan reviewer should concentrate his/her attention to some areas." What they are?

c) "Before turn a loan into problem loan, we observe some symptoms that the loan will be

problem loan." What are these symptoms?

6. a What do you mean by CRG? Mention the name of the types of grades used in CRG.

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b) Write the Objectives criteria in brief for loan classification (Classified Accounts) for commercial banking
credit. (BRPD Circular No.-09. Date-18/06/2012)

c) Explain guidelines and rules for rescheduling (only down payment) as BRDP Circular No. 08; June 14,
2012.

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