Internship Report on Nepal Investment Bank Limited, Nepal (NIBL)

Internship Report on Nepal Investment Bank Limited, Nepal (NIBL)

CHAPTER ONE

INTRODUCTION

1.1 Background

Tribhuvan University is the largest and oldest university in Nepal. It is the pioneer university in providing management education and since its establishment it has been providing the excellent education to the students. It provides a wide range of streams in the educational sector among which management education holds a major position. It introduced the BBA program in the year 2001/02 with an objective of producing middle-level managerial professionals. Bachelor in Business Administration (BBA) is the undergraduate level program of Tribhuvan University (T.U.). It is a four-year course with 120 credit hours comprehensive bachelor degree program. The program is committed to imparting the students with practical knowledge.

As per the requirement of Faculty of Management (FoM) of Tribhuvan University, students of Bachelors in Business Administration (BBA) should perform the internship in any organization for eight weeks. Simply this study is used for the partial fulfillment of BBA course affiliated to T.U. The FoM, Tribhuvan University has its ultimate objective of educating students for professional pursuits in business, industry and government. Although the course design is very much practical in all the semesters with field work, report preparation and presentations, the internship at the last semester aims in providing the students with real world experience as to how the jobs in the organizations are performed, what are the issues the business firms need to address and many others. The internship is to serve the purpose of acquainting the students with the practice of knowledge of the discipline of an organization and helps the student to understand corporate social responsibility, develop the corporate attitude and venture entrepreneurship.

        The BBA program has incorporated eight weeks internship program with a view to developing students’ skill in object-oriented business management, capable of understanding and solving real life business related problems. So, being the student of BBA in Shanker Dev Campus the intern selected Nepal Investment Bank Limited and got involved in 2 months internship program. During the period of internship, internee got the chance to learn many practical kinds of stuff of the banking sector. As the topic is about the Credit Analysis of Nepal Investment Bank Limited, this project report is basically focused on the services provided, the structure of credit department and procedures of granting the loan in NIBL.

1.2 Objective of the Study

The internship program is undertaken for the partial fulfillment of the requirements for the degree of Bachelors in Business Administration. The general objective of this program is to make students familiar with the working environment and gain the practical experience in the related field. This further helps the students to expose themselves to the real world of the external environment about different aspects of management where they can apply their theoretical knowledge. The main task of the internship program is to make a study on the banking operations process, understand the services provided to its customers, and have complete knowledge and functioning of the related departments. These objectives can be jotted down as below:

•    To understand the corporate work culture and get adjusted in it.

•    To present the understanding of banking organization and its working procedures.

•    To observe the general banking procedure and workflow of Credit Department of NIBL.

•    To understand and present the differences in classroom studies and real work life.

•    To fulfill the partial requirement of the BBA eighth semester of Faculty of Management, Tribhuvan University.

1.3 Methodology

Completion of the internship is a combination of the different types of activities. It starts from the selection of the organization for the internship, performance of different kinds of activities and placement in different parts of the organization and at last collection of various primary and secondary data for the preparation of the report. In terms of data collection, both primary as well as the secondary source had been used.

1.3.1    Selection of the Organization

Selection of the organization for the internship program is always a crucial task. As a student of banking and finance, to convert the theoretical knowledge into the practical field, intern preference would be a financial institution, especially a bank. Nepal Investment Bank is a Nepal’s leading commercial bank. It follows the standard business procedure and contains good organizational culture. Intern dropped a letter at NIBL which gave the environment that is necessary for any student doing the internship and luckily got a chance to be a part of it for eight weeks.

1.3.2    Placement

Intern was placed in NIBL, Durbarmarg, and Head Office. During the internship period, the intern was placed in customer service department, credit department, clearing, and remittance. Every staff of Head Office, NIBL was supportive and friendly. The supportive and friendly environment in the organization helped the intern to complete the internship period through the proper guidance of the staffs of various departments. Through their proper guidance, the intern was able to learn more about the organization culture, work environment, and work procedures.

1.3.3 Duration of Internship

TU has prescribed minimum six credit hours for the internship. It is equivalent to eight weeks. i.e. two months

    Duration of Internship started from 3th June to 31st July 2012 AD.

    Report the organization at 10:00 am

          The bank has closely monitored attendance, performance and conduct of intern at the workplace.

 

Table 1.1: Placement Duration during the Internship

Departments	1st	2nd	3rd	4th	5th	6th	7th	8th
CSD
Clearing
Remittance
Credit

1.3.4    Source of Data Collection

The term refers to the way of the collection of data and information. There are the different source of collection of data and information. They are the primary source and secondary source. Here, both of these sources are used to make the report authentic.

a.    Primary Source:

•    Direct personal interview with the related staffs

Asked many questions to the staffs of the related department and acquired lots of information from them.

•    Observation of activities performed

Observed the activities performed in the organization done by employees and during the on-site visit of the customer’s property.

•    Unstructured interview with the clients

Clients are also the source of information and they provide the information based on their perception towards the products and services and the time they spared at NIBL.

b.    Secondary Source:

•    Visited the site of NIBL and other commercial banks and NRB.

•    The articles, publications and journals related to NIBL in different magazines and daily newspapers.

•    Old files and records available in NIBL.

•    Credit Procedure Policy Guidelines of NIBL.

•    The brochures and the annual report of NIBL.

1.4 Limitation of the Study

Despite most of the efforts undertaken to make the project more realistic, practicable in terms of Nepalese context, there are certain limitations of the study:

•    The subject matter itself is vast and the internship period is just eight weeks. So time allocated for the internship is not sufficient to gain banking operation in depth and all the department were not possible to be covered.

•    Intern was not allowed to use the system, like Pinnacle.

•    It was not possible to gather the information regarding the system more specifically due to organizations privacy policy.

•    Most of the information is collected through personal experience and observation; the overall information may not be presented

•    Since, internee joined the credit department at Ashad end which is the end of a fiscal year in our country; internee could not gather the information regarding the system more specifically, due to their busy schedule.

 

CHAPTER TWO

INTRODUCTION OF BANKING INDUSTRY

2.1 Introduction of Bank

Bank can be defined as the financial intermediary between depositors and entrepreneurs. The intermediation takes place when banks accept deposits from the general public, corporate bodies, and private organizations and deploys those deposits for profitable purpose in the form of loans and advances. Bank is financial service institution, therefore in between this intermediation, the bank gets some earning.

According to Horrac White, “Bank is a manufacture of credit and machine so facilitating exchange.”

           According to shorter oxford English dictionary, “A bank is an establishment for the custody of money, received from or on behalf of each customer. Essential duty is to pay their draft on each profit area from its use of the money left unemployed by them.”

           By this definition, the bank can easily be defined as the custodian of deposits. The transactions in the financial market heavily depend upon the banking system of the country. Without the bank, it would be quite impossible for the industrialist and entrepreneurs to go directly to the general public for getting their savings or investments. So the simplest definition is that bank takes the saving of public by providing them with certain rates of interest and loan it to needy customers charging them the certain rate of interest and earns some profit. This is the broadest form of banking but in this age banking is such big term. It does a lot more than deposits and credits, remitting of money, letter of credit etc.

2.2 Origin of Bank

The word bank has been derived from Italian word banco. In the ancient time in the French language it is called the bank, in The English language it is called the bank. In Italian word, banco means bench. The evolution of banking industry had started a long time back in ancient times. There was the reference to the activity of money changers in the temple of Jerusalem in the New Testament. In ancient Greece, the famous temples Delphi and Olympia served as great depositories for people surplus funds and these were the centers of money lending transactions. Indeed, the traces of rudimentary banking were found in the Chaldean, Egyptian and Phoenician history. The development of banking in the ancient Rome roughly followed the Greek pattern. Banking suffered oblivion after the fall of the roman empire after the death of emperor Justinian in 565 AD and it was not until the revival of trade and commerce in the middle ages that the lesson of finance was learnt a new from the beginning. Money lending in the middle ages was however largely confined to the Jews since the Christians were forbidden by the cannon law to indulge in the sinful act of lending money to others on interest. However as the hold of church loosened with the development of trade and commerce about the 13th century Christian also took to the lucrative business of money lending thereby entering into keen competition with the Jews hither monopolized the business.

As a public enterprise banking made its forced beginning around the middle of the 12th century in Italy and the Bank of Venice founded in 1157 was the first public banking institution. Following it were the bank of Barcelona and the Bank of Genoa in 1401 and 1407 respectively. The latter two continued to operate until the 18th century. With the expansion of commercial activities in northern Europe, there sprang up a number of private banking houses in Europe. And slowly it spread throughout the world.

Development of World Banking Sector

 When the World War-2 was inching towards its end major countries started mulling the plight of the future world. There were valued concern about the reconstruction of devastated areas and rebuilding and developing the war-hit economies. In 1944, they gathered at Breton woods in New Hampshire State of the USA. They made a remarkable decision to boost international trade and economic growth and to achieve monitor stability in the global economy. The following organizations is the outcomes of historical greater woods conference of July 1944: IBRD (World Bank), IMF (International Monetary Fund), and ITO (International Trade Organisation).

2.3 History of Banking Development in Nepal

Nepal being a developing country, its banking history is not so long. According to historical records, Our King Mandev and Gunakamdev established Manank and Ginak mudra respectively. Gunakdev borrowed money to rebuild Kathmandu in 723 AD. A merchant named Sankhadhar paid all the debts of people and established Nepal Sambat for the remembrance of that occasion in 80 AD. Likewise, Jaysthiti Malla classified the people in four classes and 36 castes by their occupation. One of those castes who were involved in money lending business at that time named as Tanka-Dhari during the prime ministership of Rannodip Singh.Likewise, Tejarath Adda was established as the first financial institution of the country. In the beginning, only government staffs were allowed to take loans at 5 % interest rates and latter on public were also allowed to take the loan at the same interest rate against the gold and silver securities. Taksar Bivag was also established since 1989.

          Our oldest bank is Nepal Bank Ltd. established in 1994 BS. 30th Kartik. After that, so many banks were established. Nepal Rastra Bank was established in the year 2012 as a central bank of the country. Rastriya Banijya Bank, another commercial bank was established in 2022. Only after 2041 B.S, Nepal government allowed joint venture banks to operate in the country. At present, the banking sector is more liberalized and there are various types of the bank working in the modern banking system. This includes central, commercial, and development banks.

2.4 Need of Banking

Banks have, today gained paramount trust in the public. The functions of banks are not confined just to accept deposits and give loans; they render a wide range of financial services covering different strata of society. This gives us an impression regarding the need of a bank. Need of bank includes but does not limit to:

•    Financial intermediation

•    Legal entity and freedom from exploitation

•    Boost of trade and economic development

•    Organized institution and capital formation

•    Fund transfer and safety of valuables

•    Underwriting services and agency services

•    Employment

2.5 Types of Bank

Different banks are established for different purposes. They can be classified into the following types:

•    Central Bank

The Central bank is the bank of all banks. It is the supreme body, which controls and stabilizes the economy of the country through various direct and indirect means. In direct means, it uses the monetary policy as a tool to expand and contract the economic activities of the country and in indirect means; it uses tools like issuance of treasury bills, national savings bond, and bank rates etc. the central bank neither maintains accounts of public nor does it give loans to the public. Nepal Rastra Bank which was established in 26th April 1956 is the central bank of Nepal and Bank of England in 1694 A.D. was the first central bank of the world.

•    Commercial Bank

Commercial banks are the largest source of finance and its business is largely confined to business institutions. Though the commercial banks were established with the concept of supplying short-term credit and working capital needs of industries, they started to provide long-term loans for up to 10 years by the provision made in commercial bank act 1974. after the enforcement to lend in priority and deprived sector, these banks initiated to provide credit to small and cottage industries, agriculture, and services etc. Nepal bank Ltd was established in 15th November 1937 as the first commercial bank in Nepal.

•    Agricultural Bank

Cooperative bank, established in 1963, was converted to Agriculture development bank in 1967 with the objective of modernizing the country’s agriculture sector. This bank, besides providing credit to agriculture has been availing credit to agro-industries such as livestock, bee-keeping poultry etc. and has extended their business in hire-purchase and other loans also.

•    Development Bank

Development banks are established for the development of the economy. Nepal industrial development corporation (NIDC) was established in 1956, with the objective of providing medium-term loans for the establishment, development and modernization of private sector industries. Small industry Development Corporation was established in 1960 to provide loans to small-scale industries and it was merged to NIDC in 1971.

•    Cooperative Bank

Cooperative has developed as the alternative of usury. It is an association of voluntary members and caters the financial needs of the members only on a mutual basis. It is a self-help type of organization, where borrowers are member shareholders. There are 21 cooperative operating in Nepal.

•    Saving Bank

The establishment of saving bank was to alleviate property through the encouragement of thrift among the poor and marginalized community. Savings banks offer higher interest rate than other banks and the fund is utilized by the government. The first savings bank in Nepal is the Hulak Bachat Bank established in 1962 A.D.

•    Rural Bank

Rural banks are established with the aim of providing credit and other facilities to the small and marginal farmers, agricultural laborers, artisans and small entrepreneurs in rural areas. The main purpose of rural banks is to bridge the vast credit gap in the rural sector and curtail the role of unauthorized private moneylenders. All financial needs of the medium and small firms are expected to be met by the rural banks.

•    Merchant Bank

Merchant banking institutions offers various specialists services such as loan syndication, financing and management consultancy, project counseling, portfolio management, formulation of schemes for rehabilitation, guidance on foreign trade financing and management and advisory services to medium and small savers.

2.6 Commercial Bank

A commercial bank is a business organization, which deals in money by lending and borrowing money, in which it makes the profit. It raises its resources through borrowing from the public in the form of deposit and lends this to the business firm.  Its lending rate of interest is greater than its deposit rate. This difference in lending and borrowing rates enables it to make the profit. The basic source of funds for commercial banks are capital and reserved retained profit. It performs several functions as various types of deposit facilities like the current, saving and fixed deposit; safety of public money, remittance of money, letter of credit, loans, locker facility, foreign exchange, serving as an agent of its clients etc.

Commercial Bank Act 2031 states- “A commercial bank is the bank which exchanges money, accepts deposits, grant loans, and perform banking function.”

          According to S.2A, of Commercial Bank Act 1974 AD-“Commercial banks are the heart of the economic system.They hold deposits of millions of people, government and business unit. It exchange money, accepts the deposit, grant loan and operates commercial transactions.”                                                   

2.7 Functions of Commercial Banks

The main function of the commercial bank simply is ‘to borrow to lend’. Besides, there are other functions which have been developed according to need of the society as-

•    Accepting deposits

•    Advancing loans

•    Discounting bills of exchange

•    Transfer of money

•    Miscellaneous functions

2.8 Present Scenario of Commercial Banks in Nepal

Banks are gradually starting to realize that, in today’s competitive banking environment, exemplary customer service is one of the distinguishing characteristics that banks can exploit to establish a competitive edge. Since most banks offer comparable products and services, they should continually search for a competitive advantage that will attract new customers and help retain existing ones. Banks are therefore, looking to develop innovative products and services to maintain superior customer services levels while at the same time remaining profitable. With the number of market players in the rise, the competition has been obviously growing in the banking industry. The most obvious effect of the rising competition can be seen in the interest rates offered by the banks.

          Banks are gradually shifting towards the IT-based solution to enhance service delivery in order to address customer concerns. Most banks are embracing E-banking and provision of ATMs to reduce long queue in the banking hall. In addition, some banks have launched mobile phone banking services which facilities several account query tools, including account balances, thereby minimizing the need for customers to visit banks. This drive towards the IT-based solution will continue to gather momentum in the future as banks will find it very difficult to survive in the ever growing competition without some form of competitive advantages.

          Another trend observed nowadays is large corporate houses explore the shift towards multiple banking relationships. In order to remain competitive, banks are seen to be increasingly encouraging business houses to transact with them. This has led to the creation of the large volume of unutilized limits with the bank and in order to get a large piece of the pie banks are increasingly accepting risks, which they otherwise would not have taken. The unyielding competition has also led the banks to accept collaterals that are more risky and unsecured. The volume of loan against the hypothecation of stock, receivable and other assets are on the rise. In the absence of hypothecation in the current assets, the risk of over financing is eminent and banks are exposed to the higher degree of risk.

          A total number of commercial banks and their date of the establishment are presented in Annex I.

CHAPTER THREE

INTRODUCTION OF THE ORGANIZATION

3.1 An Overview of NIBL

Nepal Investment Bank Limited (NIBL), previously Nepal Indosuez Bank Ltd. was established in 1986 as a joint venture between Nepalese and French partners. The French partner (holding 50%of the capital of NIBL) was credit Agricole Indosuez, a subsidiary of one of the largest banking groups in the world. The bank started its banking services from Magh 6, 2042 after registration in the company act, 2021 and Nepal Banijya bank act 2031 on 6th Magh 2042 B.S. With the collaboration of foreign technology and investment the bank is established to provide the banking service in different parts of the country. There was a contract made between Rastriya Banijya Bank, Rastriya Bema Sansthan and foreign investor credit Agricole Indosuez from France. In the contract, it was stated that for the 10 years from the starting of the bank, Credit Agricole Indosuez would handle the management. With the decision of Credit Agricole Indosuez to divest a group of companies of bankers, professionals, industrialists and businessmen, on April 2002 acquired the 50% shareholding of Credit Agricole Indosuez in Nepal Indosuez Bank Ltd.

           The name of the bank subsequently changed to Nepal Investment Bank Ltd. upon approval of bank’s annual general meeting. NIBL is managed by the team of experienced bankers and professional having proven track record. So, it can offer customers what they are looking for. The choice of the bank will be guided among others by its reliability and professionalism. The fact of professionalism is reflected by the fact that the Banker of London-based Financial Times Group has awarded NIBL with “THE BANK OF THE YEAR 2003”. Besides, NIBL won the same award in the year 2005, 2008 and 2010 as well. NIBL was selected for this honor amongst the Nepali banks for meeting the benchmark criteria set by The Banker. The award is based on growth and performance of capital, assets, and return on equity and management quality. The prestigious award is the first occasion that a 100% Nepali managed bank has won. The reliability of the bank is reflected by its operation in the field. It is established to provide the banking service in different parts of the country. Customer satisfaction is the paramount driver at NIBL.NIBL provides 365 days banking services.

3.1.1 Vision

“To be the most preferred provider of Financial Services in Nepal”

3.1.2 Mission Statement

“To be the leading Nepali bank, delivering world class service through the blending of state-of-the-art technology and visionary management in partnership with competent and committed staff, to achieve sound financial health with sustainable value addition to all the stakeholders.”

          NIBL is committed to doing this mission while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance.

3.1.3 Strategic Objectives of NIBL

•    To develop a customer oriented service culture with special emphasis on customer care and convenience

•    To increase our market share by following a disciplined growth strategy

•    To leverage our technology platform and pen scalable systems to achieve cost-effective operations, efficient MIS, improved delivery capability and high service standards

•    To develop innovative products and services that attract our targeted customers and market segments

•    To continue to develop products and services that reduce our cost of funds

•    To maintain a high-quality assets portfolio to achieve strong and sustainable returns and to continuously build shareholders’ value

•    To explore new avenues for growth and profitability

 

3.1.4 Core Values and Ethical Principles

The core values let the institute, customers and communities know what they serve, who they really are and the principles by which they pledge to conduct business. In essence, the bank believes that success can only be achieved by being true to the core values and principles.

•    Customer Focus

At NIBL, the prime focus is to perfect the customer service. Customers are their first priority and driving forces. So, they wish to gain customer confidence and be their trusting partner.

•    Quality

They believe that the quality service experience is paramount to their customer and are strongly committed to fulfilling this ideal.

•    Honesty and Integrity

At NIBL, they ensure the higher level of integrity to the customer, creating an ongoing relationship of trust and confidence with a belief of treating each customer with honesty, fairness and respect.

•    Belief in staff

At NIBL, every staff is recognized as important assets and competitive strengths and their worth and dignity is respected for the progress of the bank.

•    Teamwork

NIBL is a firm believer in teamwork and feels that loyal and motivated teams can produce extraordinary results. They are driven by a performance culture when recognition and rewards are based on individual merit and demonstrated a track record.

•    Good Corporate Governance

Effective Corporate Governance procedures are essential to achieving and maintain public trust and confidence by following best practice.

•    Corporate Social Responsibility

NIBL is committed to behaving ethically and contribute towards the improvement of the quality of life of people, community and greatly the society.

3.2 Organization Structure of NIBL

Organization structure is the specified path through which the formal command of authority and responsibility flows. The organization structure of NIBL is presented in the following diagram.

Fig 3.1: Organization Structure of NIBL

          The organization structure of NIBL consists of Chairman at the topmost position followed by CED who is directly accountable to the Chairman. There are three Deputy General Managers in NIBL holding the responsibility of Corporate Banking, Retail Banking and IT, Card, Remittance and Product Development Department. They delegate responsibility to Assistant General Managers who are also three in number at different branches of NIBL.AGM again delegate authority to Department Heads and the hierarchy follows to branch manager to officers to assistants.

3.3 Ownership Structure and Share Capital of NIBL

NIBL, at present, is a Company listed on the Nepal Stock Exchange. But its shares are held by different parties. The shareholdings of the bank at present are as follows:

•    A group of companies holding 50% of the Capital.

•    Rastriya Banijya Bank holding 15% of the Capital.

•    Rastriya Beema Sansthan holding 15% of the Capital.

•    The general public holding 20% of the Capital.

       

Fig 3.2: NIBL’s Ownership Structure

          The above pie chart shows the ownership structure of NIBL. The organized institution holds the highest percentage of shares, i.e. 50%, Rastriya Banijya Bank and Rastriya Beema Sansthan hold equal division of shares, i.e. 15% each and general public hold 20% of the total share capital.

          The total share capital structure of NIBL comprises of Rs. 3,011,372,125 with an authorized capital of Rs. 4,000,000,000. The following table shows it in descriptive format:

Table 3.1: Share Capital and Ownership as at July 16, 2011

Particulars	Amount in Rs.
Authorized Capital	4,000,000,000
Issued Capital	2,409,097,700
Paid Up Capital	2,409,097,700
Proposed Bonus Shares	602,274,425
Calls in Advance	-
Total Share Capital	3,011,372,125

Source: Annual Report of NIBL 2010/11

          The above table shows the amount of different form of capital as at July 16, 2011, with the total share capital of Npr. 3,011,372,125 and no calls in advance. Total paid up capital is Npr. 2,409,097,700 with proposed bonus shares of Npr. 602,274,425.

3.4 Review of Bank’s Financial Performance

The following table shows the financial performance of NIBL in three past years from FY 2008/09 to FY 2009/10.

 

Table 3.2: Review of Bank’s Financial Performance

Source: Annual Report of NIBL 2010/11

    

     The above table shows the bank’s financial status in past three years. Despite various adversities, the Bank achieved a marginal growth in total assets (+1.83 %), deposits (+0.08 %), loans & advances (+2.29 %) and operating profit (+1.43 %). There has been some increase in loan-loss provisions this year due to which net profit of NPR 1.17 billion recorded a negative growth of NPR 89 million (-7.0 %) against last year’s net profit of NPR 1.26 billion. The increase in loan-loss provisioning and decline in net profit has led to increasing in NPA ratio and the decline in return on paid-up capital and return on shareholders’ fund ratios. Our market share in deposit and lending has declined slightly due to the entrance of new players in the market. NIBL, however, is still a dominant player and leader in the market.

          Diagrammatical presentation of financial performance of NIBL in past three years is given below

 

Fig 3.3: Review of Bank’s Financial Performance

The above bar diagram represents the major indicators of the bank’s financial performance in terms of million rupees. Total assets and deposits seem to increase every year whereas loans and advances, total investments and net profit has increased in the FY 2009/10 as compared to FY 2008/09, but again decreased in FY 2010/11 compared to previous year.          

 3.5 Major Products and Services of NIBL

NIBL aims to provide the comprehensive range of flexible and innovative products and services. To meet the changing needs of customers, NIBL is making the constant effort in providing customer focused products. It has been able to maintain its image of being the technology leader in the banking sector by adopting new technologies from the very beginning of its operation. It is never back in providing the best products and services to meet the requirement of its customers be that the existing ones or potential customers. Moreover, it has always been the innovator in introducing many of the products and services. Customer’s satisfaction is the paramount driver at NIBL.

3.5.1 Products of NIBL

Broadly speaking there are two types of products of a normal commercial banks. They are deposits and credit. Under these two categories, NIBL also provides various kinds of products. They are categorized below:

1.    Deposits

a.    Saving A/C

There are a number of saving accounts in according with the type of customers. Different types of saving account are targeted for different customers and of different requirement. Different saving accounts are as follows:

•    Normal Saving Account

Normal Saving Account is the type of a/c which encourages the customer in saving. The customers generally open this account for earning. In the case of NIBL head office, the A/C needs to have the minimum balance of Rs. 20000 if he/she wishes to take cheque book. It offers 3% quarterly interest rate. The features of this a/c are as follows:

    Unlimited deposits and withdrawals

    Free e-Banking

    VISA Electron Debit Card valid in Nepal and India

    Any Branch Banking Service (ABBS)

    Cheque book facility

•    Social Deposit Account

The Social Deposit Account is NIBL’s contribution to help achieve a better Nepal. The Social Deposit Account permits any INGO/NGO account holder to claim a share in the profits of the account. NIBL invites all such organization to join hands with the bank in this noble cause. Eligibility for opening this a/c is:

    All INGO/NGO  registered with Social Welfare Council (SWC)

    INGO/NGO engaged in non-profitable social work or charitable activities.

    Maintain an annual average balance of USD 10,000 or NPR equivalent.

•    E-Zee Saving Account

This is the type of saving account provides 3% interest on the daily balance. The minimum balance of this account is NPR 50,000.The feature of this account are:

    Waiver of key deposit fee for lockers

    Special health package at National Reference Laboratory (NRL)

    Privilege Lounge

    Unlimited deposits and Withdrawals

    Free e-Banking

    Free issuance of VISA Electron Debit Card valid in Nepal and India

    Free Any Branch Banking Service (ABBS)

    Accidental Insurance

    Cheque book facility

•    Afnai Bachat Khata

This is a type of personal a/c which can be opened with the minimum balance of Rs 1.This a/c has 3% interest on the daily balance. The features of this a/c are followed:

    Visa electron debit card @ NPR 250.00 per annum, valid in Nepal and India

    Free e-Banking facility

    Free ABBS within Kathmandu valley

    No maintenance charge

•    Keta Keti Bachat Khata

This is an a/c specially designed for the children. This a/c offers 3% interest p.a. on daily balance. This a/c doesn’t require any minimum balance. The features of this a/c are as follows:

    Visa electron debit card @ NPR 250.00 per annum, valid in Nepal and India

    Discount Privilege card

    Free e-Banking facility-pay school fees online

    ABBS facility

    No maintenance charge

    Free birthday cake for the account holder (minor)

    NPR 100 contribution from the bank as soon as the account is opened.

•    Saving Bonanza

This is a saving a/c which requires the minimum balance of NPR 100,000 to open.This a/c offer interest of 5% p.a. on daily balance. The features of this a/c are as follows:

    Privilege Lounge

    Waiver of key deposit for lockers

    Free ABBS/ e-Banking/ Visa Debit Card

    Unlimited deposits / withdrawals

    Free Utility Payment for Nepal Telecom Pre-Paid Recharge, Post Paid/PSTN Bills, Schools. ISPs, Cable networks, Insurance & Yeti Air e-Ticket

    Accidental Insurance

•    Lotus Saving

This saving account provides 3% interest per annum and is specially designed for promoting e-banking service offered mu NIBL. The features of this a/c are as follows:

    Minimum balance of NPR 1, 000/-

    Visa electron debit card @ NPR 250.00 per annum, valid in Nepal and India

    Free e-Banking facility

    ABBS facility

    No maintenance charge

•    EZee Student Account

This is the a/c specially initiated for the student level clients. The a/c should have the minimum balance of Rs. 2,000. This a/c has the interest rate of 3% per annum. The features of this a/c are:

    Visa electron debit card @ NPR 250.00 per annum valid in Nepal and India

    Free e-Banking facility

    ABBS facility

    50% waiver on TC issuance

    50% waiver on Draft

•    Parivar Bachat Khata

This is an a/c designed for the family. It requires the minimum balance of NPR 2500. The features of this a/c are as follows:

    Minimum opening balance Rs 2500/-

    Maturity period, Maximum of 3 years

    Minimum monthly deposit Rs 500/-

    Minors receive cakes on their birthday

    Parents/guardian is to have an account with NIBL and from their account the money will be transferred to this account through Standing Instruction.

    Personnel Accidental Insurance up to RS 50000/-

    Free ABBS

    E-Banking service

    Free Standing Instruction service

b.    Fixed Deposit Account

Fixed Deposit A/C is also termed as Term Deposit. In fixed deposit account, the customers keep their amount for some fixed period of time. This A/C is maintained by the customers who have cash in hand and is not interested in investing in any other field. The interest in this A/C varies with the time duration.

Table 3.3: Interest on Fixed Deposit

Fixed Deposit
	Prime (%)	Others (%)
1 month	2.50	2.00
3 months	3.00	2.50
6 months	3.50	3.00
1 year & above	5.00	4.50
Special Fixed Deposit Account	5.00	4.50
NIBL Special Deposit Account	6.00	5.50
Special Bulk Fixed Deposit Account -Individual	6.50	6.00
Special Bulk Fixed Deposit Account - Institution	5.00	4.50

Source: nibl.com.np

    The above table shows the interest rate offered by NIBL in a fixed deposit account with varying duration of deposit.

c. Current Account

Current A/C also termed as the Demand Deposit is maintained by the customers who requires the money frequently. The balance in this A/C is nonproductive for the bank since, it cannot be utilized. So, the bank does not provide interest in this A/C. Current a/c in NIBL is mostly maintained by business enterprises. The minimum balance to be maintained in this a/c is Rs.5, 000.

2.    Credits

A contractual agreement which a borrower receives something of value now and agrees to repay the lenders at some later date. Any time when an individual finances something with a loan (such as an automobile or a house), they are using credit in that situation. The various loan provided by NIBL are as follows:

a.    Home Loan

•    Finance up to NPR 10,000,000/-(Max) or 60% of the total value (whichever is lower) for:

    Readymade Houses/Buildings

    Construction of House/Buildings,

    Readymade apartment, bungalow, duplex

    Renovation and / or extension of building

•    Interest Rate:  10.50% per annum on EMI basis.

•    Tenure: Maximum of 15 years

•    Repayment: Equal Monthly Installments (EMI)

•    Fees and charges:

    Processing fee: 1 %( Flat) of the loan amount.

    Unscheduled payment: 1% of payment amount

b.    Vehicle Loan

•    Finance up to:

    80% financing of the total value for the following:

The purchase of New Private Vehicles

The purchase of New Commercial Vehicles

    50% of the total value for:

The purchase of Second Hand Vehicles (not exceeding 5 years old)

•    Tenure:

    Maximum of 5 years

    The loan shall be terminated on /or before 60 years of age of the borrower.

•    Repayment: Equal Monthly Installments (EMI)

•    Fees and charges:

    Management fee: 1% of loan amount

    Documentation Fee: NPR 2,000.00 flat

    Prepayment Fee: 1% of pre-paid amount

    CIB Charge: NPR 750.00 per page

c.    Education Loan

•    Finance for:

    Tuition fee

    Living expenses

    Travelling expenses

•    Interest Rate: 12.50% per annum

•    Period: up to the completion of course or maximum period of 10 years, whichever is earlier

•    Repayment: Equal Monthly Installments (EMI)

•    Fees and charges:

    Management fee: 1% of loan amount

    Documentation Fee: NPR 2,000.00  flat

    Prepayment Fee: 1.00% of pre-paid amount

    Commitment Fee: 1.00% of unutilized amount

    CIB Charge: NPR 750.00 per page

d.    Loan Against Gold and Silver

•    Finance up to:

    70% for Gold Ornaments

    75% for Fine Gold

•    Interest Rate:     15 % per annum

Interest to be paid on quarterly basis (as per Nepali Calendar)

•    Period: Maximum 1 (one) year (if required – to be renewed every year from the Date of maturity)

•    Partial Payment fee: 0.5% of total loan amount

•     Repayment: Can be repaid at any time

•    Fees and charges:

    Prepayment Fee: NPR 200.00 if prepaid within one year

    For lost Gold Receipt, additional NPR 200.00 will be charged

e.    Bank Overdraft

Overdraft Facility, a recurring (revolving) credit facility, is offered to customers for meeting day to day working capital requirements for funding current assets, overheads, administrative expenses etc. Interest rates charged for overdraft loan is 16.75% per annum for its prime customers and 17.75% for others.

    There are other types of products to which the bank provides. They are as follows:

•    Visa debit cards

•    Credit cards

•    Traveler’s checks

3.5.2 Services of NIBL

Like every other commercial bank, NIBL do provide services keeping the customer’s needs and wants in mind. These are the existing services provided by NIBL:

•    365 Days Banking

•    E-banking   

•    Any Branch Banking Service (ABBS)

•    Tele Banking Services

•    Statement request

•    Cheque pad request

•    Remittance

•    Trade finance

•    Utility payment

•    Lockers

•    Automated Teller Machine (ATM)                                                                                                                                 

3.6 Branches and ATMs of NIBL

Nepal Investment Bank Ltd. is in a position to serve its customers through a wide range of the domestic network. Keeping in view the need of the market and the convenience of the customers it has opened several branches all across the country. NIBL has been expanding its area of activities from its establishment. Currently, there are 41 branches of NIBL. Among these, the bank extended its operation to Seepadole, Birgunj, Banepa, Pulchowk and Jeetpur during the period of French partnership. Rests of the branches were established after the management was totally handed over to Nepalese partners.

      At present, the bank has 67 ATM locations provided to its customers in different parts of the country. Moreover, to further extend its reach and for the convenience of its customer it is planning to install new ATMs too. Thus, the bank enjoys an impeccable reputation of a lending financial institution in the country. 

3.7 SWOT Analysis

SWOT analysis refers to the strength, weakness, opportunity and threat of an environment analysis of an organization. Strength and weakness represent internal environment and can be controlled by management, whereas opportunity and threat represent to the external environment and is beyond the management control. The SWOT analysis of NIBL as observed and analyzed by the internee is as below:

3.    S - Strengths

•     Experienced and high performing executives.

•    Use of advanced information technology system.

•    Commitment from employees and loyal customers.

•    Centrally located the head office and branches and ATMs all over Nepal.

•    Good reputation in the market.

4.    W - Weaknesses

•    High operational cost.

•    Lack of training facilities to the employees.

•    Lack of proper feedback system.

5.    O - Opportunities

•    Current liquidity problem drive depositors to deposit money in older and established A class bank like NIBL.

•    The increasing trend of Nepalese people moving abroad for employment which brings an increase in remittance business.

•    Developing trend of information technology business in Nepal which brings an increase in trade finance business.

6.    T - Threats

•    Economic recession

•    Growing competition

•    Political instability

•    Entry of some new banks with greater competencies in the market. eg Mega Bank, Janata Bank, and Citizen Bank.

3.8 Credit Department in NIBL

Credit department in NIBL is further divided into Corporate Credit and Retail Credit. There are also two other departments that are actively involved in loan lending procedure, namely Credit Administration Department (CAD) and Loan Administration Department (LAD). This division of credit department into two major sections has aided NIBL to gain efficiency and effectiveness in its loan handling process. The departments are described below:

3.8.1 Corporate Credit

Corporate Bank supports the financing requirement of the project through consortium lending as the lead Bank and/or Co-lead Bank or participating bank. The Corporate bank provides solutions as per the client's specific needs. It is committed to help privately owned and publicly listed entities grow.

          The Corporate bank lends a helping hand to its clients for new business or willing to build / expand the existing ones and it focuses on building and maintaining diversified branch portfolios. NIBL has a diversified sector wise lending like agriculture and forestry, mining, manufacturing, beverage, construction, electricity, gas and water, metal products, machinery, and electronics equipment, transport, warehouse and communication, wholesalers and retailers, finance, insurance and real estate, hotel, and restaurant. However, Corporate Bank is more focused on infrastructure development projects.

 Corporate bank provides various types of credit facilities listed as below:

c.    Business Loan

•    Overdraft

•    Long Term Loan/Medium Term Loan

•    Short Term Loan

•    Working Capital Loan

d.     Import/Export Loan

•    Letter of Credit(Sight/ Usance)

•    Trust Receipt Loan

•    Packing Credit

e.    Bank guarantee

f.    Other loans

•    Hire Purchase Loan

•    Loan Against Fixed Deposits

•    Deprived Sector Loan

•    Consortium Loan

•    Pledge Loan

3.8.2 Retail Credit

Retail credit comes under retail banking also known as wholesale banking. It focuses on services like deposits, client base, product marketing, customer retention, advertisement, new customer handling, public relation, changing interest rates, loan, etc. However, here, the emphasis is given on the loan service of retail banking under credit of NIBL. Retail banking focuses on providing the loan to individual and small medium enterprises (SME). The various types of loan provide by retail credit are:

a.    Home loan

b.    Hire purchase loan

c.    Education loan

d.    Loan against gold and silver

3.8.3 Credit Administration Department

CAD is a back office in corporate banking that handles the documentation activities in loan lending process and acts as a right arm to corporate department. It is mainly responsible for the valuation of assets, stocks or property. The sight visit activity for preparation of legal documents is performed by CAD. They perform their task only after the approval of the corporate department. In addition to documentation task, CAD also handles “all staff loan” which includes social loan, land loan, home loan, vehicle loan, provident fund loan, etc.

3.8.4    Loan Administration Department

After the approval of the loan, the disbursement of cash underfunded facility is finally done by LAD. Non- funded facilities may, however, be processed for execution by the department concerned, e. g. Letter of Credit or L/G areas. Thus, everything related to cash in credit process is done through this department i.e. from the opening of loan account to the settlement of loan is all carried out here. Unlike CAD, this department doesn’t do paper works in bulk. All the works are processed through software. Major activities carried out under this department are:

•    Loan implementation

•    Loan settlement

•    Loan prepayment

•    Change interest rate

•    Prepare Balance certificate

•    Prepare interest certificate

•    Debit and credit advice

      Organization structure of credit department of NIBL is presented in Annex II.

 

CHAPTER FOUR

ANALYSIS OF ACTIVITIES DONE AND PROBLEM SOLVED

Intern is thankful that NIBL gave an opportunity to do intern at different departments during eight weeks period. Though the intern got to learn from various departments, this report basically focuses on CREDIT DEPARTMENT of NIBL since her maximum hour of the internship was spent in this department. Intern was highly concerned on the activities done in the department rather than collecting data for the report. Intern has not gone over data analysis using standard procedures such as time series, regression analysis, sensitivity analysis and other statistical tools. However Intern has described and constructed activities categorizing them under several headings with much detail as possible, and continuity between them is made as apparent as Intern could. Primarily the overall analysis is based on nothing more than self-observation, business related questions, cross questions and most importantly self-analysis with this inexperienced mind.

4.1 Activities Performed in the Organization

During the eight weeks period of internship, the intern was allowed to assist the employees of NIBL in four different departments, namely Customer Service Department, Clearing Department, Remittance Department and Credit Department. Brief views of activities intern had done in these departments are presented below.

4.1.1 Customer Service Department

•    Dealt with the customer and helped them to fill the forms.

•    Prepared checkbooks.

•    Printed statement.

•    Taken the forms for verification.

•    Checked customer’s transaction and balance on request.

•    Informed the customers about the arrival of their pin code of ATM card. 

•    Accepted different documents that arrived and entered them in the register.

•    Submitted the documents arrived at the concerned department.

•    Distributed various forms like e-banking, SMS banking, pay the bill, etc.

•    Handled phone calls and informed customer about different types of account and other queries about the operation of the bank.

4.1.2 Clearing Department

•    Observed inward and outward clearing of cheques.

•    Observed swift transfer.

•    Sent other banks’ cheques to NRB and brought NIBL’s cheque from NRB.

•    Informed the customers if their cheque had been returned from NRB.

•    Recorded the details about the cheque being returned and the cheque that was already returned to the customers.

•    Done photocopy and assisted employees in the filing.

4.1.3 Remittance Department

•    Observed the workflow of remittance department.

•    Filled the debit voucher.

•    Faxed swift transfer messages.

•    Helped the customers to fill in the forms of different remit.

•    Verified the remitter, place from where the money had been received and issued the voucher to draw money.

4.2 Credit Department

The loan and credit department is the very important department of a bank. The money mobilized from ultimate surplus units are allocated through the department to the ultimate deficit unit (borrower). The success of this department keeps a great influence over the profit of a bank. Failure of this department may lead the bank to huge loss or even bankruptcy. Hence, the bank places the extreme emphasis on its credit function. This department provides different types of credit facilities as per the requirement of the customers (i. e. the individual or corporate bodies). Management of all the credit facilities issued to customers is the major responsibility of this department which finds ways to attract new customers and retain the existing ones ensuring minimum risk of default customers.

          Being the part in credit department, intern had done the following main activities:

•    Prepared the documents required for the processing of the loan.

•    Prepared checklist of original and other required documents while providing loans.

•    Checked loan documents.

•    Helped customers in the documentation.

•    Visited credit customer for on- sight inspection.

•    Reviewed documents of clients who had been enjoying credit facility of the bank and who were going to enjoy it.

•    Filled missing information of the client in the document.

•    Searched information of the client which was required in CIC report related to a particular client.

•    Informed the customers if their guarantee had been expired.

•    Scanned the documents and sent them to the concerned place.

•    Filed and photocopied necessary documents.

•    Calculated OD limit.

•    Read and understood Credit Procedure Policy Guidelines.

4.3 Functions of Credit Department

Credit department is mainly recognized for providing loan, renewal of loan and refunding of the loan. However, there are lot more things this department is responsible for profit generation of the bank from relationship building, credit control to risk assessment. However, the intern was allowed to assist and learn only from Corporate, CAD, LAD, and Retail Departments under the Credit Department and not allowed to go to other departments due to bank’s privacy policy, rules and regulations and so, she has here presented the major functions observed in those departments.

    Relationship building with customers

    Analyzing the credibility of customers

    Credit approval process

    Collection, monitoring and recovery activity

4.3.1 Relationship Building with Customers

Relationship managers in the credit department are responsible for building relationships with their customers by finding new clients and handling the existing ones. Clients are informed about the various types and schemes of the loan by RM.

      Under this function, the intern had assisted the employees by informing the walk in customers about various schemes of the loan provided by NIBL and the procedure for granting the loan.

4.3.2 Analyzing the Credibility of Customers

The bank sets the minimum criteria for the extension of credit to customers. It analyzes the credibility of its customers on the basis of five Cs scoring factor. They are:

•    Character:  intention to pay back the loan

•    Capacity: borrower’s competency in terms of utilizing the fund profitability                       and generates income

•    Capital: financial strength to cover risk

•    Conditions: general business condition between two parties

•    Collateral: implies additional security

      Under this function, the intern had observed and learned the ways of collecting information of the prospective client through CIB report in order to check the credibility of the customers and assessing the possible risk related to the particular client. The risk is analyzed on the basis of:

    Market risk analysis

    Liquidity risk analysis

    Competitors risk analysis

    Default risk Analysis

    Cash flow risks analysis

    Financial risk analysis

    Business risks analysis

4.3.3 Credit Approval Process

Fig 4.1: Credit Approval Process

      The credit approval and loan lending procedure of NIBL strictly follows following steps:

a.    Customer Dealing Through Relationship Manager

Basically, customers are of two types viz. walk in customers and marketed clients. Walk in customers come to the credit department of NIBL and ask for the loan, whereas marketed clients are those whom the relationship managers of the bank approach and make a lending proposal. Whatever may me the type of customer, the whole process of loan lending begins with the relationship managers (RM) and account officers. The prospective customer submits the credit facility request (CFR) letter, mentioning all the relevant information and required documents to the relationship manager for loan approval process. The relevant information that must be sought by an account officer includes the following:

•    Amount of credit request;

•    Lending rationale or source of payback;

•    Other existing bank lines and bank debts;

•    Report(s) from the Credit Information Bureau(CIB) and/or other banks(s) with which the borrower might have had account relationship now or in the past;

•    The borrower’s last three annual audited financial statements if the client is a partnership or a company;

•    Corporate documents, e.g. articles and memorandum of association, partnership deeds etc for new borrower if the borrower is a partnership or a company;

•    Industry information, the borrower’s position in the industry;

•    Competitive environment; major customers, suppliers and labor force;

•    Composition and aging of inventory and receivables;

•    Regulatory guidelines and/or constraints on the lending situation, particularly in matters relating to defaulters and blacklisting;

•    Any liens on the borrower’s and/or guarantor’s assets.

The customer has to pay Credit Management Fee and Credit Information Charge (CIC) ranging from Npr.500-2/3000 along with request letter. After receiving all the necessary documents from the prospective customer, the relationship manager prepares a proposal for forwarding it to the manager of the credit department.

 In this stage, intern had done the activities like:

    Informed clients about the requirements, procedures and interest rates for acquiring the loan;

    Assisted customers in filling up the CFR letter;

    Checked all the required documents and collecting them from customers;

    Helped customers fill up the loan deed form;

    Assisted the employees by providing a helping hand in the filing, record keeping and photocopying.

b. Review of Proposal by Department Manager

The proposal prepared by RM is reviewed by credit department manager analyzing every minute detail for risk assessment and credit approval. The proposal is further forwarded one step up only after the credit manager approves it. The Credit Application/ Approval (CA) are prepared including all the details of customer and the rationale for lending. The essentials included in CA are as under:

•    Details and background of the borrower

•    Amount requested

•    Corporate structure (Pvt .Ltd or Public Ltd)

•    Financial performance in case of private or proprietorship

    Income statement

    Balance sheet

•    Inspection report and Risk analysis

•    Present facility and utilization of the client/group

•    Dealing liability with other banks (CIB report)

•    Purpose of limits(s) applied and repayment sources

    Repayment schedule

    Disbursement criteria

    Special covenant

•    Comments of approving authorities on previous approvals

•    Compliance of the comments

•    Proposal security

•    Insurance

•    Compliance with:

    NRB Directives

    Statutes

•    Documents obtained

    Loan application

    Board minutes

    Special board resolution

•    Rationale for the risk rating

•    Overall risks assessment

    Key risks and mitigations

    Recommendations/ support/approvals

 Credit manager, after reviewing and approving the proposal prepares the interoffice memo to forward it to the head of corporate in a summarized format.

In this stage, intern had done the activities like:

    Calculated the OD limits;

    Analyzed the financial position of the customer's business;

    Studied files of customers;

    Studied CPPG and understood credit policy of NIBL;

    Helped staffs by filing, record keeping, photocopying and printing documents.

c.     Approval of the Proposal

The memo forwarded by credit manager is reviewed by the head of corporate and if it meets all the lending criteria, is approved by him. In NIBL, there is a credit limit for the approving authority beyond which must be passed to CEO/ MC for credit approval.

The credit limit is presented in the table below:

                 Table 4.1: Credit Limit and Approving Authority

Credit Approved By	Funded Loan	Non-Funded Loan
HOC	10.00 million	30.00 million
CEO	50.00 million	90.00 million
MC	300.00 million	500.00 million

     

 *Combined funded + non- funded <= 500.00 million

      * All the facilities above management committee (MC) are approved by BOD.

          The facility is approved only after the detailed credit analysis. Credit analysis is actually a risk analysis, i.e. it involves analyzing the business risks of the borrower. NIBL’s approach reflects this thought and so, following questions are considered while doing risk assessment before credit approval:

    What are the purpose and the lending rationale?

    Does the borrower have the ability to repay based on the conversion of assets and generation of cash?

    What risks are inherent in the operation of the borrower’s business?

    What have the managers done or failed to do in identifying and mitigating those risks?

    How can NIBL structure and control its own risks in supplying funds?

     

 After the credit is approved from the respective authority, it should be presented to CED and BOD and duly signed by them. The signatures essential for further processing of the loan proposal are:

•    Relationship manager of the company

•    Manager of corporate department

•    Head of corporate

•    Chief executive officer

•    Board of director

d. Preparation of Offer Letter

After the approval of credit facility, bank prepares the offer letter also known as value letter. It includes interest rate repayment schedule and other criteria offering to the client. An offer letter is to be duly signed by the client. All the disbursements, whether funded or non- funded, shall be done only on the basis of an offering sheet. The offering sheet must contain at least the following information, generally retrieved from the borrower’s Credit Facility Request (CFR) and central liability records:

•    Approved CFR number and date;

•    Total approved lines to the borrower and his current outstanding;

•    Disbursement request(s) and purpose;

•    Status of loan documents;

•    Status of collateral held;

•    The Recent history of the account, including a record of past dues.

In this stage, intern had assisted the employees by:

    Record keeping, filing, and photocopying.

e. Preparation of Legal Documents and Deeds

Head of credit services should coordinate with the bank’s legal officer and outside counsel in the preparation of standard form documentation. Standard forms must conform with the legal requirements and to the credit exposure for various banking products marketed by NIBL.  After execution of the relevant loan documents by the borrower, the account officer forwards the documents to credit administration department (CAD) who prepares a Loan Document Checklist identifying the documents obtained. However, documentation process in retail loan administration is handled by the RM himself, there’s no any separate department for such tasks.

      The checklists for individual, partnership and proprietorship differs slightly which is presented in Annex III.

Valuation of real assets is done as under:

    Commercial rate (CR)

    Government rate (GR)

    Weighted average rate

          Real assets are valued from 40 % of government value and 60% of commercial value and the total value is called distress value. Only 70% of the distress value is provided to the client as the loan. Then after valuation report is sent to head office for approval.

          Weighted Average Rate = Distress Value

                                                     = 60% of CR + 40 % of GR

          While preparing legal documents and deeds, intern had performed following activities:

    Went  on on-sight inspection of the customers’ property;

    Sent customer’s information to the CIB to generate CIC report;

    Prepared checklists and checked all the essential documents to be attached;

    Assisted in filing, photocopying, scanning and printing documents;

    Filled up the loan deed form;

    Tallied the customer’s actual information with the provided information.

f. Disbursement of Loan

The Credit Administration Department handovers the executed loan documents along with the original Loan Document Checklist to the Loan Administration Department (LAD). The latter will examine the executed documents for appropriateness and authenticity of the borrower’s execution. It will also check as to their conformity with the terms of approval. Once the LAD is fully satisfied with the documents and ensures that other terms of the CFR are fully compiled with, only then a facility will be processed for disbursement. LAD will remain jointly responsible for the physical custody and maintenance of the loan documents with the CAD during the life of the facility.

      Under disbursement stage, intern had done the following activities:

    Opened customer’s account;

    Closed customer’s account;

    Verified expiry date, interest rates and loan amount for further processing;

    Disbursed the amount of loan in customer’s account.

4.3.4 Collection, Monitoring and Recovery Activity

The purpose of providing credit to the customers is the generation of income thereof in the form of interest. NIBL regularly generates income from interest on the loan, advances, and overdrafts. The total interest income from loan, advances and overdrafts as at July 16, 2011, was NPR. 5,435,842,729. Basically, there are three types of interest collection schemes in NIBL. They are:

•    Quarterly interest payment

•    Monthly interest payment

•    Equal monthly installment (EMI)

          NIBL regularly does monitoring under its post credit activity. The business of the client is closely examined and the necessary financial information is tracked. The intention and character of the client are also monitored on regular basis. Since, NIBL takes adequate precaution before granting any loan to its client there is the minimum nonperforming loan or bad debt of NIBL and thus, its stubborn customers are also least as compared to other commercial banks in Nepal. However, necessary action is a must for the purpose of collection and recovery of its overdue loan.

          The collection policies followed by NIBL for its loan recovery are as under:

a.    Telephone Calls

NIBL conducts its follow-up task of the telephone call as the first step of collection policy after the loan becomes overdue. The bank may also remind to some of its clients from a month before the expiration date as per the nature of the client.

b.    Letter

If the client does not adhere to the bank’s policy and does negligence in payment even after reminding through phone calls, the bank sends an email and call back the letter which is of 35 days. Bank may extend the payment period if the intention of the customer regarding payment is positive but failed to pay in time due to some unavoidable reasons.

c.    Home Visit/ Personal Visit

If letters also turn ineffective, the bank may make a personal visit. This becomes very effective collection procedure as the customer should confront the bank’s staff. This approach also facilitates on the spot payment.

d.    Public Notice on Newspaper

This is the last step followed by the bank when all other actions go in vain. The bank publishes the notice in the daily newspaper mentioning the client’s detail information to pressurize him/her for repayment of the loan and due amount. This directly affects the prestige of the client and thus, is taken as last resort. Bank generally avoids this measure trying its best to convince the customer to pay back the loan. The notice is published as below:

•    35 days notice

•    15 days notice

•    7 days notice

          If the payment is not made even after publishing 7 days notice, following actions are taken as last measures for loan recovery:

•    Auction of property

•    Blacklisting

•    Partial recovery from Deposit Insurance and Credit Guarantee Corporation (DICGC)

•    Loan recovery by realizing Bonds/NSBs.

          Under this function, intern had performed following activities and assisted the staffs:

    Calculated interest overdue of clients;

    Informed the customers about their payments of interest due to through telephone;

    Sent e-mail to the clients requesting for payment of interest overdue.

4.4 Problems Encountered and Solved

During the period of internship, intern was placed at Corporate CAD, LAD and Retail units under Credit Department which are located at the prime business location, Durbarmarg, and Lazimpat. In the process of providing the loan, small mistakes can also lead to the huge problem for the bank. Some of the general mistakes encountered are as below:

•    The clients brought only the copy of the required documents without original.

•    Most of the times firm’s documents were presented without the stamp.

•    They were not careful enough while giving the thumbprint and signing the documents.

•    They tried to operate the account without fulfilling the complete requirement.

•     Different inks were used in the same document.

•    Delayed in the renewal of the loan and other documents like insurance, firm registration etc.

          Intern had to deal with various kinds of problems. Almost all problems, which could be solved by her, were solved with the support and proper guidance by the bank’s staffs and other interns. Some of the problems that were solved by internee are:

•    Reviewed the documents as per the nature of the loan.

•    Found the missing documents and files.

•       Filled the documents which were missed by the client.

 

CHAPTER FIVE

CONCLUSION AND LESSONS LEARNT

5.1 Conclusion

The banking system in Nepal is gearing up for another round of competition with the second phase of financial sector reform and international standard oriented reforms underway. Nepalese financial system, basically the banking business, has broadened in number and diversified in the modern financial instrument. As the Nepalese financial market witnesses the domination of banking sector, it is necessary to monitor the banking system properly and enhance competitiveness with a strong, credible regulatory and supervisory bank.

          NIBL is one of the leading commercial banks with a vision of being the most preferred provider of financial services in Nepal. It has the highest customer base and is the topmost lender amongst the private sector banks in Nepal. So as to accomplish its objective, credit department plays a pivotal role in making a loan lending decision in the most productive sectors analyzing all the risks associated and taking steps to monitor and recover the amount due.

          Credit Department is thus one the most sensitive department as the quality of the loan, borrower and securities determine the health of any bank as well as the banker. It checks and evaluates different types of loan proposals like education loan, home loan, short term loan etc. It is necessary for the bank because this department helps to analyze the various types of risks occurred and mitigate the risks of the loan before and after granting the loan. Credit Department makes the loan safe because this department analyzes the financial condition of both individual borrower and institutional borrower by assessing the income and expenditure. Thus, credit department of NIBL is the major department which performs the various activities of controlling the credit and keeping the bank free from any future fallacy. It plays a major function in NIBL to control each and every loan proposals before granting the loan to the consumers and also taking necessary actions to recover the amount if the customer turns out to be the default.

          Therefore, intern concludes that Credit Department plays a major function to control each and every document before granting the loan to the customer as well as keeping an eye on customer’s actions after credit approval in order to minimize the various types of risks. It analyzes the financial condition of the borrower and tries to make it easy for granting the loan. Credit department is thus the most crucial department that attempts to make the bank’s portfolio highly profitable and thus responsible for its success in the competitive business environment.

5.2    Lessons Learnt

The duration of internship lasted for around two months and during the course of the internship there were various lessons that intern was able to learn. This internship was a great opportunity for the intern to face real-life work scenarios after four years in the classroom, and it must be said that it was a great learning experience for her. Some of the lessons intern learnt during her time as an intern at Nepal Investment Bank Limited could be summarized as follows:

•    The day to day operation of Credit Department and the process involved with it.

•    Coordination of workforce and the various activities for the smooth operation of the bank.

•    Importance and role of the banking industry in the in the development of the economy.

•    The friendly environment, good organizational culture, and efficient management being the various reasons behind the success of NIBL despite the heavy workload.

•    Use of theoretical knowledge into the practical working environment and also became aware of the huge gap between theoretical knowledge and real life situation.

•    The importance of time management and punctuality.

•    The importance of interpersonal communication skills in professional life.

•    Promotion of efficiency and effectiveness through sincerity and confidence.

•    Use and operate various machinery, equipment, and systems.

•    Work under pressure.

          It was a great opportunity to be a part of Nepal Investment Bank Ltd and learn the during the eight weeks internship programme. This has given the intern adequate feedback on how to face challenges in practical terms and mix up with the organization culture giving her best for the betterment of individual as well as organization’s career.

                                     

                                  

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