Working Capital Financing Arrangement by Natonal Bank Ltd (NBL)

Literature Review

                     The importance of Working Capital Finance

The term working capital has several meanings in business and economic development finance. In accounting and financial statement analysis, working capital is defined as the firm’s short-term or current assets and current liabilities. Net working capital represents the excess of current assets over current liabilities and is an indicator of the firm’s ability to meet its short term financial obligations.

Most fundamentally, working capital investment is the lifeblood of a company. Without it, a firm cannot stay in business. Thus, the first, and most critical, use of working capital is providing the ongoing investment in short-term assets that a company needs to operate. A business requires a minimum cash balance to meet basic day-to-day expenses and to provide a reserve for unexpected costs. It also needs working capital for prepaid business costs, such as licenses, insurance policies, or security deposits. Furthermore, all businesses invest in some amount of inventory, from a law firm’s stock of office supplies to the large inventories needed by retail and wholesale enterprises. Without some amount of working capital finance, businesses could not open and operate. A second purpose of working capital is addressing seasonal or cyclical financing needs. Here, working capital finance supports the buildup of short-term assets needed to generate revenue, but which come before the receipt of cash. For example, a toy manufacturer must produce and ship its products for the holiday shopping season several months before it receives cash payment from stores. Since most businesses do not receive prepayment for goods and services, they need to finance these purchase, production, sales, and collection costs prior to receiving payment from customers.

Figure 1.0 Cash Flow and the Working Capital Cycle

Figure 1.0 illustrates this short-term cash flow and financing cycle. Another way to view this function of working capital is providing liquidity. Adequate and appropriate working capital financing ensures that a firm has sufficient cash flow to pay its bills as it awaits the full collection of revenue. When working capital is not sufficiently or appropriately financed, a firm can run out of cash and face bankruptcy. A profitable firm with competitive goods or services can still be forced into bankruptcy if it has not adequately financed its working capital needs and runs out of cash. Working capital is also needed to sustain a firm’s growth. As a business grows, it needs larger investments in inventory, accounts receivable, personnel, and other items to realize increased sales. New facilities and equipment are not the only assets required for growth; firms also must finance the working capital needed to support sales growth. A final use of working capital is to undertake activities to improve business operations and remain competitive, such as product development, ongoing product and process improvements, and cultivating new markets. With firms facing heightened competition, these improvements often need to be integrated into operations on a continuous basis. Consequently, they are more likely to be incurred as small repeated costs than as large infrequent investments. This is especially true for small firms that cannot afford the cost and risks of large fixed investments in research and development projects or new facilities. Ongoing investments in product and process improvement and market expansion, therefore, often must be addressed through working capital financing.

                                Forms of Working Capital Financing

Working capital financing comes in many forms, each of which has unique terms and offers certain advantages and disadvantages to the borrower.

    Line of Credit

A line of credit is an open-ended loan with a borrowing limit that the business can draw against or repay at any time during the loan period. This arrangement allows a company flexibility to borrow funds when the need arises for the exact amount required. Interest is paid only on the amount borrowed, typically on a monthly basis. A line of credit can be either unsecured, if no specific collateral is pledged for repayment, or secured by specific assets such as accounts receivable or inventory. The standard term for a line of credit is 1 year with renewal subject to the lender’s annual review and approval. Since a line of credit is designed to address cyclical working capital needs and not to finance long-term assets, lenders usually require full repayment of the line of credit during the annual loan period and prior to its renewal.

    Accounts Receivable Financing

Some businesses lack the credit quality to borrow on an unsecured basis and must instead pledge collateral to obtain a loan. Loans secured by accounts receivable are a common form of debt used to finance working capital. Under accounts receivable debt, the maximum loan amount is tied to a percentage of the borrower’s accounts receivable. When accounts receivable increase, the allowable loan principal also rises. However, the firm must use customer payments on these receivables to reduce the loan balance. The borrowing ratio depends on the credit quality of the firm’s customers and the age of the accounts receivable. A firm with financially strong customers should be able to obtain a loan equal to 80% of its accounts receivable. With weaker credit customers, the loan may be limited to 50% to 60% of accounts receivable. Additionally, a lender may exclude receivables beyond a certain age (e.g., 60 or 90 days) in the base used to calculate the loan limit. Older receivables are considered indicative of a customer with financial problems and less likely to pay. Since accounts receivable are pledged as collateral, when a firm does not repay the loan, the lender will collect the receivables directly from the customer and apply it to loan payments. The bank receives a copy of all invoices along with an assignment that gives it the legal right to collect payment and apply it to the loan. In some accounts receivable loans, customers make payments directly to a bank-controlled account (a lock box).

    Factoring

Factoring entails the sale of accounts receivable to another firm, called the factor, who then collects payment from the customer. Through factoring, a business can shift the costs of collection and the risk of nonpayment to a third party. In a factoring arrangement, a company and the factor work out a credit limit and average collection period for each customer. As the company makes new sales to a customer, it provides an invoice to the factor. The customer pays the factor directly, and the factor then pays the company based on the agreed upon average collection period, less a slight discount that covers the factor’s collection costs and credit risk. In addition to absorbing collection risk, a factor may advance payment for a large share of the invoice, typically 70% to 80%, providing the company with immediate cash flow from sales. In this case, the factor charges an interest rate on this advance and then deducts the advance amount from its final payment to the firm when an invoice is collected.

Table 1.1 Summary of Working Capital Finance Instruments

Financial Instruments	Description	Key Terms
Line of Credit	Maximum loan limit established. Firm draws on loan as needed up to limit.	Can be unsecured or secured. Annual repayment. Compensating balance may be required.
Accounts Receivable (AR) Loan	Loan secured by accounts receivable.	Loan amount based on a percentage of accounts receivable. Accounts receivable assigned to lender as sales occur. Loan balance paid down with AR collection.
Factoring	Sale of accounts receivable to a third party collector (factor). Factor bears collection risk.	Company paid based on average collection period less a collection fee. Collection amount can be advanced with an interest charge.
Inventory Loan	Loan secured by inventory.	Loan amount based on a percentage of inventory value. Lender receives security interest in inventory and may take physical control. Release of inventory with loan repayment.
Term Loan	Medium-term loan. Principal repaid over several years based on a fixed schedule.	Loan amount tied to collateral value. Can be fully amortized or a balloon loan. Typical term is three to seven years.

    Inventory Financing

As with accounts receivable loans, inventory financing is a secured loan, in this case with inventory as collateral. However, inventory financing is more difficult to secure since inventory is riskier collateral than accounts receivable. Some inventory becomes obsolete and loses value quickly, and other types of inventory, like partially manufactured goods, have little or no resale value. Firms with an inventory of standardized goods with predictable prices, such as automobiles or appliances, will be more successful at securing inventory financing than businesses with a large amount of work in process or highly seasonal or perishable goods. Loan amounts also vary with the quality of the inventory pledged as collateral, usually ranging from 50% to 80%. For most businesses, inventory loans yield loan proceeds at a lower share of pledged assets than accounts receivable financing. When inventory is a large share of a firm’s current assets, however, inventory financing is a critical option to finance working capital.

    Term Loan

While the four prior debt instruments address cyclical working capital needs, term loans can finance medium-term noncyclical working capital. A term loan is a form of medium-term debt in which principal is repaid over several years, typically in 3 to 7 years. Since lenders prefer not to bear interest rate risk, term loans usually have a floating interest rate set between the prime rate and prime plus 300 basis points, depending on the borrower’s credit risk. Sometimes, a bank will agree to an interest rate cap or fixed rate loan, but it usually charges a fee or higher interest rate for these features. Term loans have a fixed repayment schedule that can take several forms. Level principal payments over the loan term are most common. In this case, the company pays the same principal amount each month plus interest on the outstanding loan balance. A second option is a level loan payment in which the total payment amount is the same every month but the share allocated to interest and principle varies with each payment. Finally, some term loans are partially amortizing and have a balloon payment at maturity. Term loans can be either unsecured or secured; a business with a strong balance sheet and a good profit and cash flow history might obtain an unsecured term loan, but many small firms will be required to pledge assets. Moreover, since loan repayment extends over several years, lenders include financial covenants in their loan agreements to guard against deterioration in the firm’s financial position over the loan term. Typical financial covenants include minimum net worth, minimum net working capital (or current ratio), and maximum debt-to-equity ratios. Finally, lenders often require the borrower to maintain a compensating balance account equal to 10% to 20% of the loan amount.

Company Overview

History and Heritage

National Bank Limited has its prosperous past, glorious present, prospective future and under processing projects and activities. Established as the first private sector bank fully owned by Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the passage of time after facing many stress and strain. The members of the board of directors are creative businessmen and leading industrialists of the country. To keep pace with time and in harmony with national and international economic activities and for rendering all modern services, NBL, as a financial institution, automated all its branches with computer networks in accordance with the competitive commercial demand of time. Moreover, considering its forth-coming future, the infrastructure of the Bank has been rearranging. The expectation of all class businessmen, entrepreneurs and general public is much more to NBL. At present we have 145 branches under our branch network. In addition, our effective and diversified approach to seize the market opportunities is going on as continuous process to accommodate new customers by developing and expanding rural, SME financing and offshore banking facilities.


National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private sector. From the very inception, it was the firm determination of National Bank Limited to play a vital role in the national economy. We are determined to bring back the long forgotten taste of banking services and flavors. We want to serve each one promptly and with a sense of dedication and dignity. 

National Bank, has now acquired strength and expertise to support the banking needs of the foreign investors. NBL stepped into a new arena of business and opened its Off Shore Banking Unit at Mohakhali to serve the wage earners and the foreign investors better than before.

The bank has a strong team of highly qualified and experienced professionals, together with an efficient Board of Directors who play a vital role in formulating and implementing policies.

Types of Working Capital Financing Arrangement by NBL

Banking business is all about deposit taking and lending. National Bank limited is not an exception to this. NBL also provide different modes of financing to assist business firms to raise funds for meeting up working capital needs. The different facilities provided by NBL are discussed below:

 

Figure 2.0 Services of NBL

Ø Trade Finance

NBL provides comprehensive banking services to all types of commercial concerns such as in the industrial sector for export-import purpose as working capital, packing credit, trade finance, Issuance of Import L/Cs, Advising and confirming Export L/Cs. - Bonds and Guarantees.

    Benefits (Condition Apply)

 Low interest rate 13.00%-14.50%.

 Minimum processing time.

 Low service charges.

Ø Overdraft

NBL offers overdraft facility for corporate customers for day to day business operations .

    Benefits (Condition Apply)

 Low charges in overdraft account maintenance.

 Facility is available against deposit receipt or mortgage property.

 Low interest rate 13-16%.

    Account Opening

General procedure of opening account:

v

Ø Small Medium Enterprise Loan

NBL offers financial support to small businessmen/enterprise with new products named "Festival Small Business Loan" and "NBL Small Business Loan" has been introduced in the Bank.

    Benefits (Condition Apply)

 Maximum Tk.3.00 lac (Festival Scheme) and Maximum Tk.5.00 lac (Small Business Scheme) .

 3 Months (Festival Scheme) and 5 years (including 1 month grace period (Small Business Scheme))

 Collateral Free Advance.

    Eligibility

Any genuine and small businessmen/ entrepreneurs/enterprise having honesty, sincerity, and integrity.

Ø Consumer Credit Loan

NBL offers consumer credit facility for retail customers.

    Financing items

 Electornics consumer products.

 Computer or Computer acessories.

    Benefits (Condition Apply)

 Fast processing.

 Competitive interest rate.

 No application or processing fee.

 Easy monthly installment.

Ø Lease Finance

National Bank Limited offers leasing facility for clients with easy installment facility.

    Financing Area

 Capital machinary.

 Different equipments.

 Gas, Diesel generator and Power plant.

 Medical equipments.

 Lift or elevator.

 Inroformantion Technology equipments.

 Construction equipments.

 Consumer durables.

    Benefits (Condition Apply)

 Competitive monthly rental.

 Tax benefit.

 Fast processing.

 Easy handover after leasing period.

Ø Letter of Credit

Letter of Credit (L/C) is a letter from the importer’s bank to the exporter that the bills if drawn as per terms and conditions are compiled with will be honored or accepted for deferred payment on presentation.

    Requirements for opening L/C

• Trade license,
• IRC,
• Membership Certificate,
• TIN and VAT Certificate,
• Bond License,
• Memorandum of Articles (Incase of a limited co.),
• Registered Deed (Partnership Firm),
• Resolution and Photographs

Ø Loan against trust receipt

• Advance against a Trust receipt obtained from the customers are allowed to only first class tested parties when the documents covering an import shipment or other goods pledged to the bank as security are given without payment. However, for such advances prior permission / sanction from Head Office must be obtained.
• The customer holds the goods or their sale proceeds in trust for the bank, till such time, the loan allowed against the Trust Receipts is fully paid off.
• The trust receipt is a document that creates the banker’s hen on the goods and practically amounts to hypothecation of the proceeds of sale in discharge of the lien.

Ø Loan against imported merchandise

Advance (loan) against the security of merchandise imported through the bank may be allowed either on pledge or hypothecation, of goods, retaining margin prescribed  or their landed cost, depending on their categories and credit restriction imposed by the Bangladesh bank . Bank shall also obtain a letter of undertaking and indemnity from the parties, before getting the goods cleared though LIM account.

Practical Case on NBL Working Capital Financing under Consumer Loan

Br. position As on 28.02.13   (Fig in lac)
Particulars	Target	Achievement
Deposit	42.52	111.88
Advance	38.00	35.85
Profit	72.00	67.93

NATIONAL BANK LIMITED

CREDIT RISK MANAGEMENT-III

HEAD OFFICE, DHAKA

Office note:		May 02, 2013
Re:	Proposal for sanction of CC (H) limit of Tk. 15.00 lac fvg. A/c. M/s. Rouf Store, proprietor:  Mr. Abu Bakor Siddique a customer of our Faridpur Branch.

We have been approached by our Faridpur Branch vide letter No: NBL-FARIDPUR BR/CC(H)/MLRB/2013/978 dated 09.04.2013 as recommended by Regional Office, Khulna vide letter No: ROK/MAK/FARIDPUR/AAM/2013/95 dated 11.04.2013 for considering the above proposal.

1st proposal receipt date: 15.04.2013	Complete proposal receipt date: 30.04.2013

Key Information:

Branch	:	Faridpur
Customer’s Name	:	M/s. Rouf Store,  Prop: Mr. Abu Bakor Siddique
Nature of Business	:	Crockery Business
Purpose	:	For smooth running & expansion of business
Owner of Collateral	:	Borrower himself and his two brothers
Banking with NBL Since	:	30.12.2012
Credit facility availing Since	:	New Proposal
Facility	Nature of Approval Sought			Amount
CC(H) limit	Sanction		:	Tk.15.00 lac
Any Other Facility	Interest Reduction		:	-
	Commission Reduction		:	-
	Funded		:	Tk.15.00 lac
	Non-Funded		:	-
	Total		:	Tk.15.00 lac
	Net Exposure		:	Tk.15.00 lac
Security Value by Branch	Market Value		:	Tk. 47.25 lac
	Forced Sale Value		:	Tk. 42.52 lac
Security Value by Surveyor	Market Value		:	Tk. 47.25 lac
	Forced Sale Value		:	Tk. 40.16 lac
Pricing	Commission: N/A			Interest: 18.00% p.a. qtly. rest for all funded facility.
CIB Information	CIB Report dt. 03.04.2013 obtained and status found “Nil”.

Total exposure:                                                                               (Figure in lakh Taka)

Name of the A/c.	Nature	Facility					Security
		Existing	Outs	Over due	Proposed	Total	Existing	Prop	Total
M/s. Rouf Store	CC(H)	-	-	-	15.00	15.00	i) Hypo. of stock. ii) RM of 0.63 dec. residential land with 1 storied building 1500 sft situated within Faridpur municipality valuing Tk.47.25 lac. (FSV Tk. 42.52 lac) owned by borrower himself and his two brothers iii) PG from spouse of the proprietor shall be obtained. iv) 1(one) undated cheque covering 10% above of loan amount shall be obtained.
Funded		-			15.00	15.00	RMP Tk. 47.25 lac (FSV Tk. 42.52 lac) Surveyor valuation Tk. 47.25 lac; FSV Tk. 40.16 lac
Non-Funded		-			-	-
Total					15.00	15.00

01. Transaction /Turn over in the account(s) of the client:           (Fig. in lac Taka)

Name of the A/c.	Nature of account	Year	Summation		Turn over		Balance
			Debit	Credit	Adj	Recy	Maxi.	Mini.	Present
M/s. Rouf Store,	CD (NBL)	30.12.12-08.04.13	16.25	17.71	-	-	6.41	0.02	1.42
	CD (Prime Bank)	01.01.12-31.12.12	3.25	0.73	-	-	0.70	00	-

02. Earnings from the account/allied accounts during last three years:   New Customer       

03. Financials of the custome                                                     (Fig. in lac Taka)

Name of the A/C	Year			Sales	Net Profit
M/s. Rouf Store,	2010			650.50	15.10
	2011			685.00	28.35
	2012			716.50	38.50
04. CRG Information: Score: 78			Grading: Acceptable
05. Present Status of Documentation:		:	N/A
06. Audit objections                              : N/A

07. Particulars of the client, business and other related information are as under:

a)	Name of the Account			:		M/s Rouf Store
b)	Address			:
	i)		Business/Show room/shop	:		Prop. Abu Bakor Siddique, Jutapatti, Thana Road, Faridpur. Cell: 01196-286510
	ii)		Office	:		N/A
	iii)		Factory	:		N/A
c)	Account No. & date of Account opening			:		CD-33024188 & 30.12.2012 Prime Bank-1/511040005198
d)	First Sanction			:		N/A
e)	Constitution/Legal Status			:		Proprietor
f)	Date of Incorporation/Establishment			:		1997
g)	Date of Commencement of business (For Public Limited Co.)			:		N/A
h)	TIN			:		089-100-1348
i)	Nature of Business			:		Crockery Business
j)	Net worth of business (calculation to be enclosed)			:		Tk.  55.62 lac as on 08.04.2013
k)	Market/Place of business/area of operation			:		Faridpur & its adjacent area
l)		History of relationship with the customer (How & when the relationship started/state if repayment and adjustment have been regular)		:		From the date of branch opening
m)	Capital Structure (For Ltd. Company)			:	N/A
	i) Authorized Capital			:	N/A
	ii) Paid up capital			:	N/A
	iii) Total capital Funds(Paid-up Capital + Retained Earnings + reserves + Others)			:	N/A
n)	Investment in business (For Individual & Firm)			:	Tk. 58.62 lac as on 08.04.2013
o)	Credit History				Nil

02.	Name of individual borrower/ Proprietor / Partners / Directors:
Name		Father’s Name, Mother’s Name, Husband’s Name	Address		Age (years)	Share %	Status	Personal Net worth
			Permanent Phone No.	Present (Residential) Phone No.
Md Didar Uddin Howlader		F-Llate Foyzuddin Mridha,      M- Late Fatema	Jutapatti, Thana Road, Faridpur. Cell: 01196-286510	Jutapatti, Thana Road, Faridpur. Cell: 01196-286510	63	100%	UC	Tk.110.37 Lac

*Encumbered nil and Unencumbered Tk. 47.25 lac

Profile of Key Person:

Mr. Md. Didar Uddin Hawlader, prop of M/s Rouf Store has been operating his wholesale and retail business of fertilizer, insecticide, LP gas and seasonal crops since 1995 with good market reputation.

09.	Present proposal (Sanction):                                                                    (Fig in lac Taka)
Nature of Facility		Existing			Proposed
		Limit	Expiry	Outs.	Limit	Expiry	Pricing/interest
CC(H)		-	-	-	15.00	30.04.14	18.00% p.a. at quarterly rest.
Funded		-	-	-	15.00
Non funded		-	-	-	-
Total		-	-	-	15.00
10. Liability Position of the Client and allied concerns with our Bank:   Nil

11. Liability position of the Client and allied concerns with other Banks:  Nil

13. Value of the stock:  Tk. 39.66 lac as on 08.04.13          

14. Visit Report:

Md. Lutfor Rahman Bhuiyan (SAVP & Branch In-charge), Md. Amir Hossain (SPO), Mr. Kabir Hossain Mia (Sr. Exe. Officer), Sheikh Sadi Mollah (Sr. Exe. Officer) & Mr. Ardhendu Sen (Exe. Officer) of NBL, Faridpur Branch have visited the site & RMP on 08.04.13. As per report, the concerned business is well running and the mortgaged properties are under physical possession of the owner(s)/mortgagor(s).

15. Other Information:

Mr. Md. Abu Bakor Siddique; Prof of M/s. Rouf Store is the retailer and wholesaler of crockery items at Juta Patti, Thana Road, Faridpur. He has been banking with our Faridpur branch by opening a CD a/c. In fact, there is huge demand for these types of goods and his good marketing policy with hard labor boosted his sales. They don’t avail any credit facility from any bank.

16. Justification for sanction

Mr. Md. Didar Uddin Hawlader is very much interested to enjoy credit facility and willing to expand his business arena. His market share has been increased. The price of goods has also increased. Finally, his satisfactory business performance and good relationship with our bank will award the branch more earnings.

17. Recommendation of the Branch & Regional Office:

Considering the integrity, creditworthiness of the customer, security aspect, past performance with other bank, market reputation, genuine requirement Branch Manager has recommended for sanction of CC (H) limit of Tk. 15.00 lac but Regional office, Khulna recommended the same.

18.  Recommendation of Credit Committee:

The credit committee has recommended for following facilities:

Sanction of CC (H) limit of Tk.15.00 lac

19. Recommendation of Head Office (CRM-III) :

In view of the above and as per recommendation of the Branch and Regional Office, we may place the captioned proposals for consideration under the following terms & conditions:

Facility: Sanction of CC (H) limit of Tk.15.00 lac A/c  M/s. Rouf Store,.

                    

1.	Nature of limit	:	CC (H) (Sanction).
2.	Amount	:	Tk.15.00 lac (Taka Fifteen lac) only.
3.	Validity	:	30.04.2014
4.	Rate of intt.	:	18.00% p.a. at quarterly rest  ( subject to  change from time to time at the discretion of the Bank Management) (Penal intt @ 2% at quarterly rest shall be charged on default/overdue amount )
5.	Margin	:	50% on the value of stock
6.	Purpose	:	To meet up working capital requirement in existing Business.
7.	Mode of repayment	:	Daily sale proceeds to be deposited in CC (H) A/C with satisfactory turn over and at least one adjustment within the validity of the limit.

Security:

A)

Primary :

Hypo. of stock duly insured with Bank’s mortgage clause covering all possible risks. Written authority shall be obtained from the borrower to pay insurance premium in case of need by debiting his CD or CC(H) A/c.

B)

Collateral:

RM shall be created covering entire limits/facilities on the following property in consultation with BLA:

Location

Owner

Particulars with area  & value

Construction Nature, Area & value

Market value

FSV

Assessment date

The property is located at Faridpur, Barisal. (Within Pourashaba)

Didar Uddin Howlader (Borrower Himself)

0.63 dec./0.38 katha residential land under Dag no. Sabek-765, Hal-2341, Khatian No. RS-802, SA-741, Proposed Mouz with J.L.No: Mouza: Faridpur , JL No. 118, Thana (P.S): Kotwali, Faridpur @ Tk 75.00 per dec. valuing Tk. 47. 25 lac

residential land with 07 storied foundation building under construction

Tk.47.25 lac

Tk.42.52 lac

08.04.13

Total 0.63 dec./0.38 katha land and building valuing Tk. 47.25 lac (FSV Tk.42.52 lac)

** All properties have been inspected by bank enlisted Surveyor Unique Survey Service Bureau where value stands at Tk. 47.25 lac; FSV Tk. 40.16 lac

	c) Branch has provided the certificate in respect of accepting mortgage of landed property as security as per Head Office circular no 3168 dated on 18.01.2012
	d)		Regd. irrevocable General Power of Attorney (in case of land registered and in other cases noterised as applicable) to be obtained from the mortgagor / company / borrower in terms of the section 12 of Artha Rin Adalat Ain 2003, authorizing the bank to sell the mortgaged property, hypothecated / pledged stocks and other assets movable & immovable) of the mortgagor / company / borrower in case of failure to adjust the liability.
	e)		Other security:
	i)		PG from spouse of the proprietor shall be obtained. 1(one) undated cheque covering 10% above of loan amount shall be obtained.
	ii)
	General Condition:
	a)		Disbursement/draw down against credit facilities as approved will not be allowed before adjustment/regularization of overdue liabilities, if any.
	b)		Branch shall have to keep close monitoring/post disbursement follow up on the client so as to ensure adjustment/repayment of outstanding dues/liabilities within the approved validity/tenure of the facility.
Special Conditions:
	a)			The original copies of all documents relating to the mortgage documents shall be submitted to the branch and legal opinion from our BLA shall be obtained and if opinion found “acceptable”, registered mortgage shall be executed under supervision of the BLA & branch manager.
	b)			An under taking shall be obtained from the customer to the effect that he will utilise the credit facility in his existing business & will not divert any fund to any other business.
	c)			All necessary registered mortgage formalities/documentations to be completed before disbursement of the CC (H) Limit in the name of M/s. Rouf Store, Proprietor Mr. Abu Bakor Siddique.
	d)			Branch Manager is advised to check the ownership of all properties, RM documentations, valuation etc. and ascertain their genuineness before allowing disbursement.
	e)			Excess over limit is strictly prohibited.
	f)			Fortnightly stock report in Bank’s specimen to be obtained regularly and verified by an authorized officer.
	g)			Branch must ensure regular transaction & periodical adjustment of the A/c
	h)			No EOL shall be allowed without prior permission of the competent authority.
	i)			Branch in charge shall personally monitor the transaction in the CC (H) A/c and ensure regular deposit of sale proceeds.
	j)			The Branch Manager must keep close monitoring so that the account remains well transacted and good performing.
	k)			The customer shall route entire business transaction through the respective Branch of National Bank Limited.
	l)			An undertaking on Non-Judicial stamp shall be obtained from the customer stating that he shall not avail any credit facility from any other bank in the name of M/s. Rouf Store, without the written consent of the Branch In-charge of the respective Branch of National Bank Limited.
	m)			Anti-hoarding policy of the Government shall be complied with.
				Branch is advised to follow the content of the circular letter no. 3081 dated 28.06.2011 in respect of disbursement.
	n)			Letter of Disclaimer to be obtained from the owner/ lessor in case of rented showroom(s)/ godown(s) shop(s)/factory(ies) or business on leasehold properties.
	o)			Disbursement of proposed facility/facilities is subject to availability of loanable fund of the Bank.
	p)			Certificate by Head of the Branch regarding genuineness of the mortgaged property (ies) has been checked with (a) Sub Registry Office, (b) Tahsil Office, (c) A.C land office as per Head Office Circular letter no. 3168 dated 18.01.2012.
	Other conditions:
	a)			One responsible officer should inspect the stock at least once in a month.
	b)			No transaction beyond the purpose for which the limit has been sanctioned shall be allowed.
	c)			Branch must ensure regular transaction & periodical adjustment of the A/c
	d)			The Branch-in-charge must be satisfied about the valuation, possession and ownership of the property mortgaged with the Bank.
	e)			All formalities including documentation shall be completed and a certificate to this effect be sent to Head Office before allowing the facility.
	f)			All the documents relating to the Regd. Mortgage of the property should be verified/ examined and processed by the legal Adviser/Retainer of our Bank.
	g)			The borrower must be intimated the conditions of the limit and acceptance from them in writing to be obtained before release of advance. The acceptance shall be given within 30 days from the date of intimation otherwise the limit will be cancelled.
	h)			The limit shall automatically be cancelled if it is not availed within 60 days.
	i)			The borrower shall intimate the Bank any change of address either business or residence within 24 hours of the actual change.
	j)			Bank reserves the right to alter or amend any clause of the limit or call back the facility(s) at any time without assigning any reason whatsoever.
	k)			“The Bank” has the right to set-off any outstanding on one account against any other account held in “the borrower’s” name whether in debit or credit.
	l)			“The borrower” will explicitly undertake that all information supplied by “ The borrower” to “The Bank” in connection with the approved credit facilities is correct.
	m)			Any legal fee and other cost incurred by “The Bank” in connection with the facilities will be on “The Borrower’s” account. For any deductions related to “The Borrower’s” account will be debited.
	n)			List of properties of Individual/Proprietor/Partners/Company /Directors with full details and present value shall be obtained.
	o)			Mortgaged properties shall not be released without adjustment of liability.
	p)			A Signboard as per Head Office Circular Letter No.2499 dated 07.10.2007 shall be fixed on the mortgaged property in a visible place.
	q)			2(two) sets of charge documents of each facility shall be obtained before disbursement of loan.
	r)			All other terms & conditions shall be observed as per time-to-time changes and existing norms of the bank.
	Special Covenant:
	The facilities shall be effective and /or the sanction will be operative subject to:
	a)	Satisfaction of management Authority regarding availability of funds in BDT, foreign exchange coverage, sufficient credit line or confirmation arrangement with correspondent Bank.
	b)	Compliance of Bangladesh Bank guidelines, instruction and written/oral advices.
	c)	Compliance of Bank’s various policy guidelines related to the credit(S) including all other terms & conditions stipulated in sanction.

The proposal is within the delegated business power of The Deputy Managing Director.

Submitted for kind approval                                                                                              

SEVP(CRM-III)PL

Md. Ashadur Rahman Bhuiyan Probationary Officer

Shawkat Noor Abedi Asstt. Vice President

The above proposal was placed to the Credit Committee in its…………………. meeting held on ………………2013. After perusal & discussion of the proposal, the Committee has recommended for sanction of CC (H) limit of Tk. 15.00 lac fvg. A/c. M/s. Rouf Store, proprietor:  Mr. Abu Bakor Siddique a customer of our Faridpur Branch.

Md. Mamunur Rashid Molla	Mohammad Masoom	Syed Mohammad Bariqullah
Executive Vice President	Senior Executive Vice President	Senior Executive Vice President
Abdul Hamid Mia	A. S. M. Bulbul	Nazibuddin Bhuiyan
Deputy Managing Director	Deputy Managing Director	Deputy Managing Director
AKM Shafiqur Rahman	Shamsul Huda Khan	S. M. Jaffar
Deputy Managing Director	Deputy Managing Director	Deputy Managing Director
Md. Badiul Alam
Additional Managing Director