Credit risk management of GSP Finance Company (Bangladesh) Limited

Abstract

This Report describes the Credit Risk Management system of GSP Finance Company (Bangladesh) Limited and analyses how certain factors affect the determination of interest rate for the company. Today, Non-banking Financial Institutions are contributing much in the economy of Bangladesh. There are now 31 NBFIs in Bangladesh which are providing diversifying financial services to their customers. Like banks, these financial institutions are also highly exposed to credit risk; as the main activities of NBFIs are financing other institutions and individuals through various credit facilities. For that reason, managing credit risk is a crucial task for all Financial Institutions. GSP Finance Ltd is one of the 31 NBFIs in Bangladesh, pursuing business for last 18 years. It has been financing commercial, industrial and SME sectors through Lease and Term Loan finance. To manage the credit risk associated with financing, GSP Finance has Credit Risk Management Department. This department reviews the credit applications, mitigates risk by ensuring appropriate terms & conditions, and directly monitors and manages all unclassified/classified accounts. Another important responsibility of the department is to ensuring that the company is earning right rate of return against the risk taken by facilitating finances. This is why the analysis part of the report sees how certain factors influence the determination of interest from the perspective of GSP Finance.