Credit risk management of LankaBangla Finance Ltd.

Abstract

LankaBangla Finance Ltd. is one of the leading Non-Bank Financial Institution in the country. They started their journey in 1997 and they have gained many customers throughout these years and have been recognized as the country’s leading provider of integrated financial services including Corporate Financial Services, Personal Financial Services, SME Financial Services, Stock Broking, Corporate Advisory and wealth Management Services. This report is the fulfillment of the requirement for the evaluation process of the internship program. The main purpose of the report is to have an overall idea about function and process of credit risk management, analyzing tools and techniques used to evaluate credit proposal, analyzing steps taken to ensure a reliable and effective approval process. Credit risk management is a crucial issue of risk management and an essential to the long-term success of any banking organization. The institution’s goal for credit risk management is to maximize risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. This study was done o present an overview of the different activities of LankaBangla Finance Limited,to know about the overall general financing system of LBFL, to show the loan products and loan sanctioning procedures of LankaBangla Finance Limited, to present the overall performance analysis of LankaBangla Finance Limited and to suggest measures for the development of LankaBangla Finance Limited. The primary sources of data for study were Face to face conversation with the institutions officers and staffs, Study of different files of different section of the institution, questionnaires and practical deskwork and observation. The secondary data were collected from the organization’s website, annual reports and also unpublished reports. This topic is important for research because LankaBangla Finance operates in the market segment that is highly saturated by other NBFI’s And Banks. In this highly competitive market, the NBFI’s not only have to compete between themselves, but also with the existing banks. So, in order to stay ahead in the market, some institutions lend out to borrowers without fully analyzing the risk which sometimes may bring profit, but most of the time it results in Non-Performing loans(NPL). Resolving these issues and coming up with a good and sound CRM policy is the key to success for an NBFI. The impact of resolving these problems will establish the institution’s reputation and ensure return on loans. The guidelines of the CRM department and their work process will ensure their success. The Credit Risk Management department of LankaBangla Finance is a well structured department. They have achieved this by segregating the approval authority from the business unit. They have also ensured that the responsibility of sanctioning the loan not only lies with the higher authority, but also with the analyst who recommends the loan for approval. The current situation of LBFL is satisfactory. It is also performing well in the credit department by trying to decrease the nonperforming loans by ensuring a sound and efficient credit risk management.