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Lending operation and risk management ebook free download
Only for daibb.
Free download from the link bellow:
Download
Only for daibb.
Free download from the link bellow:
Download
Ka Set
THE INSTITUTE OF BANKERS, BANGLADESH (IBB)
Banking Diploma Examination, July, 2018 DAlBB Lending Operation & Risk Management.(LRM)
Time-3 hours Full marks--100
Pass marks-50
[N.B.-AII questions carry equal marks. Answer any five questions. Diferent parts of a question should be answered in a same place]
1.(a) What is creditworthiness? Discuss the points those are essentially to be considered by a banker while assessing the creditworthiness of a perspective borrower.
(b) State how will you deal with existing borrower needing enhancement of the creditability.
2. (a) Define the SME credit in the light of Bangladesh Bank’s guidelines and mention the booster sector.
(b) Bangladesh Bank has of late made some changes as regards provisioning on SME loans, but some banks are reported to have been measuring the revised concept through unfair convension of some other loans to SME loans. Give your opinion on the matter. How to relief to this unfair Situation? Please suggest.
3. (a) Distinguish between Lending Risk Analysis (LRA) and Credit Risk Grading (CRG). Write down the expected CRG requirement for extending credit.
(b) Explain the risk factors that make an industry sick. How would you proceed to consider rehabilitation needed of a sick project?
4. (a) Define portfolio management. Highlight the role of responsibility of Branch Manager in respect of borrower selection and loan processing.
(b) What will you do when a loan proposal does not fall within set criteria of approved credit policy but the applicant affears to be potential and helpful for the bank’s branch?
5. (a) Define ALCO and its formation structure. Discuss the role and responsibility of ALCO for profer leading of a bank.
(17) Do you think that the absence of asset liability management in the bank may cause damage to its image and foundation? Elaborate your answer.
(a). Define Green banking as per Bangladesh Bank’s guidelines Discuss the importance and need of green banking in the context of present and future global warming situation of the country
(b) Briefly give a resume of green banking activity of your bank/institution
(a) What is provisioning? Discuss the basis of determining the status of classified loans and advances.
(b) Is it due to the increase of classified loans of the bank that they now facing liquidity problems and borrow interbank call money at very high rate? Justify the view. If you areagreed or not agree- comment.
(a) What do you mean by a project and its app1aisal? During appraisal of a project loan proposal what factors does a banker take into consideration? Please explain.
(b) Mr. Ahmed Ali an enterprise of your branch area has applied for a loan of Tk. 20,00,000 to establish a nursery project (to ensure green banking) to your branch. Please write an appraisal report of the banks loan proposal explaining the following points -
(i) About the applicant
(ii) About the enterprise (nursery)
(iii)About the security, calculating maximum credit Limit (MCL)
(iv) About the credit needs ,
(v) About the income and expenses ie. profitability
(Vi) About marketing
(Vii) Recommend loan amount considering the above analysis.
9. (a) Banks usually extend credit against securities. Please list down the different types of securities against which Banks sanction loans to its c1ient. Discuss their advantages & disadvantages in brief.
(b) In selecting a borrower, if it is perfectly made, “Loan cannot term into bad”. Elaborate your comment on this statement.
Write short notes on five of the following: -
a) Debt: Equity Ratio;
(b) .Bankers Book Evidence Act;
(C) MicroCredit Regulatory Authority (MRA);
d) CAMELS Rating;
e) Sensitivity Analysis for a p1oject loan Appraisal;
f) Bill of lading
g) Single Borrower exposure
h) G.S.P
THE INSTITUTE OF BANKERS,
BANGLADESH (IBB)
Banking
Diploma Examination, November, 2017
DAIBB
Lending
Operation And Risk Management (LRM)
Time-----3 hours
Full marks---100
Pass Marks-----50
[N.B.------Answer any five questions.]
(b) As a newly posted branch manager, based on the survey data, you are advised to prepare a business plan for your branch for the year 2017-2018.
2 (a) Discuss different types of security documents those a bank usually obtain at the time of disbursement of credit from a borrower.
(b) Most of the banks accept land as collateral Security against loans. List down the name of the lands those cannot he accepted as security and why cannot be taken as security, discuss the causes.
Define ALM. and ALCo. Do you think that absence of effective ALM of a bank may lead it to different crisis geopardising, image and foundation of the bank. Please elaborate your answer.
Please sholArthe thrmation of ALCo of your bank and write the role and responsibilities of ALCo.
4 istinguish between money market and capital market. Do you think
that increased . call money rate can influence capital market? In what way? Please speci
Do you suggest any amount of investment in carAtal market by Commercial Bank? Justify your answer.
Distinguish between trading loan and working capital loan. Discuss the importance of working capital loan to an industrial enterprise.
Please furnish a sample of working capital assessment for a textile industry of 100 (hundred) loam.
What is loan syndication? How does it work? Explain its merits and demerits.
(b) Suppose, the .government has decided to implement. Dhaka-Gazipur Metro rail road through syndicate financing. 9 (nine) banks agreed to finance the . project through syndicate financing. .Please prepare a syndicate financing project proposal.
Lending operation question Nov 2017
Institute of Bankers, Bangladesh
Lending operation & Risk Management
Banking Diploma question 2011 - June 2017
Download Lending operation & Risk Management question 2011-2017
December 2016
Lending operation question Nov 2017
Credit risk grading is the process which helps the sanctioning authority to decide whether to lend or not to lend, what should be the lending price, what should be the extent of exposure, what should be the appropriate credit facility, what are the various facilities, what are the various risk mitigation tools to put a cap on the risk level.
CRG is an important tool for credit risk management as it helps the banks and financial institutions to understand various dimensions of risk involved in different credit transaction. It provides a better assessment of the quality of credit portfolio of a bank.
CRG is an important tool for credit risk management as it helps the banks and financial institutions to understand various dimensions of risk involved in different credit transaction. It provides a better assessment of the quality of credit portfolio of a bank.
Importance of Credit Risk Grading:
1. Well-managed credit risk grading systems promote bank safety and soundness by facilitating informed decision-making.
2. Grading systems measure credit risk and differentiate individual credits and groups of credits by the risk they pose. This allows bank management and examiners to monitor changes and trends in risk levels.
3. The process also allows bank management to manage risk to optimize returns.
Components of Credit Risk Grading:
Financial risk: The uncertainty of future incomes due to the company’s financing. Financial risk management refers to the practices used by corporate finance managers and accountants to limit and control uncertainty in the firm’s total portfolio.
Financial risk management aims to minimize the risk of loss from unexpected changes in the prices of currencies, interest rates, commodities, and equities.
Business/Industry risk: The risk related to the inability of the firm to hold its competitive position and maintain stability and growth in earnings. It is generally measured by the variability of the firm’s operating income over time.
Management Risk: The risks associated with ineffective destructive or under-performing management, which hurts shareholders and the company or fund being managed.
Security risk: Security risk mainly depends on the potential owners or other source. There is some Security risks are given below:
- Perishability,
- Enforceability/Legal structure, and
- Forced Sale Value.
Relationship risk: Relationship risk mainly based on supplier and customer relation to the entrepreneur.
If the entrepreneur can make a good relation to the customer or supplier he or she also get the loan at a lower rate.
How to Compute Credit Risk Grading
- Identify all the Principal Risk Components.
- Allocate weight to Principal Risk Components.
- Establish the Key Parameters under each risk components.
- Assign weight to each of the key parameters.
- Add all the weight of the key parameters to have an overall score.
- Assign a grade based on the total weights. The grading method assumes simple weighted average addition of the risk criteria.
Loan Pricing:
Loan pricing means determining the interest rate for granting loan to creditors, be it individuals or business firms. It is one of the most important, however difficult task in lending funds to business firms & other customers. Because it is always very difficult to exactly know what the actual loan risk a particular loan application is. Generally the lender wants to charge a high enough rate to make sure that the loan will be profitable as well as it will covers enough compensation against the default risk. On the other hand loan price must be set low enough that helps the customers to find it easy for successful repayment of loan.
Loan pricing factors:
Loan pricing means determining the interest rate for granting loan to creditors, be it individuals or business firms. It is one of the most important, however difficult task in lending funds to business firms & other customers. Because it is always very difficult to exactly know what the actual loan risk a particular loan application is. Generally the lender wants to charge a high enough rate to make sure that the loan will be profitable as well as it will covers enough compensation against the default risk. On the other hand loan price must be set low enough that helps the customers to find it easy for successful repayment of loan.
Loan pricing factors:
- Amount of supply of loan giving fund (Available liquid fund)
- Cost of fund
- Administrative and transaction cost
- Other expense
- Loan supervision and collection cost
- Amount of risk of loan
- Security maintenance expense
- Anticipated dividend rate of shareholder
- competitive situation
- Demand for loan
Different factors in consideration while appraising an investment proposal. DAIBB Exam May 2016
The key factors to consider are:
Risks and uncertainties
All business investments involve risk – the probability that the hoped-for outcome will not happen. An investment needs to earn a return that compensates for the risk.
The risk of a capital investment will vary according to factors such as:
Length of the project
The longer the project, the greater the risk that estimated revenues, costs and cash flows prove unrealistic
Source of the data
Are estimated project profits and cash flows based on detailed research, gut feel, or a little of both?
The size of the investment
An investment that uses a substantial proportion of the available business funds is, by definition, more risky than a smaller project. Risk is also about the consequences to the business if something goes wrong!
The economic and market environment
A major issue for most large investments
Most projects will make assumptions about demand, costs, pricing etc which can become wildly inaccurate through changing market and economic conditions
The experience of the management team
A project in a market in which the management team has strong experience is a lower-risk proposition than one in which the business is taking a step into the unknown!
Qualitative influences on investment appraisal
An investment decision is not just about the numbers. A spread sheet calculation for NPV or ARR might suggest a particular decision, but management also need to take account of qualitative issues such as:
- The impact on employees
- Product quality and customer service
- Consistency of the investment decision with corporate objectives
- The business' brand and image, including reputation
- Implications for production and operations, including any disruption or change to the existing set-up
- A business' responsibilities to society and other external stakeholders
Quantitative influences on investment appraisal
The investment appraisal comes up with a result, but how is a decision made?
Many firms set what are known as "investment criteria" against which they judge investment projects.
A problem with the three main investment appraisal methods is that they can generate seemingly contradictory results. For example, an investment might have a long payback period because the returns only occur several years into the project (possibly too long to be acceptable). However, if those returns are significant to the original investment, it is likely that the NPV or ARR would suggest going ahead.
The use of investment criteria is intended to help guide management through these decisions and address the potential conflicts.
So possible criteria might suggest only accepting investment proposals which meet at least two of the following:
- A payback within four years
- ARR of at least 20%, with no profits taken into account beyond Year 5
- NPV of at least 25% of the initial investment
What qualities does a field officer (Who appraises loan proposal) should posses? Please elaborate your answer. DAIBB Exam May 2016
Ans: Qualities of Loan proposal appraisal officer
Ans: Qualities of Loan proposal appraisal officer
- Active Listening - Giving full attention to what other people are saying, taking time to understand the points being made, asking questions as appropriate, and not interrupting at inappropriate times.
- Speaking - Talking to others to convey information effectively.
- Reading Comprehension - Understanding written sentences and paragraphs in work related documents.
- Judgment and Decision Making - Considering the relative costs and benefits of potential actions to choose the most appropriate one.
- Critical Thinking - Using logic and reasoning to identify the strengths and weaknesses of alternative solutions, conclusions or approaches to problems.
- Service Orientation - Actively looking for ways to help people.
- Social Perceptiveness - Being aware of others' reactions and understanding why they react as they do.
- Complex Problem Solving - Identifying complex problems and reviewing related information to develop and evaluate options and implement solutions.
- Coordination - Adjusting actions in relation to others' actions.
- Monitoring - Monitoring/Assessing performance of yourself, other individuals, or organizations to make improvements or take corrective action.
- Time Management - Managing one's own time and the time of others.
- Management of Personnel Resources - Motivating, developing, and directing people as they work, identifying the best people for the job.
Ans:
Prospective borrower means which borrower has 'Five C of credit' quality. The five C's of credit is a system used by lenders to gauge the creditworthiness of potential borrowers. The system weighs five characteristics of the borrower and conditions of the loan, attempting to estimate the chance of default. The five C's of credit are character, capacity, capital, collateral and conditions.
Character
Sometimes called credit history, the first C refers to a borrower's reputation or track record for repaying debts. This information appears on the borrower's credit reports. credit reports contain detailed information about how much an applicant has borrowed in the past and whether he has repaid his loans on time.
Capacity
Capacity measures a borrower's ability to repay a loan by comparing income against recurring debts and assessing the borrower's debt-to-income (DTI) ratio. In addition to examining income, lenders look at the length of time an applicant has been at his job and job stability.
Capital
Lenders also consider any capital the borrower puts toward a potential investment. A large contribution by the borrower decreases the chance of default.
Collateral
Collateral can help a borrower secure loans. It gives the lender the assurance that if the borrower defaults on the loan, the lender can repossess the collateral. For example, car loans are secured by cars, and mortgages are secured by homes.
Conditions
The conditions of the loan, such as its interest rate and amount of principal, influence the lender's desire to finance the borrower. Conditions refer to how a borrower intends to use the money.
