Internship Report

On
A descriptive analysis on operation strategy
and procedure of Special Asset Management
Department of IDLC Finance Limited

Prepared for:
Md Hasan Maksud Chowdhury
Assistant Professor
BRAC University

Prepared by :
Nafisa Sanjida
ID- 12304058
BRAC Business School

Date Of Submission - 11th December, 2016

 Letter of Transmittal
December 14,2016

To

Md. Hasan Maksud Chowdhury

Assistant Professor ,BRAC Business School

BRAC University

66 Mohakhali,Dhaka -1212

Subject: Submission of internship report on IDLC Finance Limited

Dear sir,

With due respect, it is my great pleasure to submit the internship report on " A descriptive
analysis on operation strategy and procedure of Special Asset Management Department
of IDLC Finance Limited" as the requirement of BUS 400 course for your consideration. I have
completed my internship from IDLC finance limited, a well known Non- Banking Financial
Institution in Bangladesh.

My main inducement was to prepare this term paper according to your instructions while
considering the guidelines of the BBA Program. I made sincere efforts to study related materials,
documents, observe operations performed in Special Asset Management of IDLC and tried my
best to enrich this report by providing what I have learned throughout the internship program and
compiled this report as per the requirements .I hope that I have been able to relate the
fundamental things with realistic applications considering my level of experience and
competency.

Hence, I am submitting my internship report, hoping that you will appreciate my instructive and
comprehensive approach. Thank you for encouraging me for working on this interesting topic.
Kindly accept my report and oblige thereby.

Sincerely yours,

Nafisa Sanjida

ID : 12304058

BRAC Business School

 Acknowledgement
I would like to start this report by acknowledging my gratefulness to the Almighty Allah. I
would like to express heartfelt gratitude to every single person who has assisted me in the
preparation of this internship report. I wish to thank them for their support, guidance and belief
in every step.

First of all, I would like to take the opportunity to say my gratitude towards Md. Hasan Maksud
Chowdhury ,Assistant professor, BRAC Business School, for his endless support, inspiration and
guidance during this internship. This report has been prepared and presented to him for the
assessment and final evaluation of this course. I am really grateful to him for his endless support
and proper guidance without which the completion of the report would not be possible. I am also
thankful to him for contributing his valuable time while viewing my report and making all the
necessary corrections.
Secondly, I must remember to express my heartiest gratitude to my direct supervisor Mr. Dewan
Ishtiak Ahmed, Senior Manager, Special Asset Management and Sultana Razia, Assistant
Manager, Special Asset Management. I would also like to thank Rabbi Ahmed, Senior officer,
Special Asset Management and Amit Chatterjee, Assistant officer, Special Asset Management
for their kind support as well as their guidance and valuable feedback to write my report.. A very
special thanks goes to the whole Special Asset Management department for helping me in all
stage of the internship process. Simultaneously, I would like to thank my other colleagues of
IDLC who provided me with enormous insights and helped me to learn the situation of the
current business world.

Finally, I am grateful to BRAC University which is the reason I am standing here on the peak of
earning my bachelors degree successfully.
 Executive Summary
In the industry of Financial institutions of Bangladesh IDLC is the leading non-bank financial
organization which has one of the best portfolios as well .The Consumer Division was
established as one of the preliminary divisions of IDLC which became one of the forefronts of
the institution with its brunches and departments along with skilled and talented employees.
Therefore an extensive part of Special asset management (SAM) team is assigned to handle the
assets of Consumer Division strongly . SAM of IDLC finance limited works as a wing of credit
risk management. Its purpose is to exploit profitability and support the business expansion and
by sustaining stability between risk and reward over the life-cycle of services and portfolios of
IDLC. SAM plays an important role by ensuring the collection of the delinquent amounts
efficiently and effectively.SAM is responsible is to build a cost effective Collection process
which is risk responsive, pro-active and information based.
This report is based on a descriptive study of SAM and also some major issues of Non-
Performing Loan. Besides, this report also tries to find out the involvement of Special Asset
Management in the Consumer Division of IDLC Finance Limited. Moreover it shows the
observed present development of the consumer division . It also includes a statistical illustration
of the performance of SAM in terms of consumer division .The main rationale of this report is to
find out effectiveness of the policy and strategy of SAM through analyzing the NPL growth .
As a part of internship program I got the opportunity to work closely at SAM and assigned to
prepare a report. Regardless of having challenges I tried to construct this report with the amount
of resources I had. At first this report contains a comprehensive explanation about IDLC. Then it
further explores to explain the overall guiding principles and course of actions of SAM and its
competence descriptively and figuratively. I have included some findings which may help to
understand the issues regarding NPL .Later on some recommendations have been documented
for any further research regarding this topic.
Table of Contents
CHAPTER 01:THE ORGANIZATION ......................................................................................... 1
1.1 Introduction ........................................................................................................................... 2
1.2 Origin of the Report .............................................................................................................. 2
1.3 Objective of the Report ......................................................................................................... 2
1. 4 Methodology ........................................................................................................................ 3
1. 5 Limitations of the Report ..................................................................................................... 3
1.6 Description of the organization ............................................................................................. 4
1.6.1 Historical Background .................................................................................................... 4
1.6.2 Company Overview ........................................................................................................ 5
CHAPTER 02:Description of the study.......................................................................................... 8
2.1 Organogram of IDLC Finance Limited ................................................................................ 9
2.2 Subsidiary Company of IDLC ............................................................................................ 10
2.3 Shareholding Structure ........................................................................................................ 12
2.4 Location of Corporate Head Office and Branches .............................................................. 13
2.5 Key Corporate Milestone .................................................................................................... 15
2.6 Business Overview .............................................................................................................. 17
2.7 Internship experience .......................................................................................................... 19
2.7.1 Job Responsibilities as an Intern .................................................................................. 19
2.7.2 Observations during internship ..................................................................................... 20
CHAPTER 03:Project Part ........................................................................................................... 21
3.1 Non Bank Financial Institutions in Bangladesh .................................................................. 22
3.2 IDLC as an NBFIs ............................................................................................................... 22
3.3 The reason behind preferring IDLC (NBFIs) over Bank .................................................... 23
3.4 Portfolio Status of Consumer Division ............................................................................... 23
3.4.1 Number of Home loan ................................................................................................. 27
3.4.2 Number of Car loan ..................................................................................................... 28
3.4.3 Number of Personal loan ............................................................................................. 28
 3.5 Special Asset Management (Consumer Division) .............................................................. 29
3.5.1 Targets of Special Asset Management Department ..................................................... 29
3.6 Collection procedure and Operation Strategy of SAM ....................................................... 29
3.6.1 Collection Process OF SAM......................................................................................... 29
3.6.2 Regular Activities performed by SAM ........................................................................ 30
3.6.3 Operation Strategy of SAM .......................................................................................... 31
3.6.4 Recovery action plans by SAM .................................................................................... 32
3.7 Non performing loan (NPL) management .......................................................................... 34
3.7.1 NPL Trend and forecasting........................................................................................... 34
3.7.2 Trend Analysis for NPL growth rate ............................................................................ 35
3.7.3 Findings ........................................................................................................................ 38
Recommendations ..................................................................................................................... 39
Conclusion................................................................................................................................. 41
References ..................................................................................................................................... 42
 CHAPTER 01:
THE ORGANIZATION

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1.1 Introduction
The financial sector is a vital part of a country as it plays a significant role in the economic
development . The fundamental shift of private sector has appeared as an engine of economic
growth and development along with the public sector in Bangladesh. As a consequence, IDLC
Finance Ltd, the largest multi-segment Non-banking financial institution has achieved
noteworthy growth in all areas of business. It has expanded its area to Consumer, SME,
Corporate, Retail and Capital market segments. Three subsidiaries was also commenced by this
institution which has fortified its existence in the countries emergent financial market. IDLC
Finance Limited is one of the blue-chip companies on the local stock markets of Bangladesh
which is committed to sustainable practices and strong financial performance. IDLC has been
consistently recognized by independent bodies for the values underpinning its business and is
proud to be a standard bearer for the Bangladesh financial sector. The IDLC committed to
upholding the highest standards of ethics and compliance by its employees. IDLC is also
involved with lots of CSR activities.

1.2 Origin of the Report

The completion of internship is an integral part of the BBA Program as it serves the purpose of
practical orientation in the related area. I was blessed enough to complete my internship from
IDLC Finance Limited, the largest Non-Banking Financial Institution which provided me with a
real life knowledge of the activities of a financial institution. During my internship experience I
have come across a variety of functions of the company. Among them I have decided to work on
its Special Asset Management Department (SAM). All the way through the report I made an
effort to find out the actual explanation and operation of SAM from the perspective of
Bangladesh, procedure and policy of SAM, challenges faced by SAM in IDLC Finance Limited.
I tried to make the report more informative and consistent in order to represent the Special Asset
Management Department of IDLC.

1.3 Objective of the Report

This report is based on the job responsibilities that I performed at IDLC Finance Limited during
my three months long internship. Certainly this internship was a must need every BRAC
University student to put a prosperous end to their BBA program. This report shows the
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manifestation of the works that an intern does at IDLC Finance Limited as a part of the
internship program.

The objective of the study primarily is to explore the knowledge of different types of collection
strategies that are followed by Special Asset Management of IDLC Finance Limited to collect
the assets of Consumer Division after financing and the efficiency of the collection process.
Beside this, In this report there are few secondary objectives that come similarly to the core
objective. They are -
o Identify the overall activities of SAM
o Perceive present growth of IDLC in terms of Consumer Division
o Identify the reason behind Non Performing Loan
o Analyze the NPL trend forecast and draw the conclusion for IDLC Finance Limited in the
context of Bangladesh

This report is also an integral part of a whole course (BUS: 400) which is very important part for
the completion of my BBA program. So, for the successful accomplishment of the course, I had
to come up with the report. I tried to make the report more informative and competitive so that I
can easily convey the message through the report.

1. 4 Methodology
While doing the report secondary sources were for the successful accomplishment of the report.
I have collected data with the help from officials of IDLC to obtain the detail information about
the Special Asset Management department ( Face to face conversation with the respective
officials and Relevant findings as provided by the concerned representatives). Annual reports,
company website and brochures/flyers etc are used as well to analyze the statistical information
and formulate results.

1. 5 Limitations of the Report

Special Asset Management is a new department of IDLC Finance Limited. As a result it was
really hard to accumulate all the necessary data. Although I have tried my best to prepare this
report with utmost possible endeavor and dedication , I have encountered a few obstacles since
no direct information was accessible regarding SAM for making a complete and immaculate
report. Following are the list of some problem that I confronted while doing the report:

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  Non-availability of former and most recent information

 Organizational restriction to disclose sensitive and confidential information due to

business secrecy

 Insufficient time period to come up with the necessary information

 Non-availability of related journals and publications

For those limitations I was incapable to conduct more in- depth and detail oriented study and
include that in my report. However, in spite of all of those limitations I have tried my level best
to come up with the relevant information in order to make the report more informative and
analytical. I believe that, the information that I have accumulated in this report will really be
helpful for any further exploration regarding this theme

1.6 Description of the organization

1.6.1 Historical Background
IDLC Finance Limited ,the first leasing company of Bangladesh started its journey in 1985 as a
joint venture public limited company and the first leasing company of Bangladesh. It‟s
establishment was a collaboration of International Finance Corporation of World Bank, German
Investment and Development Company, Kookmin Bank and Korean Development Leasing
Corporation of South Korea, the Aga Khan Fund for Economic Development, The City Bank
Limited, IPDC of Bangladesh Limited and Sadharan Bima Corporation. In 1995, IDLC was
licensed as a Financial Institution by the country's central bank, Bangladesh Bank, following the
enactment of the Financial Institution Act 1993. As the company started to progress the initial
foreign shareholding of 49% was gradually withdrawn. In 2009, the local sponsors bought the
shareholdings, which left the company with no major foreign shareholdings. (IDLC Finance
Limited, About Us, 2016)

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1.6.2 Company Overview
IDLC Finance Limited commenced its journey, in 1985, as the first leasing company of the
country with multinational collaboration and the lead sponsorship of the International
Finance Corporation (IFC) of The World Bank Group. Technical assistance was provided by
Korean Development Leasing Corporation (KDLC), the largest leasing company of the
Republic of South Korea.
The unique institutional shareholding structure comprising mostly of financial institutions
helps the company to constantly develop through sharing of experience and professional
approach at the highest policy making level.
IDLC offers a variety of financial services and solutions to institutional and individual clients to
meet their diverse and exclusive requirements. The product offerings include Lease Finance,
Term Finance, Real Estate Finance, Short Term Finance, Corporate Finance, Merchant Banking,
Term Deposit Schemes, Debentures and Corporate Advisory Services. IDLC has also established
two wholly owned subsidiaries, IDLC Securities Limited which offers full-fledged international
standard brokerage services for both retail and institutional clients. IDLC investments, a leading
brand for investment banking in the country. The Company is devoted to viable business
practices and durable financial performance. The company is committed to maintain the utmost
standards of ethics and compliance by its employees. Employees are required to follow the
Company‟s code of conduct. It is also associated with a variety of CSR activities. In order to
fulfill the customers requirement IDLC continues to play a leading role in introducing different
types of financial instruments. They are constantly expanding their operations by providing the
best quality of products to the customers. IDLC has been constantly recognized by independent
bodies and it has achieved a significant presence in the corporate sector of Bangladesh. (Limited,
IDLC Finance, 2015)

Vision
We will be the best financial brand in the country. (Limited, IDLC Finance, 2015)

Mission
We will focus on quality growth, superior customer experience and sustainable business
practices. (Limited, IDLC Finance, 2015)

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Strategic Objectives
The strategic of IDLC Finance Limited are -
 Grow and develop our talent pool

 Fully leverage new core banking platform

 Optimize distribution points

 Grow and diversify funding sources

 Grow sales and service capabilities in Consumer Division

 Aggressively grow SME portfolio

 Focus on top-tier clients in Corporate

 Consolidate capital market operations and enhance capabilities

 Embrace internationally accepted corporate governance and sustainable business practices .

(Limited, IDLC Finance, 2015)

Core values
 Integrity

 Simplicity

 Equal Opportunity

 Customer Focus

 Trust and Respect

 Eco-friendly

 Passion(Limited, IDLC Finance, 2015)

Code of Conduct
In accordance with the approved and agreed Code of Conduct, IDLC employees shall:

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  Act with integrity, competence, dignity and in an ethical manner when dealing with
customers, prospects, colleagues, agencies and the public.
 Act and encourage others to behave in a professional and ethical manner that will reflect
positively on IDLC employees, their profession and on IDLC at large.
 Strive to maintain and improve the competence of all in the business.
 Use reasonable care and exercise independent professional judgment.
 Not restrain others from performing their professional obligations.
 Maintain knowledge of and comply with all applicable laws, rules and regulations.
 Disclose all conflicts of interest.
 Deliver professional services in accordance with IDLC policies and relevant technical
and professional standards.
 Respect the confidentiality and privacy of customers and people with whom we do
business.
 Not engage in any professional conduct involving dishonesty, fraud, deceit or
misrepresentation or commit any act that reflects adversely on our honesty,
trustworthiness or professional competence.

IDLC employees have an obligation to know and understand not only the guidance contained in
the Code of Conduct but also the spirit on which it is based(Limited, IDLC Finance, 2015)

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 CHAPTER 02:
Description of the
study

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2.1 Organogram of IDLC Finance Limited

Figure 1: IDLC Finance Limited Organogram

The Board of Directors of IDLC formed two sub-panels of the Board: Executive Committee and
Audit Committee. The matter identified with conventional business operations of the Company
and the matters that the Board of Directors every now and then, approves are vested on
Executive Committee. The Audit Committee is engaged, in addition to other things, to look at

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any matter identifying with the money related issues of the Company and to survey all review
and assessment programs, interior control frameworks and techniques, bookkeeping strategies
and adherence to compliance requirements, etc. (Limited, IDLC Finance, 2015)

2.2 Subsidiary Companies of IDLC

IDLC Securities Limited: IDLC Securities Limited, a completely owned subsidiary of IDLC,
offers full-fledged international standard brokerage services for both of their retail and
institutional clients. It has seats on both Dhaka Stock Exchange Limited and Chittagong Stock
Exchange Limited. It is also a Depository Participant (DP) of Central Depository Bangladesh
Limited (CDBL). The administration board of trustees is verging on same as IDLC. MD is
capable to keep up every one of the exercises through the hierarchy of leadership in Head of
Admin and Head of operations. Here head of operations primarily manages deals and exchanging
related exercises. Each Branch predominantly runs the deals and exchanging office. They
additionally get backing of Merchant Bank division in their Branch. (Limited, IDLC Finance,
2015)

Figure 2: IDLC Securities Limited Organogram

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IDLC Investment Limited: As per requirement of the Securities & Exchange Commission
(SEC), IDLC formed a separate subsidiary on May 19, 2010 in the name of „IDLC Investments
Limited‟, in order to transfer its existing merchant banking activities to the newly formed entity.
IDLC applied to SEC to transfer the existing merchant banking license of IDLC Finance Limited
to IDLC Investments Limited. Accordingly, IDLC Investments Limited has started its operations
from August 16, 2011 to offer merchant banking services to their individual and institutional
clients.

Figure 3: IDLC Investments Limited Organogram

The Credit Advisory group is enabled, in addition to other things, to break down the business
sector chance and favor the edge advance for the financial specialist. Head of Accounts and
Administrator are essentially in charge of the financial related exchange and controlling
administration. Head of operation controls the record opening and record looks after exercises.
(Limited, IDLC Finance, 2015)

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IDLC Asset Management Limited (AML) IDLC Asset Management Limited (AML) was
incorporated in Bangladesh on 19 November 2015 vide registration no. C-127068/2015 as a
private company limited by shares under the Companies Act, 1994.It is a subsidiary Company of
IDLC Finance Ltd that holds 99.99% ownership of the Company. The principal objective of the
company is to carry out the business of asset management, primarily, through launching and
managing mutual funds to cater to the diverse needs of investors. Besides, institutional fund
management, IDLC AML also aims at creating avenues for alternative investments through
private equity and venture capital. (Limited, IDLC Finance, 2015)

2.3 Shareholding Structure

The shareholders of IDLC Finance Ltd. can be divided into two extensive type namely Sponsors/
Directors and General Investors. General Investors can also be subdivided into two different
categories which are Institutional Investors and Individual Investors.

Figure 4: Shareholding Composition Percentage

The shareholding structure of IDLC Finance Limited is given below -

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 Figure 5: Shareholding Composition of IDLC Finance Limited

2.4 Location of Corporate Head Office and Branches

IDLC is the largest Non-Banking Financial Institution which serve the local people with financial
facilities. It provides world-class products and exclusive customer service. As a result, they already
have 34 branches and 2 booths and thus they established a strong branch network which covers the
major points of Bangladesh.

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 Figure 6: Map of IDLC's Corporate Head Office and Branches

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2.5 Key Corporate Milestone

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2.6 Business Overview
The company accomplishes its diverse business through its four arms – SME, Consumer,
Corporate and Capital Markets.

(I) SME
SME Division is considered as the priority business segment of IDLC Finance Limited. This
division is devoted to provide specialist lending to small and medium-sized businesses across a
broad range of industries including steel, cement, light engineering, plastics and textiles, among
others, geographically spread across Bangladesh. This division provides a broad range of
services e.g. term loans, working capital loans and lease financing to satisfy diversified customer
requirements. Moreover, this division customizes their services if necessary. The division also
supports and encourages women entrepreneurship by providing them loans at attractive
covenants.

Figure 7 : SME Division's Information in BDT

SME Division offers the following financial facilities:

 Small Enterprise Finance

 Medium Enterprise finance:
 Supplier Finance
 Commercial Vehicle Loan

(II) Consumer
The Consumer division deals with the retail financial services which offers a broad range of
financial products including Home Loan, Car Loan, and a small segment of Personal Loan and

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Loans against Deposits. Presently consumer division has the highest market shares and growth
rates within the Real Estate Loan industry of Bangladesh. This division is also actively engaged
in mobilizing deposits by offering multiple retail savings products with variable interest rates and
maturities.

(III) Corporate
The key role of the Corporate Division is to provide quality service to financial institutions
across the country in financial affair. It provides the following services:

 Lease Financing
 Working Capital Financing
 Term Loan Financing
 Project Financing

Moreover, this division also offers corporate bond issuance and debt syndication which belongs
to the “Structured Finance” solution.

Figure 8 : Corporate Division's Information in BDT

(IV) Capital Markets

To run capital market operations, two wholly-owned subsidiaries named IDLC Securities Ltd.
and IDLC Investments Ltd. was established by IDLC Finance Ltd. These two subsidiaries offers
all types of trading and financial services to its patrons. They provide the best infrastructural and
execution experience to their consumer base through their strong trading facilities including
underwriting, primary Share issuance and merchant banking. Recently Discretionary Portfolio

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Management services has been introduced in order to grow this portfolio with their Consumer
Division while considering interdivisional synergistic opportunities.

Figure 9: Corporate Division's Information in BDT

2.7 Internship experience

2.7.1 Job Responsibilities as an Intern
The internship program of IDLC Finance Limited creates a learning platform for the beginners.
Though the responsibilities was quite challenging I consider myself very privileged as I have
finished my internship from SAM (Special Asset Management) Division at Dilkusha- the largest
branch of IDLC.I was assigned in the SAM Division which mainly deals with clients directly
including collecting cheque for EMI and handling with the Non-Performing Loans. I had been
appointed in order to help the employees to carry out their daily activities.
During my internship period I learned a lot and also performed different types of works mostly
by assisting the regular activities with hands on support. However, I also had to do some
important and critical tasks as well under the supervision of my direct supervisor.
Specific Responsibilities of the job: As an intern I was assigned the following job
responsibilities:
 Maintaining PDC General Folder

 Operating PDC Oracle Software

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  Following up customers on a daily basis for EMI collection

 Reminder calls to the clients who does not have cheque to pay the EMI.

 Advanced calls to the clients who failed to pay within their EMI date.

 Handling customer calls and cheque return issues

 Ensuring cheque collection within the specific time limit

 Cheque entry to the PDC software

 Updating customer's profile ,address and contact number

 Maintaining the files, accounts and portfolio of the clients

 Calling the potential clients and telling them the update

 Providing customer support

Therefore I was assigned mostly to perform these basic and regular activities as an intern. At the
beginning before passing on the tasks to me my colleagues explained and showed me practically
how to do the task. Then gradually I learned how to perform the tasks more effectively and
efficiently. Whenever I faced difficulties and problems while performing my appointed task I
got a huge support from my supervisor, colleagues and the other co-interns.

2.7.2 Observations during internship

The working environment of IDLC is excellent and friendly. They treat interns as an employee.
They leave the work decision of interns on themselves. They did not put extra work loads or
pressure to the interns. Advisor assign few responsibilities and regular work which make inters
more responsible and dedicate toward their work. They were really helpful when I was making
this project.

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 CHAPTER 03:
Project Part

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3.1 Non Bank Financial Institutions in Bangladesh
Non-Bank Financial Institutions (NBFIs) contributes to the economic development of the
country as well as to the deepening of the country‟s financial system as it plays a significant role
in meeting the diverse financial needs of various sectors of an economy. According to Goldsmith
(1969), financial development in a country starts with the development of banking institutions .
NBFIs has become prominent alongside the banking sector. Both can play noteworthy roles in
influencing and mobilizing savings for investment. However, they are also complementary to
each other as each can develop its own niche, and thus may venture into an area where the other
may not, which ultimately strengthens the financial mobility of both.

There are different types of non-bank financial institutions namely insurance companies, finance
companies, investment banks and those dealing with pension and mutual funds, though financial
modernization is smearing the distinction between different organizations. In some countries
both banking and non-banking financial service packages have been adopted by financial
institutions to meet the changing requirements of the regulars. In the Bangladesh context, NBFIs
are defined by those institutions that are licensed and controlled by the Financial Institutions Act
of 1993 (FIA ‟93). NBFIs offer services for industry, commerce, agriculture, housing and real
estate, carry on underwriting or acquisition business or the investment and re-investment in
capital market; carry on the business of hire purchase transactions including leasing of
machinery or equipment, and use their capital to invest in companies.

The significance of NBFIs can be emphasized from the formation of the financial structure. Due
to the structural restrictions and rigidity of different regulations, banks could not spread out their
operations in all anticipated areas and were confined to a comparatively restricted sphere of
financial services and they could not widen their operational prospect significantly by offering
latest and innovative financial products. These drawbacks led to the materialization of NBFIs for
supporting the growth of industrialization and economic expansion in Bangladesh.

3.2 IDLC as an NBFIs

IDLC Finance Limited was in the beginning started with Lease Financing as their core product.
At present IDLC Finance Ltd has turned out to be the largest multi-product Non-Bank

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Financial Institution of Bangladesh, with about equal focus in Corporate, Retail and SME
sectors. furthermore , IDLC has a considerable existence in the Capital Markets. Their merchant
banking arm, IDLC Investments Limited is a premier brand for investment banking in the
country. Their stock brokerage arm, IDLC Securities Limited is also amongst the top five
brokers in the country .IDLC continues to play a pioneering role in initiating and launching
a various range of financial mechanisms and services suiting ever-changing necessities of its
fast-growing clients. To make certain the best quality of service to their clients at all times, they
are constantly escalating their existence in the financial sector.

3.3 The reason behind preferring IDLC (NBFIs) over Bank

The major service IDLC offers is fast communication with clients as it does not accept cash
deposits but provides all financial services except bank accounts. As a result bank has to deal
with the issues with deposit ,cheques, pay-orders or demand drafts, foreign exchange financing
etc-major drawbacks for which they cannot communicate as fast as IDLC with the clients.
Moreover, IDLC can sanction loan within 1 days whereas client has to wait for 10 to 15 days for
sanctioning loan in a Bank.
Furthermore, Bank has different rules and limitations for financing loan to the customer for
example- for car loan, a bank can't offer more than 30,00,000 BDT in Bank. However IDLC can
offer way more than 30,00,000 BDT to the clients according to their capability.
Another facilities of IDLC is that it always offers higher interest rate for FDR than Bank since it
has higher cost of funds as a result they provides higher interest rate to the customer.
Generally these are the main reason why a customer should choose IDLC .

3.4 Portfolio Status of Consumer Division

Consumer division is one of the key drivers of sustainability in IDLC Finance Limited. The
division have a high recall for its superior service standards, high levels of intelligibility,
committed sales force and robust customer experience. The Consumer division offers term
deposit products to accommodate to the needs of various institutions as well as individuals to its
targeted customer segments. This division enjoys a proven track record in Bangladesh‟s
consumer finance industry. With the constant and focused efforts the division possesses a

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significant market-share in home loans and car loans businesses due to its sound business
strategy, quicker loan processing time and other exclusive selling schemes. The division looks
forward to widen its geographical coverage to venture into other prospective territory in the
coming years.

Consumer Loan portfolio

Consumer Loan Portfolio

2011 2012 2013 2014 2015

20,633.00
Taka in Million

17,519.00

12,950.00
8,428.00 9,851.00

2011 2012 2013 2014 2015

Figure 10: Year Wise Customer Loan Portfolio

Year 2011 2012 2013 2014 2015

Taka in Million 8,428.00 9,851.00 12,950.00 17,519.00 20,633.00

Growth in Percentage 16.88 31.46 35.28 17.77

From the above graph we can see IDLC Finance Limited is in a constructive state in case of
consumer loan portfolio.

The growth in percentage are calculated by subtracting the amount of previous years from the
present year and then dividing the subtraction by the amount of previous year .

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Growth in percentage = (Pn - Po) / Po

In 2011, the portfolio was of 8,428 million taka. In next year it reached to 9,851 million taka.
The growth percentage was 16.88. From 2013 to 2015 the portfolio amount was chronologically
12,950 million, 17,519 million and 20,633 million taka. So, there was always a flow of
escalation in percentage of consumer loan portfolio up to 2014 but it decreases considerably in
2015.The reasons behind this are the discretion of authority to sanction loans to the trustworthy
clients for avoiding bad loan and in addition the division has reached at their maturity level in
PLC cycle.

Consumer Loan Disbursements

Consumer Loan Disbursements

2011 2012 2013 2014 2015

8,587.00 8,382.00
Taka in Million

6,258.00

4,201.00
2,867.00

2011 2012 2013 2014 2015

Figure 11: Year Wise Customer Loan Disbursments

Year 2011 2012 2013 2014 2015

Taka in Million 2,867.00 4,201.00 6,258.00 8,587.00 8,382.00

Growth in Percentage 46.53 48.96 37.22 (2.39)

This graph explains the new loan disbursements of IDLC Finance Limited from 2011 to 2015. In
2011, the new loan disbursement amount was 2,867 million taka. On the next year, the loan
disbursements reached to 4,201 million taka with 46.53% growth .In 2013, the amount was

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6,258 million taka and the growth rate was 48.96%. On the following year, the new loan
disbursements was even higher and the amount was 8,587 million taka. And on 2015, the new
loan disbursements was 8,382 million taka which was slightly lower than previous year. In the
final year the growth was reduced by 2.39%. In a nutshell, IDLC Finance Limited is follwing
new tactics of controlling the NPL ratio to a certain level.

Number of Loan customers

Number of Loan Customers of Consumer

Division
2011 2012 2013 2014 2015
Customers in number

7,402.00 7,803.00

6,013.00
5,169.00

3,525.00

2011 2012 2013 2014 2015

Figure 12: Year Wise Number of Customer

Year 2011 2012 2013 2014 2015

Customers in number 3,525.00 5,169.00 6,013.00 7,402.00 7,803.00

Growth in Percentage 46.64 16.33 23.10 5.42

This graph explicates the number of loan customers of consumer division. As IDLC Finance
Limited has a growing consumer loan portfolio, so correspondingly the corporation has a
growing number of loan customers for last 5 years. The loan customers‟ number was 3,525 in
2011. During 2012 it reached to 5,169. In next year the number was 6,013. In 2014, the number

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again increased to 7,402 and in final year 7,803. Though in 2012 the percentage growth was
46.64%. But in 2015, the percentage was only 5.42%.
It demonstrates that the company is stirring towards its maturity. That‟s why the growth rate has
become slow. IDLC does not want to finance the customer only to increase the loan because it
may increase the NPL as well which is dire for business. For this reason they have to move
slowly in terms of customer number.

3.4.1 Number of Home loan

NUMBER OF HOME LOAN

2015 2068

2014 2083

2013 1519

2012 1053

2011 1024

0 500 1000 1500 2000 2500

Figure 13: Number of Home loan in Last Five Year

In this figure, we can see that number of real estate financed is increasing rapidly from 2013 and
2014 but slightly decreased in 2015.

IDLC came up with new approach such as increase man power, no hidden cost and quick
services to boost up the number of home loan.

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3.4.2 Number of Car loan

NUMBER OF CARS LOAN

2015 766

2014 680

2013 327

2012 93

2011 124

0 100 200 300 400 500 600 700 800 900

Figure 14: Number of Car loan in Last Five Years

During 2011 to 2012 cars financed were not that much admirable. The growth of car loan
financing started to boost up in 2013. In 2015 it increased to almost double. This means IDLC
not only focused on home loan, they are also concentrating every sector. As a result, they
captured a huge market share in 2015.

3.4.3 Number of Personal loan

NUMBER OF PERSONAL LOAN FINANCED

2015 120

2014 147

2013 158

2012 600

2011 255

0 100 200 300 400 500 600 700

Figure 15: Number of Personal Loan in Last Five Years

In this illustration, we can notice that the number of Personal Loan financed is decreasing in
2013 and onwards.

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The main reason is that IDLC stopped financing the personal loan from 2014 because of the high
risk as the loan is only financed based on personal guarantor. However, in 2016 IDLC again
started to offer the services and hopefully by 2016 it will increase considerably as well.

3.5 Special Asset Management (Consumer Division)

Special asset management (SAM) of IDLC finance limited works as a wing of credit risk
management. SAM is in charge for all kinds of collection activity. The key objective of SAM is
to keep overdue situation at the possible lowest point so that providing for dues can be
minimized.
Therefore, a well-built Law and Recovery Team are assigned in order to obtain the following
task properly-
 Monitoring the performance of the loans & advances
 Identifying early signs of delinquencies in portfolio
 Taking corrective measures to mitigate risks
 Improving loan quality
 Ensuring recovery of loans in a timely manner including legal actions.

3.5.1 Targets of Special Asset Management Department

1. Collection of Overdue Rentals
2. Reduction of Non- Performing Loans (NPL)
3. Reduction of Infection ratio
4. Bad/Loss Provision Management- Incremental Provision Control . (Limited, IDLC
Finance, 2015)

3.6 Collection procedure and Operation Strategy of SAM

3.6.1 Collection Process OF SAM
Special Asset Management Department of IDLC mostly deals with the collection of debt. Its
purpose is to exploit profitability and support the business expansion and by sustaining stability
between risk and reward over the life-cycle of services and portfolios of IDLC. In SAM the
member of staffs are working together as team which is the main hold up of SAM. They support
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the team members with the solution of professional troubles and conveys the optimistic prospect
concerning the team's and company's performance. There are different teams assigned according
to different branches and assets. For instance, home and personal loan are handled by four team.
Specific branches are allocated to these four team and they need to monitor the performance of
loans of assigned branches. Car loan is completely dealt by another team and so on for the
other loans.

3.6.2 Regular Activities performed by SAM

 Following up (Overdue customer & exhausted Post Dated Installment cheque)
 Communication with the walk in customers to collect cash/cheque
 Providing collection related information to customers
 Issuing overdue letter/cheque exhausted letter/SMS
 Meeting & counseling with defaulter customer
 Updating any types of change related to customer like address ,contact no. etc.
 Resolving or reallocating inquiries or concerns arising from communication with clients
in focused approach
 Keep record in a file for residual cheque & hand over to Customer Services Dept.
 Writing correspondence with overdue customers
 Visiting the address of the overdue customers
 Reconciliation of accounts in Software.
 Notifying the customers about dishonored cheque, Late payment Interest / Dishonoring
Charge
 Collection & monitoring of overdue amount & accrued charges
 Reviewing sum unpaid outstanding, bearing in mind the significant information to
determine the execution to be taken
 Inter branch communication
 Serving legal notice/Final reminder/Termination letter to overdue customers.
 Process for filing Suit under the NI act in the Court of Law
 Attending the Court for legal correspondence
 Regular follow up & co-ordination with lawyer regarding litigated accounts
 Invitation for auction

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  Any activities assigned by seniors personnel

3.6.3 Operation Strategies of SAM

The intention of SAM is to obtain payments at the appointed time to diminish the risk and write-
off expenses as well as maintaining the customer's concern through providing a standardized
service.

First of all, the SAM team check and remind every customer on a daily basis whose EMI date is
approaching. Then they supervise the loan account who could not pay within their allocated time.
Those loan account are listed as Overdue clients.

Therefore for approaching the clients and to collect the Overdue amount the team need to go
through the following steps accordingly in general-
 SMS and Email
 Call
 Call and Soft Reminder
 Visiting and meeting with them
 Hard letter issuance
 legal notice
 case filing
 Repossession (Auction)

Call,SMS and Email is normally sent to the regular customer on regular basis before their EMI
date as a reminder to pay the monthly installment. SAM request the customers about cheque
exhaust. Customers send their cheque to any branch or directly at SAM .

The collection process of SAM initiates when the client failed to pay one contractual payment
which is termed Delinquent Accounts.
When accounts are delinquent, collection procedures are structured to make conform the
accounts by making certain that the wellbeing of IDLC are confined.

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For the customer who are in overdue lists termed as Non Performing Loan ,alternative strategy
called Recovery Action Plans are followed .

3.6.4 Recovery action plans by SAM

Special asset management takes various plan for fulfill departmental target. This action plans
vary depending on the duration of overdue , investment classification, client status and also
overdue status.

(I) Overdue One to Three months

 Immediate contact in the next working day after the 1st default installment to remind
about overdue. This type of clients normally do not have previous dues
 Try to get explicit commitment from client. Committed date should not exceed seven
days.
 In case of no response from client within seven days, need to call the client again in order
to discover reasons for holdup and get hold of a further specific date for the overdue
payment.
 In case of failure to get in touch with client through phone calls within seven days from
the due date of payment, need to contact with personal guarantor to inform about
customer overdue and need to request as well to take any types of initiative for payment.
 later than if client do not respond then reminder letter will be sent addressing customer
requesting to come in branch for the solution of overdue payment.

In this phase customers are more sensitive. Therefore SAM offers special concern to these
customers so that they do not move to another month as overdue client.

(II) Overdue Four to Five months

 Try to get specific payment date through phone calls, e-mails.

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  If customer do not respond in phone calls and e-mail, then need visit to the customer's
office or home.
 Try to get written commitments for overdue payment.
 Send reminder letters within three working days of default of fourth installment.
 After sending reminder letter send CC letter to the customer for overdue payment.
 Then if customer fail to fulfill the requirement legal notice will be sent.
 If these step doesn‟t work at all ,the collection team tries to bring the overdue client to
IDLC office for counseling over solution of default situation.
 If necessary, arrange meetings between higher management of IDLC and the owners/
directors, etc. of the chronic organizations for the final solutions .

(III) Overdue: Above Five Months

 Assessing the security status of the account and based on the nature of the default,
undertake following measures:
• Sending final reminder letter which allows the defaulting customer time to pay the
overdue within 15 days containing various measures that would be taken, if deadlines for
payment expire, as per the law of the land or regulatory authorities.
 In case of no progress, sending legal notices through lawyers after receipt of senior
management‟s approval.
 Based on the nature of the default, may need to appoint Recovery/Repossession
Agents with management approval.

 If no improvement takes place after taking the above actions, the following strategy will
be initiated:
1. Legal Actions as per the merit of the security of the defaulting clients. a. File suit
under the negotiable Instrument (NI) Act.
2. File suit under Artha Rin Aine (ARA) or Bankruptcy Act.
3. Circulating Names of defaulting borrowers and relevant persons and organizations
among banks and financial institutions of Bangladesh.

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  At any point of Overdue over 3 months, the following actions may be undertaken
under subjective judgment.
1. Rescheduling the account
2. Transfer accounts to block account
3. Termination of the account- as initial step to filing ARA suit or to pressurize
client.

3.7 Non performing loan (NPL) management

IDLC measures its loan portfolio in terms of payment arrears. The impairment levels on the
loans and advances are monitored regularly.

As per FID Circular No.3

1. Loan/Lease, classified as bad/loss and with 100% provision, can only be written-off.
2. Approval from the Board of Directors has to be taken before write-off.
3. The financial institutions should constantly try to recover the loan/lease written-off
amount. If legal action has not been taken against the client, legal charges should be
placed before the write off.
4. To expedite the legal settlement or collection of the due amount, third party agents
can be appointed by the financial institutions.
5. A separate ledger should be maintained for the written off loans/leases and the
accumulated written off value should be disclosed separately under the heading of
“notes to the account” in the annual report/balance sheet of the financial institutions.
6. Even if the loan/lease has been written off, the client should be classified as defaulter
and reported to CIB accordingly. Detail records for all such write off accounts are
meticulously maintained and followed up. (Limited, IDLC Finance, 2015)

3.7.1 NPL Trend and forecasting

Nonperforming loan amount from 2011 to 2015 was collected from the annual report of IDLC.
Then the following graph was plotted to see the trend.

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 NPL Trend in consumer Division

204.5
250

200
Taka in million

150

55 62 51.7
100
31.5
50

0
2011 2012 2013 2014 2015

Figure 16: Year wise NPL

In the diagram we can see that number of NPL increases from 2011 to 2013 except in 2014 it
decreases comparing to the last year. In 2015 NPL was really high which is almost triple of 2014
NPL.

3.7.2 Trend Analysis for NPL growth rate

A trend analysis is a feature of methodological analysis to facilitate the prediction of the future
situation based on previous records. Trend analysis is based on the idea that what has happened
in the past gives an idea of what may happen in the future.

To analyze the trend ,Microsoft Excel sheet was used. Non Performing Loan in BDT and in
percentage was collected from the annual report of IDLC Finance Limited. Trend forecast was
solved by the multiplication of slope and the year and adding the intercept value. Here slope and
intercept was found by using Excel trend line option in the graph .

Here two trend forecast is done for the better understanding the trend. One is in the total amount
of BDT and another one is in terms of NPL ratio. For more trouble-free estimation the years are
mentioned by using a number from 1 to 6 rather than using the whole digit of the year.

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 NPL (BDT)
250

200 y = 34.27x - 21.87

150

NPL (BDT)
Linear (NPL (BDT))
100

50

0
0 2 4 6 8

Figure 17: Year wise NPL Trend forecast in (BDT)

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 NPL Ratio (%)
3.5

3 y = 0.141x + 1.801

2.5

2
NPL Ratio (%)
1.5 Linear (NPL Ratio (%))

0.5

0
0 2 4 6 8 10

Figure 18: Year wise NPL Trend forecast in (BDT)

Here we can see that in year 2016,the Non performing loan will increase to 227.49 million BDT
and the percentage of NPL ratio will be 2.65% which is lower than 2015.

The Non Performing Loan in percentage has not been increased partially because it is
measured in terms of total customer figure. That is why as the loan number is growing and the
amount of NPL is growing too, the forecast ratio will not increase that much comparing to the
forecast NPL in BDT.
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3.7.3 Findings
By observing the trend forecast, it can be said that the measures SAM follows are efficient
except it can be more effective if some issues can be dealt more cautiously.

The reasons which were mentioned in IDLC annual report 2015 for increasing of NPL are the
political instability and few accounts turning bad which are really immense problem for financial
industry as a whole.
Beside these, I have found some other rationale behind the Non Performing Loan :-

One of the reason of NPL is the increasing number of customer in consumer division. As the
number is increasing the number of NPL increases as well.

Another reason is the high employee turnover rate in IDLC during the last two years. The
employees compensation are not satisfactory especially for entry level and mid level recruits. As
a result IDLC looses talented and experienced as well as well trained employee. Moreover the
change of the management committee can also be a reason for NPL .

Fluctuation of interest rate is also a setback. When the interest rate increases IDLC need to
increase the rate higher than the market rate to maintain the profitability as the cost of fund is
higher at IDLC .Therefore some of the customer become displeased and try to ignore the regular
payment .

The fixed interest rate of IDLC is also another explanation of NPL growth. At present the
interest rate is way more lower at market than IDLC. Therefore the client become dissatisfied
though they willingly took the finance at the rate. However IDLC is now converting those loans
rate by approving submission of request.

Some customer's unwillingness to pay is also a reason for NPL. Family problem, bad investment
and business, poor business practices ,social unrest ,unanticipated tragedy or loss in business etc
effects customer to pay on a regular basis.

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 Recommendations
As mentioned in Annual Report of IDLC 2015,the stated target is to bring the overall NPL under
3% in 2016 and below even as they go forward. It will be beneficial if some of the collection
and operation strategies can be change by bringing some alternative tactics for the default client.
Critical steps can be recommended based on the findings of the report that have explored a few
areas to enable the services to a greater efficiency level and hence smoothing the operations.

 Separate SAM team should be appointed at branch level or centralized process. Due to
the deficiency of such personnel, regular deposit statement from the branches are often
arrived not on time .
 PDC Management authorization should be centralized in all branches. Like the inside the
Dhaka city branches like Dhanmondi , Gulshan, Uttara, Savar, Narayangonj, Norsindhi
etc and documentation should be also preserved branch wise.
 Due to the growing number of customers, the system appears to be responding at a higher
output time which lead to lower efficiency level and constraint in time management.
Therefore, corrective measures should be taken to speed up the system.
 Close concentration should be given by SAM immediately not only after the overdue of
one month but also whenever any indiscretion of payment is observed.
 A monitoring team should be assigned apart from SAM to keep an eye on the activity of
customer after the loan disbursement to know whether the disbursed money is used and
utilized for the proper and specific areas or not.
 The appraisal should be more rational and transparent. Credit rating system should be
developed in order to emphasize the strength and weakness of clients. As a result it will
be lot easier to put together any lending decision.
 An attractive compensation plans and motivational packages should be offered to the
employee so that the turnover rate can be reduced.
 Arrange quality training programs for the employee of SAM on a regular basis to enrich
their up to date acquaintance ,negotiation power, persuasive ability, motivational control
and to encourage them as well.

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  Proper client selection , reasonable interest rate for the clients who are in a bad position ,
arranging workshop for the client about the ethical aspects.
 Customer's past behavior regarding loan payment regularity should be scrutinized
carefully before the loan sanctions.
 Educational program should be provided to make customers understand the requirements
and the policy as well as the regulations while taking loans and during the period of
payment .It will minimize the rate of misunderstandings and errors along with
dissatisfactions of customer.

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 Conclusion
Being the leading NBFI of Bangladesh IDLC Finance Limited is setting extraordinary footprints
in the economic development of the country. Among many other factors the increasing loan
applications from consumer client segment is also contributing in this growth that is being
experienced by IDLC in every year.
Although IDLC has adopted so many rules and policy standards of loan classification and
provisioning, the NPL ratio is still insignificantly higher compare to the industry average. Therefore
management of NPLs must be multi-pronged, with different tactics followed at the different phases
through which a credit facility passes. Measures should be in place for both prevention and
resolution. With regard to preventive actions, importance needs to be placed on credit screening, loan
surveillance and loan review functionaries. Resolution measures must be accompanied by legal
actions.
However, IDLC are actively pursuing for their funds from these defaults and are confident of
reducing the NPL to a much lower level by the end of 2016.It can be said that hopefully they will
reduce their NPL level below 3% within 2016 by maintaining their growth. By improving debt
recovery environment and reducing NPL IDLC will keep their outstanding position constant in
the financial industry. Highly trained, qualified and proficient employees of SAM will ensure
the quick and proper way to fulfill the level of NPL target of IDLC in this matter.

IDLC Finance Limited is doing a great job in the financial industry of Bangladesh. IDLC is a
very good place for a Finance, Accounting & Economics graduate to do his/her intern. One will
get precious opportunity to real life issues dealt by a financial institution by doing internship
here. Also this provides a very good networking opportunity.

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References
o Assignment Point. (n.d.). Retrieved November 2016, from www.assignmentpoint.com:
http://www.assignmentpoint.com/business/report-on-performance-and-growth-of-
financial-institution-industry-of-bangladesh.html

o Bangladesh Bank. (2007). CREDIT RISK GRADING MANUAL -NBFI.

o Bangladesh Bank. (2013). Guidelines on Products & Services of Financial Instituitions of

Bangladesh. Department of Financial Institutions & Markets .

o Bangladesh Bank. (2016). Performance, Regulation and Supervision of NBFIs.

o IDLC Finance Limited. (n.d.). About Us: IDLC Finace Limited. Retrieved December
2016, from idlc.com: http://idlc.com/

o IDLC Finance Limited. (2011-2015). Annual Report.

o Sharmin, B. (2012). Analysis of collection procedure of Retail Loan. Dhaka: BRAC

University.

o The Global Economy. (n.d.). Retrieved December 2016, from

www.theglobaleconomy.com:
http://www.theglobaleconomy.com/Bangladesh/Nonperforming_loans/

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