University of Management and Technology
Course Outline
Course Code: BN – 630
Course Title: Credit Management
Program
MBA
Credit Hours
03
Duration
15 weeks (30 sessions)
Prerequisites
Resource Person
Counseling Timing
(Room# 3N - 09)
Contact
Chairman/Director signature………………………………….
Dean’s signature……………………………
Course Outline
Date………………………………………….
Page 1
Learning Objective:
This course would focus on the following objectives:
1.
2.
3.
4.
To develop practical, analytical and managerial skills on the multifold aspects of the
banking operations and credit management.
To open the doors for enterprising careers in the fields of banking, commerce & public
sector organizations.
To serve as catalyst in career development of those participants who are already
serving in different organizations.
To develop technical and professional proficiency of the participants for qualifying
banking examinations held by local and international institutes of banking.
Learning Methodology:
The resource person shall explain and discuss a topic in accordance with course outline &
students shall be asked to solve & discuss various exercises, problems & cases based on
those discussions. Guidance in this respect will be provided by the instructor in and outside
the class during counseling hours.
Participants’ Responsibility
Academic integrity is a major part of the foundation of any institution of higher learning.
Plagiarism and cheating are among the most common form of academic dishonesty.
“Plagiarism” includes all offences in which the work of another person is claimed, even
unintentionally, to be one’s own either by copying, purchasing or borrowing such work or
failure to give credit for its source. Participants are expected to achieve high standards in
their expressions.
Participants are required to thoroughly study the topic to be discussed in the next session
apart from completing and handing over their assignments.
Grading Policy
Grades are awarded strictly in accordance with the policy of the university.
Examination
Examinations are conducted in accordance with the policy guidelines & date sheet issued
by the office of the Controller of examinations.
Course Outline
Page 2
Grade Evaluation Criteria
Following is the criteria for the distribution of marks to evaluate final grade in a semester.
Marks Evaluation
Marks in percentage
Quizzes /Assignments
15
Group Project / Case Study
25
Mid Term
25
Final exam
35
Total
100
Recommended Text Books:
Money & Capital Markets-9e, Peter S. Rose
Reference Books:
1. Financial Markets and Institutions-5e, Peter Howells, Kieth bain
2. Introduction to the Financial System, Chris Terry, Tiffany Hutcheson, Ben Hunt
3. Financial Markets & Institutions-5e, Mishkin, Eakins
4. Foundation of Financial Markets Institutions-3e, Frank J. Fabozzi, Franco Modigliani,
Course Material
 Quarterly journals from Institute of Bankers of Pakistan.
 SBP’s Latest Prudential Regulations
 Handouts
 Publications/Journals
Textbooks & Supplies:
1. PR of SBP for commercial and SME lending
2. Sspecially designed courseware.
Supplementary Material:
1. Relevant SBP circulars / handouts
Course Outline
Page 3
Calendar of Course contents to be covered during semester
Course Code: BN - 630
Session
1
Course Title: Credit Management
Topic
Banking Basics
Overview of Course - Credit Management
Core Banking products
Liability
Assets
Process Flow of Credit Management
Marketing of Credit Customer
Processing of Credit Proposal
Approval of Credit Proposal
Pre and Post Sanction Formalities
Post Disbursement Monitoring
2
Classification of Credit Customer ( as per PR)
Corporate Borrowers
SME Borrower
Retail /Consumer Borrower
Agriculture Borrower
Prudential Regulation – PR
Corporate
SME
3
Prudential Regulation – PR
Corporate
SME
4
Course Outline
Type of Facilities
Funded
Short Term / Working Capital Financing
Running Finance (hypothecation)
Cash Finance (Pledge)
Trade Related Finance
SBP Refinance
Pre-shipment FAPC
Post- Shipment FAFB
Finance Against Trust Receipt
Long Term
Term Finance
Project Finance
SBP Refinance (LTF)
Non Funded
Letter of Guarantee (LG)
Page 4
Bid Bond
Performance Bond
Advance Payment Guarantee
Letter of Credit (LC)
Sight LC
Usance LC
5
6
Category of Loans with respect to Security
Secured
Un-Secured /Clean
Types of Security
Cash / Liquid Security
Tangible Security
Categories of Securities
Primary Security
Stocks
Receivables
Book debts
Charge Current Assets
Secondary Security
Mortgage of property
Charge on Machinery
Pledge of Stocks
What is Mortgage?
Definition of mortgage ( as per TPA)
Types of Mortgage
Equitable Mortgage
Registered Mortgage
Regulations and Practices
Relevant SBP laws for lending including: lending limits, exposure calculation,
disclosure and Reporting requirements
Prevalent market practices and bank policies with respect to lending products
7
Pricing Benchmark
Structuring floating mark-up rates and their impact during change of interest rates
The basis for floating mark-up rates using:
Karachi Inter-bank Offer Rates (KIBOR),
SBP Discount Rate
Bank’s spread over cost of deposits relating to customer and transaction risks
Methods and frequency of mark-up recovery and their impact on income
recognition
Course Outline
Page 5
8
Credit Risk Assessment and Management
a. Overview
• Fundamental concept of Risk Management
• Risk and the economic environment
• Corporate governance and organizational structure
• External reporting
b. Sources of lending risk
• Obligor Risk
• Obligor Business and industry risk – cycles, price trends of raw materials, price
trends of competition products
• Transaction failure risk
• Other risks – political, economic, market, liquidity, foreign exchange, interest rate risk
c. Risk Assessment
• Financial analysis
• Market check
• Market research
• Compliance with regulation requirement
• Customer Integrity and capability
MID TERM
9
10
Course Outline
d. Risk Management
• Credit Policy
• Delinquency portfolio – trends and control measures
• Collection and Recovery – strategies and methods
e. Types of collateral
• Stated and implied lien over customer’s assets
• Hypothecation
• Assignment of receivables
• Pledge of paper securities
• Pledge of goods
• Mortgage of immovable assets
Documentation and Collateral
a. Different types of financing agreements
• Project financing
• Account receivable financing
• Lease financing
b. Types of collateral documentation
• Hypothecation agreement
• Lien agreement
• Pledge agreement
c. Safe-keeping of borrower/customer documentation
• In-house arrangements and its modus operandi
• Ex-house arrangements and its modus operandi
• Arrangements for storage of documents and the system for recording
• Procedures to be followed for depositing and retrieving documents
Page 6
11
12
Course Outline
d. Bank’s risk under various types of collateral
e. Monitoring of charge/margin
• Appointment and role of Muccudums
• Obligations of the custodial services under the arrangement
• Monitoring Guarantees- issuer’s status, guarantee validity, conditions for
claims
• Monitoring of Insurance Policies- issuer’s status, policy validity, conditions for
claims
• Monitoring of Immovable Assets
• Monitoring of stock reports and valuation
• Proper system and credible sources for monitoring prices of financed assets
and collateral
Management of Credit
a. Facility account monitoring
• Frequency of peak/low facility utilization, swing in account balances
• Frequency of irregularities in facility accounts
• Difficulties in operating within present limits
• Meeting facility turnover requirement and quantum of business booked
b. Facility monitoring systems
• Significance and use of reports on activity in facility account
• Due date diaries for retrieval of due amounts or settlement of facilities
Past Due Accounts
a. Classification – Non Performing Loan (NPL)
• Basis for classification/classification triggers
• Action steps based on classification level
b. Categories of NPLs
Substandard
Doubtful
Loss
Past-due account management
• Activating remedial action
• Customer contact modes depending on severity of failure in meeting
commitments
• Determining net exposure and status of financed assets and collateral
• Reporting defaults for in-house remedial action i.e. fulfillment of any interbank commitments that cannot be met any longer from borrower’s repayment
c. Rescheduling and restructuring of borrower accounts
d. Loan loss provisioning
Page 7
13 - 15
Course Outline
CLP Preparation and Processing
Documents in CLP
TAT Sheet
Comment Sheet
CA Face
Basic Information report
Credit Memo
BBFS
eCIB report
Financial Spread
Valuation report
Call report
Search Report
Visit report
Risk Rating score Card
Yield
Project
Page 8