What are the steps in credit / loan application process?
The credit/loan application process follows a structured sequence from the first discussion between the bank and the customer to final disbursement and monitoring.
The key steps are:
Initial Discussion (Origination)
The Relationship Manager (RM) and the customer discuss credit facilities offered by the bank and required by the customer. The RM ensures the proposed credit is from the bank’s permitted business segment and for an allowable credit facility type.
Submission of Loan Application
The customer applies for credit in a prescribed format. The application includes all basic information about the borrower, the purpose of the loan, the amount required, proposed security, and business details.
Scrutiny and Information Collection
The RM scrutinizes the submitted application and collects all required documents — including the CIB report from Bangladesh Bank, financial statements, trade licenses, and registration documents.
Credit Appraisal
The RM conducts a thorough appraisal covering managerial, organizational, marketing, technical, financial, socio-economic, and environmental aspects of the borrower and the proposed project.
ICRRS Completion
The borrower is graded using the Internal Credit Risk Rating System (ICRRS). The rating must be Excellent or Good for normal lending. For large loans, an External Credit Assessment Institution (ECAI) rating may also be obtained.
Preparation of Credit Proposal
The RM prepares a comprehensive credit proposal summarizing all findings, risk assessment, loan structure, security details, and recommendations for approval.
Referral to Risk Management Unit (RMU)
The Head of CRM forwards the proposal to the RMU for an independent risk observation before final approval.
Approval by Competent Authority
The proposal is sent to the appropriate approval authority based on the loan amount. Up to 15% of capital — CRM level. Up to 25% of capital — CEO/MD. Above 25% — Executive Committee or Board.
Issue of Sanction / Offer Letter
Upon approval, the Credit Administration Department (CAD) issues a sanction/offer letter to the customer through the RM. The customer must accept the terms and conditions.
Documentation
The RM completes the Loan Documentation Check List (LDCL). CAD verifies that all security documentation is correct, legally enforceable, and properly executed.
Disbursement
CAD disburses the loan only after all terms and conditions of approval are met, all documentation is in place, and insurance coverage on collateral is confirmed.
Monitoring and Follow-up
After disbursement, the RM regularly follows up. Early Alert Accounts are identified and reported to CRM. The account is classified and provisioned as per Bangladesh Bank guidelines.
Recovery
If a loan becomes non-performing, the Recovery Unit (RU) takes over. It determines the recovery strategy and pursues all available options to maximize recovery.
