Comprehensive Product Briefing

United Commercial Bank Limited

SME Business
 USIL > The Key Product Features

SL Items Features
1 Loan Type USIL is a Term Loan to be repaid through EMI payments
2 Loan Range Up to BDT 1 crore ; (Enterprise with no previous loan experience Max BDT 5 lacs)
With previous business loan experience: Above BDT 25 lac – max 20% of
the existing limit liability (Only business liability)
<Max. loan range is subject to repayment track record with Existing
Bank>
Bundle with Business Credit Card with a limit of 5% of approved USIL Limit
3 Max. Tenor 60 Months

4 Interest Rate 17% (To be revised by ALCO time to time)

5 Processing Fee Nil as per BB directives
6 Purpose of the  Provide funds for business expansion
loan  Long Term Working Capital Needs
 Business Premises Renovation
 Machinery Purchase
 Office Equipment Purchase

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USIL Target Market > Who are the customers?

Entity wise:
Proprietorships, Partnerships and Private Ltd Companies
Operating in the following industry segments

Trading > Examples Service > Examples Manufacturing >

 Supermarket /Dept Store/ Gift Shop  Travel Agent Examples
 Dealer of Paints  Auto Servicing Center  Steel Re rolling
 Distributor/Dealer/Agent of FMCG  Restaurant and Fast food owner  RMG Backward Linkage
 Supplier  Printing & Publishing  Cable/Hardware items
 Retailers/Shops:  Courier Service  Shoes/Hosiery
> Readymade garments  Diagnostic Center  Confectionary/Food Items
> Sari  Security Service Provider  Plastic Goods
> Shoe  Interior Designer  Electronics Goods
> Car
> Books & Stationary

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 USIL Target Market > Who are the customers?

Criterion 1
Criterion 3
Value of Fixed Assets Criterion 2
Annual Sales
Enterprise Business Segment excluding Land & Working Manpower
Turnover
Building (Head count)
(in Crore taka)
(in Crore taka)

Manufacturing or
Cottage < 0.10 </= 15 N/A
Servicing
Manufacturing 0.10 – 0.75 16 - 30 N/A
Micro Servicing < 0.10 </= 15 N/A
Trading < 0.10 </= 15 </= 1.00
Manufacturing 0.75 – 15.00 32 – 120 N/A
Small Servicing 0.10 – 2.00 16 - 50 N/A
Trading* 0.10 – 2.00 16 - 50 >1.00 – 12.00

Manufacturing >15.00 – 50.00 121 – 300* N/A

Medium
Servicing 2.00 – 30.00 51 - 120 N/A

* In-case of Readymade Garments & other Labor Concentrated Industries working manpower (head count) maximum 1000 person will
also consider as Medium Enterprise.

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 USIL Customer Selection Criterion
SL Items Criteria
1 Industry Segment/ All industries, except restricted and exclusion sectors as
Nature of Business defined by the UCB SME Credit and Country Policies.
Examples: Sea food industries, hospitals (excluding diagnostics centers),
senior politicians, schools, utilities and airlines, blade industries, cement industry, polythene
bureaucrats, industries (other than export oriented), entertainment industry (Music / film
distributor, cable operator), tourism industry, recruiting agents, Internet Service
technocrats,
Provider (ISP), cable TV operators, computer software / training center, export
defense personnel, oriented RMG, textile and directly linked industries (Excluding direct Knit
judges, armed exporters, dyes chemical importers, packaging and accessories, machinery
forces, law importers), leather, brick field, rent-a-car, and in addition beyond above
enforcing agencies businesses owned by Politically Exposed Persons [PEP] (including their family
members).

2 Business The minimum years of existence as well as operations of

Experience the business entity should be 3 years. (L2-2 years)
3 Maximum Turnover Unlimited
4 Minimum Turnover BDT 60 Lac annually
5 Minimum Income BDT 50,000/- only monthly
6 Customer Location Customers must be located (i.e. residence or office)
where UCB has a branch and collection capacity.
Continued ….
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 USIL Customer Selection Criterion
SL Items Criteria
7 Current Minimum years of operation in current office address 3 years.
Office However, for existing SME customers of UCB enjoying any type of facilities, this
criteria will not be applicable.
Address
8 Age of Minimum Age: 21 years
owner Maximum Age: 65 years
<at the time of
underwriting>

9 Customer Bio-metric mobile phone is required for Owner or major shareholders at

Contractibility the time of application.
10 Bank The customer must maintain a 12 month+ old Bank Account within the
Statement clearing zones where UCB has branch presence.
Conduct
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 Documentation requirement by significance
SL Items Criteria Documentation Req.
1 Industry Segment/ All industries, except restricted and 1. Valid Trade license
Nature of Business exclusion sectors as defined by the
UCB Credit and Country Policies.

2 Business Experience The minimum years of existence as 2. 3 years old Trade License
well as operations of the business
entity should be 3 years. (L2-2 OR 3 years Any government
years) document containing the
following,
Alternative documents
can be given, which will A – Name of the Business
be discussed in the
subsequent slides.
B – Owner’s Name
C – Nature of the Business
3 Maximum Turnover Un limited 3. Bank Statement
4 Minimum Turnover BDT 60 Lac annually 3. Bank Statement
5 Minimum Income BDT 50,000/- only monthly 3. Bank Statement
6 Customer Location Customers must be located where 1. Valid Trade license
UCB has a branch and collection
capacity.

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 Documentation requirement by significance
SL Items Criteria Documentation Req.
7 Current Minimum years of operation in current 1. Valid Trade license
Office office address 3 years. 2. 3 years old Trade License
Address
8 Age of Minimum Age: 25 years 4. Photo ID
Maximum Age: 60 years
owner
a) Copy of Passport, b)
<at the time of Driving License, c) Voter
underwriting>
ID card, d) Photographed
ID card from reputed
organization / institution, e)
Reference letters
9 Customer LAND phone/Post Paid PSTN (Public 5. Utility Bill <Telephone>
Contactibility Switched Telephone Network) is required in
both business premises and residence of the
proprietor or major shareholders at the time of
application.
10 Bank The customer must maintain a 12 month+ old 3. Bank Statement
Bank Account within the clearing zones
Statement where UCB has branch presence.
Conduct
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 Summary of documentation requirement
Documents Proprietorship Partnership Pvt. Ltd. Co.

1 Valid Trade License Y Y Y

2 3 Years Old Trade License Y Y Y
3 12 Month Bank Statement Y Y Y
4 Photo ID of the business owners Y Y Y
5 Utility Bill of the business Y Y Y
6 TIN Certificate Y* Y Y
7 Photograph of the owners Y Y Y
8 Partnership Deed & Registration N/A Y N/A
9 Memorandum & Article of
N/A N/A Y
Association, Form X and XII
10 Certificate of Incorporation N/A N/A Y
11 Board/Partnership Resolution N/A Y Y
12 All facility related offer letters Y Y Y
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Alternative documents for 3 years proof

1. VAT Certificate/Return along with three year old

A. Sanction letter of other bank under company name
OR
B. Bank statement in company name
2. Import Registration Certificate (IRC) / Export Registration
Certificate (ERC) along with copy of LC documents

Condition > The utility bill provided by the applicant

business MUST be in the name of the Proprietor’s
/Business name at the business address.

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 USIL Customer Categories

2 Customer Category
Based on EMI based loan repayment track record with UCB

New To Bank (NTB) 12 Month on Board (12MoB+)

Less than 12 Month OR “NO” repayment track record 12 Months or more repayment track record

2 Sub-categories

First Time Borrower Not First Time

(FTB) are defined as Borrower
no loan has been (NTB/NFTB) less than
found in CIB report or 12 month history with No sub
bank statement or UCB or have/had categories
customer declaration. repayment track record
Will only impact the with other banks and
limit of the USIL. FIs

IMPORTANT > ONLY incase of proprietorships, a 12 month repayment history of the

proprietor will be considered for categorizing the applicant proprietorship as a 12MoB+
customer.

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What is Maximum Unsecured Exposure (MUE)?
Unsecured Exposure/NAR is any UCB exposure (i.e. loan outstanding or O/S)
that is NOT secured by any asset (cash security, vehicles, machinery,
equipments and property).
Examples:
1. A 1000K SOD against FDR of 500K with O/S of 780K will have a NAR of (O/S 780K –
FDR 500K) = 280K
2. A 1000K SOD against FDR of 500K with O/S of 380K will have a NAR of (O/S 380K –
FDR 500K) = 0K or NIL, but NOT -120K
3. An Hire Purchase Loan of 700K will have no NAR as the full loan amount is secured by
the fixed asset’s market value.
4. A mortgage loan will not have any NAR as it is secured by a property having more value
than the loan.
5. Full outstanding of a USIL will be NAR as there is no security against the loan.
Please note that security of one loan cannot be tagged with another loan to calculate
NAR. NAR has to be calculated per product and then aggregated to arrive at Total
NAR/unsecured exposure.

As per USIL customer category

Total NAR/unsecured exposure across all products has to be = or <
MUE (Including proposed USIL NAR)

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 How much USIL will a customer get?

BDT 10K USIL amount will depend on 3 factors BDT 10000K


1
Customer Category
Already discussed MUE
2 3
Customer’s Debt
Service Capacity

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 How much USIL will a customer get?

BDT 10K IL amount will depend on 3 factors BDT 10000K


1
Customer Category
Already discussed MUE
2 3
Customer’s Debt
Service Capacity

Will be calculated
based on DBR (Debt
Burden Ratio)

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A typical business income model and relationship
with Debt Service Capacity (DSC) and DBR
Debt Service
From Capacity of
Business

DSC
the Business
Operation

Income
Company Sales Turnover

Expenses
= Less

Personal living
expenses of the
Expenses

From business owners

Less Business
Operation

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How do we use this model to assess income

Credit Turnover Application of DBR

from Bank in the income
Statements is
considered

DSC
business sales

Income
Company Sales Turnover

Expenses
= Less

Application of Industry Profit

Margin to arrive at the income
Expenses

from the business

Less Income Level-1 Level-2
Below BDT 300K 40% 45%
BDT 300K to 500K 50% 55%
BDT 500K and above 60% 65%

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 USIL income assessment model
A Basic Overview

SL Items +/- BDT Remark

1 Monthly Credit Turnover + XXXXX From bank statement
2 Monthly OD Interest - XXX Only incase of OD account
3 Net Credit Turnover = XXXXX
4 % Profit Margin % XX Prescribed industry profit margin
5 Income = XXXX As per income aggregation policy
6 % Applicable DBR % XX As per income
7 Debt Service Capacity = XXXX
8 All EMI liability - XXXX As per liability aggregation policy
9 USIL EMI Affordability = XXX Portion of income left to service additional
debts <Must also be supported by Average
Balance in case of deposit accounts>
10 USIL EMI K Factor / [Link] Against interest rate and tenor
11 Proposed USIL Amount = XXXX The result will be in K=000

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 USIL income assessment model
An example of a Grocery Shop in New Market

SL Items +/- BDT Remark

1 Monthly Credit Turnover + 30,00,000 From Sonali Bank OD statement
2 Monthly OD Interest - 62,500 OD Limit 5,000K @ 15%
3 Net Credit Turnover = 29,37,500
4 % Profit Margin % 5% Prescribed industry profit margin
5 Income = 146,875
Income Level-1 Level-2
6 % Applicable DBR % 40% Below BDT 300K 40% 45%
BDT 300K to 500K 50% 55%
BDT 500K and above 60% 65%

7 Debt Service Capacity = 58,750

8 All EMI liability - 20,000 Has a PL Installment of BDT 20,000/-
9 USIL EMI Affordability = 38,750 Portion of income left to service
additional debts <Must also be supported by
Average Balance of dates 1,8,16 & 25 in case of
deposit accounts>
10 USIL EMI K Factor / 24.85 K factor for tenor 60 months @ 19.5% rate
11 Proposed USIL Amount = 1,559 i.e. 1487K = BDT 15,59,000 only
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USIL income assessment model
A Further Drill Down

SL Items +/- Remark

1 Monthly Credit Turnover + Summation of ALL credits in Bank Accounts
Except >
1. Outward cheque return
2. Profit / Interest
3. Unusual deposits
4. Loan disbursements
5. Investment/Security Encashment

TWO credit T/Os will be calculated

1. Last 12 months T/O divided by 12
2. Last 6 months T/O divided by 6
The lower one will be considered as the Monthly Credit
Turnover as a conservative approach
2 Monthly OD Interest - OD Limit X interest rate / 12
3 Net Credit Turnover =
4 % Profit Margin %
5 Income = Income can only be aggregated for proprietorship
concerns, which will be discussed in detail in a
subsequent slide.
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USIL income assessment model
A Further Drill Down Continued …

SL Items +/- Remark

6 % Applicable DBR %
7 Debt Service Capacity =
8 All EMI liability - TWO types of liability will be aggregated
1. Company liability
2. Personal liability of business owners
The policy will be detailed in a subsequent slide.
9 USIL EMI Affordability =
10 USIL EMI K Factor / Rate 12 Month 24 Month 36 Month 48 Month 60 Month
19.50% 92.24 50.50 36.75 30.00 26.05
18.50% 91.78 50.03 36.26 29.49 25.52

11 Proposed USIL Amount =

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 Related Entities/Connected Companies
What is a related entity?
Entities having 25% or higher common ownership.

Related Entity Related Entity Related Entity

100%

75%

50%
 
25%

A B C A B C A B C
0%

Applicant Business Applicant Business

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Theory
What is a Legal Entity?
A Legal Entity is an artificial person through which the law
allows a group of individuals to act as if it were a single
composite individuals for certain purposes — most
commonly lawsuits, property ownership, and contracts.
There are limitations to the legal recognition of artificial
persons. In general legal entities cannot marry or they
usually cannot vote.
There are different types of legal entity:
> Limited liability companies > Natural persons
> Partnerships > Political parties
> Trade unions > Unincorporated associations
> Trusts > Cooperative Societies

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Theory
What is Level 1, 2 and 3?
Risk measurement standards set by the Bank is defined as
follows:

Risk Level In General In USIL

Level 1 Low Risk Standard Parameterized Risk
Level 2 Medium Risk Medium Parameterized Risk
Level 3 High Risk High Un-Parameterized Risk

Installment Loan Portfolio

Rest Level 1 20% Level 2 10% Level 3
MAX MAX

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USIL income assessment model
A Further Drill Down Continued …

SL Items +/- Remark

6 % Applicable DBR %
7 Debt Service Capacity =
8 All EMI liability - TWO types of liability will be aggregated
1. Company liability
2. Personal liability of business owners
The policy will be detailed in a subsequent slide.
9 USIL EMI Affordability =
10 USIL EMI K Factor / Rate 12 Month 24 Month 36 Month 48 Month 60 Month
19.50% 92.24 50.50 36.75 30.00 26.05
18.50% 91.78 50.03 36.26 29.49 25.52

11 Proposed USIL Amount =

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 USIL income assessment model RECAP
A Basic Overview

SL Items +/- BDT Remark


1 Monthly Credit Turnover + XXXXX From bank statement


2 Monthly OD Interest - XXX Only incase of OD account


3 Net Credit Turnover = XXXXX


4 % Profit Margin % XX Prescribed industry profit margin


5 Income = XXXX As per income aggregation policy

6 % Applicable DBR % XX As per income


7 Debt Service Capacity = XXXX


8 All EMI liability - XXXX As per liability aggregation policy


9 USIL EMI Affordability = XXX Portion of income left to service additional
debts <Must also be supported by Average
Balance in case of deposit accounts>


10 USIL EMI K Factor / [Link] Against interest rate and tenor


11 Proposed USIL Amount = XXXX The result will be in K=000

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 How much USIL will a customer get?

BDT 10K IL amount will depend on 3 factors BDT 10000K

1 
Customer Category
Already discussed MUE
2  3 
Customer’s Debt
Service Capacity

A. Additional and Topup loan C. CIB Report Will be calculated

based on DBR (Debt
B. USIL for Greater Dhaka D. Special parameter for RMG
Burden Ratio)Sectors

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CIB Report > An overview
A Credit Information Bureau (CIB) Report is given by Bangladesh
Bank (BB) which details all the facilities availed and their status by a
borrower both in individual and company names. This report is requested
by respective Banks along with the customer’s CIB undertaking form.

5 Key points to remember in case of CIB Reports,

1. CIB Report is a pre-approval requirement for USIL.
2. All funded facilities (Loans) in the CIB report MUST match with
customer declaration. Non-funded facilities are L/Cs and Guarantees.
3. The validity of a CIB Report is 90 days and it MUST be valid BOTH at
the time of approval and disbursement USIL.
4. If the information in the undertaking is incomplete or inconsistent then
it will be returned by BB with objection, which in our terms is
“deferred”.

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CIB Report > Status and Decision
CIB Elaboration Action/Decision
Status
NIL No Facility Proceed with credit assessment
Reported
STD Standard Proceed with credit assessment
SMA Special Mention Under the discretion of SME Business
A/C whether to proceed with credit assessment
SS Sub-Standard Decline
DF Doubtful Decline
BL Bad Loss Decline
BLW Bad Loss Decline
Withdrawn

<<<<<<<<<<< IMPORTANT >>>>>>>>>>>

NIL or STD CIB Status does NOT guarantee the approval of a USIL

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Symptoms of a GOOD Customer

1. Banking TxN wise

 Consistent average balance and credit T/O.

 Transaction nature will match business type.

2. Good repayment history with UCB and other banks.

3. Ownership of business property and residence property.

4. Enjoys overdraft facility (OD/CC) with other banks and has

a good swing in the A/C.

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 Good swing VS Hardcore

Good Swing
A/C

Hardcore
Limit A/C
2000 K

1 2 3 4 5 6 … … … … … … … … … … … … … … … … … … … … … … … … 28 29 30

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Symptoms of a BAD Customer

1. Hardcore utilization of overdraft limit.

2. Frequent/High credit turnover BUT poor average balance

or vise-versa.

3. Clearing A/C holder (A/C only used to honor cheques).

4. Inter A/C money transfer A/Cs.

5. Practice of “Child Labor” (i.e. employment of children

under 18).

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How to get your approvals FASTER?
1. Do a customer profiling before you submit an application.
2. Submit all credit facility sanction letters of the customer at the
time of submission.
3. If the customers is enjoying an Overdraft then provide the OD
Statement.
4. Make sure there is a six month gap between Any Other LLoan
disbursement and USIL application date of the customer.
5. Make sure the UCB loan repayment is satisfactory.
6. Give a detail overview of the business in the “Remark section” in
the back of the booklet. If necessary submit additional documents
to give clear idea on the profit margin.
7. Avoid the “Time Killers”.

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What are the “Time Killers”?

1. Application booklet not properly filled up.

2. CIB report received objection.

3. All customer CIF numbers not given.

4. All Other loan facilities not given.

5. Wrong Optima inputs.

6. Detail overview of the business not given.

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UCB SHOPNO – Cottage & Micro
Loan Product for Cottage & Micro Industry

Loan Limit BDT 5 lac

Loan Tenor 6 to 36 months
Interest Rate 20.00%
Facility Type Only Term Loan
Purpose of the Loan Short Term / Mid Term loan facilities for the purpose of
business expansion or fixed asset purchase
Target Group Cottage & Micro Business
Legal Form Proprietorship & Partnership
Business Age Min. 2 years
Business Turnover Min. 12-18 lac/year
DBR 40% - 55%
Security Hypothecation on inventory, receivables, advance payments,
plant & machineries; personal Guarantor/s; UDC & PDC.

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Thank You

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