MANAGEMENT OF CREDIT FACILITIES IN COMMERCIAL BANK
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MANAGEMENT OF CREDIT FACILITIES IN COMMERCIAL BANK
ABSTRACT
Credit management facilities are at the heart of all commercial banks’ operations, ensuring the ability to mobilise deposits and assign them to clients when they are needed.
This study looked into the credit facilities and loan management of First Bank of Nigeria Plc’s Ughelli main branch in Delta state to determine the reasons for loan failure, the types of securities required, the importance of collecting securities from prospective borrowers, and the time of loan maturity.
According to the conclusions of the investigation, first bank of Nigeria plc (delta state) generated impressive results in normal business operations due to an increase in assets, high deposits, and a variation in credit management.
Finally, it was suggested that lending officers be trained, clients be informed, and management be flexible in its credit management facility or policy assumptions in order to absorb the uncertain posture of government monetary policy guidelines. Customers should also be given current bank credit policies instructions to avoid delays caused by a failure to get bank facilities.
CHAPTER PONE
1.1 BACKGROUND OF THE STUDY
The First Bank of Nigeria plc began banking in Nigeria in 1894, following its incorporation as a limited liability company in London on March 31, that same year.
The bank’s name was changed to First Bank of Nigeria plc as a result of a significant event that occurred in 1990, after the Companies and Allied Matters Act, Section 54, and noncompliance with the provisions of Section 31.
In Delta state, the bank has provided various customers throughout the state with the following commercial, banking services: current, saving, deposit accounts (fixed and short), loans, and overdraft. Since its establishment and the quantity of services provided to its clients. The bank has grown throughout the years, and it now has twelve (12) locations around the state.
Management credit and lending are the essences of commercial banking because they enable commercial banks to contribute to the stability and growth of the economy, thereby raising the population’s standard of living. Loans and advances are the most risky assets in the investment portfolio and contribute higher returns than assets.
1.2 STATEMENT OF THE PROBLEM
Loan default has been a big issue in the Nigerian banking industry. This has contributed to the downfall and near-collapse of some of the country’s banks, prompting the Federal Government to intervene through the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) to bail them out. The following are the reasons for loan default:
1) Natural disasters such as fires and floods
2) Loans are approved late by bank managers.
3) Poor and ineffective credit management by bank executives
4) Inconsistent fiscal and monetary policies of the government
Customers’ overtrading is a major issue.
6) Ineffective loan officer supervision
7) The standard of securities banking facilities.
8) Inadequate planning for feasibility
9) Politico-financial lending
10) The client may confront a major production difficulty that necessitates the injection of more finds.
1.3 THE OBJECTIVE OR PURPOSES OF THE STUDY
This project effort aims to examine the degree to which the theory behind credit management and its actual practise in the back banking situation are congruent, with reference to First Bank of Nigeria plc ughelli Branch Delta state.
Credit analysis and control functions will be investigated in the domain of credit administration in order to improve the likelihood of rejecting prudent loan applications and approving foolish ones. The study also aimed to accomplish the following goals:
1. To determine the maturity date of a loan
2. Aside from securities, large commercial banks must meet additional requirements.
3. The significance of obtaining security from prospective borrowers.
4. Determine the root causes of loan failure
5. Commercial banks require several types of security.
1.4 THE RESEARCH QUESTION
The research question will be based on how the following things are done:
1. What is the link between interest income and performing versus nonperforming loans?
2. What is the root cause of loan failure?
3. What factors go into determining a bad debt?
4. How may the loan maturity be determined?
5. Describe the significance of gathering security from prospective borrowers.
6. What types of securities do commercial banks require?
7. What methodologies are employed in assessing the relationship between loan profitability and advances recovered from nonperforming loans, bad and doubtful debt?
8. What is the solution to these problems?
1.6 THE SIGNIFICANCE OF THE STUDY
Commercial banks are the most dominant sector in the banking system, with the end time system standard as the most dominant sector.
The study’s significance is that it will aim to enable a complete grasp and knowledge of management credit policies or commercial bank facilities.
The study’s findings and recommendations will also serve as a source of feedback and information for banks, governments, and the general public. It will also be beneficial to pupils in school.
1.7 DEFINITION OF TERMS
The Chamber Encyelpeaeida Dictionary defines credit as a depressed or implied contract whereby the property of one person is transferred into the possession of another the borrower undertaking to return the money lent to the owner while facilities is an extra feature of checking service in bank with an overdraft.
A judicious loan: A loan that is spent properly in order to provide more profit to the organisation at a specific moment. In other words, both principal and interest are paid at the same time. A portfolio consists of two or more assets.
Financial security: Documents provided to those who supply financing for the company as proof of other contributions.
Balance sheet: A financial statement that shows a company’s assets and claims (liabilities and owner equity) at a specific point in time.
Non-performing loan: The principal and interest are not paid within the specified time frame, i.e. the repayment obligation has been delinquent for more than three months.
Imprudent loan: A loan that is not paid on time, for example, principal or interest.
Loan maturity: The date the loan matures or the amount borrowed is repaid on this data.
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