MANAGEMENT OF CREDIT FACILITIES IN COMMERCIAL BANK

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

First bank of Nigeria plc commenced banking in Nigeria 1894, after its corporation as a limited liability company in London 31st March of the same year. The bank name was change to First bank of Nigeria plc as a result of significant event for over  100 yrs following the companies and allied matter act cp 54, in 1990 and incompliance with the requirements of section 31. In Delta state, the bank has provide numerous customers across the state with the following commercial, banking services eg current, saving, deposit accounts (fixed and short) loans and over draft. Since inception and quantities services to its client. The bank has expanded over the years and at present, it operate twelve (12) branches throughout the state. Management credit and lending is the essences of commercial banking because it is through that, commercial banks contribute to the stability and growth of the economy thereby raising the standard of living of the population loans and advances constitutes the most riskily assets in the investment portfolio and contribute higher retires than assets.             

1.2    STATEMENT OF THE PROBLEM 

Loan failure has bee a major problem in the Nigeria banking industry. This has lend to the demise and near collapse of some of the banks in the country before the Federal Government though the central bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation then life line to bail some out. The reason of loan failure are stated below:  

1) Natural disaster  fire, flood etc

2) Late approval of loans by banks managers

3) Bad and deficient credit management by bank managers

4) Inconsistent government fiscal and monetary policies

5) Overtrading by customers 

6) Poor monitoring loan officer

7) Quality of securities banking facilities

8) Poor feasibility planning

9) Political lending

10) Client could encounter serious production problem which could need injection of additional finds. 

1.3   THE OBJECTIVE OR THE PURPOSE OF THE STUDY

This project work is aimed to examing the extent to which congruency exist the theory behind credit management and it actual practice in the rear banking situation with reference to First Bank of Nigeria plc ughelli Branch Delta state.  Function of credit analysis and control will be look into tin the area of credit administration of improving thus minsing the probability of rejecting prudent loan application on accepting imprudent ones. The study also intended to achieve the following:-

1. To determine the time of loan maturity 

2. Other requirement needed d big commercial banks apart form securities

3. Importance of collecting securities from the prospective borrowers.

4. To ascertain the causes of loan failure

5. Types of secures needed by commercial bank.

1.4    RESEARCH QUESTION

The reseach question will be base on how the following:

1. What is the relationship between interest income and performing and non performing loan

2. What is cause of loan failure

3. How an bad debt be determining

4. How can loan maturity determining

5.What are the importance of collecting security from the prospective borrowers.

6.What are securities needed by commercial banks 

7.What are the strategies use in determining the relationship between profitability of loan and advances recovery from non performing loans, bad & doubtful debt.

8.What are the solution to these problem.

1.5   SIGNIFICANCE OF THE STUDY

Commercial banks with in the banking system indeed the end time system standard as the most dominant sector. The significance of the study will attempts to facilitate a full grasp and understanding of management credit policies or facilities of commercial banks. The finding and recommendations of this study will also serve as a resources of input and information to the banks government and the general public. It will be also useful for school students.

1.6   DEFINITIONS OF TERMS

Credit which is generally term loan and advances by bank is defined by Chamber Encyelpeaeida Dictionary as depressed or implied contract whereby the property of one person is transposed 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 prudent loan: Loan spend wisely to give more profit to firm at a exact time. Ie principal and interest are paid at this same time. Portfolio collection of two or  more assets.

Financial security: Documents give to person who provide financing for the company as evidence of other contribution.

Balance sheet: Financial statement that list a firms assets and claims (liabilities and owner equity) at a particular time.

Non – performing loan: Principal of interest are not paid at the limited period ie repayment obligation are in arrears for over three month.

Imprudent loan: Are loan paid not at the exact time ie principal may be paid or interest.   

Loan maturity: Date loan mature or due to the amount of principal borrowed is repaid on this data.