Case 1 : Credit Risk Management

Case Scenario :

ABC Textiles Ltd. is a long standing client of your bank, operating in the Spinning and Dyeing sector. The company has an outstanding credit facility of Tk. 12 crore, which includes Tk. 6 crore term loan, Tk. 4 crore cash credit (Hypo.) and Tk. 2 crore LTR. In the last few months, the following issues have raised concern :

(i) The company delayed it's last two term loan installments and requested rescheduling.
(ii) Sales declined due to rising raw materials costs and loss of a major export buyer.
(iii) Stock audit showed inventory level lower than what was declared earlier.
(iv) The borrower failed to submit updated financial statements and insurance renewals.
(v) CIB report indicates that the company has overdue positions in two other banks.
(vi) Management claims the situation is temporary and new export orders are under negotiation.

Tasks :

The branch has reported the account to the CRM Deptt. for necessary guidance and early action. As a Credit Manger, evaluate the account and suggest actions to manage and mitigate risks :