THE METHOD OF CREDIT CONTROL IN COMMERCIAL BANKS

(A CASE STUDY OF FIRST BANK OF NIGERIA PLC, YAKUBU GOWON WAY BRANCH OFFICE, KADUNA)

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ABSTRACT

The objective of this project work is to provide an insight on the method of credit control in commercial banks. The findings are based on the outcome of going through First Bank publications, newspaper and reports and other corresponding reports of the first Bank office. The study work is divided into five chapters as follows; chapter one, the background of the study was presented specifically on the role of commercial banks and the scope of the study. Chapter two discusses the loans and advances, chapter three contains methodology and research designs, chapter four talks about presentation and analysis of data, chapter five contains summary, conclusion and recommendation made on how to solve the problem of credit control commercial banks.

 

TABLE OF CONTENT

Title page                                                                               i

Declaration                                                                            ii

Approval page                                                                        iii

Dedication                                                                             iv

Acknowledgment                                                                   v

Abstract                                                                                 vi

Table of content                                                                     vii

CHAPTER ONE

1. Introduction                                                                  1
2. Brief historical background                                          4
3. Statement of the problem                                             5
4. Purpose of the objectives of the study                 6
5. Scope and delimitation                                                 7
6. Research questions                                                      7
7. Definition of terms                                                        8

 

CHAPTER TWO

1. Literature review                                                           12
2. Loans and advances                                                     12
3. Maturity pattern of bank loan and advances                16
4. Pattern of credit collateral securities                   18
5. The need for credit control                                            20
6. Basic principles of lending                                   22
7. Credit risk management                                               24

 

CHAPTER THREE

3.  Introduction                                                                 30
4. Research methodology                                                  30
5. Methods of Data collection                                   32
6. Sources of data                                                             34
7. Types of data                                                                 36
8. Summary and conclusion                                             37

 

CHAPTER FOUR

4. Introduction                                                                 38
5. Presentation of data                                                      38
6. data  of Analysis Methods of controlling

credit in bank                                                               42

1. Research findings                                                         44
2. First bank credit repayment or recovering                   50
3. Commencement of recovery process                            53

CHAPTER FIVE

5. Summary conclusion and recommendation                 55
6. Introduction                                                                  55
7. Limitation of the study                                                 57
8. Recommendations                                                        59
9. Summary of the study                                                  62

Bibliography                                                                  63
CHAPTER ONE

1. INTRODUCTION

The banking system is an important sector of the economy because it acts as an agent for mobilizing funds from those who wish to deposit their money and allocating the same to those who want to borrow, thus facilitating the efficient functioning of commercial and .manufacturing activities.

The credit allocation and control policies are required by the bank and other financial in particular development activity. Control of advances are usually targeted at reducing unwise spending and promoting industrialization with a view to reviewing the economy through generation of employment to promote development.

Government gives a directive by constituting a forum of control for bank to recover all loans advances disbursed on reduction basis so that funds available would be channeled to more preferred sectors specifically agro-based, agro-alhed, agro-chemicals industries and exports. Most of the times, the control of credit at the head office and at the branch levels are essentially. On the same basis. The only difference is that the head office and regional administration are completely detached form the scene, and this takes a more realistic approach in appraising proposals with limited and defined power, whereas as a branch often makes a hurried assessment, which in most cases is completely full of sentiment, pressure and influences. As stated above, the banking and financial sector plays the role of intermediary. The sector mobilizes funds from small and big savers who have no immediate need for such funds and provided such funds for users who are basically business entrepreneurs and investors who need such funds.

These surplus funds owners may deposit their funds in the banking sector in the form of investment and they are generally referred to ultimate savers of funds. On the other hand, the users are the business entrepreneurs and individual who have brilliant ideas on how to create additional wealth in the economy, but lack the necessary capital to execute their plan and concretize their ideas from the above this group is referred to as the ultimate users of funds. Ti must be noted that one of the basic objectives of any bank is the generation of profit, which is realized through the banks ability to attract new deposits while retaining the old ones and putting them into profitable use. Such deposits funds in the opinion of the management is not immediately required for everyday working needs of the depositors and  so it  must be channeled appropriately to places where they are needed for economic development.

However, for any bank to achieve its objectives it must be able to manage or control its credit portfolio effectively. If the spate of bad debt now engulfing the banking industry is to be abted, these speculative tendencies on the part of the customers and passive approach by lending officers towards credit control like administration process require a process of action, analysis and follow up.

1. BRIEF HISTORICAL BACKGROUND OF FIRST BANK OF NIGERIA PLC

First bank of Nigeria plc was founded by Alfred Jones, a shipping magnate form live pool, who started the business of banking in Lagos with emerging of the African banking corporation (ABC) established in 1891. it was first incorporated with the name. Bank of British west African (BBWA) as a limited liability company in London on March 31^st 1894 having its head office in Liverpool, started business of banking with a paid – up capital of twelve thousand pounds stipulated ($12,000) in 1957, the name was changed form Bank of Nigeria Ltd.

In 1979 and 1991, the bank of Nigeria changed to first Bank of Nigeria Ltd, and first Bank of Nigeria Ltd, and first Bank of Nigeria Plc” respectively. First Bank is having the largest network of branches in Nigeria. Today it has one of the largest portfolios of diversified loans and credit facilities to various sectors of the economy in the country. Lending is the main business of first Bank of Nigeria plc, in this process of lending money is created in a way of loans and advances usually disbursed to customers with interest and a sties pulsated terms of repayment

1. STATEMENT OF THE PROBLEM

There are some problems faced by some banks today, which a manager or credit officer must lay more emphasis on. The research will take a look into the ways by which the problem of lending and credit control can be eradicated in banking ( if this is a reality in the banking sector) what are the problems of leaning in banks? What problems does the credit control  manager en manager encounter, in problems in granting,