CREDIT POLICY of IIDFC
The following general policy governs the credit strategy of IIDFC:
- Loans are sanctioned after thorough investigation on the assets of the client as well as his cash flow.
- The project should be able to stand alone as a distinct legal and economic entity.
- At all times, the policy of “know your customer” and his credit standing is foremost in processing loan applications.
- IIDFC extends credit only to a qualified borrower where the intended purpose or uses of the proceeds are clear and legitimate and the applications of the funds are expected to fulfill the intended objective or the purpose of the project.
- Greenfield projects, unless sponsored by entrepreneurs with success stories of managing industrial enterprises, are discouraged.
- IIDFC participates in the expansion, modernization and balancing of existing industrial enterprises.
- IIDFC complies with all the rules and regulations imposed by Bangladesh Bank from time to time.
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Appraisal of Project Proposals
Policy of "know your customer" is the foremost in loan appraisal process of IIDFC. The successful entrepreneurs are given full support in terms of loan, equity support as well as through participation in the syndicating arrangements. The project appraisal is undertaken on the basis of the techno-economic feasibility report, supported by all financial and technical information prepared and provided by the sponsors. Technical experts of IIDFC physically visit the proposed project site during appraisal to investigate the infrastructure facilities available for the project and the impact of the project on its surrounding environment. IIDFC takes few days to complete the appraisal process depending on the scope, complexity and risk elements of the venture. The Board of Directors upon careful examination of the project appraisal report takes the final investment decision.
In essence, the project financing is approved primarily on the economic, technical, marketing and financial soundness of the project. The project should be able to generate an adequate cash flow to pay for operational costs, servicing of debts and provide the entrepreneurs a comfortable rate of return.
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Loan Ceiling
There is no loan ceiling imposed by the Company. Each loan proposal is considered on its merit. For large investment in projects beyond the financial capacity of one single financial institution, the Company will arrange syndicated finance from other financial institutions to cover the total financial requirements of the project.
Client Exposure
IIDFC strictly follows the single client exposure of 25% of its equity as provided for in the Financial Institutions Act. Exceptions are made only with the approval of Bangladesh Bank.
Maturity of Loan
The usual term of a loan is three to five years. The period can again be extended for a period of up to seven years with such grace period as may be justified depending on the project nature and the management of the company.
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Lending Rate and other Charges
For term loans, IIDFC offers a competitive interest rate considering the market conditions, financial and political risks and other relevant factors. The company follows a flexible policy in this respect. Other charges comprises of nominal fees for appraisal, documentation, commitment and supervision.
Security Structure and Guarantee
IIDFC is flexible in security considerations particularly regarding mortgage securities. IIDFC's accepts equitable mortgage and pari-passu charge on the assets of the borrowing company etc. The Company can ask for corporate guarantee, and in appropriate cases, personal guarantee from the Directors.
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How to approach
IIDFC personnel is pleased to work with prospective investors and project promoters to devise the best and the most economical financial plan for the proposed investment to ensure a rewarding rate of return on their investment. A visit or a telephone call to any of the professionals of the organization may set the ball rolling and can lead to a successful and rewarding relationship between the entrepreneur and IIDFC.
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