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7/31/2019 Internship Report on BSB-Bangladesh Shilpo Bank
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SECTION-01SECTION-01
INTRODUCTION OF THE REPORTINTRODUCTION OF THE REPORT
YOUR PARTNER IN INDUSTRIALIZATION
Rehabilitation of Sick Industries of BSB
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1.11.1 Background of the StudyBackground of the Study
The perfect coordination between theory and practice is of paramount importance in the
context of the modern business world in order to resolve the dichotomy between the
theoretical and practical areas. Any academic course of the study has a great value when it
has particular application in the real life. Only theoretical knowledge bears little importance
unless it is applicable to the practical life. When theoretical knowledge is obtained from a
course study it is only the halfway of the subject matter. So we need proper application of
our knowledge to get some benefits from our theoretical knowledge and to make it more
fruitful. Such application is made possible through internship. For the completion of this
internship program, the author of the study was placed in a bank namely, Bangladesh
Shilpa Bank . Internship Program brings a student closer to the real life situation and
thereby helps to launch a career with some prior experience. My internship is on the
evaluation of Project Rehabilitation Departments functions of BSB.
Bangladesh is one of the countries of manifestation. Here industrial sector is very weak. So
government has established Bangladesh Shilpa Bank to stimulate industrialization. Since
Bangladesh is a developing country and the present economic condition of Bangladesh is
of open market in natures, in this situation, the specialized bank like BSB can play
necessary role toward the economic improvement of BSB is to provide term loan todifferent industries and entrepreneurs in Bangladesh. The purpose of BSB is not only to
grant credit but also to develop the country through industrialization. But all industries are
not always successful. Some industries become sick due to technical, management,
economic & political reasons. In my report rehabilitation procedure of such sick industries
has been analyzed.
1.2 Statement of the problem1.2 Statement of the problem
From the perspective of rehabilitation of sick industry in developing country like
Bangladesh, BSB is a unique state owned leading financial institution. BSB provides
financial and technical assistance to broaden the private as well as public sector industrial
base of the country. But activities to industrial development are not emphasizing ones.
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Bureaucrat, political interference in case of project appraisal-all these problems are faced in
our country.
1.3 Objective of the Study1.3 Objective of the StudyThe objective of the report is to comprehensive study on Bangladesh Shilpa Bank and to
find out the problems and opportunities for the industrial development. The objective of the
study is also to find out to what extent it is successful to achieve its goals and why many of
its industries are become sick. The prime objectives of this report are as follows:
To get an overview of the operations of Bangladesh Shilpa Bank
To evaluate the success and status of loan recovery
To understand the criterion on the basis of which the industries are identified as a
sick industry
To know the rehabilitation program taken by BSB to rehabilitate these sick
industries
To know which firms are rehabilitated and which are not?
Finally to recommend necessary steps to overcome the problem of sickness of
industries
1.4 Methodology of the Study1.4 Methodology of the Study
Correct and smooth completion of research work requires adherence to some rules and
methodologies.
In order to conduct the report, I have decided to collect various types of primary data and
secondary data. Data have been collected by oral interviewing the responsible officers.
Different form of statistical configurations such as table percentages rates and ratios has
been used to make the study meaningful and realistic.
After collecting data from the interview and material provided by them, data was first
carefully scrutinized. Then the data was organized as required.
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In order to make the study effective and efficient, following two sources of data and
information have been used widely.
(a) Primary information/data
The primary data have been collected by oral interviewing the responsible officers and and
staffs of the BSB. Relevant documents studies as provided by the officers concerned. We
also get the primary information by observing the departments of the BSB.
(b) Secondary Information/data
The secondary information comes from annual report of the BSB, relevant papers/books
and periodicals publication and manual of different departments.
These reports and documents have been analyzed in the light of analytical review. Some
graphical presentation, growth rate and trend analyses have also been used.
1.5 Justification of the study1.5 Justification of the study
As this study has been done based on imperial evidence, it will have both practical and
academic value. It will help the concerned parties to get a clear picture regarding the
Rehabilitation of Sick Industries of BSB
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Primary Sources Secondary Sources
Sources of Data
1. Practical desk work2. Oral interview of the respective officers
and staffs of BSB3. Direct observations of the functions of
various department of BSB
4. Relevant documents studies as
provided by the officers concerned
1. Annual report of the BSB
2. Annual budget of the BSB
3. Various documents of the BSB4. Extensive literature search on the
basis of these documents ofpublication
5. Shilpa Banks Website
(www.shilpabank.com )
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contribution of BSB since its inception. From this study one can be able to know about
present practice of BSB in industrial development in our country.
The finding of this report will help to take appropriate actions and steps for the betterment
of existing practice, which basically help the industrial development of the country. It
would also be clear what procedures have BSB has followed to rehabilitate the sick
industries.
It is well known to everybody that institutional education and practical life is totally
different. Practical life is the application of institutional education. So, it is natural to face
realities of life in practical oriented life.
1.6 Report organization1.6 Report organization
The report is organized as follows:
The main part of the report is the literature survey about the sick industry,
methods to identify the sick industries, the quantitative and qualitative factors
used for identification of sick industries, sick industry classification and the
rehabilitation procedure of these sick industries by Bangladesh Shilpa Bank.
The later part includes some findings as well as suggestive measures and
concluding remarks.
1.7 Limitation of the Study1.7 Limitation of the Study
This internship report is my first assignment outside our course curriculum in the practical
life. In performing this report our lack of proper knowledge greatly influenced in this
performance. Beside this, some limitations in preparing this report have been faced. The
main limitations are as follows:
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Confidentiality is the main problem; as a result some confidential facts were not
sufficiently disclosed by the respective personnel.
Lack of available up-to-date information
Only few days internships experience is not enough to find out all the pros and
cons of such a vast project.
The employees of BSB had no eagerness to supply more information because of
extra hardness
Most of the manual of BSB is maintained in Bengali. To translate these terms into
English is very difficult and technical words are not understandable.
As Bangladesh Shilpa Bank is a large financial institution; it is very difficult to
understand each and every aspect of its operation within a very short period of time.
Lack of previous practical experience in this concern, as I am a newcomer.
1.8 Benefits of the Study1.8 Benefits of the Study
This study bridges between practical & theoretical life. It has created an opportunity to face
practical lice for the first time. I have obtained a comprehensive knowledge on the
organization; it has made clear what procedures BSB follow to implement a project & to
rehabilitate the sick industries, it has enriched my personal skills and knowledge on
identification of the causes of sickness of an industry and measures to overcome the
problem and also gained knowledge on rehabilitation program of BSB.
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SECTION-02
ORGANZATION PART
YOUR PARTNER IN INDUSTRIALIZATION
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2.1 Background2.1 Background
Non-Bengali entrepreneurs and the public sector nearly monopolized economic activity in
the Pakistan era. Of the very few business professionals are active in East Pakistan fewer
yet survived after the war. Post independence Bangladesh therefore presented a unique set
of opportunities and problems for the private sector. The good news was that without the
stranglehold of the elite Pakistan business family the field was wide open for the
development of a homegrown Bengali private sector, but that both a capital base and an
entirely new entrepreneurial class would have to be developed out of an economic vacuum.
Capital formation rapidly occurred and the newly nationalized banks found themselves
with serious asset management problem because there were few professional
entrepreneurial risk takers with business skills and proven track records to whom this
capital could be made available under normal and prudent banking practice.
Under this sort of circumstances, the former Industrial Development Bank of Pakistan
(IDBP) and the Equity Participation Fund (EDF) both of which were established for the
industrial development of Pakistan were converted into single institution named
Bangladesh Shilpa Bank. Bangladesh Shilpa Bank comes into existence on October 31,
1972 by the Promulgation of Bangladesh Shilpa Bank order 1972 (presidents order no 129of 1972). The BSB order, 1972 was amended subsequently by the parliament to provide
more operational autonomy to its management.
The main objective of BSB is to provide finance both in local and foreign currencies for
establishment of new industrial projects as well as balancing, modernization, replacement
and expansion of existing industrial units in Bangladesh both in private and public sectors.
It provides other types of financial assistances like guarantees for credit/loans; equity
support and working capital loan to BSB financed projects.
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2.2 Institutional Overview2.2 Institutional Overview
Bangladesh Shilpa Bank comes into existence on October 31, 1972 by the Promulgation of
Bangladesh Shilpa Bank order 1972. The head office of this institution is in Dhaka.
Presently, Bangladesh Shilpa Bank has five divisions, twenty-one departments, three zonal
offices and fifteen branch offices. Total number of employees of the organization is 794, as
on the date up to June 30, 2004.
2.3 ORGANIZATION & ITS CAPITAL STRUCTURE AND SOURCES OF FINANCE2.3 ORGANIZATION & ITS CAPITAL STRUCTURE AND SOURCES OF FINANCE
Table 01
Established : October 31, 1972
Organization : Head Office - Dhaka
Division - 5
Department - 21
Zonal Office - 3
Branch Office - 15
Manpower - 794
Capital Structure:
Authorized : TK. 2,000 million
Paid-up : TK. 1,320 million
Authorized capital of Bangladesh Shilpa Bank is Tk.. 2000 million and the amount of paid
up capital Tk.. 1320 million. Other sources of Banks fund are the Government,
Bangladesh Bank, Commercial Banks, local/overseas financial institutions and suppliers
credit. At least fifty one percent of the authorized capital of Bangladesh Shilpa Bank must
be subscribed by the government and remaining forty nine percent may be subscribed
Bangladeshi nationals or by financial institutions local or foreign. Presently, 100 percent
ownership of the bank belongs to the government
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2.4 Ownership2.4 Ownership
At least the government subscribes 51% of the authorized capital of BSB and the remaining
49% is subscribed by Bangladeshi Nationals or by local or foreign financial institutions.
Presently, 100% ownership of the bank belongs to the Government.
2.5 Zonal & Branches offices of BSB2.5 Zonal & Branches offices of BSB
2.6 Mission of BSB2.6 Mission of BSB
Bangladesh Shilpa Bank (BSB) is the state owned Leading Development FinancialInstitution (DFI) of Bangladesh. 'Shilpa' means industry. BSB provides financial and
technical assistance to broaden the private as well as public sectors industrial base of the
country. It prioritizes, especially, Export Oriented/Export Linkage industrial units, Efficient
Import Substitution, Joint Ventures, Commercialization of local technology and promotion
of agro-based industry.
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2.6 Management2.6 Management
The overall policy formulation and the general direction of Banks operation vests in a
board of directors appointed by the Government. This Board of Directors consists of
9(nine) members including the Chairman and the Managing Director. Non-Governments
shareholders subscribing to the capital of the bank shall eventually elect 4 directors from
amongst themselves. The Managing Directors is the chief executives of Bank. The General
Managers assist the Managing Director in conducting the overall banking business.
2.7 Functions2.7 Functions
BSB extends term loan facilities in local and foreign currencies to industrial projects (both
new and BMRE) in the private and public sectors. Besides Bank also performs the
following activities:
Provides working capital loans to industrial projects;
Provides equity support in the form of underwriting and bridge finance to
public limited companies.
Issues guarantees on behalf of borrowers for repayment of loan;
Extend commercials banking services along with deposit mobilization;
Purchases and sales shares/securities for BSB and on behalf of customers as
member of Dhaka Stock Exchange (DSE) Ltd. and Chittagong Stock Exchange
(CSE) Ltd. for capital market development; and
Conducts projects promotional activities along with preparation of various sub-
sectoral study reports.
2.8 A2.8 Activities ofBSBBSB
The activities of Bangladesh Shilpa Bank is given below in figure-
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2.9 Interest Rate on BSB Loan2.9 Interest Rate on BSB LoanIn BSB interest rate is not same in all sectors. There are differences in interest rate. Export
oriented industries are charged 9% interest rate. Agro based industries, small & cottage
industries, large & medium industries are charged 10% interest rate in case of long-term
loan. In Export loan interest rate starts from 7% to 11% from different case. On the other
hand, in commercial, bridge & other loans interest rate starts from 10% to 14.50%.
Note: the actual interest rate to be charged to the borrower company shall be the rate
prevailing on the date of signing the loan agreement and the same will continue till
liquidation of the loan.
2.10 SWOT Analysis of BSB2.10 SWOT Analysis of BSB
The comparison of strengths weaknesses, opportunities, and threats is normally referred to
as a SWOT analysis. The central purpose of the SWOT analysis is to identify strategies that
align, fit or match a company's resources and capabilities to the demands of the
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Activities of BSB
Operational Others
Profit and loss
Deposit MobilizationLoan application receive
Term loan sanction
Commitment & disbursement of term
loanWorking capital sanction
Other investing
Project implementationsLoan portfolio
Loa recovery
Legal action for recovery loanLoan written off
Advisory servicesTraining
Computerization
Human resourcesBoard news
Annual general meetingObservance of National Days
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environment in which the company operates. To put it an other way, the purpose of the
strategic alternatives generated by a SWOT analysis should be to build on company
strengths in order to exploit opportunities and counter threats and to correct company
weakens.
SWOT analysis explains in two broad ways on viewed of organizations environment.
These are:
A. Internal Environment Analysis: It includes
Strength
Weakness
B. External Environment Analysis: It includes
Opportunity and
Threats
SWOT analysis -BSB points of view
During my internship period in BSB I have found some aspects relating to the Bank's
strength, opportunity, weakness and threats, which are more or less. I think affecting the
Bank's performance in total. Which are explained thorough SWOT analysis below:
Strength of BSB:
As a prime DFI, it has a large number of qualified & experienced
professionals.
Structural set-up & business location is Strategic.
BSB's assets position is quite satisfactory and
BSB has requisite strength and opportunity to sustain the challenge of
the market economy.
Weakness of BSB:
Normally in BSB mid and low-level personnel are less qualified and experienced.
Bureaucracy official process hampered the daily internal workflow.
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The prime weakness I found lack of motivation of workers, interpersonal clash,
work environment and low salary structure.
Absence of teamwork because of interpersonal clash
Management - employee relation is bad in some cases.
Political influence both in the time of recruitment & promotion
Opportunity of BSB:
To make the bank a vibrant one, a pragmatic business programme is now under
implementation. The main features of the plan are as under:
Gear-up recovery through setting up of pragmatic recovery targets
Expansion of new area of investment
Cleaning of loan ledger with exit facilities.
All out efforts for deposit mobilization.
Undertake need-based training programme including computer training
To all officers & develop a computerized data-base system and
Full computerization of bank's activities
Threats of BSB:
Loan recovery systems are very weak.
Loan recovery policies are not practices properly in some cases.
Introduction of certain harder banking rules and regulation
Third Party (Bangladesh Bank, Ministry of Finance etc.) regulates the overall
internal activities of the bank and bank must be bound to follow the rules of
Bangladesh Bank.
Some times without proper investigation loan is sanctioned to different employees
relatives.
2.11 Business Programmes of BSB2.11 Business Programmes of BSB
There are six criteria of business program existing in Bangladesh Shilpa Bank. These are:
List of Business Programmes
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A. Industrial Credit programmes
Long term Finance (up to 10 Years & up to 10 cr.)
Medium term Finance (up to 3 Years)
Short term Finance (up to 1 Year) (working capital)
Syndication Finance (up to 10 Years & more than 10 cr.)
B. Commercial Banking Services
Maintaining all kinds of general banking accounts with one stop service for payment of
cheques. All kinds of Letter of Credit (L/C) opening with nominal commission (0.5% for
1st quarter and 0.25% for subsequent quarter, not less than TK. 250.00).
Issue of pays Order/Bank draft, DD/MT/TT. Guarantee issue, selling and encashment of
Bangladesh savings certificates & Prize Bonds, etc
C. EEF Programme
EEF (Equity Entrepreneurship Fund) is a equity support program sponsored by Bangladesh
Bank (Central Bank) with a view to inspire the risky but potential sectors like:
Software Industry (for the projects costing not less than Tk 10.00 million)
Food Processing and Agro-based Industries (excepting the traditional
Sub-sectors like Rice / Flour Mills, Fishing Trawlers, Potato Cold
Storages etc.) For the projects costing not less than Tk. 15.00 million.
2.11 Limit of equity support:2.11 Limit of equity support:
Not more than 49% of equity or 33.33% of project cost for bank financed units.
But up to 49% of project cost for borrowers' own financed units.
D. Share Trading Service
BSB Provides Trading facility and client service as well of DSE (Dhaka Stock
Exchange) at its share-trading cell of head office with nominal commission 237
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members are presently enjoying this facility here. No fees required being a
member of BSB share trading cell.
CDS (Central Depository System) Service initiated in the cell for providing
online Delivery of Shares in both ways.
E. Incentive Programme for Loan Recovery
Deferred payment of IDCP (Interest During Construction Period) after some
moratorium period in installments.
Regular Loan Repaying Projects are honored with special certificates and BSB
Crests. They are encouraged to take more loans l working capitals.
F. Deposit Mobilization Programme
Bank tries to meet its fund requirement from various sources like private, government and
non-government organizations for lending and investment.
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SECTION-03SECTION-03
VARIOUS FUNCTIONAL DEPARTMENT OFVARIOUS FUNCTIONAL DEPARTMENT OF
BANGLADESH SHILPA BANK AND THEIRBANGLADESH SHILPA BANK AND THEIR
MAJOR ACTIVITIESMAJOR ACTIVITIES
YOUR PARTNER IN INDUSTRIALIZATION
3.1 Introduction3.1 Introduction
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Bangladesh Shilpa Bank is the prime concern of development financing. It provides
various functions continued its efforts to make an effective contribution towards expansion
of industrialization process of the country. It emphasizes on the long term lending to the
viable new projects having comparative advantage, export prospects, forward and
backward linkage & local technology as well as raw material based projects.
Bangladesh Shilpa Bank encompasses various department and zonal offices to discharge its
activities. To perform efficient and effectively Bangladesh Shilpa Bank in its board
meeting has determined the schedule activities of various departments and zonal offices
and they supposed to perform the task accordingly and the respective employee have to
report according to organizational hierarchy.
3.2 DIFFERENT FUNCTIONAL DEPARTMENT OF BANGLADESH SHILPA3.2 DIFFERENT FUNCTIONAL DEPARTMENT OF BANGLADESH SHILPA
BANKBANK (BSB)
There are eight functional departments of Bangladesh Shilpa Bank. The operational
activities of Bangladesh Shilpa Bank have operated by these departments in different way.
Every department has its own policies, procedure, and strategy to lending, and
implementing credit. Each of the department is depends on each other for sanctioning loan
for propose industries, which applied for loan. Loan Operation Department is the first step
of loan sanction procedure and it is comparatively most important department of
Bangladesh Shilpa Bank.
1. Loan Operation Department
2. Project Implementation Department
3. Human Resource Management Department
4. Law Department
5. Loan Accounting Department
6. Project Rehabilitation Department
7. Central Recovery Department
8. Documentation and Machineries Procurement Department
3.2A LOAN OPERATION DEPARTMENT
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i. At first an application form is supplied to the entrepreneur (required Tk. 1,000), after
the entrepreneur submits filling up the application form. After filling up the
application form it is submitted by the entrepreneur. A project appraisal letter is
supplied by the entrepreneur
ii. To give advice to the entrepreneur about industrial investment. To give loan from and
to appraise the proposed project from various aspects- Management & organizational
appraisal, technical appraisal, marketing appraisal, economic appraisal & financial
appraisal.
iii. To take clearance from privatization board for proposed project, if necessary.
iv. To take necessary action to process and approve co-financing project
v. Loan sanction letter send to subsequent department
vi. To take necessary action to implement the project
vii. Re-evaluate the project on the basis of past evaluated loan agreement if necessary,
according to the updated information
viii. To issue gazette notification about loan procedure on behalf of government
ix. To examine and appraise the joint venture proposal of Bangladeshi and foreign
investors
x. Advise about preparation of loan application form to non-resident people of
Bangladesh
xi. To encourage foreign lease-financing organization who provide equipment and new
technology to set up business in our country.
xii. Keeping of non-resident Bangladeshi and joint investment guarantee statement
preparation, memorandum and approved letter
xiii. To evaluate and give opinion about zonal office sanctioning loan and their lending
activities
xiv. After analyzing the project appraisal, the board decides the loan should be sanctioned
or not;
xv. If the loan is sanctioned it is forwarded to the project implementation department.
3.2B PROJECT IMPLEMENTATION DEPARTMENT
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When the loan operation department it is forwarded to project sanctions the loan
implementation department (PID) performs the following activities:
i. Undertaking necessary initiative after granting loan in favor of the project.
ii. Taking necessary action to make the factory lay-out.
iii. Making necessary adjustment in case of change of the project place, change of board
of directions and change/extension product mix etc.
iv. Making necessary attempt to give the loan a stage by stage after the loan granting.
v. To ensure that necessary capital has been supplied by the entrepreneur and to ensure
its proper utilization.
vi. To give necessary assistance in the case of Bridge loan from any financial institution.
vii. Taking necessary indicatives to construct the lay-out of the project according to
construction cycle.
i. Monitoring the machinery of the project, inspection and taking any kind of advice
regarding to any machine related problem from machinery department.
ii. Verification of new material process of project ensuring the cash capital according to
the loan terms and condition and providing necessary assistance in this matter.
iii. Inspection and monitoring experimental production extension of loan period.
iv. Making the final construction report (FCR) and transferring it to central recovery
department (CRD) and concerned department/authorities.
v. Determination of the construction period of the project preparing loan repayment
schedule and taking after necessary action regarding this.
vi. Monitoring and inspecting the project to see whether the project is implementing
according to time schedule and taking necessary initiatives to solve any kind of
problem arising out there form and providing necessary advice to the entrepreneur.
vii. Receiving insurance letter against the predetermined risk of the implementation project
assets n ensuring its deposit to bank.
viii. Inspection of the utility of the principles regarding the project implementation and
presiding up to date principles.
3.2C DOCUMENTATION AND MACHINERY PROCUREMENT DEEPARTMENT
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After sanctioning loan by Loan Operation Department, it issues a letter to documentation
department, parities and after concerned departments. The documentation department
issues a letter to the parties to produce necessary documents. Those documents are:
i. Memorandum of Association Articles of Association
ii. The loan upon which the project will be established, document of this land must
be produced.
iii. Receipts of rent
iv. Documentation fee
v. Mouja Map
vi. The documents that reveal that the land revel that the land were not sold within
preceding two years.
Then a form is filled up. These documents are sent to lawyer. It every thing is OK it is
transferred to project implementation department.
In the documentation process the borrower are required to submit a cop of memorandum of
association and articles of associate. It is returned after the confirmation that in has been
submitted according to the rules the borrower company must submit it after the
authorization by direction of registration of Joint Stock Company and firm. The following
activities are performed during the time of documentation process:
The borrower company must submit necessary documents
Verification of documents by documentation and machinery department and law
department.
Preparation of all documents of the borrower company director.
Function of Machinery Procurement & Documentation Department
1. Documentation schedule preparation/selection and approving for tender
2. To assist the promoters to invite tender and other formalities
3. Give advice to investors/entrepreneurs about tender invitation to collect project
machinery
4. To analyze the tender price, quality of machinery among the bidders and taking
approval from the authority
5. Documentation and contract completion with loan recovery after loan sanction
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6. Examination of project memorandum and statement of affairs
3.2D CENTRAL RECOVERY DEPARTMENT
Project implementation department make a repayment schedule and given it to the
borrower. Normally the interval is 6 months. This department inspects the project after
every 6 months to see whether there is any leakage. If the borrower fails to repay the loan
as the application of the borrower it is rescheduled. Sometimes a portion of interest is
exempted. If the borrower fails to repay the loan than it is transferred to law department to
take legal action on the application of the borrower. Sometime the project is transferred to
project Rehabilitation Department to restore the project.
Principles of classification of loan and provision:
For the purpose of classification all loans and advances are divided into 4. These are:
a. Continuous loan,
b. Demand loan
c. Term loan
d. Short-term agricultural and micro-credit.
a) Continuous loan: The loan, which can be granted and recovered without any
repayment schedule but have, an expiry date and maximum limit are called
continuous loan.
b) Demand loan:The loan which mist be repaid as the bank calls it is demand loan.
c) Term loan: The loan that must be repaid as the banks cal it is term loan.
d) Short-term agricultural and micro-credit:The loan, which is paid in less term
and condition, is known as short-term agricultural and micro-credit loan.
Criteria for Classifying Loan on the Basis of Repayment
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If any continuous loan is not repaid within the expiry date that it is called irregular loan.
The classification of loan re as follows:
6 months > continuous loan > 3 months = sub topped
12 months > continuous loan > 6 months = doubtful
Continuous loan > 12 months = bad
If any installment of any term loan is not repaid within specific date it is treated installment
default.
Maintenance of provision:
1. On the basis of the equity of the loan the following precession are maintained:
A. Substandard 20%
B. Doubtful 50%
C. Bad debt 100%
2. On short term agricultural and micro-credit the following provision to be kept:
A. On all debt other than bad debt 5%
B. On bad debt 100%
3.2E LOAN ACCOUNTING DEPARTMENT
Loan Accounting Department is the department, which centrally maintains all loan
amounts of the bank. There are 4 sections, which performs the activities of the department.
1. Not due section: Not due is the installment not yet due for payment in schedule time
fixed by the project department/Branch officer.
2. Amount due section/overdue section: The payment of installment and interest in not
paid/cleared in time is overdue.
The functions of this section are:
a. Accurately list of balance preparation
b. Advice sending to borrower
c. Quarter/half year by interest charge.
3. Replacement section: When the overdue is rephrased or waived then the replacement
section will do the needful activities.
4. General and policy section:
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General and policy section do the following:
a. To prepare the monthly Trial balance.
b. Monthly recovery statement.
c. Monthly disbursement schedule
d. To make entry all the transaction as per daily statement received from the
branch officer.
e. All list of balances of not due send to the Head Office and branch Office.
f. To prepare distribution of work among the officers and staff as specific
guidelines of the authorities.
3.2F LAW DEPARTMENT
In the Bangladesh Shilpa Bank fails to recover its loan in the normal way, it must under
taken alternative action and file case in the court. The cases, which Bangladesh Shilp Bank
files, are:
1. Recovery case Section 33
2. Financial Loan Case Section 5(a)
3. Certificate Case Section 35
4. Bankruptcy Case Section 9 (1)
5. Case if Check is not cashed Section 198
(Petition Case)
6. Case if machinery of project
is transferred form the project Section 37
7. Case if false properties are mortgaged -Section -----47
Legal action taken during the year 2003-2005
Position of projects under litigation 2003-2004 2004-2005
Number of projects Number of projects
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Legal notice issued 126 33Filling of suit 205 23
Cases settled outside the court 6 11
Auction 2 11
3.2G HUMAN RESOURCE MANAGEMENT DEPARTMENT
The department of Human Resource Management was not it name as now. Modernizing
the structure of the administration of the bank and development the skill of the human
resources and reducing operating cost of the organization. The directors 244 th meeting was
conducted on 23rd April 1996. In this meeting, rename of the Administration Department as
Administration & Human Resources Department and Department of Labor as
Department of Human Resources Management.
There are five sections in department
SL. No. Section Activities
01 General administration & policy section 1. Fixing principle relating to
human resources
activities/position
2. Fixing principle relating to
organization
3. Fixing principles relating to
delegation of power
4. Activities relating to trade
union
02 Management section 1. Provide employment policy
2. Provide transfer policy
3. Provide promotion policy
4. Fixing pay scale
5. Fixing annual increment policy
03 Disciplinary section Mitigate the compliant against
personnel
04 Welfare section 1. Provide scholarship policy
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2. Assist the helpless personnel
3. Provide retirement benefit
05 Leave & medical section 1. Provide medical facility &
allowance
2. Provide vacation opportunities
3. Provide conveyance facility &
allowance
4. Provide house rent allowance
Bangladesh Shilpa Bank has total 794 personnel. It divided into two categories. These are:
a) Job-wise distribution
b) Profession-wise distribution:
Training & Development of Human Resource:
Bank has a Training Department for upgrading the professional competence and skills of
its Officers and Staff. Below are the main functions of Training Department: -
To prepare & implement Annual Training Program.
To impart training of the Officers/Staff regarding business & operations of the
Bank.
To adopt measures to hold in-house training and make arrangements to send Bank's
Officers to overseas training programmes.
To establish liaison with domestic & overseas organizations relating to training.
To send Officers to local training institutions for improving professional skills; and
To organize Seminar/Workshop/Symposium on key economic/banking issues.
Types of Training:
There are as many as 3 (three) types of training as under: -
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In-house.
Local and
Overseas.
Logistic support:
Training Department has the following logistic support: -
Training Hall with Air-condition facility accommodating about 25 (twenty
five) participants.
Multi-media Projector.
Flip Chart.
Mini Computer Lab and
In-house Resource Persons.
3.2H Project Rehabilitation Department
The objective of BSB is to stimulate industrialization of the country. But many of the
projects, which are loaned by BSB, become sick and cannot carry on their projects. There
are many reasons, so government tries to revive the proposed project for greater
advancement of the country.
In these types of cases, BSB provides assistance to rebuild their structure to restart their
businesses. Additional financial assistance may be required moreover, more information
and advice may given so that the entrepreneur may run the business more efficiently,
sufficient return & contribution to the economy.
3.2H(1) Functions of Project Rehabilitation Department
1. Recommendation and taking to rehabilitate a project after tracing the cause of
sickness if the files are transferred to Project Rehabilitation Department from the
ensured department/ branch/ zonal office after the primary analysis of the project.
The rehabilitation process starts after the recommendation of the advisory
committee formed by the General Managers.
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2. The files of the projects are transferred to Law Department to take necessary
actions, which are deemed not to be rehabilitated. Again if there is no opportunity
to rehabilitate any it also rejected.
3. Verification of the proposal regarding rehabilitation recommendation preparing the
implementation schedule and taking necessary initiatives to take care the project
and deciding the single or joint management system of the bank and performing
other activities regarding these.
4. Production of the rehabilitated project, making of the products analysis the targeted
loan recovery and actual situation and taking necessary initiates regarding these
5. Making recommendation to restructure the capital to ensure fund management,
profit sharing and loan recovery and making recommendation on the management
and direction of the acquired project.
6. Reaction of bank participation stage by stage from the project, which is profitable
7. In case of apply right management after the certification that it will be effective and
efficient.
3.2H(2) Relation with other departments
Loan Operation Department is the starting department of sanctioning loan to the sponsors
and in this department various analyses are made for making decision whether the
proposed projects are viable or not. Anyone who wants loan from BSB, he has to fulfill
certain criteria and a team evaluates the project. If the sponsors fulfill the entire
requirements then his/her project will be approved for giving loan.
Then the Loan Operation Department sends documents to Documentation & Machinery
procurement Department for proper documentation and procurement of machinery. After
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documentation and machinery procurement the project is sent to Project Implementation
Department.
After sanctioning loan by Loan Operation Department a project is forwarded to
Implementation Department. Project Implementation is one of the most important tasks
done by BSB. Project Implementation Department conducts all the works according to the
sanction letter, which is made according to appraisal report. Providing consultancy services
and other necessary assistance implementation process is going on. They inspect and
monitor physically whether the project is implementing or not. If not Project
Implementation Department report to the authority to take necessary action. When the
project started commercial production implementation process is completed and it refers to
Central Recovery Department to recover installment money.
Then Central Recovery Department starts to collect the loaned money. The project recovers
the banks loan as per repayment schedule by Project Implementation Department. The
sponsor default to pay their dues twice at a time then the bank goes to legal action. If the
project stuck-up during construction or could not operate successfully after implementation
then the sponsor will be unable to repay the dues and the project is sent to Project
Rehabilitation Department. Project Rehabilitation Department first identified the sick firms
of BSB, causes of sickness, impacts. This department also describes the rehabilitation
policy of BSB, whether all sick firms are rehabilitated or not, management, rehabilitation
program of Bangladesh Shilpa Bank.
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SECTION-04
LITERATURE SURVEY
YOUR PARTNER IN INDUSTRIALIZATION
4.1 Introduction4.1 Introduction
Industrialization is the prime concern of all the economies, especially in developing
countries. Since the independence, numerous policies and efforts have been made to
accelerate the pace of industrialization in Bangladesh. Bangladesh government has
established specialized financial institution named Bangladesh Shilpa Bank on 31st October
1972 with view to providing long term and intermediate term loan to the entrepreneurs for
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accelerating the process of industrialization of the country by providing financial assistance
and equity support.
At the very beginning of Bangladesh Shilpa Bank, it was the only institution without whose
support industrial project was impossible to build up. About the entire industrial unit
established up to 1990 is the output of Shilpa Bank. It is the bank whose main objective is
to encourage and motivate the potential entrepreneur to set up the new industry in the
various part of the country. Although some commercial banks are providing short as well
as long term industrial support to potential entrepreneurs, but still, Bangladesh Shilpa Bank
is on the prior position. For the industrial development the contribution of BSB is
incomparable.
Bangladesh Shilpa Bank undertakes various projects by providing finance, machinery and
other aids, some projects are implemented successfully and some projects are failed to
attain the goal and these firms are called sick firms according to the BSB language.
Sick industries means the industries, which either become stuck-up during construction or
could not operate successfully after implementation. These projects could either pay back
the banks dues or make any contribution to the national economy. These projects were
identified as sick due to their inability to generate sufficient fund for debt servicing. There
are so many sick industries in Bangladesh, which has no specific statistical data. Here the
main objective is to identify the causes of sickness of these industries.
4.2 Practical Observation of Special Committee of BSB regarding Sick4.2 Practical Observation of Special Committee of BSB regarding Sick
IndustriesIndustries
Managing Director of the bank in order to examine the affairs or current status of the
company and to make recommendation during the period 2002-2003 constituted a special
committee headed by a Deputy General Manager. The committee has found the possible
causes, symptoms, and identification method of sick industries. The committee has also
identified some sick industries financed by BSB.
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4.34.3 Method used to identified a Sick IndustryMethod used to identified a Sick Industry
There are some specific criteria to identify a sick industry. They are-
On the basis of Cost Benefit AnalysisFor identifying a sick industry the following criteria may be considered by cost benefit
analysis. If the cost of the project is more/greater than the benefit then the industry is to be
considered as a sick industry. Sometimes the industry cant recover the cost (labor,
material) for this reason the industry goes into loss.
a) On the basis of Break Even Analysis
An industry should produce up to break-even point because to recover the fixed cost or
overhead cost. If they cant recover fixed cost then we can consider this industry as a sick
industry.
To support the above definitions and to identify which industry is sick, I include here a
model. In 1977, Argenti developed the model called A Score Model. This model is
discussed with a list of drawbacks, which hindered the success of an industry. All the
drawbacks carry some points, which are used to identify a firm as sick or not.
4.4 Argentis Score Model to identify a Sick Project4.4 Argentis Score Model to identify a Sick Project
The model is based on-
1. Defects2. Mistakes
3. Symptoms
Weight Sign Pass
Defects 10
8 C.E.O is an Autocrat
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4 C.E.O is also the Chairman
2 Passive Board of Directors
2 Imbalanced Board
2 Weak Financed Director
1 Poor Management Depth
3 No Cash flow Plan3 No Budgets/Budgetary Controls
15 Poor Response to change
Total 43
Mistakes 10
15 High Leverage (debt/equity)
15 Overtrading
15 Big Project Gone Wrong
Total 45
Symptoms
4 Financial Signs Weak
4 Creative Accounting4 Rumors/Staff Turnover/Low
Morals/Untidy Offices/Frozen
Salaries
Total 12
Total possible score: 100 Pass: 25 or less
According to above model it is clear to identify the sick industry. The industry, which gets
score less than 25, is not considered as sick industry. But the industry, which gets more
than 25 score, is considered as sick industry.
4.5 Precaution about sick industry4.5 Precaution about sick industry
Sick situation arises in an industry in some abnormal period. But if the rate of sickness is
overwhelming then it becomes a matter of fact. So before providing loan importance must
be given on correct evaluation procedure. So at pre-investment stage the following things
must be considered-
Examine the project appropriately
The project cost is calculated in a proper way
The proper place is selected
Defect machinery must not be purchased
Ensure that skilled and experienced personnel are easily found.
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Proper steps are taken to protect uneven breakdown of electricity
Ensure that proper people are involved in the managing committee
Ensure the financial capability of the initiator
Ensure the procedure of makeup the preliminary cost and the doubtful loss
Ensure the quality of the produced product
Ensure the proper way to marketing the produced product
Consider the change of test of customer
Proper plan is taken to implement the project
Steps are taken to avoid the potential conflict.
4.6 The symptoms of Sick Industry4.6 The symptoms of Sick Industry
Sick industry is difficult to define. Nonetheless The symptoms of sick industry are as
follows-
The initiator is unable to pay sufficient money at the implementation stage
The delay of implementation increases the project cost. It also creates many
problems and the burden of loan interest is increased.
Lack of full production or frequent obstruction of industry
The initiator is unable to pay the loan installment and other liability
The failure in payment of loan installment in time increases the burden of loan
Inability to submit the financial statement in time
Increase the tendency of undertaking unfair means in preparing the papers of stock
materials
Goods of the stock increase of unsatisfactory sale
Profit from investment decrease gradually
The production level decreases gradually
Taking loan from various sources at a high rate
Applied for a large amount of loan
Non-cooperating tendency with the loan providing bankers
Lacking of perfection in the market.
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4.6 Sick Industry Classification4.6 Sick Industry Classification
The Ministry of Finance and the Ministry of Industries co-operate to provide debt relief and
other financing assistance to bail out failing firms in a specific industry that has been
identified by the government as a Sick Industry. Assistance may include waiver of interest,
reduction in principal, repeated rescheduling of overdue loans, of combination of these. A
Sick Industry classification may be purchased with a suitable bribe to the appropriate
ministry, Ministries, the PMO and the Standing Committee of Parliament on Finance may
be lobbied and bribed to obtain such a classification. Billions of BDT of NCB loans are
written down using this technique.
4.7 Causes of sickness4.7 Causes of sickness
Bangladesh Shilpa Bank undertakes various projects providing finance, machinery and
other aids, some projects are implemented and successful and some projects are failed to
attain the goal and these firms are called sick firms. These are various reasons of sick firm.
But to discuss it easily we classify it in two classes-
The reasons that are beyond the control of the project owner and
The reasons that are under the control of the project owner.
The above causes are further divided into seven causes. The causes are discussed below
according to their importance though all of the causes are important.
4.7(a) Financial Problems/Shortage of Working Capital4.7(a) Financial Problems/Shortage of Working Capital
The shortage of working capital is the most acute problem for majority of the sick
industries. Working capital is required to finance purchase of required raw materials and
other short term needs of a project after it is implemented. A survey shows that 28% of the
projects suffer due to shortage of capital. The problems, which lead an industry toward
sick, are as follows-
Measurement of investment outlay and cost of the project are not appropriate
When the means of financing is not available
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When the project is not profitable
When the production is not reached at the break-even point
When they cant calculate appropriate risk level of sick
Loan application with insufficient amount of money that would not meet fixed and
operation cost
Cash flow of the project is not available
If actual cost of the project is more than the budgeted cost
Shortage of working capital, i.e. if they do not manage the sufficient working
capital
If marketing interest rate increase cost of working capital increase as a result of the
project may become sick
Lack of operating capital
Higher fixed cost, i.e. increase the fixed cost as a result of increasing of the price of
machinery, land or other fixed items
When variable cost increases
When there is no sufficient mortgage
Improper inspection of bank financed project
Insufficient insurance facility
Economic problem comes from the social cost benefit analysis.
4.7(b) Technological problems
A survey reveals that 18% of the projects are suffered due to technological problems,
which lead an industry toward sick, are as follows-
Machinery imbalance causing lower capacity utilization is the major technical
problem of many projects. Some are also suffered for faulty technical design.
Whether the preliminary test and studies are not appropriate
Availability of raw materials, powers and other infrastructural facilities have not
been established.
The selected scale of operation is not optimal
The production process chosen is not suitable
The equipment and machine chosen are not appropriate
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Lack of modern technology like incapable to use the computer and modern
machinery
If the selection of machinery becomes faulty, it will not ensure the achievement of
objectives
Wrongly or inappropriate selection of the machinery
Lower capacity of the machine resulting price will be higher, i.e. production cost
higher
Inconsistency between the origin of raw materials and the factory location
Production of products and final consumption adversely affect the business
Lack of communication system
Lack of infrastructure facility
Unavailability of supply of gas, electricity and water etc
Selection of old and backdated technologies to be used in production
Delay of machinery procurement & rapidly change in technological environment
4.7(c) Marketing Problem4.7(c) Marketing Problem
A survey reveals that 11% of the projects suffer due to marketing inefficiencies, which
lead an industry toward sick, are as follows-
If the aggregate demand of proposed project is not possible to fill up.
If due to national financial crises product demand decrease
Introduction of new brand product
Wrong forecasting about the market
When change the consumption trends in the past and present consumption level
If change occurs in the Import and export policy
When market share of the project is under low appraisal
Smuggling of substitute goods
If the raw material of the product is not purchased at appropriate time
Improper market justification
If production cost is high resulting selling price high which ultimately decreases
the demand
Lack of market expansion and production diversification
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Shortage of raw material supply
High competition in the market
Cheap price of the foreign product
4.7(d) Administrative and Managerial problem4.7(d) Administrative and Managerial problem
Success of a firm largely depends on management. There are some internal conflict
between the worker and manager. A survey reveals that 30% of the projects are suffered
due to administrative and managerial problem. The administrative problems, which lead an
industry towards sick, are as follows-
Success of the firm largely depends on management. When the management is not
capable to manage all the managerial aspects, management should have proper
planning, organizing, controlling, administrating and monitoring.
Weak management of the project
Lack of efficiency of employment as well as managements
Conflict and also death of managements partner
Death of main entrepreneur of the project
Insufficient appointment of employee
Unskilled human resources
Corruption and intentional misuse of organizational assets
Lack of proper planning, organizing, controlling, administrating and monitoring.
4.7(e) Economic Problems4.7(e) Economic Problems
The economic problems, which lead an industry toward sick, are as follows-
Economic problem comes from the special cost benefit analysis
It does not impact of the project on the distribution of the income in the society as
well as the level of saving and investment.
4.7(f) Political problem4.7(f) Political problem
The political problems, which lead an industry toward sick, are as follows-
Political pressure
Political instability, which hampers the production
Insufficient facility provided by govt. to industrialist like tax rebate
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Political problem like worker unrest, hartal
Political pressure to loan procurement
Inappropriate action taken by govt. to protect smuggling
Political terrorism.
4.7(g) Other Reasons of Sickness4.7(g) Other Reasons of Sickness
Except the above problems there are also some problems, which leads an industry towards
sick. A survey reveals that 13% of the projects are suffered due to other problems, which
are as follows-
Selection of inappropriate industrial unit, which is not financial and logically viable
in concerned country
Delay of loan application
Internal delay of industries construction after loan sanction
If a portion of loan amount used for personal use
Delay of operation start
Over estimation of mortgage value
Delay of loan procurement and sanctioning process
Delay of documentation formalities in respect of loan
Causing of rehabilitation measure
Insufficient enforcement of law for recovery of loan
Inappropriate location of industries
Insufficient infrastructure facilities
Natural disaster that hampered production
Terrorism that hampered to establish an industry
Delay of implementation
4.8 Sick situation4.8 Sick situation
Normally BSB meets the long-term credit needs for implementation of the projects. BSB
charter provides for extending working capital to its financed projects only to a limited
scale. While sanctioning loans by BSB provision is made for commercial banks to provide
70% of the working capital needs. But in most cases it is found that the project
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management either cant all raise the required working capital from the commercial banks,
or they cant raise required amount in due time. As a result these projects could not go into
operation on schedule time and they were unable to pay the interest and the principal
amount. At last they are treated as sick industry.
According to the bank statement, BSB has so far finance about 459 projects in which:
The running projects : 176
In the implementation stage : 09
Stuck-up : 214
Existence less : 26
Sold projects : 34
4.9 Sick industries4.9 Sick industries
In Bangladesh there are so many sick industries. The sick industry concept is not the
newest one. It is occurring from the pre-independence of Bangladesh and Bangladesh
inherent some sick industries from its birth. After independence this is also continuing. The
exact figure of sick industry is not identified. There are 274 sick industries that are financed
by BSB. Some of them are stated below:
4.9(a) Some sick industries
G.M.K Textile Ltd. Ali & Sons Ltd. Malik Auto Rice Mill
Meraj Fabrics Ltd. Shardar Textile Mills Ltd. Al-Amin Lee Factory
Jahan Group of printing
& packaging
Nima Corporation Ltd. United company
Al-Amin Printing &
packaging
J.K.K Industry Ltd Mitaly Enterprise Pvt. Ltd
Riad Products Pvt. Ltd Grand Dhaka Hotel Pvt. Ltd Helal Engineering Pvt. LtdTas Toys Pvt. Ltd Hotel Konic Pvt. Ltd Quick Carrier Ltd
Micro Aliment
Manufacturing Co. Ltd.
Toronody Water Ways Pvt.
Ltd
Tempkul Ltd
Hasan Agro Engineering
Workshop Ltd
Companygonj Rubber
Industry
Tito Textile Ltd
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Pioneer Iron Foundry &
Engineering
Padma Tyre Retarding
Industry
Brick Linker Ltd
Diamond Industry Pvt.
Ltd
Shovo Auto Rice Industry Ltd Nakko Ice Ltd
Jahanara Moulding &Engineering Workshop
South East Enterprise Oriental Foundry
Allama Nails Allied
Industry Pvt. Ltd
Coxbazar Aqura Resources Khan & Khan
North Bengal Silicate
Industry Pvt. Ltd
D & S Auto Rice Mill Uttaran Engineering
Complex
Mohadevpur Auto Rice Bancharampur Textile Rangpur Food Company
Hossain Electric Com. Agro Producer Ltd Mocca Mills Ltd
Laksham flour Mills Altaf Rice Mills Noor Rice Mills
Noor Cold Storage Rangpur Poly Com. Mrs. National Cold Storage
Shovo Rubber Industry
From the above statistics it is clear that there are so many projects in Bangladesh are sick.
4.9(b) Table: Causes of sickness of BSB financed projects
SL
N
O
Sectors
No. of
pr
oje
cts
Technica
l
Managemen
t
Marketin
g
Workin
g
cap
ital
Others
1 Food & allied 71 15 14 13 24 17
2 Textile 61 11 9 30 6 7
3 Metal products 17 3 5 2 13 -
4 Jute 19 4 3 1 6 1
5 Engineering 14 1 5 - - 11
6 Paper printing 11 5 3 - 3 -
7 Service 13 1 5 2 - 1
8 Electrical 10 3 3 1 2 -
9 Petrochemicals 11 - 11 5 2 -
10 Non-metallic 9 2 - - 1 2
11 Chemicals 9 1 1 1 2 -
12 Pharmaceuticals 10 2 - - - 113 Tannery 13 - - 1 5 -
14 Transport 6 - - - - 6
Total 274 48 59 56 64 46Percentage 18% 22% 21% 24% 17%
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An analytical discussion makes it clear to us that the reasons of their sickness and which
projects are sick for which causes although the general causes of sickness are stated earlier.
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If we further analyze it we find a clear picture of the sick projects and their relevant causes.
These things are explained below under a table:
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Causes
Sectors
Technical
Management
Marketing
WorkingCap.
Tech.+Mgt.
Tech.+Mkting
Tech.+W/C
Mgt.+Mkting
Mgt.+W/C
Mkting+W/C
Tech.+Mgt.
Tech.+Mgt++W/C
Mgt.+
W/C+Mkting
Others
Totalnumber
Food &
allied
3 8 9 19 3 1 6 - 3 - 3 7 - 13 75
Textile 9 3 33 3 - - 7 5 - - - 1 - 3 64
Metal
product
s
- 5 - 2 - - 2 1 1 1 - 1 - - 13
Jute - 3 - 7 - 2 2 - 1 - 1 - 3 1 20Engineerin
g
4 3 - - 3 - - - - - - - - 5 16
Paper
printin
g
1 1 - 4 1 - - 3 1 - 1 - - - 12
Service - 1 3 - 1 - - - - 3 - - - 1 9
Electrical 2 2 2 1 - 2 - 1 - - 2 1 - - 13
Petrochemi
cals
- 1 1 - 2 - - 2 1 1 - - - - 8
Non-
metalli
c
2 1 - 4 - 1 1 - - - - - - - 10
Chemicals 1 - 2 1 - - - - 1 - - 1 - - 6
Pharmaceu
ticals
3 - - 2 1 - - 1 - 1 1 - - 5 14
Tannery - 3 1 3 - 1 - - - - - - 1 - 9
Transport - - - - - - - - - - - - 1 4 5
Total No. of
proble
ms
25 31 51 46 11 7 18 13 8 7 8 11 5 33 234
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4.10 Which cause mostly affects the sick industries in Bangladesh4.10 Which cause mostly affects the sick industries in Bangladesh
A survey reveals that-
30% of the projects suffer due to administrative and managerial problem.18% of the projects suffer due to technological problems.
28% of the projects suffer due to shortage of capital.
11% of the projects suffer due to marketing inefficiencies.
13% of the projects suffer due to other problems.
So, we see that only one reason does not affect the sick industries. All the above-mentioned
reasons are responsible for sickness of industries in Bangladesh.
4.11 Impact of sick industry in Bangladesh or BSB4.11 Impact of sick industry in Bangladesh or BSB
Increase of non-performing assets in organizational level as well as national level
Decrease contribution in GDP and GNP
Decrease in productivity at national level
Average effect in banks profitability
Increases the classified loan
Increase the lending rate of interest, which adversely affect the new and regular
borrowers
Affects adversely in the economic growth rate of the country
Create adverse psychological impact on the prospective entrepreneurs.
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SECTION-05
ANALYSIS OF DATA
YOUR PARTNER IN INDUSTRIALIZATION
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5.1 Introduction5.1 Introduction
Rehabilitation means to reshape the existing industries or projects so that it may operate
successfully in future. Keeping it mind I tried my best to find the appropriate way to
rehabilitate a sick industry.
Programs taken to rehabilitate the sick industriesPrograms taken to rehabilitate the sick industries
BSB has taken the following programs during the year 2003-2005-
Deferred payment of IDCP (Interest during construction period) after some
moratorium period in installments
Regular loan repaying projects are honored with special certificates and BSB
Crests. They are encouraged to take more loans/working capital.Problem projects are given waiver of interest, rephasement/rescheduling, block
account facilities for easy repayment of banks loan.
Injection of additional funds
Balancing & modernizing of machinery
Product diversification
Strengthening or changing the project management
Restructuring of loan accounts with transferring part of loans/interest in interest
free block account.
5.3 Facilities provided under rehabilitation program5.3 Facilities provided under rehabilitation program
We can explain with an example of Solaiman Textile Mills, Rupgonj, Narayangonj which
was a sick industry financed by BSB. BSB had given loan at the first time TK. 513 lac.
Second time BSB gave them under rehabilitation program:
Loan sanctioned TK. in lac
BSB had given loan at the first time 513.00
Under rehabilitation program:
Long term loan 163.00
Working capital 25.56
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1. Success about the proper way
2. Inspiration by providing motivation
After considering an industry as sick, then the industry is taken into rehabilitation by aiding
above additional support of those sick industry that can recovers the additional investment
then it seems to be as rehabilitated industry otherwise not. In some extraordinary case they
bound to take some terrible decision because of some political pressure.
5.7 Marketing perspective5.7 Marketing perspective
The employees of project rehabilitation department are employed in this case. Value
delivery sequence of Project Rehabilitation Department is shown below-
Choose the value
1. Segmentation the reasons of sickness
Uncontrollable
Controllable
The causes behind sick industries are discussed below-
Shortage of working capital
Lack of marketing knowledge
Technological obsolesces
Administrative and managerial inefficiencies
Present economic situation of home and abroad
Political condition
Other reasons behind sickness
2. Targeting to rehabilitate
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50
Choose the value
1. Segmentation
2. Targeting
3. Positioning
Provide the value
1. Product/Servicedevelops
2. Pricing
3. Distributing
Communicate the value
1. Sales force
2. Promotion
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1. Management perspective
2. Technical perspective and
3. Financial perspective
3. Positioning in the market
BSB rehabilitates the sick industries of their financed projects.
Provide the value
Theirproducts are-
Supporting the management
Providing the working capital
Technological enrichment
Theirprograms are-
Debt relief
Injection of additional funds
Direct management
Communicate the valueThe personnel of Project Rehabilitation Department are employed for this purpose.
5.8 Role of Management of Rehabilitation Department of BSB5.8 Role of Management of Rehabilitation Department of BSB
Bangladesh Shilpa Bank was established to stimulate industrialization in the country. So, it
financed in various types of industries. The industries on which it financed, all are not a
successful one. Some of them have failed to gain success and identified as a sick industry.
Rehabilitation Department is mainly deals with this sick industry. They find out the causes
of sickness of a particular project. Sometimes they reschedule loan according to the
capabilities of the project. Moreover more information and advises may be given so that
the entrepreneur may run the business more effectively, sufficient return may gain and
contribute to the economy. If the project is to rehabilitate, send to the law department and
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finally sued against the project. The main activities of rehabilitation department are as
follows-
The department primarily selects a sick project. PID investigates the project and
find out the causes of sickness and formed a committee to investigate the project. Then
it is taken to be considered for rehabilitation. After considering it as a rehabiliatable
industry, it is taken it the implementation after the approval of rehabilitation consultant
committee.
Take necessary action to rehabilitate sick project after appropriate investigation.
Take steps about rehabilitation document examination, recommendation
preparation, implementation and activation of plan.
Confirmation about project profitability
Take necessary steps about production, marketing of product and loan repayment.
Duties give up to the third party or previous management after successful managing
of the project.
Managing and directing recommendation preparation about take over project.
Analyze and compare the production, marketing and recovery of the rehabilitated
project and take appropriate action according.
When there is scope to rehabilitate a project, document transfer to law department
to take further steps.
5.9 Are all-sick industries are rehabilitated?5.9 Are all-sick industries are rehabilitated?
All sick industries are not rehabilitating because the all-sick firms have not all possibilities
to rehabilitate. Its mainly depends on the nature of sickness. The sick industry which is
probable to rehabilitate by providing and assisting the following supports.
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Monitoring is to supervise and control after the implementation of during the
implementation of the project. The monitoring from the viewpoint of the bank is to proper
utilization of loans and recover the loan payment with due time.
5.10(c) Sickness
When monitoring and appraisal practice is not accomplished properly then the project fall
in sickness. So, project implementation that depends on appropriate monitoring and
appraisal practice.
5.11 Rehabilitation program5.11 Rehabilitation program
The BSB also puts realistic efforts to rehabilitate its sick, problem-ridden and stuck-up
projects. In this perspective BSB has taken three-dimensional measures comprising of
1. Debt relief
2. Injection of additional funds
3. Direct management
The bank for rehabilitation of the sick projects took these three steps. It is mentionable that
with a view to making such projects capable of debt servicing through profitable operation,
the bank tried to solve their problems through a combination of measures including a
financial package.
The bank has so far rehabilitated 53 such projects. The list of these projects is already
mentioned in the sick industry chapter of this report. A summarized position of the
facilities extended under its rehabilitation program is shown below-
Types of facilities Amount involved (million taka)
Interest Waiver Allowed 880
Block Account Facility Provided 456Loan Rephrased 258
Sanction of loan 279
The bank also make a program of taking over management of the sick projects directly
where the above measures were not considered sufficient due to inefficient
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management/mismanagement. So they created a department called Sick Project
Management Department for ensuring efficient management of such sick projects. The
responsibility of this department is to make such projects capable of debts servicing
through profitable operation. So the bank continued sanctioning of term loans during FY
2003-2004. This year local currency loan of TK. 989 million, which was sanctioned to 27
projects. Of the total sanctioned amount TK 687 million was for 21 new projects and an
additional loan of TK. 302 million was for on-going projects including 3 for BMRE
purposes.
Sanction of term loan
Million TK.
2003-2004 2004-2005
Number of
projects
Number
of
projects
Local
currency
Foreign
currency
Total Number
of
projects
Local
currency
Foreign
currency
Total
New
projects
21 687 - 687 34 826 - 826
Existing
projects
(BMRE)
3 166 - 166 1 47 - 47
Additional
loans
3 136 - 136 3 136 - 136
Total 27 989 - 989 38 1009 - 1009
Under rehabilitation program BSB has taken so many measures to rehabilitate the sick
industries. Summarized measures that are taken by BSB to rehabilitate the sick industries
are given below-
5.12 Measures taken by BSB5.12 Measures taken by BSB
Loan outstanding Measures taken (Million TK.)
(Million TK.)
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Overdue
T
otaloutstanding
Projects
Rephasement
W
aiverofinterest
BlockA/C
A
dditionalLoans
WorkingCapital
Equ
ityparticipation
525 950 12 37 (10) 35 (10) 28 (7) 21 (9) 2 (1) 1 (2)
411 785 21 13 (6) 13 (6) 54 (6) 161
(16)
30 (5) 4(2)
46 350 5 73 (3) 73 (3) 18 (3) 6 (4) 52 (5) 18 (2)
444 524 3 - - - 1 (1) 6 (2) -
23 40 2 - - - 14 (2) - -
51 94 2 1 (1) - - 7 (1) 2 (1) -
66 85 2 - - 4 (1) 5 (2) - -
44 53 - - - - - - -
33 45 - - - - - - -
22 28 2 - - - 33 (2) - -
165 211 1 -- - - 1 (1) 1 (1) -
70 101 1 - - - 6 (1) - -
3 30 1 3 (1) - - 8 (1) - -
3 3 - - - - - - -
1906 3299 53 118
(21)
121
(19)
104
(17)
263
(39)
93 (15) 23 (6)
Source: Project rehabilitation department of BSBNote: Parentheses indicate number of projects
5.13 List of a few successful rehabilitated industries
After taking some initiatives and providing assistance in terms of management, technical,
marketing and financial the following sick projects financed by BSB has become
successful during the year 2003-2005.
Chemicals and Pharmaceuticals Location
01. S.S.R Chemical Industries Ltd. Dhaka02. Islam Polymers & Plasticizer Ltd. Tangail
03. Raja Plastic Industries Ltd. Gazipur04. KDH Laboratories Ltd. Dhaka05. Asiatic Business Ltd. Sylhet06. Pharmadesh Laboratory Ltd. Dhaka
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Cotton, Woolen & Synthetic Textiles
01. Azim Mannan Garments Ltd. Chittagong
02. Desh Gannents Ltd. Chittagong03. Jems Sweaters (Pvt) Ltd. Dhaka04. Auto Spinning Mills Ltd. Gazipur
05. Techno Textile Mills Ltd. GazipurFood & Allied Products01. Meenhar Sea Foods Ltd. Chittagong02. Mimi Chocolate (Bd) Ltd. Dhaka03. Modern Industries (Bd) Ltd. Munshigonj04. Mustafa Cold Storage Ltd. Rangpur05. Bangladesh Beverage Industries Ltd. Dhaka
06. Bengal Fish & Frogleg (Export) Ltd. Chittagong
Paper, Paper product & Printing
01. Eagle Box & Carton Mfg. Ltd. Dhaka
02. Holiday Printing Ltd. Dhaka
03. Toka Ink Ltd. Dhaka04. Bangladesh Paper Product Ltd. Chittagong05. Orient color Printers Ltd. Chittagong06. Transfer Paper Ltd. Bogra
Tannery & its products
01. Apex Footwar Ltd. Dhaka02. Lexco Ltd. Dhaka03. Leather Board Ltd. Dhaka04. Comfort Footwar Ltd. Dhaka
05. Bangladesh Chemical Ltd. Narayangonj
Non-metallic Mineral Products
01. Savar Refractories Ltd. Dhaka
02. Tajma Ceramic Industries Ltd. Bogra03. Standard Ceramic Industries Ltd. Gazipur
Metal products
01. Rangpur Foundry Ltd. Rangpur02. Scala Industries Ltd. Gazipur03. Oriental Foundry & Agro Engineering Ltd. Dhaka04. Bogra Metal Industries (Pvt.) Ltd. Bogra
Electrical Machinery & Goods
01. Bangladesh Lamps Ltd. Dhaka02. National Fans Ltd. Gazipur
03. Eastern Tubes Ltd. Dhaka04. National Accessories Ltd. Chittagong
Service Industries & Miscellaneous
01. Hotel Simon Ltd. Coxs Bazar02. Hotel Elysium Ltd. Dhaka03. G.Q. Ball Pet Ltd. Magura04. Rajanigandha Tankers Ltd. Dhaka
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Chapter-06
Findings, Recommendation &
Concluding Remark
YOUR PARTNER IN INDUSTRIALIZATION
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6.1 Introduction6.1 Introduction
Bangladesh Shilpa Bank plays a vital role for industrialization as a developed financial
institution. BSB is continuing its bolstering endeavor for up-graduation of our economy.
Although there are a lot of favorable and strengthen position of BSB in respect of its
activities. Nevertheless BSB has some drawbacks that are responsible for huge amount of
losses each year. BSB should overcome such problem as early as possible to become a
profitable one. One important problem of BSB is that it is a decentralized organization and
each department is responsible for particular activities but they have lack of co-ordination
to achieve the central objectives. We observed a large number of projects are sick and they
are loan defaulter. For that I criticize the loan appraisal procedure because it is the vital
documents for loan issue. In this situation I recommended some points that will help BSB
to overcome some of their problems.
6.2 Findings of the Study6.2 Findings of the Study
During the internship program I have found out the following findings from my study:
Sometimes improper feasibility reports are submitted by sponsors, which do not
contain adequate and reliable information.
Sometimes pressure groups involvement in sanctioning loan
Lack of business experience of the entrepreneurs. So, when they start business they
may be failure in business and they may become loan defaulter.
Lengthy procedure and long time (more than three months) involved in the
appraisal of project.
Lack of adequate, updated and accurate information from the Management
Information System (MIS)
Unstable policy of the government due to political changes over time
Sometimes inefficient allocations of resources create a huge amount of bad debt
Lack of financial commitment on the part of the borrower, the result being the
failure of mobilization of equity by them in future means they divert their equity in
other purpose after getting the loan amount.
Lack of effective monitoring in projected work.
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Management conflict is one of another important problem in the situation of
sickness.
Lack of motivation and team speed
Lack of proper scheduling in projected work.
Absence of an up-to-date project appraisal manual, because the present manual was
designed 18 years ago. So many aspects should consider which do not cover by the
existing manual.
Dependence on imported technology and non-availability of adequate information
about that from local source. Lack of adequate, updated and accurate information in the
country. Both
Recommended