Full & final ovi

CHAPTER- 01

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The internship program of MBA student of the faculty of business studies is a vital

part of MBA program. So we need proper application of our knowledge to get some

benefit from our theoretical knowledge to make it more effective.

We engage ourselves in such field to make proper use of our knowledge in our

practical life. Only when we come to know about the benefit of the theoretical

knowledge, such an application is made possible through internship. After compliance

of the program period a student must present the report on assigned topic to the

supervisor and the department. The program period is three month. During this period

I worked with employees of the organization. In consulting with my supervisor of the

department and bank employee I have selected a topic. My internship topic is “A

Study on Loan Sanctions & Recovery of Bangladesh Development Bank

Limited”

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

1

through internship. For the completion of this internship program, the author of the

study was placed in a bank namely, “Bangladesh Development Bank Ltd.”. 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 loan sanction & loan

recovery of BDBL.

1.2 OBJECTIVES OF THE REPORT

The prime objectives of the study are to evaluate the Loan performance of BDBL.

Besides this, there are some other objectives which are as follows:

To analyse the loan management by BDBL.

To highlight the credit and recovery procedures.

To get an idea about the condition of loan default mechanism of BDBL.

To find out the contribution of BDBL towards the economy of Bangladesh.

1.3 SCOPE OF THE REPORT

I have been selected for my internship program at Head office of Bangladesh

Development Bank Limited. The main focus of my report is to analysis the Loan

Sanctions & Recovery of Bangladesh Development Bank Limited. Bank gives me the

permission to work as an intern in the following department-

Human Resource Management Department

Principle Branch

Loan Operation Department

SME Department

Loan Recovery Department.

2

I have collect information from the bank & the working areas of my internship will

mainly in Administrative Division, General banking division & Development

Banking Division.

1.4 LIMITATIONS OF THE REPORT

I have also faced some problems during my internship that can be considered as

limitations of study. This internship report is my first assignment outside our course

curriculum in the practical life. In performing this report my lacking of proper

knowledge greatly influenced in this performance. Besides this, some limitations in

preparing this report have been faced. The main limitations are as follows:

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’ internship’s experience is not enough to find out all the pros and

cons of such a vast project.

As Bangladesh Development Bank Ltd. 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.

1.5 STRUCTURE OF THE REPORT

I prepared this report six chapters. In chapter one describes the Origin of the Report,

Background of the Study, Objectives of the Report, Scope of the Report, Limitations

of the Report & Structure of the Report.

3

In chapter two, I tried to describe the brief overview of banking in Bangladesh and

overview of Bangladesh Development Bank Limited (BDBL). It covers detailed

information about BDBL. Here I also present corporate information about BDBL.

Here I find the financial & ratio analysis of BDBL. On the basis of that I finally figure

out the SWOT analysis of the BDBL.

In chapter three, I briefly describe the loan sanction practice of BDBL and Sector

wise loan performance analysis BDBL describe.

Chapter four tells about the recovery of loan. It also describes the Process of Loan

Appraisal, Issue of loan application form, Instruction & co-operation to fill up the

form, Scrutiny of loan application and other paper evaluation of loan proposed ,

Preparation of appraisal report, Technical analysis, Financial analysis & Economic

analysis / market analysis and a clear picture of loan portfolio and loan administration.

Chapter five represents the Findings and analysis regarding the Objectives.

And in last and sixth chapter I have drawn the conclusion in the light of overall

discussion and also given recommendations on the base of given findings.

I have analysed these reports and documents highlight of analytical review. Some

graphical presentation, statistical tools, and table to find out different types of

analytical result, growth rates and trend analysis have also been used.

4

CHAPTER-2

AN OVERVIEW OF THE ORGANIZATION

2.1 BACKGROUND OF BANGLADESH DEVELOPMENT LTD BANK

With the decision of the Government, Bangladesh Development Bank Ltd. (BDBL)

was incorporated on 16 November, 2009 as a Limited Company under the Companies

Act. 1994 by merger of former Bangladesh Shiplap Bank (BSB) and Bangladesh

Shiplap Ran Sanest (BSRS) are two Development Financial Institutions (Dais) in the

public sector. Bangladesh Shiplap Bank (BSB) was established in October 31, 1972

for accelerating the industrial pace of the country through providing loans and equity

to the industrial projects as per Bangladesh Shop Bank Order, 1972 (President's Order

No. 129 of 1972). With the same objective, Bangladesh Shiplap Ran Sanest (BSRS)

was also established in October 31, 1972 as per Bangladesh Shiplap Ran Sanest

Order, 1972 (President's Order NO. 128 of 1972.

In order to carry on business activities of Bangladesh Bank issued banking licence

on 19-11-2009.Two Vendor Agreements were signed between the Governments of

the People’s Republic of Bangladesh and the BDBL on 31 December, 2009 to acquire

and take over all of their (BSB & BSRS) assets, benefits, rights, powers, authorities,

privileges, liabilities, borrowings and obligations and to carry on with the same

business. As a public limited company, BDBL formally embarked its journey on

January 03, 2012.It extends financial assistance for setting up industries and provides

all kinds of commercial banking services to its customers through its branch network

in Bangladesh. The BDBL also inherited membership of Dhaka Stock Exchange

Limited (DSE) and Citation Stock Exchange Limited (CSE). In order to contribute to

5

the capital market, it acts as stock dealer and operates two brokerage houses, one at

Motijheel and the other at Kawran Bazaar. These provide which are providing

services to investors- n small and medium. The BDBL is also managing a close and

Mutual Fund with paid up capital of TYK. 5.00 Crore.

2.2 CORPORATE INFORMATION:

Table-2.1: List of Corporate information

1. Name Bangladesh Development Bank Limited.2. Legal Status Public Limited Company3. Date of incorporation November 16, 20094 Banking Licensee obtained November 19, 2009 issued by

Bangladesh Bank5 Vendors’ Agreement Signed December 31, 2009 between the

Government and Board of Directors of BDBL nominated by the Government

6 Formal Inauguration January 03, 20107 Registered Office BDBL Bhaban, 8, Rajuk Avenue,

Dhaka-10008 Authorized Capital TK 1000 crore9 Paid up capital TK 100.00 crore 10 Reserve TK. 2270 million11 Total Assets TK 16747 million12 Total Human Resource 102513 Number of Zonal Office 414 Number of Branch Office 2115 .Membership Dhaka Stock Exchange & Chittagong

Stock Exchange Ltd16 Launching of retail banking April 201017 Corporate Tax Rate 42.50 %18 Auditors MESSERS ACNABIN AND HUDA

VASI CHOWDHURY & CO19 Legal Adviser & Consultant A. K. M. Nazrul Islam ,Bar-AT-Law20 Credit Rating Agency CRISL21 Income Tax Advisor K. M. HASAN & CO 22 Face Value per share TK.100.0023 Web Site www.bdbl.com.bd

On January 3, 2013 the bank started with 17 Branches, 4 Zonal Offices and 21

Departments in Head Office. Two new departments namely credit Risk Management

6

http://www.bdbl.com.bd/

Department and International Banking Department have been added. They plan to

open gradually 10 more branches in different commercially and geographically

important places of the country and have already got permission from the Central

bank for opening three new branches in Dhaka, Narayanganj and Khatungonj in

Chattanooga which are under process. Sites in Dhaka, Narayanganj and Khatungonj

have already been selected and these three branches may be inaugurated within

September & October, 2013 respectively. We know that Present BDBL come from

BSB and BSRS. When BSB operate their banking activities only Loan section. And

same activities were BSRS. So their employee condition is limited size. But now they

are start commercial activities. So need their more employees. On the basis of HR

Department of we know that their current employee number is 1025.

2.3 OPERATIONAL ACTIVITIES OF THE BANK

Bangladesh Development Bank Ltd. continued its operational activities as was done

former BSB & BSRS to make a defective contribution towards industrial

development of the having comparative opportunities, export prospects, forward and

backward linkages and local technology as well as indigenous raw material based and

eco-friendly projects. Commercial banking and capital market operation were also

other area of businesses.

2.4 LOAN APPLICATION RECEIVED

In 2013, the Bank received 757 loan proposals with loan amount of TK. 73.56 crore.

Among these loan applications, 24 loan proposals were for long term loan and 31 for

SME, loan while the others included 19 for cash credit and 683 for consumer’s credit

and commercial loan.

7

Sanction and disbursement of term loan: The Bank kept on sanctioning of term

loans during 2013 also. This year long term local currency loan of TK. 35.93 crore

was sanctioned to 37 projects while the Bank disbursed term loan TYK. 37.11

crore to 47 projects / loan proposals in the form of local currency at the year end

of 2013.

Sanction and disbursement of short term loan: During the year 2013, the bank

sanctioned working capital loan of TYK. 31.61 core to 18 projects and disbursed

TYK. 30.32 core to 16 projects. The Bank also sanctioned consumer credit TYK.

9.56 crore was disbursed against 630 loan proposals. The details of sanction and

disbursement of term loan including short term loan were shown below in Table-

2.2 :

Table-2.2: Sanction and disbursement of loan in 2013

Nature of Loan

Sanction Disbursements

No. Of Projects/ Proposal

Amount in Core Taka

No. Of projects/proposals

Amount in crore

TakaA. Long Term Loan

47 37.11

1)Loan for new project 13 10.50

2)Loan for BMRE project 2 1.05

3)Additional loan for existing project

4 20.41

4)Loan for SME 18 3.96

Sub Total : 37 35.93 47 37.11B. Short Term Loan

1. Cash Credit 18 31.61 16 30.322. Consumer Credit 639 9.70 630 9.56

3. Commercial Loan 13 0.08 13 0.08Sub Total 670 41.39 659 39.96

Grand Total (A+B) : 707 77.32 706 77.07

2.5 LOAN RECOVERED

8

Recovery of loan is crucial index to measure the success of a lending organisation. |

The Bank strengthened its recovery drive for realising loans and dues from its

borrowers and notable success achieved. In 2013, total recovery target of loans was

TYK. 163 .08 crore, against which actual cash recovery was TK. 170.52 crore,

showing about a 5% rise over the target. It showed core from written off loan were

recovered during the reporting year. The outstanding loan of TK. 39.85 core was

regularised through rescheduling and replacement of bad and doubtful loan accounts

of 17 projects. Loan recovery scenario was depicted in Table -2.3:

Table-2.3: Recovery of loans during 2013

Category of Loans Recovery Target Amount Recovered

Unclassified 96.80 122.32

Classified 26.28 23.56

Written-off 40.00 24.64

Total 163.08 170.52

2.6 FINANCIAL STATEMENT & RATIO ANALYSIS

Ratio Analysis is used as a way of analysing the performance of a company or

organization. As banks have very different operating structures than regular industrial

companies, it stands to reason that investors have a different set of fundamental

factors to consider, when evaluating banks. This is not meant as an exhaustive or

complete list of the financial details an investor needs to consider, when

contemplating a bank investment. I choose BDBL & Agroni for financial statement &

ratio analysis.

2.6.1 LOAN GROWTH

9

For many banks, loan growth is as important as revenue growth to most industrial

companies. The trouble with loan growth is that it is very difficult for an outside

investor to evaluate the quality of the borrowers that the bank is serving. Above-

average loan growth can mean that the bank has targeted attractive new markets, or

has a low-cost capital base that allows it to charge less for its loans. On the other

hand, above average loan growth can also mean that a bank is pricing its money more

cheaply, loosening its credit standards or somehow encouraging borrowers to move

over their business.

2011 2012 2013

Agroni 12236085269 13256184445 19085656173

BDBL 10046075415 14743064011 15457176954

1000000000

3000000000

5000000000

7000000000

9000000000

11000000000

13000000000

15000000000

17000000000

19000000000

Loan Growth

AgroniBDBL

Figure-2.1: loan Growth

In this figure we find that loan growth of BDBL is not much better than Agroni Bank.

In 2011-2012 BDBL loan growth is improved compared to Agroni bank. But in 2012-

2013 BDBL loan growth is improved but it not better than Agroni Bank.

2.6.2 DEPOSIT GROWTH

10

As previously discussed, deposits are the most common, and almost always the

cheapest, source of loanable funds for banks. Accordingly, deposit growth gives

investors a sense of how much lending a bank can do. There are some important

factors to consider with this number. First, the cost of those funds is important; a bank

that grows its deposits by offering more generous rates, is not in the same competitive

position as a bank that can produce the same deposit growth at lower rates. Also,

deposit growth has to be analysed in the context of loan growth and the bank

management's plans for loan growth. Accumulating deposits, particularly at higher

rates, is actually bad for earnings if the bank cannot profitably deploy those funds.

2011 2012 2013

Agroni 16283624192 20326011342 22208360096

BDBL 4706790985 12945566078 19988788842

2,500,000,000

7,500,000,000

12,500,000,000

17,500,000,000

22,500,000,000

Deposit Growth

AgroniBDBL

Figure-2.2: Deposit Growth

In this figure we see that the BDBL deposit growth is improved but compare to the

Agroni Bank it’s not better. Agroni Bank deposit growth is much better than BDBL.

2.6.3 LOAN/DEPOSIT RATIO

11

The Loan/Deposit Ratio helps assess a bank's liquidity, and by extension, the

aggressiveness of the bank's management. If the loan/deposit ratio is too high, the

bank could be vulnerable to any sudden adverse changes in its deposit base.

Conversely, if the loan/deposit ratio is too low, the bank is holding on to unproductive

capital and earning less than it should.Loans in the numerator of the formula are

investments or assets for a bank. Deposits in the denominator of the formula can be

considered the same as debt as the individual depositors are essentially granting

monies to the bank with a return equal to the deposit rates and that can be called upon

at any time. In these respects, the loan to deposit ratio is similar to a liquidity ratio and

debt ratio.

2011 2012 2013

Agroni 1.6351 1.3913 0.8695

BDBL 1.3243 1.4848 0.7313

10%

30%

50%

70%

90%

110%

130%

150%

170%

Loan/Deposit Ratio

AgroniBDBL

Figure-2.3: Loan/Deposit Ratio

In this figure we find that BDBL loan deposit ratio comparing with Agroni bank loan

deposit ratio is reduce year to year.

12

2.7 SWOT ANALYSIS OF THE ORGANIZATION

SWOT analysis is a tool that identifies the strengths, weaknesses, opportunities and

threats of an organization. Specifically, SWOT is a basic, straightforward model that

assesses what an organization can and cannot do as well as its potential opportunities

and threats. The method of SWOT analysis is to take the information from an

environmental analysis and separate it into internal (strengths and weaknesses) and

external issues (opportunities and threats). Once this is completed, SWOT analysis

determines what may assist the firm in accomplishing its objectives, and what

obstacles must be overcome or minimized to achieve desired results. In case of BDBL

SWOT analysis is given below:

13

1. Only one industrial bank of

our country.

2. Strong capital & asset base.

3. Deep focus on quality

control.

4. A dedicated line of human

resource & internal control

and compliance.

1. More and less all the

competitors in the

baking industry are

competent.

2. Too much interrupted by

international assistance

institution like World

Bank, IMF, WTO etc.

1. There are huge demand of

micro-credit, small and

medium scale finance.

2. Bangladeshi economy is

expanding rapidly.

3. Many opportunities of

innovation in the Banking

industry.

1. Weak internal control and

working environment.

2. Limited publication even

they have no particular

books on BSB that may

cover everything.

3. Lack of co-ordination in

the policies or directives.

HREATS

TPPORTUNITIES

O

EAKNESSES

WTRENGTHS

S

2.7.1 STRENGTH OF BDBL

BDDL is a development finance institution. It plays significant role in the industrial

development of Bangladesh. Its untiring endeavor is remarkable. As a finance

institution it has both strength and weakness. All the contribution of BDBL is the

consequences due to its strength. On the other hand failure of BDBL is for

unconsciousness and unauthorized exercise of power. It is indeed that the contribution

of BDBL is below the expectation. BDBL has some skill manpower such as Engineer,

Economist, Business executives, lower and so forth. Their capabilities are

deteriorating for lack of proper working environment and unexpected political

pressure. In some cases they are not able to work independently. If BDBL can use his

personnel sufficiently, it will be profitable in future.

BDBL has greater capacity to collect money from foreign countries. It may come

through loan aid, grant etc. and BDBL has many potential sectors where it can

disburse more money as loan. If BDBL able to merge between two (resource

mobilization and loan disburse), it will give good results for the economy as well.

BDBL is only one industrial bank of our country. All industrial must have to go

BDBL for industrial loan. They can take these opportunities through their willingness

and service mentally.

2.7.2 WEAKNESS OF BDBL

Working environment& internal control of BDBL is weak. Many people are working

in a big room. As a result office room has converted into a noisy place. As a big

organization has limited publication even they have no particular books on BSB that

may cover everything. Lack of co-ordination in the policies or directives are shown in

this BDBL.

14

2.7.3 OPPORTUNITY OF BDBL

The opportunity of BDBL is that it can regain its market and role by developing some

remedial measures, such as making a market research cell, enabling the BOD

independent. There are huge demand of micro-credit in that time & economy is

expanding rapidly in Bangladesh. It can also reduce the processing time of loan

sanction and strengthening its recover drive. However, it should diversify its products

and services to compete with the ever rising private commercial bank.

2.7.4 THREATS TO THE BDBL

There are many threats to the BDBL most strong one is the rising money market of

Bangladesh. There are now so many private commercial banks that provide credit of

various terms to the existing and new business. That is why; the demand of BDBL’s

loan is decreasing over the last decade. The business people do not want to wait three

to four months for taking loan. They want one sop service. So time will come when

the demand of loan of BDBL would never attract the entrepreneurs. International

assistance institution like World Bank, IMF &WTO are interrupt by many ways.

15

CHAPTER- 03

LOAN SANCTION PRACTICE OFBDBL

3.1 INTRODUCTION:

After appraising the project, project appraisal committee submits the project appraisal

report on the basis of that a project is approved. If the project is approved, loan is

sanctioned to the proposed project. During FY 2012-13, the bank sanctioned total

long term loan of tk.436 million to 27 projects and FY 2011-12, sanctioned loan was

tk.918 to 20 projects.

3.2 LOAN SANCTIONS PROCEDURE:

First of all, a client who wants to have a loan ask for an application form, which is

known as Bangladesh Standard Questionnaire form (BSQE).He has to pay one eight

of one percent cash money 1/8th of 1% of the total loan amount with the filled form.

The person is required to submit necessary papers and documents by the bank the

information generally consists of following:

Name of the product.

Name & designation of the entrepreneur.

Type of project &Type of products.

Site of the project.

Amount of the project.

Copy of memorandum, articles of association and other papers relating to

legality of the projects.

Site, production process flow diagram etc.

16

When all the required papers and documents are submitted along with the fee

TK.1000 plus 1/8th of 1% of total loan amount, the proposal is then under

consideration of judging the project viability.

3.3 SECTOR-WISE POSITION OF BANK’S LOAN PORTFOLIO:

Table-3.1: Sector-wise Loan Portfolio

Sectors No. of project

Total Loan

outstanding (In

Million Taka )

Food and Allied Products……

Jute and Allied products……..

Cotton. Woolen and Synthetic

Textiles……………………….

Paper, Paper Products and

Printing………………………

Tannery and Leather Products

Non Metallic Mineral Products.

Metal Products ……………..

Electrical Machinery and Goods

Machinery & spare parts……

Water Transport…………….

Chemical & Pharmaceuticals.

Petro Chemical Products…..

Service Industries…………..

Miscellaneous ………………

48

1

49

6

4

3

5

1

4

4

14

3

30

3

352

1

4635

124

79

4

19

33

20

54

228

107

196

76

3.4 SECTOR-WISE POSITION OF BANK’S LOAN PORTFOLIO:

Here are some sector that I present graphically. I summarized last five years data to

execute this figure that are given here:

17

3.4.1 JUTE & ALLIED PRODUCTS:

2008-09 2009-10 2010-11 2011-12 2012-13

No. of Project 5 3 3 2 1

Total Loan outstanding 674 538 535.75 1.38 1

50

150

250

350

450

550

650

750

5 3 3 2 1

674

538 535.75

1.38 1

Jute & Allied products

No. of Project Total Loan outstanding

Figure-3.1: Jute & allied products.

During FY 2012-13 total members of jute and Allied products projects in

the loan portfolio stood at 1 with a total loan outstanding of Tk. 1 million.

In the preceding year under this sector the total member of projects of the

loan portfolio stood at 2 with a total loan outstanding of Tk. 1.38 million.

In FY 2012-13 the member of project 1 and loan amount Tk. 0.38 million

are decreased comparing to the FY 2011-12 under this jute and allied

products.

During FY 2008-09 to FY 2012-13 there is decreased trend from previous

year. During FY 2008-09 total member of Jute and allied products

projects in the loan outstanding of Tk. 674 million, total member of

projects 5 and loan outstanding amount Tk. 673 million is decreased in FY

2012-13 comparing to the FY 2008-09 under this jute and allied products.

18

3.4.2 COTTON, WOOLEN AND SYNTHETIC TEXTILES:

2008-09 2009-10 2010-11 2011-12 2012-13

No. of Project 87 53 53 52 49


500

1500

2500

3500

4500

5500

87 53 53 52 49

4148

5304

4322.43 4401.15 4635

Cotton, woolen and synthetic Textiles


Figure-3.2: Cotton, woolen and synthetic Textiles.

During FY 2012-13 total members of cotton, wooden and synthetic textiles

projects in the loan portfolio stood at 49 with a total loan outstanding of

Tk. 4653 million. In the preceding year under this sector the total no. of

projects of the loan portfolio stood at 52 with a total loan outstanding Tk.

4401.15 million. In FY 2012-13 the total member of projects 3 are

decreased and loan outstanding amount Tk. 234 million are increased

comparing to the financial year 2011-12 under this cotton wooden and

synthetic Textiles sectors.

During financial year 2008-09 total number of cotton woolen and synthetic

Textiles projects in the loan portfolio stood at 87 with a total loan

outstanding at Tk. 4148 million. The total member of projects 38 is

increased and loan outstanding Tk. 487 million is also decreased

19

comparing to the financial year 2012-13 under this cotton woolen and

authentic Textiles sectors.

3.4.3 FOOD & ALLIED PRODUCTS:

2008-09 2009-10 2010-11 2011-12 2012-13

No. of Project 46 31 43 46 48


100

300

500

700

900

1100

1300

1500

46 31 43 46 48

1335

491

224.2 246.16352

Food and allied products


Figure-3.3: Food and allied products.

During FY 2012-13 total number of food and allied products projects in

the loan portfolio stood at 48 with a total loan outstanding of Tk. 352

million. In the preceding year under this sector the total member of

projects of the loan portfolio stood at 46 with a total loan outstanding of

Tk. 1335 million.

In FY 2011-12 total numbers of projects and total loan outstanding are

decreased comparing to the previous FY under this Food and Allied

products.

20

3.4.4 ELECTRICAL MACHINERY AND GOODS:

2008-09 2009-10 2010-11 2011-12 2012-13


Amount of loan 354 0 16 21 33

25

75

125

175

225

275

325

375

6 0 1 1 1

354

0 16 21 33

Electrical Machinery and goods

No. of Project Amount of loan

Figure-3.4: Electrical Machinery and goods.

During FY 2012-13 total numbers of machinery and spare parts projects in

the loan portfolio stood at 1 with a total loan outstanding of Tk. 33 million.


loan portfolio stood also 1 with a total loan outstanding of Tk. 21 million.

In FY 2011-12 total numbers of projects remain unchanged but loan

amount decreased comparing to the FY 2012-13 under this Machinery and

spare parts sectors.

21

3.4.5 PETRO CHEMICAL:

2008-09 2009-10 2010-11 2011-12 2012-13


Amount of loan 102 133 121 123 107

10

30

50

70

90

110

130

5 5 5 4 3

102

133121 123

107

Petro Chemical

No. of Project Amount of loan

Figure-3.5: Petro Chemical Products

During FY 2012-13 total number of Petro Chemical Products projects in

the loan portfolio stood at 3 with a total loan outstanding of Tk. 107

million.


loan portfolio stood 4 with a total loan outstanding of Tk. 123million.

In FY 2012-13 total numbers of projects and total loan outstanding are

decreased comparing to the previous FY under this Service Industries.

22

23

3.5 LOAN SANCTION SCENERY OF BDBL OVER LAST 10 YEARS

(Amount in thousand BDT)

Here 10 years loan sanction of BSB to various sectors has been shown in the table

3.2:

Table-3.2: Loan Sanction of BDBL in 10 years

Loan Sanction of BDBL in 10 yearsName of the

Projects2003-

042004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11 2011-

122012-

13

Textiles 252852

440093

628498

645628

685794

530400

428690

432243 1303

104759000

Electrical 255 365 697 5208 1009 0 0 15812055

033000

Food & Allied 17591

19587

20597

17819 22650

49100

29226

22402246160

352000

Jute & Allied 15818

40385

18324

19313 30513

53800

53671

53575 13801000

Machinery & Metallic Products

8785 3909 4093 7101 8019 7600 1119

10832526

020000

Petrol Chemicals

3711 6300 3055 3379 6226 13300

12649

12084122450

107000

Rubber 95 109 235 315 301 398 0 0- -

Service 25555

20594

25829

27829 30845

20400

22838

22450207110

196000

Tannery 18880

20200

13220

13441 15509

10000

10903

106068933

079000

Water Transport

8097 5011 4525 3518 60745

5028 6030

69167440

054000

Total 348567

556193

718146

900764

90599

586200

565126

563020

5699740

5965000

24

CHAPTER -4

RECOVERY OF LOAN

4.1 INTRODUCTION

Loan recovery is a crucial index to measure the success of a lending organization. The

success and failure of a lending organization largely depends on its drive for realizing

loans and dues from its borrowers. In 2011-12, was tk.900 million, against which

actual cash recovery was tk.981.20 million constituting 100+ percent of the target.

But during the reporting year, outstanding loan of tk. 423.00 million is regularized

through rescheduling and replacement of bad and doubtful loan accounts of 16

projects. In FY year cash recovery was tk. 1065.71 million and the amount of loan

regularized through replacement was tk. 280.20 million.

4.2 RECOVERY OF LOAN

Table-4.1: Recovery of Loan

Category of loan Loan Amount recovered (Million Taka)2011-12 2012-13

A) Long Term Loan:

Long Term project loan 735 596Bridge Loan .40 .29Staff loan 48 62Administered Loan 38Sub-Total 784 696

B) Short Term Loan :Working Capital Loan 67 58

C) OthersDebenture/ Shares/ loan against FDR

11 16

Written off Loan 120 138Sub- Total: 131 154Grand Total (A+B+C) 981 908.29

25

4.3 LOAN RECOVERY METHODS:

BSB usually follow a formal way to recover its loan. Normally before an installment

falls due they issue many reminders to remind sponsor to prepare to pay loan. They

use phone call, formal letter, and physical visiting to remind the sponsor to prepare for

paying installment on due time. Formally, central recovery department perform this

duty. The officers of central recovery department go for physical visit to project site

twice in a year. By this visiting they try to understand the present condition of the

project and predict future position of the project. By analyzing the condition of the

project, they suggest sponsors to take necessary to measure to sustain project and

increase the cash flow. Sometime they offer them additional credit to strengthen their

cash generation, which is called cash credit. However, the recovery method of BSB is

not still modern and sophisticated one like the existing private lending and financial

organization.

Some Other Technique Which Are Applied by BSB to Recover the Loan and

Advances are as follows.

BDBL ensures regular recovery of loans as per repayment schedule

BDBL reserves the right to nominate its officers to act as directors on the

BOD of the company.

The borrowers who pay their installments of the principal loan, interest, and

other charges on or before due date as per repayment schedule may be allowed

rebate at a rate of 5% on interest by BSB Board.

Personal properties of directors, managing directors are attached as collateral

securities and law department-1 recovers it.

Visit the project personally by BSB concerned department officers.

26

At first negotiation personally for rescheduling or others without legal action

through noticing. Personal negotiation gives positive result to recover the loan

then legal action.

Thus it can be said that the officers of BSB try hard and fast to recover the advances

in any way

4.4 SECTOR-WISE LOAN RECOVERY OVER 10 YEARS

Here I present 10 sectors from which BSB recovered loan over 10 years. By the loan

recovery table, we will better be able to understand about the performance of BSB in

regarding loan collection and sector-wise performance of loan collection.

4.4.1: JUTE AND ALLIED PRODUCTS

In collection of loan money in Jute and Allied Products is remarkably upward trend

except in FY2012-13. But during FY 2008-09 was recovered tk. 70272.

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Jute & Al-lied Products

41458 44371 28171 26285 43001 70272 14972 10182 9170 116000

10000

30000

50000

70000

90000

110000

130000

41458 44371

28171 26285

43001

70272

14972 10182 9170

116000

Jute & Allied Products

Figure-4.1: Jute and Allied Products

27

4.4.2: COTTON WOOLEN AND SYNTHETIC TEXTILES

The highest recovery of this sector is tk. 702722 thousand in the year 2008-09 and

other years are medium position. So this sector is in volatile position because

increasing and decreasing pattern in existed in these sectors.

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Cot-ton Woolen & Syn-thetic tex-tiles

414589 443717 281719 262854 430019 702722 811319 640390 612120 555940

50000250000450000650000850000

414589 443717281719 262854

430019

702722811319

640390 612120 555940

Cotton Woolen & Synthetic textiles

Figure-4.2: Cotton Woolen and Synthetic textiles

4.4.3: FOOD AND ALLIED PRODUCTS

Food and Allied sectors in respect of collection of loan money from the sponsors is

positive because it is also a positive sector in our country.

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Food & Al-lied Products

13319 17574 19270 19907 25160 25232 17809 30902 25160 32900

25007500

1250017500225002750032500

1331917574 19270 19907

25160 25232

17809

3090225160

32900Food & Allied Products

Figure-4.3: Food and Allied Products

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4.4.4: ELECTRICAL MACHINERY AND GOODS

This sector was a downward trend from FY 2003-04 to 2009-10. But from 2010-11 to

2012-13 is well recovery position.

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Elec-trical Ma-chinery & Goods

176 270 175 130 161 431 881 1825 2800 4552

250175032504750

176 270 175 130 161 431 8811825

2800

4552Electrical Machinery & Goods

Electrical Machinery & Goods

Figure-4.4: Electrical Machinery and Goods

4.4.5: PETRO-CHEMICALS

Loan recovery in these sectors is also in volatile positive. However in 2012-13 the

more loans are recovered.

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Petro-chemi-cals

2629 3101 2711 7400 2468 3561 51612 24915 17210 27310

50001500025000350004500055000

2629 3101 27117400

2468 3561

51612

2491517210

27310

Petro-chemicals

Petro-chemicals

Figure-4.5: Petro-chemicals

29

CHAPTER- 5FINDINGS AND ANALYSIS

5.1. FINDINGS ON LOAN SANCTION:

BDBL grants normally four kinds of loans such as, continuous loans, demand

loan, fixed term loans, and short term agriculture and micro finance credit.

During 1995-96, the Bank started sanctioning working capital to the project that

they financed, but in this case they incurred huge losses being unable to recover

the loan.

BDBL uses project appraisal technique comprising technical, market, financial,

economic, and management & organization analysis.

The main problems can be summarized in the following way:

Sponsors always tend to overstate their future cash flow, revenue and

income and understate the risk with capturing market and expenses.

Market don’t remain same over the years especially over the time gap

between loan sanction and loan recovery.

Loan sanction process is not always free from political pressure.

Lengthy procedure and long time involved in the appraisal of project.

Sometimes, there is pressure groups’ involvement in sanctioning loan.

Many projects are sanctioned loan due to influence of political and

pressure group.

Sometimes, the amount of loan sanction is more than that is required by

the project because of over invoicing from the part of sponsors.

Lack of eagerness to devote themselves for bank because of lower benefits

is given to employees.

30

5.2: FINDINGS ABOUT THE LOAN RECOVERY:

After sanctioning loan, the implementation department recovers the first and

second installments then the recovery department takes the duty of recovering

the rest of the installments.

The recovery process is not satisfactory because the persons involved in the

recovery process show lax or laggardness.

Usually they inform the borrowers before 15 days of the scheduled date of

payment about his/her next upcoming installment due.

Visiting to the borrowers premises is hardly done before the loan is defaulted.

The recovery department makes the replacement of loan and rescheduling of

the loan when necessary.

The recovery department cannot coerce or make bound to repay the loan

because of pressure from political and other higher management.

Every government makes impediment in their normal recovery process

especially if the borrower is linked with that political party.

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CHAPTER-6

CONCLUSIONS AND RECOMMENDATIONS

6.1 CONCLUSION

Most of the banks of Bangladesh are offering a wide array of financial services

including new types of loans and advances and some whole new services are launched

every year. As a DFI, BDBL also has to discover new avenues to reach its goal. It is a

state owned bank. For this reason it should go to the people’s heart through various

schemes. It should follow a mix lending policies designed to improve the quality of its

portfolio and reduce its risk exposure so that in near future when competition among

banks will serve more it can stand with its own entity. Now BDBL is trying to operate

its business successfully in this country.

The success has been resulted from the prediction, commitment and dynamic

leadership of its management. For success, BDBL has to consider the behavioral

issues of this bank’s customers. By proliferation of new advance service expanding

use of automated equipment and electronic transfer of financial information, BDBL

can be a truly fascinating institution in the near future. The institutional future of the

bank depends on its ability to achieve a substantially higher recovery ratio and

profitability in future. And this achievement will help BDBL to overcome its image

crisis.

32

6.2 RECOMMENDATIONS

It is very difficult to give any recommendation about the operation of BDBL because

I have not worked here; rather I listened to the personnel of BDBL. However, as per

as I understand, I can some recommendations about loan sanction & recovery

6.2.1. RECOMMENDATIONS FOR LOAN SANCTIONS

Project appraisal technique should strictly be followed through the loan

sanction process.

Relevant and accurate data about project should be collected.

Persons involved in project appraisal should have more expertise and practical

knowledge.

In analyzing the viability of a project, market of the products or services and

management should rigorously be analyzed.

The time of loan sanction should be reduced; it should not be more than 20-30

days.

For reducing time, the Bank should instruct the borrower to bring all the

documents needed by the documentation department and the functions of loan

operation department and documentation department should simultaneously be

done.

Over invoicing should be checked and detected by expertise. The real price of

machinery should be found out by using various sources.

33

6.2.2. RECOMMENDATIONS FOR RECOVERY DEPARTMENT

Recovery drive should be reshuffled and strengthened.

At least before 30-45 days of scheduled time of installments due, the

borrowers should be reminded about the installments is falling due.

The defaulting borrower should be monitored so that he cannot channel his

fund to other business of firms.

They should assist the sponsors if he requires continuing his business

operation and generating cash to repay loan.

No political or other pressure should be considered for loan recovery.

34

Bibliography

Bangladesh Development Bank annual report 2012/2013



Bangladesh Shilpa Bank Annual Report 2008/2009

Bangladesh Development Bank annual report , 2007/2008



Different Project Appraisal reports of BDBL.

Loan sanctioning letter of BDBL.

Bangladesh Shilpa Bank Ordinance 1972.

Manual of different departments of BDBL.

Different project appraisal reports of BDBL

Loan sanctioning letter of BDBL

Bangladesh Shilpa Bank Ordinance 1972

Manual of Different department of BDBL

Debnath, Dr. R.M., Business of Banking, Dhaka: Lotus Publishers, 2008.

Website-http://www.bdbl.com.bd

35

Education

Full & final ovi