internship report on bsb-bangladesh shilpo bank

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


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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 )
http://www.shilpa/http://www.shilpa/


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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



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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


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



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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Sick Industries


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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



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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


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


57Source: Project Rehabilitation Department of BSB


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Chapter-06

Findings, Recommendation &

Concluding Remark



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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

internship report on bsb-bangladesh shilpo bank

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