BDBL

1

Chapter

One

INTRODUCTIONINTRODUCTION

1.1 Background 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 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 Statement of the project issue/research problem

This paper has been titled as “A Study on Loan Sanctions & Recovery,. The report

mainly synthesizes the loan sanctions & recovery of BDBL. I have mainly tried to

find out two things, such as what is the trend of loan sanction & recovery by using ten

years data, sector wise analysis. Finally, some remedial measures have been

suggested.

1.3 Significance and Rationale of the study

Well- educated, dedicated, skilled and enterprising workforce is the sine-qua-non for

the progress and development of a service oriented industry like Bank. From very first

emergence and inception of modern civilization, Bank plays a pivotal role in case of

overall financial and socioeconomic development of any country.

As Bangladesh is a developing country, it is very much unorganized in all the sectors.

After the independence, it is trying to develop itself. To develop a country, the

development of economy must be ensured. In this perspective, the economic

development of our country mainly depends upon the efficiency of the banking

results.

2

With the rapid changes of time the people of this country readily depend on the

consequences of the business of foreign exchange and trade. So it is very much

needed to develop the banking practices relating to foreign exchange operation in

order to provide better situation to the countrymen. The people as customers favoring

to a bank are being served by providing various opportunities. The government of

our country and the central bank i.e., the Bangladesh Bank has decided to extend

considerable help in every respect of banking activities to concerned people. Beside

other nationalized and non-nationalized commercial banks the IBBL serves the nation

by providing various modern banking services and products concerning to foreign

trade. So as an Internee I thought of having special knowledge on this field of

increased importance.

1.4 Objectivity of the study(Major and specific objectives)

The objectives of the study are mentioned as beneath:

Primary objective of the report is fulfilling the course requirement for Completion of

the degree of BBA program from Dhaka University

The objective of the report is to do comprehensive study on Bangladesh Development

Bank Ltd 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. The prime objectives of this report are as follows:

To get an overview of the operation of Bangladesh Development Bank

Ltd.

To acquire practical experience about working environment, to know

discipline and behavior of an organization that will help me to buildup my

career.

To evaluate the success and status of loan recovery

To know the rehabilitation program taken by BDBL to rehabilitate the sick

industries

To know the firms which are rehabilitated and which are not rehabilitated.

Finally to recommend necessary steps to overcome the problems of BDBL.

3

1.5 Scope and limitations

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.

The employees of BDBL are reluctant to supply any information because

of maintaining confidentiality in their record keeping.

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.

4

5

Chapter

TwoMETHODOLOGYMETHODOLOGY

2.1 Population parameters

This bank has 17 branch offices, 3 zonal offices, 5 divisions, 21 departments. All of the

branches of the bank are the population.

2.2 Sampling design

I have worked on Head office as internee Student. There are few employees working

in the head office. Most of them are very well traine4d and have vast knowledge on

computer.

2.3 variables Covered

I have worked on the following Departments:

Recovery Department

Loan sanction Department

Law Department

Implementation Department

2.4 Methods of data collection & data collection instruments used

Correct and smooth completion of research work requires adherence to some rules and

methodologies. In order to conduct the report, the decision had been taken to collect

various types of primary data and secondary data. Data have been collected by oral

interviewing the responsible officers. Different forms of statistical configurations such as

table percentages rates and ratios have been used to make the study meaningful and

realistic.

After collecting data from the interview and material provided by them, data were first

carefully scrutinized. Then the data were organized as required.

In order to make the study effective and efficient, following two sources of data and

information have been used widely.6

(a) Primary information/data

The primary data have been collected by oral interviewing the responsible officers and

staffs of the BDBL, practical deskwork, direct observation of the functions of various

departments of BDBL and relevant document’s studies as provided by the officers

concerned.

(b) Secondary Information/data

The secondary information comes from annual report of the BDBL, relevant papers/books

and periodicals publication and manual of different departments.

7

Source of Data

Primary Sources Secondary Sources

1. Annual report of BDBL2. Annual budget of BDBL3. Various documents of BDBL4. Extensive literature search on the

basis of these documents of publication

1. Practical desk work2. Oral interview of the respective

officers and staffs of BDBL 3. Direct observations of the functions of

various departments of BDBL 4. Relevant document’s studies as

provided by the officers concerned

Chapter

ThreeORGANIZATIONALORGANIZATIONAL

PROFILEPROFILE

8

3.1 Background of Bangladesh Development Ltd Bank

Bangladesh Development Bank Limited (BDBL) is fully state owned Bank of

Bangladesh which came to effective at 3rd January 2010. Bangladesh Shilpa Bank(BSB)

and Bangladesh Shilpa Rin Songstha(BSRS)were merge into Bangladesh Development

Bank Ltd(BDBL) at 16th November 2009 and come to effective at 3rd January 2010.In

addition commercial banking, BDBL provides financial and technical assistance to

broaden the private as well as public sector 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.

Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin Songstha (BSRS), with

almost similar functions, were established on 31st December, 1972 under the presidential

order no. 129 to provide loans and facilities to industrial institutions, help to set up new

industries and expand investment in Bangladesh. But the two companies failed to meet

expectations. In 1992, the government moved to privatize BSRS, which remained

unaccomplished due to some complexities. The company’s board sat on December 8 to

fix a vendor agreement schedule with the government, the BDBL organogram, employee

pay structure and select office space for the bank’s headquarter. As per merger plans, the

accounts of the two organization’s consolidated by December 2009.

The paid up capital of the merged company will amount to 400 crore. Before merged the

paid-up capital of BSB was Tk. 200 crore was Tk. 70 crore for BSRS. Making

adjustments to the reserve funds of the two companies will raise the capital. In the

meantime, BSRS raised its funds to Tk. 200 crore. As per BDBL operational plans, the

bank will operate across the country by setting up branches at district levels. At present,

BSB has 15 branches while BSRS has 2.

3.2 Mission

To be competitive with other Banks and Financial Institutions in rendering

services ;

9

To contribute to the country’s socio-economic development by identifying new

and profitable areas for investment ;

To mobilize deposit for productive investment ;

To expand branch network in commercially and geographically important places ;

To employ quality human resources and enhance their capability through

motivation and right –type of training at home and abroad.

To delegate maximum authority ensuring proper accountability ;

To maintain continuous improvement and up-gradation in business policies and

procedures ;

To adopt and adapt to new technology ;

To maximize profit by strong, efficient and prudent financial performance ; and

To introduce new product lines according to market needs.

3.3 Vision:

To emerge as the country’s prime Financial Institution for supporting private sector industrial and

other projects of great significance to the country’s economic development. Also be active participant

in commercial banking by introducing new lines of product and providing excellent services to the

customers.

3.4 Objectives:

o Invest in Eco – friendly industries that help mitigate environmental degradation by lending

more for renewable energy, and effluent treatment plants and other projects that employ

energy efficient low-emission technologies including agro-based industries, small power

projects, ICT, transport and infrastructure projects.

o Select and invest industrial projects where location advantages like local availability of raw

materials, good infrastructural facilities (road communication, transport facilities, etc.) and

utilities (power, gas, water, etc.) shall be available.

o Limit project loan to Tk. 15 core maximum and Tk.2 core minimum (for large projects).

Arrange and participate in syndicated loan for projects above Tk. 15 core.

o Identify prospective and potential entrepreneurs and investors/ clients and motivate, guide and

help them select profitable industrial venture for investment.

o Regularly publish financial disclosures.

10

o Undertake from time to time SWOT (Strength, Weakness, Opportunity and Threats) analysis

for reviewing bank’s market position.

3.5 CORPORATE PROFILE

Established: October 31, 1972

Organization: head office : Dhaka

Division : 5

Department : 21

Zonal office : 3

Branch office : 17

Human Resource : 725

3.6 Capital Structure and Sources of Fund

Authorized capital : TK 2000 million

Paid up capital : TK 2000 million

The sources of Bank’s fund are the government, Bangladesh Bank, Commercial

Banks, local/overseas Financial Institutions and Supplies’ Credit.

3.7 OWNERSHIP

At least 51 per cent of the authorized capital Bangladesh Development Bank Ltd.

(BDBL) is subscribed by the government and the remaining 49 per cent are

subscribed by Bangladesh nationals or by local or foreign Financial Institutions.

Presently, 100 per cent ownership of the Bank belongs to the Government.

3.8 MANAGEMENT

The overall policy formulation and the general direction of the bank’s operation

vested in the Board of Directors appointed by the Government. This Board of

Directors consists of 9 members including the Chairman and the Managing Director. i

3.9 BDBL: At A Glance

11

2004-

05

2005-

06

2006-

07

2007-

08

2008-09

Number of projects

Loan application receive 5183 96 51 47 36

Term loan sanctioned:

New

BMRE

Addition

Total

34

1

3

38

45

2

5

52

37

-

2

39

12

-

8

20

12

10

5

27

Term loan Disbursed 23 43 53 45 40

Working Capital Loan

sanction

3 9 15 3 7

Start of commercial

operation

7 12 8 27 12

Inclusion in loan portfolio 14 23 31 14 17

Rephasment/Rescheduling 23 16 13 16 14

Liquidation of loan liabilities 41 20 20 21 29

Loan portfolio 166 164 179 177 175

Write-off ledger 281 283 287 321 308

No. of total projects 308 447 477 457 498

(million Taka)

Term Loan sanctioned 1009 1311 1006 918 436

Term loan Disbursed 144 485 534 384 616


sanction

14 232 105 3 10


disbursed

21 32 196 33 22

Loan Recovered 1391 1159 1065 981 908

Rephrased/Rescheduled 259 790 280 423 264

Loan written off 11867 12626 12478 12531 12258

12

3.10 Achievement of the Bank in FY 2008-09

(1) Recovery of loan Tk. 908 million (96% of the target).

(2)Sanction of loan Tk. 446 million.

(3) Disbursement of loan Tk. 638 million.

(4) Income from purchase and sale of shares Tk. 130 million.

(5) Provision of loan kept Tk. 1237 million as against required provision of Tk. 1212

million.

(6) Capital surplus Tk. 917 million.

(7) DSL payment Tk. 574 million in cash.

(8) Liquidation of loan accounts of 29 projects.

(9) Rephasement/ Rescheduling of loan accounts of 14 projects.

(10) Net Asset Value Per Share Tk. 1727 (value of per share Tk. 1000.

(11) Earnings Per Share (EPS) Tk. 127 (value of per share Tk. 1000.

13

NameName :: Bangladesh Development Bank, a state-owned commercial BankBangladesh Development Bank, a state-owned commercial Bank

(formed through merger of Bangladesh Shilpa Bank & Bangladesh(formed through merger of Bangladesh Shilpa Bank & Bangladesh

Shilpa Rin Sangstha)Shilpa Rin Sangstha)

Legal StatusLegal Status :: Public Limited CompanyPublic Limited Company

Date of incorporationDate of incorporation :: November 16, 2009November 16, 2009

Banking LicenseBanking License

obtainedobtained

:: November 19, 2009 issued by Bangladesh BankNovember 19, 2009 issued by Bangladesh Bank

Vendors’ AgreementVendors’ Agreement

SignedSigned

:: December 31, 2009 between the Government and Board ofDecember 31, 2009 between the Government and Board of

Directors of BDBL nominated by the Government.Directors of BDBL nominated by the Government.

Formal InaugurationFormal Inauguration :: January 03, 2010January 03, 2010

Registered OfficeRegistered Office :: BDBL Bhaban, 8, Rajuk Avenue, Dhaka-1000BDBL Bhaban, 8, Rajuk Avenue, Dhaka-1000

Authorized CapitalAuthorized Capital :: Tk.10000 millionTk.10000 million

Paid Up CapitalPaid Up Capital :: Tk. 4000 millionTk. 4000 million

Reserve (As onReserve (As on

01.01.2010)01.01.2010)

:: Tk. 2270 millionTk. 2270 million

Total Assets (As onTotal Assets (As on

01.01.2010)01.01.2010)

Tk. 16747 millionTk. 16747 million

Total Human ResourceTotal Human Resource :: 781781

Number of Zonal OfficeNumber of Zonal Office :: 33

Number of BranchNumber of Branch

OfficeOffice

:: 1717

MembershipMembership :: Dhaka Stock Exchange & Chittagong Stock Exchange Ltd.Dhaka Stock Exchange & Chittagong Stock Exchange Ltd.

Web SiteWeb Site :: www.bdbl.com.bdwww.bdbl.com.bd

3.11: Institutional OveInstitutional Overview

14

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

Activities of BDBL

Operational Others

Profit and loss Deposit MobilizationLoan application receive Term loan sanction Commitment & disbursement of term loan Working capital sanction Other investing Project implementations Loan portfolioLoan recovery Legal action for recovery loan Loan written off

Advisory services Training Computerization Human resources Board news Annual general meetingObservance of National Days

3.12: Activities of BDBL:

The activities of Bangladesh Development Bank Limited (BDBL) is given below in

figure - -

3.13 Sources of Fund

Paid up capital

Loan from Government of Bangladesh

Loan from Bangladesh bank

Commercial Banks

Local/overseas Financial Institutions

Suppliers’ Credit

3.14 Merger of BSB & BSRS

The merger of BSB and BSRS and transferring them to a government owned proposed

public limited company naming Bangladesh Development Bank Ltd. (BDBL) has been

approved in the meeting of Advisors’ Committee and passed in the first session of the 9 th

15

National Assembly held on 24-02-2009 as Bangladesh shilpa bank (amendment) bill,

2009 and published in the Bangladesh gazette as the 14 th Law. The bank, among others,

has been informed this by the Ministry of Finance vide its Memorandum and Articles of

Association vetted by the Ministry of Law for creating BDBL as well as a draft copy of

Vendors’ Agreement for the whole undertaking of BSB & BSRS to BDBL to be signed

between the Government and the BDBL.

Besides, it has been directed, among others, to complete the following activities;-

(1) To adopt required steps for registering Bangladesh Development Bank Ltd as the

public Limited Company with the office of the Register of Joint Stock Companies

& Firms.

(2) To take measures for getting Banking License to be issued by Bangladesh Bank in

favor of this proposed company and

(3) To complete Vendors’ Agreement between the Government and the Board of

Directors of the company relating to the transferring of assets and liabilities BSB

& BSRS after finalizing the process establishing the proposed company.

With a view to seeing of up of BDBL, the following work has been completed by the

bank as per direction of the ministry of finance:-

(1) taken approval from Bangladesh bank regarding memorandum and Articles of

Association vetted by ministry low;

(2) collected Certificate of incorporation & certificate for commencement of Business

from the joint stock companies and firms and

(3) Got permission from the Securities and Exchange Commission for utilizing

TK400 crore as per paid up capital.

It may be mentioned that the Vendors’ Agreement has been signed on31-12-2009

between the company and the Board of Directors of the company. The honorable

finance minister has been inaugurated the commencement journey of BDBL.

The first Board of Directors of the proposed Bangladesh Development Bank Ltd

(BDBL) is composed of ten Directors appointed by the government. The time tenure

16

of the Board would be two years. The newly appointed Board would finalize the

activities of setting up of BDBL by the merger of BSB & BSRS within this

timetimeframe.

The preparation of vision, mission and prime goal of the Bangladesh Development

Bank Ltd in line with the Business and Investment Policies of the Bank is going on.

17

ZONAL & BRANCHES OFFICES OF BDBL

18

19

Chapter

FourLOAN SANCTION

PRACTICE OF

4.1 Introduction: 4.1 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 2008-09, the bank sanctioned total

long term loan of tk.436 million to 27 projects and FY 2007-08, sanctioned loan was

tk.918 to 20 projects.

4.2 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

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.

4.3 Sector-wise position of Bank’s Loan portfolio:

(AS ON 30-06-2009)

Sectors No. of project

Total Loan

outstanding (In

Million Taka )

Food and Allied Products…… 48 352

20

Jute and Allied products……..

Cotton. Woolen and Synthetic

Textiles……………………….

Paper, Paper Products and

Printing………………………

Tannery and Leather Products

Non Metallic Mineral Products.

Forest & Wooden Products…

Rubber and Rubber Products.

Basic Metal Products……….

Metal Products ……………..

Electrical Machinery and Goods

Machinery & spare parts……

Water Transport…………….

Chemical & Pharmaceuticals.

Petro Chemical Products…..

Service Industries…………..

Miscellaneous ………………

1

49

6

4

3

-

-

-

5

1

4

4

14

3

30

3

1

4635

124

79

4

-

-

-

19

33

20

54

228

107

196

76

4.4 Sector-wise position of Bank’s Loan portfolio:

1. Food & Allied products:

FY 2004-05 2005-06 2006-07 2007-08 2008-09

No. of

Project

46 31 43 46 48

Total Loan

outstanding

(million

Taka )

1335 491 224.2 246.16 352

21

0

200

400

600

800

1000

1200

1400

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Project

Total Loan outstanding(million Taka )

Fig: Food and allied products.

During FY 2008-09 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 t 46 with a total loan outstanding of Tk. 1335 million. In FY

2007-08 total numbers of projects and total loan outstanding are decreased

comparing to the previous FY under this Food and Allied products.

2. Jute & Allied products:

FY 2004-05 2005-06 2006-07 2007-08 2008-09

No. of

Projects

5 3 3 2 1

Total Loan

outstanding

(million

Taka)

674 538 535.75 1.38 1

22

Loa

ns (

Mil

lion

Tak

a)

0

100

200

300

400

500

600

700

2004-05 2005-06 2006-07 2007-08 2008-09

No. ofProjects

Total Loanoutstanding(millionTaka)

Year

Fig: Jute & allied products.

During FY 2008-09 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

2008-09 the member of project 1 and loan amount Tk. 0.38 million are

decreased comparing to the FY 2007-08 under this jute and allied products.

During FY 2004-05 to FY 2008-09 there is decreased trend from previous

year. During FY 2004-05 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 2008-09

comparing to the FY 2004-05 under this jute and allied products.

23

Loa

ns (

Mil

lion

Tak

a)

3. Cotton, woolen and synthetic Textiles:

FY 2004-05 2005-06 2006-07 2007-08 2008-09

No. of

Projects

87 53 53 52 49

Total Loan

outstanding

(million

Taka)

4148 5304 4322.43 4401.15 4635

0

1000

2000

3000

4000

5000

6000

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects

Total Loan outstanding(million Taka)

Year

Figure: Cotton, woolen and synthetic Textiles.

During FY 2008-09 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 2008-09 the total member of projects 3 are decreased and loan

outstanding amount Tk. 234 million are increased comparing to the financial

year 2007-08 under this cotton wooden and synthetic Textiles sectors.

24

Loa

ns (

Mil

lion

Tak

a)

During financial year 2004-05 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 comparing to the financial year

2008-09 under this cotton woolen and authentic Textiles sectors.

4. Paper, Paper products and printing:

FY 2004-05 2005-06 2006-07 2007-08 2008-09

No. of

Projects

15 6 7 6 6

Amount of

total loan

(million)

591 177 140.02 130.31 124

0

100

200

300

400

500

600

700

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects

Amount of total loan(million)

Year

Figure: Paper, Paper products and printing

During FY 2008-09 total numbers of paper, paper products and printing

projects in he loan portfolio stood at 6 with a total loan outstanding of Tk. 124

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

25

Loa

ns (

Mil

lion

Tak

a)

the loan portfolio stood at 6 with a total loan outstanding of Tk. 130.31

million.

In FY 2008-09 the total member of projects remain unchanged and loan

outstanding amount 6.31 million are decreased comparing to the financial

year 2007-08 under this paper, paper products and printing sectors.

5. Tannery and leather products:

FY 2004-05 2005-06 2006-07 2007-08 2008-09

No. of

Projects

9 4 4 4 4

Amount of

Loan

outstanding

333 100 106 89 79

0

50

100

150

200

250

300

350

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects

Amount of Loanoutstanding

Year

Figure: Tannery and leather products.

During FY 2008-09 total member of Tannery and leather products projects in

the loan portfolio stood at 4 with a loan outstanding of Tk. 79 million. In the

preceding year under this sector the total number of projects of the loan

portfolio stood at 4 with a total loan outstanding of Tk. 89 million. In FY

2008-09 the total member of projects has no change and loan outstanding

26

Loa

ns (

Mil

lion

Tak

a)

amount 10 million are also decreased comparing to the FY 2007-08 under this

Tannery and leather products sectors.

During FY 2004-05 total member of Tannery and leather products projects in

the loan portfolio stood at 9 with a total loan outstanding of Tk. 333 million.

The total member of projects 5 is decreased and loan outstanding amount Tk.

254 million also decreased in FY 2008-09 comparing to the FY 2004-05

under this paper, paper products and printing sectors.

6. Non-metallic Mineral products:

FY 2004-05 2005-06 2006-07 2007-08 2008-09

No. of

Projects

4 2 2 3 3

Amount of

loan

outstanding

130 100 71 57 41

0

20

40

60

80

100

120

140

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects

Amount of loanoutstanding

27

Loa

ns (

Mil

lion

Tak

a)

Year

Figure: Non-metallic Mineral products.

During FY 2008-09 total no. of Non-metallic Mineral products projects in the


the preceding year under this sector the total number of projects of the loan


2008-09 the total number at projects has no change and loan outstanding

amount Tk. 16 million are decreased comparing to the FY 2003-04 under this

non-metallic Mineral products factory.

7. Forest and wooden products:

FY 2004-05 2005-06 2006-07 2007-08 2008-09

No. of

Projects

2 1 0 0 0

Amount of

loan

(million)

10 7 0 0 0

0

1

2

3

4

5

6

7

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects

Amount of loan (million)

28

Loa

ns (

Mil

lion

Tak

a)

Year

Figure: Forest and wooden products.

During FY 2008-09 total member of forest and wooden products project in

the loan portfolio stood at zero. In the preceding year under this sector the

total no. of projects of the loan portfolio stood also zero.

During FY 2004-05 total number of forest and wooden products projects in

the loan portfolio stood 2 with a total loan outstanding of Tk. 10 million. The

total member of projects 2 is decreased and loan outstanding amount Tk. 10

million also decreased in FY 2008-09 comparing to the FY 2004-05 under

this forest and wooden products sectors.

8. Electrical Machinery and goods:

FY 2004-05 2005-06 2006-07 2007-08 2008-09

No. of

Projects

6 0 1 1 1

Loan

amount

(million

Tk.)

354 0 16 21 33

0

50

100

150

200

250

300

350

400

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects

Loan amount (million Tk.)

29

Loa

ns (

Mil

lion

Tak

a)

Year

Figure: Electrical Machinery and goods.

During FY 2008-09 total numbers of machinery and spare parts projects in the

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


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

2007-08 total numbers of projects remain unchanged but loan amount

decreased comparing to the FY 2008-09 under this Machinery and spare parts

sectors.

9. Machinery and spare parts:

FY 2004-05 2005-06 2006-07 2007-08 2008-09

No. of

Projects

6 6 7 5 4

Amount of

loan

(million

Tk.)

190 45 48 25 20

0

20

40

60

80

100

120

140

160

180

200

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects

Amount of loan (million Tk.)

Year

Figure: Machinery and spare parts.

30

Loa

ns (

Mil

lion

Tak

a)

During FY 20084-09 total numbers of machinery and spare parts projects in

the loan portfolio stood at 4 with a total loan outstanding of Tk. 20 million. In



20087-09 total number of projects is decreased comparing to the FY 2007-08

under this Machinery and spare parts sectors.

10. Service Industries:

FY 2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects 28 18 25 27 30

Amount of total

loan (million

taka)

422 204 225 207 196

0

50

100

150

200

250

300

350

400

450

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects

Amount of total loan (milliontaka)

Year

Figure: Service Industries

During FY 2008-09 total number of service industries projects in the loan

portfolio stood at 30 with a total loan outstanding of Tk 196 million. In

31

Loa

ns (

Mil

lion

Tak

a)

preceding year under this sector the total number of projects of the loan


2008-09 the total numbers of projects 3 are increased but total loan amount

Tk.11 million decreased comparing to the FY 2007-08 under this service

Industries sectors.

11. Miscellaneous:

FY 2004-05 2005-06 2006-07 2007-08 2008-09


Amount of loan

outstanding

(million taka)

198 96 96 76 76

0

20

40

60

80

100

120

140

160

180

200

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects

Amount of loan outstanding(million taka)

Year


During FY 2008-09 total numbers of miscellaneous projects in the loan

portfolio stood at 3 with a total loan outstanding of Tk. 76 million. In the

preceding year number this sector the total number of projects and a total loan

outstanding was also same, i.e. Tk. 76 million.

32

Loa

ns (

Mil

lion

Tak

a)

During FY 2004-05 total member of projects in the loan portfolio stood at 13

with a total loan outstanding of Tk. 198 million. The total number of projects

10 and loan outstanding amount Tk. 122 million is decreased in FY 2008-09

comparing to the FY 2004-05 this miscellaneous sectors.

12. Metal Products:

FY 2004-05 2005-06 2006-07 2007-08 2008-09


Amount of loan

outstanding

(million taka)

96 31 15 14 19

0

10

20

30

40

50

60

70

80

90

100

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects


Year


During FY 2008-09 total number of Service Industries projects in the loan

portfolio stood at 5 with a total loan outstanding of Tk. 19 million. In the


portfolio stood 3 with a total loan outstanding of Tk. 14 million. In FY 2008-

33

Loa

ns (

Mil

lion

Tak

a)

09 total numbers of projects and total loan outstanding are increased

comparing to the previous FY under this Service Industries.

13. Transport and Transport Equipment:

FY 2004-05 2005-06 2006-07 2007-08 2008-09


Amount of loan

outstanding

(million taka)

32 16 69 74 54

0

10

20

30

40

50

60

70

80

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects


Year

Figure: Transport and Transport Equipment

34

Loa

ns (

Mil

lion

Tak

a)

During FY 2008-09 total numbers of Transport and Transport Equipment

projects in the loan portfolio stood at 4 with a total loan outstanding of Tk.

54million. In the preceding year under this sector the total member of projects

of the loan portfolio stood 5 with a total loan outstanding of Tk. 74 million. In

FY 2008-09 total numbers of projects and total loan outstanding are decreased


14. Chemical and Pharmaceuticals:

FY 2004-05 2005-06 2006-07 2007-08 2008-09


Amount of loan

outstanding

(million taka)

202 198 230 234 228

0

50

100

150

200

250

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects


35

Loa

ns (

Mil

lion

Tak

a)

Year

Figure: Chemical and Pharmaceuticals

During FY 2008-09 total number of Chemical and Pharmaceuticals projects in

the loan portfolio stood at 14 with a total loan outstanding of Tk. 228 million.

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

portfolio stood 16 with a total loan outstanding of Tk. 234 million. In FY

2008-09 total numbers of projects and total loan outstanding are decreased


15. Chemical and Pharmaceuticals:

FY 2004-05 2005-06 2006-07 2007-08 2008-09


Amount of loan

outstanding

(million taka)

102 133 121 123 107

0

20

40

60

80

100

120

140

2004-05 2005-06 2006-07 2007-08 2008-09

No. of Projects


Year

Figure: Petro Chemical Products

36

Loa

ns (

Mil

lion

Tak

a)

During FY 2008-09 total number of Petro Chemical Products projects in the



portfolio stood 4 with a total loan outstanding of Tk. 123million. In FY 2008-

09 total numbers of projects and total loan outstanding are decreased


4.5. 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:

Table 6.3: Loan Sanction of BDBL in 10 Sectors

Name of the

Projects

1999-

00

2000

-01

2001

-02

2002-

03

2003-

04

2004

-05

2005

-06

2006-

072007-

08

2008-

09

Textiles2528

52

4400

93

6284

98

64562

8

6857

94

5304

00

428

690

43224

31303

10

47590

00

Electrical 255 365 697 5208 1009 0 0 1581 2055

0

33000

Food & Allied1759

1

1958

7

2059

717819

2265

0

4910

0

292

2622402 2461

60

35200

0

Jute & Allied1581

8

4038

5

1832

419313

3051

3

5380

0

536

7153575

1380

1000

Machinery &

Metallic

Products

8785 3909 4093 7101 8019 7600111

91083 2526

0

20000

Petrol

Chemicals3711 6300 3055 3379 6226

1330

0

126

4912084 1224

50

10700

0

37

Rubber 95 109 235 315 301 398 0 0- -

Service2555

5

2059

4

2582

927829

3084

5

2040

0

228

3822450 2071

10

19600

0

Tannery1888

0

2020

0

1322

013441

1550

9

1000

0

109

0310606 8933

0

79000

Water

Transport8097 5011 4525 3518

6074

55028

603

06916 7440

0

54000

Total3485

67

5561

93

7181

46

90076

4

9059

9

5862

00

565

126

56302

0

5699

740

59650

00

Commitment & Disbursement Of Term Loan

TK in Million

Commitment

/Disbursement

2007-08

Total2008-09

TotalNo of

projects

Local

Currency

Foreign

Currency

No of

projects

Local

Currency

Foreign

Currency

Commitment 13 403 - 403 8 511 - 511

Disbursement 45 384 - 384 40 616 - 616

38

Sanction & Disbursement Of Term Loan And Tk. In Million

2004-05 2005-06 2006-07 2007-08 2008-090

200

400

600

800

1000

1200

1400

SanctionDisbursement

Sanction Of Loan TK in Million

Nature of

the project

2007-08 Total 2008-09

Number

of the

project

Local

currency

Foreign

currency

Number

of the

project

Local

currency

Foreign

currency

Total

New

project

12 538 - 538 12 316 - 316

Existing

project

- - - - 10 46 - 46

39

Additional

loan

8 380 - 380 5 74 - 74

Total 20 918 - 918 27 436 - 436

40

5.1 Introduction

41

Chapter

FiveRECOVERY OFRECOVERY OF

LOANLOAN

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 2007-08, was tk.900 million, against which actual

cash recovery was tk.981.20 million constituting 100+ per cent of the target. But during

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

rescheduling and rephasement 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

rephasement was tk. 280.20 million.

5.2 RECOVERY OF LOAN

Category of loan Loan Amount recovered (Million Taka)

2007-08 2008-09

A) Long Term Loan:

Long Term project loan 735 596

Bridge Loan .40 .29

Staff loan 48 62

Administered Loan 38

Sub-Total 784 696

B) Short Term Loan :

Working Capital Loan 67 58

C) Others

Debenture/ Shares/ loan against FDR 11 16

Written off Loan 120 138

Sub- Total: 131 154

Grand Total (A+B+C) 981 908.29

42

5.3. 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.

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

5.4. Sector-Wise Loan Recovery Over 10 Years

43

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. From the table-

3.2.2, we see that in 2004-05, the highest amount of loan was collected from textile

industries, and there are some sectors from which no loan was collected, because this

sector has been liquidated and no new loan has been granted against it

5.4.1: RECOVERY OF LOAN

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

except in FY2007-08. But during FY 2003-04 was recovered tk. 70272.

Year Loan Recovery (Amount in thousands)

1998-99 41458

1999-00 44371

2000-01 28171

2001-02 26285

2002-03 43001

2003-04 70272

2004-05 14972

2005-06 10182

2006-07 9170

2007-08 116000

Graph: Jute and Allied Products

44

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

0

20000

40000

60000

80000

100000

120000

Chart Title

SOURCE: BSB ANNUAL REPORT & OFFICAL DATA

5.4.2: Cotton Woolen and Synthetic textiles

The highest recovery of this sector is tk. 702722 thousand in the year 2003-04 and other

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

decreasing pattern in existed in these sectors.


1998-99 414589

1999-00 443717

2000-01 281719

2001-02 262854

2002-03 430019

2003-04 702722

2004-05 811319

2005-06 640390

2006-07 612120

2007-08 555940

45

Graph: Cotton Woolen and Synthetic textiles

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

0100000200000300000400000500000600000700000800000900000

Chart Title


5.4.3: 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.


1998-99 13319

1999-00 17574

2000-01 19270

2001-02 19907

2002-03 25160

2003-04 25232

2004-05 17809

2005-06 30902

2006-07 25160

2007-08 32900

46

Graph: Food and Allied Products

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

05000

100001500020000250003000035000

Chart Title


5.4.4: Electrical Machinery and Goods

This sector was a downward trend from FY 1998-99 to 2004-05. But from 2005-06 to

2007-08 is well recovery position.


1998-99 176

1999-00 270

2000-01 175

2001-02 130

2002-03 161

2003-04 431

2004-05 881

2005-06 1825

2006-07 2800

2007-08 4552

47

Graph: Electrical Machinery and Goods

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Chart Title


5.4.5: Petro-chemicals

Loan recovery in these sectors is also in volatile positive. However in 2007-08 the more

loans are recovered.


1998-99 2629

1999-00 3101

2000-01 2711

2001-02 7400

2002-03 2468

2003-04 3561

2004-05 51612

2005-06 24915

2006-07 17210

2007-08 27310

48

]

49

Chapter

SixSWOT ANALYSIS

OF BDBL

6.1. 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.

I hope that our government will help BDBL to perform his duties independently. There is

no alternative way of employment generation of our country without industrialization,

which is essential for poverty alleviation.

6.2. Weakness of BDBL

The weaknesses that I found in the operational activities are as follows:

Weak internal control and working environment. 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.

50

6.3. 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.

6.4. 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. 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.

51

52

Chapter

SevenFINDINGS

Findings:

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.

53

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 rephasement 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.

54

55

Chapter

Eight

Recommendations

i

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

5.2.1. 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.

5.2.2. 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.

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.

BibliographyBibliography

1.Bangladesh Shilpa Bank "Annual Report 2008-2009"

2.Bangladesh Development Bank annual report , 2007/2008



5. Different Project Appraisal reports of BDBL.

6. Loan sanctioning letter of BDBL.

7. Bangladesh Shilpa Bank Ordinance 1972.

8. Manual of different departments of BDBL.

9. BDBL web site " www.BDBL.gov.bd"

10. Manual of Loan Sanction & Recovery Department.

11.Ahmed, K. (1981), The Role of Bangladesh Development Bank in Financing Private

Sector Industries, The Dhaka University Studies, Part- C. Vol.2, June, PP-96-107

12. " Why institutional loans are refused to small entrepreneurs", Md. Azizur Rahman khan,

vol-1, no-2, June 19801journal Dhaka university studies.

13."Industrial financing and institutional arrangement for setting up of industries in the private

sector", DR. M. Habibullah, vol- 1, no-2, June 1980

http://www.BDBL.gov.bd/

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