Shilpa Bank

Loan Operations Analysis & Evaluation: Bangladesh Shilpa Bank

Internship Report

ON

Loan Operations Analysis & Evaluation:

Bangladesh Shilpa Bank


YOUR PARTNER IN INDUSTRIALIZATION

Internship Report

ONLoan Operations Analysis & Evaluation:

Bangladesh Shilpa Bank

Submitted To

Dr. Md. Afjal HossainProfessor Internship Supervisor,Department of MarketingDepartment of Marketing

aculty of Business Studiesaculty of Business Studies

University of DhakaUniversity of Dhaka

Prepared By

MD. Abul Kalam AzadMBA Roll No.-102MBA 6nd BatchDepartment of MarketingUniversity Of DhakaUniversity Of Dhaka

Department of Marketing Date of Submission

University of Dhaka


Letter of Transmittal

August 19, 2006

Mr. Abu TalebSupervisor & Assistant ProfessorDepartment of BankingUniversity of Dhaka

Subject: Solicitation for acceptance of the “Internship Report”.

Dear Sir,I am pleased to submit my internship report after successful completion of internship program on Rehabilitation of Sick Industries: An Evaluation in Bangladesh Shilpa Bank, Head Office, Dhaka-1000. I am absolutely pleased on my department for replacement in a specialized bank named Bangladesh Shilpa Bank. I was assigned to engage with the bank from July 24, 2006. This report is an outcome of the internship program I have undergone.

The preparation of this formal report is of an integrated part of our M.B.A program and I am quite happy to submit it duly applying all that I think should have to be included and which should not to be included. It was a great experience for me and though I am on the learning curve but, this report has put an impression on my mind all the matters of the efficient management of one’s time, skills, experience, knowledge, and finally reality. If I am not asked to submit this report then it might be like that I am going out of our program without having something so much important for my life and so much practical. I strongly believe that this sort of knowledge is an invaluable asset in my life.

Finally, thank you for your supportive thought and kind consideration for formulating an idea and developing the structure of the report. All the works presented here is done with utmost sincerely and honestly. I have tried to make this report comprehensive and informative. I hope any unintentional mistakes that may remain in this report will be considered with compassion.

Thanking You,

-----------------------


(Md. Abdul Malek)MBA Roll: 2-241MBA 2nd Batch,Department of BankingUniversity of Dhaka

Acknowledgement

It is well known that practical knowledge in subject matter is essential

to substantiate the theoretical knowledge gathered in the educational

institutions. In order to resolve the dichotomy between these areas, I

was assigned to carry out on internship program in Bangladesh Shilpa

Bank. When I got chance to work as intern in Bangladesh Shilpa Bank,

it was like a long cherished dream to come to reality.

At the very outset, I would like to thanks to the All Mighty Allah for

special blessing in completing the report. There are also a few people

who really deserve to be thanked for making this paper a success.

Without their support this paper could never have been completed.

This internship report is an accumulation of many people’s effort. So

with my full honesty I would like to show my gratitude to them who

helped me in preparing this report. First of all we would like to thank

the Bangladesh Shilpa Bank authority to give me the opportunity for

internship program. In this regard I express my gratitude to Mr. Abdul

Awal Chowdhury, Asst. General Manager, Training Department,

Bangladesh Shilpa Bank, to allow me to complete my internship in the

bank. I am also indebted to Engineer A.S.M. Masudul Alam, Assistant

General Manager, Project Rehabilitation Department, for providing his

profound guidelines. In this regard I also express our heartiest

gratitude to the officials of the various departments of the bank.

Habibur Rahman Patwari, Deputy General Manager of the

Department of Loan Operation Department also deserves to get

special thanks for his kind discussion.


Especially I am grateful to Mrs. Maksuda Siddiqua, Officer, Training

Department who provided various information and materials. I am also

thankful to the Department of Banking, University of Dhaka for giving

me such exposure to the practical business world.

My special thanks goes to my internship group members: Md.

Faruquzzaman (Department of Accounting & Information System), Md.

Shahidul Islam (Department of Banking), Mohammad Anower Hossain

(Department of Banking) and Md. Akabbor Hossain (Department of

Marketing) for their help in preparing this report.

Finally, my sincere thanks go to my internship supervisor Mr. Abu

Taleb, Assistant Professor, Department of Banking, University of

Dhaka for his appropriate suggestion, moral support and invaluable co-

operation, inspirations from time to time in completing the internship

program. His extended support and advice, any time discussion helped

me more than anybody in this regard.

However, the responsibilities of errors and omissions in the report, if

any, lie with me.

Executive SummaryExecutive SummaryThe 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. Internship Program brings a student closer to the real life

situation and thereby helps to launch a career with some prior experience. The internship

program at Bangladesh Shilpa Bank helped me a lot to learn about the practical

environment and situation of a financial institution and also make up a bridge between

the theoretical and practical aspects. Internship Program is also an integral part of MBA

Program.


The report is prepared on the basis of few days’ practical experience at the Bangladesh

Shilpa Bank (BSB). This report is organized as follows:

Section-1: contains background of study, objective of the study, statement of the

problem, methodology of the study, justification of the study, report organization,

limitation of the study and benefits of the study. Section-2: contains brief overview of

BSB and the functions of its various departments. Section-3: contains research themes,

findings and suggestions of Bangladesh Institute of Development Studies& Ministry of

Industry on sick industries and various newspaper reports on sick industries

rehabilitation. Section-4: contains method used to identify a sick industry, some

identified industries on the basis of some criteria, precautionary measures regarding sick

industries, rehabilitation policy and programs of Bangladesh Shilpa Bank, role of Project

Rehabilitation Department of BSB regarding the rehabilitation of the sick industries and

their success in this regard. Section-5: contains the findings, suggestive measures &

concluding remarks of the report.

All information included in this study is taken mainly from various manuals of various

departments of BSB, annual report of BSB 2004-2005, loan sanctioning letter, research

paper & Internet etc.

Certainly there are some problems in their rehabilitation of sick industries. In order to

overcome these problems, some suggestive measures have been included in my study.

TABLE OF CONTENTS


Subjects Page no.

Acknowledgement

Executive Summary

Section-01: Introduction of the Report

1.1 Background of the Study1.1 Background of the Study 01


1.2 Statement of the Problem1.2 Statement of the Problem 02

1.3 Objectives of the Study1.3 Objectives of the Study 02

1.4 Methodology of the Study1.4 Methodology of the Study 03

1.5 Justification of the Study1.5 Justification of the Study 04

1.6 Report organization1.6 Report organization 04

1.7 Limitation of the Study1.7 Limitation of the Study 05

1.8 Benefits of the Study1.8 Benefits of the Study 05

Section-02:Section-02: Organization PartOrganization Part

2.1 Background of BSB2.1 Background of BSB 06

2.2 Institutional Overview2.2 Institutional Overview 07

2.3 Zonal & Branch Offices2.3 Zonal & Branch Offices 08

2.4 Ownership2.4 Ownership 08

2.5 Mission of BSB2.5 Mission of BSB 08

2.6 Management 2.6 Management 09

2.7 Functions of BSB2.7 Functions of BSB 09

2.8 Interest Rate on BSB Loan2.8 Interest Rate on BSB Loan 10

2.9 Different Functional Departments of BSB2.9 Different Functional Departments of BSB 10-17Section-03: Section-03: Literature SurveyLiterature Survey

3.1 Research Paper of Bangladesh Institute of Development 3.1 Research Paper of Bangladesh Institute of Development Studies (BIDS) on Sick IndustryStudies (BIDS) on Sick Industry

18

3.2 Sickness syndrome in the industry sector of Bangladesh: 3.2 Sickness syndrome in the industry sector of Bangladesh: Chronology of Govt. Initiatives and various studiesChronology of Govt. Initiatives and various studies

19

3.2(a) Industrial Sicknesses and its Incidence in Bangladesh3.2(a) Industrial Sicknesses and its Incidence in Bangladesh 19

3.2(b) BIDS Comprehensive Study on sick Industries3.2(b) BIDS Comprehensive Study on sick Industries 20


3.2(c) Causes of Industrial Sickness and Suggested Policy3.2(c) Causes of Industrial Sickness and Suggested Policy Measures for Prevention andMeasures for Prevention and Rehabilitation Rehabilitation

21-23

3.2(d) Preventive Measures3.2(d) Preventive Measures 23-27

3.2(e) Remedial Measures 3.2(e) Remedial Measures 27-28

3.3 Studies on Sub-Sectoral/Enterprise Level Sickness3.3 Studies on Sub-Sectoral/Enterprise Level Sickness 28-29

3.4 Ministry of Industry (MOI) - Sponsored Sickness Study by 3.4 Ministry of Industry (MOI) - Sponsored Sickness Study by the House of Consultants Ltdthe House of Consultants Ltd

29-31

3.5 Functioning of Sick Industries3.5 Functioning of Sick Industries Rehabilitation Rehabilitation and Revival and Revival Cell UnderCell Under IP-91IP-91

31-34

3.5(a) Definition of Sick Industry According to Sick Industries 3.5(a) Definition of Sick Industry According to Sick Industries RehabilitationRehabilitation and Revival Cell and Revival Cell

32

3.5(b) Causes of Sick Industry According to Sick Industries 3.5(b) Causes of Sick Industry According to Sick Industries RehabilitationRehabilitation and Revival Cell and Revival Cell

32-33

3.5(c) Recommendations of Sick Industries 3.5(c) Recommendations of Sick Industries RehabilitationRehabilitation and and Revival Cell for Sick IndustryRevival Cell for Sick Industry

33-34

3.6 Recognition of Sick Industries in the Fifth Five-Year Plan 3.6 Recognition of Sick Industries in the Fifth Five-Year Plan (1997-2002)(1997-2002)

34-35

3.7 Supportive Measures Proposed in the National Budget of 3.7 Supportive Measures Proposed in the National Budget of 1998-99 for Curbing Industrial Sickness1998-99 for Curbing Industrial Sickness

35-36

3.8 Formation of Special Committee on Interest Remission for3.8 Formation of Special Committee on Interest Remission for the Identified Sick Industries the Identified Sick Industries

36-37

3.9 Daily Star Report on April 7, 20063.9 Daily Star Report on April 7, 2006 38

3.10 Financial Express Report on February 2, 20063.10 Financial Express Report on February 2, 2006 39-40

Section-04:Section-04: Data AnalysisData Analysis

4.1 Sick Situation of a Industry4.1 Sick Situation of a Industry 42

4.2 Method Used to Identify a Sick Industry4.2 Method Used to Identify a Sick Industry 42

4.2(a) Quantitative Factors4.2(a) Quantitative Factors 42-44


4.2(a.1) On the Basis of Cost- Benefit Analysis4.2(a.1) On the Basis of Cost- Benefit Analysis 42

4.2(a.2) On the Basis of Break-Even Analysis 43

4.2(a.3) On the Basis of Financial Problems/Shortage of Working Capital

43-44

4.2(b) Qualitative Factors 44-55

4.2(b.2) The symptoms of Sick Industry 44-45

4.2(b.3) Technological Problems 45-46

4.2(b.4) Administrative and Managerial Problems 46

4.2(b.5) Marketing Problems 47

4.2(b.6) Economic Problems4.2(b.6) Economic Problems 47

4.2(b.7) Political Problems4.2(b.7) Political Problems 48

4.2(b.8) Other Reasons of Sickness4.2(b.8) Other Reasons of Sickness 48

4.3 Argenti’s Score Model to Identify a Sick Project 49-51

4.4 Identified Sick Industries 51-53

4.5 Major Causes That Affect the Sick Industries in Bangladesh 54

4.6 Impact of Sick Industry in Bangladesh or BSB 54

4.7 Precautions about Sick Industry 54-55


4.8 Rehabilitation Policy of Bangladesh Shilpa Bank4.8 Rehabilitation Policy of Bangladesh Shilpa Bank 55

4.8(A) Management Perspective4.8(A) Management Perspective 55-56

4.8(B) Technological Perspective4.8(B) Technological Perspective 56

4.8(C) Financial Perspective4.8(C) Financial Perspective 56

4.8(D) Marketing Perspective4.8(D) Marketing Perspective 56-57

4.9 Programs Taken to Rehabilitate the Sick Industries 58

4.10 Facilities Provided Under Rehabilitation Program 58-60

4.11 Are All-Sick Industries Rehabilitated? 61

4.12 The Industries which are Rehabilitated and the Industries

which are not Rehabilitated

61

4.13 Role of Management of Rehabilitation Department of BSB 61-62

4.14 List of a Few Successful Rehabilitated Industries 63-64

Section-05: Findings, Suggestive Measures & Concluding Remarks 65-70

5.1 Findings Of The Study 65-66

5.2 Suggestive Measures 67-69

Conclusion 70


Form A

Supervisor’s Certificate

This is to certify that the Internship Report on “Rehabilitation of Sick Industry: An

Evaluation in the bonafide record at the report is done by Md. Abdul Malek as a partial

fulfillment of the requirement of Masters’ of Business Administration (MBA) degree

from the Department of Banking, University of Dhaka.

The Report has been prepared under my guidance and is a record of the bonafide work

carried out successfully.

---------------------------------Signature of the Supervisor


Form B

Declaration

I do hereby solemnly declare that the work presented in this Internship Report has been

carried out by me and has not been previously submitted to any other University/

College/ Organization for an academic qualification/ certificate/ diploma or degree.

The work I have presented does not breach any existing copyright and no portion of this

report is copied from work done earlier for a degree or otherwise.

I further undertake to indemnify the Department against any loss or damage arising from

breach of the foregoing obligation.

-----------------------------Signature of the Student


ID. No.-2-241

Batch: 2nd

Department of Banking

University of Dhaka

Date:


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 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 Department’s 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 to different

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.

1.21.2 STATEMENT OF THE PROBLEMSTATEMENT 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. BSB provides 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. But activities to industrial development are not emphasizing ones. Bureaucrat,

political interference in case of project appraisal-all these problems are faced in our

country.

1.31.3 OBJECTIVE OF THE STUDYOBJECTIVE OF THE STUDY

The 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 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 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 the firms which are rehabilitated and which are not rehabilitated.

Finally to recommend necessary steps to overcome the problem of sickness of

industries

1.41.4 METHODOLOGY OF THE STUDYMETHODOLOGY OF THE STUDY

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 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.

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

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

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

concerned.

(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

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.

Primary Sources Secondary Sources

Sources of Data

1. Practical desk work2. Oral interview of the respective officers

and staffs of BSB 3. Direct observations of the functions of

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

provided by the officers concerned

1. Annual report of the BSB2. Annual budget of the BSB3. Various documents of the BSB4. Extensive literature search on the

basis of these documents of publication

5. Shilpa Bank’s Website (www.shilpa bank.com )

http://www.shilpa/


1.6 REPORT ORGANIZATION1.6 REPORT ORGANIZATION

The report is organized as follows:

The initial part of the report is the introduction of the report, the history and

background, financial conditions and activities of Bangladesh Shilpa Bank.

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

and include 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:

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 BSB are reluctant to supply any information because of

maintaining confidentiality in their record keeping.

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.

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 follows 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 programs of BSB.

2.1 BACKGROUND OF BSB2.1 BACKGROUND OF BSB

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 which 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 (president’s order no

129 of 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.

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 FINANCE

Table – 01Table – 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 Bank’s 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

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 BSB 2.5 ZONAL & BRANCHES OFFICES OF BSB


2.6 MISSION OF BSB2.6 MISSION OF BSB

Bangladesh Shilpa Bank (BSB) is the state owned Leading Development Financial

Institution (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.

2.7 MANAGEMENT2.7 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.

2.8 FUNCTIONS2.8 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

2.9 INTEREST RATE ON BSB LOAN2.9 INTEREST RATE ON BSB LOAN

In 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%.

2.10 2.10 DIFFERENT FUNCTIONAL DEPARTMENTS OF BANGLADESHDIFFERENT FUNCTIONAL DEPARTMENTS OF BANGLADESH

SHILPA BANKSHILPA BANK

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

2.10A LOAN OPERATION DEPARTMENT2.10A LOAN OPERATION DEPARTMENT

Bangladesh Shilpa Bank (BSB) grants loan on the basis of certain criteria. The loan

operation department does the first activities of loan granting. Any entrepreneur who

wants to borrow money, from Bangladesh Shilpa Bank must fulfill at first Bank Standard

Questionnaire Form (BSQF) in terms of Tk. 1,000.

Functions of Loan Operation Department:Functions of Loan Operation Department:

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.

2.10B PROJECT IMPLEMENTATION DEPARTMENT2.10B PROJECT IMPLEMENTATION DEPARTMENT

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.

2.10C DOCUMENTATION AND MACHINERY PROCUREMENT 2.10C DOCUMENTATION AND MACHINERY PROCUREMENT

DEEPARTMENTDEEPARTMENT

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.

Functions of Machinery Procurement & Documentation DepartmentFunctions 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 investor’s/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

6. Examination of project memorandum and statement of affairs

2.10D CENTRAL RECOVERY DEPARTMENT2.10D 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.

2.10E LOAN ACCOUNTING DEPARTMENT2.10E 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:


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.

2.10F LAW DEPARTMENT 2.10F LAW DEPARTMENT

If the Bangladesh Shilpa Bank fails to recover its loan in the normal way; it must take

alternative action and file case in the court.

Legal action taken during the year 2003-2005

Position of projects under litigation 2003-2004 2004-2005

Number of projects Number of projects

Legal notice issued 126 33

Filling of suit 205 23

Cases settled outside the court 6 11

Auction 2 11

2.10G HUMAN RESOURCE MANAGEMENT DEPARTMENT 2.10G 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 director’s 244th 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 this 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

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

2.10H PROJECT REHABILITATION DEPARTMENT2.10H 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.

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.


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

3.1 ACCORDING TO RESEARCH PAPER OF BANGLADESH3.1 ACCORDING TO RESEARCH PAPER OF BANGLADESH

INSTITUTE OF DEVELOPMENT STUDIES (BIDS)INSTITUTE OF DEVELOPMENT STUDIES (BIDS) ON SICK INDUSTRYON SICK INDUSTRY

Sickness in the industrial units is not a new phenomenon as is evident in the developing

countries. Even in the industrially advanced countries of the world, varying degrees of

sickness are found to occur. An industrial unit may face a number of odds during its

implementation and operation stage because of a number of factors in the environment –

internal and external. If the problems perpetuate & does not permit the unit to pursue the

normal course of operations leading to reasonable utilization of capacity, generation of

surplus, debt servicing, etc, it can be presumed that some kind of sickness has engulfed

the unit and if this trend grows unchecked, it would adversely affect production and

employment in the country besides other socio-economic repercussions. However, it is

also recognized that in a market economy, the survival of the fittest and weeding out of

inefficient industrial units is a natural outcome, which is considered useful as well

because the exit of the non-competitive and loss-incurring units should not pose difficulty

to any society. But sickness assuming an epidemic shape creates concerns to the policy

makers and stakeholders. Experience suggests that small-scale industries are more prone

to sickness as compared to medium and large-scale industries. In this context, sickness in


small industry should not be left only to the market forces. Creation of objective

conditions and enabling environment through suitable policy support are essential for

sustained growth of the small industry sector in the developing economies. It is,

therefore, imperative to diagnose the causes of sickness so that preventive measures are

suggested. Even if a small unit turns sick despite taking all possible precautionary

measures, efforts should be made to find out the possibility of its revival. This warrants

appropriate package of restructuring and rehabilitation strategies. If the unit’s survival is

still under threat, it should be better allowed to die a natural death.

The researchers have shown the incidence of sickness and causes thereof in the industry

sector of Bangladesh with particular reference to small industry sub-sector and suggest

policy measures, both preventive and corrective, to address the problem of sick industries

in the backdrop of pursuing the rapid industrialization strategy as the major prop for

acceleration of economic growth in their paper. For this purpose, extensive survey of

literature has been made and relevant Govt. publications, pervious studies and various

initiatives taken by the successive Governments have been consulted. Section–II presents

the industrial scenario in Bangladesh, Section-III highlights the role of small industries in

the economy and polices pursued, Section-IV brings out the sickness syndrome

prevailing in the industrial sector of Bangladesh, industrial sickness in neighboring

countries is briefly described in Section – V, and Section-VI deals with the suggested

policy framework for prevention of industrial sickness and rehabilitation measures.

3.2 SICKNESS SYNDROME IN THE INDUSTRY SECTOR OF BANGLADESH: 3.2 SICKNESS SYNDROME IN THE INDUSTRY SECTOR OF BANGLADESH:

CHRONOLOGY OF GOVT. INITIATIVES AND VARIOUS STUDIESCHRONOLOGY OF GOVT. INITIATIVES AND VARIOUS STUDIES

In this section the researchers have shown the industrial sicknesses and its incidence in

Bangladesh.

They said that Sick industries refer to those units, which perform poorly against expected

results, incurs cash losses for consecutive years, gradually erode the entire net worth and

obviously fail to service the debt obligations.

They think that the following major criteria are used to identify a sick unit-


A unit incurring financial loss/not being capable to produce at / above break-even point

A unit incurring continuous cash losses

A unit having negative equity

A unit having excess of current liabilities over current assets

A unit making defaults in payment of principal sums with interest.

A unit having low capacity utilization

A unit having worsening debt-equity ratio

They also observed that it is very difficult to recognize sick units on some definite criteria

as a wide variety of interlinked symptoms characterize the sickness of a unit. Likewise, a

number of causes are responsible for turning an industrial unit as sick. These causes

prevailing simultaneously in a unit may be closely inter-related or even independent of

each other. Some of the causes originate outside the unit (e.g. changes in the structural

and environmental factors like infrastructural problem, govt. policies, etc.) and some crop

up within the unit itself that relate to the functional areas like management, production,

finance etc.

BIDS also made a comprehensive study on sick Industries in 2005. This study based on

Ministry of Industry (MOI) data reveals that the highest incidence of sickness is as

follows-

Sectors % of sickness

The manufacturing of textiles 19.6%

The sub-sectors-food manufacturing 14.3%

Non-electrical machinery 5.7%


Leather and its products 5.4%

It appears from the study that ‘small scale’ industries is at the top (72.5%) in terms of

incidence of sickness, followed by "medium" and "large" scale industries – 19.7% and

4.1% respectively.

From the enterprise level survey of the study they found that among the internal factors

causing industrial sickness, the entrepreneurs have singled out use of obsolete technology

as the most important one (23%) followed by faulty employee appointment (15%), lack

of working capital (13%), marketing problem (11%), poor management (9%), and wrong

feasibility (5%). Among the external factors, lack of working capital has been mentioned

as the single most important cause (35%) followed by natural calamities (13%), trade

liberalization (9%), problems in disbursement of project loan (7.5%), poor

infrastructure/utilities (7%), political unrest (5%), and smuggling (3%).

They have also identified some causes of Industrial Sickness and suggested policy

measures for Prevention and Rehabilitation. They classified the causes into two

categories:

(I) External causes (exogenous factors)

The external causes, which are beyond the control of the industrial unit, usually affect the

industry group as a whole.

(II) Internal causes (endogenous factors)

Internal causes occur due to some intra-firm weaknesses in various functional areas of the

unit and are, therefore, management related:

A. INTERNAL

SL. Broad Area Detail Causes


01. Managementa. Lack of proper education, training, experience and business

outlook of the Sponsors/Entrepreneurs

b. Poor Entrepreneurial skills

c. Poor Management

d. Poor Equity base

e. Lack of Integrity/Division of Funds

f. Faulty Project Planning and Appraisal

02. Production/

Technical

a. Wrong choice of technology

b. Improper utilization of production capacity

c. Imbalanced and Defective Machinery

d. Poor Raw-material Planning

e. Inadequate Quality Control

f. Poor labor relations

g. Location problem

03. Marketinga. Lack of Market Planning

b. Inadequate Market Survey

c. Poor Collections

d. Defective Pricing

04. Financea. Poor Management of Financial Resources

b. Delay in Mobilization of Equity Funds

c. Faulty Costing

d. Adverse debt-equity combination

e. Lack of Proper Accounting system

05. Personnela. Lack of Competence

b. Lack of Loyalty

c. Lack of Professionalism


B. EXTERNAL

SL. Broad Area Detail Causes

01. Govt. Policy &

Implementation

a. Frequent Policy changes

b. Lack of Proper Implementation of Industrial Policies

c. Liberal Import Policies

d. Poor Infrastructure / Frequent Power Disruption

e. Smuggling

f. Fiscal Anomalies

g. Exchange Rate Fluctuation

h. Lack of Co-ordination between various ministries and Govt.

Departments, etc.

i. Over-Saturation of particular industry type / Sector due to

wrong policy

j. Non-availability of Raw-material, etc.

02. Bank &

Financial

Institutions

a. Non-availability/Inadequacy of Working Capital

b. Lack of required financial assistance for BMRE

c. High rate of Interest on bank loan

d. Lack of timely decision & support by the banks and financial

institutions.

03. Environmenta. Political Unrest

b. Labor Unrest

c. Market Recession

d. Delay in Project Implementation

a) PREVENTIVE MEASURES


They have shown that small industrial units fall sick much to the occurrence of external

causes while medium and large industries get exposed to sickness largely due to internal

causes. Though it would be hardly impossible to eliminate the causes altogether, attempts

should be made to undertake measures that would reduce the magnitude of ailment in the

industrial units for healthy survival and growth. So, they have suggested to take the

following measures to prevent industrial sickness:

1. Macro-economic Policy changes:

The industrial entrepreneurs should make their own appraisal within a predictable macro-

economic environment. For this, policy changes should not be abrupt, have to be pre-

announced and gradual.

2. Sub-Sector wise Long term Policy:

For each sub-sector, the long-term policy (e.g. for a period of 5 years) should be

announced by the Government so that entrepreneurs’ appraisal of the policy implications

do take a near-accurate shape.

3. Implementation of the Announced Polices:

There should be effective co-ordination amongst the various ministries, Govt.

Departments and relevant agencies involved for proper implementation of policies related

to industrialization.

4. Development of Small industry Sector:

The small industry sector is characterized by low-level of technology, low equity base,

traditional management practices, poor marketing outlets and undeveloped sub-

contracting arrangement. The small industries should not be left to the market forces

only. The following measures may be taken for preventing sickness in the small-scale

sector:

Arranging access to institutional credit at reasonably lower rate of interest.


Industrial Estates equipped with the required facilities should be set up in suitable

locations.

Entrepreneurship and Technology training should be arranged and then linked

with the provision of credit facilities. A national level training institute for

entrepreneurship development in the small-scale sector should be set up. Meanwhile,

BSCIC Training Institute and DCCI Business Institute may be strengthened for up

gradation of capability of the existing entrepreneurs.

Establishing complimentary relationship with the medium and large industries

should make sub-contracting arrangements. Government supplies may be procured

from small industries as far as possible.

Data Bank should be developed at the Chamber Bodies/BOI/BSCIC to facilitate

the adequate flow of market-related information.

There may be one marketing agency entrusted with the responsibility of

purchasing all goods manufactured by SSI units (Say, up to Tk. 10 million

investment) and the task of channeling sales through various sales depots.

5. Rationalization of Tariff:

In cases where deemed necessary, some protective measures should be taken by

restricting import of the locally produced finished goods so that fiscal anomalies could be

removed.

6. Improvement of Infrastructural Facilities:

Insfrstructural facilities including utilities should be made available to the entrepreneurs

at low cost and at the appropriate time.

7. Monitoring of Saturation in Particular industry Sub-sector:


There should be some agency entrusted with the task of monitoring the establishment of

too many units in the same sub-sector so that over-crowding could be prevented.

8. Development of Linkage Industries:

In order to mitigate the problem of non-availability/scarcity of raw material as well as

marketing of finished goods, backward and forward linkage industries should be set up in

a planned way. Moreover, close linkage of industry with agriculture will help ease

problem of scarcity of raw material.

9. Active Support of Banks and Financial Institutions:

In case of industrial units where term loan is needed, the availability of working

capital should be ensured as part of the financial package.

Banks should provide due attention to process the working capital needs of the

industrial units without any delay.

The banks and financial institutions should actively consider BMRE Loan for the

existing industrial units undergoing the reality of rapid change in technology so that

productive capacities are not rendered idle/underutilized.

Interest rate on loan should be made lower by improving operational efficiency of

the banks. This will help reduce financial costs of the industrial units and thus gain

access to competitiveness.

Bank-client relationship should be based on understanding of the mutual problems

and prospects for greater interest of survival of both the entities.

Banks should improve the quality of project appraisal in order to prevent the

growth of born- sick projects and for that, availability of adequate and accurate data

and skilled manpower have to be ensured.


Banks could fix up a time limit for sanction and disbursement of loan limits for

helping timely implementation of the projects/utilization of capacity of the borrowing

industrial units.

Monitoring system of the projects financed by the banks should be thoroughly

intensive and for this, both off-site and on-site mechanisms should be used in

conjunction with each other in order to take timely steps for prevention of sickness.

Educated entrepreneurs with technical know-how should be encouraged to set up

industrial units. They should be provided with all possible support, both financial and

non-financial without emphasis on collateral.

10. Expansion of Market Base through Increased Exports:

Domestic market is gradually getting squeezed due to the influx of officially imported

foreign goods and smuggled goods. On the one hand, increasing the number of

exportable products should expand export market. On the other, anti-smuggling drive

should be strengthened. For this, import policy should be restructured in a way that

discourages smuggling to a great extent.

11. Use of Predictive Models:

Banks and entrepreneurs should follow some predictive models for early detection of

sickness on the basis of evaluation of financial health of the industrial units.

12. Facilitation of Enabling Environment

Deterioration of Law and Order, extortion, harassment etc. should be checked at any cost.

In case of natural calamities, special assistance should be provided for resilience.

b) REMEDIAL MEASURES


They also suggested the following measures for the industrial units approaching towards

sickness and already turned are as follows:

(i) Every bank and financial institution should have a "Project Rehabilitation Cell"

manned by the experts of various disciplines. There should be ongoing process of

evaluation of the heath of the assisted units by the banks to detect early warning signals.

For this, congenial bank-client relationship is a must for extending co-operation to each

other.

Genuine sick units capable of being revived should be allowed rehabilitation

package by way of rescheduling of existing loans, waiver/remission of interest

payments, conversion of short-term liabilities into long term obligations, etc.

depending on the merit of the each case.

There might be one "Interest Remission Committee" to be formed by the Govt.

from time to time to address the genuine problems of small sick units (where

investment ceiling may be up to Tk. 1 crore). However, this step should not

encourage the non- sick units to avail of this temporary facility. The screening

process should be strict enough to select the genuine sick units for such concession.

As it was followed previously, the Govt. may compensate up to 50% of the waived

interest to the concerned banks.

If necessary, change of management of the sick units should be brought in to

facilitate successful running of the projects.

Only financial and management rehabilitations of the sick units will not bring the

desired result unless Govt. assistance in the form of reduced taxes, duties,

concessions on various charges like gas, electricity, etc., imposition of restriction on

related import items etc are made available.

Bangladesh Bank may set up a sick industry Cell to monitor the performance of

the lending institutions in handling the problems of sick units and to co-ordinate the


rehabilitation efforts of banks, financial institutions, Govt. and other agencies

involved.

Possibilities of mergers and acquisitions may be explored in case of sick industrial

units not capable of being revived by their own strengths. Suitable policy guidelines

may be framed in this regard.

SOEs found chronically sick should not be allowed to operate in the limping state

any further. In case of sick SOEs capable of being revived, disinvestments process

may be expedited.

3.3 STUDIES ON SUB-SECTORAL/ENTERPRISE LEVEL SICKNESS3.3 STUDIES ON SUB-SECTORAL/ENTERPRISE LEVEL SICKNESS

Mr. Saha, Head of Research Division of Depository Financial Institution (DFI) (1997)

carried out a research work on industrial sickness of the DFI- financed projects in

Bangladesh.

He identified the following principal causes are responsible for the sickness of DFI-

financed projects:

i. Internal:

i. Marketing problem (31%)

ii. Management inefficiency and lack of entrepreneurial skills (22%)

iii. Faulty project planning and appraisal (14%)

iv. Imbalance of machinery and inappropriate technology (12%)

v. Implementation delay in (mobilization of equity, etc) (12%)

vi. Others (diversion of funds, labor problem, etc.) (9%)

ii. External:


i. Delays in loan sanction and disbursement (22%)

ii. Non- availability/ shortage of working capital (21%)

iii. Power problem (15%)

iv. Changes in Govt. policy (import liberalization) (13%)

v. Non-availability/ irregular supply of raw material and other critical inputs

(11%)

vi. Natural calamities (57%)

vii. Smuggling, Political unrest (5%)

viii. Others (8%)

He found out the following important findings of the study:

Most of the sick projects (64%) were established during the 1980s’

Average capacity utilization of the sick projects was 41%

Working capital finance gap (difference between the required working capital and

available working capital) prevailed within the range of 21-80%. for 76.48% of the

sample sick projects.

3.4 MINISTRY OF INDUSTRY (MOI) - SPONSORED SICKNESS STUDY 3.4 MINISTRY OF INDUSTRY (MOI) - SPONSORED SICKNESS STUDY

BY THE HOUSE OF CONSULTANTS LTD.BY THE HOUSE OF CONSULTANTS LTD.

In 1988, under the sponsorship of Ministry of Industries (MOI), Government of

Bangladesh (GOB), the House of Consultants Ltd. undertook a study to develop criteria

and identify the causes of sickness of manufacturing establishments in Bangladesh and

find solutions to remove or at least reduce the impact of the causes. According to the

study, an industrial unit has been defined to be sick if it fails to cover all the costs of

production (including finance cost) and earn normal profit in the long run (i.e., a three –

year period). A set of criteria was developed for the study in order to identify an

industrial unit as sick which are as follows:

If it incurs net loss in consecutive years,


If its debt-equity ratio deteriorates over time (net loss wiping out the equity base),

If it fails to meet debt-servicing liabilities on time,

If it defaulted in payment of past taxes,

If its share price is going down (in case of public limited companies listed in the

stock exchange),

If it is facing working capital problem and its cash ratio is declining over time

(creating liquidity problem).

By applying the above criteria to a sample of 300 industrial units, it was found that 67.3%

were sick in terms of one or more criteria. The extent of sickness is the highest i.e.,

75.8% among the small-scale industries. The major causes contributing to the state of

sickness are listed below:

Poor entrepreneurship

Lack of proper studies

Lack of management & technical knowledge

Low equity base and dishonesty of purpose

Poor market planning

Idle capacity/low capacity

Infrastructure (power, etc)

Shortage of funds (Working capital & BMRE)

The study suggested a number of measures to alleviate the cause of industrial sickness.

The immediate measures included–Easing debt burden, Reappraisal of sick units, Debt-

equity swap, Rescheduling, Funds for BMRE & Working Capital, Manpower training,


uninterrupted power supply, etc. On the other hand, the suggested long run measures

were – conducting sector reviews, developing project preparation capability, creating an

Institute of Technology, creating management capability, etc. However this study suffers

from methodological problem.

3.5 FUNCTIONING OF SICK INDUSTRIES3.5 FUNCTIONING OF SICK INDUSTRIES REHABILITATIONREHABILITATION AND AND

REVIVAL CELL UNDER IP-91REVIVAL CELL UNDER IP-91

A ‘Sick Industries rehabilitation and Revival Cell’ was formed in the middle of 1991 at

the Ministry of Industries (MOI). The cell headed by the Secretary, MOI, and GOB with

representatives of all prominent chambers and financial institutions had the following

terms of reference –

To define a sick industry

To identify sick industries and the reasons thereof on the basis of a survey

To submit report with specific recommendations for arriving at the appropriate

solutions in each case

1. Definition of sick industry according to Sick Industries rehabilitation and

Revival Cell

The cell defined a sick industry as follows –

An industrial unit (a) which could not reach the stage of normal production with normal

profit or (b) has incurred loss or remained at the unprofitable level for consecutive 3 to 6

years from the first year of commercial production or (c) could not produce above the

break-even point for reasons beyond the control of the entrepreneurs.

2. Causes of sick industry according to Sick Industries rehabilitation and

Revival Cell

The Cell identified the following major causes of various types of industries fallen sick:


Selection and Implementation of Projects without the required feasibility studies

Supply of imbalanced and defective machinery

Inadequate/Non-availability of working capital (in majority of the cases)

Non-provision of financial assistance for BMRE, where necessary

Lack of timely decision and support by the financial institutions and the related

agencies (in majority of the cases)

Loss incurred by natural calamities.

Unauthorized inflow of smuggled and officially duty-free foreign goods

Frequent power disruption, irregular supply & high price of power

Improper utilization of productive capacity

Disruption of production due to political unrest, labor unrest, etc

High rate of interest on bank loan

Marketing problem for locally produced goods

Upward movement of exchange rates

Fiscal anomalies between the imported raw material of locally produced goods

and imported finished goods.

Lack of sound management

Lack of proper implementation of industrial policies

3. Recommendations of Sick Industries rehabilitation and Revival Cell for sick

industry


A number of recommendations were suggested by the selection committees separately

sub-sector-wise in order to rehabilitate and revive the identified sick industries, which

were finally approved by the sick industry cell. The principal recommendations were here

as under:

Waiver of 100% penal and 50% - 100% normal interest

Rescheduling of outstanding loan for repayment in easy installments

Provision of necessary working capital, financial and technical assistance to

BMRE cases after conducting fresh feasibility studies

Withdrawal of all filed suits

Supply of electricity and other utilities on regular basis and discontinuance of

peak hours of electricity

Unnecessary delays in providing financial assistance and support to be avoided

Stoppage of unauthorized inflow of foreign goods

Lowering of interest rate on industrial loan

Fiscal anomalies to be removed

Introduction of special insurance scheme on easy terms for natural calamities

Compilation of accurate statistics for investment decision

In order to provide protection to home industry, local goods that are produced

abundantly should be discouraged for import.

The report further suggested that as there exists special need for co-ordination between

the operations of the different ministries, agencies, banks and financial institutions and

the policies and rules of the Govt. and various laws for rehabilitation of sick industries, a


"Board for Industrial and Financial Restructuring" might be formed through enactment of

special laws. Under the same law, there may be a high level appellate authority to review

the appeals of the concerned quarters and provide judgments against the decisions of the

said board.

3.6 RECOGNITION OF SICK INDUSTRIES IN THE FIFTH FIVE-YEAR3.6 RECOGNITION OF SICK INDUSTRIES IN THE FIFTH FIVE-YEAR

PLAN (1997-2002)PLAN (1997-2002)

The Fifth Five Year Plan (1997-2002) was launched by the Government. Unlike the

previous Five-Year Plans, the Fifth Five Year Plan recognized the presence of a large

number of sick industries and listed the main reasons therefore as follows:

Depreciation of taka in relation to the foreign currency in which loan capital was

obtained

Technological obsolescence

Withdrawal or lowering of protective tariff wall,

Management inefficiency

Inadequate working capital support by the banking system; and

Pilferages by the sponsors, in collusion with the personnel of the lending banks or

financial institutions

In this paper it has been suggested that during the plan period concrete steps will be taken

to remove the relevant causes of sickness through joint efforts of the owners,

management, labor and the funding agencies.

3.7 SUPPORTIVE MEASURES PROPOSED IN THE NATIONAL3.7 SUPPORTIVE MEASURES PROPOSED IN THE NATIONAL

BUDGET OF 1998-99 FOR CURBING INDUSTRIAL SICKNESS BUDGET OF 1998-99 FOR CURBING INDUSTRIAL SICKNESS


While announcing the national budget for the financial year 1998-99, the Finance

Minister referred to the sick industries in Bangladesh. Though he admitted the realities of

sickness in the context of governing principles of capitalism, he attributed the main

reasons of sickness to mismanagement, political and economic stability and rapid

liberalization and unexpected shifts in economic policy. A package of supportive

measures was proposed in the budget speech with a view to scaling down the problems of

sick industries which are follows:

Since small entrepreneurs are adversely affected by the phenomenon of sickness

and detailed investment analysis is hardly possible in case of small units, steps would

be taken for providing assistance to the small sick industries already registered with

MOI.

A special committee would be set up to consider remission of interest and penal

interest up to 100% of those enlisted sick industries which had borrowed up to Tk. 50

lacs from any state-owned bank. The Government would reimburse 50% of such

remitted interest amount to banks. The amount remaining due after remission would

become payable by three years in monthly installments.

Sponsors of sick industries having borrowed more than Tk. 50 lacs, and being

unable to pay the dues, may submit compromise proposal to the banks for decision on

the basis of bank-client relationship. In cases, the sponsors believe that their sick

industries can be profitably rehabilitated; they may submit feasibility reports to the

concerned banks for taking appropriate steps on the basis of guidelines given by the

special committee.

Where court cases are pending, all proceedings would be taken within the legal

framework without compromising the interests of the banks.

Upon implementation of the above measures, all Govt. Committees relating to

sick industries would stand abolished and hence, all sick industries would have to

seek redress under the Bankruptcy Act.


The Government will issue bonds worth Tk. 60 crore in FY 1998-99 to

compensate the banks for implementation of the above measures. If necessary,

allocations for this purpose may be enhanced in the future.

3.8 FORMATION OF SPECIAL COMMITTEE ON INTEREST REMISSION3.8 FORMATION OF SPECIAL COMMITTEE ON INTEREST REMISSION

FOR THE IDENTIFIED SICK INDUSTRIESFOR THE IDENTIFIED SICK INDUSTRIES

The Ministry of Finance considered some observations of SIA and constituted a ‘Special

Committee on Interest Remission’ under the convener ship of a retired judge.

While resolving the cases under consideration for remission of interest, the following

reasons were found to be dominant in contributing to sickness in industries:

Selection of project without proper feasibility studies and appraisal

Failure in selecting appropriate technology

Supply of defective machinery due to inexperience of both entrepreneurs and

banks

Problem in marketing the produced goods

Location problem and lack of skilled manpower

Non-availability/Inadequacy of working capital from the financing banks

Delay in financing decision and loan disbursement

Natural disasters

Smuggling of foreign goods/liberal import policy

Frequent power disruption/Non-availability of gas and power connection.


Frequent changes in exchange rates and fiscal anomalies.

Lack of co-ordination amongst various ministries and Govt. departments

Over-crowding of industries in the same sub-sector

Deterioration of law and order, political instability, extortion, strike, etc

Management inefficiency, etc

However, in April 2001 the Finance Minister in his speech remarked that there was no

scope for continuing state support for rescue of sick industries. He added that the Govt.

tried its best to reduce the number of sick industries from over 1700 to less than 400

through supportive measures. But this should not be looked upon as a permanent

phenomenon in a market oriented economy.

3.9 DAILY STAR REPORT ON APRIL 7, 20063.9 DAILY STAR REPORT ON APRIL 7, 2006

Govt. urged to frame law for protecting sick industries

--Staff Correspondent

President of Bangladesh sick Industries Association Chowdhury Muhammad Ishaq urged

the government to constitute a rehabilitation and reconstruction board and frame an

appropriate law for protecting the sick industries of the country.

He said at a Press conference held at the National Press Club on Saturday, "The

government had identified 2580 industries as the sick industries and of them 100 are in


the public sector. About one lakh workers have become jobless and 49000 people have

been affected directly due to serious disruption in these industries,"

He said- only 700 sick industries could be traced and others were abolished. The

president of the association alleged that the government policy for rescheduling the loans

was not the borrower friendly.

He urged for keeping the sick industries out of the purview of Artha Rin Adalat.

Responding to a question he said the association had submitted its demands to the

government and met with the Minister for Law and Parliamentary Affairs Barrister

Moudud Ahmed. The minister according to them assured the association of reviewing the

problem faced by the sick industries.

.

3.10 FINANCIAL EXPRESS REPORT ON FEBRUARY 2, 20063.10 FINANCIAL EXPRESS REPORT ON FEBRUARY 2, 2006

Entrepreneurs in distress: Rescue plan of sick industries shelved

--By Staff Reporter

Chowdhury Muhammad Ishaq, President of Bangladesh sick Industries Association said

that entrepreneurs burdened with their sick industries have been passing their days in

distress since 1991, due to non-implementation of the government decision to write off

bank’s bad debts.

He thinks that the causes which led to loss of commercial viability of these sick units

included selection and implementation of the projects without judging viability, supply of

sub-standard machines for the units, non-cooperation of banks to provide working capital

to the units, lack of fund for BMRE of the projects, affected by the natural calamities,

power outages, drastic fall in productivity for various reasons, lack of protection for


marketing of the local products, reduction of export market, continued losses, non-

availability of connections of gas and electricity as per need, absence of proper industrial

policy and lack of efficient management.

He also identified non-cooperation of the commercial banks to provide working capital in

time as key factor for turning their industrial units sick.

The association leader also informed that the sick Industries Rehabilitation Cell formed

as per government gazette notification on June 1991, identified sick units and

recommended immediate measures to rehabilitate the sick units by waiving their bad

debts. But instead of paying heed to the cause, Bangladesh Bank issued a circular asking

the commercial banks and other financial institutions to go for legal battle and settle bank

loans through filing of cases against the defaulters before the Artha Rin Adalat, they

regretted.

Secretary General of the Association Rafiqul Hoque Akand informed that as per a survey,

at least 700 private sick industries needs write off their debts on principle loan involving

Taka 300 crore,, the association leaders said adding that the remaining 1,780 enterprises

have no existence due to various factors including fund constraints.

Senior Vice- President of the association M Siddiqur Rahman also demands necessary

steps immediately for promulgation of Bangladesh sick Industries Act and constitution of

sick Industries Rehabilitation Reconstruction Board to address the problem in a proper

manner.

He also demanded scrapping of cases filed against the sick industries entrepreneurs under

the existing Bankruptcy law to end their harassment.


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 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 mean the industries, which either become stuck-up during construction or

could not operate successfully after implementation. These projects could either pay back

the bank’s 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.

4.1 SICK SITUATION OF A INDUSTRY4.1 SICK SITUATION OF A INDUSTRY

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

management either can’t raise the required working capital from the commercial banks,

or they can’t raise required amount in due time. As a result these projects could not go

into operation on schedule time and they become unable to pay the interest and the

principal amount. At last they are treated as sick industry. In Bangladesh, the growing

incidence of industrial sickness and its adverse impact on the economy in the form of loss

of productive capacities, investment potential, employment, etc. drew the attention of the

policymakers in the Government first in the late eighties. In the nineties, with the advent

of market economy and consequent trade liberalization, the intensity of industrial

sickness took a new dimension. The successive governments came up with policy

measures at different periods to address the problem of sick industries.

4.2 METHOD USED TO IDENTIFY A SICK INDUSTRY4.2 METHOD USED TO IDENTIFY A SICK INDUSTRY


There are some specific criteria to identify a sick industry. Two types of factors can be

considered to identify the sick industries. They are-

Quantitative factors

Qualitative factors

A.A. QUANTITATIVE FACTORS:QUANTITATIVE FACTORS:

To identify a sick industry the following quantitative factors are considered-

a) On the basis of Cost- Benefit Analysis

For identifying a sick industry the following criteria may be considered by cost- benefit

analysis. If the cost of the project is more than the benefit then the industry is to be

considered as a sick industry. Sometimes the industry can’t recover the cost of labor,

material. For this reason the industry goes into loss.

b) On the basis of Break Even Analysis

O

An industry should produce up to break-even point due to recover the fixed cost or

overhead cost. If they can’t recover fixed cost then this industry can be considered as a

sick industry.

FC

Cost

Production

VC

TR Profit

Break-Even Point


c) On the basis of 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

When the project is not profitable

When the production is not reached at the break-even point

When they can’t 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 interest rate increases the cost of working capital then the project may become

sick

Lack of adequate 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.

B.B. QUALITATIVE FACTORS:QUALITATIVE FACTORS:


To identify a sick industry the following qualitative factors can be considered-

1. 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 liabilities

The failure of payment of loan installment in time increases the burden of loan

amount

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

2. Technological problems

A survey of Depository Financial Institution reveals that 12% of the projects suffer

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 also suffer from faulty technical design.

Whether the preliminary test and studies are not appropriate


Availability of raw materials, powers and other infrastructural facilities are not

established.

The selected scale of operation is not optimal

The production process chosen is not suitable

The equipment and machine chosen are not appropriate

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 infrastructure facility

Selection of old and backdated technologies to be used in production

Delay of machinery procurement & rapidly change in technological environment

Unavailability of supply of gas, electricity and water etc

3. Administrative and Managerial problems

Success of a firm largely depends on management. There are some internal conflict

between the workers and managers. According to the research paper of Bangladesh

Institute of Development Studies reveals that 9% of the projects suffer due to

administrative and managerial problems. The administrative problems, which lead an

industry towards sick, are as follows-

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 management’s partner

Death of main entrepreneur of the project

Insufficient employees

Unskilled human resources

Corruption and intentional misuse of organizational assets

Lack of proper planning, organizing, controlling, administrating and monitoring

4. Marketing Problems

A survey of Depository Financial Institution reveals that 31% of the projects suffer

due to marketing inefficiencies, which lead an industry toward sickness, are as

follows-

If the aggregate demand of products 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

Shortage of raw material supply

High competition in the market

Cheap price of the foreign product


5. Economic Problems

]The economic problems, which lead an industry toward sickness, 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.

6. Political problems

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

Political problem like worker unrest, hartal

Political pressure to loan procurement

Inappropriate action taken by govt. to protect smuggling

Political terrorism

7. Other Reasons of Sickness

Except the above problems there are also some problems, which lead an industry towards

sickness. A survey Depository Financial Institution also reveals that 9% of the projects

suffer 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

Natural disaster that hampered production

Terrorism that hampered to establish an industry

Delay of implementation

4.3 ARGENTI’S SCORE MODEL TO IDENTIFY A SICK PROJECT4.3 ARGENTI’S SCORE MODEL TO IDENTIFY A SICK PROJECT

To support the above definitions and to identify which industry is sick, a model has been

included here. 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.

The model is based on-

1. Defects

2. Mistakes

3. Symptoms

Weight Situation Occurs Qualifying Marks

Defects 10

8 Chief Executive Officer (C. E. O)

is an Autocrat

4 Chief Executive Officer (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 Plan

3 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 05

4 Financial Signs Weak

4 Creative Accounting

4 Rumors/Staff Turnover/Low

Morals/Untidy Offices/Frozen

Salaries

Total 12

Total possible score: 100 Qualified: 25 or less

According to the Model, defects part carries total 43 weights and qualifying marks in this

part is 10 out of 43. If-

The C.E.O is an autocrat then the industry is weighted by 8

And the C.E.O is also the chairman then the industry is weighted by 4.

For –

Passive Board of Directors the industry is weighted by 2

Imbalanced Board of Directors the industry is weighted by 2

Weak Financed Directors the industry is weighted by 2

Poor Management Department the industry is weighted by 2

No Cash flow Plan the industry is weighted by 3

No Budgetary Control the industry is weighted by 3

Poor Response to change the industry is weighted by 15.


If the industry gets 10 or less marks in this defect part then it will not be considered as

sick. But if it gets more than 10 then it will be treated as sick.

In the mistakes part-

For-

High leverage, the industry is weighted by 15

Over trading the industry is weighted by 15

And Big Gone Wrong the industry is weighted by 15

If the industry gets 10 or less marks in this part then it will not be considered as sick. But

if it gets more than 10 then it will be treated as sick.

In the symptoms part-

Financial weakness carries 4 marks

Creating Accounting carries 4 marks

Rumors/Staff turnover/Low morals also carries 4 marks.

Here the total weight is 12 and qualifying marks is 5.

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.

4.4 IDENTIFIED SICK INDUSTRIES 4.4 IDENTIFIED 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. But on the basis of the above factors

274 sick industries that are financed by BSB are identified as sick during the year 2003-

2005. Some of them are stated below:


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. Ltd

Tas 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

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

Source: Manual of Project Rehabilitation Department 2005


From the above statistics it is clear that there are so many projects in Bangladesh are sick.

An analytical discussion makes it clear to us that the reasons of their sickness and which

projects are sick for which causes.

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:


Causes

Sectors

Tec

hn

ical

Man

agem

ent

Mar

keti

ng

Wor

kin

g C

ap.

Tec

h. +

Mgt

.

Tec

h. +

Mkt

ing

Tec

h. +

W/C

Mgt

. + M

ktin

g

Mgt

. + W

/C

Mkt

ing

+ W

/C

Tec

h. +

Mgt

.

Tec

h. +

Mgt

+ +

W/C

Mgt

. + W

/C+

Mkt

ing

Oth

ers

Tot

al n

um

ber

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 products - 5 - 2 - - 2 1 1 1 - 1 - - 13

Jute - 3 - 7 - 2 2 - 1 - 1 - 3 1 20

Engineering 4 3 - - 3 - - - - - - - - 5 16

Paper printing 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

Petrochemicals - 1 1 - 2 - - 2 1 1 - - - - 8

Non-metallic 2 1 - 4 - 1 1 - - - - - - - 10

Chemicals 1 - 2 1 - - - - 1 - - 1 - - 6

Pharmaceuticals 3 - - 2 1 - - 1 - 1 1 - - 5 14

Tannery - 3 1 3 - 1 - - - - - - 1 - 9

Transport - - - - - - - - - - - - 1 4 5

Total No. of

problems

25 31 51 46 11 7 18 13 8 7 8 11 5 33 234

Source: Manual of Project Rehabilitation Department 2005

4.5 MAJOR CAUSES THAT AFFECT THE SICK INDUSTRIES IN4.5 MAJOR CAUSES THAT AFFECT THE SICK INDUSTRIES IN

BANGLADESHBANGLADESH


A survey of Depository Financial Institution reveals that-

22% of the projects suffer due to administrative and managerial problem.

12% of the projects suffer due to technological problems.

12% of the projects suffer due to shortage of capital.

31% of the projects suffer due to marketing inefficiencies.

9% 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.

4.6 IMPACT OF SICK INDUSTRY IN BANGLADESH OR BSB4.6 IMPACT OF SICK INDUSTRY IN BANGLADESH OR BSB

Sick industries have negative consequences on 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.

4.7 PRECAUTIONS ABOUT SICK INDUSTRY4.7 PRECAUTIONS 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 location is selected


Defect machinery must not be purchased

Ensure sufficient skilled and experienced personnel

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 taste of customer

Proper plan is taken to implement the project

Steps are taken to avoid the potential conflict.

4.8 REHABILITATION POLICY OF BANGLADESH SHILPA BANK4.8 REHABILITATION POLICY OF BANGLADESH SHILPA BANK

All sick industry is not rehabilitated because the all-sick industry has not al l possibilities

to rehabilitate. It’s mainly depends on the nature of the sickness. The sick industry that is

probable to rehabilitate by providing and assisting some predefined criterion. The

predefined criterions are based particularly on:

1. Management perspective

2. Technical perspective and

3. Financial perspective

4. Marketing perspective

In the case of rehabilitating sick industries the bank takes different policies in different

situations, which are given as follows:

4.8(a) MANAGEMENT PERSPECTIVE4.8(a) MANAGEMENT PERSPECTIVE

Management of the project should measure the aggregate demand of the product or the

project and also maintain the market share. Consumption trends and production are to

measure for rehabilitating a sick industry. If the bank thought that a little change in the

managing committee would reestablish the project then they make a change in the

managing committee.


4.8(b) TECHNOLOGICAL PERSPECTIVE4.8(b) TECHNOLOGICAL PERSPECTIVE

Whether the raw material and technology is available or not that must be measured in the

form of price quality. If they thought that some technological change would reestablish

the project they make some technological change.

4.8(c) FINANCIAL PERSPECTIVE4.8(c) FINANCIAL PERSPECTIVE

In the financial measurement the project should compute the cost of capital and maintain

budgeting. The present value of net cash inflow should be higher than the present value

of cash outflow. In such case, the bank provides some financial treatment that the amount

of interest is to be waived or re-phased or providing consulting service, i.e.

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.

4.8(d) MARKETING PERSPECTIVE4.8(d) 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

Choose the value

1. Segmentation

2. Targeting

3. Positioning

Provide the value

1. Product/Service develops

2. Pricing3. Distributing

Communicate the

value

1. Sales force

2. Promotion


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

Management perspective

Technical perspective and

Financial perspective

3. Positioning in the market

BSB rehabilitates the sick industries of their financed projects.

Provide the value

Their products are-

Supporting the management

Providing the working capital

Technological enrichment

Their programs are-

Debt relief

Injection of additional funds

Direct management

Communicate the value

The personnel of Project Rehabilitation Department are employed for this purpose.

4.9 PROGRAMS TAKEN TO REHABILITATE THE SICK INDUSTRIES4.9 PROGRAMS 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 bank’s 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

4.10 FACILITIES PROVIDED UNDER REHABILITATION 4.10 FACILITIES PROVIDED UNDER REHABILITATION

PROGRAM PROGRAM

BSB had given loan to sick industries at the first time TK. 513 lac during the year 2005.

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

The bank also makes a program of taking over management of the sick projects directly

where the above measures were not considered sufficient due to inefficient

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

2004-2005. 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 during the year 2003-2005. Summarized measures that are taken by BSB to

rehabilitate the sick industries are given below-

Loan outstanding Measures taken (Million TK.)


(Million TK.)

Ove

rdue

Tot

al

outs

tand

ing

Pro

ject

s

Rep

hase

men

t

Wai

ver

of

inte

rest

Blo

ck A

/C

Add

itio

nal

Loa

ns

Wor

king

Cap

ital

Equ

ity

part

icip

atio

n

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: Manual of Project rehabilitation department of BSB 2005

Note: Parentheses indicate number of projects

4.11 ARE ALL-SICK INDUSTRIES REHABILITATED?4.11 ARE ALL-SICK INDUSTRIES 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 are rehabilitated.


4.12 THE INDUSTRIES WHICH ARE REHABILITATED AND THE4.12 THE INDUSTRIES WHICH ARE REHABILITATED AND THE

INDUSTRIES WHICH ARE NOT REHABILITATEDINDUSTRIES WHICH ARE NOT REHABILITATED

A. Sick industries, which are rehabilitable

Changing of management structure

Providing financial aids or loan without interest or lower rate of interest

Financial treatment that the amount of interest is to be released

Assisting for replacement of machine

Rehabilitation is sometimes depending on merit of the project.

Providing consulting service

a) Success about the proper way

b) Inspiration by providing motivation

B. Sick industries, which are not rehabilitable

After considering a firm as sick, then the firms are taken into rehabilitation by aiding

above additional support of those the sick firm that can recover the additional investment

then it seems to be as rehabilitated firm otherwise not.

4.13 ROLE OF MANAGEMENT OF REHABILITATION DEPARTMENT4.13 ROLE OF MANAGEMENT OF REHABILITATION DEPARTMENT

OF BSBOF 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 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.

4.144.14 LIST OF A FEW SUCCESSFUL REHABILITATED INDUSTRIES 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 have become

successful during the year 2003-2005.


Chemicals and Pharmaceuticals Location

01. S.S.R Chemical Industries Ltd. Dhaka

02. Islam Polymers & Plasticizer Ltd. Tangail

03. Raja Plastic Industries Ltd. Gazipur

04. KDH Laboratories Ltd. Dhaka

05. Asiatic Business Ltd. Sylhet

06. Pharmadesh Laboratory Ltd. Dhaka

Cotton, Woolen & Synthetic Textiles

01. Azim Mannan Garments Ltd. Chittagong

02. Desh Gannents Ltd. Chittagong

03. Jems Sweaters (Pvt) Ltd. Dhaka

04. Auto Spinning Mills Ltd. Gazipur

05. Techno Textile Mills Ltd. Gazipur

Food & Allied Products

01. Meenhar Sea Foods Ltd. Chittagong

02. Mimi Chocolate (Bd) Ltd. Dhaka

03. Modern Industries (Bd) Ltd. Munshigonj

04. Mustafa Cold Storage Ltd. Rangpur

05. 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. Dhaka

04. Bangladesh Paper Product Ltd. Chittagong

05. Orient color Printers Ltd. Chittagong

06. Transfer Paper Ltd. Bogra

Tannery & its products

01. Apex Footwar Ltd. Dhaka

02. Lexco Ltd. Dhaka

03. Leather Board Ltd. Dhaka


04. Comfort Footwar Ltd. Dhaka

05. Bangladesh Chemical Ltd. Narayangonj

Non-metallic Mineral Products

01. Savar Refractories Ltd. Dhaka

02. Tajma Ceramic Industries Ltd. Bogra

03. Standard Ceramic Industries Ltd. Gazipur

Metal products

01. Rangpur Foundry Ltd. Rangpur

02. Scala Industries Ltd. Gazipur

03. Oriental Foundry & Agro Engineering Ltd. Dhaka

04. Bogra Metal Industries (Pvt.) Ltd. Bogra

Electrical Machinery & Goods

01. Bangladesh Lamps Ltd. Dhaka

02. National Fans Ltd. Gazipur

03. Eastern Tubes Ltd. Dhaka

04. National Accessories Ltd. Chittagong

Service Industries & Miscellaneous

01. Hotel Simon Ltd. Cox’s Bazar

02. Hotel Elysium Ltd. Dhaka

03. G.Q. Ball Pet Ltd. Magura

04. Rajanigandha Tankers Ltd. Dhaka

It is observed that a large number of projects are sick and they are loan defaulter. In this

situation some suggestions has been given that will help BSB to overcome some of their

problems.

5.15.1 FINDINGS OF THE STUDYFINDINGS OF THE STUDY

During the internship program the following findings have been found out from my

study:

Source: Manual of Project Rehabilitation Department of BSB 2005


Sometimes improper feasibility reports are submitted by sponsors, which do not

contain adequate and reliable information.

Sometimes pressure group’s 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.

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 primary and secondary data are not readily available.

Inadequate attention is paid to analyze risk and an uncertainty associated with the

projects, means only sensitivity analysis is done to analyze the risk.

There is no system of accountability of the project appraisal team if the approved

project fails due to their improper appraisal.

Most of the personnel are not as much experienced and skilled to operate banks

activities in proper way.


Shortage of working capital is another problem because some industry may sick

for this problem.

Inefficient project cost estimation, not considering inflation, different changes in

the cost factors, waste and spoilage, personnel replacement cost etc. As a result

sometimes project become sick.

Because of country’s existing political instability, unstable tariff and fiscal policy

some industries may become sick.

No use of latest technology and permanent IT specialist

Poor quality of local machinery, equipment and construction materials is another

cause for sickness.

Lack of co-ordination among various financial institutions in exchange of

information

Lack of proper control over the project may cause of sickness.

Delay in settlement of case

Project rehabilitation is one of the criteria of BSB that revives the sick project

Finally contribution of BSB is the highest in the industrialization of Bangladesh

though there are some problems.

5.25.2 SUGGESTIVE MEASURES SUGGESTIVE MEASURES

Being the prime Development Financing Institution BSB continues its efforts to make an

effective contribution towards expansion of industrialization process of the country. With

keeping this view, following suggestive measures can be taken to overcome the noted

problems. From my viewpoint, the suggestive measures to resolve sickness are as

follows:

Sanctioning of loan to the sponsors should be made through making feasibility

report properly.


Loan appraisal procedure is time consuming and to some extent project plan

become irrelevant after getting the loan. Since all the process is completed, he is

bound to take this loan because some expenditure has already been incurred (sunk

cost). As a result loan recovery may slow and sometimes difficult. My suggestion is

that BSB should rearrange appraisal procedure so that the entrepreneurs can take loan

within short period of time.

Experienced and motivated entrepreneurs should be allowed for sanctioning the

loan.

BSB should avoid unnecessary political interfere. If political problem influences

the baking activity must create new problem, no doubt.

BSB should give more consideration on physical investigation before issuing

loan. However project appraisal should be strict so that nobody cal use its loopholes.

Sometimes real entrepreneur does not get bank loan. So actual entrepreneurs

should be identified and give loan.

The projects/industries, which are profitable, should be identified and sanctioned

loan to those projects/industries.

Risk adjusted discount rate method; program evaluation and review technique

(PERT) and probability analysis should be introduced.

Market Research Institution should be established for proper market survey.

A co-ordination cell should be established for sharing information among various

institutions.

Responsibility should be established to all employees according to their

involvement in appraisal project.

Honesty, morality, responsibility and patriotism of employees should be

enhanced.

Properly check the feasibility report before issuing loan.

Proper policy to be adopted and implemented

BSB must have to identify viable project and make feasibility study through

efficient personnel before sanctioning of loan to an industry.

Employees who are directly involved with loan recovery should be motivated and

experienced.


BSB should introduce modern communication system so that every department or

unit can get information in his or her desk. Now one department must have to go

other departments for information. It is also time consuming. Preserving documents

also need to be computerized instead of filing.

Encouraging the borrower to repay the loan in time. Special arrangements should

be introduced in this respect. Legal steps should be dynamic so that default loan

recovery should be accelerated. And security against the loan should be sufficient to

recover the loan.

Project must be scrutinized in and appropriate manner as well as the sponsor

taking into consideration on the changing environment and economic reforms and

globalization.

National observation committee can be established to analyze, evaluate and solute

proper loan recovery.

In selecting borrower, 5C’s (capital, capacity, character, condition, collateral)

must be considered.

Proper communication should be established with the clients.

Ensure accountability among the appraisal team who appraise the sick industry.

Number of trained supervisor to be revised

Both primary & secondary database of the BSB should be improved &

strengthened.

5.35.3 SOME OTHER IMPORTANT SUGGESTIONS SOME OTHER IMPORTANT SUGGESTIONS

On the basis of interest rate

The interest rate of the bank in different sectors is not favorable to the new entrepreneur.

So the interest rate in priority sector should be truncated to a minimal percentage.

This should be reduced to encourage agro-based industries, small & cottage industries,

which are very much viable for the economic development of a country.

Promoting new entrepreneurs

To promote new entrepreneurs following steps can be taken-

No collateral


Tolerable interest rate

No bureaucratic problem

Encouraging existing entrepreneurs

To encourage existing entrepreneurs following steps can be taken-

Lesson the red tappism

Awarding the good entrepreneurs

Incentives such as lowering interest rate for the existing customer for their better

repayment behavior.

CONCLUSIONCONCLUSION

Bangladesh Shilpa Bank is a well-known specialized bank of our country. We cannot

think industrialization in our country without the contribution of Bangladesh Shilpa

Bank. Although there are some drawbacks of BSB activities nevertheless it plays an

important role in the industrial sector of Bangladesh. We get clear idea about this

contribution through the analysis of the BSB activities from 1972 to till now. Although

some unexpected political pressure hamper such activity but BSB always tries to

overcome these sort of problem by his own policy and procedure. We observed that BSB

able to contribute to GDP through their industrialization. It is clear that industrialization

is the base of the economy of the economy. I observed that the loss of BSB is 100 crore


less than that of previous year. It present that the position of BSB is more strength than

previous year. Another notable thing is that BSB reduces their loan sanctioning area. As a

result their loan sanctioning reduced to TK. 429 million. I think, it is not good news for

our economy. Because new industry essential for employment generation. At present

BSB carefully takes steps for sanctioning loan because of a huge fund become

irrecoverable due to sickness of various projects. It is indeed that sickness is the

consequences of unconscious and lack of investigation in case of issue of loan. We know

sick project is the burden of bank as well as overall economy of Bangladesh. So, now-a-

days BSB is reducing rehabilitation of sick industries. Because those industries, which

are unable to pay their previous loan amount, if they are rehabilitate by the BSB most of

them will not be able to pay the rehabilitated money also. So there was huge amount of

loss occurred and for this reason project rehabilitation of sick industry and the work of

this department is decreasing day by day. So I think BSB will close their rehabilitation to

reduce their loss. I think proper scrutinizing of project proposal and careful physical

verification may make sure to be profitable of that industry as well as Bangladesh Shilpa

Bank. Bangladesh Shilpa Bank should concentrate on loan recovery that is necessary for

long-term profitability and sustainability. Without pros and cons everybody should to

confess of BSB contribution. We expect continue their operations without influence and

contribute more and more to our industry that brings good luck to the nation.


BibliographyBibliography

1. Bangladesh Shilpa Bank "Annual Report 2004-2005"

2. Different Project Appraisal reports of BSB.

3. Loan sanctioning letter of BSB.

4. Bangladesh Shilpa Bank Ordinance 1972.

5. Manual of different departments of BSB.

6. BSB web side " www.shilpabank.gov.bd"

7. Manual of Project Rehabilitation Department.

http://www.shilpabank.gov.bd/

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