Measuring the customer satisfaction of the service provided by Bangladesh Shilpa Bank

1.1 Background of the study


Theoretical knowledge is not enough for a business student because there is a gap between theoretical knowledge and practical field. Our internship program has been launched mainly to bridge this gap.


Industries play a pivotal role in the economic development of every country. Bangladesh is in the midst of gigantic efforts to speed up the process of economic growth. Therefore, significance of credit in promoting sustaining economic growth in a developing country like Bangladesh can hardly be over emphasized. Credit is needed for many purposes and is employed by almost all sectors of the economy. The demand for institutional credit in Bangladesh is much in excess of what can be supplied by the banking sector. To consider the real situation government has established Bangladesh Shilpa Bank to stimulate industrialization. The main function of Bangladesh Shilpa Bank is not only to grant credit but also to develop the country through industrialization by selecting correct project and provides assistance in different way to implement successfully of selected project.


1.2 Objectives of the Study


The main objective of the report is to comprehensive study on Bangladesh Shilpa Bank – its overall functions, loan sanctioning procedure, and to find out the problems and opportunities for the entrepreneurship development. The following are the other objectives of the study-


  • Analyze the productivity of Bangladesh Shilpa Bank.
  • Develop knowledge about the reasons of making loan default by the sponsors.
  • Get an idea about the condition loan default mechanism of BSB.
  • Acquire knowledge about faulty and disorder loan payment by the sponsors.
  • The impact of loan default to the overall economy.
  • Effects of loan default to the industrial sector of the economy.
  • Consequence of loan default of financial condition of BSB.
  • To recommend necessary steps for overcoming such problems of BSB.
  • To get an overall idea about the existing projects appraisal procedure.
  • To determine the limitations or problems (if any) of the project appraisal.
  • To recommend necessary steps to overcome such limitations.
  • To go through all the departments of the BSB and observe how the works are being done.
  • To determine the limitations or problems (if any) of Loan Operation Department.
  • To find out the contribution of BSB towards expansion of industrialization process of the country.

1.3 Methodology of the Study


Different kinds of primary and secondary data are collected from different sources. After collecting data from the interview and material, the data was first carefully scrutinized. Then the data was organized as required.


1.3.1 Primary Sources


  • Face to face conversation with the respective officers and Staff of BSB.
  • Oral interview of the responsible officers.
  • Relevant document’s studies as provided by the officers concerned.
  • Observation of department of BSB.


1.3.2 Secondary Sources


  • Annual report of the BSB
  • Annual Budget of the BSB.
  • A brief on BSB for chief officers and staff of BSB.
  • Various document of the BSB
  • Extensive literature search on the basis of these documents of publication.


1.4 Limitations of the study


This is the first ever practical field assignment in my life. So improper knowledge along with other problems take effect in proper performing this report-


  • Sufficient books, publications and journals were not available.
  • Insufficiency of necessary information and data.
  • Sometimes officials deny disclosing some information as to maintain secrecy.
  • BSB is not furnished with adequate written document related to this report.
  • Many personnel of BSB were reluctant to provide useful information.
  • Improper combination among various departments.
  • Up-to-date information was not available.
  • As an autonomous organization without any shareholder and established under special act BSB is not always responsible to make disclosure of all data. They do not provide update of key variable also.
  • Performance analysis does not finish with collecting information. To find an explainable conclusion it needs lot of calculation and analysis.
  • Unwilling to give information more because of extra harassment that are without their responsibility.
  • Business confidentiality is also the fact for not providing more information.


2.1 Background of Bangladesh Shilpa Bank


Bangladesh Shilpa Bank (BSB) established under the Bangladesh Shilpa Bank Order 1972 (Presidential Order No. 129 of 1972) on 31 October 1972, to provide credit facilities and equity support to industrial enterprises in Bangladesh. Before independence the name of this bank was Industrial Development Bank of Pakistan (IDBP). After liberation it was renamed as Bangladesh Shilpa Bank. The BSB order 1972 was amended subsequently by the parliament to provide more operational autonomy to the management. It is the prime development financing institution (DFI) in the country for extending financial assistance for industrialization. After getting liberation a newly born country required rapid financial assistance and advisory services to industrialize the nation and BSB supposed to bolster in this regard. It has been extending long and medium term loan facilities in local and foreign currencies to industrialize projects (both new and BMRE) in the private and public sectors. BSB provides free technical advice in respect of plant and machinery, product and process, raw materials, market for products, and other related aspects to prospective entrepreneurs. It prepares project profiles for private entrepreneurs. All industrial projects either in the public sector or in the private sector are eligible for financial assistance from the bank. It follows a policy of diversifying its lending portfolio for widespread geographical dispersal of industrial enterprises, especially in less-developed areas of the country. With the view to bringing more dynamism and diversity in its activities, BSB started full-fledged commercial banking in 1993-94. This enables bank-financed projects to obtain commercial banking services including working capital loans, import of raw materials etc. With the passage of time due to mismanagement of loan distribution and ill motive of borrower left he sector derelict.

2.2 Mission


The mission of BSB is to provide long-term and intermediate-term loan to accelerating the process of industrialization of the country by providing financial assistance and equity support to the enthusiastic and skilled entrepreneur. It prioritizes, especially, export oriented/export linkage industrial units, efficient import substitution, joint ventures, commercialization of local technology and promotion of agro- based industry.

2.3 Institutional overview of BSB


Established October 31,1972
Organization Head office Dhaka
Division 5
Department 21
Zonal office 3
Branch office 15
Manpower 731

2.4 Capital Structure


Capital Structure Taka
Authorized 2,000 million
Paid – Up 2,000 million

2.5 Ownership and Sources of Fund


At least 51% of the authorized capital of BSB be subscribed by the Bangladesh government and remaining 49% be subscribed by Bangladesh nationals or by local or foreign financial institutions. Presently 100% ownership of the Bank belongs to the government. The sources of Bank’s fund are the government, Bangladesh bank, commercial banks, local/overseas financial institutions and suppliers’ credit.


2.6 Management


The management of the bank is vested in a 9-member board of directors, including the chairman and the managing director appointed by the government. However, there is a provision that non-government shareholders of the bank shall elect 4 directors from amongst themselves. But till now, there is no private subscription in the bank’s capital, and all directors are appointed by the government. The managing director is the chief executive of the bank. The General managers assist the Managing director in conducting the overall banking business of the bank.


2.7 Management Apparatus

2.8 Location: Zonal & Branch Offices of BSB

2.9 Functions of BSB


BSB extends long and medium term loan facilities in local and foreign currencies to industrial projects (both new and BMRE) in the private and public sectors. Besides, the Bank also performs the following activities-


  • Provide working capital loans to industrial project.
  • Provides equity support in the form of underwriting and bridge finance to public limited companies.
  • Issues guarantees on behalf of the borrowers for repayment of the loan.
  • Extend commercial Banking services along with deposit mobilization.
  • Purchases and sells shares / securities for BSB and on behalf of customers as a member of Dhaka Stock Exchange (DSE) Ltd. and Chittagong Stock Exchange (CSE) Ltd. for capital market development.
  • Conduct project promotional activities with preparation of various sub-sectoral study reports.


The activities of Bangladesh Shilpa Bank are given below in figure-


Here some of the operational activities and other activities are discussed. other operational activities are discussed in part 4 in details.

2.9.1 Operational Activities of the Bank

Profit & Loss


The Bank made a net profit of Tk. 335.05 million (after adjustment) during FY 2005-2006 as against net loss of Tk. 219.62 million (after adjustment) in the previous year. During FY 2005-2006, the Bank earned total income of Tk. 702.70 million as against Tk. 715.20 million of the previous year. One of the major reasons for decrease of Bank’s income, among others, was the fall of interest income.


Capital Adequacy


In FY 2005-2006, the actual required amount of Capital Adequacy of the bank was TK. 655.99 million against which Tk. 1862.50 million was reserved showing a rise of 22 per cent up than that of the previous financial year.


Deposit Mobilization


During FY 2005-06, the Bank tried to meet its fund requirement from various sources for lending and investment. The Bank emphasized more on no cost and/or low cost deposit mobilization during the period. The total actual deposit collection was Tk. 569 million on June 30, 2006, as against target of Tk.800 million which was less by Tk, 46 million than that of the previous year.


Loan Application Received


In FY 2005-06, the Bank has accepted 96 new loan proposals after proper scrutiny, which was higher by about 16 per cent than those of the previous year.


Project Implementation


The Bank intensively monitors and supervises implementation of its own financed projects. During FY 2005-06,12 projects commenced trial run and commercial production and 60 projects were under different stages of implementation. Of these, 25 projects were under construction, 24 projects completed loan agreement and I I projects were awaiting documentation. In comparison with the last financial year, this showed a significant rise at the rate of 71 per cent for projects going into commercial operation and 25 per cent for projects under different stages of implementation.


Stages of implementation of projects

Position of projects under implementation 2004-2005 2005-2006
Started commercial operation 7 12
Under construction 11 25
Documentation completed 10 24
Awaiting documents 27 11
Total 48 60


Other Investments


During FY 2005-06, the Bank sold shares of Tk. 7.32 million and earned an amount of Tk. 10.53 million as capital gain, dividend and commission from share trading. In the same financial year, the Bank invested Tk. 34.81 million to purchase shares from the primary and secondary market.


2.9.2 Other activities

Advisory Services


Apart from identification and development of viable projects, the Bank assists the interested entrepreneurs in selecting industrial projects having appropriate technology and potential market by providing advisory services and various information.



For upgrading the professional competence and skills of its employees, the Bank is continually arranging training programs both at home and abroad. During FY 2005-2006, 430 officers and staff were provided in-house and local training. Besides, 1 officer was sent abroad for this purpose. In FY 2004-2005, 452 employees were imparted in-house and local training. During the period under report, I in-house Seminar was held on the topic ” Prevention of Money Laundering”.



To improve the working efficiency and providing better customer service, computerization of Bank’s activities is going on. In this regard, the Bank has undertaken a far-flung action plan. During FY 2005-06, 106 officers and staff were provided training to make expertise in computer. Under network-based computerization LAN (Local Area Network) was activated in the Head Office .To bring the Zonal Offices and Branch Offices of the Bank under integrated network, setting up of LAN and WAN (Wide Area Network) is in progress.


Human Resources


As on June 30, 2006 the total staff position of the Bank stood at 731; of which 457 were officers and 274 were supporting staff. This year, 99 officers and 59 supporting staffs were promoted to the next higher position. During the period, 28 employees retired.

Observance of National Days


Important national days like National Martyrs’ and International Mother Language Day on February 21. Independence Day on March 26 and Victory Day on December 16 were observed with due respect and solemnity. Floral wreaths were laid at the Shaheed Minar and at National Martyrs’ Memorial to pay homage to the martyrs who made supreme sacrifices to uphold the dignity of the mother language and to achieve independence of the country.


2.10 Policy for BSB’s own investment


  • Debt equity Ratio ranging from 50:50 to 60:40 depending upon the nature of the project, repayment capability, sponsor credit worthiness etc.
  • Investment Limit Taka 10 core in a single project but above Taka 10 core may be financed in syndication.
  • Working capital loan for BSB-financed projects, especially, for operative and profitable projects under the branch offices of the bank.
  • BMRE (Balancing, Modernization, Replacement and Expansion) facility given to regular good borrowers of the Bank.
  • Reduction of 1.5% interest or 10% rebate of chargeable interest for regularly repaying borrowers.
  • Reduction of rate of interest to attract prospective entrepreneurs.
  • Introduction of lending facilities to proprietorship and partnership concerns alongside traditional financing of private and public limited companies.
  • Reduction of time limit for processing of loan application from 90 to 60 days.
  • Special emphasis to promote agro-based small industries.
  • Sub-sectors selected by Bangladesh Bank under EEF (Equity & Entrepreneurship Fund) are encouraged for financing.
  • Joint venture projects based on technical collaboration and foreign equity participation is given special preference.


2.11 Business Programmes


There are several criteria of business program existing in Bangladesh Shilpa Bank. These are-


2.11.1 Industrial credit programmes

  • Long-term finance (upto 10 years & upto 10 crores)
  • Medium term finance (up to 3 years)
  • Short-term finance (upto 1 year) (working capital)
  • Syndication finance (upto 10 years & more than 10 crores)


2.11.2 Commercial Banking Services

  • Maintaining all kinds of general banking accounts with one stop service for payment of cheques.
  • All kinds of Letter of Credit (L/C) opening with nominal commission (0.5% for 1st quarter and 0.25% for subsequent quarter, not less than TK. 250.00).
  • Issue of pays Order/Bank draft, DD/MT/TT.
  • Guarantee issue.
  • Selling and encashment of Bangladesh savings certificates (Sonchoy Pattra) and Prize Bonds, etc.

2.11.3 Share Trading Service

  • BSB Provides Trading facility and client service as well of DSE (Dhaka Stock Exchange) at its share trading cell of head office with nominal commission 237 members are presently enjoying this facility here. No fees required being a member of BSB share trading cell.
  • CDS (Central Depository System) Service initiated in the cell for providing online Delivery of Shares in both ways.
  • BSB’s Chittagong Branch office has started to provide share trading service to Chittagong people.


2.11.4 Deposit Mobilization Programme

Bank tries to meet its fund requirement from various sources like private, government and non-government organizations for lending and investment.


2.12 Key financial indicators of BSB

Description 2001-02 2002-03 2003-04 2004-05 2005-06
Total income 1237 1100 771 722 714
Total expenses 322 310 350 941 379
Net profit/(loss) before tax 915 790 421 (220) 335
Total loan & advances 7151 6877 6513 5269 6432
Total borrowings 8919 8992 7191 5911 5125
Total deposits 646 641 712 710 655
Reserve fund & other reserves 823 823 823 823 823
Paid-up capital 1320 1320 2000 2000 2000
Authorized capital 2000 2000 2000 2000 2000
Total income to total assets 5.00 4.93 3.56 5.15 5.62
Total expenses to total assets 1.30 1.39 1.62 6.72 2.98
Total expenses to total income 26.03 28.18 45.40 130.33 188.29
Total financial expenses to total income 10.44 10.45 14.92 6.93 9.24
Net profit to total income 73.97 71.82 54.60 (30.47) 46.92
Net profit to total equity 157.07 57.58 17.02 (9.76) 12.94
Administrative expenses to:
Total assets 0.69 0.85 0.94 1.56 1.97
Total expenses 52.76 61.29 58.0 23.27 65.96
Total income 13.74 17.27 26.33 30.33 35.01
Debt-equity 16.43:1 7:01 3:01 2.94:1 2.94:1
BSB at a glance

(Number of projects)

Items 2001-02 2002-03 2003-04 2004-05 2005-06
Loan application received 31 31 51 83 96
Term loan sanctionedNew







5 18 21 34 45
1 2 3 1 2
2 1 3 3 5
8 21 27 38 52
Term loan disbursement 8 11 14 23 43
Working capital loan sanctioned 1 3 5 3 9
Start of commercial operation 2 2 4 7 12
Entrance into loan portfolio 2 7 6 14 23
Replacement/Rescheduling 52 27 17 23 16
Liquidation of loan liabilities 21 31 22 41 20
Total loan portfolio 513 461 308 166 164


(Million Taka)

Term loan sanctioned 189 1418 989 1009 1311
Term loan disbursement 84 170 297 144 485
Working capital loan sanctioned 4 30 19 14 232
Working capital loan disbursement 1 9 28 21 32
Loan recovery 1198 1316 1124 1391 1159
Rephrased/Rescheduled 1833 507 149 259 790

3.1 Functions of various departments of BSB


Bangladesh Shilpa Bank encompasses various department and zonal offices to discharge its activities. To perform efficient and effectively Bangladesh Shilpa Bank in its board meeting has determined the schedule activities of various departments and zonal offices and they supposed to perform the task accordingly and the respective employee have to report according to organizational hierarchy.


There are 8 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. These 8 departments are as follows-


  1. Loan Operation department (LOD).
  2. Documentation and machinery Procurement department.
  3. Project Implementation department (PID).
  4. Central Recovery department (CRD).
  5. Loan Accounting department (LAD).
  6. Project Rehabilitation department (PRD).
  7. Law department.
  8. Human Recourses Management Department.


3.1.1 Loan Operation Department (LOD)


LOD is the starting department of sanctioning loan to the sponsors and in this department various analysis are made for making decision whether the proposed projects are viable or not. Functions of Loan operation Department


  • Issue of Loan Application form.
  • Instruction & co-ordination to fill the form.
  • Receive form (BSQF) along with 1/8th of 1% project estimated cost & other necessary documents.
  • Scrutiny of loan application and other papers for evaluation of loan proposal.
  • Preparation of Appraisal Report.
  • Granting /Rejecting loan application.
  • Put-up loan appraisal is granted.
  • Loan sanctioned with memorandum.
  • Send information to PID, documentation & other department Loan Sanction Procedure


Bangladesh Shilpa Bank (BSB) grants loan on the basis of certain criteria. The processes are as follows-


  • At first an application form is supplied to the entrepreneur
  • After filling up the application from it is submitted by the entrepreneur.
  • A project appraisal letter is supplied by the entrepreneur
  • After analyzing the project appraisal, the board decides whether the loan will be sanctioned or not.
  • If the loan is sanctioned it is forward to the project implementation department. Issuance of Loan Application Form


The starting point of loan sanctioning is the issuing of Loan Application Form (BSQF) to the potential sponsors in exchanging the stipulated fee of tk. 1000 only. The detailed guidelines are supplied along with the form. The sponsor may take the help of the concern offices of BSB in form related issues. The sponsors are required to submit full-dressed feasibility report at the time of submitting the filled Loan Application Form to the BSB. The sponsor can get their feasibility report prepared by themselves or by any firm at their own cost. Receipts Filled-in Bank Standard Questionnaire Form (BSQF)


The sponsors are required to submit the application form dully filled in along with other papers and documents and also pay the required project deposit. In terms of the present policy, sponsors are required to pay 10% of the project cost as part of their equity during the various stages of sanctioning loan. The project deposit is taken to ensure timely mobilization of the sponsors’ equity in the project. The concerned section (called the receiving cell) scrutinizes the filled-in BSQF submitted by the sponsors. If the filled-in BSQF together with the required papers and in order, the loan proposal is considered as fully documented and accepted for further processing. Contents of BSQF


To obtain funds from BSB every project-sponsoring agency has to submit loan application to the BSB in the prescribe Loan Application Form known as “Bank’s Standard Questionnaire Form (BSQF)”. Any potential entrepreneur seeking assistance from BSB can obtain the application form along with detailed guideline in exchange of prescribed fee of Taka 1000 only.


The BSQF is divided into the following six main parts-

Part- A: Containing information relating to project, promoters, corporate set-up and management.

Part-B: Containing information about technical details of the project.

Part-C: Containing data relating to the costs of the project and means of finance.


Part-D: Containing information relating to the market and selling arrangement of the product(s).

Part-E: Containing general information.

Sub form: Form-1, Form-2, Form-3 and Form-4.

Part-A: This part prescribes the entrepreneur to provide information about-


  • The project name, location site of the project, line of production and amount of loan applied in terms of local and foreign currency.
  • The personal details of the promoters and their closely related persons i.e. father, mother and spouse etc. Their name, address, qualification, expertise etc. are required.
  • The type of the company either it is/would be private, public, partnership or co-operative society.
  • In case of limited company, if it is already incorporated then the date, place of incorporation, directors particulars, portion of shareholding, a copy of memorandum, articles of association and incorporation certificate is required.
  • In case of co-operative society, the name and address of the president and secretary, a copy of society’s institution, By-laws and certificate of registration needs to be mentioned. In case of partnership, the name address, share of interest, copy of registered partnership deed is required.
  • The management of the proposed company. The name, position of the personal, if they have other business then three years audited balance sheet, profit and loss statement need to be enclosed. If they applied to any other financial institution for this project or any other project that also need to be stated.


Part-B: This part requires technical information relating to the project are as follows-

  • Proposed product, quality, capacity, sales value, detail arrangements of foreign collaboration if any.
  • Infrastructural facilities (water, gas, power, communication etc.), holding type (free-hold/lease-hold) of the project land, area, price of the land, (paid, to be paid) and development cost of that land, area, cost, type of building and other civil works.
  • Complete list of machinery (imported, local) together with competitive prices quotations, annual raw materials requirements (imported, local).
  • Personal requirement (managerial), technical, administrative, sales), labor (skilled, unskilled) and the name, experience, qualifications of the personal who will supervise the project both at implementation and production stages are required.

Part-C: The part requires financial information, which are as follows-

  • The cost of the project means of finance and profitability estimation of the projects.
  • Detail cost information like land, land development, building and civil works, machinery and equipment, custom duty, insurance, freight, erection and installation, furniture and fixture, vehicles, preliminary and start-up expense, contingencies and net working capital are required.
  • Equity capital (own contribution, public issue, other), loan from BSB, others in term’s local and foreign currency along with the name of commercial bank (s), if any contact with them for short-term loan.
  • Estimated capacity, sales, cost of goods, gross profit, administrative expense, financial expenses and net profit at least for three years.


Part-D: This requires information elated to marketing and selling arrangement such as-

  • Producer/supplier of the raw material, target consumer and the marketing channel.
  • Proposed selling price and prevailing market price of the product.
  • If the product is particularly or fully proposed to be exported, information about the quantity of the product, name of the imported countries along with the FOB price of the products are required.



This part containing general information which are not covered by this questionnaire but have a material impact on the feasibility of the project like estimate of foreign exchange earning/savings, any other advantage of national importance, declaration by the sponsor.




  • FORM-1: Declaration of assets and liabilities of promoters/directors.
  • FORM-2: Form of a letter to be addressed to the banker (s) of the applicant.
  • FORM-3: Bio data of promoters/directors in case of partnership business.
  • FORM-4: Three types of Affidavits for the sponsor/directors. Different Aspects of Project Appraisal


The aim of project appraisal is to examine the need of the project, judge whether the project is likely to meet this need and fulfill requirement in respect of BSB. It is important basis of decision-making because project appraisal gives a clear idea about whole aspect short-term lending. It is not usually necessary to make extensive study of the customer’s future potential. Examination of general credit worthiness of a customer and his current financial position is adequate.


Although there is no fixed or standardized approach for project appraisal nevertheless numerous and diverse elements can come into the process of appraisal. It is difficult to appraise of a certain project sufficiently however should cover as much as possible. BSB tries to follow some set of scrutinize factors for their evaluation procedure. As a result, they are able to overcome some problem and unnecessary time consuming. In practice, project appraisal covers five different aspect of a project, which is-


  • Management and organization aspect
  • Technical aspect
  • Market aspect
  • Financial aspect
  • Economic aspect


Management and Organization Aspect

Appraisal of management is very important part of project appraisal. The successful implementation and running of the project depends on the resourcefulness, competence and integrity of its management. There are no sets of rules to find out if the borrowers’ are persons of integrity. It is done by direct and indirect investigation. His educational background, business experience, general reputation and above all, his/her receptiveness to new ideas and potentially to learn new things can assess the borrowers’ experience and capabilities. Closely related to the management is the type of organizational structure necessary to carry out and operated the project successfully.


The basic aspects of Management appraisal are-

  • Structure & Shares.
  • Memorandum of Articles and relevant (Joint Stock Company’s) registration certificates.
  • Introduction to members of the proposed management, relevant experience, net worth (asset   declaration).
  • Comparison of equity proposed and net worth declared.
  • Source of working capital or working capital loan.
  • Note: Lending Risk Analysis (LRA) with estimate of Z-score and Y-score estimation required for proposed loan amount more than Bangladesh tk 5 million.


Technical Aspect

Technical appraisal report is prepared by an engineer of the appraisal section to see whether the project is sound with regard to every engineering and technological consideration, including product specification, product process, size, internal balance, suitability and availability of physical facilities, designs and layouts of equipment and building etc.


The basic aspects of technical appraisal are-


  • Cost of the project.
  • Annual production capacity & manufacturing process.
  • Location, infrastructural facilities feature and estimated cost   of the land.


  • Civil drawing(s) and cost of civil works.
  • Layout plan for Building and Machinery.
  • Estimated cost of machinery with installation.
  • Selection of product process involving the choice of alternatives, wastage, by-product, disposal of waste and effluents etc.
  • Annual requirement of raw material(s) with source of   availability.
  • All input output data of the project.


  • Core points that are considered in this aspect are;
  • Preliminary investigation-
  • Product mix & products capacity
  • Raw materials
  • Skilled and technology required for manufacture/ service
  • Testing and analytical report
  • Selection of production process-
  • Choice of alternative and selection criteria;
  • Manufacturing process
  • Process flow diagram
  • Wastage in manufacturing process;
  • By-products and their recovery;
  • Disposal of wastes and effluents
  • Environment and pollution control.
  • Machinery and equipment for production/service
  • Productive capacity and efficiency
  • Site selection
  • Technical factors;
  • Cost factors of production;
  • Marketing factors;
  • Administrative and housing factors; and
  • Transportation factors.
  • Layout
  • Land and location;
  • Building & construction;
  • Plant and Machinery; and
  • Supplementary Installations
  • Analysis and evaluation of utilities and supplies
  • Raw materials;
  • Stores and spares;
  • Repair and maintenance
  • Technical Know-how;
  • Transfer of technology;
  • Power, Fuel, Utilities, Water, Stream etc;
  • Labor; and
  • Transportation
  • Work schedule
  • Estimation and evaluation of costs.
  • The relative importance of this aspect will vary from project to project.



Market Aspect

Detailed market appraisal report is prepared by the project economists to determine the size of the market, ascertain the supply gap on the hand. An industrial project is to bring in some goods or services for a community. But the community does not need them infinitely. Their demand is of course finite and at given prices. The objective of market study is to see how much of the goods or services the community supposed to acquire and at what price. The market includes the whole environment in which the enterprise is to live and to which it must adapt itself. Market analysis is the first screening stage in the project appraisal, at which projects that cannot accept satisfactory market acceptance shall be rejected. For appropriate marketing objective, it is necessary to look at depth into the macro/ micro demand/ supply situation for specific products in the market, existing and expected competition in local and foreign markets, the market share etc. while appraising industrial projects, the bank is required to analysis these factors and to bring out the objectives in quantitative terms.  Here expertise judges whether the product has the market or not. If the demand for the product is more than the supply of the product, that means whether there is any supply gap or not. If there is a considerable supply gape, the project is viable in marketing aspect.

Some important points that are considered in this regard are as follows-


  • Use & users
  • Demand analysis
  • Project demand
  • Supply analysis
  • Projected supply
  • Supply gap
  • Capacity utilization
  • Marketing strategy
  • Distribution
  • Product quality
  • Product pricing
  • Input & raw materials price


Financial Aspect

Financial appraisal is important for the assessment of an organization. The main purpose of such appraisal is to assess the viability of the project in terms of its operation in the future years and its financial soundness. It is concerned with assessing the feasibility of a project from the point of view of its financial result. The projects direct costs and benefits are calculated in pecuniary terms at the prevailing market prices. The BSB has to satisfy itself not only about the current solvency of the project but also about its continued solvency during the currency of the loan to ensure timely payment of the principal, regular payment of interest and adequacy of physician assets representing security for the loan. The revenant information collected on technical economic and management aspects of the project have got direct bearing upon the financial appraisal. Such appraisal is directed to examine mainly the following aspects:


  • Financial requirement to bring the project into existence and the probable sources of finance;
  • Prospect of adequate revenue generation with particular emphasis on actual cash generation (liquidity) and probable impact on the financial condition (solvency).


The first aspect deals with the total cost of the project (fixed cost and net working capital) and a suitable financial arrangement. The second aspect related to the analysis of production, cost, income etc. at different volumes of production at different levels of activity. BSB’s focus of attention is on the earnings of the project. Earnings should be sufficient so as to enable the project to services its debt (installments and interest). There are various approaches for financial appraisal of which the following techniques are being used by the BSB:


The basic aspects of financial appraisal are-


1. Ratio Analysis:

  • Liquidity Ratios:

ü  Current Ratio

ü  Quick Ratio

ü  Working Capital Ratio

  • Leverage Ratios:

ü  Debt-equity Ratio

ü  Debt service Ratio

ü  Fixed Asset Ratio

  • Activity Ratios:

ü  Inventory Turn Over Ratio

ü  Asset Turn Over Ratio

ü  Accounts Receivable Ratio

  • Profitability Ratios:

ü  Return on Sales

ü  Return on Equity

ü  Return on Capital Employed.

2. Break-even Analysis3. Earning Forecast

4. Fund flow Statement

5. Internal Rate of Return (ERR)

6. Internal Rate of Return (IRR)

7. Pay Back Period Method

8. Net present value (NPV) Method.


Socio Economic Aspect:

Economic analysis eliminates the divergence between social and private by valuing all goods and services in terms of real costs and benefits. This report is prepared by the economist to determine the economic justification of setting up of the project. In Socio-economic appraisal, the project is evaluated from the social point of view and the economic cash flow is constructed on the basis of true or real prices commonly known as accounting or shadow prices.


Economic analysis of a project aims at determining whether the project is viable with overall national and sectorial objectives and whether the investment proposed is the best means of achieving the intended objectives or not. It involves a systematic analysis & evaluation of a range of options for achieving a stated set of objectives. Allocation of resources available for other sectors and purposes. Therefore, it is essential that the allocation of investment resources be efficient among sectors. Economic appraisal is the primary means of determining whether a proposed investment is worthwhile or not. It should determine whether a project is acceptable and, if it is, whether it is the best alternative.  If the project is socially acceptable and has a positive economic growth in the country, and have a positive impact on employment opportunity the project is said to be economically feasible.


Economic appraisal should cover both-

  • Quantifiable factors, and
  • Non-quantifiable factors (where applicable).


Such factors are described below-

Quantifiable Factors: The quantifiable factors include the following-

  • Economic rate of return (ERR)
  • Bruno Ratio/ Domestic resource costs
  • Contribution to GDP growth
  • Employment opportunity


Non-Quantifiable/Intangible/Externalities: The non-quantifiable factors refer both the following-

  • To effect that are known to arise but which cannot be measured in physical terms and
  • To effect, which cannot be valued. Difficulties/ problems are often date problems.


When all the side is analyzed and judged, the draft project appraisal report is prepared and placed to the board committee. If the committee finds all aspects sound feasible and positive, it recommends for the approval.


After completion of Appraisal report there will be constitute a credit committee who prepare a memo. On the basis of Memo & appraisal report there will be a meeting held by general managers for sectioning the loan. Various sectors for granting loan

  • Reserved   sectors (these   sectors   are reserved only for govt. investment)
  • Industry sectors (LOD grants loan on behalf of BSB only for these sectors)
  • Arms, ammonium, and defense devices and machineries.
  • Foods and related goods:

Fruits or vegetables processing

  • Manufacture atomic energy
  • Textile industries:

Spinning projects, Specialized textiles, Terry towels, Knit composite.

  • Printing securities (paper notes) and ‘takshal’.


  • Leather and leather produced goods:

Leather shoes, Leather made items (gloves, bag, jacket, luggage etc)

  • Forestation in the restricted forest areas and mechanical extraction.
  • Chemicals and pharmaceuticals:

Chemicals for processing of leather, Other chemicals,

  • Air transport and railway in the international routes.
  • Service projects
  • Others (if any).


  • Technology-dependent projects
    introduced by BSCIR.
  • Miscellaneous (if any).


3.1.2 Documentation and Machinery Procurement Department


With the objective to procure effective machineries & equipment for the project  & for safe custody of the important documents this department have been established. This department has two phases –


  • Machinery procurement
  • Documentation Machinery procurement phase

The objective of this phase is to achieve effective role in future in the matters of procurement of machinery, equipment and services for the projects approved by BSB. There are some functions performed by this department-


  • To select and give approval of machinery for inclusion in the tender paper.
  • Making invitation for tender of machinery & giving necessary advice to entrepreneur to perform the related task.
  • To examine the related papers & collecting information about the supplier of the machineries.
  • To select & collect approval from proper authority for machinery after getting the tender analyzing that.
  • Prepare the list of inspectors at pre-shipment position.
  • To formulate the procurement policies for regional & branch offices.
  • To control the quality of machinery.


Henceforth the borrowers shall follow the following procedures of machinery, equipment and services for the projects approved by BSB loan-


A. For procurement of imported machinery, equipments & services whose value is up to US$ 300000 and for local machinery and works, the selection shall be finalized by floating a local tender by the borrowers.


B. For procurement of imported machinery, equipments & services whose value is above US$ 300000 the selection shall be finalized by floating an International Tender by the borrowers.


C. The borrowers shall follow C. For Local and International competitive bidding the following procedures-


  • Preparation of machinery list, tender documents & flotation of tender etc, by the borrowers.
  • Evaluation of tenders and recommendation for award of contract by the   borrowers.
  • Approval of procurement proposal by BSB & its transmittal to the borrowers.
  • Submission of final papers to BSB by the borrowers for opening of letter of credit.


D. Special provision: If there is any condition relating to the recording of assets must be specified by the related parties in consent of both parties i.e. (Shilpa bank & parties)


E. General provision: According to general provision, usually bank follows the banking specified guidelines for maintaining the related properties. Requirement of papers at the time of appraisal and procurement


A. Imported Machinery

1. Each offer should mention/submit:

  • Detail technical specification
  • Detail terms & conditions
  • Delivery schedule (maximum 180 days)
  • Validity (120 days)
  • Catalogues
  • Manuals
  • Drawings
  • Manufacturers recommended square parts
  • Price in CFR Chalna/Ctg./Dhaka/Benapole basis (showings FOB & freight separately)

2. The offer should be concluded in US$ basis as well as currencies of the country of origin.
3. The offer should contain the clause that all negotiating Bank Charges at supplier end will have to be borne by the suppliers.

4. If the offer submitted by the local agent, the agent should submit:

  • Photocopy of the Agency Agreement with the overseas principal.
  • Registration No of CCI&E.
  • Indenting Association registration number.
  • Permission number of Bangladesh Bank.
  • Commission in the invoice.

5. The supplier/manufacturer must furnish the name & countries to which similar machinery has been exported by them indicating the volume of exports in last three years.

6. The suppler/manufacturer should also submit the following:

  • Latest audited Balance Sheet.
  • Constitution of the company.
  • Letter of authority to BSB whereby BSB ask for confidential report/opinion from the designated Bank (Account no. to be provided by the Company).
  • Letter of recommendation or certificate from the National Chamber of Commerce & Industry or Government responsible for export.

7. The manufactures/suppliers should provide drawing & technical documents for use in the machinery layout foundation, installation & supervision of the machinery.

8. The manufacturer/supplier will guarantee the production as per claimed production capacity.

9. The manufacturer/supplier should also mention the following:

  • Life expectancy of machinery.
  • Spare parts & accessories for two years of operation with price in FOB & Freight separately.
  • After sales services facility to be provided by them to the users of machinery.

10. The manufacturer/supplier if selected required to:

  • Enter into a contract with the buyer as per BSB’s pro-forma.
  • Submit 15% Performance Bank Guarantee as per BSB’s pro-forma or accept the conditions of 15% retention money or combination of both.
  • Submit guarantee & Warranty Certificate as per BSB’s pro-forma be countersigned by manufacturer.

B. Local Machinery

1. Each offer should mention/contain.

  • Detail technical specification.
  • Detail terms & conditions.
  • Delivery schedule (maximum 120 days from placement of order).
  • Validity (120 days).
  • Catalogues.
  • Manuals.
  • Drawings.
  • Manufacturers recommended spare parts.
  • Price (ex-factory).

2. The supplier/manufacturer must furnish the name & countries to which similar machinery has been exported by them indicating the volume of exports in last three years.

3. The suppler/manufacturer should also summit the following:

  • Latest audited Balance Sheet.
  • Constitution of the company.
  • Letter of authorities to BSB whereby BSB may ask for confidential report from the designated Bank (Account no. to be provided by the Company).

4. The manufacturer/suppliers should provide drawing & technical documents for use in the      machinery layout foundation, installation & supervision of the machinery.

5. The manufacturer/supplier will guarantee the production as per claimed production capacity.

6. The manufacturer/supplier should also mention the following:

  • Life expectancy of machinery.
  • Spare parts & accessories for two years of operation with price in FOB & freight separately.
  • After sales services facility to be provided by them to the users of machinery.

7. The manufacturer/supplier if selected required to:

  • Enter in to a contract with the buyer as per BSB’s prescribed proforma.
  • Submit 10% Performance Bank Guarantee as per BSB’s proforma or accept the conditions of 10% retention money. Documentation phase

After sanctioning of loan-by-loan operation department, it issues letter to documentation department, parties and concerned departments. The documentation department issues a letter to the parties to produce necessary documents. The functions are-


  • Taking necessary steps to complete the creation of necessary documents and completing the agreement between the entrepreneur & bank, after sanctioning the loan.
  • Reviewing & examine the documents submitted by the loan taker to the bank.
  • To examine the article of association & memorandum of association & taking necessary steps to preserve the interest of bank.
  • Making the file with company registrar about the mortgaged assets.
  • Taking necessary steps for making renewal of documents when necessary.


Common documents are-

  • The land upon which the project will be established, document of this land must be produced.

ü  Receipts of Rent.

ü  Documentation fee.

ü  Mouja Map.

ü  The document that will be reveal that the land were not sold within preceding two Years.

  • Water/soil test report
  • Final lay out plan of the factory and other building with details structured drawing, cost estimates etc.
  • Final lay out plan of machinery
  • Copies of guarantee from the supplier for satisfactory performance
  • Copy of agreement with the supplier of machinery for providing erection engineers/ technicians.
  • Final price quotation both for imported / local machinery
  • The sponsoring companies are required to submit the   following papers / documents-

ü  Certified copy of memorandum of association & article of    association.

ü  Certified copy of incorporation/commencement of business of the company.

ü  Certified copy of the return of allotment of shares (if any).

ü  Permission from the controller of capital issues for rising paid up capital where applicable.

ü  Auditors certificate regarding the paid up capital of the company.

ü  Any other documents as may be necessary based on the terms and conditions of sanctions of loans.


Then a form is filled up. These documents are sent to lawyers. If everything is ok it is transferred to Project Implementation Department. It is returned after the confirmation that Directorate of Registration of Joint Stock Company and firm have submitted it according to the rules the borrower company must it after the authorization. The following activities are performed during the time of documentation process-


  • The borrower company must submit necessary documents.
  • Verification of documents by Documentation and Machinery Department and Law Department.
  • Preparation of all documents of the borrower company director.
  • Registration of first charge of Bank on projects properties.


3.1.3 Project Implementation Department


When the loan is sanctioned and forwarded to Document and machinery Procurement department then the step of project implementation. This department helps to begin operation of estimated activities. Here, mainly to import the machinery, installation, collection of raw material, hiring of experts, training of employee for becoming experienced etc are performed by the BSB in respect of sponsors for smoothing movement of the projects. Besides, others are as follows:


  • Arranging all sorts of activities for starting the projects operation.
  • Taking necessary steps to make the factory layout
  • Making necessary adjustment in case of change of the proposed project          place, change has Board of Directors and change/extension products mix etc.
  • Making necessary attempt to give the loan a stage by stage after the loan granting.
  • To ensure that necessary capital supplied by the entrepreneur and to ensure its    proper utilization.
  • To give necessary assistance in the case of bridge loan from any financial institution.
  • Taking necessary initiatives to construct the layout of the project according to construction cycle
  • Monitoring the machinery of the project, inspection and taking any kind of advice regarding to any machine related problem from machinery department.
  • Verification of new material process of project ensuring the cash capital   according to loan terms and condition and providing necessary assistance in this matter.
  • Inspection and monitoring experimental production and production of loan and extension of loan period.
  • Making the final Construction report (FCR) and transferring to its central    recovery Department (CRD) and concerned department/authorities.
  • Determination of construction period of the project preparing loan repayment schedule and taking after necessary action regarding this.
  • Monitoring and inspecting the project to see whether the project is implementing according to time schedule and taking necessary initiates to solve any kind of problem arising out there from and providing necessary advice to the entrepreneur.
  • Receiving insurance letter against insurance letter against the predetermined risk of the implementing projects and ensuring its deposit to the bank.
  • Inspection of the utility of the principles regarding the project implementation and presiding up to date principles.
  • Sending the file of the project to Central Recovery Department (CRD) from project Implementation Department after receiving at least two installments from the borrower after the final construction report (FCR).
  • Sending the file to the law department to take legal action if the borrower fails to repayment at least installment.
  • Converting the foreign currency into local currency and vice versa if it is necessary.
  • Revaluation and connecting of sanction letter on the basis of different up to date information.
  • Up dating the sanction letter according to necessary of the foreign tender.
  • Rescheduling the construction period, taking the authorization the concerned authority and taking necessary action relation to this.
  • And performing different activities given by the department. Pre-requisites for successful project implementation


For successful project implementation there are some preconditions, which must be taken into consideration. These are-

  • Adequate formulation
  • Sound project organization
  • Proper implementation planning
  • Advance actions
  • Timely availability of funds
  • Better contact management
  • Effective monitoring


3.1.4 Central Recovery Department (CRD)


This is one of the main departments of the bank. We can say one project successful or bad by considering its recovery position. Sanctioning loan is easy, proper implementation is difficult but recovery is the main task and the most difficult task. This department is engaged in collecting of loan amount with interest though they’re some sort of reschedule and rephrase. This department inspects the project’s condition whether there is any leakage. Functions of CRD department

  • Recovery of loan & taking necessary steps regarding this.
  • Maintaining regular communication with client that is borrower.
  • Provisioning of loan
  • Rescheduling of loan
  • Giving necessary information to branches control department about progression of recovery.
  • Visiting the project and taking necessary decision.
  • Collecting the insurance paper about the asset of the project & making renewal of it.
  • Collecting the financial statement of the company & analyzing it & giving necessary suggestion.


If the borrower fails to repay the loan as the application of the borrower it is rescheduled and sometimes interest is exempted to the sponsor for reviving the projects. Sometimes they justify that for various reason loan amount would not be paid because of various reasons such as-


  • Due to change in technology
  • With the passage of time.
  • Due to change in fashion of human beings.
  • Due to change in demands of people.
  • Tuff competition among the same type of companies.


Some of the reasons out of total problem, BSB rescheduled the undue amount .The bank always try to revive the project but if the authority think that this reasons is faulty of the sponsors then it is transferred to Law Department to take legal action. Sometimes, the project is transferred to project Rehabilitation Department to restore the project. Principles of Classification of Loan and Provisioning


For the purpose of classification all loans and advances are divided into 3 categories are as follows-

(a) Continuous Loan: The loan sanctioned and recovered without any repayment schedule but have an expiry date and maximum limit are called Continuous Loan.


(b) Demand Loan: The loan, which must be repaid as the bank calls, is called demand loan.


(c) Term Loan: This loan is usually for long term for the project. If any loan is not repaid within the expiry date then it is called classified loan. The classifications of this loan are as follows-

  • Substandard=6months>Continuous Loan>>3 months
  • Doubtful=12months>continuous Loan>>6months
  • Bad= continuous Loan>12months.

If any installment of any term loan is not repaid within a specific date it is treated installment default. Maintenance of Provision

  • On the basis of the equity of the loan the following provision are made –

ü  Substandard 20%

ü  Doubtful 50%

ü  Bad Debt 100%

  • On short term agricultural and micro-credit the following provision to be Kept-

ü  On all debts other than bad debt 5%

ü  On bad debt 100% Direction of Loan Rescheduling


  • On the application of rescheduling the bank inspects reason of the loan default. If it is revealed that the borrower has spent the money in another way instead of specific investment than such application is not considered. In this case legal action is being taken.


  • The position of liabilities of the borrowers to other bank is to be considered.


  • The bank will analyze the cash flow statement, audited balance sheet, Income statement and other financial statement.


  • If necessary, the bank will inspect the business premises of the borrower to ensure that he will be able to repay the schedule loan. Rescheduling of term loan

  • A term loan may be rescheduled in 15%of expired installment or 10%of total due whichever is lower is paid in cash at first.
  • A term loan is considered to be rescheduled for the second time if 30%of expired installment or20% of total due which is lower is paid in cash.
  • To reschedule term of the term loan for the third time or more 50% of expired installment or30% of due whichever is lower must be paid in cash. Demand and Continuous loan rescheduling


  • To reschedule the demand loan and continuous loan the rate of down payment are as follows-


Inspired loan Rate of down payment
Up to 1 crore 15%
1 to 5 crore 10% (but not less than 15 lacks)
5 crore and above 5% (but not less than 10 lacks)


  • To reschedule the demand loan and continuous loan which has been converted into term loan 30%of the expired installment or 20%oftotal dues whichever is lower must be paid in cash.
  • If loan is required to reschedule again 50%of expired installment or 30% of total dues must be paid in cash at first.


3.1.5 Loan Accounting Department


This department is usually involved in accounting of all types of loan related accounts that is given to the sponsors. Here both local and foreign currencies loans are included. Some sort of exemption, rescheduling are made by the bank that also the concerned of this department. Functions of the department

  • Maintaining the accounts centrally.
  • Preparation of financial statements for the bank & getting the approval of it from the general meeting.
  • Preparation of budget relating to income & expense of bank, loan sanction & getting the approval of from BOD of bank & government
  • Cash management
  • Preparation of payroll of bank.
  • Giving the loan to the staff & keeping the records of it.
  • Examining the expenses of the bank & taking or giving approval of it as the situation required.
  • Making the investment of pension fund of the staff & keeping the records of it.
  • Calculating, making payment & keeping records of income tax of the staff.
  • Underwriting the shares of the projects.
  • Implementation of “Exchange Fluctuation Burden Absorption scheme (EFAS) 1990.
  • Giving the information about the gazettes of Bangladesh Bank to different department, branches & regional offices.
  • Formulating policies relating to the accounting of the bank.
  • Keeping proper records of Benevolent fund, Gratuity fund, making proper use of it & making proper payment of it.
  • Keeping proper records of total payable to & receivable from different organizations including Bangladesh Bank.
  • Producing weekly, monthly etc report & sending these to Bangladesh Bank.
  • Preparation of cash flow statement.
  • Performing the task given by the head of the department.


Here considerable matter is that bank gives opportunity to the sponsor’s during the construction period called Interest during Construction Period (IDCP). This interest is payable with various installment that is designed by the bank authority. There is no further interest upon this amount of interest. So this department centrally maintains all loan accounts of the projects of the bank. Sections of the department

There are 4 sections, which performs the operation of the department-


  • Not due section
  • Overdue Section
  • Rephasement section
  • General and policy section


Not due section


The Branch Officer usually fixed the time schedule to be paid by the sponsors. Not due means the amount not yet due. Quarterly/half/half yearly installment and installment and charge and transferred it to Amount Due section. The rate of interest is fixed by the prevailing interest at the time of execution of loan discount. Foreign currency installment and interest will full as foreign currency loan agreement as per contract of overseas donor agency.


In case of foreign currency loan-

  • Exchange Fluctuation Absorption Schedule (EFAS) is inlayed. Interest rate is fixed at particular rate giving exchange premium in this case fluctuation of foreign currency is not affected in installment and interest.
  • In EFAS is not available installment fall at foreign currency and converted into conversion rate from time to time circulated by Bangladesh Bank.


This department calculates all types of benefits, fixing interest rate as per regulation of BSB. Particularly, EDCP’s period calculation and interest rate is usually from 9 to 12%. The Loan operation department makes primarily time payment disbursement schedule but also by request of higher authority it is rescheduled by this department.


If the sponsor makes the payment in right time then will get rebate. That means, this department maintains all ledgers. Rebate percentage is usually 10%. But in failing the installment, no rebate will be given. And the entry will be as follows-


Amount due to loan a/c          Dr                    Tk. 000

Interest on loan a/c                  Cr                    Tk. 000

Installment amount                 Cr                    Tk. 000


Overdue section


This section records the overdue amount. i.e. installment and interest is not paid/cleared in time is overdue. Main function of this section is maintaining balance of the sponsor’s accounts. In a word called Balance Confirmation Certificate (BCC).


In a brief way, the functions of this section are as follows:

  • Making balance confirmation certificate.
  • Giving the advice to the lender.
  • Charging interest in installment basis (monthly/ quarterly/ half yearly/ yearly).


If the sponsor fails to pay any installment then it is called classified loan. Classified loan are 3 types-

  • Substandard: Here all operations are normal but interest is considered as suspense.
  • Doubtful: Here also all operations are normal but interest is considered as suspense.
  • Bad: If the operations are continued 24months but not paid installment then the activities to be closed and closed this operation and sent to the court.


Then the entries will be-

Amount due to loan a/c          Dr                    Tk. 000

Installment amount                 Cr                    Tk. 000

Interest suspense A/C             Cr                    Tk. 000


Rephasement section


This section makes reschedule of term loan. That is the sponsor don’t give loan and interest amount in various reason but prospects is high, the authority decided to make rephasement of payment schedule through this section. So they’re some problem faced by the concerned officer. For example, if the project is over 20 year’s ago with original amount and interest may be doubled or more so the calculation is very hard and tough that is schedule preparation is in problem.


General and policy section:


This section performs the following activities-

  • Preparing the monthly statement
  • Monthly recovery statement
  • Monthly disbursement schedule.
  • Making entry all the transaction as per daily statement received from branch officer.
  • Lists of balances not due and amount sent to head office and Branch       office.
  • Preparing distribution of work among the officers and staff as specific guidelines of the authorities.


3.1.6 Project Rehabilitation department (PRD)


The objective of BSB is to make 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 cases, BSB provides assistance to rebuild their structure to restart their business. Additional financial assistance may be required moreover; more information and advices may be given so that the entrepreneur may run the business more efficiently sufficient return and contribution to the economy. Functions of the Department


  • Recommendation and taking initiative to rehabilitate a project after tracing the causes of sickness if the files are transferred to Project Rehabilitation department from the ensured department/branch/zonal/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.
  • 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.
  • 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 of the bank over the project if necessary.
  • Taking rehabilitation program controlling projects management and monitoring and ensuring the management system taken over by bank and performing other activities regarding these.
  • Production of the rehabilitated project, making of the products analyzing the targeted loan recovery and actual situation and taking necessary initiates regarding these.
  • Retraction of bank participation stage by stage from the project, which is profitable.
  • In case of apply right management after the certification that it will be effective and efficient. Rehabilitated projects

The bank has a provision for rehabilitation of the sick project, but all sick projects do not rehabilitated. It depends on the nature of sickness. The department will analyze the project & then decide whether it should be rehabilitated or not.


The sick projects which are probable to rehabilitate get the following assistance-

  • Providing financial aid or loan without interest or at lower rate.
  • Assistance for replacement of machine
  • Changing of management structure
  • Giving Inspiration for motivation.


There are some projects which do not rehabilitated. When a project become sick, it will be analyzed & then the department tries to find out, whether the rehabilitation of the project is cost effective & economically feasible or not. For these reason some analysis & measurement have been done. These are –

  • Financial measurement
  • Marketing measurement
  • Technical measurement


Financial measurement

In the financial measurement the following things are calculated-

  • Project cost of capital
  • Determination of capital structure
  • Present value of net cash inflow

If the above calculations give result in favorable position the project will be rehabilitated.


Marketing measurement

Under this section demand for the product of the project, market share of the product, consumption trend, etc have been calculated.


Technical measurement

Here the technology of the project that is machineries of the project is examined. Deciding whether raw material is available or not.


3.1.7 Law Department


In case of default in loan recovery, it must undertaken alternative action and files case in the court for recovering the due amount. Law Department is responsible for taking all necessary steps to take legal action. Functions of the department

  • Enforcement of law for recovery of loan.
  • Issuing legal notice to execute farther lawful action as against the loan defaulter.
  • Making all the arrangements to putting case against all the loan defaulters as per the rules of banking act.
  • Monitoring the cases which are putted by the branches.
  • Monitoring the project petition to the High court & Supreme Court and carrying them till end.
  • Enforcement of law for recovery of loans from projects other than Dhaka, Mymensingh and Faridpur branch office.
  • Call auction of the properties declared by the court. Different types of cases


The cases that are filled by the bank are-

  • Recovery case                                     Section 33
  • Financial Loan Case                            Section 5(a)
  • Certificate Case                                  Section 35
  • Bankruptcy Case                                 Section 9 (1)
  • Case if Check is not cashed                Section 138

(Petition Case)

  • Case if machinery of project               Section 37

is transferred from the project

without permission

  • Case if false properties                        Section 47

are mortgaged


Recovery Case

Case is filled with the court of District Judge or Sub Judge the concerned company and its director such case filled according to Bangladesh Shilpa Bank ordinance 1972 section 33.


Finance Loan Case

Such case is filled against the concerned company and its directors to recover the loan that are due.

Certificate Case

This case is filled against the loan default company and its director according to public demand Recovery Act 1997.


Insolvency Case

Bankruptcy case can be filled if at least Tk.5 lacks are due. This case filled according to insolvency Act 1997.


Case if check is not cashed

This case is filled if any check is dishonored. It is done according to the Negotiable Instrument Act, 1994.


Case if mortgage machinery is transferred from the project without permission

These cases are filled BSB Ordinance 1972 under section -37. Process of deposing civil case (Recovery, certificate and insolvency).


  • Preliminary stage
  • Pre-trial stage
  • Trial stage
  • Post trial stage


Finance Artharin Adalot-2003


To recover the loan of financial institution, the government has announces finance loan Act 1990.


Power of Finance Loan Court

All case related to finance loan must be filled with finance loan court. Provided that if the financial institution is established by any specific purpose and if they’re every specific producer to recover the loan, it must be maintained.


Rules in case of notice

The notice of these cases must be published in Bengali and English dailies if anyone claims that no notice has been published than the document must be produced.


Decision of the court

No question will arise about the rules, order and decision.


Appeal: Section 7

Any one can appeal against the decision of the court by depositing 50% of the money declared by the court to High court.

Installment of Loan: Section 8


The court can order the business to repay the loan within one year. But it can be more than one year and interest will be charged on the amount declared to be repaid.


Insolvency Act, 1997

Sometimes to recover loan from the borrower, it is not possible for the court because it takes a long process and the borrower must be declare insolvent. To stimulate the process Insolvency Act 1997 was formed.


This Act specifies how a man should be declared insolvent and the asset should be distributed among the creditor. Moreover, this Act also specifies-

  • To protect the debtors.
  • To protect the interest of the creditor.


The following person will be considered to be insolvent-


  • Inhabitant of Bangladesh or Head Office of the business is situated in Bangladesh.
  • He had been living in Bangladesh for one preceding year or he had workplace in Bangladesh.
  • Generally the business is continuing through representative.


Bangladesh Shilpa Bank Ordinance 1972

Bangladesh Shilpa Bank (BSB) was entrusted to grant loan and recover it. The procedure of loan recovery has been discussed as follows-


Subsection 32


BSB can recover the loan before it has become due if it deems that the loan should be recovered immediately. The following reasons are available-


  • In any wrong information is promised in application form.
  • If any agreement made by the borrower is not abide by.
  • If it is deemed that the borrower s will not able to repay the loan.
  • If the mortgage properties is not according to specific caution of Bank or if the property security is not deposited to the bank.
  • If any mortgage is transferred from the project without the permission of the bank.
  • If there is any change in the management without the permission of the bank.
  • If the borrower company cannot provide any satisfactory answer or cannot produce any document required by the bank.
  • For ant other reason for which the interest of the bank must be protected
Subsection 33


Under this subsection the bank attach through court any mortgage asset or any personal asset of the borrower to recover the money.


Subsection 35


Under this subsection the bank can make an application to General Certificate Officer against the Borrower Company and its director following public demand recovery Act 1913.

After the certificate case the court will give 15 days time and a notice describing the installment to repay the loan.


3.1.8 Human Resource Management Department (HRD)


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 and Human Resource Department” and department of labor as ‘department of Human resources Management’. Functions of the HRM department


  • To control the administration of human resources of the bank.
  • To assess and collect compatible personnel who will be perfect for the bank.
  • To take program and implement for developing human resources.
  • To make appointment, promotion, and appraising skill of officer and stuff.
  • To make service rules, correction, expansion, administration rules, sub rules, orders, notice etc for controlling and stuff. .
  • To give scholarship to the brilliant student of the university for appointing and finding skilled officer.
  • To give general scholarship to the brilliant and daughter of stuff.
  • To communicate with trade union scrutinizing their demands, open discuss developing the relationship with administration proper implementation of labor law.
  • To give loan for house building, by cycle. Motorcycle, and ensure their proper utilization.
  • To assess and grant retirement facilities at the time of retirement.
  • To give medical facilities to the stuff.
  • To maintain relationship with retired or dead stuffs and their families to know their condition.
  • To maintain and grant leaves without regular leave.
  • To coordinate and evaluate the branch and regional stuff activities.
  • To step and implement for opening new branch office.
  • To maintain relationship with government and other institution
  • To prepare and implement policy about human resources and related activities.
  • To control the activities the staff of the banks and take proper. Step to implement computer technology.
  • To perform the activities assigned by the departmental head. Sections of the department


There are five sections in this department. These are-

Section Activities
1. General administrative
& policy section, 
– Fixing principles relating to human
Resource activities/position,- Fixing principles relating to organization.

-Fixing principles relating to delegation of power,

-Activities relating to trade union,

-Send statements relating to delegation of power.

2. Management section -Provide employment policy,-Provide transfer policy,

-Provide promotion policy,

-Fixing pay scale.

-Fixing annual increment policy.

3. Disciplinary section -Mitigates the complaint against personnel.
4. Welfare section  -Provide scholarship policy,-Assist the helpless personnel,

-Provide retirement benefit.

5. Leave & medical section  -Provide medical facility & allowances.-Provide vacation opportunities,

-Provide conveyance facility & allowances;

-Provide house rent allowances.

-Provide cloths benefits. Managerial off-the job Training


BSB generally use the following off-the job managerial training-


Case study method

A development method in which the manager is presented with a written description of an organizational problem to diagnose and solve.


Management game

A development technique in which teams of managers compete with one another by making computerized decisions regarding realistic but simulated companies.


University- Related Programs

Colleges and universities provide three types of management development activities.


Role Playing

A training technique in which trainees act out the parts of people in a realistic management situation.


Behavior Modeling

A training technique in which trainees are first which trainees are first shown good management techniques in a film, are then asked to play roles in a simulated situation, and are then given feedback and praise by their supervisor.


In-house development centers

A company-based method for exposing prospective managers to realistic exercises to develop improved management skills.


Organizational development (OD)

A method aimed at changing the attitudes, values, and beliefs of employees so that employees can improve the organization.


Survey feedback

A method that involves surveying employees’ attitudes and providing feedback to department managers so that the managers and employees can solve problems.


Sensitivity training

A method for increasing employees’ insights into their own behavior by candid discussions in groups led by special trainers.


Team building

Improving the effectiveness of teams such as corporate officers and division directors through use of consultants, interviews, and teambuilding meetings. Developing Employees by BSB

Internal Training

BSB has a training department to build the skilled manpower. It provides one year probation period training for confirmation of the job. Training department has the logistic supports including air-conditioned room facility, multimedia projector, flip chart, and mini computer lab etc. They provide training on the following areas –


  • Orientation
  • Computer Training
  • Appraisal
  • Auditing
  • Accounting


The training department evaluates the effectiveness of the training program through the performance in tests. The employees sometimes are sent to the outside for training. They are sent to-


  • BIBM
  • BMDC
  • PATC
  • Computer Center

Foreign Training


No financial benefits are provided for foreign training except consideration at the time of promotion and study leave. Foreign training for employees of BSB managed by the Ministry of Finance. Scholarships for short-term courses are provided by the following organization-


  • World Bank
  • ADFIMI (Association of National Development Finance Institution in Member Countries of the Islamic Development Bank)
  • IDI (International Development Ireland Ltd)
  • FMO (Netherlands’s Development Finance Company)
  • ADB (Asian Development Bank)


Banking Diploma

BSB encourages the employees to complete the Banking Diploma given by the IBB (Institute of Bankers of Bangladesh). Employee gets the following benefits for his achievements of Banking Diploma.


  • Remuneration (cash)
  • Promotion Benefits
  • Study Leave
  • Increment


Higher Study by self-Finance

No pecuniary encouragement relating to higher study available in BSB. But if some one achieves higher degree by self-finance he can get privilege at the time of promotion and study leave can be given. Performance Appraisal

To appraise the following methods can be used-


Graphic rating scale

A scale that lists a number of traits and a range of performance for each. The employee ID then rated by identifying the score that best describes his or her level of performance for each trait.


Alternation ranking method

Ranking employees from best to worst on a particular trait.


Paired comparison method

Ranking employees by making a chart of all possible pairs of the employees for each trait and indicating which is the better employee of the pair.

Management by objectives (MBO)

Involves setting specific measurable goals with each employee and then periodically reviewing the progress made. Performance Evaluation by BSB

Evaluation on BSB

The performance is evaluated by the Departmental Head or immediate boss in quarterly for all employees. They evaluate annually for permanent employees. They also depend on training Report.


Purpose of the performance Appraisal

Appraisal of Performance serves following objectives-

  • Promotion
  • Transfer
  • Determination of Time Scale
  • To find out any training need of employees.


Motivation of Employees

The following methods and techniques are used to motivate the employees-

  • Promotion
  • Financial Incentives
  • Job Rotation
  • Work Sharing


Benefits and services for the employees

  • House Rent
  • Leave with Pay (Staff)
  • Children’s education facility
  • Home furnishing Allowance (MD & GM)
  • House Loan
  • Sick Leave
  • Maternity Leave
  • Ordinary Leave


Several Types of Leave in BSB

  • Ordinary Leave (with full payment)
  • Leave on half pay
  • Advance Leave
  • Leave without Pay
  • Special disability Leave
  • Study Leave
  • Quarantine Leave
  • Maternity Leave
  • Casual Leave


Pay Scales

BSB has no pay scales for its own employees. It follows structured of Bangladesh Govt.


Over Time

The management level or officers are not entitled to overtime. Only staffs overtime is determined According to per hour basic. No Allowances are provided for overtime.


Compensation Principles


There is a Welfare Trust in BSB. The compensation is determined according to the nature of case. It does not exceed Tk. 25,000.


Promotion Policies


It is done on the basis of-


  • ACR
  • Training Report
  • Qualification
  • Viva
  • Seniority


Trade Union & Association

There are 2 Trade Union in BSB for 3rd and 4th class employees. The Name of Trade Unions and Associations are –


  • BSB Karmachary Union (Reg #10 16)
  • BSB Employees Union (Reg # 2013)
  • BSB Officers’ Samity (Unregistered)


Trade Unions bargains with Mgt. for greater job security and working conditions. They don’t create pressure on workers to join Unions. There is a officer’s Association for the welfare of officers.


Labor Dispute & Solutions


If the strike is legal and federation of Labor Union supports it the workers of BSB can join with strikes. If any dispute arises, it will be resolved by discussion between mgt. and Union’s Leaders.




If anybody plays any role against the BSB, or Banking Rules or Govt. service rules, an inquiry committee will be formed. If the crime proves undoubtfully, the BOD will punish him or her. The punishment may be


  • Held up increment
  • Held up Promotion
  • Demotion (Removed from Service)
  • Dismissal from Service



BSB maintains the rules and regulation of govt. for retirement benefits employees. They approve 1-year leave for preparation of Retirement (LPR). The pension will by calculated in the following way-


a) At the time of Retirement:


Basic Salary x 80%x 200


b)         Monthly:

Basic Salary x 80%


Up to the death of employee and after his death his wife will get during her whole life.


c) One Time:


Basic Salary x 80%x 300



BSB Culture


  • There is a less or more good relationship among the work force.
  • Senior and junior and officer and staff do not strictly maintain their status.
  • The office work place is like as their home.
  • They treat the visitors as friendly.
  • Some Officers are very busy some have no business.
  • All workers do their work traditionally.
  • The workers work when pressure is created. No body works spontaneously.


In the context of a developing economy like Bangladesh, where the need for formation of capital is pressing, where developments in the field of industrial and bank management are dynamic, and where financial crises accompanying pangs of economic growth are frequent, the challenges posed by HRM are of great importance: and, as a sequel, exploring the possibilities of the application of HRM becomes a very relevant field of inquiry and research.


4.1 Interest rate fixation


The interest of some enlisted thirsty sectors of BSB are given-


Sector Rate (%)
  • Long term Loan:

Export oriented Industries (thrust sector)

Agro based Industries

Small & cottage Industries (priority sector)

Small & cottage Industries (non-priority sector)

—- Up to Tk. 3.00 crore

—- Tk. 3,00 to 10.00 crore

Large & Medium Industries (priority sector)

Large & Medium Industries (non-priority sector)









  • Working Capital Loan:

Agro based Industries

Jute Industries

Cold storage (Potato Preservation) Industries






  • Export Loan:

RMG, Frozen Foods, Agro Products, Leather Products & Shoes

Working Capital against packing credit agreement

Post Import LTR in case of capital machinery of export oriented industries

Other export Loan

Medium term Loan

Cash credit (Hypo)







  • Commercial Loan:

Jute Trading




  • Bridge Loan:

Industrial Projects

Service Industries



  • Other Loans:


Brick Field

Work Order

Advance against DPS

Advance against BD savings certificate (sanchoy patra)

Service Industries and housing Loan

3% above the rate given on fixed deposit but not exceeding 10.00








4.2 Loan sanction


4.2.1 Sanction of Term Loans


The Bank kept on sanctioning of term loans during FY 2005-06 also. This year long term local currency loan of Tk 1311 million was sanctioned to 52 projects and short-term loan ( of TK. 202 million was sanctioned to 9 projects. Of the total sanctioned long-term loan, Tk .1183 million was for 45 new projects, TK.6 million for 2 BMRE projects and an additional loan of Tk.122 million for 5 existing projects. This showed an increase of long-term loan in terms of number of projects and loan amount by 37 and 30 per cent respectively over the previous year. It is worth mentioning here that the bank had sanctioned TK.209.million to I large project under consortium finance as the lead bank /member bank. Besides. 6 more projects with Tk.800 million was under process of sanction.


Sanction of term loans

(Million Taka)

Nature of the project  2003-2004 2004-2005 2005-2006
Number of projects Amount Number of projects Amount Number of projects Amount
New project 21 687 34 826 45 1183
Existing project (BMRE) 3 166 1 47 2 6
Additional loans 3 136 3 136 5 122
Total 27 989 38 1009 52 1311


4.2.2 Sanction of Working Capital / Commercial Loan


During FY 2005-06, the Bank sanctioned working capital commercial loans of Tk.232 million to 9 projects and disbursed TK.32 million to 7 projects. The Bank sanctioned Tk. 15 million to 3 projects and disbursed Tk. 21 million to 5 projects in the last year. The financial year under review witnessed a rise in respect of both sanction and disbursement of working capital /commercial loan over the previous year.


4.2.3 Commitment (Documentation Completed)


During FY 2005-06, the Bank made a loan agreement of Tk. 765 million in local currency with the entrepreneurs of 36 projects. The number of projects and committed loan amount in this regard were 22 and Tk 327 million respectively in FY 20042005. The committed loan amount in FY 2005-2006 increased mainly due to making a loan agreement of TK.310 million with 3 spinning projects showing a rise of 134 per cent committed loan over the previous year.


4.2.4 Disbursement of Term loans


In FY 2005-06, the Bank disbursed term loans of Tk 485 million in local currency to 43 projects registering an increase in terms of number of projects and amount of loan respectively by about 87 and 237 per cent over the previous financial year.


Commitment and disbursement of term loans

(Million Taka)

Commitment/ Disbursement  2004-2005 2005-2006
Number of projects Amount Number of projects Amount
Commitment 22 327 36 765
Disbursement 23 144 43 485


4.2.5 Loan Portfolio


In FY 2005-06, the total number of projects in the loan portfolio stood at 164 with total loan liabilities of Tk. 6260.18 million for keeping the written off projects separate as per the guideline of Bangladesh Bank. Among these existing projects, 58 were export- oriented, 71 import-substitute and 35 were service/other industries. In FY 200506 loan liabilities of 20 projects were liquidated and 23 new projects entered into the loan portfolio. In the same period of the previous financial year, there were 166 projects with loan liabilities of Tk.7441.92 million. Of these 166 projects, 60 were export-oriented, 72 import-substitute and 34 were service/ other industries.


Sector – wise position of bank’s loan portfolio (as on 30.06.2006)

Sub Sector Number of projects Total loans outstanding(Million Tk.)
Food & Allied 35 292.26
Jute & Allied 3 536.71
Cotton & Textile 50 4286.90
Paper, Paper product & printing 6 140.59
Tannery 4 109.03
Non-metallic 2 86.00
Forest & wood product
Rubber & Rubber products
Basic Metal 2 11.19
Metal Products 2 12.78
Electric Machinery and goods
Machinery & Spare parts 9 49.10
Transport & TransportEquipment 7 60.30
Chemical & Pharmaceuticals 14 237.19
Petro-Chemicals 5 126.49
Service Industries 20 228.38
Miscellaneous 4 83.23
Total BSB Projects 163 6260.16
Total BSCIC Sponsored project 1 0.027
Grand Total 164 6260.18


Sector wise loan sanction are described in details below-


1. Cotton Woolen and Synthetic Textiles

This sector is the only sector against which BSB has been giving more loans during last seven years. According to the BSB official, this sector is performing very well as garments industry is booming in Bangladesh and for its large market in abroad. Moreover, because of its revenue generation and cash flow is better than other industries, its loan repayment is outstanding. So for its outstanding performance, the loan sanction in this sector is rising.


2. Electrical Machinery and Goods

In this industry, the amount of loan sanction is lower than other sectors. This is one of the minor sectors of BSB’s loan portfolio. However, from graph we see that the amount of loan sanction in this sector shows a gradual upward trend during the period from 1997-98 to 2000-01. From 2001-02 to 2004-05, shows a volatile trend in loan sanctioning, as in 2000-01 the loan amount was tk.697 thousands and in 2001-02 it was Tk. 5208 thousands followed by a drastic decrease in 2002-03 in which loan sanction was Tk. 1009 thousands.


3. Food and Allied Products

This industry shows a normal trend of sanctioning loan. We see from the graph that there is no volatility of loan sanction. However the main firms in this industry are Bakery, Tannery, Agro-based products, and other food & beverage industries. Though the amount of loan sanction in this sector is lower than other industries but this is one of better performing industries.

4. Jute and Allied Products

BSB is hardly granting any credit in the jute and industry sector, because there is a dearth of financially viable firm. On the other hand the performance of this industry is not also satisfactory. So we see from graph that the highest amount of loan was sanctioned in 2003-04 which was tk.67441 thousands and thereafter the amount of loan sanction is decreasing up to 2005-06.


5. Machinery and metallic products

The amount of loan sanction in this sector is decreasing in the current periods. However, in the previous period the loan sanction in this sector shows volatile trend. Some reasons for granting low credit in this industry is the risk of obsolesce, inadequate technical knowledge of sponsors, and low market share of this product.


6. Petro-chemicals

The amount of loan sanction in this industry also shows volatile trend. From graph we see that the highest loan was granted in 2002-2003 and thereafter there are ups and downs of loan sanction.


7. Service industries

The loan sanction in the service industry is decreasing from period to period. Service industry includes many firms like Hotel Restaurant, Cinema Hall, Hospital & Clinic etc. Moreover, some firms like Cinema Hall are not being given any loan in the last few years. For expanding this industry, BSB gave loan to the tourism center, hotel  & restaurant, and service oriented activities. The graph shows the amount of loan granted in this sector over years.


8. Tannery

The following graph shows the amount of loan granted in the Tannery and Tannery Product industry which is increasing year by year. Because domestic products are cheap and the necessary instrument of processing this goods are available in our country. Also by exporting these goods, lot of foreign currencies can be earned.


9. Water Transports

This industry is not performing well in the recent time because of the transportation facilities improvement in the roads and highways. For this reason the sponsors of water vessels are fall in problem and not able to repay the loan amount in due time. The graph shows this phenomenon by decreasing trend in the recent time.



4.3 Loan defaults


4.3.1 Loan defaults over the years

From table we see that percentage of loan default is decreasing from year to year. In 30-03-07 the outstanding loan was Tk.6260608 and amount defaults were Tk. 852715 constituting 13.62 per cent default, whereas in 30-06-98 the loan outstanding was Tk. 19375520 and the loan default was Tk. 11536243 constituting 59.63 percent loan defaults. So the amount of loan outstanding and the amount of loan defaults are decreasing simultaneously year by year.


Year Total outstanding Total dues/defaults % of defaults
1997-1998 19375520 11536243 59.63
1998-1999 19865783 11544839 58.11
1999-2000 19215203 10595023 55.13
2000-2001 18602278 10682169 57.42
2001-2002 17730776 9480969 53.47
2002-2003 14374572 6996814 48.67
2003-2004 13998110 7371706 52.66
2004-2005 7441928 1630574 21.91
2005-2006 6260176 936418 14.96


The following graph shows that there is downward trend in the percentage of loan defaults over the period. However, in 2006 the rate is the lowest ever in BSB history. The main reasons of decreasing the loan defaults in the recent years are-

  • Rigorous recovery drive and enactment to Arthe Rin Adalat-2003.
  • Sanctioning very low amount of loan in the recent years.


4.3.2 Reasons for loan defaults

  • Sometimes project become failure because of market failure, unrest political situation, unavailability of raw material, increase in the cost of project, change in demand.
  • Sometimes default have been made from the result of project failure due to rapid change in technology.
  • There is an existence of default culture in our country.
  • Sometime loans are sanctioned under the political pressure without feasible conditions.
  • Sometimes loans can not be recovered because of inefficiency of management of the organization.
  • Bureaucrats continued to move in and out of banking orbit and off and thus contributed negatively towards his proper uplift of the banking system.
  • BSB was called by the government to extend credits to revitalize war-torn and damaged industries, this increase the amount of loan defaults.
  • The loans taken by the public sector bodies like Bangladesh Jute Mills Corporation, Bangladesh Textile Mills Corporation and other state owned enterprises that were stuck-up with huge losses.
  • As the bank was 100% owned by the government the bank management whose hiring authority was the government itself had to take the dictation of the government in making default loans to the defaulting public sector enterprises. As a result, non-performing assets swelled up with the passage of time.
  • They are some pressure of the power group in case of sanctioning loan. After taking loan through instruction of high channel, sponsors are not able to repay the loan because improper suggestion and improper use of the asset of sanctioned money. In some cases, sponsors didn’t use loan amount properly or in according with the given suggestion.
  • BSB invested a lot of capital in jute and jute related sectors. But at beginning of 1980s the synthetic fiber invented and the demand for jute related products decreased. As a result this sector gradually turning into loosing concern and becomes the victim of loan default.
  • BSB invested a lot of capital in sugar industry. After nationalization, various political activities as well as corruptions made the whole sector inefficient and losing sector.
  • The loan given to make water vessels is now in losing concern because of the development and transportation facilities of roads and highways. Sponsors fail to repay the loan.
  • People who took loan and established rice mills are now in losing concern and not able to repay loan money because of the automated systems to process the grain.

4.4 Loan Recovery


4.4.1 Loan Recovered

Loan recovery is a crucial index to measure the success of a lending organization. Like previous years, this year too, the Bank had strengthened its recovery drive for realizing loans and dues from its borrowers and significant success was achieved. Total recovery target of loans during the FY 2005-06 was Tk 1200 million, against which actual cash recovery was Tk 1158.85 million indicating about 97 per cent of the target. During the reporting year, outstanding loan of Tk. 790.10 million was regularized through rescheduling and rephasement of bad and doubtful loan accounts. The amounts regularized through cash recovery and rescheduling were Tk. 1391.00 million and Tk. 259.50 million respectively in FY 2004-2005. During FY 2005-2006, the percentage of classified loan declined to 8 per cent from 41per cent of the preceding year and thus stood at 33 per cent in FY 2005-2006. During the reporting year, the classified amount of loan decreased by Tk. 1060.40 million from Tk. 3664.70 million of the previous year and reached to TIC 2604.30 million.


Recovery of loans

Category of Loans Amount Recovered (million Tk.)
2004-2005 2005-2006
(A) Long Term Loans:
Long Term projects LoansBridge Loan

Staff Loan

Administered loan







Subtotal 1196 1094.81
(B) Short Term Loans:
Working capital loansOthers (Debentures/shares/loans against FDR) 45150 30.4733.57
Sub-total 195 64.03
Grand Total (A+B): 1391 1158.85

4.4.2 Legal Actions Taken for Recovery of Loans


The Bank initiates legal actions under the BSB Order, 1972 and Artho Rin Adalat Ain-2003 against those defaulting and recalcitrant borrowers who fail to come up with any satisfactory proposal for settlement of Bank’s dues after all normal recovery efforts have been exhausted.


In FY 2005-2006, legal notices were issued against 15 defaulting companies for recovery of Bank’s dues while lawsuits were filed against 288 companies. Besides, 110 sale/ auction notices were published in the national dailies for auction. At the same time, efforts were made for settlement of disputes outside the court through negotiation. As a result, 19 litigated companies settled the disputes outside the court. Besides, assets of 9 projects were sold. Apart from this, sales of assets of 33 projects were under process and notices were issued for the sale of 62 projects in the national dailies.


Legal Actions Taken

Position of Projects Under Litigation 2004-2005 2005-2006
Number of Projects Number of Projects
Legal Notice Issued 33 15
Filling of Suit 23 288
Cases Settled Outside the CourtSale/issuance of auction notices 1111 19110


4.4.3 Loan Written off

During FY 2005-06, the Bank had written off a total loan liability of Tk.830 million. In the last FY 2004-05, the Bank had written off total loan amount of TK. 6155 million. Out of this written off loan, the Bank in FY 2005-2006 recovered an amount of Tk. 117.68 million. In FY 2004-2005, the Bank recovered Tk. 49.51 million.


4.4.4 Loan recovery targets and actual recovery of BSB over the years


Loan recovery is a crucial index to measure the success of a lending organization. The success and failure of a lending organization largely depends on its drive for realizing loans and dues from its borrowers. Recovery targets and actual recovery shows the efficiency of BSB in planning for recovery and their success of their recovery. From the table we see that during the last 9 years BSB’s recovery target did not meet the reality. Every year there is negative variance in recovery budget. Moreover it has not been followed any specific trend. In the 1997-98 session recovery rate was only 53.39%, which increases to 99.39% in 2004-05 sessions because of the highest amount of loan collection from textile industries. And also there are some sectors from which no loan was collected, because these sectors has been liquidated and no new loan has been granted against it. So we can easily conclude that BSB is accelerating its recovery process at a higher rate in the recent years.


Year Target(Million) Actual(Million) % of recovery
1997-1998 1650 980 53.39
1998-1999 2000 997 48.85
1999-2000 1800 1350 67.02
2000-2001 1650 1400 84.85
2001-2002 1700 1198 70.47
2002-2003 1600 1316 82.25
2003-2004 1500 1124 74.95
2004-2005 1400 1391 99.39
2005-2006 1750 1159 49.8

4.4.5 Reasons for bad recovery position


  • Sometimes projects fails because of increase in the cost of project
  • There is lack of infrastructural facilities, such as- non- availability of electricity, gas, water, road connection etc.
  • Inefficient project cost estimation, for example- not considering inflation, waste & spoilage etc.
  • Natural disaster that hampered production.
  • Sometimes loans can not be recovered because of inefficiency of management of the organization.
  • The steps for the recovery of loan are not satisfactory.
  • The authorized persons who are employed for recovery of loan are not free from biasness.
  • The management is not professional for recovery of loan.
  • Lack of working capital.
  • Legal action procedure for recovery of loan is not strong enough.
  • Lack of motivation to collect the old loan.
  • Lack of coordination with other department.
  • Lack of proper reward systems for good work.
  • Sometimes sanctioned loan can not be realized because of lack of maintaining proper securities against the loan.
  • Lack of sufficient staff.

5.1 Findings


BSB is a development finance institution (DFI). It plays significant role in the industrial development of Bangladesh. Its untiring endeavor is remarkable. By analyzing facts and figures of Bangladesh Shilpa Bank the following findings are explored-


Lengthy procedure of sanctioning loan:

Loans are given to sponsors through preparing appraisal report and filling BSQF form. Lengthy procedure and long time (more than three month) involved in the appraisal of project. And BSQF is a lengthy form that is difficult for a client for filling. Time taken by project implementation department is also very high (more than 10 months).

Poor accounting system:

Accounting system of BSB was poor. They did not even follow the BAS standard disclosure guideline. As a government organization BSB has high degree of credibility that does not consistent with its balance sheet. For this reason many parties does not get required information. And management hides the bank’s real condition from policy maker. After all, BSB convert their accounting process to world standard in 2000.


Bureaucratic problem:

Like all other government organization bureaucratic process is one of the main problems for BSB. Sometimes pressure groups are involved in sanctioning loan. It takes more time to process a loan. That actually very shocking thing to the real entrepreneurs.


Risk of default:

There are some sick industries in which BSB sanctioned loan where entrepreneurs lack business experiences. BSB promote some risky industry that requires huge capital by taking unlimited risk. Those induce many others to come and play in that industry.   These inefficient allocations of resources have created huge amount of bad debt.


Coordination problem:

There have lack of co-ordination in exchange of transferring information from the management information department to other departments that are resulting from the lack of motivation and team speed.


Lack of expertise:

There have some skilled and professional expertise engineers to judge technical viability but is not sufficient for varieties of proposed project. And also it doesn’t use latest technology and permanent IT specialist.


Lack of proper management:

There have no strict corporate governance due to political changes over time. Policies are frequently changes due to the result of change in government party. There is also lacking of effective monitoring, inspection and proper control system at the time of implementing the project. Delay in settlement of case, weak recovery trend due to corruption, negligence and political pressure creates no true development of the bank.

Overall contribution:

In spite of various problems, the bank has a great contribution to the GDP through industrialization of Bangladesh. Sometimes BSB helps more by providing additional financing to prospect project and giving advice about the projects function for their future success. Project Rehabilitation is one of the criteria of BSB that revive the sick project.

5.2 Recommendations


  • Sanctioning loan to the sponsor’s carefully through proper making feasibility report.
  • Adequate working capital should be sanctioned to the selective projects in order to initiate operations and repay the bank loan.
  • Central Observation Committee (COC) can be established to analyze, evaluate and solute proper loan recovery.
  • Encouraging the borrower to repay the loan in time.
  • 5 C’s i.e. (Character, capital, capacity, collateral and condition) must be considered for giving loan.
  • Since loan operation department is the crucial and most important department, so this department should be made out of political violence.
  • The loan operation department should be made fully computerized and each of the engineers should have a personal computer to do their job promptly and make decision accurately.
  • Some more technicians and expert engineer should be there to judge project viability accurately.
  • Political pressure should be in lower interference in sanctioning loan for establishment of the project.
  • Experienced and motivated entrepreneur should be allowed for sanctioning the loan.
  • The project which is profitable should be identified and sanctioned loan to those projects.
  • Computer system has already been installed but more Internet facilities to be introduced.
  • A co-ordination cell should be established for sharing information among various departments.
  • More emphasis on the effect of a project to measure socio-economic cost and benefit should be taken into consideration.
  • Responsibility should be established to all according to their involvement in appraisal of project.
  • A regular training program should be launched for each employee from the training department so that the employees keep themselves updated with any change occurred in the field of innovation, technology and edge.
  • Honesty, morality, responsibility and patriotism of employee should be enhanced.
  • Benefits and incentives should provide to the employees on the basis of market rate.
  • The BSQF from should be more concise and easy for the client to fill it up.
  • If there have any management conflict among sponsors group, proper guidance and consultancy should be provided to resolve such conflict.
  • To do well in the industrial sector, BSB should come out from bureaucratic influence.
  • Nepotism is highly present here. So to make it as a profitable organization nepotism should be removed from the Bank totally.
  • At last BSB should be isolated from Government influence. To do so Bangladesh Shilpa Bank should meet the process of privatization.


5.3 Conclusion


Bangladesh is a densely populated country with full of natural resources where the economic situation is very poor and unemployment rate is another burden for development of the country. The Bangladesh economy was confronted with the serious threats for present global competitive challenges of the market economy. This was further aggravated by the persistent hike of fuel price and some other necessary importable items in the international market along with other obstacles of the domestic economy. Accommodating the challenges along with maintaining macro economic stabilization, various reform programs like cautious and restrained Monetary Policy, reality based Fiscal Policy, strong participation of private sector in the economic activities led to greater success in the manufacturing sub-sector aided by strong agricultural recovery, unique export growth of the Ready-Made Garments (RMG) industry despite phasing out of global Multi Fibre Arrangement (MFA), highest growth in the remittance flow made possible to achieve a sustainable economic stabilization for the country.



Thus it is clear that industrialization is the base of the economy of the country. We cannot think industrialization in our country without meaningful contribution of Bangladesh Shilpa Bank (BSB). Bangladesh Shilpa Bank being the prime Development Financing Institution continued its efforts to make an effective contribution towards expansion of industrialization process of the country. It emphasized on long term lending to the viable new projects having comparative advantage, export prospects, forward and backward linkages and local technology as well as raw material based project. Top Priority has been given to realization of its loans for augmenting and recycling of the investable funds and maintaining satisfactory loan portfolio for increasing profitability. With this end in view, the Bank has undertaken some realistic steps towards rephasement/ rescheduling and liquidation of loan accounts of sick /closed/ stuck-up projects with waiver facilities where deemed appropriate. Besides, Bank has written off a large number of projects’ loan account in line with the Bangladesh Bank’s guidelines to lower down the classified loan to a single digit.


While working in BSB I have discovered some major problems associated with different departments in this organization. These problems can be classified from bureaucratic, political as well as financial perspective. Since this organization is now fully owned by Government, political pressure is always hindering some problems against its smooth operation. 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. 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 is now loosing concern but it tries to overcome such problem. Though it is a loosing concern, but its contribution in the infrastructural development of the country is undeniable. The management of the bank has a tendency to overcome those

limitations with their limited resources & scope. The bank is primarily subject to interest rate, credit and currency risks. To manage credit risk, the bank applies credit limits to its customers and obtains adequate collaterals. BSB has formed Asset Liabilities Committee (ALCO) to screen out the banks and determine the maximum risk exposure on each of them. Without pros and cons everybody should to confess of BSB contribution. We expect BSB continue their operations without outside influence and contribute more and more to our industry that brings good luck to the nations.

5.4 References

  • Annual Report of Bangladesh Shilpa Bank 2002-03.
  • Annual Report of Bangladesh Shilpa Bank 2003-04.
  • Annual Report of Bangladesh Shilpa Bank 2004-05.
  • Annual Report of Bangladesh Shilpa Bank 2005-06.
  • Website-
  • Bangladesh Shilpa Bank, Manual of the Project Appraisal, August 1984.
  • Loan sanctioning letter of BSB.
  • Bangladesh Shilpa Bank Ordinance 1972.
  • Manual of different departments of BSB.