Operational Procedures of Bangladesh Shilpa Bank


1.1. Background of the banking Sector in Bangladesh:

A. Introduction
After independence of Bangladesh the banking sector was restructured as a fall out of war liberation. Banking grew primarily in the public sector with a view to reconstruction of the war-torn economy. With gradual liberalization in subsequent years, it was increasing felt that banks should be allowed in the private sector, for development process. In the 1980’s for the first time a number of banks in the private sector were allowed. Subsequently in the mid 90’s some more banks in private sector commenced operations. In 1999, 3rd generation of private sector banks was given permission to operate. Finally in 2001 4th generation of private banks commenced operation.
Now we are standing in the dawn of the new millennium in a progressively emerging scenario of economic liberation dominated by WTO regime where the private sector in the engine of economic growth. The challenges of globalization particularly in service sector have become quality service, quick service, reliable service, dependable service etc. As part of the service sector, bank must belong to be producing qualitative service within shortest possible time for its immediate success.
As ‘knowledge’ has become ‘cutting edge’ business professionals of the new millennium would require a multidimensional & multidisciplinary knowledge, training and expertise to be able to discharge their professionally competitive responsibilities adequately and effectively. The business community must therefore act proactively in devising relevant strategies to meet those emerging challenges completely and utilize the opportunities beneficially for greater business professional and public interest. Besides, the first ministerial meeting of the WTO held in Singapore in December, 1996 identified accountancy as the most important service sector for promoting transborder flow of funds. Good financial reports promote investor confidence, facilitate the flow of investment funds, and thereby encourage economic development.
With keeping these views in the mind the department of Accounting & Information Systems (AIS) launched an Internship Program for out going business graduates for the duration of 3 months to expose themselves with more practical oriented and to enhance the students exposures to the rural world business environment. In order to accomplish the practical training as part of “Internship Program” I attached with Bangladesh Shilpa Bank (BSB).
B. Banking Environment in Bangladesh:
Bangladesh is a developing country in the region of South Asia having 130 million of people against which only 52 banks are operated in the economy which are as below:

  1. Nationalized Commercial Bank                      4
  2. Private Commercial Bank                               31
  3. Foreign Commercial Bank                              11
  4. Specialized Bank                                            4
  5. Development Financial Institution                 2

The growth of industrial sector is an infant situation because as lacking adequate funds and financial management system. Therefore, funds and fund management was the main problem for rapid growth of the industry. Now banks take this responsibility in different manner.
C. Mission of Bank:
Every bank has a mission and vision as to establish them as the number of one bank in Bangladesh and their employees feel proud for that. It is possible by providing services to their valued customers efficiently & effectively. Since, the banks are not engaged in producing goods like as manufacturing concern that they would sell; their main product is “service”. The bank that is able to provide multi-natural service to the customer efficiently, the bank will undoubtly raise overnight. “Quality of service” is the main reason as to why people will come to our bank instead of other banks? Every bank provides services and facilities but the bank who should different than others in terms of service and efficiency. Therefore in the present borderless economy and era of globalization bank should be committed to do something extra than others.
¨ Faster service
¨ Efficient Manpower
¨ Giving Quick/Spot decision
¨ Honesty/Sincerity
¨ Moral human being
¨ Reliable Manpower.
D. Principal Activities of the bank:
The principal activities carriers out by the bank are providing all kind of commercial banking activities/services to its customers through its branches in Bangladesh. Since inception the bank has been rendering high quality services in different areas of banking and able to win confidence of the public through excellence of services, professional competence and employment of the art technology.

1.2. Background of the Study:

a. Introduction:
Bangladesh Shilpa Bank (BSB) as the prime Development Financing Institution (DFI) of the country extends financial assistance both the local and foreign currencies for setting up new industries BMRE of existing industries rehabilitation of sick industries.
The bank has five divisions and twenty one departments in its head office located in Dhaka at Motijheel named “BSB Building”. Besides, there are three zonal offices in different divisions namely Chittagong, Rajshahi & Khulna.
Among twenty-one departments Loan Operation Depertment (LOD) is most important because sanctioning and analyzing loan proposal is executed in this department and then the function of all other departments starts gradually. If this department can select proper and suitable project, recovery of loan amount along with interest become easy and secure and therefore, industrial growth and sustainability also become fruitful. So, total BSB and managers should concentrate their more effort attentively in this department.
b. Organizational Attachment:
The department of Accounting and Information Systems (AIS) selected the host organization for the students. The department after consultation with the top management of the host organization sends the interns to the organization for 3 months practical training under the guidance of the faculty Advisor. Following all these rules I am deputed in Bangladesh Shilpa Bank for accomplishing the said program. In this bank, the training department of Bangladesh Shilpa Bank (BSB) scheduled an internship program covering almost all activities of BSB. I worked according to scheduled and prepared the report.
c. Problem statement
Bangladesh Shilpa Bank (BSB) is being functioning to accelerating to industrialization in the country by providing equity loan to various sectors. The main objective is to create employment opportunity, infrastructural development, upgrading living standard and social welfare through industrial long term financing. In the process of loan sanctioning, strictly BSB order 1972 is being followed and research has been made to improve and upgrade the processing consideration with changed free market, improved technological edge. This process is lengthy, have some weakness. So, a research to improve and update loan sanction and recovery process should be conducted. Beside while assessing proposed project social contribution, GDP (Gross Domestic Product) Contribution should be considered. On the other hand, there should keep provision to have proper and sufficient collateral against loan sanctioned which is specified but in practice it is not strictly followed and maintained. Why it is not being followed and to what extant it is being followed should be under examination and research.

1.3. Objective of the study:

  1. To get an idea about the history of BSB and nature of operation and function of loan operation department.
  2. To be familiar with the current loan sanction procedure of Bangladesh Shilpa Bank.
  3. To enrich personal skills and knowledge.
    1. To implement personal theoretical knowledge to improve loan sanction procedure in practice.
    2. To form some essential guidelines for BSB and sanctioning procedure.
      1. To have some recommendation for improving the sanctioning, monitoring and recovery loan.
      2. To determine the limitations of the operation of BSB.
      3. To evaluate the trend growth rate and acceleration of industrialization.
      4. To mis-match of the practical knowledge with theoretical knowledge.
        1. To expose ourselves to the service sector which is more challenging profession.

About 60% projects on an average financed by BSB become sick or cannot go a long way successfully. Remaining 40% projects are contributing for its own sustainability. If this study can increase the portion of successful project operation, this will be a great help and success for BSB as well as industrialization and social welfare. Besides, no research has been executed in this ground recently. This research will cost a small amount, since it is a theoretical development research. This research obviously will contribute to enrich and update the project appraisal manual and “BSB order 1972”. It may provide helpful in other specialized Banks and DFC of Bangladesh.


1.4. Methodology :

I have collected primary and secondary data from various sources.


Primary Sources

Secondary Sources

Sources of Data

  1. Practical desk work
  2. Oral interview of the respective officers and staffs of BSB
  3. Direct observations of the functions of various departments of BSB
  4. Relevant document’s studies as provided by the officers concerned


  1. Annual report of the BSB
  2. Annual budget of the BSB
  3. Various documents of the BSB
  4. Extensive literature search on the basis of these documents of publication
  5. Shilpa Bank’s Website (www.shilpabank.com)

1.5. Report organization:

The report is organized as following:

  • The initial part of the report is the banks and Banking industries in Bangladesh, which describes overall Banking Industry in Bangladesh, present conditions, problems and prospects as well as the history and background, financial conditions and activities of Bangladesh Shilpa Bank.
  •  The later part is the main project part which describes different functional departments, project  of Bangladesh Shilpa Bank as well as recommendations and conclusion.

  1.6. Limitation of the study:


The main limitations of the study are as follows:

  • The organization maintained confidentiality in providing some relevant information, so the author could not incorporate those.
  • Insufficiency of necessary information.
  • BSB is not furnished with adequate written document related to this report.
  • Employees were too much busy with their regular activities and could not provide enough time to me.


ORganization PArt


2.1 institutional Overview 14
2.2 Mission of BSB 22
2.3 Management 22
2.4 Functions 22
2.5 Objectives of BSB 24

2.1. Institutional Overview:

(i) Establishment
Bangladesh Shilpa Bank (BSB) once a leading developed financial institution (DFC) established in October 31, 1972.
(ii) Organization

Head Office Dhaka
Division 5
Department 21
Zonal Office 3
Branch Office 15
Personnel 794

(iii) Capital Structure
Authorized Capital     : Tk. 2,000 million
Paid up Capital           : Tk. 1,320 million
(iv) Sources of fund
The sources of Bank’s fund are the Government, Bangladesh Bank, Commercial Banks, Local/Overseas Financial Institutions, Customer deposits and suppliers credit.
(v) Ownership
At least 51% of the Authorized capital of BSB be subscribed by the Govt. and remaining 49% by Bangladesh nationals of by local or foreign financial institutions. Presently, 100% ownership of the bank belongs to the Government.
(vi) Mission
Accelerating the process of industrialization of the country by providing financial assistance and equity support.
(vii) Management
The overall policy formulation and the general direction of Bank’s operation are vested in a Board of Directors appointed by the Government. This Board of Directors consists of 9 (nine) members including the Chairman and the Managing Director. Non-Government shareholders subscribing to the capital of the bank shall eventually elect 4 directors from amongst themselves. The managing Director is the chief executive of the bank. The General Managers assist the Managing Director in conducting the overall banking business.
(viii) Functions
BSB extends term loan facilities in local and foreign currencies to industrial projects (both new & BMRE) in the private and public sectors. Besides, the Bank also performs the following activities.
q      Provides working capital loans to industrial projects.
q      Provides equity support in the form of underwriting and bridge finance to public limited companies.
q      Issues guarantees on behalf of borrowers for repayment of loan.
q      Extends commercial banking services along with deposit mobilization.
q      Purchase and sells shares/securities for BSB and on behalf of customers as member of Dhaka Stock Exchange (DSE) Ltd. and Chittagong Stock Exchange (CSE) Ltd. for capital market developments; and
q      Conducts project promotional activities along with preparation of various subsectoral study reports.
q            Provides working capital loans to industrial projects.
BSB: At a Glance

  2001-2002 2002-2003 2003-2004 2004-2005
Loan Applications received 13 31 31 51
Term Loan Sanctioned:        
New 5 5 18 21
BMRE 1 2 3
Additional 3 2 1 3
Total 8 8 21 27
Working capital Loan Sanctioned 2 1 3 5
Term Loan Disbursed 10 8 11 14
Started Commercial Operation 5 2 2 4
Rephased/Rescheduled 47 52 27 17
Entered into Loan Portfolio 3 2 7 6
Liquidated Loan Liabilities 32 21 31 22
Total Loan Portfolio 532 513 461 308
  (Million taka)
Term Loan Sanctioned 293 189 1418 989
Term Loan Disbursed 134 84 170 297
Loan Recovered 1400 1198 1316 1124
Working Capital Loan Sanctioned 9 4 30 19
Working Capital Loan Disbursed 15 1 9 28
Rephased/Rescheduled 574 1833 507 149

(ix) Operational Activities of the Bank
Bangladesh Shilpa Bank being the prime development financing institution continued its efforts in FY 2004-05 to make an effective contribution towards expansion of industrialization process of the country. By mobilizing local resources, the bank emphasized on long term lending to the viable, comparatively advantageous, export oriented, forward and backward linked, agro-based, local technology and raw material based projects.
Top priority has been given for realization of its loan towards augmenting and recycling of the invest able funds and maintaining satisfactory loan portfolio for increasing profitability. Besides, in FY 2004-05 the bank has introduced one-stop service in its commercial banking operation for better and modern customer service.
(x) Profit and Loss:
The bank made a net profit (after adjustment) of Tk. 42.109 million during FY 2003-04 as against Tk. 78.95 million after adjustment in the previous year.
(xi) Deposit mobilization:
During FY 2004-05, the bank tried to meet its fund requirement from various sources for lending and investment. The bank emphasized more on deposit mobilization during the period total deposit was Tk. 540 million on June 30, 2005.
(xii) Loan Application received:
During the period under review, the bank accepted 51 new loan proposals after proper scrutiny.
(xiii) Sanction of Term Loan:
The bank continued sanctioning of term loans during FY 2004-05. This year local currency loan of Tk. 1418 million was sanctioned to 21 projects of the total sanctioned amount Tk. 1236 million was for 18 new projects and an additional loan of Tk. 182 million was for 3 on going Projects including 2 for BMRE purposes.
Sanction of Term Loan

    Million Taka
Nature of the Project 2003-2004 2004-2005
Number of Projects Local Currency Foreign Currency Total Number of Projects Local Currency Foreign Currency Total
New Projects 18 1236 1236 21 687 687
Existing Projects (BMRE) 2 102 102 03 166 166
Additional Loans 1 80 80 03 136 136
Total 21 1418 1418 27 989 989

(xiv) Commitment and distribution of Term Loan
During FY 2004-05, the bank made commitment of Tk. 116 million in local currency to 4 projects. During the period, the bank disbursed term loans of Tk. 170 million in local currency to 11 projects as against disbursement of Tk. 84 million to 8 projects in the previous year.
Commitment and Disbursement of Term Loans

    Million Taka
2003-2004 2004-2005
Number of Projects Local Currency Foreign Currency Total Number of Projects Local Currency Foreign Currency Total
Commitment 3 164 164 4 116 116
Disbursement 8 84 84 11 170 170

(xv) Sanction & Disbursement of working capital
During FY 2004-05 the bank sanctioned working capital loans of Tk. 30 million to 3 projects and disbursed Tk. 9 million to 4 projects. The Bank sanctioned Tk. 4 million to 1 projects and disbursed Tk. 1 million to 2 projects in the last year.
(xvi) Other Investment
During FY 2004-05 the bank invested Tk. 6.44 million to purchase shares from the primary and secondary markets and the bank earned an amount of Tk. 5.82 million as capital gain, dividend and commission from share trading.
(xvii) Project implementation
Stages of implementation of projects

Position of Projects Under Implementation 2003-2004 2004-2005
Number of Projects Number of Projects
Started Commercial Operation 2 04
Under Construction 5 06
Documentation Completed 4 15
Awaiting Documentation 23 22

(xviii). Sector-wise Loan Outstanding Position (major sectors)
Loan portfolio
Sector-wise position of Bank’s Loan portfolio as on 30/ 06/2005

Sectors No. of Projects Amount of Total Loan (million taka)
Food and Allied Products 58 1335
Jute and Allied Products 5 674
Cotton, Woolen and Synthetic Textiles 87 8148
Paper, Paper Products and Printing 15 591
Tanner and Leather Products 9 333
Non-Metallic Mineral Products 4 130
Forest and Wooden Products 1 7
Rubber and Rubber Products 2 4
Basic Metal Products 1 2
Metal Products 14 304
Electrical and Machinery and Goods 6 354
Machinery and Sphere Parts 13 190
Transport equipment 12 86
Chemical and pharmaceuticals 26 812
Petro Chemical Products 10 407
Service Industries 28 422
Miscellaneous 13 198
Total BSB Projects 304 13997
Total BSCIC Sponsored Projects 4 1
Grand Total 308 13998

Sources of Fund:
Paid-up Capital
Loan from Government of Bangladesh
Loan from Bangladesh Bank (Central Bank)
Different Loan Giving Agencies
Customers’ Deposit

Authorized capital of Bangladesh Shilpa Bank is Tk. 2000 million and the amount of paid up capital Tk. 1320 million. Other sources of Bank’s fund are the Government, Bangladesh Bank, Commercial Banks, local/overseas financial institutions and suppliers’ credit. At least fifty one percent of the authorized capital of Bangladesh Shilpa Bank must be subscribed by the government and remaining forty nine percent may be subscribed Bangladeshi nationals or by financial institutions local or foreign. Presently, 100 percent ownership of the bank belongs to the government.


Bangladesh Shilpa Bank (BSB) is the state owned Leading Development Financial Institution (DFI) of Bangladesh. ‘Shilpa’ means industry. BSB provides financial and technical assistance to broaden the private as well as public sector industrial base of the country. It prioritizes, especially, Export Oriented/Export Linkage industrial units, Efficient Import Substitution, Joint Ventures, Commercialization of local technology and promotion of agro-based industry. It also accelerating the process of industrialization of the country by providing financial assistance and equity support.

2.3.  Management:

The overall policy formulation and the general direction of Banks operation vests in a board of directors appointed by the Government. This Board of Directors consists of 9(nine) members including the Chairman and the Managing Director. Non-Governments shareholders subscribing to the capital of the bank shall eventually elect 4 directors from amongst themselves. The Managing Directors is the chief executives of Bank. The General Managers assist the Managing Director in conducting the overall banking business.


BSB extends term loan facilities in local and foreign currencies to industrial projects (both new and BMRE) in the private and public sectors. Besides Bank also performs the following activities:
Extend long and medium term loan facilities in local and foreign currencies to industrial projects (both new and BMRE) in the private and public sectors as well as partnership & proprietorship concern.
Provides working capital loans to Industrial units.
Provides equity support by way of participation in the equity of the company in the form of underwriting and bridge finance to public limited companies.
Issues guarantees on behalf of borrowers for repayment of loan.
Extends commercial banking service along with deposit mobilization, foreign exchange business, L/C handling, foreign exchange remittances inland & outland.
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 and
Conducts project promotional activities along with preparation of various sub-sectoral studies.
Involved in Capital market activities by way of under writing and extending bridge finance to public limited company








2.5. Objectives 0f BSB:

At the time of inception Bangladesh Shilpa Bank set some objectives which are being  implemented through its different departments. These objectives are pointed as follows.

  1. To contribute the industrial development of Bangladesh.
  2. To follow the industrial polices of 1982.
  3. To accelerate the pace of industrial development through out the country.
  4. To  provide loan to the borrowers to develop their ventures.
  5. To provide a large amount of money as loan to the owners of small industries so that they can contribute to the economic development of Bangladesh.
  6. To support indigenous industries so that balance of trade will be positive.
  7. To implement different projects as far as possible.
  8. To recover the loan amount after a certain period of time.
  9. To make profit as a financial institution.
  10. To make employees expert in case of loan operation.
  11. To provide necessary support to the interested groups .
  12. To take legal actions against loan defaulters.
  13.   To rehabilitate the project if there is any  possibility to be successful in future.
  14. To keep accounts clearly.
  15. To disclose financial report to the interested users.

2.5.1 The Link Between Objectives Of BSB & Financial Indicators of BSB:

table -6

Significant Financial Indicator (Last Five Years, amounts in million taka)
Description 2000-01 2001-02 2002-03 2003-04 2004-05
Total income 926  1012 1237  1100  771
Total expenses 3969 336 322 310 350
Net profit/before tax (3053) 676 915 790 421
Total loan & advances 7433  7133 7151 6877 6513
Total borrowings 8604 8743 8919 8992 7191
Total deposits 568 647 646 641 712
Reserve fund & other reserves 644 823 823 823 823
Paid-up capital 1320 1320 1320 1320 2000
Authorized capital 2000 2000 2000 2000 2000
Provision for income tax
Payment to national exchequer
Total income to total assets 3.82 4.12 5.00 4.93 3.56
Total expenses to total assets 16.54 1.37 1.30 1.39 1.62
Total expenses to total income 433.30 33.20 26.03 28.18 45.40
Total financial expenses to total income 55.79 13.71 10.44 10.45 14.92
Net profit to total income  – 66.80 73.97 71.82 54.60
Net profit to total equity  –  157.07  57.58 17.02
Administrative expenses to:
Total assets 0.70 0.68 0.69 0.85 0.94
Total expenses 4.23 49.40 52.76 61.29 58.00
Total income 18.45 16.40 13.74 17.27 26.33
Debt-equity 7.25:1 26.33:1 16.43:1 7:01 3:01
Debt-service coverage 0.32 3.70 4.00 4.00 2.00


Part Three

Page No

3.1. Activities of BSB


3.2. SWOT Analysis of BSB


 3.3. Functions of different departments of BSB


3.3.1. Loan Operation Department:


3.3.2. Project implementation department:


3.3.3. Documentation and machinery

 procurement department:


3.3.4. Central recovery department:


3.3.5. Loan accounting department:


3.3.6. Law department:


3.3.7. Human resource management department:


 3.3.8. Project rehabilitation department:



3.1. Activities of BSB:

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

Activities of BSB
   Deposit Mobilization
Loan application receive
Term loan sanction
Commitment & disbursement      of term loan
Working capital sanction
Other investing
Project implementations
Loan portfolio
Loa recovery
Legal action for recovery loan
Loan written off
   Advisory services
Human resources
Board news
Annual general meeting
Observance of National Days


A. Operational activities of the bank:

Bangladesh Shilpa Bank being the prime Development Financing Institution continued its efforts in FY-2004-05 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, exports prospects, forward and backward linkages and local technology as well as material projects. Top priority has been given realization of its loans towards augmenting and recycling of the investable fund and maintaining satisfactory loan portfolio for increasing profitability.

Deposit Mobilization: During FY 2004-05, the Bank tried to meet its fund requirement for lending and investment from various sources. The Bank emphasized more on no cost and/or low cost deposit mobilization during the period. Total deposit was Tk. 621.21million on June 30, 2005.

Loan Application Received: During the period under review, the bank accepted 51 new loan proposals after proper scrutiny.

Sanction of term Loan: The Bank kept on sanctioning of term loans during FY 2004-05. This year local currency loan of Tk 98.65 million was sanctioned to 27 projects. Of the total sanctioned amount Tk 686.99 million was for 21 new projects, Tk.165.56 million was for 3 BMRE projects and an additional loan of Tk 136.10 million for 3 on-going projects

Commitment and Disbursement of Term Loans:

During FY 2004-05, the Bank made commitment of Tk. 406.51 million in local currency to 15 projects. During the period, the Bank disbursed term loans of Tk 296.96 million in local currency to 14 projects as against the disbursement of Tk.170.00 million to 11 projects in the previous year. During the period the bank signed loan agreements with the sponsors of 15 sanctioned projects for an amount of Tk.406.51 million. During the last year the number of such projects was 4 and the loan amount was Tk.116.00 million only.

Sanction of Working Capital/Commercial Loan:

During FY 2004-05, the Bank sanctioned working capital / commercial loans of Tk.19.00 million to 5 projects and disbursed TK.27.51 million to 5 projects. The Bank sanctioned Tk. 4.00 million to 1 project and disbursed Tk. 1.00 million to 2 projects in the last year.

Others investments:
During FY 2004-05, the Bank invested Tk. 22.05 million to purchase shares from the primary and secondary market and the Bank earned an amount of Tk.9.21 million as capital gain, dividend and commission from share trading.
Projects implementation:

The Bank intensively monitors and supervises implementation of its financed projects. During FY 2004-05, 4 projects commenced commercial production and 43 projects were under different stages of implementation. Of these, 6 projects were under construction, 15 projects completed loan agreement and 22 projects were awaiting documentation.

Loan portfolio:
During FY 2004-05, loan liabilities of 31 projects were liquidated and 7 new projects were recorded in the bank’s loan portfolio. As on 30th June 2005 total number of projects in the loan portfolio stood at 461 with a total outstanding of Tk. 14374 million compared to that of 513 projects having a total loan outstanding of Tk. 17731 million in the proceeding year. Out of 461 projects in the loan portfolio, 133 were export oriented, 224 import-substituting and 104 service/other industries.
Table -7

Sector-wise Position (As on 30-06-2005)


Sectors No. of Projects Amount of Total Loan (Milion Taka)
Food and Allied Products 58 1335
Jute and Allied Products 5 674
Cotton. Woolen and Synthetic Textiles 87 148
Paper, Paper Products and Printing 15 591
Tannery and Leather Products 9 333
Non-Metallic Mineral Products 4 130
Forest and Wooden Products 1 7
Rubber and Rubber Products 2 2
Basic Metal Products 1 57
Metal Products 14 304
Electrical Machinery and Goods 6 354
Machinery and Spare Parts 13 190
Transport Equipment 12 86
Chemical and Pharmaceuticals 26 812
Petro Chemical Products 10 407
Service Industries 28 422
Miscellaneous 13 198
Total BSB Projects 304 13997
Total BSCIC Sponsored Projects 4 1
Grand Total 308 13998

B. 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 2004-2005, 408 officers were imparted in-house and local training. Besides, 4 officers were sent abroad for this purpose. During the period under report, 4 in-house Seminars/Symposiums were held on the topics viz. “Managing Core Risk in the Banking”, “Project Management”, “and Corporate Governance “and” Anti dowry social movement”.

To improve the working efficiency and provide better customer service, computerization of bank’s activities is on. In this regard, the bank has undertaken a far-flung action plan. Implementation of the first phase of network-based computerization is at the final stage.
Human Recourses:
As on December 2005, total staff position of the bank stood at 741, of which 430 were officers and 364 were supporting staff.  This year, 10 supporting officers was promoted to the next higher position. During the period, 29 employees retired and 2 left the bank services

A. Job-wise distribution


Sl No. Name of the post Nos.
01. Managing Director 01
02. General Manager 06
03. Deputy General Manager 15
04. Asstt. General Manager 28
05. Senior Manager 62
06. Manager 116
07. Senior officer, Librarian/Medical Officer, Sr. Security Officer 117
  Total Class – | 34
  Total Class – || 104
  Total Officer 449
  Class – ||| 194
  Class – |V 98
  Total 292
  Grand Total : 741

B. Profession-wise distribution:

 SL No.  Profession No.
01.  PhD (Economics)  01
02.  PhD (MIS)  01
03.  Professional Accountant (ICMA, FCA, etc.) 04
04. Engineers (Civil, Mechanical, Electrical, Chemical, Naval, Metallurgical)  46
05.  IT Expert (From Engineers, MBAs, other professionals having PGD/Diploma in Computer Science, Software Eng., Computer Application, etc.) 15
06.  MBAs  09
07.  Economist  56
08.  Accounting  42
09.  Finance  03
10.  Marketing & Management  12
11.  Law Officer  10
12.  Statistician  13
13. Others (Inclusive of Applied Physics, Applied Chemistry and other University Graduates and Post-Graduates) 529
Grand Total: 741


3.2. SWOT analysis of BSB:

3.2.1. SWOT analysis:

The comparison of strengths weaknesses, opportunities, and threats is normally referred to as a SWOT analysis. The central purpose of the SWOT analysis is to identify strategies that align, fit, or match a company’s resources and capabilities to the demands of the environment in which the company operates. To put it an other way, the purpose of the strategic alternatives generated by a SWOT analysis should be to build on company strengths in order to exploit opportunities and counter threats and to correct company weakens.

SWOT analysis explains in two broad ways on viewed of organizations environment. These are:

 A. Internal Environment Analysis:  It includes



B. External Environment Analysis: It includes

 Opportunity and


3.2.2. SWOT Analysis BSB Points of View:

During my internship period in bsb I have found some aspects relating to the Bank’s strength, opportunity, weakness and threats, which are more or less. I think affecting the Bank’s performance in total. Which are explained thorough SWOT analysis below:

³ Strength of BSB:

  As a prime DFI, it has a large number of qualified & experienced professionals.
Structural set-up & business location is Strategic.
BSB’s assets position is quite satisfactory and
BSB has requisite strength and opportunity to sustain the challenge of the market economy.
³ Weakness of BSB:
Normally in BSB mid and low level personnel are les qualified and experienced.
Bureaucracy official process hampered the daily internal workflow.
The prime weakness I found lack of motivation of workers, regaining from interpersonal clash, work environment, low salary structure.
Absence of teamwork because of interpersonal clash
Management – employee relation is bad in some cases.

³ Opportunity of BSB:

To make the bank a vibrant one, a pragmatic business programme is now under implementation. The main features of the plan are as under: –

  Gear-up recovery through setting up of pragmatic recovery targets
Expansion of new area of investment
Cleaning of loan ledger with exit facilities
All out efforts for deposit mobilization.
Undertake need-based training programme including computer training to all officers & develop a computerized data-base system and
Full computerization of bank’s activities

³ Threats of bsb:

  Loan recovery systems are very weak.

  In some cases recovery policies are not practices properly.

  Introduction of certain harder banking rules and regulation

  Third Party (Bangladesh Bank, Ministry of Finance etc.) regulates the overall internal activities of the bank and bank must be bound to follow the rules of Bangladesh Bank.

3.3. Different functional department of Bangladesh shilpa bank (BSB):

There are eight functional departments of Bangladesh Shilpa Bank. The operational activities of Bangladesh Shilpa Bank have operated by these departments in different way. Every department has its own policies, procedure, and strategy to lending, and implementing credit. Each of the department is depends on each other for sanctioning loan for propose industries, which applied for loan. Loan Operation Department is the first step of loan sanction procedure and it is comparatively most important department of Bangladesh Shilpa Bank.

 Loan Operation Department
Project Implementation Department
Documentation and Machineries Procurement Department
Project Rehabilitation Department
Human Resource Management Department
Law Department
Loan Accounting Department
Central Recovery Department

3.3.1. Loan Operation Department:

Bangladesh Shilpa Bank (BSB) grants loan on the basis of certain criteria. The loan operation department does the first activities of loan granting. Any entrepreneur who wants to borrow money, from Bangladesh Shilpa Bank must fulfill at first Bank Standard Questionnaire Form (BSQF) in terms of Tk. 1,000. These processes are as follows:
At first an application form is supply to the entrepreneur (required Tk. 1,000);
After filling up the application form it is submitted by the entrepreneur;
The entrepreneur supplies a project appraisal letter
After analyzing the project appraisal, the board decides the loan should be sanctioned or not;
If the loan is sanctioned it is forwarded to the project implementation department.
steps in project appraisal
There are several steps involve in project appraisal. The steps are as follows: Issuance of loan application form:


The starting point of project appraisal is the receipt of loan application form from the sponsors in the Banks Standard Questionnaire Form known as BSQF. The sponsors are required to submit full-dressed feasibility report at the time of submission of loan proposal to the BSB.

The sponsors can get their feasibility report prepared by any firms at their own cost. They can also prepare the feasibility report by themselves. The sponsors are required to submit the application form duly 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 project deposit of 10% of the project cost as past of their equity during the various stages of sanctioning loan. The project deposit is taken to ensure timely mobilization of sponsors’ equity in the project. Information Contain in the Loan Application Form:

To obtain funds from BSB every project sponsoring agency has to submit loan application to the Bangladesh Shilpa Bank in the prescribed “Application Form” known as bank’s standard questionnaire form (BSQF). Any potential entrepreneur seeking financial assistance from Bangladesh Shilpa Bank can obtain the application form along with the detailed guidelines in exchange of prescribed fee of taka 1,000 only. Receipt of Bank Standard Questionnaire Form (BSQF):

The concerned section (Called the receiving cell) scrutinized the filled-in BSQF submitted by the sponsors. If the filled-in BSQF together with the required papers and are found in order, the loan proposal is considered as fully documented and accepted for further processing. Contents of BSQF are given below:  The BSQF is divided into the following six main parts:

  1. Part A: Containing information relating to project, promoter, corporate set-up and management.
  2. Part B: Containing information about the technical details of the project.
  3. Part C Containing data relating to the cost of the project and means of finance.
  4. Part D: Containing information relating to the market and selling arrangement of the product(s).
  5. Part E: /containing general information.
  6. Sub form: form-1, Form 2, Form 3, Form 4.

These parts are described below:
Part A
This part prescribes the entrepreneur to provide information about:

  1. The project name, location site of the project, line of production and amount of loan applied in terms of local and foreign currency.
  2. The personal details of the promoters and their closely related persons i.e. father, mother and spouse etc. Their name, address, qualification, experience etc. are requiring.
  3. The type of the company either it is would be private, public, partnership or cooperative 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 address, share of interest, copy of registered partnership deed is required.]

  1. The management of the proposed company. The name, position of the personnel, 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:

  1.                     i.            Proposed product, quality, capacity, and sales value, detail arrangements of foreign collaboration if any.
  2.                   ii.            Infrastructure facilities (water, gas, power, communication etc), holding type (“free-hold/less-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.
  3.                 iii.            Complete list of machinery (imported, local) together with competitive price quotations, annual raw material requirements (imported, local).
  4.                 iv.            Personnel requirement (managerial, technical, administrative, sales), labor (skilled, unskilled) and the name, experience, qualifications of the personnel who will supervise the project both at implementation and production stage are require.

Part C:
This part requires financial information, which are as follow:

  1. The cost of the project, means of finance and profitability estimation of the project.
  2. Detail cost of formation 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.
  3. Equity capital (won contribution, public issue, other), loan from Bangladesh Shilpa Bank, others in term’s local and foreign currency along with the name of commercial bank(s), if any contact with them for short-term lean.
  4. Estimated capacity, sales, cost of goods sold, gross profit, administrative expense financial expense and net Profit at least for three years.

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

  1. Producer/supplier of the raw material, target consumer and the marketing channel.
  2. Proposed selling price and prevailing market price of the product
  3. If the product is partially 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 require.

Part E:
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 notational importance, declaration by the sponsor.

Declaration of assets and liabilities of promoter/directors.
Form of a letter to be addressed to the banker (s)j of the applicant.

Bio data of promoters/directors in case of partnership business.

Three type of Affidavits for the sponsor/directors. Processing of Loan Proposal:


On receipt of the fully documented loan proposal, it is forwarded to the appraisal section for processing in keeping with the project appraisal manual, policy directives of the Government and other directives of the board of the directors of BSB received from time to time. The project appraisal is carried out by a professional team comprising an Engineer, and Economist and a financial analyst under the guidance of the senior officials of the BSB. The appraisals of the loan proposal covers technical, market, and financial economic and managerial aspects. Different aspects of project appraisal:

There can be no fixed or standardized approach to project appraisal. Numerous and diverse elements enter into the process of appraisal. It is difficult to have a cut and dried formula with the help of which a proposal for financial assistance can be adjusted straightway as acceptable or unacceptable. While broadly the same set of factors is taken into consideration in the scrutiny of individual applications, the weight age given to the factors varies from project to project. In practice, project appraisal covers five different aspects of a project, viz.
Economic, and
Management and Organization Technical Appraisal:

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 BSB has to ensure that the project is sound designed and appropriately engineered. More concretely, technical appraisal is concerns with questions of physical scale, layout and location of facilities; the technology to used, including types of equipment or processes, the appropriateness to local conditions of technical standard adopted; the approach to be followed for the provision of services; the realism of the implementation schedule; and the likelihood of the achieving the expected levels of output.
A critical part o technical appraisal is a review of the cost estimates and the engineering and other data, which they are based to determine whether they are accurate within an acceptable margin. The technical appraisal is also concerned with estimating the costs of operating project facilities and services and with the availability of necessary raw materials and other outputs. The potential impact of the project on the human and physical environment is also examined to make sure that any adverse effects can be controlled or minimized.
The ultimate aim of project appraisal is to determine the profitability of the project both from commercial and social points of view. This cannot be undertaken unless a thorough technical study and cost analysis is made and related technical problem solved. Thus the technical study and cost analysis provide the basis both for the initial estimates of the profitability of an investment during the initial stage and also for the final decision to implement the project. The technical appraisal, therefore, constitute the foundation of the entire structure of project appraisal.
The basic aspects of technical appraisal are:
The basic aspects to be analyzed in the course of technical appraisal are-
(A) Preliminary investigation
Products/ Service;
Raw materials;
Skills and technology required for manufacture/ service; and
Testing and analytical report.
(B). Selection of production process
Choice of alternative and selection criteria;
Wastage in manufacturing process;
By-products and their recovery;
Disposal of wastes and effluents; and
Environment and pollution control.
I. Machinery and equipment for production/service,
II.    Productive capacity and efficiency,
III.    Site -selection
(a) Technical factors;
(b) Cost factors of production;
(c) Marketing factors;
(d) Administrative and housing factors; and
(e) Transportation factors,
IV.   Layout plan,
(a) Site;
(b) Building;
(c) Plant and Machinery; and
(d) Supplementary Installations,
V.    Analysis and evaluation of utilities and supplies,
(a) Raw materials; (b) Stores and spares;
(c) Technical Know-how;
(d) Transfer of technology;
(e) Power, Fuel, Water, Steam etc;
(f) Labor; and
(g) Transporting,
VI.   Work Schedule.
VII. Estimation and evaluation of cost.
The relative importance of these aspects will, however, vary from project to project. Market Appraisal:

Detailed market appraisal report is prepared by the project economists to determine the size of the market, and ascertain the supply gap on the hand, and to analyze the marketability of products and services on the other. An industrial project is expected to bring in some goods and services for the community. But the community may not need them infinitely. Their demand may be finite but at the given price. The objective of market study is to see how much of the goods or services the community is supposed to acquire and at what price. In other words, the market analysis is concerned with the study of demands for a project’s output.
The demand for products and services changes over time as a function of price, income and other variables. It is thus necessary to estimate how much the project can sell in the short and long run taking these variables into consideration. Generally, the actual consumption or the effective demand for an output in physical quantities is determined taking into consideration: production, import, exports, and changes in stock position. In absence of adequate information, Apparent Consumption Method is used as an approximation to true consumption.
The future demand for gods and services of an industrial project is determined on the basis of trend extrapolation. In a large number of cases, data relating to past levels of consumption, income and prices are not available. In such cases, the trend method is used for projecting future demand. This is done by way of establishing a median line between the quantities consumed over a number of years and estimating the future demand in accordance with the trend of this line.
Intermediate goods are to facilitate production of final consumer goods. Therefore, the demand for intermediate goods in linked with the activities in the using sector. For example, the demand for Yarn will largely depend on the prospect of development in the weaving sector.
The demand for capital goods is estimated based on the rate and volume of investment in the using industry, durability of capital goods, technological innovation etc. In the, demand projection of import substituting goods, the level of imports is taken as the indicator. Financial Appraisal:

The next step is to prepare a detailed report on the financial viability of the project. 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:

  1. Financial requirement to bring the project into existence and the probable sources of finance;
  2. 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: Economic Appraisal:

Economic analysis eliminates the divergence between social and private by valuing all gods and services in terms of the real costs and benefits, which their production imposes on the economy. The economic analysis of a project begins with the appropriate valuation of all inputs and outputs. The local currency is used as enumerative and the foreign exchange is converted into local currency at the official exchange rates.
Treatment of inflation is always a peculiar problem in the field of project appraisal. This problem is handled by way of considering a contingency margin depending on the current rate of inflation. As regards, the fluctuation of exchange rates, BSB has introduced a self-finance insurance scheme known as the “The Exchange Rate Fluctuation Absorption Scheme (EFAS).”

Under the scheme, the borrowers’ of foreign currency loan are being protected from the adverse fluctuation of exchange rates on payment of the required exchange premium by way of converting foreign currency loans disbursed at rates prevailing on the date of disbursements. Both Internal Rate of Return (IRR) and Economic Rate of Return (ERR) is calculated regarding the project under this aspect.

Economic appraisal report is prepared by the project economist to determine the economic justification for setting up of the project. The project is looked from the national or social point of angel the economic cash flow is constructed on the basis of “true or real, process” commonly known as accounting or shadow prices. Shadow prices, when considered in project evaluation; reveal more accurately the social cost and benefits to a country then if it are based on market prices, which are frequently distorted. When the gap between shadow prices and actual prices become too large, prices appear to be far from reality and thus the viability of the project is affected.

Economic appraisal should cover both quantifiable and non-quantifiable benefits where applicable). Such benefits are described ad-seriatim.
Employment Generation and Cost per employment:
The number of full-time and part-time jobs measured in man-years expected to be created both during construction and during operation of the project should be estimated separately. If data are available, these estimates should be related to Regional, sectoral and national levels of unemployment and under employment and under employment. Where possible, the degree of labor intensiveness (i.e. the number of workers employed per unit of investment) of the project should also be estimated.
Contribution to Gross Domestic Product (GDP):
Contribution to GDP of a project is estimated from sales value and inter-firm transactions. Data regarding sales value is taken from the calculation of sales estimate of the financial appraisal. Sales value of fourth year is taken. Similarly data estimate of the financial appraisal. Sales value of fourth year is taken. Similarly, data relating to inter-firm transaction of fourth year is collected from the calculation sheet of cost of goods sold and General Administration and selling expenses of the financial appraisal. Detail calculation of contribution to GDP of a project may be worked out as per the following format:
A:  Sales (4th year).
B:  Less: Inter-firm Transaction (4th year),

  • Raw and packing materials,
  • Stores and spares,
  • Water,
  • Power and Fuel,
  • Repair and maintenance,
  • Rent, Tax and insurance,
  • Postage, telephone, fax etc.
  • Stationery and printing,
  • Traveling and conveyance,
  • Advertisement,
  • Miscellaneous .exp.
  • Contribution to GDP (A-B) Management Appraisal:

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.
Appraisal of management and organization of a project cannot be done adequately without undertaking credit investigation. The credit worthiness of the sponsors is assessed, among others, by way of obtaining credit reports from the various banks and financial institutions.

After preparation of he draft project appraisal report and its approval by the appropriate authority of the financial institution, it is placed before the BSB’s Loan Committee for consideration. After clearance by the Loan Committee, a Memorandum on the project for sanctioning loan is prepared and placed for approval by the competent authority. After loan is sanctioned, a pie-sanction letter is issued to the sponsor for acceptance of the terms and conditions of the loan. The sponsors and the required project deposit issue formal sanction letter on receipt of the acceptance of pie-sanction terms and conditions.

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 taka 5.00 million.

3.3.2. Project implementation department:

When the loan operation department it is forwarded to project sanctions the loan implementation department (PID) performs the following activities:
Undertaking necessary initiative after granting loan in favor of the project.
Taking necessary action to make the factory lay-out.
Making necessary adjustment in case of change of the project place, change of board of directions and change/extension product mix etc.
Making necessary attempt to give the loan a stage by stage after the loan granting.
To ensure that necessary capital has been 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 indicatives 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 the loan terms and condition and providing necessary assistance in this matter.
Inspection and monitoring experimental production extension of loan period.
Making the final construction report (FCR) and transferring it to central recovery department (CRD) and concerned department/authorities.
Determination of the 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 initiatives to solve any kind of problem arising out therefore, and providing necessary advice to the entrepreneur.
Receiving insurance letter against the predetermined risk of the implementation project assets and ensuring its deposit to bank.
Inspection of the utility of the principles regarding the project implementation and presiding up to date principles

bsb’s achivement as per objectives:


Million Taka
No. of projects financed (term loan) : 1793
Amount of total loan provided : 15347
Amount recovered : 19932
No. of projects liquidated : 1335
Existing term loan portfolio:    
                      No. of projects : 199
Total outstanding : 8902
Fund borrowed : 10485
Repayment against borrowings : 10716
Payment to Govt. exchequer* : 1190
Contribution of BSB – Financed
Projects to the National Economy
Contribution to GDP : 22320
Employment generation (Number) : 140361
Foreign exchange earnings : 52874
Foreign exchange savings
(through import substitution)
: 90605
* Payment made as income tax and dividend.


3.3.3. Documentation and machinery procurement department:

After sanctioning loan by Loan Operation Department, it issues a letter to documentation department, parities and after concerned departments. The documentation department issues a letter to the parties to produce necessary documents. Those documents are:
Memorandum of Association Articles of Association
The loan upon which the project will be established, document of this land must be produced.
Receipts of rent
Documentation fee
Mouja Map
The documents that reveal that the land revel that the land were not sold within preceding two years
Then a form is filled up. These documents are sent to lawyer. It every thing is OK it is transferred to project implementation department.
In the documentation process the borrower are required to submit a cop of memorandum of association and articles of associate. It is returned after the confirmation that in has been submitted according to the rules the borrower company must submit it after the authorization by direction of registration of Joint Stock Company and firm. The following activities are performed during the time of documentation process:

  • The borrower company must submit necessary documents
  • Verification of documents by documentation and machinery department and law department.
  • Preparation of all documents of the borrower company director.


3.3.4. Central recovery department:

Project implementation department make a repayment schedule and given it to the borrower. Normally the interval is 6 months. This department inspects the project after every 6 months to see whether there is any leakage. If the borrower fails to repay the loan as the application of the borrower it is rescheduled. Sometimes a portion of interest is exempted. If the borrower fails to repay the loan than it is transferred to law department to take legal action on the application of the borrower. Sometime the project is transferred to project Rehabilitation Department to restore the project.
Principles of classification of loan and provision:
For the purpose of classification all loans and advances are divided into 4. These are:
Continuous loan,
Demand loan
Term loan
Short-term agricultural and micro-credit

  1. Continuous loan: The loan, which can be granted and recovered without any repayment schedule but have, an expiry date and maximum limit are called continuous loan.
  2. Demand loan: The loan which mist be repaid as the bank calls it is demand loan.
  3. Term loan: The loan that must be repaid as the banks cal it is term loan.
  4. Short-term agricultural and micro-credit: The loan, which is paid in less term and condition, is known as short-term agricultural and micro-credit loan.

Objective criteria:
If any continuers loan is not repaid within the expiry date that it is called irregular loan. The classification of loan re as follows:
6 months > continuous loan > 3 months = sub topped
12 months > continuous loan > 6 months = doubtful
Continuous loan > 12 months = bad
If any installment of any term loan is not repaid within specific date it is treated installment default.
Maintenance of provision:

  1. On the basis of the equity of the loan the following precession are maintained:
  1. Substandard             20%
  2. Doubtful                  50%
  3. Bad debt                  100%
  4. On all debt other than bad debt          5%
  5. On bad debt    100%
  1. On short term agricultural and micro-credit the following provision to be kept:

Loan Recovered:
Loan recovery is a crucial index to measure the success of a lending organization. Like previous years, this year too, the bank strengthened its recovery drive for realizing loans and dues from its borrowers and significant success was achieved.
Total recovery target of loans during FY-2004-05 was Tk. 1600 million against which actual cash recovery was Tk. 1316 million constituting 82% of the target. Besides, the bank succeeded in reducing its total classified loan by 9% during the year under review.
Graph -2.
Sector-wise Loan Outstanding Position
(Major sectors)
Recovery of loans of BSB
Graph: -3
Graph: Loan Recovery rate of BSB
Recovery of Loans as per objectives:

Category of Loans Amount Recovered (million Tk.)
2003-2004 2004-2005
A. Long Term Loans:    
     Long Term Projects Loans 989 915
     Bridge Loan 1 1
     Staff Loan 34 35
     Administered Loan 137 105
Sub-Total 1161 1056
B. Short Term Loans    
     Working Capital Loans 23 27
against FDR)
132 41
Sub-Total 155 68
Grand Total (A+B) 1316 1124


3.3.5. Loan accounting department:

Loan Accounting Department is the department, which centrally maintains all loan amounts of the bank. There are 4 sections, which performs the activities of the department.
Not due section
Amount due section/overdue section
Replacement section
General and policy section
Not due is the installment not yet due for payment in schedule time fixed by the project department/Branch officer.
The payment of installment and interest in not paid/cleared in time is overdue.
The functions of this section are:
Accurately list of balance preparation
Advice sending to borrower
Quarter/half year by interest charge
When the overdue is rephrased or waived then the replacement section will do the needful activities.
General and policy section do the following:
To prepare the monthly Trial balance
Monthly recovery statement
Monthly disbursement schedule
To make entry all the transaction as per daily statement received from the branch officer.
All list of balances of not due send to the Head Office and branch Office.
To prepare distribution of work among the officers and staff as specific guidelines of the authorities

3.3.6. Law department:

In the Bangladesh Shilpa Bank fails to recover its loan in the normal way, it must under taken alternative action and file case in the court. The causes which Bangladesh Shilpa Bank files cases 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 198
(Petition Case)
Case if machinery of project
Is transferred from the project            Section 37
Legal Actions taken for Recovery of Loans as per objectives:
The Money Loan Court Act 2003 has been enacted in the year 2003 with effect from May 01, 2003 in order to streamline the process of realization of loans and advances by the banks and financial institutions. Provisions have been made in this Act for realization of the banks dues by selling of properties held as security without filing suits before the court.

Position of projects Under Litigation 2003-2004 2004-2005
Number of Projects Number of Projects
Legal Notice Issued 28 126
Filling of Suit 15 205
Cases Settled Outside the Court 31 06
Auction 10 02


3.3.7. Human resource management department:

Bangladesh Shilpa Bank has total 794 personnel. It divided into two categories. These are:

A. Job-wise distribution

B. Profession-wise distribution

Training & Development of Human Resources as per objectives:
Bank has a Training Department for upgrading the professional competence and skills of its Officers and Staff. Below are the main functions of Training Department: – To prepare & implement Annual Training Program.
To impart training of the Officers/Staff regarding business & operations of the Bank.
To adopt measures to hold in-house training and make arrangements to send Bank’s Officers to overseas training programmes.
To establish liaison with domestic & overseas organizations relating to training
To send Officers to local training institutions for improving professional skills; and
To organize Seminar/Workshop/Symposium on key economic/banking issues

3.3.8. Project rehabilitation department:

Sick industries refer to those units, which perform poorly against expected results, incurs cash losses for consecutive years, gradually erode the entire net worth and obviously fail to service the debt obligations. the major criteria to identify a sick unit may generally be listed as follows:

  A unit incurring financial loss/not being capable to produce at / above break-even point
A unit incurring continuous cash losses
A unit having negative equity
A unit having excess of current liabilities over current assets
A unit making defaults in payment of principal sums with interest.
A unit having low capacity utilization Causes of Industrial Sickness and Suggested Policy Measures for Prevention and Rehabilitation

The deliberations elaborated on the causes of industrial sickness in Section III & IV indicate that a number of factors, both internal and external are responsible for turning an industrial unit as sick. The major causes pushing the industrial units towards sickness in Bangladesh have been summed up in the following table:

SL. Broad Area Detail Causes
01. Management
  1. Lack of proper education, training, experience and business outlook of the Sponsors/Entrepreneurs
  2. Poor Entrepreneurial skills
  3. Poor Management
  4. Poor Equity base
  5. Lack of Integrity/Division of Funds
  6. Faulty Project Planning and Appraisal
02. Production/ Technical
  1. Wrong choice of technology
  2. Improper utilization of production capacity
  3. Imbalanced and Defective Machinery
  4. Poor Raw-material Planning
  5. Inadequate Quality Control
  6. Poor labor relations
  7. Location problem
03. Marketing
  1. Lack of Market Planning
  2. Inadequate Market Survey
  3. Poor Collections
  4. Defective Pricing
04. Finance
  1. Poor Management of Financial Resources
  2. Delay in Mobilization of Equity Funds
  3. Faulty Costing
  4. Adverse debt-equity combination
  5. Lack of Proper Accounting system
05. Personnel
  1. Lack of Competence
  2. Lack of Loyalty
  3. Lack of Professionalism


SL. Broad Area Detail Causes
01. Govt. Policy & Implementation
  1. Frequent Policy changes
  2. Lack of Proper Implementation of Industrial Policies
  3. Liberal Import Policies
  4. Poor Infrastructure / Frequent Power Disruption
  5. Smuggling
  6. Fiscal Anomalies
  7. Exchange Rate Fluctuation
  8. Lack of Co-ordination between various ministries and Govt. Departments, etc.
  9. Over-Saturation of particular industry type / Sector due to wrong policy
  10. Non-availability of Raw-material, etc.
02. Bank & Financial Institutions
  1. Non-availability/Inadequacy of Working Capital
  2. Lack of required financial assistance for BMRE
  3. High rate of Interest on bank loan
  4. Lack of timely decision & support by the banks and financial institutions.
03. Environment
  1. Political Unrest
  2. Labor Unrest
  3. Market Recession
  4. Delay in Project Implementation Functioning Of Sick Industries Rehabilitation And Revival Cell Under Ip-91
In 1991, the announced industrial policy, interalia, included the provision that problems of sick industries will be identified and appropriate measures will be taken for solution of these problems. In line with that, a ‘Sick Industries rehabilitation and Revival Cell’ was formed in the middle of 1991 at the Ministry of Industries (MOI). The cell headed by the Secretary, MOI, and GOB with representatives of all prominent chambers and financial institutions had the following terms of reference –
To define a sick industry
To identify sick industries and the reasons thereof on the basis of a survey
To submit report with specific recommendations for arriving at the appropriate solutions in each case Major causes that affect the sick industries in Bangladesh:


A survey of BSB reveals that-

  30% of the projects suffer due to administrative and managerial problem.

  18% of the projects suffer due to technological problems.
28% of the projects suffer due to shortage of capital.
11% of the projects suffer due to marketing inefficiencies.
13% of the projects suffer due to other problems.
So, we see that only one reason does not affect the sick industries. All the above-mentioned reasons are responsible for sickness of industries in Bangladesh. Impact of sick industry in Bangladesh on BSB:
Increase of non-performing assets in organizational level as well as national level
Decrease contribution in GDP and GNP
Decrease in productivity at national level
Average effect in banks profitability
Increases the classified loan
Increase the lending rate of interest, which adversely affect the new and regular borrowers
Affects adversely in the economic growth rate of the country
Create adverse psychological impact on the prospective entrepreneurs. Rehabilitation policy of Bangladesh Shilpa bank:

All sick industry is not rehabilitated because the all-sick industry has not al l possibilities to rehabilitate. It’s mainly depends on the nature of the sickness. The sick industry that is probable to rehabilitate by providing and assisting some predefined criterion. The predefined criterion are based particularly on:

  1. Management perspective
  2. Technical perspective and
  3. Financial perspective
  4. Marketing perspective

In the case of rehabilitating sick industries the bank takes different policies in different situations, which are given as follows: Management Perspective:

Management of the project should measure the aggregate demand of the product or the project and also maintain the market share. Consumption trends and production are to measure for rehabilitating a sick industry. If the bank thought that a little change in the managing committee would reestablish the project then they make a change in the managing committee. Technological Perspective:

Whether the raw material and technology is available or not that must be measured in the form of price quality. If they thought that some technological change would reestablish the project they make some technological change. Financial Perspective:

In the financial measurement the project should compute the cost of capital and maintain budgeting. The present value of net cash inflow should be higher than the present value of cash outflow. In such case, the bank provides some financial treatment that the amount of interest is to be waived or re-phased or providing consulting service, i.e.

  1. Success about the proper way
  2. Inspiration by providing motivation

After considering an industry as sick, then the industry is taken into rehabilitation by aiding above additional support of those sick industry that can recovers the additional investment then it seems to be as rehabilitated industry otherwise not. In some extraordinary case they bound to take some terrible decision because of some political pressure. Marketing Perspective:

The employees of project rehabilitation department are employed in this case. Value delivery sequence of Project Rehabilitation Department is shown below-

Choose the value

  1. Segmentation
  2. Targeting
  3. Positioning
Provide the value

  1. Product/Service develops
  2. Pricing
  3. Distributing
Communicate the value

  1. Sales force
  2. Promotion



Choose the value

1. Segmentation the reasons of sickness
ü  Uncontrollable
ü  Controllable
The causes behind sick industries are discussed below-
Shortage of working capital
Lack of marketing knowledge
Technological obsolesces
Administrative and managerial inefficiencies
Present economic situation of home and abroad
Political condition
Other reasons behind sickness
2. Targeting to rehabilitate
Management perspective
Technical perspective and
Financial perspective
3. Positioning in the market
BSB rehabilitates the sick industries of their financed projects.

Provide the value

Their products are-
Supporting the management
Providing the working capital
Technological enrichment
Their programs are-
Debt relief
Injection of additional funds
Direct management Programs taken to rehabilitate the sick industries.

BSB has taken the following programs during the year 2003-2005-
Deferred payment of IDCP (Interest during construction period) after some moratorium period in installments
Regular loan repaying projects are honored with special certificates and BSB Crests. They are encouraged to take more loans/working capital.
Problem projects are given waiver of interest, rephasement/rescheduling, block account facilities for easy repayment of bank’s loan.
Injection of additional funds
Balancing & modernizing of machinery
Product diversification
Strengthening or changing the project management
Restructuring of loan accounts with transferring part of loans/interest in interest free block account.   Facilities provided under rehabilitation program:

Provision of facilities can be explained with an example of Solaiman Textile Mills, Rupgonj, Narayangonj which was a sick industry financed by BSB. BSB had given loan at the first time TK. 513 lac during the year 2005.
Second time BSB gave them under rehabilitation program.

Loan sanctioned TK. in lac
BSB had given loan at the first time 513.00
Under rehabilitation program:  
Long term loan 163.00
Working capital 25.56

The bank also make a program of taking over management of the sick projects directly where the above measures were not considered sufficient due to inefficient management/mismanagement. So they created a department called “ Sick Project Management Department” for ensuring efficient management of such sick projects. The
responsibility of this department is to make such projects capable of debts servicing through profitable operation. So the bank continued sanctioning of term loans during FY 2004-2005. This year local currency loan of TK. 989 million, which was sanctioned to 27 projects. Of the total sanctioned amount TK 687 million was for 21 new projects and an additional loan of TK. 302 million was for on-going projects including 3 for BMRE purposes.
Sanction of term loan
Million TK.
2003-2004                               2004-2005

Number of projects Number of projects Local currency Foreign currency Total Number of projects Local currency Foreign currency Total
New projects 21 687 687 34 826 826
Existing projects (BMRE) 3 166 166 1 47 47
Additional loans 3 136 136 3 136 136
Total 27 989 989 38 1009 1009

Under rehabilitation program BSB has taken so many measures to rehabilitate the sick industries. Summarized measures that are taken by BSB to rehabilitate the sick industries are given below-
Loan outstanding                          Measures taken (Million TK.)
(Million TK.)

Total outstanding Projects
Rephasement Waiver of interest Block A/C Additional Loans Working Capital Equity participation
525 950 12 37 (10) 35 (10) 28 (7) 21 (9) 2 (1) 1 (2)
411 785 21 13 (6) 13 (6) 54 (6) 161 (16) 30 (5) 4(2)
46 350 5 73 (3) 73 (3) 18 (3) 6 (4) 52 (5) 18 (2)
444 524 3 1 (1) 6 (2)
23 40 2 14 (2)
51 94 2 1 (1) 7 (1) 2 (1)
66 85 2 4 (1) 5 (2)
44 53
33 45
22 28 2 33 (2)
165 211 1 1 (1) 1 (1)
70 101 1 6 (1)
3 30 1 3 (1) 8 (1)
3 3
1906 3299 53 118 (21) 121 (19) 104 (17) 263 (39) 93 (15) 23 (6)

Source: Project rehabilitation department of BSB
Note:    Parentheses indicate number of projects  Role of management of rehabilitation department of BSB:

Bangladesh Shilpa Bank was established to stimulate industrialization in the country. So, it financed in various types of industries. The industries on which it financed, all are not a successful one. Some of them have failed to gain success and identified as a sick industry. Rehabilitation Department is mainly deals with this sick industry. They find out the causes of sickness of a particular project. Sometimes they reschedule loan according to the capabilities of the project. Moreover more information and advises may be given so that the entrepreneur may run the business more effectively, sufficient return may gain and contribute to the economy. If the project is to rehabilitate, send to the law department and finally sued against the project. The main activities of rehabilitation department are as follows-
The department primarily selects a sick project. PID investigates the project and find out the causes of sickness and formed a committee to investigate the project. Then it is taken to be considered for rehabilitation. After considering it as a rehabiliatable industry, it is taken it the implementation after the approval of rehabilitation consultant committee.
Take necessary action to rehabilitate sick project after appropriate investigation.
Take steps about rehabilitation document examination, recommendation preparation, implementation and activation of plan.
Confirmation about project profitability
Take necessary steps about production, marketing of product and loan repayment.
Duties give up to the third party or previous management after successful managing of the project.
Managing and directing recommendation preparation about take over project.
Analyze and compare the production, marketing and recovery of the rehabilitated project and take appropriate action according.
When there is scope to rehabilitate a project, document transfer to law department to take further steps. List of a few successful rehabilitated industries:

After taking some initiatives and providing assistance in terms of management, technical, marketing and financial the following sick projects financed by BSB has become successful during the year 2003-2005.

Chemicals and Pharmaceuticals

01. S.S.R Chemical Industries Ltd. Dhaka
02. Islam Polymers & Plasticizer Ltd. Tangail
03. Raja Plastic Industries Ltd.  Gazipur
04. KDH Laboratories Ltd. Dhaka
05. Asiatic Business Ltd. Sylhet
06. Pharmadesh Laboratory Ltd. Dhaka

Cotton, Woolen & Synthetic Textiles

01. Azim Mannan Garments Ltd.  Chittagong
02. Desh Gannents Ltd. Chittagong
03.  Jems Sweaters (Pvt) Ltd. Dhaka
04.  Auto Spinning Mills Ltd. Gazipur
05. Techno Textile Mills Ltd. Gazipur

Food & Allied Products

01. Meenhar Sea Foods Ltd. Chittagong
02. Mimi Chocolate (Bd) Ltd. Dhaka
03. Modern Industries (Bd) Ltd. Munshigonj
04. Mustafa Cold Storage Ltd. Rangpur
05. Bangladesh Beverage Industries Ltd. Dhaka
06. Bengal Fish & Frogleg (Export) Ltd. Chittagong

Paper, Paper product & Printing

01. Eagle Box & Carton Mfg. Ltd. Dhaka
02. Holiday Printing Ltd. Dhaka
03. Toka Ink Ltd. Dhaka
04. Bangladesh Paper Product Ltd. Chittagong
05. Orient color Printers Ltd. Chittagong
06. Transfer Paper Ltd. Bogra

Tannery & its products

01. Apex Footwar Ltd. Dhaka
02. Lexco Ltd. Dhaka
03. Leather Board Ltd. Dhaka
04. Comfort Footwar Ltd. Dhaka
05. Bangladesh Chemical Ltd. Narayangonj

Non-metallic Mineral Products

01. Savar Refractories Ltd. Dhaka
02. Tajma Ceramic Industries Ltd. Bogra
03. Standard Ceramic Industries Ltd. Gazipur

Metal products

01. Rangpur Foundry Ltd. Rangpur
02. Scala Industries Ltd. Gazipur
03. Oriental Foundry & Agro Engineering Ltd. Dhaka
04. Bogra Metal Industries (Pvt.) Ltd. Bogra

Electrical Machinery & Goods

01. Bangladesh Lamps Ltd. Dhaka
02. National Fans Ltd. Gazipur
03. Eastern Tubes Ltd. Dhaka
04. National Accessories Ltd. Chittagong

Service Industries & Miscellaneous

01. Hotel Simon Ltd. Cox’s Bazar
02. Hotel Elysium Ltd. Dhaka
03. G.Q. Ball Pet Ltd. Magura
04. Rajanigandha Tankers Ltd. Dhaka


Source: Project Rehabilitation Department of BSB

It is observed that a large number of projects are sick and they are loan defaulter. In this situation some suggestions has been given that will help BSB to overcome some of their problems.
Both primary & secondary database of the BSB should be improved & strengthen



Subjects Page No.
4.1 Findings 71
4.2 Recommendations 72
 4.3 Conclusion 73

4.1. Major findings:

During my internship period I have worked with eight department of BSB. But report has been prepared on  Operational procedures . The main task of different departments is to appraise projects from different aspects, like management & organizational, economic, technical, financial and marketing. Each of the aspects has been described in this report. Major findings are as follows-

  There is no system of   accountability of the appraisal team if the approved project fails due to their improper appraisal.

  Lack of financial commitment on the part of the borrower, the result being the failure of mobilization of equity by them is future means they divert their equity in other purpose after getting the loan amount.

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

  Some times improper feasibility reports are submitted by sponsors, which do not contain adequate and reliable information.

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

  Inadequate attention is given to analyze risk and uncertainties associated with the projects means only sensitivity analysis is done to analyze risk.

  Inadequate attentions to social cost and benefits analysis (SCBA)

  Lack of business experience of the entrepreneur

  Lack of effective monitoring and inspection systems

4.2. Recommendations:

Considering the above problems I recommend some suggestions for overcoming these problems. If BSB follows the below recommendations & suggestions and reforms their activities lending loan to a project, I hope and expect that it will provide positive result.

  A co-ordinate cell should be established for sharing information among various institutions.

  The fixed time of three months for processing of project application should be strictly followed. Sometimes it takes more that then month to appraise a project.

  Effective monitoring systems should be followed to facilitate smooth implementation process.

  Responsibility should be fixed to all according to their involvement in appraisal process.

  More emphasis on the effect of a project to measure socio-economic cost and benefit analysis should be taken into consideration.

  Steps should be taken for developing entrepreneurial skill and ability of the sponsors.

  A market research institution should be established for proper market survey and the assumptions should be more realistic.

  The project appraisal manual should be updated.

  Risk adjusted discount rate method; certainty equivalent method, Program Evaluation and Review Technique (PERT) and probability analysis etc. should be introduced to assess risk and uncertainties involved in the projects.

  Ensuring proper feasibility study. The responsibility of feasibility report should be imposed, to some extent on the entrepreneurs.

  Both primary and secondary database of the country should be strengthened and improved.

  Steps should be taken to   strengthen the existing feed back system, so that the problem of getting information about technology can overcome.

  Physical field investigation should be maintained to check any irregularity.

  Adequate attention should be given to the human side of the project.

4.3. Conclusion:

Bangladesh is an over populated country of South Asia. It is a full of natural resources. But the economic situation is very poor and unemployment rate of population is another burden for developing the country. Creating new employment opportunity in our country by investing large capital must be needed. Bangladesh Shilpa Bank is playing a vital role by investing huge amount in industrialization in our country. In the process of industrialization by lending and implementing a new project, selection of right and viable project is crucial matter. If   the selection is wrong then whole process may be foil. So, to select right project proper appraisal should be maintain. If the project appraisal is done on the basis of wrong information the lending may be ineffective. So the project appraisal is most significant to select right project.

On the other hand, project implementation is conducted on the basis of appraisal report and loan sanctioning letter. The implementation processes is going on until the project started commercial production. So vigil sight should be kept in both the operational procedures and implementation processes to realizes investment effective and constructive. Because country’s industrial development is immensely depends on effective capital investment and realization of this investment.

However, for establishing a new industry and create new employment opportunity in our country the partaking of Bangladesh Shilpa Bank is remarkable. Side by side, they also help to continuing existing industry by providing financial supporting services.



1. Bangladesh Shilpa Bank, Annual Report, 2004-2005
2. Different Project Appraisal reports of BSB.
3. Loan sanctioning letter of BSB.
4. Bangladesh Shilpa Bank, Ordinance, 1972.
5. Manual of different departments of BSB.
6. BSB web side ” www.shilpabank.gov.bd
7. Different Reading Materials of BSB