Productivity and Performence Analysis of Bangladesh Shilpa Bank

Executive Summary

Bangladesh Shilpa Bank (BSB) is the prime concern of Development Financing Institution (DFI) of country extends financial assistance both in local and foreign currencies for setting up new industries to boost up the industrial development of the country in conformity with industrial policy and financial reforms program of government towards market economy.
Bangladesh Shilpa Bank has very big responsibility towards the industrial development. As a government organization BSB has big size and can dominate the industrial loan sector highly. To fulfill such goals operating activities of BSB should be in track and they must be liable to people for their performance. In this study I try to numerically express the performance of BSB. After giving an overview of BSB I go to the analytical part straight away. Finally I make some key findings from my study.
In productivity section primarily I show the responsiveness between expense and revenue; basic input and output. The basic proposition here is that the productivity of a bank is inversely related to cost responsiveness, i.e., higher cost responsiveness leads to lower productivity and vice versa. If the cost is growing more in relative to income then the Bank is more cost responsive and shows lower productivity.
In the performance segment I show the standard ratio to assess the performance. I segmented the ratios in four key categories; profitability, operating, risk and liquidity. Besides these ratios I show the Dupont analysis. Finally I show the correlation and regression of some key variables. The conclusion of this part is in terms of performance BSB do a poor job. But if we take the issue of social responsibility then they do a moderate job. BSB helps to build up some industry in our country. More over BSB create an infrastructure I which other institutions are operating.
Finally I peek up some key findings form the study such as political influence, poor corporate governance, nepotism and bureaucratic complication are the major hindrance for good performance. Besides good findings are: large infrastructure, manpower, solid credibility powered by government and linkage with our development partners to disburse their money in our economy. These facilities help BSB to collect money at very cheap rate. If the management remove their problem moderately then BSB turns into an overall profitable organization immediately.


A bank is an establishment which trades in money an establishment for deposit, custody and issue of money and also for granting loans, discounting bills and facilitating transmission of remittances from one place to another. A bank has to perform various functions such as receiving deposits, creating loan deposits, bill discounting, creating medium of exchange, money transfer and granting of loans and credits. Among the various functions the last one is of paramount importance especially in the specialized bank of a country like Bangladesh. As a specialized bank Bangladesh Shilpa Bank (BSB) is established to promote industry i.e. Shilpa. The strength of a bank lies in its quality of advances and the failure of a bank lies in its quality of advances and the failure of a bank arises because of the erosion in the quality.  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.
Objectives of the Study
The main objective of the study is to evaluate the productivity and performance of Bangladesh Shilpa Bank. More over the trend of the key indicators are evaluated in the study. This study use both accounting and statistical approach to analyze the productivity and sustainability.
Methodology of the Study
Correct and smooth completion of research work requires adherence to some rules and methodologies. Rules were followed to ease the data collection procedure. Accuracy of study depends on the information and data analysis.
Source of Data: The study concerns itself with Bangladesh Shilpa Bank required both primary and secondary data have been used for the purpose of the study. Main emphasis was given on secondary data collected through perusal of Annual reports of Bangladesh Shilpa Bank, resume of the activities of financial institutions in Bangladesh, statistical yearbooks, economic survey and trend etc.
Data processing and report writing: In order to­­ make the study more informative analytical and useful, collected data and information have been processed manually. The statistical techniques have been used in the study.
Limitation of the study:
Productivity and performance analysis is a pretty much critical issue. First challenge of this kind of study is to acquire raw data. In Bangladesh data is not an easy thing to achieve. Annual report of the organization is the only source of data. Moreover Bangladesh Shilpa Bank was not follow BAS or IAS rules for keeping account till year 2000. Reports publish before that time is not containing all the information. Besides the unavailability of the information the quality of information is questionable.
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. This not updated data is another problem.
Performance analysis does not finish with collecting information. To find an explainable conclusion it needs lot of calculation and analysis. In this part I try to relate as much as possible with my limited knowledge. It was a limitation also.

Overview 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. It is the prime development financing institution (DFI) in the country for extending financial assistance for industrialization. Initially, the authorized capital of the bank was Tk 1,000 million in 1972 and the paid up capital was then Tk 750 million, which was subscribed by the government of the People’s Republic of Bangladesh. Later, the authorized and paid up capital was enhanced. In 2004, the authorized capital was Tk 2,000 million divided into 2 million shares of Tk 1,000 each. Tk 2,000 million (100%) was subscribed and paid up by the government.
Objectives & Mission:
The Bank provides long and medium-term loans both in local and foreign currencies, guarantees repayment of loans raised by investors from other sources, and provides equity support by way of outright purchase of shares and by underwriting the public issue of shares. It also extends short-term bridge financing and working capital loans on a limited scale. 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. The basic reason is for doing all these activities to accelerate industrial growth and proper decentralization of industrial sector to create job opportunities through out the country.

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 officer. The bank has 16 branches. The total number of employees in the bank is 731. The head office of the bank is at Dhaka and it has 3 zonal offices, one each at Chittagong, Rajshahi and Khulna. It has six divisions and 23 departments.
Organizational hierarchy of Bangladesh Shilpa Bank is given in the following page.

Functions of BSB:
Bangladesh Shilpa Bank being the prime development financing institutional continued its effort to make on effective contribution towards expansion of industrialization process of the country. It emphasized on long term lending to the viable new projects having comparative advantages, export prospects, forward and backward linkage and local technology as well as raw materials based projects. BSB extends long and medium term loan facilities in local and foreign currencies to industrial projects (both new and BMRE- Balancing, Modernization, Replacement and Expansion) in the private and public sectors Besides the Bank also performs the following activities.
Provide working capital loans to industrial project. Assist in the form of underwriting and bridge finance to public limited companies as equity support. Issues guarantees for repayment of loan on behalf of borrowers, Extends 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 Citation Stock Exchange (CSE) Ltd. for capital market development and Conduct project promotional activities with preparation of various sub-sect oral study reports.
Now a day BSB has been given top priority for realization of its loans towards augmenting and recycling of the invertible funds and maintaining satisfactory loan portfolio for increasing profitability. With this end in view the Bank has undertaken some realistic steps towards replacement. Rescheduling and liquidating of loan accounts of sick / closed / stuck-up projects with waiver facilities where deemed appropriate.

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.

Financial Activities in recent years:
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. Total deposit collection was Tk. 569 million on June 30, 2006.
Sanction and disbursement of Term Loans: The Bank continued sanctioning of term loans during FY 2005-06. This year local currency loan of Tk 1311 million was sanctioned to 52 projects. Of the total sanctioned amount, Tk 1183 million was for new projects and an additional loan of Tk 128 million for 5 on-going projects including 2 for BMRE purposes. This showed an increase of long term loan in terms of number of project and loan amount by 37 and 30 percent respectively. 
But disbursement of loan is not satisfactory. If disbursement process is lengthy then it hurts entrepreneurs badly. BSB increases its disbursement compare to previous year. Still it is poor in relative to total sanction amount. During FY 2005-06, the Bank disbursed term loans of Tk 485 million in local currency to 43 projects as against the disbursement of Tk 144 million in the previous year.
Loan portfolio: During FY 2005-06 loan liabilities of 20 projects were liquated and 23 new projects were reordered in the banks loan portfolio. In the same period of previous year, there were 166 projects having a total loan outstanding of TK. 7441.92 million. Of these 166 projects, 60 were export oriented, 72 import substitute and 34 services/ other industries.
In BSB loan portfolio Textile has dominant position. It is the major exporting sector of our country. By heavy financing BSB make very good contribution to this industry. As DFI, BSB always try to promote new industry. From the beginning of the textile industry BSB continuously help this industry to make its base strong.

Chart II: Sector-wise Loan Outstanding Position (Major Sectors)

Loan Recovered: Loan recovery is a crucial index to measure the success of a lending organization. Like previous years, this year too, the Bank has strengthened its recovery drive for realizing loans and dues from its borrowers and significant success was achieved. Total recovery target of loans during FY 2005-06 was Tk 1200 million against which actual cash recovery was Tk 1158.85 million constituting 97 per cent of the target.
Loan Written off: During FY 2005-06, the Bank has written off Tk. 830 million as loan liability under Bangladesh Bank’s guidelines. It is an important activity of BSB. Because they have huge loan in bad and doubt class. By writing off BSB reduces its liability and refurnish their balance sheet in accordance to practical.
Key financial indicators of Bangladesh Shilpa Bank (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



angladesh Shilpa Bank (BSB) is the prime concern of development financing (DFI) provides a various functions continued its efforts in fiscal year 2005-2006 to make an effective contribution towards expansion of industrialization process of the country. It emphasized on the long term lending to the viable new projects having comparative advantage, export prospects, forward and backward linkage &local technology as well as raw material based projects.
BSB operates its activities through 22 departments. Out of them, we inspected 8 departments and tried to find out their details operations. These 8 departments are as follows
1. Loan Operation department (LOD).
2. Document 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.

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

Preparation of appraisal report:
The bank authority makes the report. It is a very important step. Sanction of loan is depends on this report. So for making a good loan detail analysis is required. This report consists of three (3) types of analysis, is as follows:
(a) Technical analysis
(b) Financial analysis.
(c) Economic analysis/market analysis.

Technical analysis: The technical engineer does this report whether the proposed project is viable or not. It gives indication about the project technically sound or not. Here engineer justify several aspects are follows:
The project will be established which is suitable or not for the project whether the road, railway, riversides or airport etc that are precondition for establishing the project situates this place. He also justifies the types of machines, capacity, types, production capacity etc and gives permission for that company.
Financial analysis: A financial analyst of the responsible officer makes financial analysis. He will examine prospect of the company about the demand of the product, marketability of the product, profitability of the product, supply and production capacity of the product to meet the market demand through various a financial analysis such as current ratio, profitability ratio, asset management ratio etc.
Economic analysis/market analysis: This analysis is also made by an economist or market analyst that is feasibility report of the product of related company. This study comprises of whether the product will be launched that’s acceptability and other related economic matter of the product such as marketability of the product, profitability of the product, supply and production capacity of the product to meet the market demand.

2. Document and machinery Procurement   department:

To achieve effective role in future in case of procurement of machinery, equipment and services for the projects need to approve by BSB. Hence forth 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$ 300000.00 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$ 300000.00 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: –
1. Preparation of machinery list, tender documents & flotation of tender etc, by the borrowers.
2. Evaluation of tenders and recommendation for award of contract by the   borrowers.
3. Approval of procurement proposal by BSB & its transmittal to the borrowers.
4. 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.
q  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. This documents are-
a)       Memorandum of Association and Articles of association
b)       The land upon which the project will be established, document of this land must be produced.
      ▪      Receipts of Rent.
      ▪ Documentation fee.
      ▪ Mouja Map.
      ▪ The document that will be reveal that the land were not sold within     preceding two Years
Then a form is filled up. These documents are sent to lawyers. If everything is ok it is transferred to Project Implementation Department. In the documentation process the borrowers are required to submit a copy of Memorandum of Association and articles of association. 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. 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.


4. Central Recovery department (CRD):

This department is engaged in collecting of loan amount with interest though they’re some sort of reschedule and rephrase. Normally the collection of money installment is 6 or 4months this department inspects the project’s condition whether there is any leakage.
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.
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 4 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 expirer 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:
1. On the basis of the equity of the loan the following provision are made –
a. Substandard20%
b. Doubtful50%
c. Bad Debt100%
2. On short term agricultural and micro-credit the following provision to be Kept-
a) On all debts other than bad debt 5%
b) On bad debt 100%
Rescheduling of term loan:
a)       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.
b)       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.
c)       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.

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.
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. 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.
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)

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:
a) Preparing the monthly statement
b) Monthly recovery statement
c) Monthly Disbursement Schedule.
d) Making entry all the transaction as per daily statement received from branch officer.
e) Lists of balances not due and amount Sent to head office and Branch       office.
f) Preparing distribution of work among the officers and staff as specific guidelines of the authorities.

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 types of 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.
The main activities and responsibility of Project Rehabilitation department are as follows:

  • 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.


7. Law Department:

If the Shilpa Bank fails to recover its loan in the normal way, it must undertaken alternative action and files case in the court. This is the prime job of this department. In this department law experts are involve to reduces the loss of the bank by undertaking the title of the mortgage asset give by the borrower. Besides the mortgage claim BSB can file a criminal case against the borrower to make the loans payment. But the major problem of the Shilpa bank is borrowers are generally powerful enough to halt the legislative process. By political and social power they make the process slower. And finally no real action can not be taken by this department.

8. Human Resource Management Department (HRD):

The department of human resource management was not same name as now. Modernizing the structure of the administration of the bank and Development the skill of the human resources and reducing operating cost of the organization. The director’s 244th meeting was conducted on 23rd April 1996. In this meeting, rename of the Administration department as “Administration and Human Resource Department” and Department of labor as ‘department of Human resources Management’.
Sections of this department:
There are five sections in this department

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.

Challenges in measuring productivity:
Generally, productivity means the relationship between the inputs and the outputs. In other words, the responsiveness of outputs to a given change in input is called productivity. In an industry the physical inputs produce the physical outputs. But the banks being a service industry, there the situation is quite different from that of an industry. Again, the banks are multi-product firms which use diverse inputs. There are controversies among the scholars about the identification of the inputs and the outputs of a bank. In the 1970’s, the reserve bank of India considered bank deposits are the main output of a bank. In the early 1980’s, national institute of Bank Management, India, almost on the same line considered the working fund consisting of capital, reserve, deposits and borrowings as the output of a bank.
Some western scholars consider bank loans and investments as its outputs while financial liabilities, capital, labor and land as its inputs. In reality the loans and investments constitute the main earning assets of the banks. To put it in a different way, a group of scholars consider a bank’s gross income as its output and its gross expenditure as its inputs. So, a bank’s productivity is defined as income divided by the expenditure. Income is used here as the closest proxy of the outputs while expenditure is considered as the proxy of all the inputs for the use of which bank has to bear the costs.
As an improvement of the above concept some scholars argue that it is the ratio of the incremental income and the incremental expenditure that measure the productivity of a bank. According to them banks productivity is defined as percentage change in its earnings in relation to percentage change in its costs. To put it differently, the output responsiveness as measured by proportionate change in income in relation to proportionate change in expenditure, measures the productivity of a bank. Symbolically:
Q = ƒ {(ΔI/I) ÷ (ΔE/E)}
Here, Q = productivity or output responsiveness to changes in inputs,
I = Income,
E = Expenditure
Δ = Changes.
In the absence of specific indicators of output and input of a bank, the above measurement of productivity is widely used. The basic proposition here is that the productivity of a bank is inversely related to cost responsiveness, i.e., higher cost responsiveness leads to lower productivity and vice versa.
If the proportionate change in expenditure (E) leads to a less than the proportionate change in income (I), the cost is higher. Again, if the proportionate change in Expense (E) leads to a more than proportionate change in income (I), the cost is lower. In the first case Q< 1 and in the second case Q>1. In the former case the profitability of the banks is likely to fall and in the latter case the same would increase. This study uses this approach as well as the average working fund per employee, basic Income-expenditure ratio and Composite Productivity Index (CPI) for evaluating the productivity of Bangladesh Shilpa Bank (BSB). Working fund per branch is an important measure but for a specialized bank like BSB it is not much important.
Trends in Productivity of the Bangladesh Shilpa Bank (BSB):
Table I (Appendix) exhibits the general growth trends of the level of productivity of BSB. The productivity coefficients were very in a wide range of value indicating that the proportionate changes in expenditures (inputs) of the BSB is not logically explain the proportionate change in income (Outputs). Lower output responsiveness measured as a proportionate change in income in relation to a proportionate change in expenditure reduces the profitability of the banks. On the other hand, higher output responsiveness measured as a proportionate change in income in relation to a proportionate change in expenditure increases the profitability of the banks. BSB provides us a vibrant data series with multi direction.
The reasons for unusual behavior of the productivity are given below:

  • BSB use accrual basis of accounting. In that method they write down revenue as income when it is earned, irrespective to its realization. For different issues (explains in different segment in this report) large number of borrower does not repay their loan. Also loan loss provision was not sufficient in the previous years. So in 1999 and 2000 they make a huge write off. That cause a fall of profitability in high rate.
  • From 2000 BSB maintain equal loan loss provision required by law. Now this provision is in excess of Tk. 435.6 million. Besides they follow the accounting system according to the world standard. So from 2000 productivity was not and projected that will not give those sharp rise and fall.

As a government organization BSB is always find them in trouble like other government organization. Political influence is the major issue for their poor performance. In a word BSB always is a less productive organization.
Income-Expenditure Ratio:
In the previous section, both income and expenditure is used but in different way. Responsiveness of the income towards expenditure was calculated there. Here I calculate the general income expenditure ratio. In the table II (Appendix), in 2003 I-E ratio is 3.23 (>1 is good) that is very good indeed. But productivity is -5.18, that means lower output responsiveness measured as a proportionate change in income in relation to a proportionate change in expenditure reduces the profitability of the banks. The prove of this statement is found in 2004 and 2005. In both of the year’s income respective to expense is declining. In the last year it is negative. So I-E ratio is also an important measure to find bank’s productivity.
BSB is perform poorly again in this ratio. In 2000 it produces the worst result. In this year BSB changes their accounting policy to bring it in the world standard. Huge accrued loan loss provision was adjusted in this year. After 2000 BSB did well for consecutive four years. After that they again started to perform poorly. They need to write off lot of money causes to reduce profitability and productivity.
Working fund per employee:
In this section productivity of BSB is measured by the volume of working fund per employee. Productivity in terms of working fund per employee never goes below from the base year. But numerator (working fund) does not increase widely. Rather it started to decline in 2004. The primary reason for increase in per employee working fund is the reduction of the employee. BSB is able to handle their working fund with less number employee. It indicates the organizational efficiency and expertise of the employee.
Composite productivity Index:
Composite productivity Index provides us Table-IV (Appendix) a common yardstick to compare relative performance of bank. In discussing the composite productivity index we have focused on these indicators that are:

  • Profit employed fund ratio,
  • Cost per taka employed,
  • Composite index of operational efficiency.

By deriving the formula, Profit divided by Cost is Composite Productivity index. In the first three years of my observation CPI is ZERO. Because profit from operation is also zero. As of others ratio CPI indicates the same thing. In 2000 BSB did perform poorly, because of change in accounting policy. After 2000 they perform well because they did not need to write of big loan loss provision. But again in 2005 they perform weakly. That indicates, BSB does not improve, improvement sign in middle period is for the policy revision.
Comparative productivity analysis:
From Table V (Appendix) we can analyze the comparative productivity from the viewpoint of four fields:

  • Advance per employee
  • Advance per branch
  • Deposit per employee:
  • Deposit per branch:

In Table V all the four measures of comparative productivity Index is declining trend.  Deposit and Advance in respect to branch number is decline because of deposit and advance is reduced. Branch number over the observation period was unchanged. This attributes indicate that operation of BSB is face problem. They do not attract the depositor and they have not enough funds to lend. Besides deposits BSB use various grants and loans of the government of Bangladesh for loans and advances. This sector of loans and advances is also face a downturn. BSB is losses the credibility of foreign grantors. They do not give BSB money at large amount to disburse. These are the basic reason for declining trend of the Deposit/ branch and Advance/ branch.
In Table V, Deposit/ employee and Advance/ employee are also decline but the rate and shape is less steep than the previous two measures. The reason for this happening is BSB continuously cut their manpower over the period of observation. All government organization is reducing their manpower over the last decade. BSB is also following the way of others. This reduction in employee is able to hold the ratio in the previous position. Nevertheless BSB do little bit well in this sector of productivity.
Performance analysis
Profitability Ratio:
Profit is the handiest measuring tool for analyzing the performance of any organization. The basic reason for business is making money. So owner is always looking for profit. It is very important to find out profitability of a bank.
In case of BSB, profitability is not the prime target of the bank. The government of Bangladesh establishes the bank to patronize the industrial sector at the early age of the country. Social and long-term welfare of the country is important rather profit. Nevertheless to measure the performance I show some selected profitability ratios (in appendix table VI provides the results).
Profit loanable fund ratio: It is net profit divided by loanable fund in given time period. BSB makes no or negative profit in most of the years of observation. That means BSB unable to use their fund profitably. It is measurable performance. In 2000 they face their greatest loss. The basic reason in that year BSB changes their accounting policy to meet the world standard. So they made their loan loss provision according to law that causes a huge loss. Except this year only poor performance can explain their results.
Profit employed fund ratio: It is calculated by net profit divided by utilized or employed fund. Employed fund is a part of the loanable fund. So obviously it gives the result in the same direction.
Return on Equity (ROE): ROE measures the rate of return getting by owners. Owners always want more return for their investment. The government of Bangladesh is the owner of BSB. Here Government made a very bad investment in terms of ROE. Out of twelve years data, BSB give no ROE in six years, negative in two years and positive in only four years. Of which in 2000 & 2001 BSB had negative equity. Because of negative equity ROE is zero in those years.
Return on Assets (ROA): Return on Asset is a measure of the productivity of assets. It indicates the level of profitability of the asset management decision. Generally it is low from ROE. Because it is use a large denominator with the same numerator. Over the twelve year period ROA of BSB is 0% with a standard deviation of 3.85%. BSB use all most Tk. 1.5 billion to produce nothing. It is a worst thing for a business organization.
Asset Utilization Ratio: It reflects the portfolio management policies, especially the mix and yield on a bank’s asset. The asset utilization ratio of a bank is calculated as follow:
Asset Utilization Ratio = Total Operating Revenue / Total Assets
The asset utilization ratio of BSB has a decreasing trend in the recent period. In 1994 and 1995 it was 0.0722 and 0.0830 respectively. It never reaches this level.  This trend indicate that yield on the Bank’s asset has been decreasing.
Net Profit Margin: Interest income is the main source of profit for a financial institution that usually make large industrial loan. Net profit margin tells that how much profit a company makes for every taka it generates in revenue. Profit margins vary by industry, but all things being equal, the higher a company’s profit margin compared to its competitors, the better. If the net profit margin is higher the firm can run its business operation cheaply. If net profit margin is lower the firm is not able to curb its cost. It can be negative also firm’s means to run its operation it depends on the external source because operating income is not sufficient. BSB’s average net profit margin is 0.11% with a standard deviation of 108.76%. This result indicates BSB fails cover its large expense with its income.
Net Interest Margin: It measures how large a spread between interest revenues and costs management has been able to achieve by control over Bank’s earning assets and the pursuit of the cheapest sources of fund. During the observed period net interest margins were positive except 1999. In recent years it is high. Net interest margin of BSB is higher then commercial banks of our country. The basic reason for that as a DFI BSB can collect money from relatively cheap source.

Operating Efficiency:
In this section the efficiency in terms operating activities are showed. The amount incurred per employee, cost incurred for per unit of utilized fund and expense control efficiency are explained here (according to table VII of appendix).
Per employee cost: It measures how much cost incurred for an employee on an average. Like other government organization BSB reduces their manpower during last decade. Besides the reduction of the manpower per employee cost increased through out the time period. It indicates that employees are now getting more facilities from the organization. Besides loan recovery operation takes large amount of money. In 2005 per employee cost is jumped to a very high point. It is not a good sign for any organization. 
Cost per taka employed: It shows the relationship between total operating cost and taka employed. The cost of giving one taka loan except direct interest paid for the fund is calculated here. Except 2005 this cost is moderate. But the main problem is that big amount of employed fund of BSB is in bad class that is not classified. So cost per taka employed in good loans will be higher. Moreover provision is the biggest amount written in the expense side for BSB. Operating cost divided by fund utilized is not providing the overall picture of efficiency.
Expense Control Efficiency: It defines the efficiency of the management to curb head up costs. The amount of revenue remains after operating expenses being paid off. Expense control efficiency of a bank is calculated as follow:
Expense Control Efficiency = Net Income before Tax/ Total Operating Revenue
In table VII some of this ratio is negative. That means no income reduces after paying all the expenses. BSB incur large amount of money to its administrative and other area that does not support by the banks income.

Risk Ratio:
Generally risk comes from two directions. One is flow based risk- inability to make money by business operation. Other is stock based risk- if the business carries more liability that cannot be paid up by selling assets. In this section focused on the last type of risk (according to table VIII of appendix).
A. Capital:
Equity Multiplier:
Banking industry shows high level of equity multiplier ratio. That means bank takes more liability than other industry. Bank basically collects money from general public for safe custody. This collected money is considered as liability for bank. BSB is generally disbursing the money collected from government and foreign nations as aid and grants. Be a government organization BSB has the unlimited borrowing capacity.  In 2000 and 2001 this ratio is zero. In those years equity was negative. BSB was heavily dependent on the liability. In 2003 BSB paid up all Tk. 200 million of authorized share capital. It improves the situation in recent years.
B. Asset Quality:
Asset quality can be assessed only indirectly using financial ratios. On-site inspection of the bank’s outstanding individual loans is certainly the best way to evaluate asset quality. In the absence of this opportunity, some financial ratios can provide at least a historical account of the creditworthiness of a particular bank’s loan portfolio.
Provision for Loan Losses/ Loss Ratio: Every bank holds some money to meet future losses. The amount of this provision is determined by the quality of the loan. BSB does not put money in provision in most of observed year. They did not follow the provision regulation prior 2000. In the year 2000, BSB changed their accounting policy and put a huge amount of money in provision in this year. From that year BSB maintain required amount of provision. Now they have Tk. 430 million as excess reserve.
Loan Ratio:  The loan ratio indicates the extent to which assets are devoted to loans as opposed to other assets, including cash, securities, and plant and equipment. I find a declining trend. In recent years BSB give little percentage of assets as loan. In 1994 loan ratio was 72.81% that decline to half at 35.59% in 2005. BSB reduces their loan because poor recovery rate put her in some financial distress. Now they follow very defensive strategy and give loan by following strict loan that discourage potential customer.  Low loan ratio proves the poor commitment to the society.
Liquidity Ratio:

The liquidity position of Bangladesh Shilpa Bank (BSB) is determined by using following financial ratios or liquidity indicators (according to table IX of appendix).

Cash Deposit Ratio (CDR): Cash in a bank vault and balance with other banks is the most liquid asset of a bank. Therefore, a higher CDR indicates that a bank is relatively more liquid than a bank which has lower CDR. If a bank maintain low CDR there is a chance of default. On the other hand if there is high level of CDR bank’s profitability is reduced. As specialized financial institution, deposit is not the main product of BSB. So they do not need to provide money suddenly. So they can maintain low level of liquidity. But CDR is increasing trend for BSB. It is not good and indicates that unavailability of opportunity for make investment.

Loan Deposit Ratio (LDR): A higher loan deposit ratio indicates that a bank takes more financial stress by making excessive loan. In case of BSB this hypothesis does not work. The prime activity of BSB is giving loan by collecting money from various sources. So over the observing years BSB show very high LDR.

Liquid Security Indicator: This ratio of BSB has increased during the period of 1994-2005. This increasing trend certainly indicates that the Bank’s holding of marketable securities has been improved, which indicates its stronger liquidity position. Holding marketable securities is a low return investment. So this investment reduces profitability.

Bangladesh Shilpa Bank (BSB) is not a commercial bank. They do not need to make instant payments to the customer. So BSB does not need to maintain very high level of liquidity. For that reason in compare to standard BSB provides sub standard results of above ratios. But these ratios are quite adequate for BSB liquidity.
ROE is the most used ratio for measuring profitability. The higher is the ratio, the better for the firm. In this section I show (according to table X of appendix) the break down of ROE in three components to find out the reason behind change. ROE can increase by increasing the risk of the firm as well. That is not good for the firm. Du-Pont analysis facilitates us to find out the actual reason behind increase in ROE. In Du-Pont analysis ROE is decomposed into three factors:
Net Profit Margin: A firm’s net profit margin shows the profitability of the company’s operating activities. The percentage of major revenue goes to profit segment determined here.
Total Asset Turnover or Asset Utilization Ratio: Total asset turnover indicates how efficiently firm uses its total assets to generate revenues.
Financial Leverage or Equity Multiplier: Financial Leverage indicates the dependency of a firm on debt. Heavy reliance on debt increases the risk of the firm as a result the shareholders require more return from the firm.
In my analysis it can be seen that ROE is shows very unusual pattern. It was at very high level in one year, fall dramatically in the next year. This pattern can be explained by the following notes:

  • BSB have very small equity portion. As a state owned organization BSB’s credibility is high. So it can operate with high degree of liability. Denominator of ROE is equity and numerator is net profit. Small size change in the numerator (net income) can make big percentage change in the ROE.
  • Some accounting policy revision makes the provision very large in some years. In those years net profit margin deviate largely.
  • Total asset turnover was not big for BSB. Large amount of non-performing loan was the cause for low ROA.
  • Equity multipliers were higher for BSB. Small ROA turns in to big ROE for large multipliers. In 2000 and 2001 the multipliers were zero because in those years equity was negative. At negative equity multiplier will be zero.

Determination of inter dependency of productivity variables:
Correlation matrix indicates the relationship between the variable in terms of co-efficient of correlation. Following variables are tested for their inter dependency:

  1. Income-Expenditure Ratio
  2. Fund utilization ratio
  3. Return on Asset (ROA)
  4. Advance per Branch
  5. Advance per Employee
  6. Administrative cost per Employee, and
  7. Working fund per Employee.

There are two significant relationship found with income-Expenditure ratio; ROA (0.763) and working fund per employee (0.724). Both show high degree of positive dependency. (According to Correlation matrix of Appendix)
Correlations with Fund utilization rate, Advance per Branch and Advance per Employee are -.282, -0.410, -0.308 respectively. But by using more fund productivity should be increased. But in BSB case productivity does not positively related with advance size. Non performing loans of BSB are the main reasons for that. Last year the non performing amount was Tk. 2604[1] million. This was 33% of total loans and advances. Income does not grow at a relative rate of advance growth for this large amount of non performing loan. So productivity is negatively related with advance biased ratio.
Cost per employee is determined by operating cost divided by employee number. Productivity is logically inversely related with cost per employee ratio. The degree of the dependency is lower. Because BSB takes some high cost training program for their employee to train up them. BSB belief that training make employee more productive. But this high cost does not yet put any effect on productivity.
Determination of Regression Equation of productivity variables:
Now I shall find out the dependency of profitability upon some independent variable in together. By taking seven variables (same as correlation analysis) and ten years data I run a multiple regression and the following results are appear. (According to multiple regression table of Appendix)
R: The co-efficient of multiple correlations. The R indicates how and to which degree due variables are related. Here R = .994 is coefficient of multiple correlation indicates that there exists a very high degree of relationship.
Adjusted R: In multiple correlations, adjusted R2 states the explanatory power of independent variable. If R2 = 1 than 100% of the variation in the dependent variable can be explained by the combined variation of Income-Expenditure Ratio, Fund utilization ratio, Return on Asset, Advance per Branch, Advance per Employee, Working fund per Employee and Administrative cost per Employee.
In my observation Adjusted R2 = 0.963. That means 96.3% variation can be explained by the independent variables. In a word there exists a very high degree of relationship and the variation of productivity is mainly dependent upon these variables.
ANOVA Test: In the previous segment significance of the beta coefficient was discussed. Now I test the significance of the relationship among the variables. ANOVA Table includes the computed F ratio for the regression and is sometimes called the analysis of variance (ANOVA) for the regression.
Here F-value is larger than the table value. So we will reject the null hypothesis that is there is no significant relationship among the variables. In other words there is strong relationship exist among the variables entered for the test.

Regression line: To find out the influence of independent variables in together upon productivity multiple regressions analysis has been done. In multiple regressions and which is a logical extension of two variable regression analysis instead of a single independent variable, two or more independent variables are used to estimate the values of a dependent variable.
The regression equation is,
Y = -2.613 – 1.919 X1 + 17.432 X2 + 0.013 X3 – .974 X4 + .631 X5 – 0.046 X6
Where,   Y = Income-Expenditure Ratio
X1 = Fund utilization ratio
X2 = Return on Asset
X3= Advance per Branch
X4= Advance per Employee
                                                X5 = Working fund per Employee
                                                X6 = Administrative cost per Employee
Productivity i.e. income expenditure ratio can be determined by the above mention line. By starting from a negative value the line shows positive relationship with X2, X3 andX5 and negative relationship with X1, X4 and X6. ‘B’ only gives the value of coefficient of independent variables. By observing t-value we define the significance of the equation. In this test only ROA (X2) is significant. Significance can reduce for various reasons such as small sample size, overlapping variables, data manipulation.


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:

  • BSB and political influence is synonymous word. From the beginning of BSB history politics influence the activity. So large numbers of bad loans were committed. These bad loans are hurts BSB till now.
  • BSB have very large amount of Non-performing loan. These loans are sanctioned by influencing the project appraisal system. In BSB insider activities is very high that does not give BSB to work autonomously.
  • Accounting system of BSB was poor. They did not even follow the BAS standard disclosure guideline. For this reason many parties does not get required information. And management hides the bank’s real condition from policy maker. (BSB convert their accounting process to world standard in 2000)
  • Like all other government organization bureaucratic process is one of the main problems for BSB. It takes more time to process a loan. That actually very shocking thing to entrepreneurs. Because in modern world time is the dominant factor in business process.
  • As a government organization BSB has high degree of credibility that does not consistent with its balance sheet. So BSB can bounce back from its poor performance by using this credibility. Just need some autonomy and unbiased project appraisal process.
  • As a DFI Profit is not the prime goal of BSB. But profit is important measure of performance. So every one give emphasis on profit side. After establishment BSB give numerous social benefits to the society. Promote an entire industry is not possible for any private group. BSB promote some risky industry that requires huge capital by taking unlimited risk. Those induce many others to come and play in that industry. As a DFI, BSB goes to many deprived industry to pull up that creates new opportunities for the entrepreneurs.
  • There is nearly no corporate governance in BSB.



Bangladesh in spite of a developing country much depends on agro-based products. In order to industrialization, the country should build up a strong base upon which industrialization will be grown up. For this reason Government should take forward steps considering all sorts of threats and opportunities.
Bangladesh Shilpa Bank can play a very important role in this respect, as it is the prime development financing institution of the country. Over the past the bank is showing a deteriorating trend in profitability. The cumulative loss of the bank stood at Tk 3,285.60 million in 2000. The main reason for losses is the huge amount of non-performing stuck-up loans for which the bank has to maintain large amount of provision from its profit each year.
Borrowed funds constitute a major source of the bank’s lending assets and posting of accrued interest in interest suspense account has lowered its net interest income. This is constantly creating a huge problem for bank’s overall operation and deteriorating performance.
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.
During the last five or six years a number of steps have been taken to strengthen the country’s banking system. These include improvement of the regulatory environment. Enforcement of loan classification guidelines and recapitalization of nationalized commercial banks. Over the past two years, there has been a massive infusion of taka 32,000 million in the NCBs in the shape of government bonds to make up for capital and provisioning shortfalls. BSB and BSRS (Bangladesh Shilpa Rin Shangstha) have been able to rehabilitate 471 sick industrial units which have created 21,000 new jobs.
The government is keen to correct and remedy failures and imperfection in the specialized banking operation including BSB. A small credit guarantee scheme has been introduced, to assist new entrepreneurs who can receive loan of taka 2.5 million without any collateral.
The transformation of finance priorities has brought with it problems in administration. No sound project-appraisal system was in place to identify viable borrowers and projects. Since BSB is owned fully by Government, it does not have adequate autonomy to choose borrowers and projects and is often instructed by the political authorities.
In addition, the incentive system for the bank stressed disbursements rather than recoveries, and the accounting and debt collection systems were inadequate to deal with the problems of loan recovery. It has become more common for borrowers to default on loans than to repay them; the lending system has been simply disbursing grant assistance to private individuals who have qualified for loans more for political than for economic reasons.
The rate of recovery on agricultural loans was only 47 percent in FY 2005, and the rate on industrial loans was even worse. As a result of this poor performance, major donors are constantly applying pressure to induce the government and banks to take firmer action to strengthen internal bank management and credit discipline. Actually BSB have very high contribution to our industrial development. It can be a profitable organization again if some steps taken. BSB is a national asset. So we should save it and engage it to the development of the nation.



  1. 1.       “A preliminary note on measurement of productivity in the commercial banks of Bangladesh” by M. Zainul Abedin, Mihir Kumer Roy and Fakhrul A. A. Mustafi. A preliminary note on measurement, Bank Prikrama.
  2. 2.       “An evaluation of performance of NCBs in Bangladesh” by Durgadas Bhattacharjee and Saroj Kumar Saha. Bank Parikrama.
  3. 3.       “Productivity in Uttara and Pubali Banks during nationalized and denationalized periods: A case study of commercial Banks in Bangladesh.” By MSR Bhuiyan and Md. Akhtaruddin. Bank Parikrama.
  4. 4.       “A Comparative Analysis of Commercial Banking Performance in Bangladesh” by Moniruzzaman Malek. The Cost and Management May – June, 2005.
  5. 5.       “Client Choice Analysis of Commercial Banks in Bangladesh and Some Policy Implications” by Tamzid Ahmed Chowdhury and Masud Ibn Rahman. The Cost and Management, Vol. 34 No. 1, January-February 2006, pp. 46-65.
  6. 6.       Statistics for management by Levin and Rubin.
  7. 7.       Annual Reports of Bangladesh Shilpa Bank of the observing period.
  8. 8.       “Money, Banking and Financial Markets” by miller and vanhoose. Eight edition.



Table-I: Productivity of BSB during the period of 1996-2005

year Income (I) Expenditure (E) {(ΔI/I)÷(ΔE/E)} Index

Table II: Comparison of Income-expenditure ratio and productivity of BSB for the period of ‘96-‘05

Year Income (I) Expenditure (E) I-E Ratio Productivity

Table III: Productivity of BSB on working fund/employee (1996-2005)
(In million)

Year Working fund Employee no. Per employee Index

Table-IV: Composite Productivity Index (CPI) of BSB

Year Profit Cost Employed fund CPI


Table V: Comparative productivity of BSB
(In million)

Year Deposit per branch Deposit per employee: Advance per branch Advance per employee

Table VI: Profitability Ratios of Bangladesh Shilpa Bank (BSB)

Year Profit/ loanable fund Profit employed fund Return on Equity Return on Assets Asset Utilization Ratio Net Profit Margin Net Interest Margin

Table VII: Operating efficiency measures

Years Per employee cost (in Tk.) Cost per taka employed Expense Control Efficiency


Table VIII: Risk Ratio

Years Equity Multiplier Loss Ratio Loan Ratio


Table IX: Liquidity Ratio

Years Cash Deposit Ratio Loan Deposit Ratio Liquid Security Indicator

Table X: Return on equity breakdown

Years Net Profit Margin Total Asset Turnover Return on Assets

 Financial Leverage
Return on equity
Correlations Matrix

INC_EXP Pearson Correlation 1 -.282 .763* -.410 -.308 -.273 .724*
Sig. (2-tailed) . .430 .010 .239 .387 .446 .018
N 10 10 10 10 10 10 10
FUND_UTL Pearson Correlation -.282 1 .311 .775(**) .742(*) -.380 -.677(*)
Sig. (2-tailed) .430 . .382 .008 .014 .278 .032
N 10 10 10 10 10 10 10
ROA Pearson Correlation .763(*) .311 1 -.048 .026 -.271 .264
Sig. (2-tailed) .010 .382 . .896 .944 .449 .461
N 10 10 10 10 10 10 10
ADV_BRA Pearson Correlation -.410 .775(**) -.048 1 .948(**) -.626 -.736*
Sig. (2-tailed) .239 .008 .896 . .000 .053 .015
N 10 10 10 10 10 10 10
ADV_EMP Pearson Correlation -.308 .742(*) .026 .948(**) 1 -.598 -.531
Sig. (2-tailed) .387 .014 .944 .000 . .068 .114
N 10 10 10 10 10 10 10
CO_EMPLO Pearson Correlation -.273 -.380 -.271 -.626 -.598 1 .171
Sig. (2-tailed) .446 .278 .449 .053 .068 . .638
N 10 10 10 10 10 10 10
WF_EMP Pearson Correlation .724(*) -.677(*) .264 -.736(*) -.531 .171 1
Sig. (2-tailed) .018 .032 .461 .015 .114 .638 .
N 10 10 10 10 10 10 10

* Correlation is significant at the 0.05 level (2-tailed).
** Correlation is significant at the 0.01 level (2-tailed).

Multiple Regressions
Variables Entered/Removed (b)

Model Variables Entered Variables Removed Method

a All requested variables entered.
b Dependent Variable: INC_EXP
Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate
1 .994(a) .988 .963 .2089085

a Predictors: (Constant), CO_EMPLO, WF_EMP, ROA, ADV_EMP, FUND_UTL, ADV_BRA

Model Sum of Squares df Mean Square F Sig.
1 Regression 10.376 6 1.729 39.626 .006(a)
Residual .131 3 .044
Total 10.507 9

a Predictors: (Constant), CO_EMPLO, WF_EMP, ROA, ADV_EMP, FUND_UTL, ADV_BRA
b Dependent Variable: INC_EXP
Coefficients (a)

Model Un-standardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) -2.613 3.879 -.674 .549
FUND_UTL -1.919 1.726 -.204 -1.112 .347
ROA 17.432 2.899 .664 6.014 .009
ADV_BRA .013 .008 1.479 1.787 .172
ADV_EMP -.974 .502 -1.144 -1.940 .148
WF_EMP .631 .244 .907 2.581 .082
CO_EMPLO -.046 .094 -.082 -.495 .655

a Dependent Variable: INC_EXP

Chart-I: Productivity trend of BSB during the period of 1996-2005
Chart II: Movement of working fund/employee

Chart-III: Trends of ROE and ROA of BSB.
Chart-IV: Trends of Loan and Loss ratio of BSB.

[1] Non performing loan includes Sub-standard, Bad/loss and Doubtful loans.