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Internship Report

ON

YOUR INVESTMENT PARTNER.


Internship Report
ON

Sick Industry Rehabilitation


Of Bangladesh Shilpa Bank
Submitted To
Mr: Mamtazuddin Ahmed
Professor
Department of Accounting & Information Systems
University of Dhaka

Submitted By
Md. Zakir Hossain
BBA (AIS), 8th Batch
Roll-161
Department of Accounting & Information Systems
University of Dhaka.

DEPARTMENT OF ACCOUNTING & INFORMATION SYSTEMS


UNIVERSITY OF DHAKA
May 10, 2007
LETTER OF TRANSMITTAL

Date: 10/05/2007
Mr: Mamtazuddin Ahmed
Professor
Department of Accounting & Information Systems
University of Dhaka

Sub: Submission of internship report on “Sick Industry Rehabilitation Of


Bangladesh Shilpa Bank”

Dear Sir,
Here is my internship report on “Sick industry Rehabilitation of Bangladesh
Shilpa Bank.” While preparing this report, I tried my best to follow the
instructions that you have given me. This report is prepared for the fulfillment the
requirement of the BBA Program.
The entire report is based on my practical experiences in bank. I have furnished
all the things what I have learnt during the internship program at Bangladesh
Shilpa Bank, Head Office, Dhaka.
I shall be highly encouraged if you are kind enough to receive this report.

Thanking you.
Sincerely yours,

--------------------------
Md. Zakir Hossain
BBA (AIS), 8th Batch
Roll-161
Department of Accounting & Information Systems
University of Dhaka.
AC K N OWLEDGEMENT

At first, I would like to express my gratitude to almighty Allah for enabling me the
strength and opportunity to complete the report with in the schedule time
successfully.

I like to thank from the core of my heart to the internship Supervisor, honorable
teacher, Mr Mamtazuddin Ahmed, Professor, Department of Accounting &
Information System, University of Dhaka, who helped me in every steps of my
internship.

I am very much grateful to H M Fazlur Rahman Azad,Assistant General


Manager, Bangladesh Shilpa Bank, Head Office, Dhaka, for giving me the
opportunity to complete my internship. I am sure that their dynamic managerial
activities with give inspiration to anybody to build one’s career properly.
. In this regard I also express our heartiest gratitude to the officials of the various
departments of the bank. Mrs, Nioti Rani Deb, Manager, of the Department of
Project Rehabilitation also deserves to get special thanks for her kind discussion.
Especially I am grateful to Mrs. Nurjahan begum, Officer, Training Department
who provided various information and materials. I am also thankful to the
Department of Accounting, University of Dhaka for giving me such exposure to
the practical business world.

.Then at last I shall be grateful to those persons who read this report and who
shall get benefit from this report at present and in future.
Executive Summary

The Bachelor of Business Administration (BBA) program is a professional program. This


program is designed to meet the needs of the students who want to develop their career as
executives in the fields of different business areas as well as teaching and research
positions in different institutions. To obtain this degree, Internship Program is an integral
part.

CHAPTER ONE
This INTRODUCTION OF
report is organized as following: Chapter THE
(1) Covers: REPORT
the background of the study,
Methodology of the study, Objectives of the study & Limitation of the study. Chapter (2)
contains: Overview of Bangladesh Shilpa Bank. Chapter (3) covers: Various functional
departments of Bangladesh Shilpa Bank. Chapter (4) covers: The details about sick
industry and a case study about sick industry. Chapter (5) Contains: Rehabilitation of sick
industry , past and present condition. Chapter (6) covers: Findings, Recommendation and
conclusion.

All information included in this study is taken mainly from various appraisal report of
BSB, loan sanctioning letter, annual report, manuals of various departments, Internet etc.
Certainly there are some drawbacks in their rehabilitation of sick industries. In order to
overcome these drawbacks, some suggestions have been made in my study.

YOUR INVESTMENT PARTNER


1.1 BACKGROUND OF THE STUDY

The perfect coordination between theory and practice is of paramount importance in the
context of the modern business world in order to resolve the dichotomy between the
theoretical and practical areas. Any academic course of the study has a great value when
it has particular application in the real life. Only theoretical knowledge bears little
importance unless it is applicable to the practical life. When theoretical knowledge is
obtained from a course study it is only the halfway of the subject matter. So we need
proper application of our knowledge to get some benefits from our theoretical knowledge
and to make it more fruitful. Such application is made possible through internship. For
the completion of this internship program, the author of the study was placed in a bank
namely, “Bangladesh Shilpa Bank”. Internship Program brings a student closer to the real
life situation and thereby helps to launch a career with some prior experience. My
internship is on the evaluation of Project Rehabilitation Department’s functions of BSB.

Bangladesh is one of the countries of manifestation. Here industrial sector is very weak.
So government has established Bangladesh Shilpa Bank to stimulate industrialization.
Since Bangladesh is a developing country and the present economic condition of
Bangladesh is of open market in natures, in this situation, the specialized bank like BSB
can play necessary role toward the economic improvement of BSB is to provide term
loan to different industries and entrepreneurs in Bangladesh. The purpose of BSB is not
only to grant credit but also to develop the country through industrialization. But all
industries are not always successful. Some industries become sick due to technical,
management, economic & political reasons. In my report rehabilitation
Procedure of such sick industries has been analyzed
1.2 OBJECTIVE OF THE STUDY

The objective of the report is to comprehensive study on Bangladesh Shilpa Bank and to
find out the problems and opportunities for the industrial development. The objective of
the study is also to find out to what extent it is successful to achieve its goals and why
many of its industries are become sick. The prime objectives of this report are as follows:
To get an overview of the operations of Bangladesh Shilpa Bank
To acquire practical experience about working environment, to know discipline and
behavior of an organization that will help me to buildup my career.
To evaluate the success and status of loan recovery
To understand the criterion on the basis of which the industries are identified as a sick
industry
To know the rehabilitation program taken by BSB to rehabilitate these sick industries
To know the firms which are rehabilitated and which are not rehabilitated.
Finally to recommend necessary steps to overcome the problem of sickness of
industries

METHODOLOGY OF THE STUDY


Correct and smooth completion of research work requires adherence to some rules and
methodologies.
In order to conduct the report, the decision had been taken to collect various types of
primary data and secondary data. Data have been collected by oral interviewing the
responsible officers. Different form of statistical configurations such as table percentages
rates and ratios has been used to make the study meaningful and realistic.
After collecting data from the interview and material provided by them, data was first
carefully scrutinized. Then the data was organized as required.
In order to make the study effective and efficient, following two sources of data and
information have been used widely.
(a) Primary information/data
(b)
The primary data have been collected by oral interviewing the responsible officers and
staffs of the BSB, practical deskwork, direct observation of the functions of various
departments of BSB and relevant document’s studies as provided by the officers
concerned.

(b) Secondary Information/data

The secondary information comes from annual report of the BSB, relevant papers/books
and periodicals publication and manual of different departments.

Sources of Data

Primary Sources Secondary Sources

1. Practical desk work 1. Annual report of the BSB


2. Oral interview of the respective officers 2. Annual budget of the BSB
and staffs of BSB 3. Various documents of the BSB
3. Direct observations of the functions of 4. Extensive literature search on the
various departments of BSB basis of these documents of
4. Relevant document’s studies as publication
provided by the officers concerned 5. Shilpa Bank’s Website
(www.shilpabank.com)
LIMITATIONS
LIMITATION OF THE STUDY

This internship report is my first assignment outside our course curriculum in the
practical life. In performing this report our lack of proper knowledge greatly influenced
in this performance. Beside this, some limitations in preparing this report have been
faced. The main limitations are as follows:

• Confidentiality is the main problem; as a result some confidential facts were not
sufficiently disclosed by the respective personnel.

• Lack of available up-to-date information

• Only few days internship’s experience is not enough to find out all the pros and
cons of such a vast project.

• The employees of BSB had no eagerness to supply more information because of


extra hardness

• Most of the manual of BSB is maintained in Bengali. To translate these terms into
English is very difficult and technical words are not understandable.

• As Bangladesh Shilpa Bank is a large financial institution; it is very difficult to


understand each and every aspect of its operation within a very short period of
time.

• Lack of previous practical experience in this concern, as I am a newcomer


CHAPTER-TWO
OVERVIEW OF BANGLADESH
SHILPA BANK

YOUR INVESTMENT PARTNER


2.1 BACKGROUND
Industries play a pivotal role in the economic development of every country. This is
why Industrialization has been adopted as a vital instrument of economic
development in many developing countries. Realizing this, government of
Bangladesh created a development financing institutions named Bangladesh Shilpa
Bank (BSB) on 31st December, 1972 under the presidential order no. 129 of 1972
with a view to providing long term and intermediate term loan to the entrepreneurs
for accelerating the process of industrialization of the country by providing financial
assistance and equality support.

2.2 INSTITUTIONAL OVERVIEW


Established: October 31, 1972

Head Office Dhaka


Division 5
Department 21
Organization
Zonal Office 3
Branch Office 15
Personnel 743

Capital Structure and Sources of Fund:

Authorized capital TK 2000 million


Paid up capital TK 2000 million

The sources of Bank’ fund are the government, Bangladesh Bank, Commercial Banks,
local\ overseas Financial Institutions and Suppliers’ Credit.

2.3 FUNCTIONS:

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

• Provides working capital loans to industrial projects


• Provides equity support in the form of underwriting and bridge finance to the
public limited companies
• Issues guarantee on behalf of the borrowers for repayment of loan
• Extends commercial banking service along with deposit mobilization
• Purchases and sales shares\ securities for BSB and on behalf of its customers as a
member of Dhaka Stock Exchange(DSE) Ltd and Chittagong Stock Exchange
(CSE) Ltd for capital market development and
• Conducts projects promotional activities along with preparation of various sub-
sect oral study reports.

2.4 Ownership:

At least 51 per cent of the authorized capital of BSB is subscribed by the Government
and the remaining 49 per cent be subscribed by Bangladesh nationals or by local or
foreign Financial Institutions. Presently ,100 per cent ownership of the Bank belongs to
the Government.

2.5 Mission:

Accelerating the process of industrialization of the country by providing financial


assistance and equity support.

2.6 Management:

The overall policy formulation and the general direction of the Bank’s operation vest 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
amongst themselves. The Managing Director is the Chief Executive of the Bank. The
General Managers assist the Managing Director in conducting overall business of the
bank.
2.7 Audit Committee
An audit committee has been constituted by the Board of Directors of the Bank in its
400th meeting held on 06 April, 2003 which position as on 30-06-2005 as under:
SI.No Name Status with Status With the Qualification
the Bank Committee

1 Professor Chairman Chairman M.A in Economics,


Abu Ahmed York University,
Toronto, Canada.
M.sc. in
Economics.Islamabad
University ,Pakistan
2 Mr. Md. Director Member B.Sc. Engineer (Civil)
Nural Amin
3 Mr. Liaquat Board Member- M.A in Economics
Ali Khan Secretary Secretary
Name of the Directors and the entities in which they have interest as on
30 June, 2005:
SI. No. Name Status with the Name of the firms\
Bank companies in which
interest as proprietor,
partner, director,
managing agent,
guarantor, employee,
etc.
1 Professor Abu Ahmed Chairman -
2 Dr. Nazmul Bari Managing Investment
director Corporation of
(Current Bangladesh (Director
Charge) as Govt.
Representative)
3 Mr.Mokbul Hossain Director -
4 Md. Nural Amin Director -
5 Mr. Syed Abdul Director Chairman, Kushiara
Muqtadir Service Ltd.
2.8 BSB: AT A GLANCE

2000-01 2001-02 2002-03 2003-04 2004-05


Loan application received 13 31 31 51 83
Term loan sanctioned
New 5 5 18 21 34
BMRE - 1 2 3 1
Additional 3 2 1 3 3
Total 8 8 21 27 38
Term Loan Disbursed 10 8 11 14 23
Working capital Loan
2 1 3 5 3
sanctioned
Start of commercial
5 2 2 4 7
operation
Entrance into Loan portfolio 3 2 7 6 14
Repayment\ Rescheduling 47 52 27 17 23
Liquidation of Loan
32 21 31 22 41
liabilities
Total Loan portfolio 532 513 461 308 166
(Million Taka)
Term loan sanctioned 293 189 1418 989 1009
Term Loan Disbursed 134 84 170 297 144
Working Capital Loan
9 4 30 19 14
Sanctioned
Working capital Loan
15 1 9 28 21
Disbursed
Loan Recovered 1400 1198 1316 1124 1391
Rephrased\ Rescheduled 574 1833 507 149 259
CHAPTER- THREE

FUNCTIONS OF VARIOUS
DEPARTMENT OF BSB

YOUR INVESTMENT PARTNER


3.1 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.

(1) Loan Operation Department (LOD)

(2) Documentation and Machinery Procurement Department

(3) Project Implementation Department (PID)

(4) Central Recovery Department (CRD)

(5) Central Accounts Department (CAD)

(6) Human Resources Management Department (HRM)

(7) Law Department

(8) Project Rehabilitation Department (PRD)


3.2 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:
i. At first an application form is supplies to the entrepreneur (required Tk. 1,000);
ii. After filling up the application form it is submitted by the entrepreneur;
iii. A project appraisal letter is supplied by the entrepreneur;
iv. After analyzing the project appraisal, the board decides the loan should be sanctioned
or not;
v. If the loan is sanctioned it is forwarded to the project implementation department.

Start with BSQF

Submission of BSQF with


Proposed projects

Put Up Appraisal Report

Evaluation of proposed project


by a team member

Passed process to PID dept.


documentation and as well of
other department

Ends of this department

Figure: Overview of Loan Operation Department


The process of appraising a report:
The bank authority makes the report, which consists of three (3) types of analysis, is as
follows:

(a)Technical analysis

(b)Financial analysis

(c)Economic analysis \ market analysis

(A) 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 as 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.

(B) 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.

(C) Economic \ 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’ acceptability of the product, supply and production capacity of the product
to meet the market demand.
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:
i. Memorandum of Association Articles of Association
ii. The loan upon which the project will be established, document of this land
must be produced.
iii. Receipts of rent
iv. Documentation fee
v. Mouja Map
vi. 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.
3.4 FUNCTIONS OF MACHINERY
PROCUREMENT DEPARTMENT:
 Machinery schedule preparation and approving for tender
 To assist the promoters to invite tender and other formalities.
 Necessary advice given to investor’s about tender invitation to collect
project machinery.
 Offered machinery and related document evaluation and necessary
information collection about supplier.
 To analyses the tender price, quality of machinery among the bidders and
taking approval from the authority.
 Preparation of list of pre-shipping investigator through notice and receive
approval.
 Arranging investigation procedure of importable machinery.
 To make the rules and procedure of machinery procurement and co-
ordinate the activities of branch and zonal offices.
 Information collection about different price of machinery different
capacity in industrial production.
 To give opinion about technical aspects of loan operation department and
braces.

3.5 PROJECT IMPLEMENTATION DEPARTMENT


When the loan operation department it is forwarded to project sanctions the loan
implementation department (PID) performs the following activities:
i. Undertaking necessary initiative after granting loan in favor of the project.
ii. Taking necessary action to make the factory lay-out.
iii. Making necessary adjustment in case of change of the project place, change of board
of directions and change/extension product mix etc.
iv. Making necessary attempt to give the loan a stage by stage after the loan granting.
v. To ensure that necessary capital has been supplied by the entrepreneur and to ensure
its proper utilization.
vi. To give necessary assistance in the case of Bridge loan from any financial institution.
vii. Taking necessary indicatives to construct the lay-out of the project according to
construction cycle.
i. Monitoring the machinery of the project, inspection and taking any kind of advice
regarding to any machine related problem from machinery department.
ii. Verification of new material process of project ensuring the cash capital according to
the loan terms and condition and providing necessary assistance in this matter.
iii. Inspection and monitoring experimental production extension of loan period.
iv. Making the final construction report (FCR) and transferring it to central recovery
department (CRD) and concerned department/authorities.
v. Determination of the construction period of the project preparing loan repayment
schedule and taking after necessary action regarding this.
vi. Monitoring and inspecting the project to see whether the project is implementing
according to time schedule and taking necessary initiatives to solve any kind of
problem arising out there form and providing necessary advice to the entrepreneur.
vii. Receiving insurance letter against the predetermined risk of the implementation
project assets n ensuring its deposit to bank.
viii. Inspection of the utility of the principles regarding the project implementation and
presiding up to date principles.

STAGES OF IMPLEMENTATION OF PROJECTS

2003-2004 2004-2005
Position of Projects Under Number of projects Number of projects
Implementation
Started Commercial Operation 4 7
Under Construction 6 11
Documentation Completed 15 10
Awaiting Documentation 22 27
3.6 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:
a. Continuous loan,
b. Demand loan
c. Term loan
d. Short-term agricultural and micro-credit.
a. 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.
b. Demand loan: The loan which mist be repaid as the bank calls it is demand loan.
c. Term loan: The loan which must be repaid as the banks cal it is term loan.
d. 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.

Criteria for Classifying Loan on the Basis of Repayment


If any continuous 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:
A. Substandard 20%
B. Doubtful 50%
C. Bad debt 100%
2. On short term agricultural and micro-credit the following provision to be kept:
A. On all debt other than bad debt 5%
B. On bad debt 100%
3.7 LOAN ACCOUNTING DEPARTMENT
Loan Accounting Department is the department which centrally maintains all loan
amounts of the bank. There are 4 sections which performs the activities of the
department.
1. Not due section: Not due is the installment not yet due for payment in schedule
time fixed by the project department/Branch officer.
2. Amount due section/overdue section: The payment of installment and interest in
not paid/cleared in time is overdue.
The functions of this section are:
a. accurately list of balance preparation
b. advice sending to borrower
c. Quarter/half year by interest charge.

3. Replacement section: When the overdue is rephrased or waived then the


replacement section will do the needful activities.
4. General and policy section:
General and policy section do the following:
d. To prepare the monthly Trial balance.
e. Monthly recovery statement.
f. Monthly disbursement schedule
g. To make entry all the transaction as per daily statement received from the
branch officer.
h. All list of balances of not due send to the Head Office and branch Office.
i. To prepare distribution of work among the officers and staff as specific
guidelines of the authorities.

3.8 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 cases
which Bangladesh Shilpa Bank files are:
1. Recovery case Section 33
2. Financial Loan Case Section 5(a)
3. certificate Case Section 35
4. Bankruptcy Case Section 9 (1)
5. Case if Check is not cashed Section 198
(Petition Case)
6. Case if machinery of project
is transferred form the project Section 37
7. Case if false properties are mortgaged
Section -----
Functions of Law Department:
(I) Declaration of legal notices to the loan defaulters and take legal action against
loan defaulter.
(II) Suit against loan defaulter and arranging all necessary activities to final
dismissal according to Bank ordinance.
(III) To take case of the field suit\ litigation sued by the bank and to file suit in
high court and Supreme Court for the defaulted project.
(IV) Managing the cases that filling by loan holder against Bank with the help of
law year.
(V) To invite auction to sale assets after receiving degree from the court and
maintain relations with the court and co-ordinate the activities.
(VI) Managing case against advance defaulter and filling of case against them.
(VII) Preparation of Bank’s special consultant\ legal adviser and panel lawyer’s
schedule and make communicate with them to supervise suit and also
monitoring and co-ordination their operation.
(VIII) Recommendation to change existing law to recovery of loan
(IX) To keep the interest of Bank and provide legal advice.
L
Legal actions taken

2003-2004 2004-2005
Position of projects under litigation Number of projects Number of projects
Legal notice issued 126 33
Filling of suit 205 23
Cases settled outside the court 6 11
Auction 2 11

3.9 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:

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 programmers.
 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.
PROJECT REHABILITATION DEPARTMENT
The objective of BSB is to stimulate industrialization of the country. But many of the
projects, which are loaned by BSB, become sick and cannot carry on their projects. There
are many reasons, so government tries to revive the proposed project for greater
advancement of the country.

In these types of cases, BSB provides assistance to rebuild their structure to restart their
businesses. Additional financial assistance may be required moreover, more information
and advice may given so that the entrepreneur may run the business more efficiently,
sufficient return & contribution to the economy.

Functions of Project Rehabilitation Department

1. Recommendation and taking to rehabilitate a project after tracing the cause of


sickness if the files are transferred to Project Rehabilitation Department from the
ensured department/ branch/ zonal office after the primary analysis of the project.
The rehabilitation process starts after the recommendation of the advisory
committee formed by the General Managers.

2. The files of the projects are transferred to Law Department to take necessary
actions, which are deemed not to be rehabilitated. Again if there is no opportunity
to rehabilitate any it also rejected.

3. Verification of the proposal regarding rehabilitation recommendation preparing


the implementation schedule and taking necessary initiatives to take care the
project and deciding the single or joint management system of the bank and
performing other activities regarding these.

4. Production of the rehabilitated project, making of the products analysis the


targeted loan recovery and actual situation and taking necessary initiates
regarding these

5. Making recommendation to restructure the capital to ensure fund management,


profit sharing and loan recovery and making recommendation on the management
and direction of the acquired project.

6. Reaction of bank participation stage by stage from the project, which is profitable
7. In case of apply right management after the certification that it will be effective
and efficient.

Relation with other departments

Loan Operation Department is the starting department of sanctioning loan to the sponsors
and in this department various analyses are made for making decision whether the
proposed projects are viable or not. Anyone who wants loan from BSB, he has to fulfill
certain criteria and a team evaluates the project. If the sponsors fulfill the entire
requirements then his/her project will be approved for giving loan.
Then the Loan Operation Department sends documents to Documentation & Machinery
procurement Department for proper documentation and procurement of machinery. After
documentation and machinery procurement the project is sent to Project Implementation
Department.
After sanctioning loan by Loan Operation Department a project is forwarded to
Implementation Department. Project Implementation is one of the most important tasks
done by BSB. Project Implementation Department conducts all the works according to
the sanction letter, which is made according to appraisal report. Providing consultancy
services and other necessary assistance implementation process is going on. They inspect
and monitor physically whether the project is implementing or not. If not Project
Implementation Department report to the authority to take necessary action. When the
project started commercial production implementation process is completed and it refers
to Central Recovery Department to recover installment money.
Then Central Recovery Department starts to collect the loaned money. The project
recovers the banks loan as per repayment schedule by Project Implementation
Department. The sponsor default to pay their dues twice at a time then the bank goes to
legal action. If the project stuck-up during construction or could not operate successfully
after implementation then the sponsor will be unable to repay the dues and the project is
sent to Project Rehabilitation Department. Project Rehabilitation Department first
identified the sick firms of BSB, causes of sickness, impacts. This department also
describes the rehabilitation policy of BSB, whether all sick firms are rehabilitated or not,
management, rehabilitation program of Bangladesh Shilpa Bank.
CHAPTER- FOUR

SICK INDUSTRY

YOUR INVESTMENT PARTNER


4.1 WHAT DO WE MEAN BY SICK
INDUSTRY
Industrialization is the prime concern of all the economies, especially in developing
countries. Since the independence, numerous policies and efforts have been made to
accelerate the pace of industrialization in Bangladesh. Bangladesh government has
established specialized financial institution named Bangladesh Shilpa Bank on 31st
October 1972 with view to providing long term and intermediate term loan to the
entrepreneurs for accelerating the process of industrialization of the country by providing
financial assistance and equity support.

At the very beginning of Bangladesh Shilpa Bank, it was the only institution without
whose support industrial project was impossible to build up. About the entire industrial
unit established up to 1990 is the output of Shilpa Bank. It is the bank whose main
objective is to encourage and motivate the potential entrepreneur to set up the new
industry in the various part of the country. Although some commercial banks are
providing short as well as long term industrial support to potential entrepreneurs, but still,
Bangladesh Shilpa Bank is on the prior position. For the industrial development the
contribution of BSB is incomparable.

Bangladesh Shilpa Bank undertakes various projects by providing finance, machinery


and other aids, some projects are implemented successfully and some projects are failed
to attain the goal and these firms are called sick firms according to the BSB language.

Sick industries mean the industries, which either become stuck-up during construction or
could not operate successfully after implementation. These projects could either pay back
the bank’s dues or make any contribution to the national economy. These projects were
identified as sick due to their inability to generate sufficient fund for debt servicing.
There are so many sick industries in Bangladesh, which has no specific statistical data.
Here the main objective is to identify the causes of sickness of these industries.

SICK SITUATION OF A INDUSTRY


Normally BSB meets the long-term credit needs for implementation of the projects. BSB
charter provides for extending working capital to its financed projects only to
a limited scale. While sanctioning loans by BSB provision is made for
commercial banks to provide 70% of the working capital needs. But in most
cases it is found that the project management either can’t raise the required
working capital from the commercial banks, or they can’t raise required
amount in due time. As a result these projects could not go into operation on
schedule time and they become unable to pay the interest and the principal
amount. At last they are treated as sick industry
METHOD USED TO IDENTIFY A SICK
INDUSTRY
There are some specific criteria to identify a sick industry. Two types of factors can be
considered to identify the sick industries. They are-
Quantitative factors
Qualitative factors

A. Quantitative factors:
To identify a sick industry the following quantitative factors are considered-

a) On the basis of Cost- Benefit Analysis

For identifying a sick industry the following criteria may be considered by cost- benefit
analysis. If the cost of the project is more than the benefit then the industry is to be
considered as a sick industry. Sometimes the industry can’t recover the cost of labor,
material. For this reason the industry goes into loss.

b) On the basis of Break Even Analysis

Production
TR Profit

VC

Break-Even Point

FC

O
Cost
An industry should produce up to break-even point due to recover the fixed cost or
overhead cost. If they can’t recover fixed cost then this industry can be considered as a
sick industry.

c) On the basis of Financial Problems/Shortage of Working Capital

The shortage of working capital is the most acute problem for majority of the sick
industries. Working capital is required to finance purchase of required raw materials and
other short term needs of a project after it is implemented. A survey shows that 28% of
the projects suffer due to shortage of capital. The problems, which lead an industry
toward sick, are as follows-
Measurement of investment outlay and cost of the project are not appropriate
When the means of financing is not available
When the project is not profitable
When the production is not reached at the break-even point
When they can’t calculate appropriate risk level of sick
Loan application with insufficient amount of money that would not meet fixed
and operation cost
Cash flow of the project is not available
If actual cost of the project is more than the budgeted cost
Shortage of working capital, i.e. if they do not manage the sufficient working
capital
If interest rate increases the cost of working capital then the project may become
sick
Lack of adequate operating capital
Higher fixed cost, i.e. increase the fixed cost as a result of increasing of the price
of machinery, land or other fixed items
When variable cost increases
When there is no sufficient mortgage
Improper inspection of bank financed project
Insufficient insurance facility
Economic problem comes from the social cost benefit analysis.
B. QUALITATIVE FACTORS:
To identify a sick industry the following qualitative factors can be considered-
The symptoms of Sick Industry
Sick industry is difficult to define. Nonetheless the symptoms of sick industry are as
follows-
• The initiator is unable to pay sufficient money at the implementation stage
• The delay of implementation increases the project cost. It also creates many
problems and the burden of loan interest is increased.
• Lack of full production or frequent obstruction of industry
• The initiator is unable to pay the loan installment and other liabilities
• The failure of payment of loan installment in time increases the burden of loan
amount
• Inability to submit the financial statement in time
• Increase the tendency of undertaking unfair means in preparing the papers of
stock materials
• Goods of the stock increase of unsatisfactory sale
• Profit from investment decrease gradually
• The production level decreases gradually
• Taking loan from various sources at a high rate
• Applied for a large amount of loan
• Non-cooperating tendency with the loan providing bankers
• Lacking of perfection in the market.
Technological problems
Machinery imbalance causing lower capacity utilization is the major technical
problem of many projects. Some also suffer from faulty technical design.
• Whether the preliminary test and studies are not appropriate
• Availability of raw materials, powers and other infrastructural facilities are
not established.
• The selected scale of operation is not optimal
• The production process chosen is not suitable
• The equipment and machine chosen are not appropriate
• Lack of modern technology like incapable to use the computer and modern
machinery
• If the selection of machinery becomes faulty, it will not ensure the
achievement of objectives
• Wrongly or inappropriate selection of the machinery
• Lower capacity of the machine resulting price will be higher, i.e. production
cost higher
• Inconsistency between the origin of raw materials and the factory location
• Production of products and final consumption adversely affect the business
• Lack of infrastructure facility
• Selection of old and backdated technologies to be used in production
• Delay of machinery procurement & rapidly change in technological
environment
• Unavailability of supply of gas, electricity and water etc
1. Administrative and Managerial problems
Success of a firm largely depends on management. There are some internal conflict
between the workers and managers. A survey reveals that 30% of the projects suffer due
to administrative and managerial problems. The administrative problems, which lead an
industry towards sick, are as follows-

When the management is not capable to manage all the managerial aspects;
management should have proper planning, organizing, controlling, administrating and
monitoring.
Weak management of the project
Lack of efficiency of employment as well as managements
Conflict and also death of management’s partner
Death of main entrepreneur of the project
Insufficient employees
Unskilled human resources
Corruption and intentional misuse of organizational assets

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


Marketing Problems

If the aggregate demand of products of proposed project is not possible to fill


up.

If due to national financial crises product demand decrease

Introduction of new brand product

Wrong forecasting about the market

When change the consumption trends in the past and present consumption level

If change occurs in the Import and export policy

When market share of the project is under low appraisal

Smuggling of substitute goods

If the raw material of the product is not purchased at appropriate tim

Improper market justification

If production cost is high resulting selling price high which ultimately decreases
the demand

Lack of market expansion and production diversification

Shortage of raw material supply

High competition in the market

Cheap price of the foreign product

Economic Problems
]
The economic problems, which lead an industry toward sickness, are as follows-
• Economic problem comes from the special cost benefit analysis
• It does not impact of the project on the distribution of the income in the
society as well as the level of saving and investment.

Political problems

The political problems, which lead an industry toward sick, are as follows-
Political pressure
Political instability, which hampers the production
Insufficient facility provided by govt. to industrialist like tax rebate
Political problem like worker unrest, hartal
Political pressure to loan procurement
Inappropriate action taken by govt. to protect smuggling
• Political terrorism.

Other Reasons of Sickness

Except the above problems there are also some problems, which leads an industry
towards sickness. A survey reveals that 13% of the projects suffer due to other problems,
which are as follows-
Selection of inappropriate industrial unit, which is not financial and logically
viable in concerned country
Delay of loan application
Internal delay of industries construction after loan sanction
If a portion of loan amount used for personal use
Delay of operation start
Over estimation of mortgage value
Delay of loan procurement and sanctioning process
Delay of documentation formalities in respect of loan
Causing of rehabilitation measure
Insufficient enforcement of law for recovery of loan
Inappropriate location of industries
Natural disaster that hampered production
Terrorism that hampered to establish an industry
Delay of implementation

IDENTIFIED SICK INDUSTRIES


In Bangladesh there are so many sick industries. The sick industry concept is not the
newest one. It is occurring from the pre-independence of Bangladesh and Bangladesh
inherent some sick industries from its birth. After independence this is also continuing.
The exact figure of sick industry is not identified.

Some Sick Industries


G.M.K Textile Ltd. Ali & Sons Ltd. Malik Auto Rice Mill
Meraj Fabrics Ltd. Shardar Textile Mills Ltd. Al-Amin Lee Factory
Jahan Group of printing & Nima Corporation Ltd. United company
packaging
Al-Amin Printing & J.K.K Industry Ltd Mitaly Enterprise Pvt. Ltd
packaging
Riad Products Pvt. Ltd Grand Dhaka Hotel Pvt. Ltd Helal Engineering Pvt. Ltd
Tas Toys Pvt. Ltd Hotel Konic Pvt. Ltd Quick Carrier Ltd
Micro Aliment Toronody Water Ways Pvt. Tempkul Ltd
Manufacturing Co. Ltd. Ltd
Hasan Agro Engineering Companygonj Rubber Tito Textile Ltd
Workshop Ltd Industry
Pioneer Iron Foundry & Padma Tyre Retarding Brick Linker Ltd
Engineering Industry
Diamond Industry Pvt. Ltd Shovo Auto Rice Industry Nakko Ice Ltd
Ltd
Jahanara Moulding & South East Enterprise Oriental Foundry
Engineering Workshop
Allama Nails Allied Coxbazar Aqura Resources Khan & Khan
Industry Pvt. Ltd
North Bengal Silicate D & S Auto Rice Mill Uttaran Engineering
Industry Pvt. Ltd complex
4.2 IMPACT OF SICK INDUSTRY IN

BANGLADESH OR BSB
Increase of non-performing assets in organizational level as well as national level
Decrease contribution in GDP and GNP
Decrease in productivity at national level
Average effect in banks profitability
Increases the classified loan
Increase the lending rate of interest, which adversely affect the new and regular
borrowers
Affects adversely in the economic growth rate of the country
Create adverse psychological impact on the prospective entrepreneurs.

4.3 LOAN PORTFOLIO:


During FY 2004-05, loan liabilities of 41 projects were liquidated and 14 new projects
were included in the Bank’s loan portfolio. As on 30th June, 2005 total number of
projects in the loan portfolio stood at 166 with a total loan outstanding of TK 7441.91
million compared to that of 308 projects having a total loan outstanding of TK 13998.11
million in the preceding year. Out of 166 projects in the loan portfolio, 60 were
exported-oriented, 72 import-substituting, and 34 service\ other industries.

SECTOR-WISE POSITION OF BANK’S


LOAN PORTFOLIO
(AS ON 30-06-2005)
Sectors No. of Projects Total Loan
Outstanding(million
taka)
Food & Allied Products 31 491
Jute & Allied Products 3 538
Cotton, Woolen & Synthetic Textiles 53 5304
Paper, Paper Products &Printing 6 177
Tannery & Leather Products 4 100
Non Metallic Mineral Products 2 100
Forest & Wooden Products 1 7
Rubber &Rubber Products 0 0
Basic Metal Products 1 2
Metal Products 5 31
Electrical Machinery & Goods 0 0
Machinery & Spare Parts 6 45
Transport Equipment 6 16
Chemical &Pharmaceuticals 15 198
Petro Chemical Products 5 133
Service Industries 18 204
Miscellaneous 7 96
Total BSB Projects 163 7442
Total BSCIC Sponsored Projects 3 0
Grand Total 166 7442

Food & Allied Products

Jute & Allied Products

3%3%1% 7% Cotton, Woolen &


3% 8% Synthetic Textiles
Paper, Paper Products
&Printing
Chemical
75% &Pharmaceuticals
Service Industries

Sectorwise loan outstanding


Miscellaneous

4.4 LOAN RECOVERED:


Loan recovered 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 the FY 2004-05 was TK. 1400.00 million,
against which actual cash recovery was TK.1391.44 million constituting 99 per cent of
the target. During the reporting year, outstanding loan of TK. 259.48 was regularized
through rescheduling and replacement of bad and doubtful loan accounts
The amount regularized through cash recovery and rescheduling were TK.1124.20
million and TK.149.40 million respectively in FY 2003-2004. During FY 2004-05, the
recovery drive was affected to some extent, among others, due to the ever memorable
serious flood, the country experienced. During 2004-05, the percentage of classified loan
stood at 41% with a 21% decrease over the 62% of the preceding year. In other words,
with a decrease of TK. 6359.69 million during reporting year, the classified amount of
loan stood at TK. 3664.71 million from TK 10024.40 million in the previous
RECOVERY OF LOAN
Category of Loans Amount Recovered (million taka)
(A) Long Term Loans: 915 1061
Long Term Project Loans
Bridge Loan 1 3
Staff Loan 35 34
Administered Loan 105 98
Sub-Total: 1056 1196
(B) Short Term Loans:
Working Capital Loans 27 45
Others(Debenture\ Share\ Loans
against FDR\ Write off) 41 150

Sub-Total 68 195
Grand Total (A+B) 1124 1391

Legal Actions Taken for Recovery of Loans:

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

In FY 2004-2005, legal notices were issued against 33 defaulting companies for recovery
of Bank’s dues while law suits were filed against 11 companies. Besides, 79 sale notice
were published in the national dailies for auction. At the same time efforts were made for
settlement of disputes outside the court through negotiation. As a result, 23 litigated
companies settled the disputes outside the court and assets of 11 projects were sold
through auction during the year.

Loan written off:


During FY 2004-05 the Bank had written off a total loan liability of TK. 6155.28 million
of 171 projects. Out of which 116 for long term, 52 for bridge & 3 for short term Loan.

4.5 RISK MANAGEMENT:


The bank is primarily subject to interest rate, credit and currency risks. The policies and
procedures for managing these risks are outlined in the notes below. The bank has
designed and implemented a framework of controls to identify, monitor and manage
these risks, which are as follows:

CREDIT RISK MANAGEMENT


Credit risk is the risk that one party to a financial instrument will fail to discharge and
obligation and cause the other party to incur a financial loss. Concentration of credit risk
arises when a number of counter parties are engaged in similar business activities or
activities in the same geographical region or have similar economic features that would
cause their ability to meet contractual obligations to be similarly affected by changes in
economic, political or other conditions.

CONCENTRATION OF CREDIT RISK (CRM)


Out of the total financial assets of TK. 8911 million, the financial assets that were
subject to credit risk associated to total credit. The bank’s major credit risk is
concentrated in textile sector. To manage credit risk, the bank applies credit limits to its
customers and obtains adequate collaterals.

Credit risk is the risk that one party to a financial instrument will fail to discharge an
obligation and cause the other party to incur a financial loss. Credit risk in the
Bangladesh Shilpa Bank’s portfolio is monitored, reviewed and analyzed by the Credit
Risk Management (CRM).

CRM determines the quality of the credit portfolio and assists in minimizing potential
losses. To achieve this objective, CRM formulates appropriate credit policies and
procedures for the bank to ensure building and maintaining quality credits and an
efficient credit process.

Bangladesh Shilpa Bank has formed Asset Liabilities Committee (ALCO) to screen
out the banks / financial institutions and determine the maximum risk exposure on each
of them. ALCO also assesses recommends and controls cross border / country risk.

To manage the Non-performing Loans (NPLs), Bangladesh Shilpa Bank has in place
comprehensive remedial management policy, which includes a framework of controls to
identify weak credits and monitoring of these accounts.

INTEREST RATE RISK MANAGEMENT


Interest risk is the risk that the value of a financial instrument will fluctuate due to
changes in the market interest rates. The risks are inherent on deposits, liabilities, loans/
advances and investment of the Bank.

The Assets and Liabilities Committee of Bangladesh Shilpa Bank regularly reviews
the total portfolio of the bank to ensure that risks are minimized and remain within
acceptable limits.

LIQUIDITY RISK MANAGEMENT


Liquidity risk is defined as potential loss arising from the Bank’s inability to meet its
contractual obligations when due. Liquidity risk arises in the general funding of the
Bank’s activities and in the management of its assets. Bank maintains sufficient liquidity
to fund its day to day operations, meet customers deposit withdrawals either on demand
or at contractual maturity meet customers demand for new loans participate in new
investments when opportunities arise and repay borrowing they mature. Hence liquidity
is maintained to meet known as well as unanticipated cash funding need.
Important factors in assuring liquidity is funded on the Bank’s good reputation, the
strength of its strong financial position and credit rating. Liquidity risk is managed in
accordance with a framework of liquidity polices, contracts and limits approved by
ALCO. These polices controls and limits to ensure that Bank maintains well diversified
sources of funding as well sufficient liquidity to meet all its contractual obligations when
due.
The bank can meet the liquidity crisis by taking call loan, short term deposit from other
Bank and Financial Institutions.

A CASE STUDY ABOUT SICK INDUSTRY


1.1 NAME AND LOCATION OF THE PROJECT
[

M/S J.K.K Industries Limited


11, DARUS SALAM MIRPUR DHAKA.L
Head Office : Paribahan Bhaban,
21, Rajuk Avenue Dhaka.
1.2 BOARD OF DIRECTOR
Borrowers and their net worth (position as on: October-1990)

Taka in ‘Lac’
Name Of Father’s Designation
S.L Immovable Net
Name Investment Liability
assets Worth
MD. SIDDIQUK
BHUIYAN
Managing
1. Father: Late. 18.30 2.00 - -
Director
Mojibur Rahman
bhuiyan
MD. ABU
AHMED
2. JAGLUL KARIM Director 0.75 - - -
Father: late, Dr.
Faziul Karim
Total
Classification of project and production capacity:
The project wanted to produce various types of zipper
1.4 Project Execution and Implementation
The construction period for the project was 8 months. The wanted to go in
production in September 1992. But the company could not go in production by
January 1994- Which was time for repayment of loan. As the imported machinery
were identified as unable to produce good quality of zipper. The entrepreneurs
could not go for commercial production.

Sector & Product Mix Sector tick Product Mix


Manufacturing √
Service
Others

1.5 Securities Against BSB’s Loan (Position as on 19-12-93)


Description of Value in ‘Lac’
security original Present Forced Sale
(a) Land With area
(b) Building
(c)Machinery 24.70 14.58 10.00
(d) Others

1.6 Credit Information Board (CIB) On Director’s Credit Exposure (Position as on


30-06-99)
Name of Business Mature of date of Taka in Lac
Date of Sanction
Concern Loan Expire Loan overdue
J.K.K Industries
Term Loan 2-11-90 01-07-04 27 15
Limited
Type of loan Sanction Disbursement
Date Amount Date Amount
(a)Term loan 01-12-90 18.07 21-04-92 21.15
Sub total
(b)cash credit
Pledge
Others
Grand Total 18.07 21.15

Credit Information

30
Amount

20
10
0
Loan overdue
Catagory

1.7
Type of loan Total amount paid so far Amount of last payment
&date
A.Term loan 12.64 0.5 lack Date:05-04-99
B.Cash credit
C.Others
Total 12.64

(2.0) Position of loan A\C S (As on 01-01-99)

Item Taka in lack Grand


Not due Overdue Total Total
Term Cash Term Cash Term Cash
Principal 14.05 10.54 24.59 24.59
Interest 4.93 4.93 4.93
Penal
Interest
Others if 0.04 0.04 0.04
any
Total 14.05 15.51 29.56 29.56

(2.1)Loan Classification Status (As on 31-12-98)

Status Term loan Cash credid


Unclassidfied
Substandard
Doubtful
Bad\Loss √

(2.2)Provision (As on 31-12-98) including cash credit

Item Taka in lack


Term Cash credit Total
Provision 6.72 - 6.72
Interest Suspense 12.20 - 12.20
Total 18.92 - 18.92

(2.3)Downpayment

(a)Required tk ---------------------- lack


(b) Deposited tk --------------------- lack

(c) Shortfall tk -----------------------lack

(2.4)Reasons for short fall: The company could not paid any down payment because the
borrowing company could not start their commercial operation to the specified period.

(2.5) General remarks if any:The company could not start their production for the
problem of machinery so that it could be consider as sick industry.

(2.6) Steps taken to recover the loan by BSB

(1) TO recover the loan , the bank will exert continuous pressure on all companies
director.
(2)The borrowing company paid loan to the BSB from other sources of income i,e trading
business.
(3)Because the loan borrowing company was not sincere to refund the loan.So a notice
was served on the company on 30-06-99.
(4)The loan amount which was paid by the loan borrowing company after deducting the
principal amount, the rest of the amount could be paid within 90 days.
(5)Recommendation of the special committee of BSB for waiver of interest.

(2.7)Recommendation of the special committee regarding waiver of interest

(1)To waiver of the penal interest (if any) and general interest 100%
(2)Payment after deducting waiver of interest should be paid within 30 days in
accordance with repayment schedule stipulated by the bank.

(3)At first the borrowing company have to pay the down payment (5% of principal
amount , litigation & other cost) to apply for waiver of interest facility .They have to
apply within 30days of getting the letter from the bank.

(4) The afore mentioned recommendation will be implemented and then the law suit will
be revoked.

(2.8)Circumstances under which rebate facilities had been allowed:

(1)They could not go for operation in spite of assembling machinery in the factory.
(2)The imported machinery was identified as unable to produce good quality of zipper.

(3)The imported machinery was considered as obsolete.


(4) The borrowers were inclined to repay the loan from their personnel sources in
accordance with recommendation of special committee for waiver interest.
(5)The subsidies of taka 15.36 lack will be received from the governme

(2.9) The estimated value of the assets of the project was taka 8 lack to 10 lack on 19-
10-99.

3.0 Statement of Outstanding Loan:


Types Amount (in Lackh)
A). Long term Loan:
Non expired Loan 12. 18
B). Expired Loan
Principle 9.61
Interest 16.48
IDCP 0.93
Others .05
Total expired Loan 27.09
Total (Long and expired Loan ) 39.25
Outstanding Loan

20
15

Amount
10
5
0
Non Principle Interest IDCP Others
expired
Loan

Types

(3.1) Loan Repayment Schedule


M\S J.k.k Industries Limited

Installment Installment Date Amount


1st 31-03-2001 2.12
2nd 30-06-2001 2.12
3rd 30-09-2001 2.12
4th 31-12-2001 2.12
5th 31-03-2002 2.12
6th 30-06-2002 2.12
7th 30-09-2002 2.12
8th 31-12-2002 2.12
9th 31-03-2003 2.12
10th 30-06-2003 2.08
Total 21.16

(3.2) Conditions for repayment of loan:


(1) Interest will not be imposed on the company’s loan a\c from 01-10-2000.
(2) The loan will be refunded by 10, three monthly installments of which the first 9
installments amounting to taka 2.12 lacks and the last installment amounting to taka 2.08
lacks. The date of first installment is 31-06-2003 and the date of last installment is 30-06-
2003.
(3) If the company failed to repay any of 2 installments then the rebate facilities will be
cancelled.
(4) Approval of bank is to be taken to sell the assets of the project and the selling price
will have to deposit to the bank.
(5) If any of installments is delayed for sometimes then interest will be charged for that
delayed period.
(6) At last the loan amount of the company will have to be liquidated.

(3.3) But the borrowing company could not paid the loan amount within the specified
period. The loan repayment facility extended by the BSB from 30-06-2003 to 30-04-2004
by the two installments. The borrowing company paid the last installment on 17-06-
2004.Finally Board of Directors meeting took the decision to refund their documents
against the loan provided by Bangladesh Shilpa Bank.

(3.4) Recommendation:
The recommendation to resolve sickness from my point of view is as follows:
(1) There are various reasons behind the sickness of the project .To identify the reasons
why the project is sick..
(2) Some employees are involved to sanction the loan to the entrepreneur. To identify
employee who is liable for this sick project.
(3) Proper punishment should be given to the liable person. Otherwise they could not
change their nature.
(4) Properly check the feasibility report before issuing loan.
(5) There are various polices, rules and regulations are existing in the BSB. Proper policy
to be adopted and implemented.
(6) Project must be scrutinized in and appropriate manner.
(7) Political pressure should be ignored.
(8) BSB should give more consideration on physical investigation before issuing loan.

5.1 Introduction CHAPTER-----5


Rehabilitation means to reshape the existing industries or projects so that it may operate
successfully in future. Keeping it mind I tried my best to find the appropriate way to
rehabilitate a sick industry.

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.

5.3 Facilities provided under rehabilitation program


We can explain 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.
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

5.4 Rehabilitation Policy


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

In the case of rehabilitating sick industries the bank takes different policies in situation
which are given as follows:
5.5 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.

5.6 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.

5.6 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.
5.8 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.
5.9 Are all-sick industries are rehabilitated?
All sick industries are not rehabilitating because the all-sick firms have not all
possibilities to rehabilitate. Its mainly depends on the nature of sickness. The sick
industry which is probable to rehabilitate by providing and assisting the following
supports
5.10 Which industries are rehabilitated and which industries are not
rehabilitated
A. Sick industries, which are rehabilitable
Changing of management structure
Providing financial aids or loan without interest or lower rate of interest
Financial treatment that the amount of interest is to be released
Assisting for replacement of machine
Rehabilitation is sometimes depending on merit of the project.
Providing consulting service
A. Success about the proper way
B. Inspiration by providing motivation

B. Sick industries, which are not rehabilitable


After considering a firm as sick, then the firms are taken into rehabilitation by aiding
above additional support of those the sick firm that can recover the additional investment
then it seems to be as rehabilitated firm otherwise not.

5.10 Relationship between appraisal practices, monitoring and sickness


These three things are very much interrelated. A project goes into sickness due to
inappropriate appraisal practice and monitoring. The linkage among them is discussed
below-
5.10(a) Appraisal Practices
Appraisal practices that are done from the five aspects such as-
1. Management aspect
2. Technical aspect
3. Financial aspect
4. Economic aspect
Whether the project is feasible or not from the above mentioned perspective of aspects.
5.10(b) Monitoring
Monitoring is to supervise and control after the implementation of during the
implementation of the project. The monitoring from the viewpoint of the bank is to
proper utilization of loans and recover the loan payment with due time.

5.10(c) Sickness
When monitoring and appraisal practice is not accomplished properly then the project fall
in sickness. So, project implementation that depends on appropriate monitoring and
appraisal practice.

5.11 Rehabilitation program


The BSB also puts realistic efforts to rehabilitate its sick, problem-ridden and stuck-up
projects. In this perspective BSB has taken three-dimensional measures comprising of
1. Debt relief
2. Injection of additional funds
3. Direct management
The bank for rehabilitation of the sick projects took these three steps. It is mentionable
that with a view to making such projects capable of debt servicing through profitable
operation, the bank tried to solve their problems through a combination of measures
including a financial package.

The bank has so far rehabilitated 53 such projects. The list of these projects is already
mentioned in the sick industry chapter of this report. A summarized position of the
facilities extended under its rehabilitation program is shown below-
Types of facilities Amount involved (million taka)
Interest Waiver Allowed 880
Block Account Facility Provided 456
Loan Rephrased 258
Sanction of loan 279

The bank also makes a program of taking over management of the sick projects directly
where the above measures were not considered sufficient due to inefficient
management/mismanagement. So they created a department called “ Sick Project
Management Department” for ensuring efficient management of such sick projects. The
responsibility of this department is to make such projects capable of debts servicing
through profitable operation. So the bank continued sanctioning of term loans during FY
2003-2004. 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 Number Local Foreign Total Number Local Foreign Total
of projects of currency currency of currency currency
projects projects
New 21 687 - 687 34 826 - 826
projects
Existing 3 166 - 166 1 47 - 47
projects
(BMRE)
Additional 3 136 - 136 3 136 - 136
loans
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-

5.12 Measures taken by BSB

Loan outstanding Measures taken (Million TK.)


(Million TK.)
Total outstanding

Block A/C

Working Capital
Additional Loans
Waiver of interest

Equity participation
Projects

Rephasement
Overdue

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 30 (5) 4(2)
(16)
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 53 118 121 104 263 93 (15) 23 (6)
(21) (19) (17) (39)
Source: Project rehabilitation department of BSB
Note: Parentheses indicate number of projects

5.13 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 Location
01. S.S.R Chemical Industries Ltd. Dhaka
02. Islam Polymers & Plasticizer Ltd. Tangail
03. Raja Plastic Industries Ltd. Gazipur
04. KDH Laboratories Ltd. Dhaka
05. Asiatic Business Ltd. Sylhet
06. Pharmadesh Laboratory Ltd. Dhaka
Cotton, Woolen & Synthetic Textiles
01. Azim Mannan Garments Ltd. Chittagong
02. Desh Gannents Ltd. Chittagong
03. Jems Sweaters (Pvt) Ltd. Dhaka
04. Auto Spinning Mills Ltd. Gazipur
05. Techno Textile Mills Ltd. Gazipur
Food & Allied Products
01. Meenhar Sea Foods Ltd. Chittagong
02. Mimi Chocolate (Bd) Ltd. Dhaka
03. Modern Industries (Bd) Ltd. Munshigonj
04. Mustafa Cold Storage Ltd. Rangpur
05. Bangladesh Beverage Industries Ltd. Dhaka
06. Bengal Fish & Frogleg (Export) Ltd. Chittagong
Paper, Paper product & Printing
01. Eagle Box & Carton Mfg. Ltd. Dhaka
02. Holiday Printing Ltd. Dhaka
03. Toka Ink Ltd. Dhaka
04. Bangladesh Paper Product Ltd. Chittagong
05. Orient color Printers Ltd. Chittagong
06. Transfer Paper Ltd. Bogra
Tannery & its products
01. Apex Footwar Ltd. Dhaka
02. Lexco Ltd. Dhaka
03. Leather Board Ltd. Dhaka
04. Comfort Footwar Ltd. Dhaka
05. Bangladesh Chemical Ltd. Narayangonj
Non-metallic Mineral Products
01. Savar Refractories Ltd. Dhaka
02. Tajma Ceramic Industries Ltd. Bogra
03. Standard Ceramic Industries Ltd. Gazipur
Metal products
01. Rangpur Foundry Ltd. Rangpur
02. Scala Industries Ltd. Gazipur
03. Oriental Foundry & Agro Engineering Ltd. Dhaka
04. Bogra Metal Industries (Pvt.) Ltd. Bogra
Electrical Machinery & Goods
01. Bangladesh Lamps Ltd. Dhaka
02. National Fans Ltd. Gazipur
03. Eastern Tubes Ltd. Dhaka
04. National Accessories Ltd. Chittagong
Service Industries & Miscellaneous
01. Hotel Simon Ltd. Cox’s Bazar
02. Hotel Elysium Ltd. Dhaka
03. G.Q. Ball Pet Ltd. Magura
04. Rajanigandha Tankers Ltd. Dhaka

Source: Project Rehabilitation Department of BSB


Chapter-06
Findings, Recommendation &
Concluding Remark

YOUR PARTNER IN INDUSTRIALIZATION

6.1 Introduction
Bangladesh Shilpa Bank plays a vital role for industrialization as a developed financial
institution. BSB is continuing its bolstering endeavor for up-graduation of our economy.
Although there are a lot of favorable and strengthen position of BSB in respect of its
activities. Nevertheless BSB has some drawbacks that are responsible for huge amount of
losses each year. BSB should overcome such problem as early as possible to become a
profitable one. One important problem of BSB is that it is a decentralized organization
and each department is responsible for particular activities but they have lack of co-
ordination to achieve the central objectives. We observed a large number of projects are
sick and they are loan defaulter. For that I criticize the loan appraisal procedure because it
is the vital documents for loan issue. In this situation I recommended some points that
will help BSB to overcome some of their problems.

6.2 Findings of the Study


During the internship program I have found out the following findings from my study:
Sometimes improper feasibility reports are submitted by sponsors, which do not
contain adequate and reliable information.
Sometimes pressure group’s involvement in sanctioning loan
Lack of business experience of the entrepreneurs. So, when they start business
they may be failure in business and they may become loan defaulter.
Lengthy procedure and long time (more than three months) involved in the
appraisal of project.
Lack of adequate, updated and accurate information from the Management
Information System (MIS)
Unstable policy of the government due to political changes over time
Sometimes inefficient allocations of resources create a huge amount of bad debt
ty by them in future means they divert their equity in other purpose after getting the loan
amount.
Lack of effective monitoring in projected work.
Management conflict is one of another important problem in the situation of
sickness.
Lack of motivation and team speed
Lack of proper scheduling in projected work.
Absence of an up-to-date project appraisal manual, because the present manual
was designed 18 years ago. So many aspects should consider which do not cover by
the existing manual.
Dependence on imported technology and non-availability of adequate information
about that from local source. Lack of adequate, updated and accurate information in
the country. Both primary and secondary data are not readily available.
Inadequate attention is paid to analyze risk and an uncertainty associated with the
projects, means only sensitivity analysis is done to analyze the risk.
There is no system of accountability of the project appraisal team if the approved
project fails due to their improper appraisal.
Most of the personnel are not as much experienced and skilled to operate banks
activities in proper way.
Shortage of working capital is another problem because some industry may sick
for this problem.
Inefficient project cost estimation, not considering inflation, different changes in
the cost factors, waste and spoilage, personnel replacement cost etc. As a result
sometimes project become sick.
Because of country’s existing political instability, unstable tariff and fiscal policy
some industries may become sick.
No use of latest technology and permanent IT specialist
Poor quality of local machinery, equipment and construction materials is another
cause for sickness.
• Lack of co-ordination among various financial institutions in exchange of
information.

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


Delay in settlement of case
Project rehabilitation is one of the criteria of BSB that revives the sick project
Finally contribution of BSB is the highest in the industrialization of Bangladesh
though there are some problems.

6.3 Recommendations
As a student of BBA it is very tough to give suggestions to BSB to implement a project
and to rehabilitate a sick industry. Being the prime Development Financing Institution
BSB continues its efforts to make an effective contribution towards expansion of
industrialization process of the country. With keeping this view, I recommend some
suggestions considering the noted problems. The recommendations to resolve sickness
from my viewpoint are as follows:
Sanctioning of loan to the sponsors should be made through making feasibility
report properly.
Loan appraisal procedure is time consuming and to some extent project plan
become irrelevant after getting the loan. Since all the process is completed, he is
bound to take this loan because some expenditure has already been incurred (sunk
cost). As a result loan recovery may slow and sometimes difficult. My suggestion is
that BSB should rearrange appraisal procedure so that the entrepreneurs can take loan
within short period of time.
Experienced and motivated entrepreneurs should be allowed for sanctioning the
loan.
BSB should avoid unnecessary political interfere. If political problem influences
the baking activity must create new problem, no doubt.
BSB should give more consideration on physical investigation before issuing
loan. However project appraisal should be strict so that nobody cal use its loopholes.
Sometimes real entrepreneur does not get bank loan. So actual entrepreneurs
should be identified and give loan.
The projects/industries, which are profitable, should be identified and sanctioned
loan to those projects/industries.
Risk adjusted discount rate method; program evaluation and review technique
(PERT) and probability analysis should be introduced.
Market Research Institution should be established for proper market survey.
A co-ordination cell should be established for sharing information among various
institutions.
Responsibility should be established to all employees according to their
involvement in appraisal project.
Honesty, morality, responsibility and patriotism of employees should be
enhanced.
Properly check the feasibility report before issuing loan.
Proper policy to be adopted and implemented.
BSB must have to identify viable project and make feasibility study through
efficient personnel before sanctioning of loan to an industry.
Employees who are directly involved with loan recovery should be motivated and
experienced.
BSB should introduce modern communication system so that every department or
unit can get information in his or her desk. Now one department must have to go
other departments for information. It is also time consuming. Preserving documents
also need to be computerized instead of filing.
Encouraging the borrower to repay the loan in time. Special arrangements should
be introduced in this respect. Legal steps should be dynamic so that default loan
recovery should be accelerated. And security against the loan should be sufficient to
recover the loan.
Project must be scrutinized in and appropriate manner as well as the sponsor
taking into consideration on the changing environment and economic reforms and
globalization.
National observation committee can be established to analyze, evaluate and solute
proper loan recovery.
In selecting borrower, 5C’s (capital, capacity, character, condition, collateral)
must be considered.
Proper communication should be established with the clients.
Ensure accountability among the appraisal team who appraise the sick industry.
Number of trained supervisor to be revised
Both primary & secondary database of the BSB should be improved &
strengthened.

6.4 Some other important recommendations


 On the basis of interest rate
The interest rate of the bank in different sectors is not favorable to the new entrepreneur.
So the interest rate in priority sector should be truncated to a minimal percentage.
This should be reduced to encourage agro-based industries, small & cottage industries,
which are very much viable for the economic development of a country.

 Promoting new entrepreneurs


No collateral
Tolerable interest rate
No bureaucratic problem

 Encouraging existing entrepreneurs


Lesson the red tappism
Awarding the good entrepreneurs
• Incentives such as lowering interest rate for the existing customer for their better
repayment behavior.
A CASE STUDY ABOUT SICK INDUSTRY

1.3 Name and Location of the Project

M/S J.K.K Industries Limited


11, DARUS SALAM MIRPUR DHAKA.L
Head Office : Paribahan Bhaban,
21, Rajuk Avenue Dhaka.
1.2 Board of director
Borrowers and their net worth (position as on: October-1990)

Taka in ‘Lac’
Name Of Designation
S.L Immovabl Net
Father’s Name Investment Liability
e assets Worth
1. MD. SIDDIQUK
BHUIYAN
Managing
Father: Late. 18.30 2.00 - -
Director
Mojibur Rahman
bhuiyan
2. MD. ABU Director 0.75 - - -
AHMED
JAGLUL
KARIM
Father: late, Dr.
Faziul Karim
Total

(1.3)Classification of project and production capacity:


The project wanted to produce various types of zipper.

1.7 Project Execution and Implementation


The construction period for the project was 8 months. The wanted to go in
production in September 1992. But the company could not go in production by
January 1994- Which was time for repayment of loan. As the imported machinery
were identified as unable to produce good quality of zipper. The entrepreneurs
could not go for commercial production.

1.5

Sector & Product Mix Sector tick Product Mix


Manufacturing √
Service
Others

1.6 Securities Against BSB’s Loan (Position as on 19-12-93)

Description of Value in ‘Lac’


security original Present Forced Sale
(a) Land With area
(b) Building
(c)Machinery 24.70 14.58 10.00
(d) Others

1.8 Credit Information Board (CIB) On Director’s Credit Exposure (Position as on


30-06-99)
Name of Business Mature of date of Taka in Lac
Date of Sanction
Concern Loan Expire Loan overdue
J.K.K Industries
Term Loan 2-11-90 01-07-04 27 15
Limited
Credit Information

30

Amount
20
10
0
Loan overdue
Catagory

Type of loan Sanction Disbursement


Date Amount Date Amount
(a)Term loan 01-12-90 18.07 21-04-92 21.15
Sub total
(b)cash credit
Pledge
Others
Grand Total 18.07 21.15

Type of loan Total amount paid so far Amount of last payment


&date
A.Term loan 12.64 0.5 lack Date:05-04-99
B.Cash credit
C.Others
Total 12.64

(2.0) Position of loan A\C S (As on 01-01-99)

Item Taka in lack Grand


Not due Overdue Total Total
Term Cash Term Cash Term Cash
Principal 14.05 10.54 24.59 24.59
Interest 4.93 4.93 4.93
Penal
Interest
Others if 0.04 0.04 0.04
any
Total 14.05 15.51 29.56 29.56

(2.1)Loan Classification Status (As on 31-12-98)

Status Term loan Cash credid


Unclassidfied
Substandard
Doubtful
Bad\Loss √

(2.2)Provision (As on 31-12-98) including cash credit

Item Taka in lack


Term Cash credit Total
Provision 6.72 - 6.72
Interest Suspense 12.20 - 12.20
Total 18.92 - 18.92

(2.3)Downpayment

(a)Required tk ---------------------- lack

(b) Deposited tk --------------------- lack

(c) Shortfall tk -----------------------lack


(2.4)Reasons for short fall: The company could not paid any down payment because the
borrowing company could not start their commercial operation to the specified period.

(2.5) General remarks if any:The company could not start their production for the
problem of machinery so that it could be consider as sick industry.

(2.6) Steps taken to recover the loan by BSB

(1) TO recover the loan , the bank will exert continuous pressure on all companies
director.
(2)The borrowing company paid loan to the BSB from other sources of income i,e trading
business.
(3)Because the loan borrowing company was not sincere to refund the loan.So a notice
was served on the company on 30-06-99.
(4)The loan amount which was paid by the loan borrowing company after deducting the
principal amount, the rest of the amount could be paid within 90 days.
(5)Recommendation of the special committee of BSB for waiver of interest.

(2.7)Recommendation of the special committee regarding waiver of interest

(1)To waiver of the penal interest (if any) and general interest 100%
(2)Payment after deducting waiver of interest should be paid within 30 days in
accordance with repayment schedule stipulated by the bank.

(3)At first the borrowing company have to pay the down payment (5% of principal
amount , litigation & other cost) to apply for waiver of interest facility .They have to
apply within 30days of getting the letter from the bank.

(4) The afore mentioned recommendation will be implemented and then the law suit will
be revoked.

(2.8)Circumstances under which rebate facilities had been allowed:

(1)They could not go for operation in spite of assembling machinery in the factory.
(2)The imported machinery was identified as unable to produce good quality of zipper.

(3)The imported machinery was considered as obsolete.


(4) The borrowers were inclined to repay the loan from their personnel sources in
accordance with recommendation of special committee for waiver interest.
(5)The subsidies of taka 15.36 lack will be received from the governme

(2.9) The estimated value of the assets of the project was taka 8 lack to 10 lack on 19-
10-99.

3.0 Statement of Outstanding Loan:


Types Amount (in Lackh)
A). Long term Loan:
Non expired Loan 12. 18
B). Expired Loan
Principle 9.61
Interest 16.48
IDCP 0.93
Others .05
Total expired Loan 27.09
Total (Long and expired Loan ) 39.25

Outstanding Loan

20
15
Amount

10
5
0
Non Principle Interest IDCP Others
expired
Loan

Types

(3.2) Loan Repayment Schedule


M\S J.k.k Industries Limited

Installment Installment Date Amount


1st 31-03-2001 2.12
2nd 30-06-2001 2.12
3rd 30-09-2001 2.12
4th 31-12-2001 2.12
5th 31-03-2002 2.12
6th 30-06-2002 2.12
7th 30-09-2002 2.12
8th 31-12-2002 2.12
9th 31-03-2003 2.12
10th 30-06-2003 2.08
Total 21.16

(3.2) Conditions for repayment of loan:


(1) Interest will not be imposed on the company’s loan a\c from 01-10-2000.
(2) The loan will be refunded by 10, three monthly installments of which the first 9
installments amounting to taka 2.12 lacks and the last installment amounting to taka 2.08
lacks. The date of first installment is 31-06-2003 and the date of last installment is 30-06-
2003.
(3) If the company failed to repay any of 2 installments then the rebate facilities will be
cancelled.
(4) Approval of bank is to be taken to sell the assets of the project and the selling price
will have to deposit to the bank.
(5) If any of installments is delayed for sometimes then interest will be charged for that
delayed period.
(6) At last the loan amount of the company will have to be liquidated.

(3.3) But the borrowing company could not paid the loan amount within the specified
period. The loan repayment facility extended by the BSB from 30-06-2003 to 30-04-2004
by the two installments. The borrowing company paid the last installment on 17-06-
2004.Finally Board of Directors meeting took the decision to refund their documents
against the loan provided by Bangladesh Shilpa Bank.

(3.4) Recommendation:
The recommendation to resolve sickness from my point of view is as follows:
(9) There are various reasons behind the sickness of the project .To identify the reasons
why the project is sick..
(10) Some employees are involved to sanction the loan to the entrepreneur. To
identify employee who is liable for this sick project.
(11) Proper punishment should be given to the liable person. Otherwise they
could not change their nature.
(12) Properly check the feasibility report before issuing loan.
(13) There are various polices, rules and regulations are existing in the BSB.
Proper policy to be adopted and implemented.
(14) Project must be scrutinized in and appropriate manner.
(15) Political pressure should be ignored.
(16) BSB should give more consideration on physical investigation before
issuing loan.