Internship Report: Bangladesh Shilpa Bank

Loan Operations Analysis & Evaluation: Bangladesh Shilpa Bank
Internship Report
ON
Loan Operations Analysis & Evaluation:
Bangladesh Shilpa Bank
YOUR PARTNER IN INDUSTRIALIZATION

Internship Report
ON
Loan Operations Analysis & Evaluation:
Bangladesh Shilpa Bank
Submitted To
Dr. Md. Afjal Hossain

Professor
Internship Supervisor,
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Maarrkkeettiinngg
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Buussiinneessss SSttuuddiieess
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Unniivveerrssiittyy ooff D
Dhhaakkaa
Prepared By
MD. Abul Kalam Azad

MBA Roll No.-102
MBA 6nd Batch
Department of Marketing
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Unniivveerrssiittyy O
Off D
Dhhaakkaa
Department of Marketing Date of Submission

University of Dhaka October 15, 2006
Letter of Transmittal
August 19, 2006
Mr. Abu Taleb

Supervisor & Assistant Professor
Department of Banking
University of Dhaka
Subject: Solicitation for acceptance of the “Internship Report”.
Dear Sir,
I am pleased to submit my internship report after successful completion of internship
program on Rehabilitation of Sick Industries: An Evaluation in Bangladesh Shilpa
Bank, Head Office, Dhaka-1000. I am absolutely pleased on my department for
replacement in a specialized bank named Bangladesh Shilpa Bank. I was assigned to
engage with the bank from July 24, 2006. This report is an outcome of the internship
program I have undergone.
The preparation of this formal report is of an integrated part of our M.B.A program and I
am quite happy to submit it duly applying all that I think should have to be included and
which should not to be included. It was a great experience for me and though I am on the
learning curve but, this report has put an impression on my mind all the matters of the
efficient management of one‟s time, skills, experience, knowledge, and finally reality. If I
am not asked to submit this report then it might be like that I am going out of our
program without having something so much important for my life and so much practical.
I strongly believe that this sort of knowledge is an invaluable asset in my life.
Finally, thank you for your supportive thought and kind consideration for formulating an
idea and developing the structure of the report. All the works presented here is done with
utmost sincerely and honestly. I have tried to make this report comprehensive and
informative. I hope any unintentional mistakes that may remain in this report will be
considered with compassion.
Thanking You,
-----------------------
(Md. Abdul Malek)
MBA Roll: 2-241
MBA 2nd Batch,

University of Dhaka
Acknowledgement
It is well known that practical knowledge in subject matter is essential to substantiate the theoretical
knowledge gathered in the educational institutions. In order to resolve the dichotomy between these
areas, I was assigned to carry out on internship program in Bangladesh Shilpa Bank. When I got
chance to work as intern in Bangladesh Shilpa Bank, it was like a long cherished dream to come to
reality.
At the very outset, I would like to thanks to the All Mighty Allah for special blessing in completing
the report. There are also a few people who really deserve to be thanked for making this paper a
success. Without their support this paper could never have been completed.
This internship report is an accumulation of many people’s effort. So with my full honesty I would
like to show my gratitude to them who helped me in preparing this report. First of all we would like to
thank the Bangladesh Shilpa Bank authority to give me the opportunity for internship program. In
this regard I express my gratitude to Mr. Abdul Awal Chowdhury, Asst. General Manager, Training
Department, Bangladesh Shilpa Bank, to allow me to complete my internship in the bank. I am also
indebted to Engineer A.S.M. Masudul Alam, Assistant General Manager, Project Rehabilitation
Department, for providing his profound guidelines. In this regard I also express our heartiest gratitude
to the officials of the various departments of the bank. Habibur Rahman Patwari, Deputy General
Manager of the Department of Loan Operation Department also deserves to get special thanks for his
kind discussion.
Especially I am grateful to Mrs. Maksuda Siddiqua, Officer, Training Department who provided
various information and materials. I am also thankful to the Department of Banking, University of
Dhaka for giving me such exposure to the practical business world.
My special thanks goes to my internship group members: Md. Faruquzzaman (Department of
Accounting & Information System), Md. Shahidul Islam (Department of Banking), Mohammad
Anower Hossain (Department of Banking) and Md. Akabbor Hossain (Department of Marketing) for
their help in preparing this report.
Finally, my sincere thanks go to my internship supervisor Mr. Abu Taleb, Assistant Professor,
Department of Banking, University of Dhaka for his appropriate suggestion, moral support and
invaluable co-operation, inspirations from time to time in completing the internship program. His
extended support and advice, any time discussion helped me more than anybody in this regard.
However, the responsibilities of errors and omissions in the report, if any, lie with me.
Executive Summary
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. Internship Program brings a student closer to the real life
situation and thereby helps to launch a career with some prior experience. The internship
program at Bangladesh Shilpa Bank helped me a lot to learn about the practical
environment and situation of a financial institution and also make up a bridge between
the theoretical and practical aspects. Internship Program is also an integral part of MBA
Program.
The report is prepared on the basis of few days‟ practical experience at the Bangladesh
Shilpa Bank (BSB). This report is organized as follows:
Section-1: contains background of study, objective of the study, statement of the

problem, methodology of the study, justification of the study, report organization,
limitation of the study and benefits of the study. Section-2: contains brief overview of
BSB and the functions of its various departments. Section-3: contains research themes,
findings and suggestions of Bangladesh Institute of Development Studies& Ministry of
Industry on sick industries and various newspaper reports on sick industries
rehabilitation. Section-4: contains method used to identify a sick industry, some
identified industries on the basis of some criteria, precautionary measures regarding sick
industries, rehabilitation policy and programs of Bangladesh Shilpa Bank, role of Project
Rehabilitation Department of BSB regarding the rehabilitation of the sick industries and
their success in this regard. Section-5: contains the findings, suggestive measures &
concluding remarks of the report.
All information included in this study is taken mainly from various manuals of various
departments of BSB, annual report of BSB 2004-2005, loan sanctioning letter, research
paper & Internet etc.
Certainly there are some problems in their rehabilitation of sick industries. In order to
overcome these problems, some suggestive measures have been included in my study.
TABLE OF CONTENTS
Subjects Page no.
Acknowledgement
Executive Summary
Section-01: Introduction of the Report
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11..66 RReeppoorrtt oorrggaanniizzaattiioonn 04
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11..88 BBeenneeffiittss ooff tthhee SSttuuddyy 05
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Meeaassuurreess 23-27
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33..44 M
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4.2(a.2) On the Basis of Break-Even Analysis 43
4.2(a.3) On the Basis of Financial Problems/Shortage of 43-44

Working Capital
4.2(b) Qualitative Factors 44-55
4.2(b.2) The symptoms of Sick Industry 44-45
4.2(b.3) Technological Problems 45-46
4.2(b.4) Administrative and Managerial Problems 46
4.2(b.5) Marketing Problems 47

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4.3 Argenti’s Score Model to Identify a Sick Project 49-51
4.4 Identified Sick Industries 51-53
4.5 Major Causes That Affect the Sick Industries in Bangladesh 54
4.6 Impact of Sick Industry in Bangladesh or BSB 54
4.7 Precautions about Sick Industry 54-55
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44..88((D
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Maarrkkeettiinngg PPeerrssppeeccttiivvee 56-57
4.9 Programs Taken to Rehabilitate the Sick Industries 58
4.10 Facilities Provided Under Rehabilitation Program 58-60
4.11 Are All-Sick Industries Rehabilitated? 61
4.12 The Industries which are Rehabilitated and the Industries 61

which are not Rehabilitated
4.13 Role of Management of Rehabilitation Department of BSB 61-62
4.14 List of a Few Successful Rehabilitated Industries 63-64

Section-05: Findings, Suggestive Measures & Concluding

Remarks 65-70
5.1 Findings Of The Study 65-66
5.2 Suggestive Measures 67-69
Conclusion 70
Form A
Supervisor’s Certificate
This is to certify that the Internship Report on “Rehabilitation of Sick Industry: An

Evaluation in the bonafide record at the report is done by Md. Abdul Malek as a partial
fulfillment of the requirement of Masters‟ of Business Administration (MBA) degree
from the Department of Banking, University of Dhaka.
The Report has been prepared under my guidance and is a record of the bonafide work
carried out successfully.
---------------------------------
Signature of the Supervisor
Form B
Declaration
I do hereby solemnly declare that the work presented in this Internship Report has been
carried out by me and has not been previously submitted to any other University/
College/ Organization for an academic qualification/ certificate/ diploma or degree.
The work I have presented does not breach any existing copyright and no portion of this
report is copied from work done earlier for a degree or otherwise.
I further undertake to indemnify the Department against any loss or damage arising from
breach of the foregoing obligation.
-----------------------------
Signature of the Student
ID. No.-2-241
Batch: 2nd
University of Dhaka
Date:
1.1 Background of the Study…….
The perfect coordination between theory and practice is of paramount importance in the
context of the modern business world in order to resolve the dichotomy between the
theoretical and practical areas. Any academic course of the study has a great value
when it has particular application in the real life. Only theoretical knowledge bears
little importance unless it is applicable to the practical life. When theoretical knowledge
is obtained from a course study it is only the halfway of the subject matter. So we need
proper application of our knowledge to get some benefits from our theoretical
knowledge and to make it more fruitful. Such application is made possible through
internship. For the completion of this internship program, the author of the study was
placed in a bank namely, “Bangladesh Shilpa Bank”. Internship Program brings a
student closer to the real life situation and thereby helps to launch a career with some
prior experience. My internship is on the evaluation of Project Rehabilitation
Department’s functions of BSB.
Bangladesh is one of the countries of manifestation. Here industrial sector is very weak.
So government has established Bangladesh Shilpa Bank to stimulate industrialization.
Since Bangladesh is a developing country and the present economic condition of
Bangladesh is of open market in natures, in this situation, the specialized bank like
BSB can play necessary role toward the economic improvement of BSB is to provide
term loan to different industries and entrepreneurs in Bangladesh. The purpose of BSB
is not only to grant credit but also to develop the country through industrialization.
But all industries are not always successful. Some industries become sick due to
technical, management, economic & political reasons. In my report rehabilitation
procedure of such sick industries has been analyzed.
11..22 SST
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From the perspective of rehabilitation of sick industry in developing country like

Bangladesh, BSB is a unique state owned leading financial institution. BSB provides
financial and technical assistance to broaden the private as well as public sector industrial
base of the country. BSB provides finance both in local and foreign currencies for
establishment of new industrial projects as well as balancing, modernization, replacement
and expansion of existing industrial units in Bangladesh both in private and public
sectors. But activities to industrial development are not emphasizing ones. Bureaucrat,
political interference in case of project appraisal-all these problems are faced in our
country.
11..33 O
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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
11..44 M
MEET
THHO
ODDO
OLLO
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YOOFF T
THHE
E SST
TUUD
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Correct and smooth completion of research work requires adherence to some rules and
methodologies. In order to conduct the report, the decision had been taken to collect
various types of primary data and secondary data. Data have been collected by oral
interviewing the responsible officers. Different form of statistical configurations such as
table percentages rates and ratios has been used to make the study meaningful and
realistic.
After collecting data from the interview and material provided by them, data was first
carefully scrutinized. Then the data was organized as required.
In order to make the study effective and efficient, following two sources of data and
information have been used widely.
(a) Primary information/data
The primary data have been collected by oral interviewing the responsible officers and
staffs of the BSB, practical deskwork, direct observation of the functions of various
departments of BSB and relevant document‟s studies as provided by the officers
concerned.
(b) Secondary Information/data
The secondary information comes from annual report of the BSB, relevant papers/books
and periodicals publication and manual of different departments.
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)
These reports and documents have been analyzed in the light of analytical review. Some
graphical presentation, growth rate and trend analyses have also been used.
11..55 JJU
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CAAT
TIIO
ONNO
OFF T
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As this study has been done based on imperial evidence, it will have both practical and
academic value. It will help the concerned parties to get a clear picture regarding the
contribution of BSB since its inception. From this study one can be able to know about
present practice of BSB in industrial development in our country.
The finding of this report will help to take appropriate actions and steps for the
betterment of existing practice, which basically help the industrial development of the
country. It would also be clear what procedures have BSB has followed to rehabilitate the
sick industries.
It is well known to everybody that institutional education and practical life is totally
different. Practical life is the application of institutional education. So, it is natural to face
realities of life in practical oriented life.
11..66 R
REEPPO
ORRT
TOOR
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ANNIIZ
ZAAT
TIIO
ONN
The report is organized as follows:

 The initial part of the report is the introduction of the report, the history and
background, financial conditions and activities of Bangladesh Shilpa Bank.
 The main part of the report is the literature survey about the sick industry;
methods to identify the sick industries, the quantitative and qualitative factors
used for identification of sick industries, sick industry classification and the
rehabilitation procedure of these sick industries by Bangladesh Shilpa Bank
and include some findings as well as suggestive measures and concluding
remarks.
11..77 L
LIIM
MIIT
TAAT
TIIO
ONNO
OFF T
THHE
E SST
TUUD
DYY
This internship report is my first assignment outside our course curriculum in the
practical life. In performing this report our lack of proper knowledge greatly influenced
in this performance. Beside this, some limitations in preparing this report have been
faced. The main limitations are as follows:
Confidentiality is the main problem; as a result some confidential facts were not
sufficiently disclosed by the respective personnel.
Lack of available up-to-date information
Only few days‟ internship‟s experience is not enough to find out all the pros and
cons of such a vast project.
The employees of BSB are reluctant to supply any information because of
maintaining confidentiality in their record keeping.
As Bangladesh Shilpa Bank is a large financial institution; it is very difficult to
understand each and every aspect of its operation within a very short period of time.
11..88 B
BEEN
NEEFFIIT
TSS O
OFF T
THHE
E SST
TUUD
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This study bridges between practical & theoretical life. It has created an opportunity to
face practical lice for the first time. I have obtained a comprehensive knowledge on the
organization; it has made clear what procedures BSB follows to implement a project & to
rehabilitate the sick industries, it has enriched my personal skills and knowledge on
identification of the causes of sickness of an industry and measures to overcome the
problem and also gained knowledge on rehabilitation programs of BSB.
22..11 B
BAAC
CKKG
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BSSB
B
Non-Bengali entrepreneurs and the public sector nearly monopolized economic activity
in the Pakistan era. Of the very few business professionals are active in East Pakistan
fewer yet survived after the war. Post independence Bangladesh therefore presented a
unique set of opportunities and problems for the private sector. The good news was that
without the stranglehold of the elite Pakistan business family the field was wide open for
the development of a homegrown Bengali private sector, but that both a capital base and
an entirely new entrepreneurial class would have to be developed out of an economic
vacuum.
Capital formation rapidly occurred and the newly nationalized banks found themselves
with serious asset management problem because there were few professional
entrepreneurial risk takers with business skills and proven track records to which this
capital could be made available under normal and prudent banking practice.
Under this sort of circumstances, the former Industrial Development Bank of Pakistan
(IDBP) and the Equity Participation Fund (EDF) both of which were established for the
industrial development of Pakistan were converted into single institution named
Bangladesh Shilpa Bank. Bangladesh Shilpa Bank comes into existence on October 31,
1972 by the Promulgation of Bangladesh Shilpa Bank order 1972 (president‟s order no
129 of 1972). The BSB order, 1972 was amended subsequently by the parliament to
provide more operational autonomy to its management.
The main objective of BSB is to provide finance both in local and foreign currencies for
establishment of new industrial projects as well as balancing, modernization, replacement
and expansion of existing industrial units in Bangladesh both in private and public
sectors. It provides other types of financial assistances like guarantees for credit/loans;
equity support and working capital loan to BSB financed projects.
22..22 IIN
NSST
TIIT
TUUT
TIIO
ONNA
ALLO
OVVE
ERRV
VIIE
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Bangladesh Shilpa Bank comes into existence on October 31, 1972 by the Promulgation
of Bangladesh Shilpa Bank order 1972. The head office of this institution is in Dhaka.
Presently, Bangladesh Shilpa Bank has five divisions, twenty-one departments, three
zonal offices and fifteen branch offices. Total number of employees of the organization is
794, as on the date up to June 30, 2004.
2.3 ORGANIZATION & ITS CAPITAL STRUCTURE AND SOURCES OF FINANCE
Taabbllee –– 0011
T
Established : October 31, 1972

Organization : Head Office - Dhaka
Division - 5
Department - 21
Zonal Office - 3
Branch Office - 15
Manpower - 794
Capital Structure:
Authorized : TK. 2,000 million

Paid-up : TK. 1,320 million
Authorized capital of Bangladesh Shilpa Bank is Tk.. 2000 million and the amount of
paid up capital Tk.. 1320 million. Other sources of Bank‟s fund are the Government,
Bangladesh Bank, Commercial Banks, local/overseas financial institutions and suppliers‟
credit. At least fifty one percent of the authorized capital of Bangladesh Shilpa Bank
must be subscribed by the government and remaining forty nine percent may be
subscribed Bangladeshi nationals or by financial institutions local or foreign. Presently,
100 percent ownership of the bank belongs to the government
22..44 O
OWWN
NEER
RSSH
HIIPP
At least the government subscribes 51% of the authorized capital of BSB and the
remaining 49% is subscribed by Bangladeshi Nationals or by local or foreign financial
institutions. Presently, 100% ownership of the bank belongs to the Government.
22..55 Z
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Bangladesh Shilpa Bank (BSB) is the state owned Leading Development Financial
Institution (DFI) of Bangladesh. 'Shilpa' means industry. BSB provides financial and
technical assistance to broaden the private as well as public sectors industrial base of the
country. It prioritizes, especially, Export Oriented/Export Linkage industrial units,
Efficient Import Substitution, Joint Ventures, Commercialization of local technology and

promotion of agro-based industry.
22..77 M
MAAN
NAAG
GEEM
MEEN
NTT
The overall policy formulation and the general direction of Banks operation vests in a
board of directors appointed by the Government. This Board of Directors consists of
9(nine) members including the Chairman and the Managing Director. Non-Governments
shareholders subscribing to the capital of the bank shall eventually elect 4 directors from
amongst themselves. The Managing Directors is the chief executives of Bank. The
General Managers assist the Managing Director in conducting the overall banking
business.
22..88 FFU
UNNC
CTTIIO
ONNSS
BSB extends term loan facilities in local and foreign currencies to industrial projects
(both new and BMRE) in the private and public sectors. Besides Bank also performs the
following activities:
Provides working capital loans to industrial projects;
Provides equity support in the form of underwriting and bridge finance to

public limited companies
Issues guarantees on behalf of borrowers for repayment of loan;
Extend commercials banking services along with deposit mobilization;
Purchases and sales shares/securities for BSB and on behalf of customers as

member of Dhaka Stock Exchange (DSE) Ltd. and Chittagong Stock Exchange
(CSE) Ltd. for capital market development; and
Conducts projects promotional activities along with preparation of various

sub-sectoral study reports
22..99 IIN
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In BSB interest rate is not same in all sectors. There are differences in interest rate.
Export oriented industries are charged 9% interest rate. Agro based industries, small &
cottage industries, large & medium industries are charged 10% interest rate in case of
long-term loan. In Export loan interest rate starts from 7% to 11% from different case. On
the other hand, in commercial, bridge & other loans interest rate starts from 10% to
14.50%.
22..1100 D
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SSH
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ANNK
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There are eight functional departments of Bangladesh Shilpa Bank. The operational
activities of Bangladesh Shilpa Bank have operated by these departments in different
way. Every department has its own policies, procedure, and strategy to lending, and
implementing credit. Each of the department is depends on each other for sanctioning
loan for propose industries, which applied for loan. Loan Operation Department is the
first step of loan sanction procedure and it is comparatively most important department of
Bangladesh Shilpa Bank.
1. Loan Operation Department

2. Project Implementation Department
3. Human Resource Management Department
4. Law Department
5. Loan Accounting Department
6. Project Rehabilitation Department
7. Central Recovery Department
8. Documentation and Machineries Procurement Department
22..1100A
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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.
FFuunnccttiioonnss ooff L
Looaann O
Oppeerraattiioonn D
Deeppaarrttm
meenntt::
i. At first an application form is supplied to the entrepreneur (required Tk. 1,000), after
the entrepreneur submits filling up the application form. After filling up the
application form it is submitted by the entrepreneur. A project appraisal letter is
supplied by the entrepreneur
ii. To give advice to the entrepreneur about industrial investment. To give loan from
and to appraise the proposed project from various aspects- Management &
organizational appraisal, technical appraisal, marketing appraisal, economic
appraisal & financial appraisal.
iii. To take clearance from privatization board for proposed project, if necessary.
iv. To take necessary action to process and approve co-financing project
v. Loan sanction letter send to subsequent department
vi. To take necessary action to implement the project
vii. Re-evaluate the project on the basis of past evaluated loan agreement if necessary,
according to the updated information
viii. To issue gazette notification about loan procedure on behalf of government
ix. To examine and appraise the joint venture proposal of Bangladeshi and foreign
investors
x. Advise about preparation of loan application form to non-resident people of
Bangladesh
xi. To encourage foreign lease-financing organization who provide equipment and new
technology to set up business in our country.
xii. Keeping of non-resident Bangladeshi and joint investment guarantee statement
preparation, memorandum and approved letter
xiii. To evaluate and give opinion about zonal office sanctioning loan and their lending
activities
xiv. After analyzing the project appraisal, the board decides the loan should be sanctioned
or not;
xv. If the loan is sanctioned it is forwarded to the project implementation department.
22..1100B
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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.
22..1100C
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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.
FFuunnccttiioonnss ooff M
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&DDooccuum
meennttaattiioonn D
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1. Documentation schedule preparation/selection and approving for tender
2. To assist the promoters to invite tender and other formalities
3. Give advice to investor‟s/entrepreneurs about tender invitation to collect project
machinery
4. To analyze the tender price, quality of machinery among the bidders and taking
approval from the authority
5. Documentation and contract completion with loan recovery after loan sanction
6. Examination of project memorandum and statement of affairs
22..1100D
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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.
22..1100E
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Loan Accounting Department is the department, which centrally maintains all loan
amounts of the bank. There are 4 sections, which performs the activities of the
department.
1. Not due section: Not due is the installment not yet due for payment in schedule time
fixed by the project department/Branch officer.
2. Amount due section/overdue section: The payment of installment and interest in not
paid/cleared in time is overdue.
The functions of this section are:
a. Accurately list of balance preparation
b. Advice sending to borrower
c. Quarter/half year by interest charge.
3. Replacement section: When the overdue is rephrased or waived then the replacement
section will do the needful activities.
4. General and policy section:
General and policy section do the following:
a. To prepare the monthly Trial balance.
b. Monthly recovery statement.
c. Monthly disbursement schedule
d. To make entry all the transaction as per daily statement received from the
branch officer.
e. All list of balances of not due send to the Head Office and branch Office.
f. To prepare distribution of work among the officers and staff as specific
guidelines of the authorities.
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If the Bangladesh Shilpa Bank fails to recover its loan in the normal way; it must take
alternative action and file case in the court.
Legal action taken during the year 2003-2005

Position of projects under litigation 2003-2004 2004-2005
Number of projects Number of projects
Legal notice issued 126 33
Filling of suit 205 23
Cases settled outside the court 6 11
Auction 2 11
22..1100G
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The department of Human Resource Management was not it name as now. Modernizing
the structure of the administration of the bank and development the skill of the human
resources and reducing operating cost of the organization. The director‟s 244th meeting
was conducted on 23rd April 1996. In this meeting, rename of the Administration
Department as “Administration & Human Resources Department” and Department of
Labor as “Department of Human Resources Management”.
There are five sections in this department
SL. NO. Section Activities
01 General administration & policy section 1. Fixing principle relating to

human resources
activities/position
2. Fixing principle relating to
organization
3. Fixing principles relating to
delegation of power
4. Activities relating to trade
union
02 Management section 1. Provide employment policy

2. Provide transfer policy
3. Provide promotion policy
4. Fixing pay scale
5. Fixing annual increment
policy
03 Disciplinary section Mitigate the compliant against

personnel
04 Welfare section 1. Provide scholarship policy

2. Assist the helpless personnel
3. Provide retirement benefit
05 Leave & medical section 1. Provide medical facility &

allowance
2. Provide vacation
opportunities
3. Provide conveyance facility
& allowance
22..1100H
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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
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BIID
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Y
Sickness in the industrial units is not a new phenomenon as is evident in the developing
countries. Even in the industrially advanced countries of the world, varying degrees of
sickness are found to occur. An industrial unit may face a number of odds during its
implementation and operation stage because of a number of factors in the environment –
internal and external. If the problems perpetuate & does not permit the unit to pursue the
normal course of operations leading to reasonable utilization of capacity, generation of
surplus, debt servicing, etc, it can be presumed that some kind of sickness has engulfed
the unit and if this trend grows unchecked, it would adversely affect production and
employment in the country besides other socio-economic repercussions. However, it is
also recognized that in a market economy, the survival of the fittest and weeding out of
inefficient industrial units is a natural outcome, which is considered useful as well
because the exit of the non-competitive and loss-incurring units should not pose difficulty
to any society. But sickness assuming an epidemic shape creates concerns to the policy
makers and stakeholders. Experience suggests that small-scale industries are more prone
to sickness as compared to medium and large-scale industries. In this context, sickness in
small industry should not be left only to the market forces. Creation of objective
conditions and enabling environment through suitable policy support are essential for
sustained growth of the small industry sector in the developing economies. It is,
therefore, imperative to diagnose the causes of sickness so that preventive measures are
suggested. Even if a small unit turns sick despite taking all possible precautionary
measures, efforts should be made to find out the possibility of its revival. This warrants
appropriate package of restructuring and rehabilitation strategies. If the unit‟s survival is
still under threat, it should be better allowed to die a natural death.
The researchers have shown the incidence of sickness and causes thereof in the industry
sector of Bangladesh with particular reference to small industry sub-sector and suggest
policy measures, both preventive and corrective, to address the problem of sick industries
in the backdrop of pursuing the rapid industrialization strategy as the major prop for
acceleration of economic growth in their paper. For this purpose, extensive survey of
literature has been made and relevant Govt. publications, pervious studies and various
initiatives taken by the successive Governments have been consulted. Section–II presents
the industrial scenario in Bangladesh, Section-III highlights the role of small industries in
the economy and polices pursued, Section-IV brings out the sickness syndrome
prevailing in the industrial sector of Bangladesh, industrial sickness in neighboring
countries is briefly described in Section – V, and Section-VI deals with the suggested
policy framework for prevention of industrial sickness and rehabilitation measures.
33..22 SSIIC
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In this section the researchers have shown the industrial sicknesses and its incidence in
Bangladesh.
They said that Sick industries refer to those units, which perform poorly against expected
results, incurs cash losses for consecutive years, gradually erode the entire net worth and
obviously fail to service the debt obligations.
They think that the following major criteria are used to identify a sick unit-
A unit incurring financial loss/not being capable to produce at / above break-even

point
A unit incurring continuous cash losses
A unit having negative equity
A unit having excess of current liabilities over current assets
A unit making defaults in payment of principal sums with interest.
A unit having low capacity utilization
A unit having worsening debt-equity ratio

They also observed that it is very difficult to recognize sick units on some definite criteria
as a wide variety of interlinked symptoms characterize the sickness of a unit. Likewise, a
number of causes are responsible for turning an industrial unit as sick. These causes
prevailing simultaneously in a unit may be closely inter-related or even independent of
each other. Some of the causes originate outside the unit (e.g. changes in the structural
and environmental factors like infrastructural problem, govt. policies, etc.) and some crop
up within the unit itself that relate to the functional areas like management, production,
finance etc.
BIDS also made a comprehensive study on sick Industries in 2005. This study based on
Ministry of Industry (MOI) data reveals that the highest incidence of sickness is as
follows-
Sectors % of sickness
The manufacturing of textiles 19.6%
The sub-sectors-food manufacturing 14.3%
Non-electrical machinery 5.7%
Leather and its products 5.4%
It appears from the study that „small scale‟ industries is at the top (72.5%) in terms of
incidence of sickness, followed by "medium" and "large" scale industries – 19.7% and
4.1% respectively.
From the enterprise level survey of the study they found that among the internal factors
causing industrial sickness, the entrepreneurs have singled out use of obsolete technology
as the most important one (23%) followed by faulty employee appointment (15%), lack
of working capital (13%), marketing problem (11%), poor management (9%), and wrong
feasibility (5%). Among the external factors, lack of working capital has been mentioned
as the single most important cause (35%) followed by natural calamities (13%), trade
liberalization (9%), problems in disbursement of project loan (7.5%), poor
infrastructure/utilities (7%), political unrest (5%), and smuggling (3%).
They have also identified some causes of Industrial Sickness and suggested policy
measures for Prevention and Rehabilitation. They classified the causes into two
categories:
(I) External causes (exogenous factors)
The external causes, which are beyond the control of the industrial unit, usually affect the
industry group as a whole.
(II) Internal causes (endogenous factors)
Internal causes occur due to some intra-firm weaknesses in various functional areas of the
unit and are, therefore, management related:
A. INTERNAL
SL. Broad Area Detail Causes

01. Management a. Lack of proper education, training, experience and business
outlook of the Sponsors/Entrepreneurs
b. Poor Entrepreneurial skills
c. Poor Management
d. Poor Equity base
e. Lack of Integrity/Division of Funds
f. Faulty Project Planning and Appraisal
02. Production/ a. Wrong choice of technology

Technical b. Improper utilization of production capacity
c. Imbalanced and Defective Machinery
d. Poor Raw-material Planning
e. Inadequate Quality Control
f. Poor labor relations
g. Location problem
03. Marketing a. Lack of Market Planning

b. Inadequate Market Survey
c. Poor Collections
d. Defective Pricing
04. Finance a. Poor Management of Financial Resources

b. Delay in Mobilization of Equity Funds
c. Faulty Costing
d. Adverse debt-equity combination
e. Lack of Proper Accounting system
05. Personnel a. Lack of Competence

b. Lack of Loyalty
c. Lack of Professionalism
B. EXTERNAL
SL. Broad Area Detail Causes

01. Govt. Policy & a. Frequent Policy changes
Implementation b. Lack of Proper Implementation of Industrial Policies
c. Liberal Import Policies
d. Poor Infrastructure / Frequent Power Disruption
e. Smuggling
f. Fiscal Anomalies
g. Exchange Rate Fluctuation
h. Lack of Co-ordination between various ministries and Govt.
Departments, etc.
i. Over-Saturation of particular industry type / Sector due to
wrong policy
j. Non-availability of Raw-material, etc.
02. Bank & a. Non-availability/Inadequacy of Working Capital

Financial b. Lack of required financial assistance for BMRE
Institutions c. High rate of Interest on bank loan
d. Lack of timely decision & support by the banks and financial
institutions.
03. Environment a. Political Unrest

b. Labor Unrest
c. Market Recession
d. Delay in Project Implementation
a) PREVENTIVE MEASURES
They have shown that small industrial units fall sick much to the occurrence of external
causes while medium and large industries get exposed to sickness largely due to internal
causes. Though it would be hardly impossible to eliminate the causes altogether, attempts
should be made to undertake measures that would reduce the magnitude of ailment in the
industrial units for healthy survival and growth. So, they have suggested to take the
following measures to prevent industrial sickness:
1. Macro-economic Policy changes:
The industrial entrepreneurs should make their own appraisal within a predictable macro-
economic environment. For this, policy changes should not be abrupt, have to be pre-
announced and gradual.
2. Sub-Sector wise Long term Policy:
For each sub-sector, the long-term policy (e.g. for a period of 5 years) should be
announced by the Government so that entrepreneurs‟ appraisal of the policy implications
do take a near-accurate shape.
3. Implementation of the Announced Polices:
There should be effective co-ordination amongst the various ministries, Govt.

Departments and relevant agencies involved for proper implementation of policies related
to industrialization.
4. Development of Small industry Sector:
The small industry sector is characterized by low-level of technology, low equity base,
traditional management practices, poor marketing outlets and undeveloped sub-
contracting arrangement. The small industries should not be left to the market forces
only. The following measures may be taken for preventing sickness in the small-scale
sector:
Arranging access to institutional credit at reasonably lower rate of interest.
Industrial Estates equipped with the required facilities should be set up in suitable
locations.
Entrepreneurship and Technology training should be arranged and then linked

with the provision of credit facilities. A national level training institute for
entrepreneurship development in the small-scale sector should be set up. Meanwhile,
BSCIC Training Institute and DCCI Business Institute may be strengthened for up
gradation of capability of the existing entrepreneurs.
Establishing complimentary relationship with the medium and large industries

should make sub-contracting arrangements. Government supplies may be procured
from small industries as far as possible.
Data Bank should be developed at the Chamber Bodies/BOI/BSCIC to facilitate

the adequate flow of market-related information.
There may be one marketing agency entrusted with the responsibility of

purchasing all goods manufactured by SSI units (Say, up to Tk. 10 million
investment) and the task of channeling sales through various sales depots.
5. Rationalization of Tariff:
In cases where deemed necessary, some protective measures should be taken by

restricting import of the locally produced finished goods so that fiscal anomalies could be
removed.
6. Improvement of Infrastructural Facilities:
Insfrstructural facilities including utilities should be made available to the entrepreneurs

at low cost and at the appropriate time.
7. Monitoring of Saturation in Particular industry Sub-sector:
There should be some agency entrusted with the task of monitoring the establishment of
too many units in the same sub-sector so that over-crowding could be prevented.
8. Development of Linkage Industries:
In order to mitigate the problem of non-availability/scarcity of raw material as well as

marketing of finished goods, backward and forward linkage industries should be set up in
a planned way. Moreover, close linkage of industry with agriculture will help ease
problem of scarcity of raw material.
9. Active Support of Banks and Financial Institutions:
In case of industrial units where term loan is needed, the availability of working
capital should be ensured as part of the financial package.
Banks should provide due attention to process the working capital needs of the
industrial units without any delay.
The banks and financial institutions should actively consider BMRE Loan for the
existing industrial units undergoing the reality of rapid change in technology so that
productive capacities are not rendered idle/underutilized.
Interest rate on loan should be made lower by improving operational efficiency of

the banks. This will help reduce financial costs of the industrial units and thus gain
access to competitiveness.
Bank-client relationship should be based on understanding of the mutual problems

and prospects for greater interest of survival of both the entities.
Banks should improve the quality of project appraisal in order to prevent the
growth of born- sick projects and for that, availability of adequate and accurate data
and skilled manpower have to be ensured.
Banks could fix up a time limit for sanction and disbursement of loan limits for
helping timely implementation of the projects/utilization of capacity of the borrowing
industrial units.
Monitoring system of the projects financed by the banks should be thoroughly

intensive and for this, both off-site and on-site mechanisms should be used in
conjunction with each other in order to take timely steps for prevention of sickness.
Educated entrepreneurs with technical know-how should be encouraged to set up

industrial units. They should be provided with all possible support, both financial and
non-financial without emphasis on collateral.
10. Expansion of Market Base through Increased Exports:
Domestic market is gradually getting squeezed due to the influx of officially imported
foreign goods and smuggled goods. On the one hand, increasing the number of
exportable products should expand export market. On the other, anti-smuggling drive
should be strengthened. For this, import policy should be restructured in a way that
discourages smuggling to a great extent.
11. Use of Predictive Models:
Banks and entrepreneurs should follow some predictive models for early detection of
sickness on the basis of evaluation of financial health of the industrial units.
12. Facilitation of Enabling Environment
Deterioration of Law and Order, extortion, harassment etc. should be checked at any cost.
In case of natural calamities, special assistance should be provided for resilience.
b) REMEDIAL MEASURES
They also suggested the following measures for the industrial units approaching towards
sickness and already turned are as follows:
(i) Every bank and financial institution should have a "Project Rehabilitation Cell"
manned by the experts of various disciplines. There should be ongoing process of
evaluation of the heath of the assisted units by the banks to detect early warning signals.
For this, congenial bank-client relationship is a must for extending co-operation to each
other.
Genuine sick units capable of being revived should be allowed rehabilitation

package by way of rescheduling of existing loans, waiver/remission of interest
payments, conversion of short-term liabilities into long term obligations, etc.
depending on the merit of the each case.
There might be one "Interest Remission Committee" to be formed by the Govt.

from time to time to address the genuine problems of small sick units (where
investment ceiling may be up to Tk. 1 crore). However, this step should not
encourage the non- sick units to avail of this temporary facility. The screening
process should be strict enough to select the genuine sick units for such concession.
As it was followed previously, the Govt. may compensate up to 50% of the waived
interest to the concerned banks.
If necessary, change of management of the sick units should be brought in to

facilitate successful running of the projects.
Only financial and management rehabilitations of the sick units will not bring the
desired result unless Govt. assistance in the form of reduced taxes, duties,
concessions on various charges like gas, electricity, etc., imposition of restriction on
related import items etc are made available.
Bangladesh Bank may set up a sick industry Cell to monitor the performance of
the lending institutions in handling the problems of sick units and to co-ordinate the
rehabilitation efforts of banks, financial institutions, Govt. and other agencies
involved.
Possibilities of mergers and acquisitions may be explored in case of sick industrial

units not capable of being revived by their own strengths. Suitable policy guidelines
may be framed in this regard.
SOEs found chronically sick should not be allowed to operate in the limping state
any further. In case of sick SOEs capable of being revived, disinvestments process
may be expedited.
33..33 SST
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Mr. Saha, Head of Research Division of Depository Financial Institution (DFI) (1997)
carried out a research work on industrial sickness of the DFI- financed projects in
Bangladesh.
He identified the following principal causes are responsible for the sickness of DFI-
financed projects:
i. Internal:
i. Marketing problem (31%)

ii. Management inefficiency and lack of entrepreneurial skills (22%)
iii. Faulty project planning and appraisal (14%)
iv. Imbalance of machinery and inappropriate technology (12%)
v. Implementation delay in (mobilization of equity, etc) (12%)
vi. Others (diversion of funds, labor problem, etc.) (9%)
ii. External:
i. Delays in loan sanction and disbursement (22%)

ii. Non- availability/ shortage of working capital (21%)
iii. Power problem (15%)
iv. Changes in Govt. policy (import liberalization) (13%)
v. Non-availability/ irregular supply of raw material and other critical inputs
(11%)
vi. Natural calamities (57%)
vii. Smuggling, Political unrest (5%)
viii. Others (8%)
He found out the following important findings of the study:
Most of the sick projects (64%) were established during the 1980s‟
Average capacity utilization of the sick projects was 41%
Working capital finance gap (difference between the required working capital and
available working capital) prevailed within the range of 21-80%. for 76.48% of the
sample sick projects.
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YOOFF IIN
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USST
TRRY
Y ((M
MOOII)) -- SSPPO
ONNSSO
ORRE
EDD SSIIC
CKKN
NEESSSS SST
TUUD
DYY
B
BYYT
THHE
EHHO
OUUSSE
EOOFF C
COON
NSSU
ULLT
TAAN
NTTSS L
LTTD
D..
In 1988, under the sponsorship of Ministry of Industries (MOI), Government of

Bangladesh (GOB), the House of Consultants Ltd. undertook a study to develop criteria
and identify the causes of sickness of manufacturing establishments in Bangladesh and
find solutions to remove or at least reduce the impact of the causes. According to the
study, an industrial unit has been defined to be sick if it fails to cover all the costs of
production (including finance cost) and earn normal profit in the long run (i.e., a three –
year period). A set of criteria was developed for the study in order to identify an
industrial unit as sick which are as follows:
If it incurs net loss in consecutive years,
If its debt-equity ratio deteriorates over time (net loss wiping out the equity base),
If it fails to meet debt-servicing liabilities on time,
If it defaulted in payment of past taxes,
If its share price is going down (in case of public limited companies listed in the
stock exchange),
If it is facing working capital problem and its cash ratio is declining over time
(creating liquidity problem).
By applying the above criteria to a sample of 300 industrial units, it was found that 67.3%
were sick in terms of one or more criteria. The extent of sickness is the highest i.e.,
75.8% among the small-scale industries. The major causes contributing to the state of
sickness are listed below:
Poor entrepreneurship
Lack of proper studies

Lack of management & technical knowledge
Low equity base and dishonesty of purpose
Poor market planning
Idle capacity/low capacity
Infrastructure (power, etc)
Shortage of funds (Working capital & BMRE)
The study suggested a number of measures to alleviate the cause of industrial sickness.
The immediate measures included–Easing debt burden, Reappraisal of sick units, Debt-
equity swap, Rescheduling, Funds for BMRE & Working Capital, Manpower training,
uninterrupted power supply, etc. On the other hand, the suggested long run measures
were – conducting sector reviews, developing project preparation capability, creating an
Institute of Technology, creating management capability, etc. However this study suffers
from methodological problem.
33..55 FFU
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D
R
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VIIV
VAAL
LCCE
ELLL
LUUN
NDDE
ERR IIPP--9911
A „Sick Industries rehabilitation and Revival Cell‟ was formed in the middle of 1991 at
the Ministry of Industries (MOI). The cell headed by the Secretary, MOI, and GOB with
representatives of all prominent chambers and financial institutions had the following
terms of reference –
To define a sick industry
To identify sick industries and the reasons thereof on the basis of a survey
To submit report with specific recommendations for arriving at the appropriate

solutions in each case
1. Definition of sick industry according to Sick Industries rehabilitation and

Revival Cell
The cell defined a sick industry as follows –
An industrial unit (a) which could not reach the stage of normal production with normal
profit or (b) has incurred loss or remained at the unprofitable level for consecutive 3 to 6
years from the first year of commercial production or (c) could not produce above the
break-even point for reasons beyond the control of the entrepreneurs.
2. Causes of sick industry according to Sick Industries rehabilitation and

Revival Cell
The Cell identified the following major causes of various types of industries fallen sick:
Selection and Implementation of Projects without the required feasibility studies
Supply of imbalanced and defective machinery
Inadequate/Non-availability of working capital (in majority of the cases)
Non-provision of financial assistance for BMRE, where necessary
Lack of timely decision and support by the financial institutions and the related
agencies (in majority of the cases)
Loss incurred by natural calamities.
Unauthorized inflow of smuggled and officially duty-free foreign goods
Frequent power disruption, irregular supply & high price of power
Improper utilization of productive capacity
Disruption of production due to political unrest, labor unrest, etc

High rate of interest on bank loan
Marketing problem for locally produced goods
Upward movement of exchange rates
Fiscal anomalies between the imported raw material of locally produced goods
and imported finished goods.
Lack of sound management
Lack of proper implementation of industrial policies
3. Recommendations of Sick Industries rehabilitation and Revival Cell for sick

industry
A number of recommendations were suggested by the selection committees separately

sub-sector-wise in order to rehabilitate and revive the identified sick industries, which
were finally approved by the sick industry cell. The principal recommendations were here
as under:
Waiver of 100% penal and 50% - 100% normal interest
Rescheduling of outstanding loan for repayment in easy installments
Provision of necessary working capital, financial and technical assistance to

BMRE cases after conducting fresh feasibility studies
Withdrawal of all filed suits
Supply of electricity and other utilities on regular basis and discontinuance of

peak hours of electricity
Unnecessary delays in providing financial assistance and support to be avoided
Stoppage of unauthorized inflow of foreign goods

Lowering of interest rate on industrial loan
Fiscal anomalies to be removed
Introduction of special insurance scheme on easy terms for natural calamities
Compilation of accurate statistics for investment decision
In order to provide protection to home industry, local goods that are produced
abundantly should be discouraged for import.
The report further suggested that as there exists special need for co-ordination between
the operations of the different ministries, agencies, banks and financial institutions and
the policies and rules of the Govt. and various laws for rehabilitation of sick industries, a
"Board for Industrial and Financial Restructuring" might be formed through enactment of
special laws. Under the same law, there may be a high level appellate authority to review
the appeals of the concerned quarters and provide judgments against the decisions of the
said board.
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NTTH
HEE FFIIFFT
THH FFIIV
VEE--Y
YEEA
ARR
PPL
LAAN
N ((11999977--22000022))
The Fifth Five Year Plan (1997-2002) was launched by the Government. Unlike the
previous Five-Year Plans, the Fifth Five Year Plan recognized the presence of a large
number of sick industries and listed the main reasons therefore as follows:
Depreciation of taka in relation to the foreign currency in which loan capital was
obtained
Technological obsolescence
Withdrawal or lowering of protective tariff wall,
Management inefficiency
Inadequate working capital support by the banking system; and
Pilferages by the sponsors, in collusion with the personnel of the lending banks or
financial institutions
In this paper it has been suggested that during the plan period concrete steps will be taken
to remove the relevant causes of sickness through joint efforts of the owners,
management, labor and the funding agencies.
33..77 SSU
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OFF 11999988--9999 FFO
ORRC
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NGG IIN
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ALL SSIIC
CKKN
NEESSSS
While announcing the national budget for the financial year 1998-99, the Finance
Minister referred to the sick industries in Bangladesh. Though he admitted the realities of
sickness in the context of governing principles of capitalism, he attributed the main
reasons of sickness to mismanagement, political and economic stability and rapid
liberalization and unexpected shifts in economic policy. A package of supportive
measures was proposed in the budget speech with a view to scaling down the problems of
sick industries which are follows:
Since small entrepreneurs are adversely affected by the phenomenon of sickness

and detailed investment analysis is hardly possible in case of small units, steps would
be taken for providing assistance to the small sick industries already registered with
MOI.
A special committee would be set up to consider remission of interest and penal

interest up to 100% of those enlisted sick industries which had borrowed up to Tk. 50
lacs from any state-owned bank. The Government would reimburse 50% of such
remitted interest amount to banks. The amount remaining due after remission would
become payable by three years in monthly installments.
Sponsors of sick industries having borrowed more than Tk. 50 lacs, and being
unable to pay the dues, may submit compromise proposal to the banks for decision on
the basis of bank-client relationship. In cases, the sponsors believe that their sick
industries can be profitably rehabilitated; they may submit feasibility reports to the
concerned banks for taking appropriate steps on the basis of guidelines given by the
special committee.
Where court cases are pending, all proceedings would be taken within the legal
framework without compromising the interests of the banks.
Upon implementation of the above measures, all Govt. Committees relating to

sick industries would stand abolished and hence, all sick industries would have to
seek redress under the Bankruptcy Act.
The Government will issue bonds worth Tk. 60 crore in FY 1998-99 to

compensate the banks for implementation of the above measures. If necessary,
allocations for this purpose may be enhanced in the future.
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The Ministry of Finance considered some observations of SIA and constituted a „Special
Committee on Interest Remission‟ under the convener ship of a retired judge.
While resolving the cases under consideration for remission of interest, the following
reasons were found to be dominant in contributing to sickness in industries:
Selection of project without proper feasibility studies and appraisal
Failure in selecting appropriate technology
Supply of defective machinery due to inexperience of both entrepreneurs and

banks
Problem in marketing the produced goods

Location problem and lack of skilled manpower
Non-availability/Inadequacy of working capital from the financing banks
Delay in financing decision and loan disbursement
Natural disasters
Smuggling of foreign goods/liberal import policy
Frequent power disruption/Non-availability of gas and power connection.
Frequent changes in exchange rates and fiscal anomalies.
Lack of co-ordination amongst various ministries and Govt. departments
Over-crowding of industries in the same sub-sector
Deterioration of law and order, political instability, extortion, strike, etc
Management inefficiency, etc
However, in April 2001 the Finance Minister in his speech remarked that there was no
scope for continuing state support for rescue of sick industries. He added that the Govt.
tried its best to reduce the number of sick industries from over 1700 to less than 400
through supportive measures. But this should not be looked upon as a permanent
phenomenon in a market oriented economy.
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Govt. urged to frame law for protecting sick industries
--Staff Correspondent
President of Bangladesh sick Industries Association Chowdhury Muhammad Ishaq urged

the government to constitute a rehabilitation and reconstruction board and frame an
appropriate law for protecting the sick industries of the country.
He said at a Press conference held at the National Press Club on Saturday, "The
government had identified 2580 industries as the sick industries and of them 100 are in
the public sector. About one lakh workers have become jobless and 49000 people have
been affected directly due to serious disruption in these industries,"
He said- only 700 sick industries could be traced and others were abolished. The
president of the association alleged that the government policy for rescheduling the loans
was not the borrower friendly.
He urged for keeping the sick industries out of the purview of Artha Rin Adalat.
Responding to a question he said the association had submitted its demands to the
government and met with the Minister for Law and Parliamentary Affairs Barrister
Moudud Ahmed. The minister according to them assured the association of reviewing the
problem faced by the sick industries.
.
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Entrepreneurs in distress: Rescue plan of sick industries shelved

--By Staff Reporter
Chowdhury Muhammad Ishaq, President of Bangladesh sick Industries Association said

that entrepreneurs burdened with their sick industries have been passing their days in
distress since 1991, due to non-implementation of the government decision to write off
bank‟s bad debts.
He thinks that the causes which led to loss of commercial viability of these sick units
included selection and implementation of the projects without judging viability, supply of
sub-standard machines for the units, non-cooperation of banks to provide working capital
to the units, lack of fund for BMRE of the projects, affected by the natural calamities,
power outages, drastic fall in productivity for various reasons, lack of protection for
marketing of the local products, reduction of export market, continued losses, non-
availability of connections of gas and electricity as per need, absence of proper industrial
policy and lack of efficient management.
He also identified non-cooperation of the commercial banks to provide working capital in

time as key factor for turning their industrial units sick.
The association leader also informed that the sick Industries Rehabilitation Cell formed
as per government gazette notification on June 1991, identified sick units and
recommended immediate measures to rehabilitate the sick units by waiving their bad
debts. But instead of paying heed to the cause, Bangladesh Bank issued a circular asking
the commercial banks and other financial institutions to go for legal battle and settle bank
loans through filing of cases against the defaulters before the Artha Rin Adalat, they
regretted.
Secretary General of the Association Rafiqul Hoque Akand informed that as per a survey,
at least 700 private sick industries needs write off their debts on principle loan involving
Taka 300 crore,, the association leaders said adding that the remaining 1,780 enterprises
have no existence due to various factors including fund constraints.
Senior Vice- President of the association M Siddiqur Rahman also demands necessary
steps immediately for promulgation of Bangladesh sick Industries Act and constitution of
sick Industries Rehabilitation Reconstruction Board to address the problem in a proper
manner.
He also demanded scrapping of cases filed against the sick industries entrepreneurs under
the existing Bankruptcy law to end their harassment.
Industrialization is the prime concern of all the economies, especially in developing

countries. Since the independence, numerous policies and efforts have been made to
accelerate the pace of industrialization in Bangladesh. Bangladesh government has
established specialized financial institution named Bangladesh Shilpa Bank on 31st
October 1972 with view to providing long term and intermediate term loan to the
entrepreneurs for accelerating the process of industrialization of the country by providing
financial assistance and equity support.
At the very beginning of Bangladesh Shilpa Bank, it was the only institution without
whose support industrial project was impossible to build up. About the entire industrial
unit established up to 1990 is the output of Shilpa Bank. It is the bank whose main
objective is to encourage and motivate the potential entrepreneur to set up the new
industry in the various part of the country. Although some commercial banks are
providing short as well as long term industrial support to potential entrepreneurs, but still,
Bangladesh Shilpa Bank is on the prior position. For the industrial development the
contribution of BSB is incomparable.
Bangladesh Shilpa Bank undertakes various projects by providing finance, machinery

and other aids, some projects are implemented successfully and some projects are failed
to attain the goal and these firms are called sick firms according to the BSB language.
Sick industries mean the industries, which either become stuck-up during construction or
could not operate successfully after implementation. These projects could either pay back
the bank‟s dues or make any contribution to the national economy. These projects were
identified as sick due to their inability to generate sufficient fund for debt servicing.
There are so many sick industries in Bangladesh, which has no specific statistical data.
Here the main objective is to identify the causes of sickness of these industries.
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Normally BSB meets the long-term credit needs for implementation of the projects. BSB
charter provides for extending working capital to its financed projects only to a limited
scale. While sanctioning loans by BSB provision is made for commercial banks to
provide 70% of the working capital needs. But in most cases it is found that the project
management either can‟t raise the required working capital from the commercial banks,
or they can‟t raise required amount in due time. As a result these projects could not go
into operation on schedule time and they become unable to pay the interest and the
principal amount. At last they are treated as sick industry. In Bangladesh, the growing
incidence of industrial sickness and its adverse impact on the economy in the form of loss
of productive capacities, investment potential, employment, etc. drew the attention of the
policymakers in the Government first in the late eighties. In the nineties, with the advent
of market economy and consequent trade liberalization, the intensity of industrial
sickness took a new dimension. The successive governments came up with policy
measures at different periods to address the problem of sick industries.
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There are some specific criteria to identify a sick industry. Two types of factors can be
considered to identify the sick industries. They are-
Quantitative factors
Qualitative factors
A
A.. Q
QUUA
ANNT
TIIT
TAAT
TIIV
VEE FFA
ACCT
TOOR
RSS::
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
B.. Q
QUUA
ALLIIT
TAAT
TIIV
VEE FFA
ACCT
TOOR
RSS::
To identify a sick industry the following qualitative factors can be considered-
1. The symptoms of Sick Industry
Sick industry is difficult to define. Nonetheless the symptoms of sick industry are as
follows-
The initiator is unable to pay sufficient money at the implementation stage
The delay of implementation increases the project cost. It also creates many
problems and the burden of loan interest is increased.
Lack of full production or frequent obstruction of industry
The initiator is unable to pay the loan installment and other liabilities
The failure of payment of loan installment in time increases the burden of loan
amount
Inability to submit the financial statement in time
Increase the tendency of undertaking unfair means in preparing the papers of
stock materials
Goods of the stock increase of unsatisfactory sale
Profit from investment decrease gradually
The production level decreases gradually
Taking loan from various sources at a high rate
Applied for a large amount of loan
Non-cooperating tendency with the loan providing bankers
Lacking of perfection in the market
2. Technological problems
A survey of Depository Financial Institution reveals that 12% of the projects suffer
due to technological problems, which lead an industry toward sick, are as follows-
Machinery imbalance causing lower capacity utilization is the major technical
problem of many projects. Some also suffer from faulty technical design.
Whether the preliminary test and studies are not appropriate
Availability of raw materials, powers and other infrastructural facilities are not
established.
The selected scale of operation is not optimal
The production process chosen is not suitable
The equipment and machine chosen are not appropriate
Lack of modern technology like incapable to use the computer and modern
machinery
If the selection of machinery becomes faulty, it will not ensure the achievement of
objectives
Wrongly or inappropriate selection of the machinery
Lower capacity of the machine resulting price will be higher, i.e. production cost
higher
Inconsistency between the origin of raw materials and the factory location
Production of products and final consumption adversely affect the business
Lack of infrastructure facility
Selection of old and backdated technologies to be used in production
Delay of machinery procurement & rapidly change in technological environment
Unavailability of supply of gas, electricity and water etc
3. Administrative and Managerial problems
Success of a firm largely depends on management. There are some internal conflict
between the workers and managers. According to the research paper of Bangladesh
Institute of Development Studies reveals that 9% of the projects suffer due to
administrative and managerial problems. The administrative problems, which lead an
industry towards sick, are as follows-
When the management is not capable to manage all the managerial aspects;
management should have proper planning, organizing, controlling, administrating and
monitoring.
Weak management of the project
Lack of efficiency of employment as well as managements
Conflict and also death of management‟s partner
Death of main entrepreneur of the project
Insufficient employees
Unskilled human resources
Corruption and intentional misuse of organizational assets
Lack of proper planning, organizing, controlling, administrating and monitoring
4. Marketing Problems
A survey of Depository Financial Institution reveals that 31% of the projects suffer
due to marketing inefficiencies, which lead an industry toward sickness, are as
follows-
If the aggregate demand of products of proposed project is not possible to fill up.
If due to national financial crises product demand decrease
Introduction of new brand product
Wrong forecasting about the market
When change the consumption trends in the past and present consumption level
If change occurs in the Import and export policy
When market share of the project is under low appraisal
Smuggling of substitute goods
If the raw material of the product is not purchased at appropriate time
Improper market justification
If production cost is high resulting selling price high which ultimately decreases
the demand
Lack of market expansion and production diversification
Shortage of raw material supply
High competition in the market
Cheap price of the foreign product
5. Economic Problems
]
The economic problems, which lead an industry toward sickness, are as follows-
Economic problem comes from the special cost benefit analysis
It does not impact of the project on the distribution of the income in the society as
well as the level of saving and investment.
6. Political problems
The political problems, which lead an industry toward sick, are as follows-
Political pressure
Political instability, which hampers the production
Insufficient facility provided by govt. to industrialist like tax rebate
Political problem like worker unrest, hartal
Political pressure to loan procurement
Inappropriate action taken by govt. to protect smuggling
Political terrorism
7. Other Reasons of Sickness
Except the above problems there are also some problems, which lead an industry towards
sickness. A survey Depository Financial Institution also reveals that 9% of the projects
suffer due to other problems, which are as follows-
Selection of inappropriate industrial unit, which is not financial and logically
viable in concerned country
Delay of loan application
Internal delay of industries construction after loan sanction
If a portion of loan amount used for personal use
Delay of operation start
Over estimation of mortgage value
Delay of loan procurement and sanctioning process
Delay of documentation formalities in respect of loan
Causing of rehabilitation measure
Insufficient enforcement of law for recovery of loan
Inappropriate location of industries
Natural disaster that hampered production
Terrorism that hampered to establish an industry
Delay of implementation
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To support the above definitions and to identify which industry is sick, a model has been
included here. In 1977, Argenti developed the model called “A Score Model”. This
model is discussed with a list of drawbacks, which hindered the success of an industry.
All the drawbacks carry some points, which are used to identify a firm as sick or not.
The model is based on-

1. Defects
2. Mistakes
3. Symptoms
Weight Situation Occurs Qualifying Marks
Defects 10
8 Chief Executive Officer (C. E. O)
is an Autocrat
4 Chief Executive Officer (C.E.O)
is also the Chairman
2 Passive Board of Directors
2 Imbalanced Board
2 Weak Financed Director
1 Poor Management Depth
3 No Cash flow Plan
3 No Budgets/Budgetary Controls
15 Poor Response to change
Total 43
Mistakes 10
15 High Leverage (debt/equity)
15 Overtrading
15 Big Project Gone Wrong
Total 45
Symptoms 05
4 Financial Signs Weak
4 Creative Accounting
4 Rumors/Staff Turnover/Low
Morals/Untidy Offices/Frozen
Salaries
Total 12
Total possible score: 100 Qualified: 25 or less
According to the Model, defects part carries total 43 weights and qualifying marks in this
part is 10 out of 43. If-
The C.E.O is an autocrat then the industry is weighted by 8
And the C.E.O is also the chairman then the industry is weighted by 4.
For –
Passive Board of Directors the industry is weighted by 2
Imbalanced Board of Directors the industry is weighted by 2
Weak Financed Directors the industry is weighted by 2
Poor Management Department the industry is weighted by 2
No Cash flow Plan the industry is weighted by 3
No Budgetary Control the industry is weighted by 3
Poor Response to change the industry is weighted by 15.
If the industry gets 10 or less marks in this defect part then it will not be considered as
sick. But if it gets more than 10 then it will be treated as sick.
In the mistakes part-

For-
High leverage, the industry is weighted by 15
Over trading the industry is weighted by 15
And Big Gone Wrong the industry is weighted by 15
If the industry gets 10 or less marks in this part then it will not be considered as sick. But
if it gets more than 10 then it will be treated as sick.
In the symptoms part-

Financial weakness carries 4 marks
Creating Accounting carries 4 marks
Rumors/Staff turnover/Low morals also carries 4 marks.
Here the total weight is 12 and qualifying marks is 5.
According to above model it is clear to identify the sick industry. The industry, which
gets score less than 25, is not considered as sick industry. But the industry, which gets
more than 25 score, is considered as sick industry.
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In Bangladesh there are so many sick industries. The sick industry concept is not the
newest one. It is occurring from the pre-independence of Bangladesh and Bangladesh
inherent some sick industries from its birth. After independence this is also continuing.
The exact figure of sick industry is not identified. But on the basis of the above factors
274 sick industries that are financed by BSB are identified as sick during the year 2003-
2005. Some of them are stated below:
Some Sick Industries

G.M.K Textile Ltd. Ali & Sons Ltd. Malik Auto Rice Mill
Meraj Fabrics Ltd. Shardar Textile Mills Ltd. Al-Amin Lee Factory
Jahan Group of printing & 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
Mohadevpur Auto Rice Bancharampur Textile Rangpur Food Company
Hossain Electric Com. Agro Producer Ltd Mocca Mills Ltd
Laksham flour Mills Altaf Rice Mills Noor Rice Mills
Noor Cold Storage Rangpur Poly Com. Mrs. National Cold Storage
Shovo Rubber Industry
Source: Manual of Project Rehabilitation Department 2005
From the above statistics it is clear that there are so many projects in Bangladesh are sick.
An analytical discussion makes it clear to us that the reasons of their sickness and which
projects are sick for which causes.
If we further analyze it we find a clear picture of the sick projects and their relevant
causes. These things are explained below under a table:
Causes
Tech. + Mgt+ + W/C
Mgt. + W/C+Mkting
Tech. + Mkting
Mgt. + Mkting
Mkting + W/C
Working Cap.
Total number
Management
Tech. + Mgt.
Tech. + Mgt.
Tech. + W/C
Mgt. + W/C
Marketing
Technical
Others
Sectors
Food & allied 3 8 9 19 3 1 6 - 3 - 3 7 - 13 75

Textile 9 3 33 3 - - 7 5 - - -1 - 3 64
Metal products - 5 - 2 - - 2 1 1 1 - 1 - - 13
Jute - 3 - 7 - 2 2 - 1 - 1 - 3 1 20
Engineering 4 3 - - 3 - - - - - - - - 5 16
Paper printing 1 1 - 4 1 - - 3 1 - 1 - - - 12
Service - 1 3 - 1 - - - - 3 - - - 1 9
Electrical 2 2 2 1 - 2 - 1 - - 2 1 - - 13
Petrochemicals - 1 1 - 2 - - 2 1 1 - - - - 8
Non-metallic 2 1 - 4 - 1 1 - - - - - - - 10
Chemicals 1 - 2 1 - - - - 1 - - 1 - - 6
Pharmaceuticals 3 - - 2 1 - - 1 - 1 1 - - 5 14
Tannery - 3 1 3 - 1 - - - - - - 1 - 9
Transport - - - - - - - - - - - - 1 4 5
Total No. of 25 31 51 46 11 7 18 13 8 7 8 11 5 33 234
problems
Source: Manual of Project Rehabilitation Department 2005

44..55 M
MAAJJO
ORR C
CAAU
USSE
ESS T
THHA
ATT A
AFFFFE
ECCT
T T
THHE
E SSIIC
CKK IIN
NDDU
USST
TRRIIE
ESS IIN
N
B
BAAN
NGGL
LAAD
DEESSH
H
A survey of Depository Financial Institution reveals that-

22% of the projects suffer due to administrative and managerial problem.
12% of the projects suffer due to technological problems.
12% of the projects suffer due to shortage of capital.
31% of the projects suffer due to marketing inefficiencies.
9% of the projects suffer due to other problems.
So, we see that only one reason does not affect the sick industries. All the above-
mentioned reasons are responsible for sickness of industries in Bangladesh.
44..66 IIM
MPPA
ACCT
TOOFF SSIIC
CKK IIN
NDDU
USST
TRRY
Y IIN
NBBA
ANNG
GLLA
ADDE
ESSH
HOOR
RBBSSB
B
Sick industries have negative consequences on BSB-
Increase of non-performing assets in organizational level as well as national level
Decrease contribution in GDP and GNP
Decrease in productivity at national level
Average effect in banks profitability
Increases the classified loan
Increase the lending rate of interest, which adversely affect the new and regular
borrowers
Affects adversely in the economic growth rate of the country
Create adverse psychological impact on the prospective entrepreneurs.
44..77 PPR
REEC
CAAU
UTTIIO
ONNSS A
ABBO
OUUT
T SSIIC
CKK IIN
NDDU
USST
TRRY
Y
Sick situation arises in an industry in some abnormal period. But if the rate of sickness is
overwhelming then it becomes a matter of fact. So before providing loan importance
must be given on correct evaluation procedure. So at pre-investment stage the following
things must be considered-
Examine the project appropriately

The project cost is calculated in a proper way
The proper location is selected
Defect machinery must not be purchased
Ensure sufficient skilled and experienced personnel
Proper steps are taken to protect uneven breakdown of electricity
Ensure that proper people are involved in the managing committee
Ensure the financial capability of the initiator
Ensure the procedure of makeup the preliminary cost and the doubtful loss
Ensure the quality of the produced product
Ensure the proper way to marketing the produced product
Consider the change of taste of customer
Proper plan is taken to implement the project
Steps are taken to avoid the potential conflict.
44..88 R
REEH
HAAB
BIIL
LIIT
TAAT
TIIO
ONN PPO
OLLIIC
CYYO
OFF B
BAAN
NGGL
LAAD
DEESSH
H SSH
HIIL
LPPA
ABBA
ANNK
K
All sick industry is not rehabilitated because the all-sick industry has not al l possibilities
to rehabilitate. It‟s mainly depends on the nature of the sickness. The sick industry that is
probable to rehabilitate by providing and assisting some predefined criterion. The
predefined criterions are based particularly on:
1. Management perspective
2. Technical perspective and
3. Financial perspective
4. Marketing perspective
In the case of rehabilitating sick industries the bank takes different policies in different
situations, which are given as follows:
44..88((aa)) M
MAAN
NAAG
GEEM
MEEN
NTT PPE
ERRSSPPE
ECCT
TIIV
VEE
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.
44..88((bb)) T
TEEC
CHHN
NOOL
LOOG
GIIC
CAAL
L PPE
ERRSSPPE
ECCT
TIIV
VEE
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.
44..88((cc)) FFIIN
NAAN
NCCIIA
ALL PPE
ERRSSPPE
ECCT
TIIV
VEE
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.
44..88((dd)) M
MAAR
RKKE
ETTIIN
NGG PPE
ERRSSPPE
ECCT
TIIV
VEE
The employees of project rehabilitation department are employed in this case. Value
delivery sequence of Project Rehabilitation Department is shown below-
Choose the value Provide the value Communicate the

1. Segmentation 1. Product/Service value
develops 1. Sales force
2. Targeting
2. Pricing
3. Positioning 3. Distributing 2. Promotion
Choose the value

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

Their products are-
Supporting the management
Providing the working capital
Technological enrichment
Their programs are-
Debt relief
Injection of additional funds
Direct management
Communicate the value

The personnel of Project Rehabilitation Department are employed for this purpose.
44..99 PPR
ROOG
GRRA
AMMSS T
TAAK
KEEN
NTTO
ORRE
EHHA
ABBIIL
LIIT
TAAT
TEET
THHE
E SSIIC
CKK IIN
NDDU
USST
TRRIIE
ESS
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
44..1100 FFA
ACCIIL
LIIT
TIIE
ESS PPR
ROOV
VIID
DEED
DUUN
NDDE
ERRR
REEH
HAAB
BIIL
LIIT
TAAT
TIIO
ONN
PPR
ROOG
GRRA
AMM
BSB had given loan to sick industries at the first time TK. 513 lac during the year 2005.
Second time BSB gave them under rehabilitation program.
Loan sanctioned TK. in lac

BSB had given loan at the first time 513.00
Under rehabilitation program:
Long term loan 163.00
Working capital 25.56
The bank also makes a program of taking over management of the sick projects directly
where the above measures were not considered sufficient due to inefficient
management/mismanagement. So they created a department called “Sick Project
Management Department” for ensuring efficient management of such sick projects. The
responsibility of this department is to make such projects capable of debts servicing

through profitable operation. So the bank continued sanctioning of term loans during FY
2004-2005. This year local currency loan of TK. 989 million, which was sanctioned to 27
projects. Of the total sanctioned amount TK 687 million was for 21 new projects and an
additional loan of TK. 302 million was for on-going projects including 3 for BMRE
purposes.
Sanction of term loan

Million TK.
2003-2004 2004-2005
Number 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 during the year 2003-2005. Summarized measures that are taken by BSB to
rehabilitate the sick industries are given below-
Loan outstanding Measures taken (Million TK.)

(Million TK.)
Rephasement
outstanding
participation
Block A/C
Additional
Waiver of
Total
Working
Overdue
Projects
interest
Capital
Equity
Loans
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: Manual of Project rehabilitation department of BSB 2005

Note: Parentheses indicate number of projects
44..1111 A
ARRE
EAAL
LLL--SSIIC
CKK IIN
NDDU
USST
TRRIIE
ESS R
REEH
HAAB
BIIL
LIIT
TAAT
TEED
D??
All sick industries are not rehabilitating because the all-sick firms have not all
possibilities to rehabilitate. Its mainly depends on the nature of sickness. The sick
industry, which is probable to rehabilitate by providing, and assisting the following
supports are rehabilitated.
44..1122 T
THHE
E IIN
NDDU
USST
TRRIIE
ESS W
WHHIIC
CHH A
ARRE
E R
REEH
HAAB
BIIL
LIIT
TAAT
TEED
D A
ANND
D T
THHE
E
IIN
NDDU
USST
TRRIIE
ESS W
WHHIIC
CHHA
ARRE
ENNO
OTTR
REEH
HAAB
BIIL
LIIT
TAAT
TEED
D
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.
44..1133 R
ROOL
LEEO
OFF M
MAAN
NAAG
GEEM
MEEN
NTTO
OFF R
REEH
HAAB
BIIL
LIIT
TAAT
TIIO
ONND
DEEPPA
ARRT
TMME
ENNT
T
O
OFF B
BSSB
B
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.
44..1144 L
LIISST
TOOFF A
A FFE
EWW SSU
UCCC
CEESSSSFFU
ULLR
REEH
HAAB
BIIL
LIIT
TAAT
TEED
D IIN
NDDU
USST
TRRIIE
ESS
After taking some initiatives and providing assistance in terms of management, technical,
marketing and financial the following sick projects financed by BSB have become
successful during the year 2003-2005.
Chemicals and Pharmaceuticals Location

01. S.S.R Chemical Industries Ltd. Dhaka
02. Islam Polymers & Plasticizer Ltd. Tangail
03. Raja Plastic Industries Ltd. Gazipur
04. KDH Laboratories Ltd. Dhaka
05. Asiatic Business Ltd. Sylhet
06. Pharmadesh Laboratory Ltd. Dhaka
Cotton, Woolen & Synthetic Textiles
01. Azim Mannan Garments Ltd. Chittagong
02. Desh Gannents Ltd. Chittagong
03. Jems Sweaters (Pvt) Ltd. Dhaka
04. Auto Spinning Mills Ltd. Gazipur
05. Techno Textile Mills Ltd. Gazipur
Food & Allied Products
01. Meenhar Sea Foods Ltd. Chittagong
02. Mimi Chocolate (Bd) Ltd. Dhaka
03. Modern Industries (Bd) Ltd. Munshigonj
04. Mustafa Cold Storage Ltd. Rangpur
05. Bangladesh Beverage Industries Ltd. Dhaka
06. Bengal Fish & Frogleg (Export) Ltd. Chittagong
Paper, Paper product & Printing
01. Eagle Box & Carton Mfg. Ltd. Dhaka
02. Holiday Printing Ltd. Dhaka
03. Toka Ink Ltd. Dhaka
04. Bangladesh Paper Product Ltd. Chittagong

05. Orient color Printers Ltd. Chittagong
06. Transfer Paper Ltd. Bogra
Tannery & its products
01. Apex Footwar Ltd. Dhaka
02. Lexco Ltd. Dhaka
03. Leather Board Ltd. Dhaka
04. Comfort Footwar Ltd. Dhaka
05. Bangladesh Chemical Ltd. Narayangonj
Non-metallic Mineral Products
01. Savar Refractories Ltd. Dhaka
02. Tajma Ceramic Industries Ltd. Bogra
03. Standard Ceramic Industries Ltd. Gazipur
Metal products
01. Rangpur Foundry Ltd. Rangpur
02. Scala Industries Ltd. Gazipur
03. Oriental Foundry & Agro Engineering Ltd. Dhaka
04. Bogra Metal Industries (Pvt.) Ltd. Bogra
Electrical Machinery & Goods
01. Bangladesh Lamps Ltd. Dhaka
02. National Fans Ltd. Gazipur
03. Eastern Tubes Ltd. Dhaka
04. National Accessories Ltd. Chittagong
Service Industries & Miscellaneous
01. Hotel Simon Ltd. Cox’s Bazar
02. Hotel Elysium Ltd. Dhaka
03. G.Q. Ball Pet Ltd. Magura
04. Rajanigandha Tankers Ltd. Dhaka
Source: Manual of Project Rehabilitation Department of BSB 2005

It is observed that a large number of projects are sick and they are loan defaulter. In this
situation some suggestions has been given that will help BSB to overcome some of their
problems.
55..11FFIIN
NDDIIN
NGGSS O
OFF T
THHE
E SST
TUUD
DYY
During the internship program the following findings have been found out 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
Lack of financial commitment on the part of the borrower, the result being the
failure of mobilization of equity by them in future means they divert their equity in
other purpose after getting the loan amount.
Lack of effective monitoring in projected work.
Management conflict is one of another important problem in the situation of
sickness.
Lack of motivation and team speed
Lack of proper scheduling in projected work.
Absence of an up-to-date project appraisal manual, because the present manual
was designed 18 years ago. So many aspects should consider which do not cover by
the existing manual.
Dependence on imported technology and non-availability of adequate information

about that from local source. Lack of adequate, updated and accurate information in
the country. Both primary and secondary data are not readily available.
Inadequate attention is paid to analyze risk and an uncertainty associated with the
projects, means only sensitivity analysis is done to analyze the risk.
There is no system of accountability of the project appraisal team if the approved
project fails due to their improper appraisal.
Most of the personnel are not as much experienced and skilled to operate banks
activities in proper way.
Shortage of working capital is another problem because some industry may sick
for this problem.
Inefficient project cost estimation, not considering inflation, different changes in
the cost factors, waste and spoilage, personnel replacement cost etc. As a result
sometimes project become sick.
Because of country‟s existing political instability, unstable tariff and fiscal policy
some industries may become sick.
No use of latest technology and permanent IT specialist
Poor quality of local machinery, equipment and construction materials is another
cause for sickness.
Lack of co-ordination among various financial institutions in exchange of
information
Lack of proper control over the project may cause of sickness.
Delay in settlement of case
Project rehabilitation is one of the criteria of BSB that revives the sick project
Finally contribution of BSB is the highest in the industrialization of Bangladesh
though there are some problems.
55..22 SSU
UGGG
GEESST
TIIV
VEEM
MEEA
ASSU
URRE
ESS
Being the prime Development Financing Institution BSB continues its efforts to make an
effective contribution towards expansion of industrialization process of the country. With
keeping this view, following suggestive measures can be taken to overcome the noted
problems. From my viewpoint, the suggestive measures to resolve sickness are as
follows:
Sanctioning of loan to the sponsors should be made through making feasibility
report properly.
Loan appraisal procedure is time consuming and to some extent project plan
become irrelevant after getting the loan. Since all the process is completed, he is
bound to take this loan because some expenditure has already been incurred (sunk
cost). As a result loan recovery may slow and sometimes difficult. My suggestion is
that BSB should rearrange appraisal procedure so that the entrepreneurs can take loan
within short period of time.
Experienced and motivated entrepreneurs should be allowed for sanctioning the
loan.
BSB should avoid unnecessary political interfere. If political problem influences
the baking activity must create new problem, no doubt.
BSB should give more consideration on physical investigation before issuing
loan. However project appraisal should be strict so that nobody cal use its loopholes.
Sometimes real entrepreneur does not get bank loan. So actual entrepreneurs
should be identified and give loan.
The projects/industries, which are profitable, should be identified and sanctioned
loan to those projects/industries.
Risk adjusted discount rate method; program evaluation and review technique
(PERT) and probability analysis should be introduced.
Market Research Institution should be established for proper market survey.
A co-ordination cell should be established for sharing information among various
institutions.
Responsibility should be established to all employees according to their

involvement in appraisal project.
Honesty, morality, responsibility and patriotism of employees should be
enhanced.
Properly check the feasibility report before issuing loan.
Proper policy to be adopted and implemented
BSB must have to identify viable project and make feasibility study through
efficient personnel before sanctioning of loan to an industry.
Employees who are directly involved with loan recovery should be motivated and
experienced.
BSB should introduce modern communication system so that every department or
unit can get information in his or her desk. Now one department must have to go
other departments for information. It is also time consuming. Preserving documents
also need to be computerized instead of filing.
Encouraging the borrower to repay the loan in time. Special arrangements should
be introduced in this respect. Legal steps should be dynamic so that default loan
recovery should be accelerated. And security against the loan should be sufficient to
recover the loan.
Project must be scrutinized in and appropriate manner as well as the sponsor
taking into consideration on the changing environment and economic reforms and
globalization.
National observation committee can be established to analyze, evaluate and solute
proper loan recovery.
In selecting borrower, 5C‟s (capital, capacity, character, condition, collateral)
must be considered.
Proper communication should be established with the clients.
Ensure accountability among the appraisal team who appraise the sick industry.
Number of trained supervisor to be revised
Both primary & secondary database of the BSB should be improved &
strengthened.
55..33 SSO
OMME
EOOT
THHE
ERR IIM
MPPO
ORRT
TAAN
NTT SSU
UGGG
GEESST
TIIO
ONNSS
 On the basis of interest rate

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

To promote new entrepreneurs following steps can be taken-
No collateral
Tolerable interest rate
No bureaucratic problem
 Encouraging existing entrepreneurs

To encourage existing entrepreneurs following steps can be taken-
Lesson the red tappism
Awarding the good entrepreneurs
Incentives such as lowering interest rate for the existing customer for their better
repayment behavior.
C
COON
NCCL
LUUSSIIO
ONN
Bangladesh Shilpa Bank is a well-known specialized bank of our country. We cannot

think industrialization in our country without the contribution of Bangladesh Shilpa
Bank. Although there are some drawbacks of BSB activities nevertheless it plays an
important role in the industrial sector of Bangladesh. We get clear idea about this
contribution through the analysis of the BSB activities from 1972 to till now. Although
some unexpected political pressure hamper such activity but BSB always tries to
overcome these sort of problem by his own policy and procedure. We observed that BSB
able to contribute to GDP through their industrialization. It is clear that industrialization
is the base of the economy of the economy. I observed that the loss of BSB is 100 crore
less than that of previous year. It present that the position of BSB is more strength than
previous year. Another notable thing is that BSB reduces their loan sanctioning area. As a
result their loan sanctioning reduced to TK. 429 million. I think, it is not good news for
our economy. Because new industry essential for employment generation. At present
BSB carefully takes steps for sanctioning loan because of a huge fund become
irrecoverable due to sickness of various projects. It is indeed that sickness is the
consequences of unconscious and lack of investigation in case of issue of loan. We know
sick project is the burden of bank as well as overall economy of Bangladesh. So, now-a-
days BSB is reducing rehabilitation of sick industries. Because those industries, which
are unable to pay their previous loan amount, if they are rehabilitate by the BSB most of
them will not be able to pay the rehabilitated money also. So there was huge amount of
loss occurred and for this reason project rehabilitation of sick industry and the work of
this department is decreasing day by day. So I think BSB will close their rehabilitation to
reduce their loss. I think proper scrutinizing of project proposal and careful physical
verification may make sure to be profitable of that industry as well as Bangladesh Shilpa
Bank. Bangladesh Shilpa Bank should concentrate on loan recovery that is necessary for
long-term profitability and sustainability. Without pros and cons everybody should to
confess of BSB contribution. We expect continue their operations without influence and
contribute more and more to our industry that brings good luck to the nation.
B
Biibblliiooggrraapphhyy
1. Bangladesh Shilpa Bank "Annual Report 2004-2005"

2. Different Project Appraisal reports of BSB.
3. Loan sanctioning letter of BSB.
4. Bangladesh Shilpa Bank Ordinance 1972.
5. Manual of different departments of BSB.
6. BSB web side " www.shilpabank.gov.bd"
7. Manual of Project Rehabilitation Department.

Internship Report: Bangladesh Shilpa Bank

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Loan Operations Analysis & Evaluation: Bangladesh Shilpa Bank

YOUR PARTNER IN INDUSTRIALIZATION

Dr. Md. Afjal Hossain

MD. Abul Kalam Azad

Department of Marketing Date of Submission

August 19, 2006

Mr. Abu Taleb

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

MBA 2nd Batch,

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

Subjects Page no.

Section-01: Introduction of the Report

11..11 BBaacckkggrroouunndd ooff tthhee SSttuuddyy 01

11..55 JJuussttiiffiiccaattiioonn ooff tthhee SSttuuddyy 04

11..66 RReeppoorrtt oorrggaanniizzaattiioonn 04

11..88 BBeenneeffiittss ooff tthhee SSttuuddyy 05

22..11 BBaacckkggrroouunndd ooff BBSSBB 06

22..33 ZZoonnaall &

22..77 FFuunnccttiioonnss ooff BBSSBB 09

22..88 IInntteerreesstt RRaattee oonn BBSSBB LLooaann 10

22..99 DDiiffffeerreenntt FFuunnccttiioonnaall D

33..11 RReesseeaarrcchh PPaappeerr ooff BBaannggllaaddeesshh IInnssttiittuuttee ooff D

33..22((aa)) IInndduussttrriiaall SSiicckknneesssseess aanndd iittss IInncciiddeennccee iinn BBaannggllaaddeesshh 19

33..22((cc)) C Caauusseess ooff IInndduussttrriiaall SSiicckknneessss aanndd SSuuggggeesstteedd PPoolliiccyy 21-23

33..33 SSttuuddiieess oonn SSuubb--SSeeccttoorraall//EEnntteerrpprriissee LLeevveell SSiicckknneessss 28-29

33..55 FFuunnccttiioonniinngg ooff SSiicckk IInndduussttrriieess RReehhaabbiilliittaattiioonn aanndd RReevviivvaall 31-34

RReehhaabbiilliittaattiioonn aanndd RReevviivvaall C

33..55((cc)) RReeccoommm meennddaattiioonnss ooff SSiicckk IInndduussttrriieess RReehhaabbiilliittaattiioonn aanndd 33-34

33..88 FFoorrm maattiioonn ooff SSppeecciiaall C Coom

33..1100 FFiinnaanncciiaall EExxpprreessss RReeppoorrtt oonn FFeebbrruuaarryy 22,, 22000066 39-40

44..11 SSiicckk SSiittuuaattiioonn ooff aa IInndduussttrryy 42

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

4.2(a.3) On the Basis of Financial Problems/Shortage of 43-44

4.2(b) Qualitative Factors 44-55

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

4.2(b.3) Technological Problems 45-46

4.2(b.4) Administrative and Managerial Problems 46

4.2(b.5) Marketing Problems 47

44..22((bb..77)) PPoolliittiiccaall PPrroobblleem

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

4.4 Identified Sick Industries 51-53

4.5 Major Causes That Affect the Sick Industries in Bangladesh 54

4.6 Impact of Sick Industry in Bangladesh or BSB 54

4.7 Precautions about Sick Industry 54-55

4.9 Programs Taken to Rehabilitate the Sick Industries 58

4.10 Facilities Provided Under Rehabilitation Program 58-60

4.11 Are All-Sick Industries Rehabilitated? 61

4.12 The Industries which are Rehabilitated and the Industries 61

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

4.14 List of a Few Successful Rehabilitated Industries 63-64

Section-05: Findings, Suggestive Measures & Concluding

5.1 Findings Of The Study 65-66

5.2 Suggestive Measures 67-69

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

1.1 Background of the Study…….

From the perspective of rehabilitation of sick industry in developing country like

Primary Sources Secondary Sources

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

The report is organized as follows:

2.3 ORGANIZATION & ITS CAPITAL STRUCTURE AND SOURCES OF FINANCE

Established : October 31, 1972

Authorized : TK. 2,000 million

Efficient Import Substitution, Joint Ventures, Commercialization of local technology and