Internship Report

ON

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Internship Report

ON

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

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

DEPARTMENT OF ACCOUNTING & INFORMATION SYSTEMS UNIVERSITY OF DHAKA
May 10, 2007

LETTER OF TRANSMITTAL

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

Sub: Submission of internship report on “Sick Industry Rehabilitation Of Bangladesh Shilpa Bank”

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

Thanking you.
Sincerely yours,

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

A C K N O W L E D G E M E N T

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

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

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

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

Executive Summary

The Bachelor of Business Administration (BBA) program is a professional program. This program is designed to meet the needs of the students who want to develop their career as executives in the fields of different business areas as well as teaching and research positions in different institutions. To obtain this degree, Internship Program is an integral part.

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

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

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

2. OBJECTIVE OF THE STUDY

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

4 METHODOLOGY OF THE STUDY

Correct and smooth completion of research work requires adherence to some rules and methodologies.
In order to conduct the report, the decision had been taken to collect various types of primary data and secondary data. Data have been collected by oral interviewing the responsible officers. Different form of statistical configurations such as table percentages rates and ratios has been used to make the study meaningful and realistic.
After collecting data from the interview and material provided by them, data was first carefully scrutinized. Then the data was organized as required.
In order to make the study effective and efficient, following two sources of data and information have been used widely.

a) Primary information/data b)
The primary data have been collected by oral interviewing the responsible officers and staffs of the BSB, practical deskwork, direct observation of the functions of various departments of BSB and relevant document’s studies as provided by the officers concerned.

(b) Secondary Information/data

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

12 LIMITATIONS OF THE STUDY

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

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

• Lack of available up-to-date information

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

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

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

• As Bangladesh Shilpa Bank is a large financial institution; it is very difficult to understand each and every aspect of its operation within a very short period of time.

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

CHAPTER-TWO

Overview of Bangladesh Shilpa Bank

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1. bACKGROUND

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

2. INSTITUTIONAL OVERVIEW

Established: October 31, 1972

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

Capital Structure and Sources of Fund:

|Authorized capital |TK 2000 million |
|Paid up capital |TK 2000 million |

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

3. FUNCTIONS:

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

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

4. Ownership:

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

5. Mission:

Accelerating the process of industrialization of the country by providing financial assistance and equity support.

6. Management:

The overall policy formulation and the general direction of the Bank’s operation vest in a Board of Directors appointed by the Government. This Board of Directors consists of 9(nine) members including the chairman and the Managing director. Non-Government shareholders subscribing to the capital of the Bank shall eventually elect 4 directors amongst themselves. The Managing Director is the Chief Executive of the Bank. The General Managers assist the Managing Director in conducting overall business of the bank.

7. Audit Committee

An audit committee has been constituted by the Board of Directors of the Bank in its 400th meeting held on 06 April, 2003 which position as on 30-06-2005 as under:
|SI.No |Name |Status with the Bank |Status With the Committee |Qualification |
|1 |Professor Abu Ahmed |Chairman |Chairman |M.A in Economics, York University, Toronto, |
| | | | |Canada. |
| | | | |M.sc. in Economics.Islamabad University |
| | | | |,Pakistan |
|2 |Mr. Md. Nural Amin |Director |Member |B.Sc. Engineer (Civil) |
|3 |Mr. Liaquat Ali Khan |Board Secretary |Member-Secretary |M.A in Economics |

Name of the Directors and the entities in which they have interest as on 30 June, 2005:

|SI. No. |Name |Status with the Bank |Name of the firms\ companies in which |
| | | |interest as proprietor, partner, director, |
| | | |managing agent, guarantor, employee, etc. |
|1 |Professor Abu Ahmed |Chairman |- |
|2 |Dr. Nazmul Bari |Managing director (Current |Investment Corporation of Bangladesh |
| | |Charge) |(Director as Govt. Representative) |
|3 |Mr.Mokbul Hossain |Director |- |
|4 |Md. Nural Amin |Director |- |
|5 |Mr. Syed Abdul Muqtadir |Director |Chairman, Kushiara Service Ltd. | 8. BSB: AT A GLANCE

| |2000-01 |2001-02 |2002-03 |2003-04 |2004-05 |
|Loan application received |13 |31 |31 |51 |83 |
|Term loan sanctioned | | | | | |
|New |5 |5 |18 |21 |34 |
|BMRE |- |1 |2 |3 |1 |
|Additional |3 |2 |1 |3 |3 |
|Total |8 |8 |21 |27 |38 |
|Term Loan Disbursed |10 |8 |11 |14 |23 |
|Working capital Loan sanctioned |2 |1 |3 |5 |3 |
|Start of commercial operation |5 |2 |2 |4 |7 |
|Entrance into Loan portfolio |3 |2 |7 |6 |14 |
|Repayment\ Rescheduling |47 |52 |27 |17 |23 |
|Liquidation of Loan liabilities |32 |21 |31 |22 |41 |
|Total Loan portfolio |532 |513 |461 |308 |166 |
|(Million Taka) |
|Term loan sanctioned |293 |189 |1418 |989 |1009 |
|Term Loan Disbursed |134 |84 |170 |297 |144 |
|Working Capital Loan Sanctioned |9 |4 |30 |19 |14 |
|Working capital Loan Disbursed |15 |1 |9 |28 |21 |
|Loan Recovered |1400 |1198 |1316 |1124 |1391 |
|Rephrased\ Rescheduled |574 |1833 |507 |149 |259 |

1. Different Functional department of Bangladesh Shilpa Bank (BSB)

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

1) Loan Operation Department (LOD) 2) Documentation and Machinery Procurement Department 3) Project Implementation Department (PID) 4) Central Recovery Department (CRD) 5) Central Accounts Department (CAD) 6) Human Resources Management Department (HRM) 7) Law Department 8) Project Rehabilitation Department (PRD)

2. Loan Operation Department

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

Figure: Overview of Loan Operation Department

The process of appraising a report:

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

(a)Technical analysis (b)Financial analysis (c)Economic analysis \ market analysis
(A) Technical analysis:

The technical engineer does this report whether the proposed project is viable or not. It gives indication about the project technically sound or not. Here engineer justify several aspects are as follows:

The project will be established which is suitable or not for the project whether the road, railway, riversides or airport etc that are precondition for establishing the project situates this place. He also justifies the types of machines, capacity, types, production capacity etc and gives permission for that company.

(B) Financial analysis:

A financial analyst of the responsible officer makes financial analysis. He will examine prospect of the company about the demand of the product, marketability of the product, profitability of the product, supply and production capacity of the product to meet the market demand through various a financial analysis such as current ratio, profitability ratio, asset management ratio etc.

(C) Economic \ Market analysis:

This analysis is also made by an economist or market analyst that is feasibility report of the product of related company. This study comprises of whether the product will be launched that’ acceptability of the product, supply and production capacity of the product to meet the market demand.

3. Documentation and machinery procurement department

After sanctioning loan by Loan Operation Department, it issues a letter to documentation department, parities and after concerned departments. The documentation department issues a letter to the parties to produce necessary documents. Those documents are: i. Memorandum of Association Articles of Association ii. The loan upon which the project will be established, document of this land must be produced. iii. Receipts of rent iv. Documentation fee v. Mouja Map vi. The documents that reveal that the land revel that the land were not sold within preceding two years.

Then a form is filled up. These documents are sent to lawyer. It every thing is OK it is transferred to project implementation department.
In the documentation process the borrower are required to submit a cop of memorandum of association and articles of associate. It is returned after the confirmation that in has been submitted according to the rules the borrower company must submit it after the authorization by direction of registration of Joint Stock Company and firm. The following activities are performed during the time of documentation process:

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

4. FUNCTIONS OF MACHINERY PROCUREMENT DEPARTMENT:

✓ Machinery schedule preparation and approving for tender ✓ To assist the promoters to invite tender and other formalities. ✓ Necessary advice given to investor’s about tender invitation to collect project machinery. ✓ Offered machinery and related document evaluation and necessary information collection about supplier. ✓ To analyses the tender price, quality of machinery among the bidders and taking approval from the authority. ✓ Preparation of list of pre-shipping investigator through notice and receive approval. ✓ Arranging investigation procedure of importable machinery. ✓ To make the rules and procedure of machinery procurement and co-ordinate the activities of branch and zonal offices. ✓ Information collection about different price of machinery different capacity in industrial production. ✓ To give opinion about technical aspects of loan operation department and braces.

5. Project Implementation department

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

STAGES OF IMPLEMENTATION OF PROJECTS

| |2003-2004 |2004-2005 |
|Position of Projects Under Implementation |Number of projects |Number of projects |
|Started Commercial Operation |4 |7 |
|Under Construction |6 |11 |
|Documentation Completed |15 |10 |
|Awaiting Documentation |22 |27 |

6. central recovery department

Project implementation department make a repayment schedule and given it to the borrower. Normally the interval is 6 months. This department inspects the project after every 6 months to see whether there is any leakage. If the borrower fails to repay the loan as the application of the borrower it is rescheduled. Sometimes a portion of interest is exempted. If the borrower fails to repay the loan than it is transferred to law department to take legal action on the application of the borrower. Sometime the project is transferred to project Rehabilitation Department to restore the project.
Principles of classification of loan and provision:
For the purpose of classification all loans and advances are divided into 4. These are: a. Continuous loan, b. Demand loan c. Term loan d. Short-term agricultural and micro-credit. a. Continuous loan: The loan which can be granted and recovered without any repayment schedule but have an expiry date and maximum limit are called continuous loan. b. Demand loan: The loan which mist be repaid as the bank calls it is demand loan. c. Term loan: The loan which must be repaid as the banks cal it is term loan. d. Short-term agricultural and micro-credit: The loan which is paid in less term and condition is known as short-term agricultural and micro-credit loan.

Criteria for Classifying Loan on the Basis of Repayment
If any continuous loan is not repaid within the expiry date that it is called irregular loan. The classification of loan re as follows: ✓ 6 months > continuous loan > 3 months = sub topped ✓ 12 months > continuous loan > 6 months = doubtful ✓ Continuous loan > 12 months = bad
If any installment of any term loan is not repaid within specific date it is treated installment default.
Maintenance of provision: 1. On the basis of the equity of the loan the following precession are maintained: A. Substandard 20% B. Doubtful 50% C. Bad debt 100% 2. On short term agricultural and micro-credit the following provision to be kept: A. On all debt other than bad debt 5% B. On bad debt 100%

7. LOAN ACCOUNTING DEPARTMENT

Loan Accounting Department is the department which centrally maintains all loan amounts of the bank. There are 4 sections which performs the activities of the department. 1. Not due section: Not due is the installment not yet due for payment in schedule time fixed by the project department/Branch officer. 2. Amount due section/overdue section: The payment of installment and interest in not paid/cleared in time is overdue. The functions of this section are: a. accurately list of balance preparation b. advice sending to borrower c. Quarter/half year by interest charge.

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

8. law department

In the Bangladesh Shilpa Bank fails to recover its loan in the normal way, it must under taken alternative action and file case in the court. The cases which Bangladesh Shilpa Bank files are: 1. Recovery case Section 33 2. Financial Loan Case Section 5(a) 3. certificate Case Section 35 4. Bankruptcy Case Section 9 (1) 5. Case if Check is not cashed Section 198 (Petition Case) 6. Case if machinery of project is transferred form the project Section 37 7. Case if false properties are mortgaged Section -----

Functions of Law Department: I) Declaration of legal notices to the loan defaulters and take legal action against loan defaulter. II) Suit against loan defaulter and arranging all necessary activities to final dismissal according to Bank ordinance. III) To take case of the field suit\ litigation sued by the bank and to file suit in high court and Supreme Court for the defaulted project. IV) Managing the cases that filling by loan holder against Bank with the help of law year. V) To invite auction to sale assets after receiving degree from the court and maintain relations with the court and co-ordinate the activities. VI) Managing case against advance defaulter and filling of case against them. VII) Preparation of Bank’s special consultant\ legal adviser and panel lawyer’s schedule and make communicate with them to supervise suit and also monitoring and co-ordination their operation. VIII) Recommendation to change existing law to recovery of loan IX) To keep the interest of Bank and provide legal advice. L Legal actions taken

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

9. HUMAN Resource MANAGEMENT Department

Bangladesh Shilpa Bank has total 794 personnel. It divided into two categories. These are:
A. Job-wise distribution
B. Profession-wise distribution:

Bank has a Training Department for upgrading the professional competence and skills of its Officers and Staff. Below are the main functions of Training Department: - ❑ To prepare & implement Annual Training Program. ❑ To impart training of the Officers/Staff regarding business & operations of the Bank. ❑ To adopt measures to hold in-house training and make arrangements to send Bank's Officers to overseas training programmers. ❑ To establish liaison with domestic & overseas organizations relating to training. ❑ To send Officers to local training institutions for improving professional skills; and ❑ To organize seminar/workshop/symposium on key economic/banking issues.

13 PROJECT REHABILITATION DEPARTMENT

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

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

Functions of Project Rehabilitation Department

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

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

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

4. Production of the rehabilitated project, making of the products analysis the targeted loan recovery and actual situation and taking necessary initiates regarding these

5. Making recommendation to restructure the capital to ensure fund management, profit sharing and loan recovery and making recommendation on the management and direction of the acquired project.

6. Reaction of bank participation stage by stage from the project, which is profitable

7. In case of apply right management after the certification that it will be effective and efficient.

Relation with other departments

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

CHAPTER- FOUR

SICK INDUSTRY

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1. WHAT DO WE MEAN BY SICK INDUSTRY

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

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

Bangladesh Shilpa Bank undertakes various projects by providing finance, machinery and other aids, some projects are implemented successfully and some projects are failed to attain the goal and these firms are called sick firms according to the BSB language.

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

17 SICK SITUATION OF A INDUSTRY

Normally BSB meets the long-term credit needs for implementation of the projects. BSB charter provides for extending working capital to its financed projects only to a limited scale. While sanctioning loans by BSB provision is made for commercial banks to provide 70% of the working capital needs. But in most cases it is found that the project management either can’t raise the required working capital from the commercial banks, or they can’t raise required amount in due time. As a result these projects could not go into operation on schedule time and they become unable to pay the interest and the principal amount. At last they are treated as sick industry

3 METHOD USED TO IDENTIFY A SICK INDUSTRY

There are some specific criteria to identify a sick industry. Two types of factors can be considered to identify the sick industries. They are-

[pic] Quantitative factors [pic] Qualitative factors

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

a) On the basis of Cost- Benefit Analysis

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

b) On the basis of Break Even Analysis

O

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-

[pic] Measurement of investment outlay and cost of the project are not appropriate [pic] When the means of financing is not available [pic] When the project is not profitable [pic] When the production is not reached at the break-even point [pic] When they can’t calculate appropriate risk level of sick [pic] Loan application with insufficient amount of money that would not meet fixed and operation cost [pic] Cash flow of the project is not available [pic] If actual cost of the project is more than the budgeted cost [pic] Shortage of working capital, i.e. if they do not manage the sufficient working capital [pic] If interest rate increases the cost of working capital then the project may become sick [pic] Lack of adequate operating capital [pic] Higher fixed cost, i.e. increase the fixed cost as a result of increasing of the price of machinery, land or other fixed items [pic] When variable cost increases [pic] When there is no sufficient mortgage [pic] Improper inspection of bank financed project [pic] Insufficient insurance facility [pic] Economic problem comes from the social cost benefit analysis.

B. QUALITATIVE FACTORS:
To identify a sick industry the following qualitative factors can be considered-

The symptoms of Sick Industry

Sick industry is difficult to define. Nonetheless the symptoms of sick industry are as follows- • The initiator is unable to pay sufficient money at the implementation stage • The delay of implementation increases the project cost. It also creates many problems and the burden of loan interest is increased. • Lack of full production or frequent obstruction of industry • The initiator is unable to pay the loan installment and other liabilities • The failure of payment of loan installment in time increases the burden of loan amount • Inability to submit the financial statement in time • Increase the tendency of undertaking unfair means in preparing the papers of stock materials • Goods of the stock increase of unsatisfactory sale • Profit from investment decrease gradually • The production level decreases gradually • Taking loan from various sources at a high rate • Applied for a large amount of loan • Non-cooperating tendency with the loan providing bankers • Lacking of perfection in the market.

Technological problems

Machinery imbalance causing lower capacity utilization is the major technical problem of many projects. Some also suffer from faulty technical design. • Whether the preliminary test and studies are not appropriate • Availability of raw materials, powers and other infrastructural facilities are not established. • The selected scale of operation is not optimal • The production process chosen is not suitable • The equipment and machine chosen are not appropriate • Lack of modern technology like incapable to use the computer and modern machinery • If the selection of machinery becomes faulty, it will not ensure the achievement of objectives • Wrongly or inappropriate selection of the machinery • Lower capacity of the machine resulting price will be higher, i.e. production cost higher • Inconsistency between the origin of raw materials and the factory location • Production of products and final consumption adversely affect the business • Lack of infrastructure facility • Selection of old and backdated technologies to be used in production • Delay of machinery procurement & rapidly change in technological environment • Unavailability of supply of gas, electricity and water etc 1. Administrative and Managerial problems
Success of a firm largely depends on management. There are some internal conflict between the workers and managers. A survey reveals that 30% of the projects suffer due to administrative and managerial problems. The administrative problems, which lead an industry towards sick, are as follows-

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

[pic] Lack of proper planning, organizing, controlling, administrating and monitoring.

Marketing Problems

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

If due to national financial crises product demand decrease

Introduction of new brand product

Wrong forecasting about the market

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

If change occurs in the Import and export policy

When market share of the project is under low appraisal

Smuggling of substitute goods

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

Improper market justification

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

Lack of market expansion and production diversification

Shortage of raw material supply

High competition in the market

Cheap price of the foreign product

Economic Problems

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

Political problems

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

Other Reasons of Sickness

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

2 IDENTIFIED SICK INDUSTRIES

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

Some Sick Industries

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

2. IMPACT OF SICK INDUSTRY IN BANGLADESH OR BSB [pic] Increase of non-performing assets in organizational level as well as national level [pic] Decrease contribution in GDP and GNP [pic] Decrease in productivity at national level [pic] Average effect in banks profitability [pic] Increases the classified loan [pic] Increase the lending rate of interest, which adversely affect the new and regular borrowers [pic] Affects adversely in the economic growth rate of the country [pic] Create adverse psychological impact on the prospective entrepreneurs. 3. LOAN PORTFOLIO:

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

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

[pic]

4. LOAN RECOVERED: Loan recovered is a crucial index to measure the success of a lending organization. Like previous years, this year too, the Bank has strengthened its recovery drive for realizing loans and dues from its borrowers and significant success was achieved. Total recovery target of loans during the FY 2004-05 was TK. 1400.00 million, against which actual cash recovery was TK.1391.44 million constituting 99 per cent of the target. During the reporting year, outstanding loan of TK. 259.48 was regularized through rescheduling and replacement of bad and doubtful loan accounts

The amount regularized through cash recovery and rescheduling were TK.1124.20 million and TK.149.40 million respectively in FY 2003-2004. During FY 2004-05, the recovery drive was affected to some extent, among others, due to the ever memorable serious flood, the country experienced. During 2004-05, the percentage of classified loan stood at 41% with a 21% decrease over the 62% of the preceding year. In other words, with a decrease of TK. 6359.69 million during reporting year, the classified amount of loan stood at TK. 3664.71 million from TK 10024.40 million in the previous

RECOVERY OF LOAN

|Category of Loans |Amount Recovered (million taka) |
|(A) |Long Term Loans: |915 |1061 |
| |Long Term Project Loans | | |
| | | | |
| | | | |
| | | | |
| | | | |
|(B) | | | |
| |Bridge Loan |1 |3 |
| |Staff Loan |35 |34 |
| |Administered Loan |105 |98 |
| |Sub-Total: |1056 |1196 |
| |Short Term Loans: | | |
| |Working Capital Loans |27 |45 |
| |Others(Debenture\ Share\ Loans against FDR\ Write | | |
| |off) |41 |150 |
| |Sub-Total |68 |195 |
| |Grand Total (A+B) |1124 |1391 |
| | | | |

Legal Actions Taken for Recovery of Loans:

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

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

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

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

CREDIT RISK MANAGEMENT

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

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

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

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

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

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

INTEREST RATE RISK MANAGEMENT

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

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

LIQUIDITY RISK MANAGEMENT

Liquidity risk is defined as potential loss arising from the Bank’s inability to meet its contractual obligations when due. Liquidity risk arises in the general funding of the Bank’s activities and in the management of its assets. Bank maintains sufficient liquidity to fund its day to day operations, meet customers deposit withdrawals either on demand or at contractual maturity meet customers demand for new loans participate in new investments when opportunities arise and repay borrowing they mature. Hence liquidity is maintained to meet known as well as unanticipated cash funding need.

Important factors in assuring liquidity is funded on the Bank’s good reputation, the strength of its strong financial position and credit rating. Liquidity risk is managed in accordance with a framework of liquidity polices, contracts and limits approved by ALCO. These polices controls and limits to ensure that Bank maintains well diversified sources of funding as well sufficient liquidity to meet all its contractual obligations when due.
The bank can meet the liquidity crisis by taking call loan, short term deposit from other Bank and Financial Institutions.

A CASE STUDY ABOUT SICK INDUSTRY 1. NAME AND LOCATION OF THE PROJECT

[

M/S J.K.K Industries Limited 11, DARUS SALAM MIRPUR DHAKA.L Head Office : Paribahan Bhaban, 21, Rajuk Avenue Dhaka.

2. BOARD OF DIRECTOR Borrowers and their net worth (position as on: October-1990)

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

21 Classification of project and production capacity:

The project wanted to produce various types of zipper 4. Project Execution and Implementation The construction period for the project was 8 months. The wanted to go in production in September 1992. But the company could not go in production by January 1994- Which was time for repayment of loan. As the imported machinery were identified as unable to produce good quality of zipper. The entrepreneurs could not go for commercial production.

|Sector & Product Mix |Sector |tick |Product Mix |
| |Manufacturing |√ | |
| |Service | | |
| |Others | | |

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

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

6. Credit Information Board (CIB) On Director’s Credit Exposure (Position as on 30-06-99)
|Name of Business Concern |Mature of Loan |Date of Sanction |date of Expire |Taka in Lac |
| | | | |Loan |overdue |
|J.K.K Industries Limited |Term Loan |2-11-90 |01-07-04 |27 |15 |

[pic]
|Type of loan |Sanction |Disbursement |
| |Date |Amount |Date |Amount |
|(a)Term loan |01-12-90 |18.07 |21-04-92 |21.15 |
|Sub total | | | | |
|(b)cash credit | | | | |
|Pledge | | | | |
|Others | | | | |
|Grand Total | |18.07 | |21.15 |

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

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

|Item |Taka in lack |Grand Total |
| |Not due |Overdue |Total | |
| |Term |Cash |Term |Cash |Term |Cash | |
|Principal |14.05 | |10.54 | |24.59 | |24.59 |
|Interest | | |4.93 | |4.93 | |4.93 |
|Penal Interest | | | | | | | |
|Others if any | | |0.04 | |0.04 | |0.04 |
|Total |14.05 | |15.51 | |29.56 | |29.56 |

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

|Status |Term loan |Cash credid |
|Unclassidfied | | |
|Substandard | | |
|Doubtful | | |
|Bad\Loss |√ | |

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

|Item |Taka in lack |
| |Term |Cash credit |Total |
|Provision |6.72 |- |6.72 |
|Interest Suspense |12.20 |- |12.20 |
|Total |18.92 |- |18.92 |

(2.3)Downpayment

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

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

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

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

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

(2.6) Steps taken to recover the loan by BSB

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

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

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

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

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

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

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

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

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

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

[pic]

1) Loan Repayment Schedule M\S J.k.k Industries Limited

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

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

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

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

5.1 Introduction CHAPTER-----5
Rehabilitation means to reshape the existing industries or projects so that it may operate successfully in future. Keeping it mind I tried my best to find the appropriate way to rehabilitate a sick industry.

1 Programs taken to rehabilitate the sick industries

BSB has taken the following programs during the year 2003-2005-

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

5.3 Facilities provided under rehabilitation program
We can explain with an example of Solaiman Textile Mills, Rupgonj, Narayangonj which was a sick industry financed by BSB. BSB had given loan at the first time TK. 513 lac.
Second time BSB gave them under rehabilitation program:

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

5.4 Rehabilitation Policy

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

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

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

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

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

5.6 Financial perspective

In the financial measurement the project should compute the cost of capital and maintain budgeting. The present value of net cash inflow should be higher than the present value of cash outflow. In such case, the bank provides some financial treatment that the amount of interest is to be waived or re-phased or providing consulting service, i.e. 1. Success about the proper way 2. Inspiration by providing motivation

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

5.8 Role of Management of Rehabilitation Department of BSB

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

5.9 Are all-sick industries are rehabilitated?

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

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

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

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

5.11 Rehabilitation program

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

The bank has so far rehabilitated 53 such projects. The list of these projects is already mentioned in the sick industry chapter of this report. A summarized position of the facilities extended under its rehabilitation program is shown below-

|Types of facilities |Amount involved (million taka) |
|Interest Waiver Allowed |880 |
|Block Account Facility Provided |456 |
|Loan Rephrased |258 |
|Sanction of loan |279 |

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

Sanction of term loan
Million TK.

2003-2004 2004-2005
|Number of projects|Number of |Local currency |Foreign |Total |Number of |Local currency |Foreign |Total |
| |projects | |currency | |projects | |currency | |
|Existing projects |3 |166 |- |166 |1 |47 |- |47 |
|(BMRE) | | | | | | | | |
|Additional loans |3 |136 |- |136 |3 |136 |- |136 |
|Total |27 |989 |- |989 |38 |1009 |- |1009 |

Under rehabilitation program BSB has taken so many measures to rehabilitate the sick industries. Summarized measures that are taken by BSB to rehabilitate the sick industries are given below-

5.12 Measures taken by BSB

Loan outstanding Measures taken (Million TK.)
(Million TK.)
| |Total outstanding |
|Overdue | |
|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 |

Chapter-06

Findings, Recommendation & Concluding Remark

[pic]YOUR PARTNER IN INDUSTRIALIZATION

6.1 Introduction

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

6.2 Findings of the Study

During the internship program I have found out the following findings from my study: [pic] Sometimes improper feasibility reports are submitted by sponsors, which do not contain adequate and reliable information. [pic] Sometimes pressure group’s involvement in sanctioning loan [pic] Lack of business experience of the entrepreneurs. So, when they start business they may be failure in business and they may become loan defaulter. [pic] Lengthy procedure and long time (more than three months) involved in the appraisal of project. [pic] Lack of adequate, updated and accurate information from the Management Information System (MIS) [pic] Unstable policy of the government due to political changes over time [pic] Sometimes inefficient allocations of resources create a huge amount of bad debt ty by them in future means they divert their equity in other purpose after getting the loan amount. [pic] Lack of effective monitoring in projected work. [pic] Management conflict is one of another important problem in the situation of sickness. [pic] Lack of motivation and team speed [pic] Lack of proper scheduling in projected work. [pic] 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. [pic] 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. [pic] Inadequate attention is paid to analyze risk and an uncertainty associated with the projects, means only sensitivity analysis is done to analyze the risk. [pic] There is no system of accountability of the project appraisal team if the approved project fails due to their improper appraisal. [pic] Most of the personnel are not as much experienced and skilled to operate banks activities in proper way. [pic] Shortage of working capital is another problem because some industry may sick for this problem. [pic] 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. [pic] Because of country’s existing political instability, unstable tariff and fiscal policy some industries may become sick. [pic] No use of latest technology and permanent IT specialist [pic] 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.

[pic] Lack of proper control over the project may cause of sickness. [pic] Delay in settlement of case [pic] Project rehabilitation is one of the criteria of BSB that revives the sick project [pic] Finally contribution of BSB is the highest in the industrialization of Bangladesh though there are some problems.

6.3 Recommendations

As a student of BBA it is very tough to give suggestions to BSB to implement a project and to rehabilitate a sick industry. Being the prime Development Financing Institution BSB continues its efforts to make an effective contribution towards expansion of industrialization process of the country. With keeping this view, I recommend some suggestions considering the noted problems. The recommendations to resolve sickness from my viewpoint are as follows: [pic] Sanctioning of loan to the sponsors should be made through making feasibility report properly. [pic] 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. [pic] Experienced and motivated entrepreneurs should be allowed for sanctioning the loan. [pic] BSB should avoid unnecessary political interfere. If political problem influences the baking activity must create new problem, no doubt. [pic] BSB should give more consideration on physical investigation before issuing loan. However project appraisal should be strict so that nobody cal use its loopholes. [pic] Sometimes real entrepreneur does not get bank loan. So actual entrepreneurs should be identified and give loan. [pic] The projects/industries, which are profitable, should be identified and sanctioned loan to those projects/industries. [pic] Risk adjusted discount rate method; program evaluation and review technique (PERT) and probability analysis should be introduced. [pic] Market Research Institution should be established for proper market survey. [pic] A co-ordination cell should be established for sharing information among various institutions. [pic] Responsibility should be established to all employees according to their involvement in appraisal project. [pic] Honesty, morality, responsibility and patriotism of employees should be enhanced. [pic] Properly check the feasibility report before issuing loan. [pic] Proper policy to be adopted and implemented. [pic] BSB must have to identify viable project and make feasibility study through efficient personnel before sanctioning of loan to an industry. [pic] Employees who are directly involved with loan recovery should be motivated and experienced. [pic] 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. [pic] 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. [pic] 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. [pic] National observation committee can be established to analyze, evaluate and solute proper loan recovery. [pic] In selecting borrower, 5C’s (capital, capacity, character, condition, collateral) must be considered. [pic] Proper communication should be established with the clients. [pic] Ensure accountability among the appraisal team who appraise the sick industry. [pic] Number of trained supervisor to be revised [pic] Both primary & secondary database of the BSB should be improved & strengthened.

6.4 Some other important recommendations

❖ On the basis of interest rate
The interest rate of the bank in different sectors is not favorable to the new entrepreneur. So the interest rate in priority sector should be truncated to a minimal percentage.

This should be reduced to encourage agro-based industries, small & cottage industries, which are very much viable for the economic development of a country.

❖ Promoting new entrepreneurs [pic] No collateral [pic] Tolerable interest rate [pic] No bureaucratic problem

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

3. Name and Location of the Project

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

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

(1.3)Classification of project and production capacity:

The project wanted to produce various types of zipper.

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

1.5

|Sector & Product Mix |Sector |tick |Product Mix |
| |Manufacturing |√ | |
| |Service | | |
| |Others | | |

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

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

8. Credit Information Board (CIB) On Director’s Credit Exposure (Position as on 30-06-99)
|Name of Business Concern |Mature of Loan |Date of Sanction |date of Expire |Taka in Lac |
| | | | |Loan |overdue |
|J.K.K Industries Limited |Term Loan |2-11-90 |01-07-04 |27 |15 |

[pic]
|Type of loan |Sanction |Disbursement |
| |Date |Amount |Date |Amount |
|(a)Term loan |01-12-90 |18.07 |21-04-92 |21.15 |
|Sub total | | | | |
|(b)cash credit | | | | |
|Pledge | | | | |
|Others | | | | |
|Grand Total | |18.07 | |21.15 |

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

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

|Item |Taka in lack |Grand Total |
| |Not due |Overdue |Total | |
| |Term |Cash |Term |Cash |Term |Cash | |
|Principal |14.05 | |10.54 | |24.59 | |24.59 |
|Interest | | |4.93 | |4.93 | |4.93 |
|Penal Interest | | | | | | | |
|Others if any | | |0.04 | |0.04 | |0.04 |
|Total |14.05 | |15.51 | |29.56 | |29.56 |

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

|Status |Term loan |Cash credid |
|Unclassidfied | | |
|Substandard | | |
|Doubtful | | |
|Bad\Loss |√ | |

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

|Item |Taka in lack |
| |Term |Cash credit |Total |
|Provision |6.72 |- |6.72 |
|Interest Suspense |12.20 |- |12.20 |
|Total |18.92 |- |18.92 |

(2.3)Downpayment

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

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

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

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

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

(2.6) Steps taken to recover the loan by BSB

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

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

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

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

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

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

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

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

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

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

[pic]

2) Loan Repayment Schedule M\S J.k.k Industries Limited

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

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

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

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

[pic]
-----------------------
Production

Cost

FC

VC

TR

Profit

Break-Even Point

Source: Project Rehabilitation Department of BSB

Start with BSQF

Submission of BSQF with Proposed projects

Put Up Appraisal Report

Evaluation of proposed project by a team member

Passed process to PID dept. documentation and as well of other department

Ends of this department

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

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

Sources of Data

Secondary Sources

Primary Sources

CHAPTER ONE

INTRODUCTION OF THE REPORT

[pic] YOUR INVESTMENT PARTNER

CHAPTER- THREE

FUNCTIONS OF VARIOUS DEPARTMENT OF BSB

[pic] YOUR INVESTMENT PARTNER