Chapter - 03

Credit Management Of BDBL

Analysis Of Loan Portfolio Of Bangladesh Development Bank Ltd. (BDBL)

3.1. Process of Loan Appraisal

Preparation of appraisal 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

(d) Market analysis.

Technical analysis

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

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

Financial analysis

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

Economic analysis / market analysis

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

After appraising the project, project appraisal committee the appraisal report, on the basis of that a project is approved. If the project is approved, loan is sanctioned to the proposed project .During FY-2009-10; the bank sanctioned total long term loan of tk. 1006 million to 39 projects and short term loan of tk.105 million to 15 projects and disbursed tk.534 million to 53 projects.

3.2. Loan Sanction Procedure -

A client who wants to have a loan ask for an application form , which is known as Bangladesh Standard Questionnaire form (BSQC) . After fulfilling this form by the sponsors’ and authority receive with l/80fl% project estimated cost other necessary documents complied by the sponsor’s. He has to pay one eight of one percent cash monthly 1/8 of 1 of the total loan amount with the filled form.

The persons is required to submit necessary papers and documents by the bank the information generally consists of:

When all the required papers and documents are submitted along with the fee tk. 1000 plus 1/8th of 1% of total loan amount , the proposal is then under consideration of judging the project viability.

3.3. Loan Portfolio -

Loan Application Received: In 2011, the Bank received 1685 loan proposals with loan amount of TK. 617.47 core. Among these loan applications, 56 loan proposals were for long term loan and 67 for SME, loan while the others included 71 for cash credit and 844 for consumer’s credit and commercial loan.

Sanction and Disbursement of term loan: The bank kept on sanctioning of term loans during 2011 also. This year long term local currency loan of tk 60.88 crore was sanctioned to 85 projects while the bank disbursed term loan 32.81 crore to 97 projects while the bank disbursed term loan tk 32.81 crore.

Sanction and disbursed of loan in 2011 (In crore tk)

Nature Of Loan

Sanction

Disbursement

No of Projects

Amount of crore tk

No of Projects

Amount of crore tk

  1. Long term loan

 

 

97

32.81

  1. Loan for new project

22

46.94

  1. Loan for BMRE project

0

0

  1. Additional loan for existing project

3

5.37

  1. Loan for SME project

60

8.57

Sub Total

85

60.88

97

32.81

  1. Short term loan

 

 

 

 

1.Cash credit

64

78.06

35

9.99

2. Consumer credit

345

9.92

360

10.21

3. Commercial loan

26

0.22

24

0.23

4.Personal loan

312

13.99

317

13.79

  1. Others

80

10.25

98

11.52

Sub total

827

112.44

834

45.74

Grand Total(A+B)

912

173.32

931

78.55

 

Commitment (Documentation Completed)

At the year-end of 2011 , the Bank made a loan agreement of tk 27.79 crore in local currency with the entrepreneurs of 90 projects. Out of this, tk 18.13 crore was distributed to 62 projects, while the rest of tk 9.66 crore was awaiting for disbursement to 28 projects.

Project Implementation

Implementation status of projects in 2011 ( taka in crore)

Stages of Implementation

Jan-Dec2011

Jan-Dec2011

No of projects

Amount Disbursed

  1. Under construction

44

112.65

  1. Documentation Completed

90

27.79

  1. Awaiting documentation

27

100.30

 

During the reporting year, 27 new projects entered into the loan portfolio with loan liabilities of tk 25.26 crore. Besides the total number of sick projects stood at 30 with loan liabilities of tk 109.43 crore. In 2010,

The sector wise Bank’s loan portfolio was shown below in Table:

The sector-wise position of Bank’s loan portfolio(For the year ended December,2010.)

Sectors

No. of projects

Total loan outstanding (in Crore)

Food and allied products

55

48.14

Jute and allied products

3

26.61

Cotton. Woolen and synthetic textiles

60

535.63

Paper, Paper products and printing

8

13.20

Tannery and leather products

2

8.04

Non-metallic mineral products

3

1.68

Forest and wooden products

1

2.51

Rubber and Rubber products

1

0.19

Metal products

8

11.37

Electrical machinery products

1

4.47

Spare products

2

0.12

Water transport

2

0.90

Chemical and Pharmaceuticals

15

41.17

Petro Chemical products

2

5.03

Services industries

33

18.61

Miscellaneous

9

8.14

Total

205

725.63

Sources: Annual report 2010 (page. 64)

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 loan outstanding of Tk 7441.91 million compared to that of 308 projects luring a total loan outstanding of Tk. 13998.11 million in the preceding year. out of 166 projects in the loan portfolio, 60 were export oriented, 72 import substituting and 34 service other industries.

 

Food and Allied products:

During FY 2004-05 total number of food and allied products projects in the loan portfolio stood at 31 with a total loan outstanding of Tk. 491 million. In the preceding year under this sector the total member of projects of the loan portfolio stood t 58 with a total loan outstanding of Tk. 1335 million. In FY 2004-05 total number of projects and total loan outstanding are decreased comparing to the previous FY under this Food and Allied products.

Food & Allied products:

FY

2000-01

2001-02

2002-03

2003-04

2004-05

No. of Project

103

99

85

58

31

Total Loan outstanding (million Taka  )

2457

2424

1375

1335

491

Jute & Allied products: 

During FY 2004-05 total members of jute and Allied products projects in the loan portfolio stood at 3 with a total loan outstanding of Tk. 538 million. In the preceding year under this sector the total member of projects of the loan portfolio stood at 5 with a total loan outstanding of Tk. 674 million. In FY 2004-05 the member of projects 2 and loan amount Tk. 136 million are decreased comparing to the FY 2003-04 under this jute and allied products.

Cotton, woolen and synthetic Textiles:

During FY 2004-05 total members of cotton, wooden and synthetic textiles projects in the loan portfolio stood at 53 with a total loan outstanding of Tk. 5304 million. In the preceding year under this sector the total no. of projects of the loan portfolio stood at 87 with a total loan outstanding Tk. 8148 million. In FY 2004-05 the total member of projects 34 and loan outstanding amount Tk. 2844 million are decreased comparing to the financial year 2003-04 under this cotton wooden and synthetic Textiles sectors.

 

FY

2000-01

2001-02

2002-03

2003-04

2004-05

No. of Projects

122

119

112

87

53

Total Loan outstanding (million Taka)

9314

8487

7650

8148

5304

Paper, Paper products and printing:

During FY 2004-05 total numbers of paper, paper products and printing projects in the loan portfolio stood at 6 with a total loan outstanding of Tk. 177 million. In the preceding year under this sector the total member of projects of the loan portfolio stood at 15 with a total loan outstanding of Tk. 591 million.

Paper, Paper products and printing:

FY

2000-01

2001-02

2002-03

2003-04

2004-05

No. of Projects

20

14

18

15

6

Amount of total loan (million)

459

481

324

591

177

Tannery and leather products:

During FY 2004-05 total member of Tannery and leather products projects in the loan portfolio stood at 4 with a loan outstanding of Tk. 100 million. In the preceding year under this sector the total number of projects of the loan portfolio stood at 09 with a total loan outstanding of Tk. 333 million. In FY 2004-05 the total member of projects 5 are decreased and loan outstanding amount 133 million are also decreased comparing to the FY 2005-04 under this Tannery and leather products sectors.

Tannery and leather products:

FY

2000-01

2001-02

2002-03

2003-04

2004-05

No. of Projects

16

15

14

9

4

Amount of Loan outstanding

657

598

612

333

100

Non-metallic Mineral products: 

During FY 2004-05 total no. of Non-metallic Mineral products projects in the loan portfolio stood at 02 with a total loan outstanding of Tk. 130 million. In the preceding year under this sector the total number of projects of the loan portfolio stood at 4 with a total loan outstanding of Tk. 130 million. In FY 2004-05 the total number at projects 02 and loan outstanding amount Tk. 30 million are decreased comparing to the FY 2003-04 under this non-metallic Mineral products factory.

Non-metallic Mineral products:

FY

2000-01

2001-02

2002-03

2003-04

2004-05

No. of Projects

9

9

6

4

2

Amount of loan outstanding

380

342

276

130

100

 

Forest and wooden products:

During FY 2004-05 total member of forest and wooden products project in the loan portfolio stood at 1 with a total loan outstanding of Tk. 7 million. In the preceding year under this sector the total no. of projects of the loan portfolio stood at 1 with a total loan outstanding of 7 million which is same to the current FY 2004-05 under this forest and wooden products sectors.

Forest and wooden products:

FY

2000-01

2001-02

2002-03

2003-04

2004-05

No. of Projects

2

2

2

1

1

Amount of loan (million)

10

10

7

7

7

 

Electrical Machinery and goods:

During FY 2004-05 no loan was sanctioned of Electrical and grounds projects. In the preceding year under this sector the total number of projects of the loan portfolio stood at 6 with a total loan outstanding of TK. 354 million.

Electrical Machinery and goods.

FY

2000-01

2001-02

2002-03

2003-04

2004-05

No. of Projects

10

10

9

6

0

Loan amount (million Tk.)

386

437

332

354

0

Machinery and spare parts:

During FY 2004-05 total numbers of machinery and spare parts projects in the loan portfolio stood at 6 with a total loan outstanding of Tk. 190 million. In the preceding year under this sector the total member of projects of the loan portfolio stood at 13 with a total loan outstanding of Tk. 190 million. In FY 2003-04 total number of projects 7 are decreased comparing to the FY 2003-04 under this Machinery and spare parts sectors.

Machinery and spare parts:

FY

2000-01

2001-02

2002-03

2003-04

2004-05

No. of Projects

14

19

18

13

6

Amount of loan (million Tk.)

239

262

190

190

45

Service Industries:  

During FY 2004-05 total number of service industries projects in the loan portfolio stood at 18 with a total loan outstanding of Tk 209 million. In preceding year under this sector the total number of projects of the loan portfolio stood at 28 with a total loan outstanding of Tk. 422 million. In FY 2003-04 the total numbers of projects 10 are decreased comparing to the FY 2004-05 under this service Industries sectors.

Service Industries:

FY

2000-01

2001-02

2002-03

2003-04

2004-05

No. of Projects

52

46

38

28

18

  Amount of total loan (million taka)

969

912

723

422

204

Miscellaneous: 

During FY 2004-05 total numbers of miscellaneous projects in the loan portfolio stood at 7 with a total loan outstanding of Tk. 96 million. In the preceding year number this sector the total number of projects of the loan portfolio stood at 13 with a total loan outstanding of Tk. 198 million. In FY 2003 the total number of projects 6 are decreased comparing to the FY 2003-04 under this miscellaneous sectors.

Miscellaneous:

FY

2000-01

2001-02

2002-03

2003-04

2004-05

No. of Projects

16

15

15

13

7

Amount of loan outstanding (million taka)

214

213

200

198

96

3.4. Sanction long-term loans

The bank kept on sanctioning of term loans during FY 2009-2010 this year local currency loan of BDT 1006 million was sanctioned to 39 projects. Of the total sanctioned amount tk 928 million was for 37 new projects , and additional loan of tk million for 2 ongoing projects.

3.5. Commitment and disbursement of Term Loans (FY 2009-10)

During FY 2009-10 the Bank made commitment of TK 765 million in local currency to 36 projects. During the period the Bank disbursed term loans of TK. 485 million in local currency to 43 projects as against the disbursement of TK. 296.96 million to 14 projects in the previous year. During the period the bank signed loan agreements with the sponsors of 10 sanctioned projects for an amount of TK. 300.95 million.

During the last year the member of such projects was 15 and the loan amount was TK. 406.51 million only.

 

Stages of Implementation of projects

Position of projects under implementation

2000-01

2001-02

2002-03

2003-04

2004-05

2008-09

2009-10

No. of Project

No. of Project

No. of Project

No. of Project

No. of Project

No. of Project

No. of Project

Started commercial operation

5

2

2

4

7

36

14

Under construction

11

6

5

6

11

-

-

documentation completed

3

3

4

15

10

-

--

Awaiting Documentation

5

4

23

22

27

-

-

 

3.6. 10 years loan sanction of BDBL in various sectors

Bangladesh Development Bank Ltd (BDBL) is a specialized bank that’s mainly emphasize on industrial loan. The table shows that the various sectors of the industry where the bank sanctioned loan. Here is the 10 years loan sanction scenario of Food and allied,textiles,printing,Tannery and leather,Non-metallic mineral ,Forest and wooden ,Metal ,Electrical machinery ,Water transport,Chemical and Pharmaceuticals.

Note-Former BSB and BSRM and present BDBL

 

Name of the project

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

Textiles

363085

252852

440093

628498

645628

685794

530400

428690

432243

4882769

Electrical

305

255

365

697

5208

1009

0000

0000

1581

20552

Food and allied

15521

17591

19587

20597

17819

22650

49100

29226

22402

3399516

Jute and allied

17586

15818

40385

18324

19313

30513

53800

53611

53575

5702

Metal products

3188

8785

3909

4093

7101

8019

7600

1119

1083

51930

Petro Chemical

2727

3711

6300

3055

3379

6226

13300

12649

12084

125642

Rubber

107

95

109

235

315

301

398

000

000

000

Services

22877

25555

20594

25825

27894

30845

20400

22838

22450

208521

Tannery

15289

18880

20200

13220

13441

15509

10000

10903

10606

131881

Water transport

9001

8097

5011

4525

3518

60745

5028

6030

6916

75442

Total

448750

348567

556193

718146

900764

90599

586200

565126

536210

8901955

Table: Loan sanction scenario of BDBL.

Source: The sector wise Bank’s loan portfolio (As on 30-06-2011)

Chapter - 04

Loan Recovery performance of Bangladesh Development Bank Ltd

4.1. Definition of loan performance -

Financial soundness of all banks depends on the performance of its disbursed loan on various sectors. Loan performance means how the loans were scheduled to act and how they are actually acting. It is closely associated with timely and steady repayment of interest and principal of a loan. A loan is said to be well performed when its repayment is duly made. If a loan fails to be repaid duly for some consecutive period or installments, it falls under the classification criteria. Performance bank’s loan is usually measured through the percentage of classified and unclassified loan of total outstanding. If the amount of classified loan is high, overall loan performance of a bank is poor and low amount of classified loan indicates an effective and efficient loan performance.

4.2 Loan recovery Methods -

BDBL usually follow a formal way to recover its loan. Normally before an installment falls due they issue reminders to remind sponsor to prepare to pay loan. They use phone call, formal letter and physical visiting to to remind the sponsor to prepare for a paying installment on due time. Formally, Central recovery department is responsible for perform this duty. The officers of Central recovery department go for physical visit to project site twice in a year. By analyzing the condition of the project they suggest sponsors’ to take necessary measure to sustain projects and increase the cash flow.

Some other technique which are applied by BDBL to recover the Loan and Advance:

Weekly, monthly statements of recovery department, law department are prepared by these departments and submitted it to the managing director, board of director to inform about the latest recovery position.

 4.3. Loan Recovered -

Loan recovered is a crucial index to measure the success of a lending organization. Like previous years, This year two, the Bank has strengthened its recovery drive for realizing loans and dues from its borrowers and significant success was relieved. 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 percent of the target. During the reporting year, outstanding loan of Tk. 259.48 million was regularized through rescheduling and replacement of bad and doubtful loan accounts.

The Bank initials 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 Banks dues while law suits were filed against 11 companies. Besides, 79 sale notices were published in the national dailies for auction At the same time efforts were made for some 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 assist of 11 projects were sold through auction during the year.

The amount regularized through cash recovery and rescheduling were Tk. 1124.20 million and Tk. 14940 million respectively in FY 2003-04. During FY 2004-05, The recovery drive was affected to same 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 the reporting year, the classified amount of loan stood at Tk. 3664.71 million from Tk. 10024.40 million in the previous year.

Category of Loans

770

1011

1000

989

915

1061

A. Long term project loans

1

1

1

1

1

3

Staff Loan

33

34

33

34

35

34

Administered Loan

326

166

118

137

105

98

Sub Total

1130

1212

1153

1161

1056

1196

B. Short term loans:

90

38

25

23

27

45

Other’s (Debenture (Shares/Loans against FDR)

4

150

20

132

41

150

Sub total

1114

1400

1198

1316

1124

1391

Ground Total

 

 

 

 

 

 

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 and 3 for short term Loan.

Loan recovered during 2010 (tk in lac)

Category of loans

Recovery Target

Amount received

Unclassified

9680

12232

Classified

2628

2356

written off

4000

2464

Total

16308

17052

Loan recovered during 2011 (tk in lac)

Category of loans

Recovery Target

Amount received

Unclassified

13277

11316

Classified

1723

1281

written off

5000

3884

Total

20000

16481

Recovery up to November, 2012(Recovery)

Loan Type

Unclassified

Classified

written off

Total

Long term

5669.98

845.68

3084.74

9600.40

Working Capital

1778.45

0.00

3619.40

5397.85

Staff

965.47

0.00

0.00

965.47

Misc.

5169.93

0.00

0.00

5169.93

Total=

13583.83

845.68

6704.14

21133.65

Source: Loan recovery Department

 

4.4. Sector wise loan performance of BDBL

4.4.1. Food and allied products

Food and allied product sector is one of the improving sectors of BDBL. In the financial year 2010-11, food and allied sector got 4% concentration of its total loan outstanding amounting to a total of TK224 million.

Status of classified loan:

For the year 2010-l1 food and allied sector classified TK38 million as bad loans, representing 17%percent of the total outstanding where as TK185 million is still unclassified.

Findings of the sector:

Though the percentage of classified loan is 17% but the total outstanding is still too high in 2010-11, this sector got some improvements over the last couple of years. Total bad loan of this sector in 2010-11 was TK 423 million but it was reduced to TK 172 million in 2009-10 and got a dramatic improvement in 2009-11 with a 78%fall to 38% million. This sharp and continuous reduction in Bad loans indicates better loan monitoring and administration in this sector.

From unclassified loans point of view, this sector also conveys some positive signal. Unclassified loans with the reduction in bad loans, goes up from 66 million in 2008-09 to 185 million in 2010-11. In short, loans of this sector are performing better year to year and demands constant concentration.

4.4.2 Jute and allied fibber:

Jute and allied fibber is that sector with which BDBL is going to close its operation. Already bank has stopped sanction and disbursement in this sector only job of the bank is to recover the amount of loan money which was given before. In 2010-11 this sector got 9%concentration and its loan outstanding amount is 535 million.

Status of classified loan: For the financial year 2010-l1 this sector has classified TK 416 million as bad loan which is 78% of total outstanding where as TK 118 million is still unclassified.

Findings of the sector: This sector has 78% bad loan comparing with the total outstanding, though it is 78% and seems too high hut if we analyse the previous year’s data we will get some different idea about this sector.

If we start talking about bad loan or classified section we see the difference year to year. In 2009-10 the amount of bad loan was TK 530 million, in 2008-09 the amount was TK 424 million and in 2010-l1the amount is TK 412 which is comparatively low than previous years. But the decreasing speed is slow here.

If we see the diagrams here we see the amount of unclassified loan is increasing and its growth rate is good enough. It was only TK 7 million in 2009-10 there was huge change, it was TK 112 million which is 16 times more than previous year. And in 2010-11 TK 118 million is also good if we apply the growth of unclassified loan point of view.

4.4.3 Cotton and Woollen Products

This is the prime sector among the sectors with those BDBL deals. Sanction, disbursement and recovery all is good in this sector. This is the sector by which the country earns most of its foreign income and it is playing a vital role since couple of years. This sector is getting more concentration year to year 69% of outstanding in this sector.

Status of classified loan: In the year 2010-l1 the percentage of classified loan is TK818 million which is 19% of total outstanding and 81% of total outstanding is unclassified which sounds good is of TK 3 504 million.

Findings of the sector: 

In 2010-11 the amount of bad loan was of TK 1588 million and in the year 2009-10 that was of TK 948 million and in the year 2010-l1 it is of TK 818 million. So here

If we talk about substandard loan in the diagram, we see in 2009-10 it was of TK 110 million and in 2009-10 it was of TK .158 million and in 2010-11 no existence of this class. So it indicates well because a class has dropped out. In the consecutive years there is no significant change among the amount of unclassified loan, which really proves better performance of this sector better planning, monitoring and controlling of the bank.

4.4.4 Paper and Paper products

Only 2%of total outstanding exist in this sector. This is the sector which is very important for a country, if the sector falls then the country become dependent on import which may not be good for a country.

Status of classified loan:

In this sector here the percentage of bad loan is 10% which is relatively low comparing with other sectors and with total outstanding. The amount of bad loan is of TK 14 million in 2010-11 where unclassified loan is 90% and it is of TK 125 million.

Findings of the sector: 

In this sector the data gives us that kind of information which can be matter of hope. Here he see, in 2008-09 bad loan was of TK 54 million, in 2006-07 the amount was TK 22 million and in 2010-l1 the amount is only 14 million. So the falling rate of bad loan is 60% and 37% in two consecutive years, a positive change in unclassified section.

Though in 2009-10 unclassified section showed negative signals and there was also a big amount of doubtful loan but the bank has crossed the session and now is in good position. In 2010-11 the unclassified loan is of TK125 million which is 76.8% more than the last year, so it proves the great performance of the bank and demands such kind of performance in all sectors.

 

4.4.5 Tannery and its products:

This is the sector from which country can earn money by export though this sector is earning money but it is not equal to the opportunity and also the expectation. This sectors has 2% of total outstanding is of TK 14 million

Status of classified loan:

This sector’s classified loan is 14% of outstanding is of TK 91 million in the year 2010-11 is conveys a message that the amount of classified loan is almost same of the year 2009-10.And the unclassified loan is 86%.

Findings of the sector: 

When we see the same scenario year to year then it is said that, probably the same effort has given to this sector or we can say that no strategic change. In this sector in 2009-10 the amount of bad loan was 79 million, in 2008-09 it was 91 million and in 2010-11 it is 91 million also. So this sector demands some new policy to recover the bad loan amount quickly.

Comparing with bad loans or the classified sectors, it is too low, the amount of unclassified loan. And year to year the amount is falling. So from this scenario we can conclude that this sector is in danger and the bank should reform all strategy and need new plan if the bank wants to deal with this sector

4.4.6 Non-metallic mineral products:

Non-metallic sector is that kind of sector which is actually helping the bank. Indirectly bank doesn’t need to think about the sectors like others because it is performing very well.

Status of classified loan: 

Total outstanding loan was 71 million in the year 2010-11 and the total amount has gone under the title unclassified loan and the classified section is 0%, really sounds good.

Findings of the sector: 

The amount of unclassified loan was TK 100 million in the year 2010-11. 86 million in the in 2010-l1 it is 71 million, its falling year to year so it can be seems that the sector is not performing well but it will not be right cause this sector keeping its classified sector nil, year to year. Fall of the amount of unclassified loan can be linked with other sections like sanction, disbursement etc.

4.4.7 Forest and Wood Products

Though it is an important sector of the country but BDBL is not currently dealing with this sector.

Status of classified loan: There is no amount of outstanding loan in last two years and also classified and unclassified loans.

Findings of the sector:

In 2009-10 there was only of TK 6 million bad loans in this sector. After that we see no activities of this sector. BDBL need to consider the sector again not only for its profitability but for the people who deals with this sector.

 

4.4.8 Basic metal Products

Though the outstanding amount of this sector has a little significance but it is not a matter of hope that the total outstanding amount is bad loan.

Findings of the sector:

In 2010-11 the amount of bad loan is of TK 10 million and it was of TK 11 million in 2009-10. And in those years these amount were also the total outstanding amount. So it means either the sector has fallen totally or the inefficiency of loan handling of BDBL. So BDBL should keep watching and think how the can recover their money quickly and how the sector can be raised again.

4.4.9 Metal products

Among the sectors with which BDBL deals this is one of the small sectors. BDBL is doing transaction with this sector regularly but the amount is comparatively low.

Status of classified loan:

In 2010-11 the total amount of outstanding was of TK 14 million. Of that amount bad loan is 81% and unclassified loan is 19%.bank actually does not expect this type of scenario but it happed.

Findings of the sector:

Last three years three years the bad loan has shown abnormal attitude, in 2010-11 the amount of unclassified loan was .5 million and the amount of bad loan was 30 million which was 60 times more than the unclassified loan after that year bad loan was 11 million and after that year it means an 2010-11 it was 11 million also and in the other hand unclassified loan

4.4.10 Electrical Machinery

This is the sector with which BDBL has started dealing again with a very good performance.

Status of classified loan: In the year 2010-11 the there was only outstanding amount 15 million and the whole amount is unclassified.

Findings of the sector: In the year there 2009-10 there was no amount of outstanding loan. But in the year 2010-11 here there was only 15 million outstanding and which is totally unclassified. So from these data we can say that the sector is really performing well and the bank should keep and monitor the performance level which exists now.

4.4.11 Machinery and spare parts:

This sector is very much necessary for a country to make production and the bank is dealing with this sector year to year.

Status of classified loan: 93% of the total outstanding is classified in this sector and it is near about 47 million in the year of 2010-11, where the unclassified section is only 7%.

Findings of the sector: In 2009-10 the amount of bad loan was 26 million and substandard loan was 13 million and the unclassified loan was only 12% of the total unclassified loan. 2010-11, here we see the unclassified amount is only 7% of classified loan. So finally we see the section’s performance is not rising rather falling.

4.4.12 Transportation: One of the most important sectors with which BDBL deals. This sector has a great utility for communication purpose.

Status of classified loan: 19% of total outstanding is not bad when the amount of bad loan is falling year to year. In 2010-l1 the amount of classified loan was 13 million and the unclassified loan was almost 56 million.

Findings of the sector: In 2008-09 the total outstanding amount was bad loan, the amount of bad loan was 15 million which was 26% of total outstanding and that year unclassified loan was 44 million, which was 78% of total outstanding and in 2009-lOthe difference between classified and unclassified loan improved and turned into the proper way.

4.4.13 Chemicals

Chemical sector is one of the important sectors of BDBL. This sector has the outstanding amount which is 230 million and this amount is 4% of the total outstanding.

Status of classified loan: We divided the total outstanding amount into two sections, classified and unclassified. In this sector in the year 2009-10 bad loan we 44% and the unclassified amount was 56%.

Findings of this sector: In this sector, here we see the contra situation of the two sections. In the year 2008-09, bad loan was 120 million and unclassified loan was 76 million, the year 2009-10, bad loan was 102 million and the unclassified loan is 127 million. So here we see that, the amount of bad loan is falling and unclassified section is improving.

4.4.14 Petra Chemicals

This is a sector which is really important for our country and in the current situation the sector has to do a lot for us. This sector got 2% concentration of total outstanding loan.

Status of classified loan: In the year 2010-l1 the total outstanding amount was 120 million of that amount 19% considered as bad loan or the classified loan and the rest amount considered unclassified.

Findings of this sector: Again we see the contra situation between classified and unclassified section and also seeing the positive changes 2008-09 and 2009-10 in these years position of unclassified loan improved and bad loan also improved with a positive change.

4.4.15 Miscellaneous

When the outstanding amount of a section is 2% of total outstanding and the total amount are classified then the sector is bad can be easily said.

Status of classified loan: In the year 2009-lOthe total outstanding amount is 97 million and 96.5 million is bad loan, so this is the section which is in danger.

Findings of this sector: In 2007-08, the amount of bad loan was 12 million; the amount of substandard loan was 69 million and the unclassified loan was 14 million which only 19% of total outstanding was. In the year 2008-09, the classified loan was 76 and unclassified was 6 million only and the final year the situation is 96 million bad loan and unclassified loan is only 7 million, and the ratio is 14:1. So BDBL need to take quick and effective initiative to bring the sector from this kind of bad situation.

4.4.16 Service Sector

Last decade some Industries has come under the focus of BDBL, service sector is one of them and performing well. This sector has got 4% concentration of total outstanding.

Status of classified loan: Here unclassified loan is relatively high, which is 85% of the total outstanding is of 190 million and classified section is 32.6 million

Findings of this sector: In 2008-09 classified and unclassified section was almost in competition, classified loan was 96 million and unclassified loan was 112 million. In we see the ratio of classified and unclassified loan is 2:1 and the most recent year the ratio is 6:1. So finally we can say the section is really performing well.

4.4.17 Classified and unclassified loan at glance

BDBL deals with 18 sectors. 1 or 2 sectors are going to close by the bank because of loan default, government policy, donor pressure etc, but the remaining sectors will run. So if we look at the chart, wee see 22% of outstanding amount is bad loan or we can say the portion under classified section and the rest amount is unclassified.

Total Findings in brief

In the year 2009-10, bad loan was 2975 million, doubtful loan was 46 million, substandard loan was 193 million and unclassified loan was 4226 million, go by ratio the situation was 1.3:1. substandard loan was 1.9 million and unclassified loan was 4122 million, the ratio was 2:1, and in the recent last year 2010-11 , the ratio is 2.63:1, so considering the previous situations, comparing the performance of year to year, the bank is performing good now and their loan performance is coming in control.

 

4.5. Legal Actions Taken for Recovery of Loans

The Bank initials 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 Banks dues while law suits were filed against 11 companies. Besides, 79 sale notices were published in the national dailies for auction At the same time efforts were made for some 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 assist of 11 projects were sold through auction during the year.

Bangladesh Development Bank Limited (BDBL) legal action against those loans where the borrower do not paid their installment that means who are defaulter.

Legal action taken:

Position of projects under litigation

2008-09

2009-10

No. of projects

No. of projects

Legal notice issued

15

10

Filing of suit

288

304

Cases settled outside the court

19

9

Sold through Auction

110

72

                       

Chapter - 05

Credit Management Of BDBL

5.1. Loan Operation Department

As a development bank, BDBL primarily remains committed to committed to provided industrial financing. Bank formulated a lending policy with a view to providing speedy & efficient services to clients in a consistent manner.

Loan Section

# At first an Application form is supplied to the entrepreneur for to 3000 only.

# After filling up Application form And ready Project Appraisal letter.

For achieving loan an investor must fulfill two steps

Step-1

1. Information form (Particulars) for issuing loan application form, an investor must fulfil this from and then submitted it loan operation department. If all required information fulfilled correctly by investor as required of department, department judge this given information within their rules & regulation. 2. Loan application from if investor given information in particulars form are correct then he/she collect loan application form paid of Tk.3000. Investors then fulfils all required information needed in application form and submitted it department along with a feasibility report of his/her proposed project.

Step-2

In this step department judge application form information given by investor and make a project appraisal fill (including technical aspect, market condition, financial ratio, management information) and also judge different ratio related to project. Department also ensure utility service availability that’s why they informed an enquiry committee which committee judge all information given in application form (land position, management position, utility service availability, CIB report etc). After judging all information and if given information are correct for sectioning loan, loan operation department then pass loan fill next department along with all documents and their approved signature.

Loan section power of different persons is distinct in policy

For private ltd. Company

MD – 5 corers, DMD – 3corers, GM – 2.5 corers, 4 Ronal DGM – 1.5 corers, Branch

manager – 1 corer, Above 5 corers loan consider by board of directors

For proprietorship/partnership company

MD – 2.5 Corers, DMD – 1.5 corers, GM – 1.25 corers, DGM – 75 laces, AGM – 50 laces,

Above 2.5 corers loan consider by board of directors.

SME:  Bank also provided SME loan with a 12% interest rate for manufacturing company and 14% interest rate for service and trading company. Amount of SME loan 50 thousand to 50 laces which is approved by credit committee consists of 4 GM as consultant officer. For SME loan investor need to provide application form along with TIN number and treading certificate.

 

5.2. Loan Recovery Department

This department had started their work after one year of sanctioned loan. Loan recovery is held responsible for recover amount of long along with interest of loan. Loan recovery remove hurdle related to recovery amount. This department always maintains connection with investor for loan recovery.

Any investor if failed to paid any amount of loan this department them and inform them for collecting loan & interest amount as per rules of loan recovery.

Some time an incumbent situation recovery department gives an opportunity to investor for playing hair/ her portions some time delay.

But if an investor modes of payment always delay then recovery department deals with him/her according rules & regulation, if recovery department failed to recover their amount under their rules & regulation they will pass it Law department to deals with investor.

This department also find out the most default sector of loan.

There are four types of classified loan. Those are

# Continuous loan # Demand loan # Term loan # Short term loan

 

5.3. Law Department

when department loan recovery department failed to collects their amount of loan in normal procedure then law department negotiate the situation with clients with the help of court or by law.

BDBL has 47 advocate panels for different who are experienced in different Act. To deals

with all the case of BDBL in court lead by a barrister. To collect borrowed fund BDBL

normally applied following Act.

The Money Laundry Act.2003

Negotiable Instrument Act. 1881

The Bankruptcy Act. 1997

 

Public Demand Recovery Act. 1987

 

 

5.4. Debt Collection Department

Main function and responsibilities of debt collection department are:

5.5. Human Resource Management Department

Human Resource Management (HRM) department has seven (7) sections which are:

Policy and staff loan

Welfare section

Disciplinary section

Management section

Leave section

Officer section

Staff section

 

 

Human Resource Management (HRM) department has also done these activities

5.6. Central Accounts Departments

For proper functioning, Accounts department complete their work by 11 sections, each section done separate jobs for complete accounts department works.

Accounts department collects information/data time to time those department and makes final.

                         

Findings

6.1. Problems regarding smooth performance of BDBL

In this section I will focus on problems regarding smooth performance of BDBL on the basis of my internship program in BDBL .During my internship period I have worked in many departments. But my working experience with loan operation and recovery department was most significant. So I’ve emphasize on these two department in preparing this report According to my observation I find out some key issues regarding project appraisal practices, loan operation and recovery of BDBL.

During the internship program the following findings are obtained:

Sponsors always tend to overstate their future cash flow, revenue and income and understate the risk with capturing market and expenses.

6.2. Problems regarding Loan Sanction -

During my internship period. by observing and analyzing the loan sanction procedure of BDBL following problems have been noted out.

This is a great problem in sanctioning loan, because when the loan amount is more than tk 5000000 the normal of the bank cannot sanction the loan. In this situation they transfer it to the principal branch and for this customer also suffers for the time period and Principal Branch also feel extra pressure.

In most of the cases loan sanction procedure of Bangladesh Development Bank Limited (BDBL) is being politically biased. Sometimes there is group’s involvement in sanctioning loan. Many viable projects do not get sanctioned loan due to absence of bribe and pressure from political and others pressure group. Sometimes, the amount of loan sanction is more than is required by the project because over invoicing from sponsors. It is seen that due to political and others pressure groups influence many projects got loan though they don’t have any qualification.

Some application or project for the loan because of educated and unskilled entrepreneur , but for this the employees of the bank have to face problem in different stage in negotiation.

6.3. Problems regarding Loan recovery activities

In case of loan recovery, Bangladesh Development Bank Limited (BDBL) some difficult problems. Those following problem are ……

                                                         

Recommendations and Conclusions

7.1. Recommendation regarding loan sanction

Considering the above findings, some recommendations regarding loan sanction have been given below.

 

7.2. Recommendation regarding loan recovery activities

In respect of above mentioned findings regarding loan recovery, some recommendations are present below….

 

7.3. Recommendation regarding the existing problems of loan operation of BDBL

Actually, it’s very difficult to give any recommendation about the operation of BDBL because I am not am efficient banker. As I have worked there so I noticed some drawbacks in the daily operation of BDBL. However, as per as I understand, going through various banking related books and journals I can give some suggestions that how to recover existing problems of loan operation performance:

7.4. Recommendation regarding overall activities of BDBL

While working as an intern in BDBL, I found some limitations of the Bank, which should be reduced to keep pace with the competitive world. The following points have been suggested for the Bank…..

7.5. Conclusion

On the basis of overall study on “loan operation & activities of Bangladesh Development Bank Ltd. (BDBL) ” it can be easily conducted that recent performance of BDBL in respect of loan performance is not satisfactory. But the contribution of Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin Sangstha (BSRS) now BDBL after liberation in accelerating the country’s economy and rehabilitation of industrial sectors cannot be ignored. From the above findings, it can be concluded that the merger of BSB and BSRS into BDBL has added value to the overall development of our country’s economy as a whole. It is expected that if operated efficiently and effectively, BDBL will one day be one of the prime financial institutions in Bangladesh. Most of the banks of Bangladesh are offering a wide array of financial services including new types of loans and advances and some whole new services are lunched every year. As a DPI, Bangladesh Development Bank Ltd. (BDBL) also has to discover new avenues to reach its goal. It is a state owned bank. For this reasons, it should go to the people’s heart through various schemes. It should follow a mix lending policies designed to improve the quality of its portfolio and reduce its risk exposure so that in near future when competition among banks will serve more it can stand with its own entity.

Although there are some drawbacks of BDBL activities nevertheless it plays an important role in the industrial sector of Bangladesh. The contribution of BDBL after Liberation in accelerating the country’s economy and rehabilitation of industrial sectors can’t be ignored. Now BDBL is trying to operate its business successfully in this country. The success has been resulted from the prediction, commitment and dynamic leadership of its management. For success, BDBL has to consider the behavioral issues of this bank’s customers. By proliferation of new advance service expending use of automated equipment and electronic transfer of financial information, BDBL can be a truly fascinating institution in the near future. The institutional future of the BDBL depends on its ability to achieve a substantially higher recovery ratio and profitability in future. And this achievement will help BDBL to overcome its image crisis.

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