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Rehabilitation of Sick Industry Financed by Bangladesh Development Bank Ltd

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study:

With a view to acquiring in-depth knowledge about practical aspect of modem business I was attached with Bangladesh Development Bank Ltd for the purpose of internship program. The academic program of Accounting Department requires every MBA Student to undergo an Internship Program. Keeping this view in consideration, students of MBA are advised to visit Organizations/Institutions and discuss with management personnel for gathering practical knowledge. After completion my study and field work. I would write up an internship report under supervision of the Assistant Professor Rumana Ahmed, Department of Accounting & Information Systems, University of Dhaka. I have made this report under his guidance and supervision on the rehabilitation of sick industries financed by Bangladesh Development Bank Ltd. Bangladesh Development Bank Ltd was setup for the purpose of industrialization of our country after liberation. Our economic growth rate is very low. So for the economic development, industrial growth is obligatory. More or less Bangladesh is an agricultural country. But now a day Bangladesh is trying to shift this philosophy, and wanted to enter a new dimension. This dimension is industrialization. To become an industrialized country, Bangladesh Govt. set up many types of industries e.g. large-scale jute, textile, spinning and packaging, non-metal products. etc. If these industries run well, then it will provide great contribution to develop the country. But we can see that all these industries are not contributing well. Even they are not profitable and became burden for the country in the form of sick industry. Sick industry does not bring good result for the developing country like Bangladesh.

1.2 Statement of the problem:

There are different industries in Bangladesh. Performance of the entire industrial sector is not satisfactory. Many firms in different industries are becoming increasingly sick. Some of these firms were liquidated or closed and some are on the verge of being closed. Why firms are increasingly becoming sick and what action to be taken to ensure their survival and growth are yet to be discovered. This study addresses the issues pertaining to the above-mentioned problems.

1.3 Objectives of the study:

The main objectives of my studies are to find out how the overall operation of BSB is performed and to examine the sick industries. 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 –

• To get an overall idea about the operation of BSB

• To examine the success status of loan recovery

• To know how they identify a sick firm.

• To identify the causes behind sickness of enterprises.

• To know what types of measurement are taken to rehabilitate the sick industries?

• To know which firms are rehabilitate and which are not.

• To observe the existing rules, regulation, theories and practices for BSB.

• To recommend some steps to overcome such problem

1.4 Rational of the study:

Industrialization is the main indicator to develop a country, so Govt. has established Bangladesh Development Bank Ltd (BDBL) to dispense the loan and other technical facilities among the entrepreneurs to develop industry. Since Bangladesh is a developing country, and the present economic situation of Bangladesh is of open market in nature so in this situation the specialized Bank like BSB can play necessary role toward the economic improvement. The types of organizations in which BSB finance are – large-scale jute, textile spinning and weaving, composite textile, cinema halls, water transport (both passenger and cargo), computer software, fish processing, etc. Many of the sponsoring borrowers of BSB financed projects have now become the most successful entrepreneurs of the country. In working with the BSB I found that some of its financed industry is unable to operate in the market. These industries are recognized as sick industry. So, at once I determined to find out the reasons of sickness and how to overcome this. That’s why I select this topic “Rehabilitation of Sick Industry” financed by BSB.

1.5 Scope of the Study:

This report will mainly focus on the rehabilitation of sick industry financed by Bangladesh Development Bank Ltd. This study covers the causes of sickness, different aspects of sickness, habilitation policy; management of rehabilitation; rehabilitation between appraisal practices, monitoring & sickness, sector-wise loan outstanding position, loan portfolio and success & failure of rehabilitation. My study is mainly related with practical oriented case, I have studied on the Faridpur Textile Mills Limited, Khulna. Flow it went into sick and how it rehabilitated.

1 .6 Methodology of the Study:

The area of my study has been encompassed the operation area of Bangladesh Shilpa Bank, Dilkusha, Motijheel, Dhaka. The report is based on both primary and secondary data and interviewing the mangers and officers if the bank, employees of the related parties have provided the primary sources of information. Further more the secondary sources of information are the 1ifferent annual reports, guide about activities of bank and financial institution.

The sources of primary data are:

• Official records & documents of BSB.

• Face to face interview.

• Communication with other respective personnel of BSB.

The sources of secondary data are:

• Annual report & rehabilitation manual of BSB

• Project rehabilitation documents of Faridpur Textile Mills Limited

• Journals and relevant books.

• Website of BSB

1.7 Justification of the Study:

This study will have both practical and academic value. It will help to get a clear idea about the rehabilitation procedure of sick industry of BSB. On the other hand, the findings of this study will help to take appropriate actions and steps for the betterment of the existing practice, which basically help the industrial development of the country.

1.8 Limitation of the Study:

This Internship Report is my first assignment outside our course curriculum in the practical life. I, the students of “Department of Accounting & Information Systems”, just have completed our formal education stage. After completing the institutional experience, Practical performance in the formal stages become difficult. So in performing this report our lack of practical knowledge greatly influenced in this performance. Besides above, other limitations that were faced are:

1. Lack of availability of data

2. Many personnel of BSB were reluctant to provide useful information.

3. They are in government employee so have no eagerness to supply more because of extra hardness.

4. Up-to-date information was not available.

5. Sufficient records, publications, facts and figures are not available.

6. For the reason of confidentiality, some useful information cannot be expressed in this report.

7. Limitation of time.

8. No hypothesis has been drawn for this report.

CHAPTER TWO

OVERVIEW OF BAGLADESH SHILPA BANK

2.1 Introduction

2.2 Vision, Mission & Prime Coal

2.3 Institutional overview of BSB

2.4 Capital structure and sources of fund

2.5 Ownership of BSB

2.6 Management

2.7 Operational Activities of BSB

2.8 Steps Taken to Gear-up the Bank’s Activities

2.9 Bangladesh Development Bank Ltd: At a glance

2.1 Introduction:

The Bangladesh economy is confronted with the stiff competitive challenge in the context of the free market economy and present globalization. The economic crisis is further aggravated by the persistent hike of oil price and some other necessary importable items in the international market as well as political unrest along with many other internal shocks. Accommodating the challenges alongside for maintaining macro economic stabilization as well as moderate CPI inflation and for achieving desired economic growth, various measures are undertaken by the Government and the Central Bank like, cautious and restrained Monetary Policy, reality based Fiscal Policy, strong participation of private sector in the manufacturing sub-sector aided by continued growth of the Ready Made Garments industry despite phasing out of global Multi Fibre Arrangement, highest growth in the remittance flow has made possible to achieve a sustainable economic stabilization for the country. 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. The former Industrial development Bank of Pakistan (IDBP) and The Equity Participation Fund (EPF) both of which were established for the industrial development of Pakistan were converted into a single institution named Bangladesh Development Bank Ltd (BDBL). I3SB comes into existence on October 31, 1972 by the promulgamation of BSB order 1972 under the president Order No. 129 of 1972 with a mission of “accelerating the process of industrialization of the country by providing financial assistance and equity support to the enthusiastic and skilled entrepreneurs “The BSB order, 1972 was amended subsequently by the parliament to provide more operational autonomy to its management. It has been extending long and medium term loan facilities in local and foreign currencies to industrialize projects, both new and Balancing, Modernization, Replacement and Expansion (BMRE), in the private and public sectors.

The main objective of BSB is to provide finance both in local and foreign currencies for establishment of new industrial projects as well as to Balancing, Modernization, Replacement and Expansion (BMRE) of existing industrial units in Bangladesh both in private and public sectors. It also provides other types of financial assistances like guarantees for credit/loans, equity-support, underwriting of shares for other parties and working capital loans to the BSB financed projects. BSB also provide banking business of limited scales.

2.2 Vision, Mission & Prime Goal:

Vision: To broaden the country’s industrial base for enhancing the contribution of industrial sector to Gross Domestic Product (GDP) in congruence with the national policies.

Mission: Accelerating the pace of industrialization of the country by providing financial assistance and equity support to the enthusiastic and skilled entrepreneur.

Prime Goal: Like the glorious past, Bangladesh Development Bank Ltd is committed to fulfill customers’ needs and satisfaction as the trusted partner in industrial financing.

2.3 Institutional overview of BSB:

Established October 31, 1972

Organization Head office Dhaka

Division 5

Department 21

Zonal Office 3

Branch Office 15

Personnel 725

2.4 Capital structure and sources of fund:

Authorized capital : Tk 2000 million

Paid up capital : Tk 2000 million

The sources of bank’s fund are the government, Bangladesh Bank, Commercial Bank, Local/Overseas financial institution and suppliers’ credit.

2.5 Ownership of BSB:

At least 51 percent of the Authorized capital of BSB be subscribed by Bangladesh government and remaining 49 percent be subscribed by Bangladeshi nationals or by financial institutions local or foreign. Presently, 100 percent ownership of the Bank belongs to the government.

2.6 Management:

The overall policy formulation and the general direction of Banks operation vest on a board of directors appointed by the government. The board of Directors consists of nine (9) members including the chairman and the Managing director. Non- government shareholder subscribing to the capital of the Bank shall eventually elect four (4) Directors from amongst themselves. The Managing Director is the chief conducting the overall Banking business.

2.7 Operational activities of BSB:

Bangladesh Development Bank Ltd being the prime development financing institutional continued its effort to make on effective contribution towards expansion of industrialization process of the country. It emphasized on long term lending to the viable new projects having comparative advantages, export prospects, forward and backward linkage and local technology as well as raw materials based projects. Fop priority has been given for realization of its loans towards augmenting and recycling of the invertible funds and maintaining satisfactory loan portfolio for increasing profitability. With this end in view the Bank has undertaken some realistic steps towards replacement. Rescheduling and liquidating of loan accounts of sick / closed / stuck-up projects with waiver facilities where deemed appropriate.

2.8 Steps taken to Gear-up the bank’s activities:

To make the bank a vibrant one, a pragmatic business Program is now under implementation. The main features of the plan are as under: –

• Gear-up recovery through setting up of pragmatic recovery targets.

• Expansion of new area of investment.

• Cleaning of loan ledger with exit facilities.

• All out efforts for deposit mobilization.

• Undertake need-based training Program including computer training to all officers & develop a computerized data-base system and

• Full computerization of bank’s activities.

2.9 Bangladesh Development Bank Ltd : At a glance

CHAPTER THREE

LITERATURE REVIEW

3.  LITERATURE REVIEW

Bangladesh Development Bank Ltd 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 are fail 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 project. Some time they reschedule loan according to the capabilities of the project. Moreover more information and advices may be given so that the entrepreneur may run the business more effectively; sufficient return may gain and contribute to the economy. It basically needs to be satisfied about the overall viability of a project to be financed. For this purpose, an objective assessment of the viability of the project is required to be examined by BSB from various points of view. Project appraisal cover five different aspects of a project: Management and Organization, Technical, Market, Economic, and Financial. Although, the above five steps are followed in case of implement a project or to finance a project, hut these five steps cannot always ensure that a project should be successful. There are many odd or uncertain situation may happen, which can make a project sick or unsuccessful. If the project is not rehabilitable, then send it to the Law Department and finally sued against the project.

Sick industries mean the industries, which either become stuck-up during construction or could not operate successfully after implementation. These projects could neither pay back the bank’s dues nor make any contribution to the national economy. These projects were identified as sick due to their inability to generate sufficient fund for debt servicing.

The Ministry of Finance and the Ministry of Industries co-operate to provide debt relief and other financing assistance to bail out failing firms in a specific industry that has been identified by the government as a “Sick Industry”. Assistance may include waiver of interest, reduction in principal, repeated rescheduling of overdue loans, of combinations of these.

There are some specific criteria’s to identify a sick industry. They are

a) On the Basis of Cost Benefit Analysis

b) On the basis of Break Even Analysis

There are various reasons of sick firm. But to discuss it easily I classify it in two classes. They are-

a) The reasons that are beyond die control of the project owner; and

h) The reasons that arc under control of the project owner

The above causes are further divided into seven (7) causes such as financial, marketing, technological, administrative & managerial, economic, political and other causes of sickness.

Rehabilitation of a project means to reshape the existing industries or project that is diagnosis a weak or sick project, so that it may operate successfully in future.

All sick industry is not rehabilitated because all sick industry has not all 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

a. Management Perspective

b. Technological Perspective

c. Financial Perspective.

After considering a industry as sick, then the industry are taken into rehabilitation by aiding additional support of those the sick industry that can recovers the additional investment then it seems to he as rehabilitated industry otherwise not. in some extraordinary case they were bound to take some terrible decision because of sonic political pressure.

Under recommendation of Govt’s special committee for waiver of interest the bank’s Board of Director approved liquidation of 53 Bank-financed sick, problem rider and stuck-up projects. 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 debt relief, injection of additional funds, and direct management

The bank for the rehabilitation of the sick project took these three steps. The compensation amount of Tk. 29.06 crores (in the form of bond) was obtained from Government against waiver of interest. Under this scheme 23 projects liquidated their loan, 30 projects are LD1 and remaining 3 in LD2. 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 also made 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 debt servicing through profitable operation. So the bank continued sanctioning of term loans during FY 2007-2008. This year local currency loan of TK. 918 million has been sanctioned to 20 projects and short-term loan (C.C. loan) of TK 3 million to 3 projects. Of the total sanctioned long-term loan, TK 538 million is for 12 new projects and an additional loan of TK. 380 million for 8 existing projects. Under rehabilitation program BSB has taken so many measures to rehabilitate the sick industries. I have elaborately discussed these measures by chart and table in the report.

The success and failure of rehabilitation is depends on how many projects the bank are rehabilitated and amongst the rehabilitated projects from how many it would able to recollect its money back. According to some records BSB has already rehabilitated some of 53 projects that are identified by the Govt. of Bangladesh. The lists of these projects are given in details by table in the report.

CHAPTER FOUR

SICK INDUSTRY

4.1 Introduction

4.2 Method used to identify a Sick Industry

4.3 Precautions about Sick Industry

4.4 The Symptoms of Sick Industry

4.5 Sick Industry Classification

4.6 Causes of Sickness

4.6.1 Financial Problems/Shortage of Working Capital

4.6.2 Marketing Problem

4.6.3 Technological Problem

4.6.4 Administrative and Managerial Problem

4.6.5 Economic Problem

4.6.6 Political Problem

4.6.7 Other reasons of sickness

4.7 Sick Situation

4.8 Sick Industries

4.9 Impact of Sick Industry in Bangladesh or BSB

4.1 Introduction:

Sick industries mean the industries, which either become stuck-up during construction or could not operate successfully after implementation. These projects could neither pay back the bank’s dues nor make any contribution to the national economy. These projects were identified as sick due to their inability to generate sufficient fund for debt servicing.

4.2 Method used to identify a Sick Industry:

There are some specific criteria’s to identify a sick industry. They are —

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/greater than the benefit then the industry is to be considered as a sick industry. Some time the industry can’t recover the cost (labor, material) for this reason the industry goes into loss.

b) On the basis of Break-Even Analysis:

An industry should produce up to break-even point because to recover the fixed cost or overhead cost. If they can’t recover fixed cost then we can consider this industry as a sick industry.

4.3 Precautions about Sick Industry:

Sick situation arises in an industry in some abnormal period. But if the rate of sickness is overwhelming then it becomes a matter of fact. So before providing loan importance must be given on evaluation. If the evaluation procedure is correct, sick industry situation may avoid quite easily. So at pre-investment stage the following things must be considered-

• Examine the project is done appropriately.
• The project cost is calculated in a proper way.
• The proper place is selected.
• Defect machineries must not be purchased.
• Ensure that skilled and experienced personnel are easily found.
• Proper stapes are taken to protect uneven breakdown of electricity.
• Ensure that proper people arc involved in the managing committee.
• Ensure the financial capability of the initiator.
• Ensure the procedure of makeup the preliminary cost and the doubtful loss.
• Ensure the quality of the produced product.
• Ensure the proper way to marketing the produced products.
• Consider the change of test of customer.
• Proper plan is taken to implement the project.
• Steps are taken to avoid the potential conflict

4.4 The Symptoms of Sick Industry:

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 liability.
• The failure in payment of loan installment in time increases the burden of loan.
• Inability to submit the financial statement in time.
• Increase the tendency of undertaking unfair means in preparing the papers of stock materials.
• Profit from investment is decrease gradually.
• The project faces loss 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.

4.5 Sick Industry Classification:

The Ministry of Finance and the Ministry of Industries co-operate to provide debt relief and other financing assistance to bail out failing firms in a specific industry that has been identified by the government as a “Sick Industry”. Assistance may include waiver of interest, reduction in principal, repeated rescheduling of overdue loans, of combinations of these. A ‘Sick Industry” classification may be purchased with a suitable bribe to the appropriate ministry, Ministries, the PMO, and the Standing committee of Parliament on Finance may be lobbied and bribed to obtain such a classification. Billions of BDT of NCB loans are written down using this technique.

4.6 Causes of Sickness:

Bangladesh Development Bank Ltd undertakes various projects by providing finance, machinery and other aids, some projects are implemented and successful and some projects are failed to attain the goal and these firms are called sick firm. There are various reasons of sick firm. But to discuss it easily I classify it in two classes. They are-

• The reasons that are beyond die control of the project owner; and
• The reasons that arc under control of the project owner

The above causes are further divided into seven (7) causes. The causes are discussed below according to their importance though all of the causes are important.

4.6.1 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 17% of the projects suffered due to shortage of capital. The problems, which lead an industry towards sick, are as follows-

• Measurement of investment outlay and cost of the project are not appropriate.
• When the means of financing is not available.
• When the project is not profitable.
• When the production is not reached at the break-even point.
• Loan application with insufficient amount of money that would not meet fixed and operation cost.
• When they can’t calculate appropriate risk level of sick.
• Cash flow of the project is not available.
• If actual cost of the project is more than the budgeted cost.
• Shortage of working capital, i.e. if they do not manage the sufficient working capital.
• If market interest rat increase, cost of working capital increase as a result the project may become in sick.
• Lack of operating capital.
• Higher fixed cost. i.e. increase fixed cost as a result of increasing of the price of machinery, land or any other fixed items.
• When variable cost increase.
• Does not ensure sufficient mortgage.
• Improper inspection of Bank financed project.
• Insufficient insurance facility.
• Economic problem comes from the social cost benefit analyses.

4.6.2 Marketing problem:

Marketing problems are the next serious problem. This problem occurs due to a large number of similar industries and the availability of the products in the secondary market by unauthorized import of such products. A survey reveals that 24% of the projects are suffered due to marketing problem. The marketing problems, which lead an industry towards sick, are as follows:

• The aggregate demand of the proposed project is not possible to till up.
• When the market share of project is under low appraisal
• When change the consumption trends in the past and present consumption level
• If the changes occurred in the import and export policies
• Change of customer behavior, intention, attitude, motivation, preferences, requirements, distribution channel and marketing policy.
• Administrative problems and legal constrains.
• Introduction of new brand of product
• Wrong forecasting about the market. Smuggling of substitute goods
• If the raw material of the product is not purchase at appropriate time
• If the market is not monitor properly
• Improper market justification
• Lack of market expansion and product diversification
• Hugh competition in the market
• If income level of the people in a society is decrease then demand of the product will be decrease
• Cheap price of the foreign product
• Cost of production is high.

4.6.3 Technological Problem:

Machinery imbalance causing lower capacity utilization is the major technical problem of many projects. Some are also suffered for faulty technical design. A survey reveals that 13% of the projects are suffered due to technological problem. The technological problems, which lead an industry towards sick, are as follows:

• Whether the preliminary lest and studies are not appropriate.
• Availability of raw materials, powers and other infra-structural facilities have not been 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 modem technology, like incapable to use the computer and modem 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, ie. Production cost high.
• Inconsistency between the origin of raw materials arid the factory location, production of products and final consumption adversely affect the business.
• Lack of communication system.
• Lack of infrastructure facilities.
• In availability of supply of gas, electricity and water etc.
• Selection of old and backdated technologies to be used in production.
• Delay of machinery procurement & rapidly change in technological environment.

4.6.4 Administrative and Managerial Problem:

There are also some internal conflict between the worker and manager. A survey reveals that 22% of the projects are suffered due to administrative and managerial problem. The administrative problems, which lead an industry towards sick, are as follows-

• Weak management of the project.
• Lack of efficiency of employment as well as management.
• Conflict and also death of management partner’s.
• Death of main entrepreneur of the project.
• Insufficient appointment of employee
• Unskilled human resources
• Corruption and intentional misuse of organizational assets.
• Lack of proper planning, organizing, controlling, administrating and monitoring.

4.6.5 Economic Problem:

The economic problems, which lead an industry towards sick, are as follows:

• Economical problem comes from the social 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.

4.6.6 Political Problem:

The political problems, which lead an industry towards sick, are as follows:

• Political pressure
• Political instability which disrupt the production
• Insufficient facilities provided by govt. to industrialist like tax rebate etc.
• Political problem like unrest, hartal etc.
• Political pressure to loan procurement
• In appropriate action taken by govt. to protect smuggling
• Political terrorism

4.6.7 Other reasons of sickness:

Except the above problems there are also some problems, which lead an industry towards sick. A survey reveals that 10% of the projects are suffered due to other problem. They are as follows:

• Selection of in appropriate industrial unit which is not financial and logically viable in concerned country
• Delay of loan application
• Internal delay of industries construction after loan sanction
• If a portion of loan amount used for personal use
• Delay of operation start
• Over estimation of mortgage value
• Delay of loan procurement and sanctioning process
• Delay of documentation formalities in respect of loan
• Causing of rehabilitation measures
• Insufficient enforcement of law for recovery of loan
• Inappropriate location of industries
• Insufficient infrastructure facilities
• Natural disaster that hampered production
• Terrorism that hampered to establish an industry
• Delay of implementation

4.7 Sick Situation:

Normally, BSB meets the long-term credit needs for implementation of its 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 al all 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 were unable to pay the interest and the principal amount. At last they are treated as sick industry. There are 53 projects which are named as sick by the BSB.

4.8 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. There 53 sick industries that are financed by BSB. Some of them are stated below:

Table-1

From the above statistics it is clear that there are so many projects in Bangladesh are sick.

An analytical discussion makes it clear to us that the reasons of their sickness and which projects are sick for which causes although the general causes of sickness are stated earlier.

Causes of Sickness

Table- 2

If we further analyze it we will find a clear picture of the sick projects and their relevant causes. These things are explained below under a table.

Causes of Sickness of BSB Financial Projects

Table- 3

4.9 Impact of Sick Industry in Bangladesh or BSB:

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

CHAPTER FIVE

REHABILITATION OF SICK INDUSTRY

5.1 Introduction

5.2 Rehabilitation Policy

5.3 Management of Rehabilitation

5.4 Rehabilitable Sick industries

5.5 Relationship between appraisal practices, monitoring and sickness

5.6 Rehabilitation Program

5.7 Measurement taken at the time of rehabilitation

5.1 Introduction:

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

5.2 Rehabilitation Policy:

All sick industry is not rehabilitated because all sick industry has not all 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

a) Management Perspective

b) Technological Perspective

c) Financial Perspective

In the case of rehabilitating sick industry the hank takes different policy in different situation. They are

a) Management Perspective:

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

b) Technological Perspective:

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

c) Financial Perspective:

In the financial measurement the project should compute the cost of capital and maintain capital budgeting. The present value of net cash inflow should be higher than the present value of cash outflow. In such a case, the bank provides some financial treatment that the amount of interest is to be waived or rephrased or providing consulting service, i.e.

• Success about the proper way

• Inspiration by providing motivation.

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

5.3 Management of Rehabilitation:

Bangladesh Development Bank Ltd was established to stimulate industrialization in the country. So, it financed in various types of industries. The industries on which it financed, afl are not a successful one. Some of them are fail 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 project. Some time they reschedule loan according to the capabilities of the project. Moreover more information and advices 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 not rehabilitable, then send it to the Law Department and finally sued against the project. The main activities of rehabilitation department are the following:

• The department primarily selects a project that becomes sick. Project Implementation Department investigates the project and find out the causes of sickness and formed a committee to investigate the project. Then it is taken to he considering for rehabilitation. After considering it as a rehabilitable industry, it is taken to the implementation after the approval of rehabilitation consulting committee.
• Take necessary action to rehabilitate sick project after appropriate investigation.
• Take steps about rehabilitation document examination, recommendation, preparation, and implementation schedule preparation and activation of plan.
• Conformation about project profitability.
• Take necessary steps about production, marketing of product and loan repayment.
• Duties give up to the third party or previous management, after successful managing of the project.
• Managing and directing recommendation preparation about take over project.
• Analyze and compare the production, marketing and recovery of the rehabilitated project and take appropriate action accordingly.
• When there is no scope to rehabilitate a project, doc