Bangladesh Shilpa Bank (BSB): Objective, Operating Policies, Investment Priorities, Types of Financial Assistance, Security for Loans and Repayment

Bangladesh Shilpa Bank (BSB)

The Bangladesh Shilpa Bank (BSB) is a development banking company established on October 31, 1972, in terms of the BSB Order, 1972 (President’s Order No. 129 of 1972). The main objective of BSB is to aid industrial development by providing credit facilities and equity support for accelerating the process of industrialization of the country. To achieve this objective BSB

  1. mobilizes domestic and external resources for investment in industry.
  2. undertakes to stimulate industrial development by identifying, selecting, promoting and financing industrial projects.
  3. advises entrepreneurs on the establishment of new projects as well as for balancing, modernization, replacement  and expansion of existing units in both public and private sectors.
  4. assists entrepreneurs/organizations on the implementation of new projects through the provision of technical guidance in the form of supplying various information and data, project supervision and monitoring the progress of projects during implementation and initial operation.
  5. issues guarantees for repayment of loan on behalf of borrowers.
  6. issues performance bank guarantee.
  7. extends commercial banking service.
  8. associates with capital market for sale and purchase of shares/securities for themselves as well as on behalf of the clients.

Operating Policies

Public and private sector projects are eligible to BSB’s financing assistance. In the private sector, assistance will be extended to those industries indicated in the Industrial Investment Schedule published by the Government from time to time and, to industries not specified in the Industrial Investment schedule if their financial and economic merits can be established and that too under policy directives given by the Ministry of finance. In the public sector, assistance will normally be extended only to those projects which have been approved by the Government and included in its Annual Development Programme (ADP) and which meet BSB’s economic and financial eligibility criteria.

BSB provides all reasonable assistance to prospective borrowers in identifying industrial project possibilities of financial and economic merit and furnishes relevant information about plant and machinery, product and process, raw materials and market for products and other related matters. It helps the borrowers to overcome the problems associated with implementation and operation of their project. BSB also assists local entrepreneurs in setting up viable projects in collaboration with foreign investors. Viable projects in the public or private sector is eligible for financial assistance from the bank.

Investment Priorities

In the private sector, BSB Lending operations will be confined primarily to the industrial sectors included in the Industrial Investment Schedule. However, BSB considers loan applications under industrial sectors falling outside the Industrial Investment Schedule, if it is reasonably convened that investment in the proposed industry is economically and financially viable and socially desirable too.

Financial assistance provided by the bank is expected to give a boost to the process of the country’s economic development. The BSB-financed industrial units will not only provide additional goods and services but will also help creating employment opportunities, foreign exchange earnings and savings.

Types of Financial Assistance

Term Loans: BSB extends long term loans in foreign currency and/or local currency for setting up new industrial projects and/or for balancing, modernization, replacement and expansion of existing industrial enterprise.

Bridge Financing: BSB also extends short term bridge financing by making advances against shares under-written to enable (i) a company to go into commercial production before floating the shares for public subscription, or (ii) release of fund against Annual Development Plan allocations by the government in respect of public sector projects.

Working Capital Loans: BSB provides short term loans on a limited scale to the working capital needs of industries it has financed.

Equity support: BSB provides equity support to limited liability companies only for financing industrial projects by way of

  1. Outright purchase of shares, and
  2. Under-writing the issue of shares either directly or through consortium of banks and financial institutions.

Guarantees for Credits/Loans: BSB may provide guarantees for credits/loans raised by industrial projects from projects from other sources.

Security for Loans

BSB will obtain adequate security coverage to protect its exposure in any loan. Loans will usually be secured by mortgage, hypothecation of existing assets of the project and/or the assets to be created with BSB’s financial assistance.

Repayment

Repayment of loans and guarantees should be made in accordance with the repayment schedule drawn up on the basis of the repayment capacity of the project or in credit-line under which the sub-loan I accommodated up to a maximum period of 15 years.

Leave a Reply

Your email address will not be published. Required fields are marked *