Nowadays the number of consumers in the distribution system is increasing, the electricity demand and the number of capacitor bank placement is also increasing. Improper placement of capacitor bank leads to decrease the benefits of the system. The objective function of the proposed work is to minimize the total power loss of the system while satisfying all the constraints. The Loss Sensitivity Factor (LSF) has implemented to pre-identify the optimal location of the capacitor. An effective biologically inspired algorithm (Bat Algorithm) is proposed to search the optimal size of the capacitor banks. The proposed method has been tested on IEEE 34-bus distribution system to demonstrate the performance and effectiveness of the technique. © 2015 The Authors. Published by Elsevier Ltd.