This paper deals with algorithm for placement and sizing of the shunt capacitor banks in distribution networks of radial structure. In this paper algorithm for optimal placement and sizing of shunt capacitor banks is based on load flow calculation algorithm and integer genetic algorithm. Firstly, paper describes the problem of optimal placement and sizing of the shunt capacitor banks with constrains. Also, paper describes algorithm for the calculation of the load flow in the radial distribution networks. Used integer genetic algorithm is also presented. Proposed algorithm was verified on the IEEE 34 bus test distribution network. Finally, practical application of the proposed algorithm was demonstrated on one real 10 kV distribution network in Bosnia & Herzegovina.