FINANCIAL SYSTEM OF BANGLADESH
The financial system of Bangladesh consists of different types of institutions:
1. Bangladesh Bank 2. Nationalized Commercial Banks 3. Government owned specialized banks 4. Domestic private commercial banks 5. Foreign commercial banks 6. Non-bank financial institutions 7. Insurance Companies 8. Stock Exchanges 9. Cooperative Banks 10. Micro Finance Institutions
Bangladesh Bank: It is the Central Bank.
Functions of Bangladesh Bank: It has the legal authority to supervise and regulate all types of banks and non-bank financial institutions. It works as the banker to the government and banks. It has the traditional role of note (currency) issuance. It formulates and implements monitory policy. It manages foreign exchange reserves. Bangladesh Bank has the power to intervene in the management of a bank if serious problems arise and to impose penalties for non compliance.
Commercial Banks: Commercial banking system dominates the financial sector of Bangladesh. It accounts for a substantial share of assets of the financial system. There are four nationalized commercial banks in Bangladesh - Janata Bank, Rupali Bank, Agrani Bank, Sonali Bank. Banking system of Bangladesh is dominated by the non-commercial banks which together more than 54% of the deposits of the banking system and operates more than 3368 branches.
Foreign Commercial Banks
Specialized Banks: There are 5 specialized banks in this country.
2 Krishi Banks, Bangladesh Krishi Bank & Rajshahi Krishi Unnayon Bank. Their purpose is to meet the credit needs of the agricultural sector.
2 specialized banks for the Industrial Sector, Bangladesh Shilpa Bank & Bangladesh Shilpa Rin Sangstha. They extend term loans for the development of the industrial sector.
Basic Bank: Provides loans to the small-scale industries.
Non-Bank Financial Institutions: This type of institutions accumulate funds by borrowing forms the general public and lending funds to meet the specialized financing needs. They are prohibited to accept deposits from the public. Non-bank financial sector has a wide variety of institutions such as leasing companies, mortgage companies, housing banks, insurance companies, savings banks, pension funds, investment companies, provident funds, post office saving banks.
Cooperative Banks: Commercial banks are organized on the principle of cooperation and self-help basis. They function on no loss-no profit basis. Some cooperative banks operating in Bangladesh are Eden Bank, Syedpur Commercial Bank, Comilla Cooperative Bank, Dinajpur Industrial Bank, Rajshahi Bank, Shankar Bank, Faridpur Banking Corporation, Madaripur Commercial Bank.
Stock Exchanges: There are two stock exchanges in Bangladesh, Dhaka and Chittagong.
Functions of the stock exchanges:
To promote savings and investment in the capital market
To provide liquidity to investors. The investor can recover the money invested when needed by selling their securities.
To guarantee the legal and economic security of the agreed contracts
To provide official information about the quantities that are traded and of the quoted price
To fix the price of the securities according to the fundamental laws of the offer and the demand.
Micro-Finance Institutions: There are more than 1000 micro finance institutions operating in Bangladesh. Major ones are, Grameen Bank, BRAC, ASA and Proshika. Grameen Bank alone provides about 1/3 of the total amount of the outstanding loans. BRAC, ASA and Proshika provide around 27% of the total amount of outstanding loans.
