Marketing Research – Banking System of BangladeshEssay Preview: Marketing Research – Banking System of BangladeshReport this essayChapter-OneIntroduction of the StudyAn Overview of Banking:The English word Bank is derived from the Italian word Banco. The Latin word Bancus and the French word Banque which means a bench. They are of the opinion that the medieval.
European banker (i.e. moneychanger and moneylenders) transacted their banking activities on the benches in the market place. This money changing and money lending business is known as banking business. The overall purpose of banking is to collect money from surplus unit and transfer it to the deficit unit.
The history of banking is as old as the history of many. Generally, to the necessity for keeping the money safe, the business of banking comes in to existence. The evolution if money solved the problem of Barter System. Earlier there are two groups of people. One group felt the need of honest and faithful person to keep their surplus money safe and the other group owing to transaction felt the need of some person who could provide money. As a result based on two groups a kind of businessman came in to picture. They used to keep the money as deposit for security and give loans to the needy people. This is how the banking sector has developed.
Banking System Of Bangladesh:Banking system occupies an important place in a nations economy because of its intermediary role; it ensures allocation and reallocation of resources and keeps up the momentum of economic activities. A banking institution is indispensable in a modern society. It plays a pivotal role in the economic development of a country and forms the core at the money market of any country. In a developing country like Bangladesh the banking system as a whole has a vital role to play in the progress of economic development.
Before liberation in 1971, the banking system of this part of the country that now constitutes Bangladesh consisted of the State bank of Pakistan, the central Bank of the country and 17 scheduled banks. These banks had a total of 1169 branches. Among these 17 banks, 12 were Commercial Banks, one Industrial Development Bank, one agricultural development Bank and three Foreign Commercial Banks. Beside these, a lot of co-operative banks were in operation. At the time of liberation only two banks had their head offices in Bangladesh and were managed by Bangladeshis. These two banks were the Eastern Mercantile Bank Ltd. and the Eastern Banking Cooperation Ltd. West Pakistani capitalists owned and managed all the other 10 commercial banks that had their head offices in West Pakistan. The 2 development banks had very limited number of branches operating in the then Bangladesh.
The banking system of Bangladesh has become more complicated with the increase of the number of people who are still employed in commercial banking in Dhaka. These people have worked in Bangladesh and, because of this, banks have been established in more than 130 countries and they have become the first established in Bangladesh. In Pakistan it is estimated that half of the population of Bangladesh has no bank. However, in Dhaka about 85% have bank.
The banks that are now established in Bangladesh are the National Bank of Bangladesh, a State Bank of Pakistan (KCP) and the Central Bank of Bangladesh (CBC). Both these two banks have a total of 3 bank branches. The other 2 banks are the Central Bank of Pakistan (KFRC) and the Bank of Bangladesh (BKA). It is very difficult to get enough bank in Bangladesh for all the banks that are currently operating in Bangladesh. In December last year, when the Khyber-Pakhtunkhwa (the official name of the government), had given in the petition to the Bank, they asked the Bank to provide some more branches by the end of January 2016. But they still haven’t got the necessary money. Why? Why not have a national bank? Why then do the banks that are already situated in these new places come using loans that have already been paid by the central bank of Pakistan and are paying their interest from the Pakistan government – a debt that now has to be repaid? This situation has forced us to change our system from a national banking to a multi-national banking structure. But is this really what we should want in Bangladesh?
First, let’s first recognize that the banking system in Bangladesh is not as well developed as it would be in other countries. One reason that things are getting even worse in Bangladesh is that the bank system remains at the same level as it has been for a long time. For instance, as a result of the Bangladesh central banks’ policies, the total number of banks in Bangladesh increased to almost 16,000 in 2011 from 10,000 in 1971. Also in 2011, more than 500,000 households were still poor-poor in Bangladesh, according to the report of the Bangladesh government. This increase was in part because the state government invested more in national banking to help the poor. Therefore, there was no incentive to move to more centrally planned banking. This is not to say that our system in Bangladesh is poor or bad. But this system was not designed for them.
Second, let’s take note that the Bank of Pakistan now invests in nearly every bank in Bangladesh. In 2001, the number of banks in Bangladesh was over 14,500. In 2011, the number of Banks was 11,400, of which more than 40% of which are banks of private enterprises. Thus of the 7,500 banks in Bangladesh, five are the Central Banks of Pakistan. Even if the percentage of banks in Bangladesh can stay as high as 13% and that number falls to 3% if the overall bank size changes by some 10%, even if the proportion of BCA’s banking is still 5%, then the total number of banks in Bangladesh still stands at 9% in 2013 (about a fifth of Bangladesh’s total banking sector). And even on the international trade volume index, the proportion of Bangladeshis living in the country today is not even close to the level of 3%. This doesn’t mean that we cannot change banking, but we should still look at the fact that, in the global economic system, bank lending is not part of the economic system.
The banking system of Bangladesh has become more complicated with the increase of the number of people who are still employed in commercial banking in Dhaka. These people have worked in Bangladesh and, because of this, banks have been established in more than 130 countries and they have become the first established in Bangladesh. In Pakistan it is estimated that half of the population of Bangladesh has no bank. However, in Dhaka about 85% have bank.
The banks that are now established in Bangladesh are the National Bank of Bangladesh, a State Bank of Pakistan (KCP) and the Central Bank of Bangladesh (CBC). Both these two banks have a total of 3 bank branches. The other 2 banks are the Central Bank of Pakistan (KFRC) and the Bank of Bangladesh (BKA). It is very difficult to get enough bank in Bangladesh for all the banks that are currently operating in Bangladesh. In December last year, when the Khyber-Pakhtunkhwa (the official name of the government), had given in the petition to the Bank, they asked the Bank to provide some more branches by the end of January 2016. But they still haven’t got the necessary money. Why? Why not have a national bank? Why then do the banks that are already situated in these new places come using loans that have already been paid by the central bank of Pakistan and are paying their interest from the Pakistan government – a debt that now has to be repaid? This situation has forced us to change our system from a national banking to a multi-national banking structure. But is this really what we should want in Bangladesh?
First, let’s first recognize that the banking system in Bangladesh is not as well developed as it would be in other countries. One reason that things are getting even worse in Bangladesh is that the bank system remains at the same level as it has been for a long time. For instance, as a result of the Bangladesh central banks’ policies, the total number of banks in Bangladesh increased to almost 16,000 in 2011 from 10,000 in 1971. Also in 2011, more than 500,000 households were still poor-poor in Bangladesh, according to the report of the Bangladesh government. This increase was in part because the state government invested more in national banking to help the poor. Therefore, there was no incentive to move to more centrally planned banking. This is not to say that our system in Bangladesh is poor or bad. But this system was not designed for them.
Second, let’s take note that the Bank of Pakistan now invests in nearly every bank in Bangladesh. In 2001, the number of banks in Bangladesh was over 14,500. In 2011, the number of Banks was 11,400, of which more than 40% of which are banks of private enterprises. Thus of the 7,500 banks in Bangladesh, five are the Central Banks of Pakistan. Even if the percentage of banks in Bangladesh can stay as high as 13% and that number falls to 3% if the overall bank size changes by some 10%, even if the proportion of BCA’s banking is still 5%, then the total number of banks in Bangladesh still stands at 9% in 2013 (about a fifth of Bangladesh’s total banking sector). And even on the international trade volume index, the proportion of Bangladeshis living in the country today is not even close to the level of 3%. This doesn’t mean that we cannot change banking, but we should still look at the fact that, in the global economic system, bank lending is not part of the economic system.
The banking system of Bangladesh was virtually in a state of disarray immediately after the liberation in 1971. On the eve of our independence, only one bank in this country was fully owned by Bangladeshis. All the others were owned and operated by Pakistanis who had just left and abandoned these enterprises. Partly because of the manifesto of the then ruling party and partly because of the need of the hour, the government nationalized the entire banking system. The Dhaka branch of the State Bank of Pakistan was declared the central bank of Bangladesh in December 16, 1971. All the domestic banks were reorganized into six separate entities. Leaving aside the three foreign banks, the two other specialized banks were also restructured as Bangladesh Krishi Bank and Bangladesh Shilpa Bank.
• In 1991 Bangladesh became the third largest economy in the world. It is estimated that half of Bangladesh’s global GDP consists of imports and exports. Although the U.S. does not currently fund nationalization of foreign banks, the United States has established a permanent presence in Bangladesh in order to finance regional economic policies and promote national development. In the early 1990s, the U.S. was in contact with Bangladesh, including through an official visit from President Bill Clinton to his country, and at the same time was able to provide loans to Bangladesh to help it pay off its debts, through which the U.S. had provided funds for loans to other countries after the overthrow of the country by the U.S. government. The U.S. has made good progress on this side, however. It is also working with Bangladesh on the development of international capital markets and through investments in energy, health, and other economic development priorities. In return for the new international loans received by Bangladesh over the counter through the U.S. government in 1991, the Bank of Bangladesh’s loans were also secured by a number of international investors for investment and training programs or assistance to the community in the developing country, which is also in very poor shape. In August 2000, a series of major banks, including Banco Santander (which was founded in 1995), Barclays (BKS), Citibank (SCB), Morgan Stanley (CMK), Credit Agricole (CAB), Bank of America (BAC), Goldman Sachs (GAIB), National Australia Bank (NABA), Bankers Trust Fund (BITS), Citigroup (CACC), Goldman Sachs Group Inc., American Express Corporation (AMP), and Merrillice Ltd have joined the Bank of Bangladesh. These banks all took some money from the Central Bank of Bangladesh, but not all of them, and some took money from Bangladeshis. The U.S. government initially refused to help Bangladesh with domestic currency exchanges, but because of this the U.S. government began the process of lending to the banking sector with the hope that by this point funds would be coming into banking. (Although the U.S. Congress refused to assist in this, as did many other countries, like Israel and the United Kingdom.) In 2006, during the process of nationalization and nationalization of national banks, the United States stopped providing financial assistance to Bangladesh. The U.S. stopped funding international organizations like the World Bank, the World Health Organization, and the Committee on the Elimination of Racial Discrimination in Banking (CORE), for example. The international bankers who work in Bangladesh, which is dominated by Bangladeshis, have been forced to withdraw their U.S. loans and continue working for the government’s own, non-governmental, banks. However, they are still under U.S. control. The situation is somewhat inhumane. It is impossible for the Bangladeshi economy to recover and any efforts to improve economic conditions in Bangladesh might actually be undone, if Bangladeshi workers do not accept government help. The fact that the Bangladeshis are not working and doing their work while their government grants them government aid is not the only problem. Despite the United States
The Bangladesh government had established the Central Bank of Pakistan, the first in the country, in early 1973 and the nationalization of Dhaka’s banks was announced three years later.
The Indian government maintained control of most of the banks throughout the country and was directly involved in setting up the nationalization that followed, although it failed to make any major progress in reducing the rate of inflation. Moreover, there remained a pervasive perception in the financial community that there was a lack of control and that the government did not have a clear grasp on the banking system and the nation’s structure. One reason for the lack of accountability was the government’s long and complicated record on the issue of the money supply. In addition, a series of actions, including the creation of the Central Account System in 1971, were often taken only to make sure that the money supply would be maintained as a basis for capital formation. In addition, the government failed to implement the reforms of the International Monetary Fund, the international financial authority that the government founded in 1968, in line with other efforts, including the National Financial Plan of 1972, established under a previous government policy and which had made significant reforms for the first time in more than two decades.
The central bank was initially established to implement the reform plan formulated in the first financial reform package adopted by the Central Bank of India in 1976. At the same time in October 1997, the Finance Minister told a committee in Dhaka that his intention to implement reforms was being guided by an awareness of political and economic realities, not political institutions. However, in January 2002, at the conclusion of his remarks regarding the National Financial Plan, Finance Minister Sitaram Yechury announced that the National Economic and Social Research Institute (NESRI) would take over the task of reviewing the banks’ reform program. The New Development Goals of the National Development Program were implemented in October and November 2002, through financial institutions and the State Department. Following the enactment of the New Development Goals, the central bank under Secretary-General R.S. Khanna began the process of reforming the banking system.
The banks of Bangladesh took over the Central Bank of Pakistan in early 1972. As a result of their new role, some banks in the country were reorganized along with the local branches of the other central banks into groups and managed through regional central banks. This reorganization process was followed by the creation of Bangladesh Krishi Bank. The Krishi Bank was established as an independent bank in 1973 and is the first bank in Bangladesh to have operational branches. It has an operational maturity of 30 years and is insured by the Reserve Bank of India. In November 2003, the Central Bank was launched the National Bank of Bangladesh. Bangladesh Krishi Bank has a national maturity of 30 years, the second most outstanding bank in Bangladesh. Krishi has a national asset value of over $300 billion, making it of the top bank in the country. In early 2003, Bangladesh Krishi Bank introduced a new national asset measure, the National Asset Fund with an annual effective maturity of 20 years. At the beginning of the year of 2002, the national asset measures were designed to encourage new investment. During this period, a number of emerging
After 1987, private banks came more strongly into the Banking sector scenario. The expansion of private banks has helped to increase the service quality of the total banking sector of our country. Although they primarily invest in short term ventures, their introduction has created a valuable source of capital for businessmen of Bangladesh.
There are five category banks in Bangladesh and 52 Banks works in Bangladesh are given bellow:Central BankBangladesh Bank : Pursuant to Bangladesh Bank Order, 1972 the Government of Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of the country, and named it Bangladesh Bank with retrospective effect from 16 December, 1971.
Nationalized Commercial BanksThe banking system of Bangladesh is dominated by the 4 Nationalized Commercial Banks, which together controlled more than 54% of deposits and operated 3388 branches (54% of the total) as of December 31, 2004[1]. The nationalized commercial banks are:
Sonali BankJanata BankAgrani BankRupali BankPrivate Commercial Banks:Private Banks are the highest growth sector due to the dismal performances of government banks (above). They tend to offer better service and products.
AB Bank Ltd.BRAC Bank LimitedEastern Bank LimitedDutch Bangla Bank LimitedDhaka Bank LimitedIslami Bank Bangladesh LtdPubali Bank LimitedUttara Bank LimitedIFIC Bank LimitedNational Bank LimitedThe City Bank LimitedUnited Commercial Bank LimitedNCC Bank LimitedPrime Bank LimitedSouthEast Bank LimitedAl-Arafah Islami Bank LimitedSocial Islami Bank LimitedStandard Bank LimitedOne Bank LimitedExim Bank LimitedMercantile Bank LimitedBangladesh Commerce Bank LimitedMutual Trust Bank LimitedFirst Security Bank LimitedThe Premier Bank LimitedBank Asia LimitedTrust Bank Limited