Banking Structure of

Bangladesh
Bank Management
Coursework

Banking Structure of Bangladesh

Prepared for
Dr. Toufic Ahmad Choudhury
Director General of Bangladesh Institute of Bank Management (BIBM)
Visiting Faculty
Institute of Business Administration (IBA)
University of Dhaka

Prepared by
Nafis Uddin Mehran (ZR-67)
Md. Saad Sikder (ZR-68)
Parashar Saha (ZR-81)
Md. Junayed Hasan (ZR-91)
Ahnaf Tahmid (ZR-116)
BBA 21st Batch
Institute of Business Administration(IBA)
University of Dhaka

Date of Submission: 24th August, 2016

Letter of Transmittal
24th August, 2016
Dr. Toufic Ahmad Choudhury
Director General of Bangladesh Institute of Bank Management (BIBM)
Visiting Faculty
Institute of Business Administration (IBA), University of Dhaka
Subject: Letter of transmittal for the Investment Policy Statement (IPS) Assignment
Sir;
We have prepared this formal report as part of our Bank Management coursework. The title of
our paper is Banking Structure of Bangladesh.
The report has been prepared under your supervision and thereby, no part of it can or will be
revealed to any external bodies unless and until you permit otherwise. We certify to you that the
paper has never been and neither will it ever be, reproduced for any other course.
We hope that We have been able to fulfill the course requirements successfully through the
submission of this report. We have put in our best efforts to contribute towards its completion
and hope that it will reach the standards you have set for us. We have tried our best to make the
report as comprehensive as possible but if any discrepancy or incongruity attracts your eyes, we
would appreciate it very much if you notify us and help us get rid of our mistakes.
Yours sincerely,
Nafis Uddin Mehran (ZR-67)
Md. Saad Sikder (ZR-68)
Parashar Saha (ZR-81)
Md. Junayed Hasan (ZR-91)
Ahnaf Tahmid (ZR-116)
BBA 21st Batch
Institute of Business Administration(IBA)
University of Dhaka

Table of Contents
Introduction......................................................................................................................................5
Financial Sector of Bangladesh.......................................................................................................5
The Banking Structure of Bangladesh.............................................................................................6
The Central bank: Bangladesh Bank:..........................................................................................7
The subordinate Banks of Bangladesh Bank...............................................................................7
1.

Scheduled Banks:..........................................................................................................7

State Owned Commercial Banks (SOCBs):......................................................................7

Specialized Banks (SDBs):...............................................................................................8

Private Commercial Banks (PCBs):..................................................................................8

Conventional PCBs:..........................................................................................................8

Islamic Shariah based PCBs.............................................................................................8

Foreign Commercial Banks (FCBs):.................................................................................8

2.

Non-Scheduled Banks:..................................................................................................8

Bibliography....................................................................................................................................9

Introduction
Banks can be defined as an establishment authorized by a government to accept deposits, pay
interest, clear checks, make loans, act as an intermediary in financial transactions, and provide
other financial services to its customers.
So, banks perform a lot of function however, the core function of a bank only include

taking deposits in form cash from surplus units of the economy & giving out
loans to the deficit units of the economy. All the other services provided by banks
are ancillary or off balance sheet activities.
Bangladesh is a developing country. Banking sector plays a pivotal role in the economic
development of the country. Banking system of a country can well be said as a barometer of its
economic prosperity. Well-developed banking system is indispensable for modern trade and
commerce. Now-a-days, banks not only act as custodian of public money but also are
indispensable as vital agent for maintenance of sound financial position of a country.

Financial Sector of Bangladesh

The financial system of Bangladesh is comprised of three broad fragmented sectors:
1. Formal Sector
2. Semi-Formal Sector
3. Informal Sector
The sectors have been categorized in accordance with their degree of regulation.
The formal sector includes all regulated institutions like Banks, Non-Bank Financial Institutions
(FIs), Insurance Companies, Capital Market Intermediaries like Brokerage Houses, Merchant
banks.
The semi-formal sector includes those institutions which are regulated otherwise but do not fall
under the jurisdiction of Central Bank, Insurance Authority, Securities and Exchange
Commission or any other enacted financial regulator. This sector is mainly represented
by Specialized Financial Institutions like House Building Finance Corporation (HBFC), Palli
Karma Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., Non-Governmental
Organizations.

The informal sector includes private intermediaries which are completely unregulated.
(Financial Sector of Bangladesh, 2016)

So, the banking system of Bangladesh falls under the category of Formal Sector.
Bangladesh has a mixed banking system comprising nationalized, private and foreign
commercial banks. Bangladesh Bank is the central bank of the country and is in charge of
monetary policies of the Government and controls all commercial banks. (Banking System of
Bangladesh, 2016)

The Banking Structure of Bangladesh

BANGLADESH BANK
(The Central bank is at the top of the
Banking structure in Bangladesh)

Scheduled Banks
(57
Scheduled
Bangladesh)

State Owned
Commercial
Banks (SOCB)

Specialized
Banks (SDB)

Banks

Non Scheduled Banks

in

Private
Commercial
Banks (PCB)

(4 Non schedule banks are there

in Bangladesh)

Foreign
Commercial
Banks (FCB)

Conventional PCB
Shariah Based PCB

The Central bank: Bangladesh Bank:

The Bangladesh Bank performs all the functions that a central bank in any country is expected to
perform. Such functions include maintaining price stability through economic and monetary
policy measures, managing the countrys foreign exchange and gold reserve, and regulating the
banking sector of the country. Like all other central banks, Bangladesh Bank is both the
governments banker and the bankers bank, a lender of last resort. Bangladesh Bank, like most
other central banks, exercises a monopoly over the issue of currency and banknotes. Except for
the one- and two-taka notes, it issues all other denominations of Bangladeshi taka. (Bangladesh
Bank, 2016)
The major functional areas include:

Formulation and implementation of monetary and credit policies.

Regulation and supervision of banks and non-bank financial institutions, promotion and
development of domestic financial markets.

Management of the country's international reserves.

Issuance of currency notes.

Regulation and supervision of the payment system.

Acting as banker to the government.

Money laundering prevention.

Collection and furnishing of credit information.

Implementation of the Foreign Exchange Regulation Act.

Managing a deposit insurance scheme.

The subordinate Banks of Bangladesh Bank

After the independence, banking industry in Bangladesh started its journey with 6 Nationalized
commercialized banks, 2 State owned Specialized banks and 3 Foreign Banks. In the 1980's
banking industry achieved significant expansion with the entrance of private banks. Now, banks
in Bangladesh are primarily of two types:

1. Scheduled Banks: The banks which get license to operate under Bank Company
Act, 1991 (Amended up to 2013) are termed as Scheduled Banks.
There are 57 scheduled banks in Bangladesh who operate under full control and
supervision of Bangladesh Bank which is empowered to do so through Bangladesh Bank
Order, 1972 and Bank Company Act, 1991. Scheduled Banks are classified into following
types:

State Owned Commercial Banks (SOCBs): There are 6 SOCBs which are
fully or majorly owned by the Government of Bangladesh.

Specialized Banks (SDBs): 2 specialized banks are now operating which were
established for specific objectives like agricultural or industrial development. These
banks are also fully or majorly owned by the Government of Bangladesh.

Private Commercial Banks (PCBs): There are 39 private commercial

banks which are majorly owned by the private entities. PCBs can be categorized into two
groups:

Conventional PCBs: 31 conventional PCBs are now operating in the industry.

They perform the banking functions in conventional fashion i.e. interest based operations.

Islamic Shariah based PCBs: There are 8 Islamic Shariah based PCBs in
Bangladesh and they execute banking activities according to Islamic Shariah based
principles i.e. Profit-Loss Sharing (PLS) mode.

Foreign Commercial Banks (FCBs): 9 FCBs are operating in Bangladesh as

the branches of the banks which are incorporated in abroad. (Financial Sector of
Bangladesh, 2016)

2. Non-Scheduled Banks: The banks which are established for special and definite
objective and operate under the acts that are enacted for meeting up those objectives, are
termed as Non-Scheduled Banks. These banks cannot perform all functions of scheduled
banks. (Financial Sector of Bangladesh, 2016)
There are now 4 non-scheduled banks in Bangladesh which are:

Ansar VDP Unnayan Bank,

Karmashangosthan Bank,

Probashi Kollyan Bank,

Jubilee Bank

Bibliography
Bangladesh Bank. (2016, August 24). Retrieved from https://www.bb.org.bd/
Banking
System
of
Bangladesh.
(2016,
August
24).
http://www.sdnbd.org/sdi/statisticapocketbook/Chap01/0117.htm

Retrieved

from

Financial
Sector
of
Bangladesh.
https://www.bb.org.bd/fnansys/

Retrieved

from

(2016,

August

24).