Central Bank

A central bank, reserve bank, or monetary authority is a banking institution granted the exclusive
privilege to lend a government its currency. Like a normal commercial bank, a central bank
charges interest on the loans made to borrowers, primarily the government of whichever country
the bank exists for, and to other commercial banks, typically as a 'lender of last resort'. However,
a central bank is distinguished from a normal commercial bank because it has the monopoly on
creating the currency of a nation, which is loaned to the government in the form of legal tender.
It is a bank that can lend money to other banks in times of need. Its primary function is to
provide the nation's Money Supply, but more active duties include controlling subsidized-Loan
Interest Rates, and acting as a lender of last resort to the Banking Sector during times of financial
crisis (private banks often being integral to the national financial system). It may also have
supervisory powers, to ensure that banks and other financial institutions do not behave recklessly
or fraudulently. Strengthening the financial sector is a vital concern for an economy. Efficient
banking or sound financial system serves as an effective channel for mobilizing funds from
savers to productive sectors and thus helps to achieve economic growth. However, the idea of
‘Bank’ is so ancient and this concept is evolving over time. Around the time of Adam Smith
(1776) there was a massive growth in the banking industry. Within the new system of ownership
and investment, the state's role as an economic actor changed substantially. The Jews in
Jerusalem introduced a kind of banking in the form of money lending before the birth of
Christ. The word 'Bank' was probably derived from the word 'bench' as during ancient time
Jews used to do money lending business sitting on long benches. First modern banking was
introduced in 1668 in Stockholm as 'Svingss Pis Bank' which opened up a new era of banking
activities throughout the European Mainland.

In the South Asian region a major landmark was the establishment of the Hindustan Bank in
1700 at Kolcutta. Dhaka Bank started to operate in1806. Banks established in this region during
the British period include Kurigram Bank (1887), Kumarkhali Bank(1896), Mahalaxmi Bank,
Chittagong bank(1910), Dinajpur Bank(1914), Comilla Banking Corporation (1914) and Comilla
Union Bank(1922). Major Indian Banks also had branches in this territory. In Europe prior to the
17th century most money was Commodity Money, typically Gold or silver. However, promises
to pay were widely circulated and accepted as value at least five hundred years earlier in both
Europe and Asia. The medieval European Knights Templar ran probably the best known early
prototype of a central banking system. At about the same time, Kublai Khan of the Mongols
introduced Fiat Currency to China, which was imposed by force by the confiscation of Specie.
Although central banks are generally associated with fiat money, under the international Gold
Standard of the nineteenth and early twentieth century’s central banks developed in most of
Europe and in Japan, though elsewhere Free Banking or Currency Boards were more usual at this
time. Problems with collapses of banks during downturns, however, was leading to wider support
for central banks in the respective nations which did not as yet possess them, most notably in
Australia.
As the first public bank to "offer accounts not directly convertible to coin", the Bank of
Amsterdam established in 1609 is considered to be the "first true central bank". This was
followed in 1694 by the Bank of England, created by Scottish businessman William Paterson in
the City of London at the request of the English government to help pay for a war. With the
collapse of the gold standard after World War II, central banks became much more widespread.
The banking system at our independence consisted of two branch offices of the former State
Bank of Pakistan established in July 1948: one was in Bangladesh (former East Pakistan) and the
other was in West Pakistan (present Pakistan).

Central bank of Bangladesh

Bangladesh Bank, the central bank and apex regulatory body for the country's monetary and
financial system, was established in Dhaka as a body corporate vide the Bangladesh Bank Order,
1972 (P.O. No. 127 of 1972) with effect from 16th December 1971. At present it has ten offices
located at Motijheel, Sadarghat, Chittagong, Khulna, Bogra, Rajshahi, Sylhet, Barisal, Rangpur
and Mymensingh in Bangladesh; total manpower stood at 5807 (officials 3981, subordinate staff
1826) as on March 31, 2015.
Governor Fazle Kabir
Central bank of Bangladesh
Currency Taka (৳)
JBJ (ISO 4217)
Reserves ৳2565 billion (US$33 billion)
Bangladesh Bank is a member of the Asian Clearing Union.
The bank is active in developing green banking and financial inclusion policy and is an
important member of the Alliance for Financial Inclusion. Bangladesh Financial Intelligence
Unit (BFIU), a department of Bangladesh Bank, has got the membership of Egmont Group.
Bangladesh Bank is the first central bank in the world to introduce a dedicated hotline (16236)
for the general populace to complain any banking related problem. Moreover, the organization is
the first central bank in the world to issue a "Green Banking Policy". To acknowledge this
contribution, then-governor Dr. Atiur Rahman was given the title 'Green Governor' at the 2012
United Nations Climate Change Conference, held at the Qatar National Convention
Centre in Doha

History of BB
After the Liberation War and the eventual independence of Bangladesh, the Government of
Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of
the country, naming it Bangladesh Bank. This reorganization was done pursuant to Bangladesh
Bank Order, 1972, and the Bangladesh Bank came into existence retroactively from 16
December 1971.
The 1971 Mujib regime pursued a pro-socialist agenda. In 1972, the government decided to
nationalize all banks to channel funds to the public sector and to priorities credit to those sectors
that sought to reconstruct the war-torn country – mainly industry and agriculture.[4] However,
government control of the wrong sectors prevented these banks from functioning well. This was
compounded by the fact that loans were handed out to the public sector without commercial
considerations; banks had poor capital lease, provided poor customer service and lacked all
market-based monetary instruments. Because loans were given out without commercial
considerations, and because they took a long time to call a non-performing loan, and once they
did, recovery under the erstwhile judicial system was so expensive, loan recovery was abysmally
poor.[4][5] While the government made a point of intervening everywhere, it didn't set up a
proper regulatory system to diagnose such problems and correct them. Hence, banking concepts
like profitability and liquidity were alien to bank managers, and capital adequacy took a
backseat.[5]
In 1982, the first reform program was initiated, wherein the government denationalized two of
the six nationalized commercial banks and permitted private local banks to compete in the
banking sector. In 1986, a National Commission on Money, Banking and Credit was
appointed[5] to deal with the problems of the banking sector, and a number of steps were taken
for the recovery targets for the nationalized commercial banks and development financial
institutions and prohibiting defaulters from getting new loans. Yet the efficiency of the banking
sector could not be improved.
The Financial Sector Adjustment Credit (FSAC) and Financial Sector Reform Programme
(FSRP) were formed in 1990, upon contracts with the World Bank. These programs sought to
remove government distortions and lessen the financial repression.[5] Policies made use of the
McKinnon-Shaw hypothesis, which stated that removing distortions augments efficiency in the
credit market and increases competition.[4] The policies therefore involved banks providing
loans on a commercial basis, enhancing bank efficiency and limiting government control to
monetary policy only. FSRP forced banks to have a minimum capital adequacy, to systematically
classify loans and to implement modern computerized systems, including those that handle
accounting. It forced the central bank to free up interest rates, revise financial laws and increase
supervision in the credit market. The government also developed the capital market, which was
also performing poorly.
FSRP expired in 1996. Afterwards, the Government of Bangladesh formed a Bank Reform
Committee (BRC), whose recommendations were largely unaddressed by the then-government.

BRANCHES OF BANGLADESH BANK

Bangladesh Bank has 9 branch offices, two in Dhaka city (SADARGHAT and Motijheel), and one
each in CHITTAGONG, KHULNA, RAJSHAHI, SYLHET, BOGRA, RANGPUR and BARISAL. The head
office discharges its duties with 28 departments-

Bangladesh Bank
Barisal

Bangladesh Bank
Chittagong
Bangladesh Bank
Sadarghat

Bangladesh
Bank
(Motijheel
Bangladesh Bank Office) Bangladesh Bank
Rajshahi Rangpur

Bangladesh Bank
Bangladesh Bank
Khulna
Sylhet

Organization
The bank's highest official is the governor (currently Fazle Kabir). His seat is in Motijheel,
Dhaka. The governor chairs the board of directors. The executive staff, also headed by the
governor, is responsible for the bank's day-to-day affairs.Bangladesh Bank also has a number of
departments under it, namely Debt Management, Law, and so on, each headed by one or more
general managers. The Bank has 10 physical branches: Bangladesh, Mymensingh,
Motijheel, Sadarghat, Barisal, Khulna, Sylhet, Bogra, Rajshahi, Rangpur and Chittagong; each is
headed by a general manager. Headquarters are located in the Bangladesh Bank Building in
Motijheel, which has two general managers.
Hierarchy
Governor

Deputy Governor

Executive Director
Economic Adviser

General Manager
Systems Manager
Chief Maintenance
Engineer

Deputy General Manager

Senior Systems Analyst
Deputy Chief Medical Officer
Principal Maintenance
Engineer

Joint Director
Joint Manager
Systems Analyst/
 Sr. Programmer
Sr. Maintenance
Engineer
Operation
Manager
Asstt. Chief
Medical Officer

Deputy Director
Deputy Manager
Programmer
Maintenance
Engineer
Computer Operation
Supervisor
Sr. Medical Officer

Assistant Director
Assistant Manager
Assistant
Programmer
Assistant Maintenance
Engineer
Sr. Computer Operator
Medical Officer

Officer
Cash Officer
Data Entry/Control Supervisor

The executive staff is responsible for daily affairs, and includes the governor and three deputy governors.
Under the governors, there are executive directors and an economic advisor.[7]
The general managers of the departments come under the executive directors, and are not part of the executive
staff.[7]
The two deputy governors are:
S. M. Moniruzzaman and Ahmed Jamal .[8]

Board of Directors[edit]
The board of directors consists of the bank's governor and eight other members. They are responsible for the
policies undertaken by the bank.

Governors[edit]
Since its conception, the Bangladesh Bank has had 11 governors:[9]
A.N.M. Hamidullah (18 January 1972 – 18 November 1974)
A.K. Naziruddin Ahmed (19 November 1974 – 13 July 1976)
M. Nurul Islam (13 July 1976 – 12 April 1987)
Shegufta Bakht Chaudhuri (12 April 1987 – 19 December 1992)
Khorshed Alam (20 December 1992 – 21 November 1996)
Lutfar Rahman Sarkar (21 November 1996 – 21 November 1998)
Mohammed Farashuddin (24 November 1998 – 22 November 2001)
Fakhruddin Ahmed (29 November 2001 – 30 April 2005)
Salehuddin Ahmed (1 May 2005 – 30 April 2009)
Atiur Rahman (1 May 2009 – 15 March 2016)
Fazle Kabir (20 March 2016 – present)
VISION
To develop continually as a forward-looking central bank with competent and committed
professionals of high ethical standards, conducting monetary management and financial sector
supervision to maintain price stability and financial system robustness, supporting rapid broad
based inclusive economic growth, employment generation and poverty eradication in Bangladesh

MISSION
We at Bangladesh Bank are carrying out its following main functions as the country's central
bank:

Formulating monetary and credit policies;

 Managing currency issue and regulating payment system;

Managing foreign exchange reserves and regulating the foreign exchange market;

Regulating and supervising banks and financial institutions, and advising the
government on interactions and impacts of fiscal, monetary and other economic
policies.

We are discharging these functions in a forward looking, proactive, responsive and consultative
manner. In our aspiration for ever higher standards of performance we are aware of our
limitations in independence, logistics, professional know-how and appropriateness of skill sets in
staffing; we are persistent in effort to overcome these limitations. In our work we shall preserve
and further strengthen the already earned confidence and trust of the nation, to continue being
seen as a respected institution to be emulated. Towards achieving these, our performance
commitments to our diverse broad stakeholder groups are as follows:

For the Nation

We shall catalyze and support socially responsible and environmentally sustainable development
initiatives, inter alia including fuller financial inclusion of under-served productive sectors and
bringing in needed new dimensions in financial markets and institutions; to facilitate broad based
growth in output, employment and income, for rapid poverty eradication and inclusive economic
and social progress.

For the government

We shall adopt and implement monetary and credit policies conforming with national priorities,
in coordination with government's fiscal and other macroeconomic objectives. We shall optimize
foreign exchange reserves and returns thereon,maintain stability in financial markets curbing
excessive volatility, and provide analysis and advice to the government on issues in economic
management and development.
For depositors in banks and financial institutions, investors in financial assets
We shall ensure safety of deposits in licensed banks and financial institutions with on-site and
off-site supervision of their activities and with adequate financial information disclosure
requirements, besides insuring small deposits. We shall maintain an interest rate structure that
provides fair return on financial assets while also supporting growth in the real sector, and we
shall promote and support development of markets in bonds and securities.

For banks and financial institutions in Bangladesh

We shall provide precise prudential regulatory, risk management and disclosure framework to
protect solvency and liquidity of individual institutions and stability of the overall financial
system, acting as lender of last resort if and when needed. We shall issue regulations and enforce
compliance therewith inter alia on capital adequacy, asset classification, income recognition and
provisioning, large exposure and risk management; through open consultative processes. We
shall maintain external sector viability with exchange rate stability and adequate foreign
exchange reserves. We shall provide a secure and quick payment settlement system. We shall
promote and support development of new financial products, services and instruments.

For banks abroad

We shall maintain a solvent, liquid domestic financial system with precise prudential regulatory,
risk management and disclosure framework in line with global best practice standards. We shall
maintain external sector viability with exchange rate stability and adequate reserves. We shall
maintain a secure, quick payment system for settlement of claims.

For the business community, including farm and non-farm SMEs

We shall maintain liquidity conditions and credit policies ensuring adequate credit flows at
market driven flexible interest rates for all productive economic activities, including in sectors
like agriculture and SMEs where markets have not been very responsive. We shall foster
macroeconomic stability through monetary and external sector management. We shall promote
and support development of new financial products, services and instruments. We shall maintain
a secure and quick payment system for settlement of claims.

For Bangladeshis abroad

We shall facilitate remittances from your earnings abroad to Bangladesh through legitimate
banking channels free of involvement of money launderers or terrorism financiers. We shall
support and promote development of new investment opportunities for your remittances to
Bangladesh.

For our employees

We shall maintain an environment that reinforces our pride in being employees of Bangladesh
Bank with compensation structure adequate to attract and retain the best in the market, job
assignments and logistically well resourced work situations encouraging continuous learning and
rewarding innovativeness and performance excellence by fast tracking in career path, clear
delegation and delineation of responsibilities and accountabilities, fairness and objectivity in
performance appraisal and personnel placement decisions.

FUNCTIONS OF BANGLADESH BANK

GENERAL FUNCTIONS

1. Bank of issue:
The issue of paper money is the most important function of a central bank. In fact the
privilege of note-issue was almost everywhere associated with the origin and
development of central banks. Central banks were generally known as ‘bank of issue’
 until the beginning of the twentieth century. The issue of money was always claimed to
be a prerogative of the government.

2. Banker, Agent & Adviser to the Government:

A central bank functions as a banker to the government of the country. In this capacity, it
conducts the banking accounts of government department, institutions & enterprises. It
makes short-term advances to the Government in normal condition and extra ordinary
advances during a depression, war or other emergency. It carries out the government’s
transaction involving purchase or sales of foreign currencies.
As an adviser to the government the central bank gives advice to the govt. on important
matters of economic policy like deficit financing, trade policy, foreign exchange policy
etc. The ultimate responsibility for laying down the monetary policy and maintaining the
monetary stared lies with the government.

3. Custodian of the cash reserves of the commercial Bank:

The commercial banks in the country keep a part of their cash balance as deposits with
the central bank, either voluntarily because conversion or because of some legal
obligation. In many countries, the banks are required under some legislation to maintain
statutory minimum cash reserves, mostly as a specified proportion of their deposits.

4. Custodian of the nation’s reserves of international currency:

The central banks, function of holding the nation’s metallic reserves and its foreign
exchange reserves was automatically derived from its functions as the bank of issue and
the custodian of commercial banks cash preserves. In most cases a central bank is
required by law to maintain a minimum reserve against its note issue.

5. Lender of last resort: The expression lender of last resort implied the assumption of the
responsibility of meeting directly or indirectly. The Central Bank helps the member
banks in times of crisis. If the banks can’t manage the money then Bangladesh bank helps
those commercial banks by supplying them money.
6. Central clearance, settlement and transfer:
As the central bank is the custodian of cash reserves of the commercial banks, it can
easily assume the function of acting as a clearing hours or settlement bank for other
banks in the country.
As all banks maintain their accounts with the central bank, the claims of banks against
one another are settled by simple transfers from and to their accounts this method of
settling accounts through the central bank apart from being of great convenience to the
banking system, provides economy in the use of money in banking operations. It tends
generally to strengthen the banking system of a country.

7. Controller of credit:
The control of credit is considered to be the main function of a central bank. De Kock
observes, “It is the function which embraces the most important questions of central
banking policy and the one thorough which practically all the other functions are united
and made to serve a common purpose.”
The central bank functions of note-issue, the management of government accounts, and
the custody of the commercial banks cash reserves along with those of rediscount and
lender last resort, are closely associated with the control of credit by the central bank. An
effective monetary management requires a centralized control over both currency and
credit. That is why the central banks, which enjoy the monopoly of note-issue, also
exercise control over excessive expansion of credit by the commercial banks.

8. Promoter of economic development:

The modern central bank is an institution responsible not only for the maintenance of
economic stability; it also performs a variety of development and promotional factions,
which were regarded in the past as being outside the normal purview of central banking.
The main objective of a central bank’s monetary policy is to achieve growth with stability
within the frame work of the general economic policy of the country. For the sake of
economic development the central bank should provide sufficient quality of money
appropriate to growth process.
FUNCTIONS AS GOVERNMENT BANK

Central bank is known as govt. bank all over the world. Central bank everywhere fulfills the
functions of banker, agent and adviser of the government. Central bank performs the following
functions govt. banks.

1. Maintain government fund and accounts:

Central bank maintains and monitors govt. fund and reserve on behalf Govt. For this
reason central bank is called the custodian of govt. fund.

2. Collection and transfer of money:

Central bank collects govt. revenues from different sectors and deposit it the account of
govt. Besides it transfers money from one place to another according to directions of govt.

3. Handling of government monetary transaction:

Central bank performs all monetary transaction of home and abroad on behalf of govt.
According to M.H. De-Kock “it carries out the govt.’s involving purchase and sale of
foreign currencies.

4. Sanctioning and supervision of loan:

Central banks not only perform monetary transaction on behalf of govt. but also sanctions
supervising of loans of different ministry, department and institution of govt.

5 Maintaining relation with foreign bank:

As an agent of govt. central banks maintain relationship with central banks of different
countries, World Bank (WB), International Monetary Fund (IMF), Regional Development
bank (i.e. ADB), different development agencies etc.

6. Adviser and agent of government:

Central bank acts as agent of govt. to establish and maintain relationship with different
parties inside and outside the country. It also advises govt. in policy making.
 7. Implementation of government monetary policy:

The implementation of government monetary policy in the timing of impact on the

economic inflation in the country. Central bank influences the economy through monetary
policy, because of the monetary policy is very important to the investors.

FUNCTION AS A BANKER OF OTHER:

Central bank performs the following functions as a banker of other banks.

1. Scheduling bank:

Central gives the license/permission of new banks to start business and schedule them. For
this reason central is always careful whither the commercial banks following /maintaining the
conditions of scheduling. It also set up new rules and policies for other commercial bank to
open new branches.

2. Functions as a clearing house:

Inter banks indebtedness is arisen from operations of day to day banking activities.
Sometimes it becomes very difficult for commercial bank to settle inter banks indebtedness.
For this reason central perform the function as clearing house all over the world.

3. Sanction of loan:

Central bank gives loan to scheduled commercial bank if necessary. Even, when the
commercial banks are in financial crisis and cannot collect loan from other sources, then
central bank acts as lender of last report.

4. Supervision of loan:

Central banks not only sanction loan but also manage how & when scheduled commercial
banks are granting loan and in different sectors.

5. Assistance in collecting credit:

 Central bank extends the helping hands to the commercial banks in collecting loans by
enacting new rules and regulation about loan and default loan and its report publication.

6. Audit of accounts:

Central bank carefully check the book of accounts of commercial bank and its proper
maintenance .As a result commercial banks are bound to maintain properly books of
accounts.

7. Collection and preservation of deposits:

All the scheduled commercial banks have to maintain a certain percentage of their deposits
into central bank. Central bank carefully monitor about this.

9. Acts as adviser and agent:

Central bank advises and directs commercial bank for the betterment of their operations of
banking activities/function. Besides it acts as the agent of scheduled bank in home and
abroad.

DEVELOPMENT FUNCTION

The objective of central bank is to ensure economic development. According to the direction of
Govt. central bank undertake different development activities and tries to implement. These
development activities are as follows:

1. Development of different production oriented sectors:

Central bank helps to argent extent in the production oriented sectors like the development
of agriculture and industry etc. For this reason it extend helping hands to establish
specialized banks like agricultural bank, industrial bank, investment bank etc.

2. Development of banking system:

 Central bank is always engaged in the development of banking system as the leader of
banking empire. For this reason, central bank set up different rules and regulations when
banking institutions are in danger, central extends it help.

3. Development of foreign trade:

Central bank under take different activities for the development of foreign trade (i.e. import
and export). Central bank tries to stabilize exchange rate of a country. It creates confidence
among the foreign exporters about country’s banking system.

4. Improving the quality of economic plan:

Central bank is the top most financial institution in the country and the banker of Govt. So it
helps for the development of the quality of economic plan taken by Govt.

5. Improving the quality of manpower:

Central bank tries to improve the quality of manpower in the banking sector. For the
development of its own manpower inside the bank, the central bank arranges training
facilities. It motivates scheduled commercial banks to manage adequate training facility for
the development of quality of their manpower.

6. Development of natural resources:

Central bank provides assistance and help to extract natural resources for use of these
resources to the enhancement of the economic welfare of the people. For this reason it
extends financial help assistance those institution engaged in extracting these natural
resources.

OTHER FUNCTIONS

In addition to above function, central bank also provides some others functions. These are as
follows

1. Economic research:
 Central bank has to undertake different Economic research activities for the development of
banking system effective operation of money market, formulation of different policy of
government etc.

2. Collection and supply of data:

Central bank has to collect different data to act act as the banker of the other banks and the
banker of government. Central bank supply information to various departments of
government and different scheduled bank.

3. Preparation of report and publication:

Central bank is to prepare many reports to meet the need of government and the bank itself.
Besides, central banks publish annual report and sell it. To do this bank has separate
publication and cell department.

MONETARY POLICY STRATEGY OF THE BANGLADESH BANK

Monetary policy strategy of the Bangladesh bank was first issued in January 2006. The most
important thinks of monetary policy is followed-

(1) Achieving price stability:

The central bank of a country control the money supply, availability of money, cost of money
or rate of interest rate in order to set of objectives oriented towards the growth and stability of
the economy.

(2) Maintaining high levels of production:

Bangladesh is food crops country. In Bangladesh many people depends on cultivation of land.
As a result, Bangladesh bank maintains the high level of production. For the high level of
production many times Bangladesh bank provides different types of facilities to the farmer.

(3) Employment and economic growth:

Bangladesh is over populated country. As a result, many people are in under unemployment.
For that reason our economic growth is low. As a result, our government announced they will
try to provide job at least one people in a family. When in every family get the job, the
economic growth will also increase day by day.

OVERVIEW OF T-BILLS MARKET IN BANGLADESH

Another important think is treasury bonds and PRIZE BONDs, the bond market is a financial
market where participants buy and sell debt securities, usually in the form of bonds. Like
emerging-market countries around the world, Bangladesh could benefit from having a local-
currency, fixed-income securities market. At present, its main fixed-income financial products
are bank deposits, bank loans, government savings certificates, term loans, treasury bills, and
government bonds and corporate debt (syndicated loans, private placement, and debentures).
But in general the corporate debt market is still very small compared with the equity market.
Numerous factors in Bangladesh today suggest that Bangladesh will not be able to develop an
active, local-currency fixed-income market. The Bangladesh Bank sells government
TREASURY BILLs on tender, PRIZE BONDs and different types of saving certificates
(sanchayapatra). The market for Bangladesh Treasury bills has a complex structure and
involves numerous participants--Ministry of Finance, Bangladesh Bank, government
securities dealers and brokers, and other holders of Treasury securities. The Bangladesh
government finances its expenditures in excess of tax receipts through the sale of debt
obligations. Currently, the total par value of outstanding Treasury bills stood at about Taka
22000 crore approximately. Treasury bills are short-term Government debt securities with
maturity of a period less than one year. However, in Bangladesh, two and five year securities
are also regarded as T-bills since they are zero coupon securities. They are the most well
 known of all Government securities. Treasury bills are designated by the number of days to
their maturity.

IMPORTANCE OF THE BANGLADESH BANK

In our economy, Bangladesh bank is the most important part of our country. Like in our survey,
we got the information that Bangladesh Bank try to develop in our banking sector. And also
Bangladesh bank is strengthening in our money market and to assist to our capital market. And
also Bangladesh bank try to develop in our agriculture sector and rural development and poverty
alleviation and to develop in our industry sector in many ways like Bangladesh bank provide
many types of facilities to them.

REGULATIONS

As a central bank of the countries there are some laws to regulate the financial market as well as
money market. They are some law to regulate this like money laundering act, banking act, and
insurance act etc. This is the central bank weapon to monitor the financial institutions. As a
central bank they regulate the daily activates of the commercial bank. As well as when
commercial bank in trouble Bangladesh bank give them suggestion also. If they do anything
illegal than they take necessary action against it. The best example of taking action against
commercial bank is oriental bank which is now known as ICB Islamic bank.

Bangladesh bank has followed some internal act also for their employee also. The rules are this:

Bangladesh Bank Order

Bank Company Act, 1991

Money Laundering Prevention Act

Foreign Exchange Regulation Act

Micro credit Regulatory Authority Act

 Financial Institutions Act

The Negotiable Instruments Act

The Bankers' Book Evidence Act

Money Loan Court Act

Bank Deposit Insurance Act

Anti-terrorism Act

Regulators of the Financial System

Central Bank

Bangladesh Bank acts as the Central Bank of Bangladesh which was established on December
16, 1971 through the enactment of Bangladesh Bank Order 1972- President’s Order No. 127 of
1972 (Amended in 2003).

The general superintendence and direction of the affairs and business of BB have been entrusted
to a 9 members' Board of Directors which is headed by the Governor who is the Chief Executive
Officer of this institution as well. BB has 45 departments and 10 branch offices.
In Strategic Plan (2010-2014), the vision of BB has been stated as, “To develop continually as a
forward looking central bank with competent and committed professionals of high ethical
standards, conducting monetary management and financial sector supervision to maintain price
stability and financial system robustness, supporting rapid broad based inclusive economic
growth, employment generation and poverty eradication in Bangladesh”.
The main functions of BB are (Section 7A of BB Order, 1972) -
1. to formulate and implement monetary policy;
2. to formulate and implement intervention policies in the foreign exchange market;
3. to give advice to the Government on the interaction of monetary policy with fiscal and
exchange rate policy, on the impact of various policy measures on the economy and to
propose legislative measures it considers necessary or appropriate to attain its objectives
and perform its functions;
4. to hold and manage the official foreign reserves of Bangladesh;
5. to promote, regulate and ensure a secure and efficient payment system, including the
issue of bank notes;
6. to regulate and supervise banking companies and financial institutions.
7.
Core Policies of Central Bank
Monetary policy

The main objectives of monetary policy of Bangladesh Bank are:

Price stability both internal & external
Sustainable growth & development
High employment
Economic and efficient use of resources
Stability of financial & payment system
Bangladesh Bank declares the monetary policy by issuing Monetary Policy Statement (MPS) twice (January and July) in a year.
The tools and instruments for implementation of monetary policy in Bangladesh are Bank Rate, Open Market Operations (OMO),
Repurchase agreements (Repo) & Reverse Repo, Statutory Reserve Requirements (SLR & CRR).

Reserve Management Strategy

Bangladesh Bank maintains the foreign exchange reserve of the country in different currencies to minimize the risk emerging
from widespread fluctuation in exchange rate of major currencies and very irregular movement in interest rates in the global
money market. BB has established Nostro account arrangements with different Central Banks. Funds accumulated in these
accounts are invested in Treasury bills, repos and other government papers in the respective currencies. It also makes investment
in the form of short term deposits with different high rated and reputed commercial banks and purchase of high rated
sovereign/supranational/corporate bonds. A separate department of BB performs the operational functions regarding investment
which is guided by investment policy set by the BB's Investment Committee headed by a Deputy Governor. The underlying
principle of the investment policy is to ensure the optimum return on investment with minimum market risk.

Interest Rate Policy

Under the Financial sector reform program, a flexible interest policy was formulated. According to that, banks are free to
charge/fix their deposit (Bank /Financial Institutes) and Lending (Bank /Financial Institutes) rates other than Export Credit. At
present, except Pre-shipment export credit and agricultural lending, there is no interest rate cap on lending for banks. Yet, banks
can differentiate interest rate up to 3% considering comparative risk elements involved among borrowers in same lending
category. With progressive deregulation of interest rates, banks have been advised to announce the mid-rate of the limit (if any)
for different sectors and the banks may change interest 1.5% more or less than the announced mid-rate on the basis of the
comparative credit risk. Banks upload their deposit and lending interest rate in their respective website.

Capital Adequacy for Banks and FIs

Basel-III has been introduced with a view to strenghening the capital base of banks with the goal of promoting a more resilient
banking sector. The Basel III regulation will be adopted in a phased manner starting from the January 2015, with full
implementation of capital ratios from the beginning of 2019. Now, scheduled banks in Bangladesh are required to maintain
minimum capital of Taka 4 billion or Capital to Risk Weighted Assets Ratio (CRAR) 10%, whichever is higher. In addition to
minimum CRAR, Capital Conservation Buffer (CCB) of 2.5% of the total RWA is being introduced which will be maintained in
the form of CET1. Besides the minimum requirement all banks have a process for assessing overall capital adequacy in relation
to their risk profile and a strategy for maintaining capital at an adequate level.

For FIs, full implementation of Basel-II has been started in January 01, 2012 (Prudential Guidelines on Capital Adequacy and
Market Discipline (CAMD) for Financial Institutions). Now, FIs in Bangladesh are required to maintain Tk. 1 billion or 10% of
Total Risk Weighted Assets as capital, whichever is higher.

Deposit Insurance

The deposit insurance scheme (DIS) was introduced in Bangladesh in August 1984 to act as a safety net for the depositors. All
the scheduled banks Bangladesh are the member of this scheme Bank Deposit Insurance Act 2000. The purpose of DIS is to help
to increase market discipline, reduce moral hazard in the financial sector and provide safety nets at the minimum cost to the
public in the event of bank failure. A Deposit Insurance Trust Fund (DITF) has also been created for providing limited protection
(not exceeding Taka 0.01 million) to a small depositor in case of winding up of any bank. The Board of Directors of BB is the
Trustee Board for the DITF. BB has adopted a system of risk based deposit insurance premium rates applicable for all scheduled
banks effective from January - June 2007. According to new instruction regarding premium rates, problem banks are required to
pay 0.09 percent and private banks other than the problem banks and state owned commercial banks are required to pay 0.07
percent where the percent coverage of the deposits is taka one hundred thousand per depositor per bank. With this end in view,
BB has already advised the banks for bringing DIS into the notice of the public through displaying the same in their display
board.

Insurance Authority

Insurance Development and Regulatory Authority (IDRA) was instituted on January 26, 2011 as the regulator of insurance
industry being empowered by Insurance Development and Regulatory Act, 2010 by replacing its predecessor, Chief Controller of
Insurance. This institution is operated under Ministry of Finance and a 4 member executive body headed by Chairman is
responsible for its general supervision and direction of business.
IDRA has been established to make the insurance industry as the premier financial service provider in the country by structuring
on an efficient corporate environment, by securing embryonic aspiration of society and by penetrating deep into all segments for
high economic growth. The mission of IDRA is to protect the interest of the policy holders and other stakeholders under
insurance policy, supervise and regulate the insurance industry effectively, ensure orderly and systematic growth of the insurance
industry and for matters connected therewith or incidental thereto.

Regulator of Capital Market Intermediaries

Securities and Exchange Commission (SEC) performs the functions to regulate the capital market intermediaries and issuance of
capital and financial instruments by public limited companies. It was established on June 8, 1993 under the Securities and
Exchange Commission Act, 1993. A 5 member commission headed by a Chairman has the overall responsibility to administer
securities legislation and the Commission is attached to the Ministry of Finance.
The mission of SEC is to protect the interests of securities investors, to develop and maintain fair, transparent and efficient
securities markets and to ensure proper issuance of securities and compliance with securities laws. The main functions of SEC
are:
Regulating the business of the Stock Exchanges or any other securities market.
Registering and regulating the business of stock-brokers, sub-brokers, share transfer agents, merchant bankers and
managers of issues, trustee of trust deeds, registrar of an issue, underwriters, portfolio managers, investment advisers and other
intermediaries in the securities market.
Registering, monitoring and regulating of collective investment scheme including all forms of mutual funds.
Monitoring and regulating all authorized self regulatory organizations in the securities market.
Prohibiting fraudulent and unfair trade practices in any securities market.
Promoting investors’ education and providing training for intermediaries of the securities market.
Prohibiting insider trading in securities.
Regulating the substantial acquisition of shares and take-over of companies.
Undertaking investigation and inspection, inquiries and audit of any issuer or dealer of securities, the Stock Exchanges
and intermediaries and any self regulatory organization in the securities market.
Conducting research and publishing information.
Regulator of Micro Finance Institutions

To bring Non-government Microfinance Institutions (NGO-MFIs) under a regulatory framework, the Government of Bangladesh
enacted "Microcredit Regulatory Authority Act, 2006’" (Act no. 32 of 2006) which came into effect from August 27, 2006.
Under this Act, the Government established Microcredit Regulatory Authority (MRA) with a view to ensuring transparency and
accountability of microcredit activities of the NGO-MFIs in the country. The Authority is empowered and responsible to
implement the said act and to bring the microcredit sector of the country under a full-fledged regulatory framework.
MRA’s mission is to ensure transparency and accountability of microfinance operations of NGO-MFIs as well as foster
sustainable growth of this sector. In order to achieve its mission, MRA has set itself the task to attain the following goals:
To formulate as well as implement the policies to ensure good governance and transparent financial systems of MFIs.
To conduct in-depth research on critical microfinance issues and provide policy inputs to the government consistent with the
national strategy for poverty eradication.
To provide training of NGO-MFIs and linking them with the broader financial market to facilitate sustainable resources and
efficient management.
To assist the government to build up an inclusive financial market for economic development of the country.
To identify the priorities in the microfinance sector for policy guidance and dissemination of information to attain the MRA’s
social responsibility.
According to the Act, the MRA will be responsible for the three primary functions that will need to be carried out, namely:
Licensing of MFIs with explicit legal powers;
Supervision of MFIs to ensure that they continue to comply with the licensing requirements; and
Enforcement of sanctions in the event of any MFI failing to meet the licensing and ongoing supervisory requirements.
Bangladesh Bank Open Data Initiative
Bangladesh Bank took another step forward in making its vast repository of data accessible to the general public. Data from
the Monthly Economic Trends publication can now be easily downloaded by anyone interested, free of cost, into an Excel file .
This includes detailed data, some dating back almost twenty years, on balance of payments, money supply, various consumer
price indices, national accounts, stock price indices, interest rates, remittances, exchange rates, commodity prices and tax
revenue. This file will be updated monthly.
Moreover for those researchers interested in analyzing time series data as far back as 1972 the
Statistics Department has prepared a historical data set in Excel which includes the indicators in the
Monthly Economic Trends Publication. This file will be updated yearly.
For detailed banking sector data please click on the following link which has all the Excel tables in the latest edition of the
quarterly Scheduled Bank Statistics publication. For a detailed analysis of some of this data you will also find attached our
first Financial Stability report which presents summary statistics and analysis of the banking sector.
Data on the weighted average rate of interest on deposits and loans for each bank is now available. In addition to this summary
data we also have detailed interest rate data by type of deposit and loan product. We will progressively bring out other data in
easily downloadable format, and develop new user-friendly applications, as part of this "Bangladesh Bank Open data initiative"
to promote greater use of data for more effective policymaking.
The Bank also compiles and publishes a range of economic data in html format.

Investment facilities through Bonds

Bangladesh offers generous opportunities for investment under its liberalised Industrial Policy and export-oriented, private
sector-led growth strategy. The government's role is that of a facilitator which helps create an enabling environment for
expanding private investment, both domestic and foreign. The Board of Investment (BOI), established by the government for
accelerating private investment, provides institutional support services to intending investors.

Non Resident Bangladeshis have numbers of opportunities to invest their money in different bonds to earn attractive profit like
premium bond, investment bond etc.

Bangladeshi nationals living abroad can send Foreign Exchange very easily and directly to bank accounts maintained in
Bangladesh. For this, drawing arrangements is created with Foreign banks and Exchange houses .Persons willing to remit their
earnings through official channels can buy either Taka draft or US dollar draft from these Foreign banks and Exchange houses
having drawing arrangements with different banks in Bangladesh.

Prizebond and Shanchaypatra are two facilities for local Bangladeshi citizens.
Services for general public
Bangladesh Bank serves the people in many ways.

The Bank issues banknotes with special security features so that owner knows the money is genuine. View the security posters to
know the features.
If you have deposited your money in scheduled banks, and have not made transaction for last ten years, you can check your
account from 'Claim your money' link.
Any client, person or agency having complaint(s) against a Scheduled Bank/FI/Bangladesh Bank or related official may write
down his/her complaint(s) in the 'Customer Complaint' link.
Find out some important BB forms from 'BB Forms' link.

E-Services
Time series(Economic data)
Bangladesh Bank (BB), the central bank of Bangladesh, has rich traditions of publishing data on various aspects of the
Bangladesh Economy through several of its publications. Using this Data Warehouse application, data are mainly presented
through time-series formatted reports.

Reports can be saved as excel format for further analysis.

Users: Banks, FIs, Economists, Researchers, Analysts
Online CIB services
To create a disciplined environment for borrowing, the automated CIB service provides credit related information for prospective
and existing borrowers. With this improved and efficient system, risk management will be more effective. Banks and financial
institutions may furnish credit information to CIB database 24 by 7 around the year; and they can access credit reports from CIB
online.
Users: Banks and FIs
Online Agent Information Management System
This system is to be used to send the required information and documents by the Authorized Dealer Bank for granting permission
under Section-18A of Foreign Exchange Regulation Act, 1947 to work as local agent of foreign principal(s).
Users: AD Branch of Banks

User Guide: Online Agent Information Management System

Reporting goAML
goAML is a UNODC response to combat money-laundering. The goAML Client application is an intelligence analysis system
intended to be used by Bangladesh Financial Intelligence Unit (BFIU) which is the central agency of Bangladesh responsible for
analyzing Suspicious Transaction Reports (STRs), Cash Transaction Reports (CTRs) & information related to money laundering
(ML)/financing of terrorism (TF) received from reporting organizations & other sources and disseminating
information/intelligence thereon to relevant law enforcement agencies for further action. The goAML Web application provides a
secure web based interface between the BFIU and its reporting organizations for the electronic upload of reports such as XML
files, filling out the online report forms or sending XML files as attachments by secure e-mail, information sharing among
stakeholders and other information.
Users: All scheduled Banks, Stakeholders & other reporting agencies
Market Infrastructure

Web Upload
In terms of article 36(3) of Bangladesh Bank Order, 1972,all scheduled banks are subject to submit Weekly Statement of Position
as at the close of business on every Thursday to the Department of Off-site Supervision. This statement must be submitted
through on-line using this web service within o3 (three) working days after the reporting date.
Users: All scheduled banks
Prizebond Matching
Online Foreign Exchange Transaction Monitoring System
Online Foreign Exchange Transaction Monitoring System is used for monitoring total foreign exchange transactions of
Bangladesh. The system includes Export, Import, Inward remittance(Wage Earners' remittance and other) and Outward
remittance(Traveling and Miscellaneous). Through it's services, Banks and AD Branches issue & reports Foreign Exchange
Transactions to Bangladesh Bank.
Users: Banks, AD Branch of Banks and Customs

Mobile Apps: Banking Information

Mobile app for ATM Booths and Branches location details as well as services provided to the customers in Bangladesh.
Download link: https://play.google.com/store/apps/details?id=com.isdd.bb.org
Bangladesh Bank eTender System
Bangladesh Bank introduces the online tendering system to facilitate the procurement process of Bangladesh Bank. The system
will help you to participate in the local and international tender/procurement of Bangladesh Bank.
Users: Interested Bidders
eReturns
An Online Portal Service for Scheduled Banks to submit Electronic Returns using predefined template for the purpose of Macro
Economy Analysis through related BB Departments.
Users: All Schedule Bank

User Guide: Rationalized Input Template has been provided to all Schedule Bank
Special Foreign Currency Account Monitoring System (SFCAMS)
Online Special Foreign Currency Account Monitoring System is used for monitoring FC account transactions of
Bangladesh.Through it's services, AD Branches of Banks report day to day Transactions (Only Special FC A/C) to Bangladesh
Bank.
Users: AD Branch of Banks

User Manual: view

Information for Deposit Insurance Premium Assessment (IDIPA)

Deposit Insurance System (DIS) is now contributing financial stability, protecting bank's depositors and assuring insurance
benefits in the unlikely event of Scheduled Banks. The key elements of DIS are to maintain public confidence and promote
financial sector's resilience through increasing savings. DIS in Bangladesh is now being administrated by 'The Bank Amanat
Bima Ain, 2000'.
Users: All scheduled banks

User Manual: view

Corporate Memory Management Systems (CMMS)

Corporate Memory Management Systems is a web-based application to monitor the errors, omission and violation of regulations
and policies by the Schedule Commercial Banks/FI's and their executives..
Users: All Scheduled Banks and FIs
e-statement for CRR & SLR
In terms of article 36 of Bangladesh Bank Order, 1972 and Bank Company Ain, 1991,all scheduled banks (both Conventional
and Islamic Banking) in Bangladesh are subject to submit Thursday Positions of Demand And Time Liabilities for calculating
CRR and SLR at the close of business. This statement must be submitted through on-line using this web service to Department of
Off-site Supervision (DOS) within the 10th of the following month.
Users: All Scheduled Banks
User Guide: Download User Guide
Using this service you can search single or multiple numbers at a time.

CONCLUSION

 In order uphold the mission, Bangladesh banks aims would be provide the required
leadership by discharging its duties in a manner that shows a clear vision, it’s watchful,
far-sighted, intelligent and responsive based on an effective and efficient communication
strategy. At all times Bangladesh bank aims would be to remain committed, efficient,
capable, logistically supported, speedy, focused, and aggressive where necessary in order
to ensure that the Bangladesh bank always remains a credible and prestigious institution
with an efficient organizational structure committed to achieving its goals. And also
Bangladesh Bank tries to impose something new for the people of our country. The
Bangladesh Bank always remains a reliable and important institution with an efficient
organizational structure committed to achieving its goals. In Bangladesh Bank reserve is
now cross to 10 billion US dollar for the strong monetary policy.

 In this report we tried to focus on the function of Bangladesh Bank. Bangladesh Bank
cans an important role in one’s organization. Bangladesh bank always tries to impose
something new for the people of the country.