Overview of Bangladesh Bank

Organizational Structure of Bangladesh

Bank
▶ Governor: Dr. Atiur Rahman took the helm of the central Bank of Bangladesh for four year
tenure on May 1, 2009 as the 10th Governor of Bangladesh Bank, the country's monetary
policy authority, financial sector regulator and supervisor.
▶ Deputy Governors: Four Deputy Governors looking after the following sectors: Banking
Regulation and Policy Department, Department of Financial Institutions and Market, Law
Department, Credit Information Bureau Statistics Department, Monetary Policy
Department , Foreign Exchange Policy Department, Expenditure Management Department,
Common Services Department, Department of Banking Inspection -1
▶ Board of Directors
▶ Executive Staffs
▶ General Managers
Overview of BB:
▶ Bangladesh Bank was established as a body corporate vide the Bangladesh Bank
Order, 1972 with effect from 16 th December 1971 . All the members of he body must
have experience and proven capacity in the fields of banking, trade, commerce,
industry or agriculture - all nominated by the government. The broad objectives
of the Bank are :

a) To regulate the issue of the currency and the keeping of reserves;

b) To manage the monetary and credit system of Bangladesh with a view to
stabilizing domestic monetary value;
c) To promote and maintain a high level of production, and to foster growth and
development of the country's productive resources for the national interest
Core functions of BB:
▶ The core functions of BB are briefly discussed as follows:
a) BB formulates and implements monetary policy aiming at stabilizing domestic
monetary value and maintaining competitive external per value of taka for
fostering growth.
b) BB formulates and implements intervention policies in the domestic money
market and foreign exchange market.
c) BB, as the central bank of Bangladesh reserves sole responsibility to issue bank
note
d) BB performs as a clearing house for the scheduled banks to clear and settle
inter-bank payment arising through drawing cheque, drafts, bills, etc to one
another.
e) BB acts as a banker to the government;
f) BB functions as a lender of the last resort for the government as well as for the
country’s scheduled banks;
g) BB acts as an advisor to the government;
Core Functions of BB:
▶ Overview of Financial system of Bangladesh

The financial system of Bangladesh is comprised of two broad fragmented sectors:

▶ Formal Sector, includes all regulated institutions like Banks, Non-Bank Financial
Institutions (FIs), Insurance Companies, Capital Market Intermediaries like
Brokerage Houses, Merchant Banks etc.; Micro Finance Institutions (MFIs).

▶ Semi-Formal Sector, inludes SEC, House Building Finance Corporation, NGO,

Grameen Bank
Overview of BB:
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
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.
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
(BankUnder 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. Yet, banks can differentiate
interest rate up to 3% considering comparative risk elements involved
among borrowers in same lending category.
Exchange Rate Policy:
▶ The exchange rate policy of Bangladesh Bank aims at maintaining the
competitiveness of Bangladeshi products in the international markets,
encouraging inflow of wage earners' remittances, maintaining internal price
stability, and maintaining a viable external account position. Under the existing
floating exchange rate regime (that started from 31/05/2003), the interbank
foreign exchange market sets the exchange rates for customer transactions and
interbank transactions based on demand-supply interplay; However, along with
intervention in the taka money market, the US dollar purchase or sale
transactions take place by the Bangladesh Bank as needed, to maintain orderly
market conditions.
Indicators used by BB:
▶ Foreign Exchange reserve
▶ Call Money Rate
▶ Share Price Index
▶ Export
▶ Import
▶ Tax Revenue
▶ L/C Opening
▶ Foreign/Local Debt
▶ Rate of Inflation
▶ GDP
▶ Bank Deposit
▶ Industrial & Consumer Loans
Organiszation of BB:
▶ The financial system of Bangladesh consists of
Bangladesh Bank (BB) as the central bank,
government owned specialized banks, domestic
private banks, foreign banks and non-bank financial
institutions. The financial system also embraces
insurance companies, stock exchanges and co-
operative banks.
Organization of BB:
▶ Bangladesh offers generous opportunities for investment under its liberalized
Industrial Policy and export-oriented, private sector-led growth strategy. All but
four sectors (i.e. (1) arms and ammunition and other defense equipment and
machinery, (2) forest plantation and mechanized extraction within the bounds of
reserved forests, (3) production of nuclear energy, and (4) mining  are open for
private investment in Bangladesh.

▶ Tax holiday

Tax holiday facilities will be available for 5 or 7 years depending on the location of
the industrial enterprise. For industrial enterprises located in Dhaka and
Chittagong Divisions ( excluding Hill Tract districts of Chittagong Division) the tax
holiday facility is for 5 years while it is 7 years for locations in Khulna, Sylhet,
Barisal, and Rajshahi, Divisions and the 3 Chittagong hill districts.

▶ .
Organization of BB:
▶ Tax exemptions are allowed in the following cases:

* Tax exemption on royalties, technical know-how fees received by any

foreign collaborator, firm, company and expert.

* Tax exemption on income of the private sector power generation

company for 15 years from the date of commercial production.

Industrial undertakings not enjoying tax holiday will enjoy accelerated

depreciation allowance
Organization of BB:
▶ Foreign Investment
Private investment from overseas sources is welcome in all areas of
the economy with the exception of the four reserved sectors
(mentioned earlier). Such investments can be made either
independently or through venture on mutually beneficial terms and
conditions. Foreign investment is, however, especially desired in the
following major categories of industries:
*  Export oriented industries
*  Industries in the Export Processing Zones ( EPZs)
*  High technology products that will be either import substitute or
export oriented.
Organization of BB:

▶ Facilities/Incentives
A)For foreign direct investment, there is no limitation pertaining to foreign equity
participation, i.e. 100 percent foreign equity is allowed. Non-resident institutional
or individual investors can make portfolio investments in stock exchanges in
Bangladesh.

B) A foreign technician employed in foreign companies will  not be subjected to

personal tax up to 3 (three) years , and beyond that period his/ her personal
income tax payment will be governed by the existence or non-existence of
agreement on avoidance of double taxation with country of citizenship.
Overview of BB:
▶ Other Incentives

Citizenship by investing a minimum of US $ 500,000 or by transferring US$

1,000,000 to any recognized financial institution ( Non-repatriable ).

Permanent resident ship by investing a minimum of US$ 75,000 ( non-

repatriable).

Special facilities will be provided to export-oriented industries  under "Thrust

sectors" . Thrust Sectors include Agro-based industries, Artificial flower-
making, Computer software and information technology, Electronics, Frozen
food, Floriculture, Gift items, Infrastructure, Jute goods, Jewellery and
diamond cutting and polishing, leather, Oil and gas, Stuffed toys, Textiles,
Tourism. Investment Protections / International Agreements