Financial Performance Analysis of Sonali Bank Limited.(part-2)
Subject: Economics, Finance | Topics: ,

2.6 Central Bank and Its Policy

Bangladesh Bank is the central bank in Bangladesh. It was established on 16th December 1971 under the Bangladesh Bank (Temporary) Order 1971. Bangladesh Bank (BB), as the central bank, has legal authority to supervise and regulate all the banks. It performs the traditional central banking roles of note issuance and being banker to the government and banks. It formulates and implements monetary policy manages foreign exchange reserves and supervises banks and non-bank financial institutions. Its regulations Include:

      Minimum capital requirements.

      Limits on loan concentration and insider borrowing.

      Guidelines for asset classification.

      Income recognition.

Bangladesh Bank has the power to impose penalties for non-compliance and also to intervene in the management of a bank if serious problems arise. It also has the delegated authority of issuing policy directives regarding the foreign exchange regime. The powers and functions of Bangladesh Bank are governed by Bangladesh Bank Order 1972 and Banking Companies Act 1991 to make provisions for streamlining the affair of banking companies to suite the present day’s socio-economic needs of the country. The function of Bangladesh Bank may be classified into following:

 Commercial Bank:

The commercial banking system dominates Bangladesh’s financial sector with limited role of Non-Bank Financial Institutions and the capital market. The Banking sector alone accounts for a substantial share of assets of the financial system. The banking system is dominated by the 4 Nationalized Commercial Banks, which together controlled more than 57% of deposits and operated 3390 branches (55% of the total) as of December 31, 2007.

Specialized Banks:

Out of the 5 specialized banks, two (Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank) were created to meet the credit needs of the agriculture sector while the other two (Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangstha) are for extending term loans to the industrial sector. BASIC Bank Limited was established as the policy makers of the country felt the urgency for a bank in the private sector for financing small scale industries (SSSIs).

List of scheduled banks in Bangladesh:

Nationalized Banks:

National Commercial Bank

Web link

Sonali Bank Limited

http://www.sonalibank.com.bd

Janata Bank Limited

http://www.janatabank-bd.com

Agrani Bank Limited

http://www.agranibank.org

Rupali Bank Limited

http://www.rupali-bank.com

Specialized Commercial Banks:

National Commercial Bank

Web link

Bangladesh Krishi Bank

http://www.krishibank.org.bd

Bangladesh Shilpa Bank

http://www.shilpabank.gov.bd

Rajshahi Krishi Unnayan Bank

http://www.rakub.org.bd

Bangladesh Shilpa Rin Shangstha

http://www.bsrs.org.bd/

BASIC Bank Limited

http://www.basicbanklimited.com

Private Commercial Banks:

National Commercial Bank

Web link

Pubali Bank Limited

http://www.pubalibangla.com

Uttara Bank Limited

http://www.uttarabank-bd.com

AB Bank Limited

http://www.abbank.com.bd

IFIC Bank Limited

http://www.ificbankbd.com

Islami Bank Bangladesh Limited

http://www.islamibankbd.com

National Bank Limited

http://www.nblbd.com

The City Bank Limited

http://www.thecitybank.com

United Commercial Bank Limited

http://www.ucbl.com

ICB Islamic Bank Limited

http://www.icbislamic-bd.com/

Eastern Bank Limited

http://www.ebl-bd.com

National Credit & Commerce Bank Limited

http://www.nccbank.com.bd

Prime Bank Limited

http://www.prime-bank.com

Southeast Bank Limited

http://www.sebankbd.com

Dhaka Bank Limited

http://www.dhakabank.com.bd

Al-Arafa Islami Bank Limited

http://www.al-arafahbank.com/

Social Investment Bank Limited

http://www.siblbd.com

Dutch-Bangla Bank Limited

http://www.dutchbanglabank.com

Mercantile Bank Limited

http://www.mblbd.com

One Bank Limited

http://www.onebankbd.com

EXIM Bank Limited

http://www.eximbankbd.com

Premier Bank Limited

http://www.premierbankltd.com

First Security Bank Limited

http://www.fsblbd.com

Standard Bank Limited

http://www.standardbankbd.com

The Trust Bank Limited

http://www.trustbank.com.bd

Mutual Trust Bank Limited

http://www.mutualtrustbank.com

Bank Asia Limited

http://www.bankasia-bd.com

Bangladesh Commerce Bank Limited

http://www.bcbl-bd.com

Jamuna Bank Limited

http://www.jamunabankbd.com

Shahjalal Bank Limited

http://www.shahjalalbank.com.bd

BRAC Bank Limited

http://www.bracbank.com

Foreign Banks:

National Commercial Bank

Web link

Commercial Bank of Ceylon Limited

http://www.combankbd.com

Standard Chartered Bank Limited

http://www.standardchartered.com/bd

Habib Bank Limited

http://www.habibbankltd.com

State Bank of India

http://www.statebankofindia.com

National Bank of Pakistan

http://www.nbp.com.pk

Citi Bank N.A.

http://www.citi.com/domain/index.htm

Woori Bank

http://www.wooribank.com

Bank Al-Falah Limited

http://www.bankalfalah.com

The Hong Kong and Shanghai Banking Corporation Limited

http://www.hsbc.com

3.1 A Brief Overview of Sonali bank Limited

 Sonali Bank is a state-owned commercial bank in Bangladesh. It is the largest bank of the country.[A fully state-owned enterprise, the bank has been discharging its nation-building responsibilities by undertaking government entrusted different socio-economic schemes as well as money market activities of its own volition, covering all spheres of the economy. Sonali Bank Limited singularly enjoys the prestige of being the agent of the Central Bank of Bangladesh in such places where the guardian of the money market has chosen not to act by itself.

Sonali Bank was established in 1972 under the Bangladesh Banks (Nationalization) Order, through the amalgamation and nationalization of the branches of National Bank of Pakistan, Bank of Bhowalpur and Premier Bank branches located in East Pakistan until the 1971 Bangladesh Liberation War. When it was established, Sonali Bank had a paid up capital of 30 million taka. In 2001, it’s authorized and paid up capital were Tk. 10 billion and Tk. 3.272 billion respectively. The bank’s reserve funds were Tk. 60 million in 1979 and Tk. 2.050 billion on 30 June 2000.

The management of Sonali Bank is vested in a 7-member board of directors appointed by the government. The managing director is the chief executive. He is assisted by a deputy managing director, six general managers, and other senior executives. The general managers are in charge of the bank’s branches in the headquarters of the six administrative divisions of the country namely, Dhaka, Chittagong, Rajshahi, Khulna, Sylhet and Barisal. The bank has 32 departments at its head office including a training institute in Dhaka. On 30 June 2000, the total number of employees of the bank was 26,085.

3.2 Role of Sonali bank Limited in the National Economy

Economy and Banking industry go together and are inseparable. Sonali Bank Limited has been playing an important role in the economic development of the country. As many as 26,085 people are in the employment of the Bank as on December 31, 2008. Besides, Sonali Bank Limited has generated employments for hundreds of people in the projects and industries established under finance. The Bank has been financing the trade and commerce of the country since inception of the Bank in 1997. We have handled a volume of countries exports and imports. The deposits our Bank mobilized through the outlets of branches helped in the formation of capital in the country. Our lending to borrower reached Tk. 23163.18 million as on June 30, 2009. It has contributed to the industrialization and improvement of trade and commerce of the country which ultimately accelerated economic growth and national welfare through multiplying effect. We have collected VAT and tax on interest/ profit earning of customers of the Bank. For relief and rehabilitation of natural calamity-hit people of the country in 2007 the bank has donated a denoted amount of money.

Foreign Remittance

To develop national infrastructure and economy of Bangladesh Sonali Bank Limited has been playing dominant role to bring hard earning of Bangladesh expatriates working/ living abroad through banking channels. For this purpose, Sonali Bank Limited has established a bank named Sonali Bank (U.K) and an exchange house named Sonali Exchange Company Inc. (SECI), USA. Our Bank has also established drawing arrangement with various exchange house / banks in Middle East, Canada and Malaysia. Under this arrangement, remitters can easily send their hard earning to the beneficiaries in Bangladesh through 1184 Sonali Bank Limited Branches across the country. They can remit their money through Demand Drafts (DD), Telegraphic Transfers (TTs), SWIFT and / or Computerized Payment Instructions (PC to PC via dial up modem) on Sonali Bank Limited selective branches.

Trade Financing:

Sonali Bank Limited extends multiple credit facilities to boost up trade, commerce and industry. The credit packages and interest rates are as under:

Credit Packages

Interest Rate (Floating)

  1. Credit to Trade and Commerce

14%

  1. Credit for Power Driven Vehicle/ Water Transport

14%

  1. Overdraft Against:
Fixed Deposits

13%

SDPS Accounts
Five years period

12%

Ten years period

14%

Insurance Policy/ Shares and Debenture of Public Ltd. Co.

14%

Work order of Govt./ Semi Govt. Corp

14%

Wage Earners Dev. Bond

13%

  1. Housing Loan
Residential

13.5%

Commercial

14%

  1. Small Loan

14%

  1. Consumers credit

14%

  1. Loans To Public Sector Enterprise

14%

  1. Cash Credit Facilities for Small Business enterprises

14%

  1. Cash Credit Facilities against Bricks Manufacturing

14%

Investment Banking:

Central Accounts & Fund Management Division at Head Office maintains Investment Portfolio of the Bank. With a view to implementing Government policies & decisions and accelerating the growth of the capital market of the country, surplus funds of Sonali Bank are utilized in the following areas:

A)    Short Term:

  1. Call loans: An overnight investment to other Banks & Financial Institutions.
  2. Treasury Bills: Investment made to the Government through Treasury bills.

B)    Long Term:

  1. Government/ Public Bonds: Sonali Bank Limited purchases bonds issued by the Govt. of Bangladesh and other Public Bodies.
  2. Shares/ Equity Participation: Sonali Bank Limited participate in the IPO and extend bridge finance to the equity of public limited companies, institutions and public bodies.
  3. Debentures: Sonali Bank Limited purchases debentures issued by the public bodies and financial institutions under Government.

 

For more parts of this post, click the following links-

Financial Performance Analysis of Sonali Bank Limited.(part-1)

Financial Performance Analysis of Sonali Bank Limited.(part-2)

Financial Performance Analysis of Sonali Bank Limited.(part-3)

Financial Performance Analysis of Sonali Bank Limited.(part-4)

Financial Performance Analysis of Sonali Bank Limited.(part-5)

Financial Performance Analysis of Sonali Bank Limited.(part-6)

Related Economics Paper: