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.
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:
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.
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:
National Commercial Bank
|Sonali Bank Limited|
|Janata Bank Limited|
|Agrani Bank Limited|
|Rupali Bank Limited|
Specialized Commercial Banks:
National Commercial Bank
|Bangladesh Krishi Bank|
|Bangladesh Shilpa Bank|
|Rajshahi Krishi Unnayan Bank|
|Bangladesh Shilpa Rin Shangstha|
|BASIC Bank Limited|
Private Commercial Banks:
National Commercial Bank
|Pubali Bank Limited|
|Uttara Bank Limited|
|AB Bank Limited|
|IFIC Bank Limited|
|Islami Bank Bangladesh Limited|
|National Bank Limited|
|The City Bank Limited|
|United Commercial Bank Limited|
|ICB Islamic Bank Limited|
|Eastern Bank Limited|
|National Credit & Commerce Bank Limited|
|Prime Bank Limited|
|Southeast Bank Limited|
|Dhaka Bank Limited|
|Al-Arafa Islami Bank Limited|
|Social Investment Bank Limited|
|Dutch-Bangla Bank Limited|
|Mercantile Bank Limited|
|One Bank Limited|
|EXIM Bank Limited|
|Premier Bank Limited|
|First Security Bank Limited|
|Standard Bank Limited|
|The Trust Bank Limited|
|Mutual Trust Bank Limited|
|Bank Asia Limited|
|Bangladesh Commerce Bank Limited|
|Jamuna Bank Limited|
|Shahjalal Bank Limited|
|BRAC Bank Limited|
National Commercial Bank
|Commercial Bank of Ceylon Limited|
|Standard Chartered Bank Limited|
|Habib Bank Limited|
|State Bank of India|
|National Bank of Pakistan|
|Citi Bank N.A.|
|Bank Al-Falah Limited|
|The Hong Kong and Shanghai Banking Corporation Limited|
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.
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.
Sonali Bank Limited extends multiple credit facilities to boost up trade, commerce and industry. The credit packages and interest rates are as under:
Interest Rate (Floating)
|Five years period|
|Ten years period|
|Insurance Policy/ Shares and Debenture of Public Ltd. Co.|
|Work order of Govt./ Semi Govt. Corp|
|Wage Earners Dev. Bond|
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:
- Call loans: An overnight investment to other Banks & Financial Institutions.
- Treasury Bills: Investment made to the Government through Treasury bills.
B) Long Term:
- Government/ Public Bonds: Sonali Bank Limited purchases bonds issued by the Govt. of Bangladesh and other Public Bodies.
- 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.
- Debentures: Sonali Bank Limited purchases debentures issued by the public bodies and financial institutions under Government.
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