Factors Encouraging Foreign Banks to do Business in Bangladesh:

Bangladesh is a developing country with a good financial Market. It has generous investment facilities and so on which allure foreign commercial banks to do business in Bangladesh. 1. A Good Financial Market: Bangladesh is a country of sixteen hundred million people. This means there is a good market for the foreign banks. Last year the commercial banks of Bangladesh have made a profit of around `ten thousand corer taka. This allures foreign commercial banks to do business in Bangladesh. 2. Moderate Law and Regulation: Bangladesh has a moderate law and regulation for foreign commercial banks as well as many other incentives. These moderations encourage foreign banks to come in Bangladesh. 3. Resource Advantage: In Bangladesh, the prices of resources necessary during starting up a commercial bank are relatively cheap in comparison to other countries. 4. A Developing Economy: Bangladesh is developing and it is recognized as one of the next 20 developed countries. This amounts people need good amount of loans and advances. Besides this people have high rate of being engaged in banking activities. 5. Under Developed Banking Sector: Before 1990 without foreign commercial banks, Bangladesh had a under developed banking sector. Private and public commercial banks provided poor quality services to customers. There was no use or very little use of computer then in the banking sector. But foreign commercial banks have the knowledge of how to provide a good quality of banking services to customers. This knowledge is one of the factors encouraging foreign banks to do business in Bangladesh. 6. Globalization and regional Integration: Due to globalization, the people of Bangladesh have a positive mentality towards foreign banks. Moreover regional Integration has made easier for the commercial banks of the neighboring to do business in Bangladesh. 7. Generous Investment facilities: Foreign investors can enjoy very generous investment facilities in Bangladesh like five to seven years tax holiday, opportunity to have citizenship and many more.

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Problems and Benefits Received by Local Banks due to foreign commercial Banks:
There are 31 private local commercial banks and 9 foreign private commercial banks in Bangladesh. Because of existence of both local and foreign commercial banks, they are having some mutual benefits and problems.

Benefits:
1. Expertise Knowledge: Our local banks are far away incase of banking expertise knowledge from foreign commercial banks. From the foreign banks our local banks have learnt the use of technology in the field of banking. Besides this our local banks have got many other lessons from the foreign banks which helped the domestic banks to offer higher services. 2. Efficiency: With the presence of foreign commercial banks, the market becomes more competitive. This helps the local commercial banks to be much more efficient than before as well as to reduce their service charges. 3. Favorable Government Regulation: Foreign bank entry may also lead to improvements of bank regulation and supervision, since these banks may demand improved systems of regulation and supervision from the regulatory authorities in the recipient countries. This may contribute to improving the quality of banking operations of domestic banks. 4. Increased Quality of Human Capital: Foreign banks may increase the quality of human capital in the domestic banking system in a number of ways. To begin with, if foreign banks import highskilled bank managers to work in their foreign branches, local employees/bankers may learn from the practices of these foreign bank managers. Moreover, foreign banks may invest in training of local employees. Increasing the quality of available human capital for the domestic banking system may contribute to more efficient domestic banking practices, which may help to reduce costs. 5. Reduced Government Control: Foreign bank presence may contribute to a reduced influence of the government on the domestic financial sector, which may reduce the importance of financial repression policies, such as interest rate controls, directed credit policies, etc.

Problems:
1. Higher Competition: Foreign banks come to the market with high expertise knowledge and modern technologies. This makes the market much more competitive for the local commercial banks. Local commercial banks have to then loss their customers and profit. 2. Lower Profit: Due to the existence of foreign commercial banks, local commercial banks have to lower their service change which amounts to lower profit. 3. Engaging in Higher Risk: With the presence of foreign commercial banks, local banks can make lower profit and Market gets much more competitive. This makes the local commercial banks to be engaged in riskier credit activities. Sometimes this amounts to big financial loss to the local commercial banks.

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