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Financial Structure & Banking

System of Bangladesh
Introduction

Financial structure is a vital of any modern economy. The financial structure involves
institutions and markets that concentrate on the creation, purchase, and resale of
financial claims. The system is an essential part of the real economy. It brings together
surplus units, savers, with deficit units, investors, and permits a divergence between an
individuals own resources and his investment potential. As such, the financial system
allocates saving to its highest and best use and encourages real investment and wealth
accumulation.
The primary purpose of this financial system is to encourage
individuals and institutions to save and to transfer those savings
to those individuals and institutions planning to invest in new
projects, products, and services.
Financial System

Financial Institutions Financial Instruments Financial Markets

Banking Financial Non-Banking Financial Money Market Security Market


Institutions Institutions Instruments

Primary Market
Capital Market
Scheduled Bank Non-Scheduled Bank Instruments

Secondary Market
Foreign Bank

Organized Over-the-Counter Third Fourth


Local Bank Stock Market Market Market
Exchange

Specialized Bank Commercial


Bank Non-Security Market

Public Ltd. Bank

Banking Financial Institutions Non-Banking Financial Institutions


Private Commercial Bank

Full Private Ltd. Bank Denationalized Private


Ltd. Bank
The Securities and Exchange Commission:
The Securities and Exchange Commission exercises powers under the
Securities and Exchange Commission Act 1993. It regulates
institutions engaged in capital market activities. The purpose of
Securities and Exchange Commission is to protect the interest of
investors in securities and the development of the securities market
toward achieving the objectives of the securities investors.
Bangladesh Bank:
Bangladesh Bank exercises powers under the Financial Institutions
Act 1993 and regulates institutions engaged in financing activities
including leasing companies and venture capital companies.
Bangladesh Bank is the organization of government that undertakes
the major financial operations of the government and by its conduct
of these operations and by other means influences the behavior of
financial institutions so as to support the economic policy of the
government.
Banks in Bangladesh: Past and Present:
Bangladesh inherited its banking structure from the British
regime and had 44 banks and other financial institutions
before the partition of India in 1947.

Following the emergence of Pakistan in 1947, the State


Bank of Pakistan- the Central Bank of the country, came
into existence in July 1948. Later on, the National Bank of
Pakistan, a strong Commercial Bank was set in 1949. Above
all, 36 scheduled commercial banks were in operation in
the whole Pakistan until 1971.
The Financial sector in Bangladesh includes the
Ministry of Finance, Bangladesh Bank(the Central
Bank), Scheduled Banks various Co-operative Banks,
Non-Banking Financial Institutions ,Micro Finance
Institutions(MFIs), Insurance Companies, Credit
Trading Agencies and Stock Exchange.
In Bangladesh Banking Financial Institutions are mainly
concerned with making and receiving payments on behalf of
their customers, accepting deposits and making loans to private
individuals, companies and their organizations. Examples:
Janata Bank, Premier Bank, BASIC Bank etc.
Bangladesh Bank
(Central Bank}

Other Banks

Schedule Banks Non-schedule Banks

Foreign Banks Local Banks

Commercial Banks Specialized Banks


Islamic banking refers to a system of banking or banking activity that is consistent
with the principles of Islamic law (Sharia) and its practical application through the
development of Islamic economics. Sharia prohibits the payment or acceptance of
interest fees for the lending and accepting of money respectively, (Riba, usury) for
specific terms, as well as investing in businesses that provide goods or services
considered contrary to its principles (Haraam, forbidden).
Examples:
Islami Bank Bangladesh Ltd
Al-Arafah Islami Bank Limited
Social Islami Bank Limited
First Security Islami Bank Limited
Shahjalal Islami Bank Limited
ICB Islami Bank
Three NCBs (Sonali, Janata and Agrani Bank) have been corporatized for allowing them to
operate as Public Limited Companies.

A bank would be having a Board of Directors consisting maximum of 13(thirteen) members,


where 02(two) members will be allowed from a family, two members will come from the share
holders.

Money Laundering Prevention (Amendment) Ordinance 2007 is promulgated by amending of


the Money Laundering Prevention Act 2002 which will require banks to submit cash transaction
report (CTR) to Bangladesh Bank for cash deposit or withdrawal of any amount of Tk.7,00,000
(Seven hundred thousand) or above.

Banks/financial institutions have been urged to invest their excess liquidity in productive SME
sectors including women entrepreneurs.

The paid up capital and statutory reserve of all bank companies has been raised to a minimum
ceiling of Tk.200crore.

More than thirty percent of its capital cannot invested in any subsidiary of the bank.