The Functions of Bangladesh Bank

Md. Rakibul Hasan Rony

The Functions of Bangladesh Bank

BBA in Marketing

JAGANNATH UNIVERSITY

Contents INTRODUCTION 1 STANDARDCHARTEREDBANK 1 STANDARDCHARTEREDBANKINBANGLADESH 2

BranchesandofficesinBangladesh 2 Business&Strategy 2 Pers onal B ank ing 2 Priority B ank ing 2

ProductsandServices 3 Loa ns 3 Auto Loan 4 Personal Loan & Flexi Loan 4 Home Loan 4

Accounts 4 Super Savers Account 4 eSavers Account 5 VIP Current Account 5 Foreign Currency (FCY) Current Account 5 Convertible & Non-Convertible Current Account 5

Credit Card 5 Debit Card 6 Prepaid Gift Card 6 ATM Cards 6

SMEBanking 6 B usi ne s s In stal l me nt L oan 7 Orjon 7 Transacti on Ser vice in SME B ank ing 7 Straight 2 Bank 7 Door Ste p B ank ing 7

Saadiq”ForIslamicBanking 8 Saadiq Deposit Accounts 8 Saadiq Current Account 8 Saadiq Savings Account 8 Saadiq Term Deposits Account 8

Saadi q Fi nanc i ng Pr od uc t s 9 Saadiq Auto Finance 9 Saadiq Personal Finance 9 Saadiq Home Finance 9

Saadiq Cards 9 Saadiq Debit Card 9 Saadiq Credit Card 9

OthersServices 10 24- h our C on tac t Ce ntr e 10 B ills Pay Centre 10 Internet Banking 11 SMS Banking 11 E-State ments 11

HONGKONGANDSHANGHAIBANKINGCORPORATION 11 HSBCINBANGLADESH 11

KeyBusinessAreas 12 BranchesandofficesinBangladesh 12 Business&StrategyofHSBC 12 Pers onal B ank ing 13 Commercial B ank ing 13 Cor p orate and In stit utional B ank ing 13 HSBCnet 13 Trade & Supply Chai ns 13 Pay ment s and Ca sh Manage ment 13 C ust ody and Cl e ar i ng 13 In vest men t B ank ing and Markets 14 Tr e asur y an d Capi tal M ar k e ts 14

ProductsandServicesofHSBC 14 Loa ns 14 Sa vings Plan 14 Services f or n on -residen t B angladeshis 15 Pers onal Fi nancial Services 15 Power Vantage Acc ount 15 HSBC Select 15 B usi ne s s B ank i ng 16 Cor p orate Credit 16 Exp ort Services 16 Imp ort Services 16 Trade Expres s 17

“Amanah”ForIslamicBanking 17 Ama nah C ur r e nt Ac c ount 17 Ama nah I mp ort Fina nce 18

OthersServices 18 C ust ome r Se r vi c e Ce ntr e 18 Easy Pay 18 Call Centre 19 ATM Card 19 Phone B anking 19 CONCLUSION 20

This paper provides you a clear concept of several functions of Bangladesh Bank. You also clarified about central bank and Bangladesh Bank as a central bank of Bangladesh government. Here we have tried to accumulate all sorts of key functions of Bangladesh Bank as a bank of Bangladesh government. Also we discuss what Bangladesh Bank does as a leader of all banks in Bangladesh.

Bangladesh Bank performs all the functions that a central bank of any country is expected to perform, and such functions include maintaining the price stability through economic and monetary policy measures, managing the country’s foreign exchange and the gold reserve and regulating the banking sector of the country. Like all other central banks across the globe, Bangladesh Bank is both the Government’s banker and the banker’s bank, a “Lender of the Last Resort”. Bangladesh Bank, like most of the central banks of different countries, exercises monopoly over the issue of currency and the banknotes. Except for the 1 and 2 taka notes, it issues all other denominations of Bangladeshi Taka. Bangladesh Bank has been entrusted with all the traditional central banking functions including the sole responsibilities of issuing currency, keeping the reserves, formulating and managing the monetary policy and regulating the credit system of Bangladesh with a view to stabilizing domestic and external monetary value and promoting and maintaining a high level of production, employment and real income in the country.

A central bank, reserve bank, or monetary authority is a banking institution granted the exclusive privilege to lend a government its currency. Like a normal commercial bank, a central bank charges interest on the loans made to borrowers, primarily the government of whichever country the bank exists for, and to other commercial banks, typically as a 'lender of last resort'. However, a central bank is distinguished from a normal commercial bank because it has a monopoly on creating the currency of that nation, which is loaned to the government in the form of legal tender. It is a bank that can lend money to other banks in times of need. Its primary function is to provide the nation's money supply, but more active duties include controlling subsidized-loan interest rates, and acting as a lender of last resort to the banking sector during times of financial crisis (private banks often being integral to the national financial system). It may also have supervisory powers, to ensure that banks and other financial institutions do not behave recklessly or fraudulently. Most richer countries today have an "independent" central bank, that is, one which operates under rules designed to prevent political interference. Examples include the European Central Bank (ECB) and the Federal Reserve System in the United States.

Some central banks are publicly owned, and others are privately owned. For example, the United States Federal Reserve is a quasi-public corporation.

Bangladesh Bank is the Central bank of Bangladesh. It is the monetary authority of the country. It came into existence under the Bangladesh Bank Order 1972 (Presidential Order No. 127 of 1972) which took effect on 16 December 1971. Through this order, the entire operation of the former State Bank of Pakistan in the eastern wing was transferred to Bangladesh Bank. Bangladesh Bank headquarters in Motijheel. Bangladesh Bank has 9 branch offices, two in Dhaka city (Sadarghat and Motijheel), and one each in Chittagong, Khulna, Rajshahi, Sylhet, Bogra, Rangpur and Barisal. The head office discharges its duties with 28 departments. Bangladesh Bank performs all the functions that a central bank of any country is expected to perform. But here is some major objective in the bank; a) To regulate the issue of the currency and the keeping of reserves; b) Manage the monetary and credit system of Bangladesh with a view to stabilizing domestic monetary Value c) To preserve the par value of the Bangladesh Taka; d) To promote and maintain a high level of production, employment and real income in Bangladesh; and to foster growth and development of the country's productive resources for the national interest.

The first and most important function of a central bank is to accept responsibility for advising the government on the making of the country’s financial policy, and thus to see that it is carried out. The government must decide how much money there shall be in the country at a given time, and the central bank must take steps to increase or decrease the supply accordingly. Then provide money for the government during the time when public expenditure had become too expensive to be financed out of current taxation. Its business at first was the receiving of money on deposit and lending of money against satisfactory security. Now let’s look at little brief of some of them:         

Supervision of the banking system Advising the government on monetary policy Issue of banknotes Acting as banker to other banks Acting as banker to government Raising money for the government Controlling the nation’s currency reserves Acting as “ lender of last resort” Credit control

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Money market control Foreign exchange control Determination of foreign exchange rate Maintaining foreign exchange reserve Keeping the gold standard Creating job opportunity Maintain of government’s fund Received and transfer of money Keeping the government account Foreign financial transaction Loan issue and supervision Maintenance of relationship with foreign bank Counselor and representative of government Implementation of financial policy of government Revenue collection Maintenance of information Co-coordinator Formation & expansion of bank Enlistment of commercial bank Custodian of the cash reserve of the commercial banks Clearing house Audit of accounts Maintenance of deposit Act as an advisor Assist to collect credit New branches Control Representative of other banks

The Central Bank is a financial institution charged with several functions: Let’s do a little bit of discussion on it: Supervision of the Banking System

Central Bank is the leader of all banks in Bangladesh. It supervises the banking system of the country. Why not Central may be responsible for banking system. They collect information from commercial bank and take necessary decision by two waysa) bank examine and b) bank regulation. When a bank takes decision for customer or others, Central Bank examines it and gives permission for implement or eliminates the project. Central Bank also make project for customer and advice to implement in Other Banks. Advising the Government on Monetary Policy

Monetary policy is a most important issue for economic. The decision on monetary policy may be taken by the central bank. Monetary policy refers to interest rates and

money supply. The central bank will corporate with the government on economic policy generally and will produce advice on monetary policy and economic matters, including all the statistics. Issue of Banknotes

Money is a key of economy. The central bank controls the issue of banknotes and coins. Most payment these days does not involve cash but cheques, standing order, direct debit, credit cards and so on. Nevertheless, cash is important as bank’s cash holdings are a constraint on creation of credit, as we have seen. Acting as Banker to Other Banks

The Central bank will act as banker to the other banks in the country. As well as holding accounts with international bodies like IMF World bank. It is a common habit for the central bank to insist that the other banks hold non-interest bearing reserves with in proportion to their deposit.

Acting As Banker to Government

Normally a central bank acts as the government’s banker. It receives revenues for Taxes and other income and pay out money for the government’s expenditure. Usually, it will not lend to the government but will help the government to borrow money by the sales of its bill and bonds. Raising Money for the Government

The government Treasury bill and bond markets are covered by the central bank. While sometimes the treasury or ministry of finance handle. Controlling the Nation’s Currency Reserves

Another main function of Bangladesh Bank is to control the nation’s currency reserves. Again by controlling the exchanging rate, it protects the value of national currency in international market. So in a short, Bangladesh Bank always attempts to maintain the value of national currency steady. Acting as “Lender of Last Resort”

When all kinds of enlisted bank or govt. cannot collect loans in times of their economical crisis from anywhere, then Bangladesh Bank is only the bank which helps as the lender of last resort. Credit Control

To solve the problem of inflation and deflation, Bangladesh Bank takes the task of credit control as the guardian of country’s money market and bank management. For controlling credit central bank uses the method of opening market policy, credit budgeting policy. Received and Transfer Of Money

As the bank of Bangladesh government, Bangladesh Bank collects money from different sectors and deposit these is various accounts without interest not only

deposit these money but also transfer these fund from one place to another and one sector to another according to the instruction of Bangladesh government Money Market Control

Bangladesh Bank acts as the guardian of country’s money market as the director and controller of money market. It also controls the money currency, controls credit, stability in money supply and exchange rate of foreign currency etc. It establishes a country’s well organized and develops money market. Foreign Exchange Control

The country’s export and import as well as international trade success rate largely depend on the good conduct and control of foreign exchange. So foreign exchange system is also controlled by Bangladesh. Determination of Foreign Exchange Rate

By purchasing commodities from other country one country paid its value through foreign currency. The value of all foreign currency is not same, so right determination of foreign exchange rate is needed by performing this task central bank made easy the foreign trade. Maintaining Foreign Exchange Reserve

High level of crisis and abundance of foreign exchange are harmful for economy. So this reason Bangladesh Bank maintains sufficient foreign exchange, so that there is no problem in case of export and import trade. Keeping the Gold Standard

The precondition of country’s economic stability is to control countries gold standard. If the money market is stranded on the basis of gold standard, the main task of central bank is to keep gold standard. Creating Job Opportunity By permitting and adopting developing project for opening new bank and branch,

Bangladesh Bank creates enormous opportunity for employment in Bangladesh. Maintain of Government’s Fund

As Bangladesh Bank is the bank of Bangladesh government. So it protects all sorts of government’s fund as a bank of government, Bangladesh Bank keeps to itself the whole amount of government’s income and expenditures from this fund according to government needs. Keeping the Government Account

Besides receiving and transferring government fund, Bangladesh Bank maintains the account of various government’s division, ministry and organizations i.e. Bangladesh Bank keeps the account of all monetary and economical transactions. Foreign Financial Transaction

On behalf of the Bangladesh government Bangladesh Bank accomplish all sorts of foreign financial transaction. It purchases and sells foreign currency and collects

foreign currency on behalf of the Bangladesh government in a word Bangladesh Bank perform all sorts of financial transaction with abroad on behalf the Bangladesh government. Loan Issue and Supervision

This bank issue loan in case of crisis of government in different terms and also helps in case of collecting loan from different sectors. Maintenance of Relationship with Foreign Bank

To make and maintains a good relationship with other foreign country. This is also a function of Bangladesh Bank. Bangladesh Bank does this task on behalf of the Bangladesh government. Without this, Bangladesh Bank also maintain good relationship with others regional and international organization, such as World Bank, IMF, A.D.B, I.D.B etc. Counselor and Representative of Government

This bank suggests and advices government in various behinds of economical issues such as-import and export polices, investment polices etc. Bangladesh Bank acts as the financial adviser of Bangladesh government. Not only as adviser but also Bangladesh Bank acts as the agent of Bangladesh government. It performs various kinds of contracts and transactions with foreign and abroad. Implementation of Financial Policy of Government

It doesn’t merely give advice to government. It also helps in implementing of different types of financial policy without the help of Bangladesh Bank it is much more complicated for the Bangladesh government to implement financial policies and economic developments. Revenue Collection

As the bank of govt. Bangladesh Bank helps to collect revenue by collecting different types of tax, duty. Maintenance of Information

Bangladesh Bank does the task of collecting and reserving all sorts of information’s which are much helpful in case of various governmental planning. Co-coordinator

Bangladesh Bank plays the role of co-coordinator by maintaining relationship with others foreign banks & international economical organizations. Enlistment of Commercial Bank

Through enlistment commercial banks take various privileges of Bangladesh Bank, There is need of permission of Bangladesh Bank for establishing conducting & enlisting any other kind of banks Custodian of the Cash Reserve of the Commercial Banks

Every enlisted bank deposit a certain amount of their cash reserve compulsorily according to low. In Bangladesh this rate is 8%. As a result, Bangladesh Bank supervises all kinds of commercial banks & helps by profiling loan & distributing bill in times of economical crisis.

Formation & Expansion of Bank

Bangladesh Bank plays a vital role in case of formatting & expanding any kinds of new & old bank in our country. Actually without the permission of Bangladesh Bank, no new bank can be formatted as well as no branch of old bank can be opened. Clearing House

Among various functions of central bank, the most one is accomplishing the internal transactions of all enlisted bank. For this purpose Bangladesh Bank mange a clearing house by the coordination of all member banks. Bangladesh Bank meets up the all sorts of relative/reciprocal transactions with in the banks. Audit of Accounts

For building fair banking environment in the country and for controlling all other banks Bangladesh Bank arranges the accounts of audit for several times for all kinds of enlisted and all other banks. Maintenance of Deposit

Bangladesh Bank deposits a certain amount of their reserve so that commercial banks cannot use this fund as their awards. Act As an Advisor

Bangladesh Bank delivers’ suggestions or an instruction to commercial banks by providing various kinds of financial information. Bangladesh Bank helps the commercial banks as well. Assist To Collect Credit

Bangladesh Bank assists to collect credit through commercial bank. Regarding this, Bangladesh Bank suggests the government apply law at a time, it also take lawful schemes. It makes a list of countries bankrupts & assists government to collect credit.

After a little bit of discussion on the function of Bangladesh Bank as a central bank of Bangladesh government, we can easily understand about the whole activities of Bangladesh Bank relating to banking, economic development, making policies, doing job for the government, making rules and regulation for several financial organizations, controlling the money market and social development works etc. The bank acts as the banker to the government and accepts government deposits, cheques and drafts, and undertakes collection of cheques and drafts drawn on other banks. The government deposits all its cash balances with the Bangladesh Bank free of interest. The bank transfers government funds from one place to another as requested by the government and its agencies. Bangladesh Bank is empowered to act as the watchdog of the country's banking system, and all scheduled banks are accountable to Bangladesh Bank, which has extensive powers to ensure soundness of the banking system. No bank can commence banking business in Bangladesh and no existing bank can open a new branch in or outside the country or shift any branch from one place to another without obtaining a license/permission from the Bangladesh Bank.

BBAMBA, (2010). Functions-of-Central-Banks, taken from an undefined article, available at http://bbamba.info/Articles/Business/Functions-of-CentralBanks.html. Khalekkuzzaman, M. (2007). Functions of Central Bank, Banking & Insurance, The Jomuna Pablisers. Ullah, P.A., Jui, R. P. and Kalam, M. A. (2002). Functions of Central Bank, Central Banking Theory, Banking & Insurance, Commerce Publications. pp. 231-234.