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Functions of Banking Sectors in Bangladesh.

The document discusses the functions of banking sectors in Bangladesh. It describes the roles of the central bank (Bangladesh Bank) which includes maintaining price stability, managing foreign exchange reserves, regulating banks, and acting as a banker to the government. It also outlines the key functions of commercial banks which are receiving deposits from customers in various accounts and advancing loans for purposes like marketing, overdrafts, and bill discounting. Specialized banks aim to extend credit to different economic sectors to support development through long term loans and equity investments.

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Omar Faruk
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358 views2 pages

Functions of Banking Sectors in Bangladesh.

The document discusses the functions of banking sectors in Bangladesh. It describes the roles of the central bank (Bangladesh Bank) which includes maintaining price stability, managing foreign exchange reserves, regulating banks, and acting as a banker to the government. It also outlines the key functions of commercial banks which are receiving deposits from customers in various accounts and advancing loans for purposes like marketing, overdrafts, and bill discounting. Specialized banks aim to extend credit to different economic sectors to support development through long term loans and equity investments.

Uploaded by

Omar Faruk
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Functions of Banking Sectors In Bangladesh

Central Bank (Bangladesh Bank)

The Bangladesh Bank performs all the functions that a central bank in any country is expected to perform. Such functions
include maintaining price stability through economic and monetary policy measures, managing the country's foreign
exchange and gold reserve, and regulating the banking sector of the country. The major functional areas include:

 Formulation and implementation of monetary and credit policies.


 Regulation and supervision of banks and non-bank financial institutions, promotion and development of domestic
financial markets.
 Management of the country's international reserves.
 Issuance of currency notes.
 Regulation and supervision of the payment system.
 Acting as banker to the government.
 Implementation of the Foreign Exchange Regulation Act.

Commercial Banks of Bangladesh

Function of Commercial Banks in Bangladesh

Receiving Deposit Advancing Loans

Current Saving Fixed Marketing Bank Cash Discounting


Account Account Deposit Loans Overdraft Credit of Bills

Medium
Short Term Long Term Term Loans
Loans Loans

Figure: Function of Commercial Banks in Bangladesh

Receiving Deposits:

This is the main function of commercial banks to collect savings of individuals and firms. They offer different types of
deposits for the facility of the customers.

 Current Account: Any amount can be withdrawn from this account at any time without any notice. No interest is
allowed on this type of account.
 Saving Account: This type of deposit account which is usually held by the middle-class group. The saving
account carries lower rate of interest.
 Fixed Deposit: Amount cannot be withdrawn before the fixed future date in this type of deposit. High interest is
allowed in fixed deposit which is different according to period.

Advancing Loans:

This is the important function of the commercial bank. Credit is given to the people in different ways.

 Marketing Loan: There are three types of marketing loan given to borrowers-

i. Short Term Loans: These loans are advanced for the period of six months to one year. High interest rate is charged on
this type of accounts.

ii. Long Term Loans: Loans which are advanced for the period, more than ten years are long term loans.

iii. Medium Term Loans: Loans from one to five years are called medium term loans.

 Bank Overdraft: Banks allows their trustful customers to draw more than the deposit they have in the bank.
Bank charges interest on overdraft.
 Cash Credit: Bank also gives credit against immovable property and interest is charged by the bank.
 Discounting of Bills: This is income source of bank to discount bills of exchange. They charge nominal interest
and discount only reputed and clear bills of exchange.

Specialized Banks of Bangladesh

The main functions of a specialized bank are to extend credit to the deficit economic unit that comprises borrowers of all
types. Bank credit is essential for economic development. Adequate finance, important for the economy in the sense that it
can simultaneously finance all the sub sectors of financial area, which comprises agricultural, commercial and industrial
activities of a nation.

 Extends long and medium-term loan facilities in local and foreign currencies to industrial projects in the private
and public sectors as well as partnership & proprietorship concern.
 Provide equity support by way of participation in the equity of the company in the form of underwriting and
bridge finance to public limited companies.
 Extend commercial banking service along with deposit mobilization, foreign business, L/C handling, foreign
remittances inland & outland.
 Finance public sector projects without any ceilings and undertook industrial promotional activities, especially in
less developed areas.
 Provide equity finance, guarantees, deferred payments for machinery imported from abroad under suppliers'
credit, guarantee and counter guarantee for loans, debts, credits, performance of contracts and financing
arrangements with foreign lending agencies, as well as local banks and financial institutions for industrial
concerns.

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