Assignment on Banking Industry of Bangladesh

Course: Banking & Finance (Fin 401)

Section: 1
Submission Date: 27 April, 2021

Submitted to
Zaima Ahmed
Lecturer, Finance
School of Business
Independent University, Bangladesh

Submitted by
Name ID

1. Tanjila Afrin 1720460 Introduction, Background of bank, Role of

economy, Current banking service Factors
effect banking sectors, Reference, Executive
Summary & compile the assignment

2. Shahidul Haque Shanto 1722027 Service bank provide, Islamic rules in

Bangladeshi bank

3. MD Salman Rahman 1610127 Financial Sectors & Relevant Charts

4. Kamrun Nahar 1610068 Financial Sectors & Relevant Charts

5. Anika Ansari 2010039 Potential and challenges & Conclusion

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Letter of Transmittal

To,
Zaima Ahmed
Lecturer. Finance
School of Business
Independent University, Bangladesh
Date: April 27, 2021

Subject: Assignment on Banking Industry of Bangladesh

Dear Mam,

With due respect, it is our pleasure and honor to be your students and have this opportunity to
present this assignment. While preparing for this assignment, we have given our best effort. We
have tried to provide all relevant information regarding the banking sectors of Bangladesh and we
believe and hope that this assignment will provide you with a clear conception about our findings.

We all gave our best to accumulate required information and we will be more than happy to answer
any question and clarify it fully to your understanding. Thank you for all your help and support
which helped us significantly in preparing this research.

Yours Sincerely,

Tanjila Afrin
Shahidul Haque Shanto
MD Salman Rahman
Kamrun Nahar
Anika Ansari

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 Acknowledgement

First and foremost, we would like to express our heartfelt gratitude to Almighty God for providing
us with the strength and calmness necessary to complete the task on time.

Then, thanks to Zaima Ahmed, our mentor for leading us. We respect highly her professionalism
and extensive academic skills. During multiple consultations, we are very thankful for giving us a
strong guideline for this work.

We'd also like to express our heartfelt thanks to everyone who has helped us prepare this
assignment, both directly and indirectly. Many people, particularly our team members, have made
helpful comments and suggestions on this subject, inspiring us to significantly improve our
assignment. We would like to express our gratitude to all who attempted to assist us in completing
this task.

Thank You

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 Table of Content

Executive Summary 5
Introduction 6
Objectives of Bank 7
Evolution of the Bangladesh banking sectors 8
The role of banking sectors in economy of Bangladesh 8
Current situation of the banking sectors 9
Description of the services of bank what they provide 9
The services provide by the scheduled bank 10
Types of deposit accounts: 10
Services of Islamic Bank 16
Depositor Services: 16
Lending Services: 16
Recent Banking Services 16
Factors that effect in Bangladesh banking sectors 17
Financial sector 18
18
Financial Sector in BANGLADESH 18
Banking sector impact on financial sector of Bangladesh: 19
Banking sector impact on Bangladesh: 21
Important data charts and figures to support 22
Export & Import Outlook 26
Remittance Outlook: 27
The potential and challenges of the banking sector of Bangladesh 28
Challenges of this industry 29
Conclusion 30
References 32

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 Executive Summary

This report reflects on the research we have done on the banking industry of Bangladesh.

Firstly, we have discussed about the Introduction and Objectives of Bangladesh bank sectors.

Then we discussed about the history and evaluation of the Bangladesh banking industry.

Secondly, we have discussed about the role of the banking in Bangladesh. Here we discuss about
the impact of banks in our socio-economic state. We also discuss about the current banking
situation of Bangladesh during Covid-19.

Later we have discussed about the services that bank provide to its client. Also the Islamic banking
system and online and mobile banking system.

We have discussed about that factors which are affecting in banking system of Bangladesh.

We did some necessary financial analysis and impact of banking in Bangladesh finance sector.

There has some challenges faced the banking sectors which we also have discussed about in our
assignment.

Recommendations are given in the concluding part of this report which will give a clear idea of
how to improve the situation and can have better opportunities gain by Bangladeshi banks.

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 Introduction
A bank is a government-licensed financial institution. Its main functions are to provide financial
services to clients while also enriching its investors. Over time, certain financial transactions were
permitted.

The Bangladeshi's financial system is dependent largely on banks, so a stable and effective
Banking System is one of the directly concerned for economic growth in Bangladesh. Recognizing
the bank's success includes knowledge of profitability and the relationships between factors such
as organizational size, financial leverage, and profitability market growth. In fact, due to fierce
competition, the performance assessment of commercial banks is particularly critical today.
Although much has been said, it is now time and take action to resolve the issues. The financial
industry should be a top priority for the next administration.

The Bangladeshi banking sector is a mixed industry of nationalized, private and international
business banks. There must be a comparison of the results of four types of banks and the aggregate
performance of the banking industry must be contrasted with other nations.

There are four types of banks in Bangladesh:

1. State Owned Bank

2. Private Commercial Bank
3. Foreign Commercial Bank
4. Non-Scheduled Bank.

Categories of banks Number of banks

1. State Owned Bank

i. State Owned Commercial Bank 6

ii. Specialized Bank 3

2. Private Commercial Bank

i. Conventional PCBs 33

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 ii. Islamic Sharia Based PCBs 10

3. Foreign Commercial Bank 9

4. Non-Scheduled Bank 5

Total 61

Objectives of Bank
1. Profit maximization
2. Money saving and lending
3. Instilling in people a need to save money.
4. Increasing money supply, create money against money.
5. Save money and build up the wealth.
6. Make savings as quickly as possible.
7. Managing the money consumer
8. Extend economic cooperation and guidance to the government.
9. Doing trade and industry growth, as well as socioeconomic development.

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 Evolution of the Bangladesh banking sectors
After the independence newly independent government declared the Dhaka branch of the State
Bank of Pakistan as the central bank and renamed it the Bangladesh Bank. Post-independence,
Bangladesh's banking sector began with six nationalized commercial banks, two state-owned
specialist banks, and three international banks. Bangladesh's banking market was severely
repressed until the early 1980s. Throughout the 1970s, the primary role of the commercial banks
was to fund commerce. The government controlled all banks and other financial institutions.
However during early 1980s, the government's funding of agricultural production and private
ownership resulted in improvements in lending strategies.

Bangladesh joined the World Bank adjustment programs in early 1980s, and the process of
privatization under the World Bank control. Since then, Bangladesh's banking sector has become
a desirable investment destination for both domestic and international investors and thus the
banking sector increased considerably.

The role of banking sectors in economy of Bangladesh

Commercial banks have played an important role in Bangladesh's economic growth. They offer
investible funds to both the public and private sectors, with a focus on the latter. Commercial banks
accept deposits from both consumers and enterprises, which are then made accessible to
enterprises for using the country's profitable purposes.

As a result, banks serve as both a repository for the country's capital and a pool of economic
resources for economic growth.

Banks have also played a significant role in Bangladesh's three big factors of economic
development, which are agriculture, manufacture and service. Bangladesh is a nation that relies
heavily on imported goods. To support the growth of the manufacturing sector, including the RMG
sector, it must import raw materials, accessories, and machinery. Transaction, investment, and risk
control systems have all been made available to the industry by banks. Migrant workers'
remittances are greatly facilitated by banks. Remittances to the nation were smaller than in the
past, and bank transfers were also lower. However, due to a strong pick-up in global economic

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activity, especially in Middle Eastern countries, Bangladesh obtained better remittances in the past
financial year.

Commercial banks are lending money to the farmers to grow agriculture and also for micro
enterprises. Considering the importance of agriculture and its associated sectors have been given
the highest priority for sufficient low-cost credit. Bank loan disbursements surpassed the goal, with
the crop sub-sector receiving nearly 50 % of the total credit to agriculture, followed by farmland
and other livestock farming. Credit to the agriculture sector has significantly aided in increasing
agricultural production and farmer profits.

The Bangladesh Bank has been encouraging both banks and non-bank financial institutions
(NBFIs) to provide low-interest loans to women entrepreneurs. Provide credit to new women
entrepreneurs in this market, as well as new loan loans to women entrepreneurs with only a
personal guarantee with no collateral.

Current situation of the banking sectors

The coronavirus outbreak has shattered the banking industry. Because of the current economic
consequences of the coronavirus pandemic, most businesses have been forced to take out large
sums of money to cover workers' wages and salaries, as well as for other operating expenses.
Individuals are now taking money out of their bank accounts to help cover their families' expenses.
Bank deposits have declined, according to Bangladesh Bank. Furthermore, the government's recent
decision to limit bank interest rates to 9% for loans and 6% for deposits would undoubtedly
promote borrowing, but banks will face challenges in attracting depositors.

Description of the services of bank what they provide

There are 2 types of banks:

• Scheduled Banks: The banks that remain in the list of banks maintained under the
Bangladesh Bank Order, 1972.
• Non-Scheduled Banks: The banks which are established for special and definite objective
and operate under any act but are not Scheduled Banks. These banks cannot perform all
functions of scheduled banks.

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The services provide by the scheduled bank
Deposit Accounts: Deposit suite has been designed keeping in mind the diverse needs of
customers. From basic banking to special notice and foreign currency accounts, you can choose
the option that best suits your requirements and begin enjoying daily banking services with
absolute convenience.
Types of deposit accounts:
Current Account: Enjoy daily banking
needs with absolute ease through our non-
interest bearing Current Account, which
provides with instant access to your cash,
from any branch across growing network.

Features and Benefits:

• Minimum account opening requirement of BDT. 2,000 only
• First cheque book issued free of cost
• Free monthly account statement
• Free online banking across nation-wide branches
• Easy access to funds through your VISA Debit/ATM Card, which can be used at over
ATM’s and VISA retail outlets across the country
• Unlimited number of withdrawals and deposits
• No minimum balance requirement

Savings Account: Enjoy basic banking needs

with complete ease, while also earning profits
on savings for a more protected tomorrow.

Features and Benefits:

• Open your account with an initial
deposit of BDT 500 only
• No monthly minimum balance requirement
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 • Profit is calculated on a daily basis and paid out monthly
• Unlimited monthly deposits and withdrawal transactions
• First cheque book issued free of cost
• Easy access to funds through your VISA Debit/ATM Card, which can be used at over
ATM’s and VISA retail outlets across the country
• Convenience of free online banking across banks’ nationwide branches
• Free half yearly account statement

Fixed Deposit Account: With Advance Profit client will get his/her one year profit right up front.
Open an account with just BDT100, 000 and
his/her wait for profit is over.
Now your account can meet any unforeseen
expenditure by preparing you in advance. And if
you choose to withdraw your money before a year
is up, all you will face is an adjustment of the
interest rate – there are no penalties.

Features and Benefits:

• Open an account with BDT100,000

• Earn 12 months profit in advance
• Premature withdrawal option subject to adjustment of interest

Salary Account: Salary Account streamlines salary

payments and provides numerous benefits for
employees, allowing them to bank at their own
convenience – from their office, home or elsewhere.

Features and Benefits:

• Attractive profits calculated daily and paid

monthly
• Open with an initial deposit of BDT 100 only

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 • First cheque book is issued free of cost
• Free VISA Debit/ATM Card that can be used at over ATMs and VISA retail outlets across
the country
• Convenience of free online banking across all Bank branches countrywide

Visa Debit card: VISA Debit Card holder, Customer can enjoy a plethora of benefits and services
designed carefully to meet his/her needs.

Features and benefits:

• Country-wide Acceptability: VISA Debit Card saves you from the hassle of carrying
cash or writing cheques, along with the freedom of making electronic payments anywhere
in Bangladesh. It is compatible with VISA, NPSB and Q – Cash network.
• World Class Security: VISA Debit Card comes with enhanced EMV chip based security
features to make it more protected from fraud risks. The new EMV chip based cards have
in-built security functionalities in areas like card authentication, card holder verification
and transaction authorization.
• E-Commerce Transactions: Client will be able to avail the benefits of e-commerce
transactions such as online shopping with your VISA Debit Card.

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SMS Alert Service: With SMS Alerts Service, client can keep track of your transactions 24/7. By
subscribing to the service, client can receive real-time SMS updates for transactions conducted on
your Debit Card. It also helps client keep track of all your POS, ATM, in-branch and
supplementary Card transactions as and when they are conducted.
Internet Banking: Internet
Banking offers client the
convenience of banking from
anywhere, anytime. Just register
through following few simple
steps and enjoy the benefit of
accessing your account 24/7

Features and Benefits:

• View your account details and summary

• Manage multiple accounts
• Transfer funds within Bank accounts

E-Statements: With e-statement service, client can

receive Daily, Weekly, Monthly, Quarterly or Half-
yearly account statements directly via email. This
facility is offered at no extra cost, need a personal e-
mail address to which your e-statements will be sent.

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Locker Facility: If a client is looking for a place to keep his/her valuables safe and secure, then
there’s no better option than banks’ Lockers. This service comes with the assurance that client can
withdraw his/her valuables at your convenience.

Working Capital Finance: Successful businesses often experience considerable pressure on the
available finances due to timing difference of cash inflows and outflows, up-gradation of existing
facilities and business expansion. Dedicated team of relationship managers can structure tailor-
made credit
solutions to meet
clients’ specific
short-term or
long-term
funding
requirements.
The loans are
provided at
competitive rates
and are structured to

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enhance your profitability by scheduling the repayment to match the cash flow available to repay
the debt.

Trade Finance: Bank offer a wide range of trade

services designed to meet a range of banks’
corporate clients’ needs. They have industry
specialists who are professional and seasoned to
make sure that all clients trade finance
requirements are taken care of with precision and
skill. The team is strongly supported by a wide and
effective correspondents’ network spread
worldwide. The team of specialists goes the extra
mile to ensure that their customers` experience with the below mentioned services is nothing but
exceptional.

• Import letter of credits including back to back LC.

• Full range of services related to imports e.g. handling of DP/DA bills (import without LC),
advance payment against import.
• Collection of export bills, negotiation of export bills drawn under sight LCs, local bill
discounting, Export against advance payment/advising/confirmation/transfer of export
letter of credits.
• Issuance of various guarantees i.e. bid bond/performance bond/advance payment
guarantee/customs bond and others.
• Structured trade solutions.

Services of Non-Unscheduled Bank: This kind of bank provide two types service. They are:

1. Savings Deposit: people from low earnings are mainly their target client. They can open the
account by deposit any amount of money. They get interest based on deposit money. They can
deposit money through cash and cheque both.

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2. Loan: They provide small loan in various sector such as transportation, fishing, small business,
small and carfting industry etc.

Services of Islamic Bank

Depositor Services:
Al-Wadiah Account (Current Account): Bank operates Al-wadeah Current Account on the
principles of Al-wadeah. The Bank commits to refund money deposited in these Accounts on the
demand of customers. On the other hand the Bank takes permission from customers that the Bank
may utilize their money. Customers may operate these Accounts as their desires. No profit is
disbursed in these Accounts and depositors do not bear any loss.

Mudaraba Account (Savings Account): In the perspective of these Accounts the Bank is
'Mudarib' and customers are 'Shahib Al-Mal'. On behalf of depositors, the Bank invests their
deposited money and distributes minimum 65% of investment-income earned through deployment
of Mudaraba funds among Mudaraba depositors after the closing of the year.

Lending Services:
Loans with a Service Charge: Without interest the bank loans money but making some operating
costs cover their expenses.

No Cost Loans: This kind of profit free loan is offered to clients on poverty or charity basis and
usually collected from the banks’ own fund.

Recent Banking Services

Payment processing sector have shifted dramatically over the course of the year. Before managing
an account used to be more limited in terms of paper work and more physically demanding. Things
have changed rapidly, and many banks now use an online system to keep track of their customers.

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Saving money isn't as easy as it once was. Today's family members depend on adaptability. They
can purchase items on the internet using a credit card or a web-based savings account.

Banks are using more advanced innovations to provide quality services to their customers. People
can now withdraw cash from any place without having to use their bank accounts. All they have
is the card, which they can use to withdraw cash from ATM machines. Management and
operational dynamics at the moment Digital distribution system provide a variety of options for
delivering financial services to a broader spectrum of consumers more quickly.

E-banking is the most recent method of delivering banking services. The most popular platform is
Internet Banking or online banking. It either could be in the form of app based or simple mobile
banking. BRAC bank 1st introduced the mobile banking by Bkash, following by Dutch Bangla
Bank Rocket , Rupali Bank's Sure Cash, Markentile Bank's My Cash, United Commercial Bank's
Upay, also Bangladesh Post Office's Nagad and so on. The majority of people who start banking
online do so because they have a lot of bills to pay and want to do so quickly. Apart from that,
people use internet banking to keep track of their finances, update account balances, and check for
payments from third parties.

Factors that effect in Bangladesh banking sectors

Bank Size: The size of the bank is a significant determinant of profit. In any case, it will have an
effect on the bank's internal activities. The favorable relationship between bank measure and ROA
indicates that the bank has the ability to achieve economies of scale, which effectively lowers
operating costs and results in higher efficiency. A negative correlation, on the other hand, indicates
size inefficiencies.

Non-Performing Loan Ratio (NPLR): The non-performing loan percentage is a metric of credit
that has gone bad. Various Non-Performing Loans have a negative impact on banks' profits
(NPLs). The lower the profitability of banks, the more important the calculation of combined
progress as a rate of overall credit.

Liquidity: There is a trade-off between liquidity and profitability. Liquid assets act as a deterrent
against markets that can require on-demand installation. As a result, although greater liquidity

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reduces risk, it also reduces the reserves available for lending. As a result, increased liquidity
indicates a decrease in profitability. As a result, there is a negative association between these two.

Operating Expense Ratio: As a substitute for calculating working efficiency, we can use the
amount of working expenses divided by the sum of capital. Effective management leads to a
reduction in operating costs, which increases the firm's profit margin. The relationship between
ROA and working expense proportion is usually inverse.

Capital Adequacy Ratio (CAR): A bank's net reserves are measured by the capital sufficiency
ratio. It shows the amount of reserve available to protect against antagonistic growth. The
relationship between ROA and CAR is unusual. Although sometimes correlation is negative and
sometimes it is positive.

Financial sector
The financial sector is a segment of the economy composed of companies and institutions that
provide commercials and retails customers with financial service.

Financial sector
The financial sector is a segment of the economy composed of companies and institutions that
provide commercials and retails customers with financial service.

Financial Sector in BANGLADESH

Financial Sector in Bangladesh

Capital Market
Money Market Microfinance

Securities Insurance and

Market Pension and
Provident Funds

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1. Bangladesh Bank 1. Securities 1. Controller of 1. Nongovernment
2. All banks and Exchange Insurance Organizations
3. Nonbank Commission 2. General and Affairs Bureau
financial 2. Stock exchanges: life insurance 2. Palli
institutions Dhaka Stock companies Karma
4. Moneychangers Exchange and 3. Government Shahayak
5. Credit rating Chittagong Pension Scheme Foundation
agencies Stock Exchange 4 Central Provident 3. Grameen Bank
3. Investment Fund 4. Bangladesh
Corporation of Rural
Bangladesh 5. Private sector Development
4. Merchant banks pension funds
Board and other
(typically
nongovernment
small) organizations,
microfinance
institutions
Source: Policy Analysis Unit, Bangladesh Bank.

Banking sector impact on financial sector of Bangladesh:

The financial sector of Bangladesh is generally small and underdeveloped. This sector consists of
a banking segment and an emerging but still nascent capital market segment. The banking segment
in the country is relatively more developed than the equity market segment, even though both are
quite underdeveloped in international comparison.

Money market of Bangladesh has gone through some swift changes due to the backlash on the
liquidity. Liquidity drag has mainly occurred due to the extensive private sector credit growth
keeping most of the banks’ advance deposit ratio (ADR) close to 85%. At least 12 commercial
banks including the public banks have exceeded the existing ADR limit. Private sector credit
growth was mainly fueled by borrowers’ appetite for cheap fund and banks’ opportunity to
generate profit. As a drive to squeeze the excessive private sector credit growth, Bangladesh Bank
plans to curtail limit on advance-deposit ratio which will persuade banks to seek large deposits in
short time. To pursue the objective, deposit rate needs to be attractive for all sorts of potential
depositors. The impact is already apparent in the interest rates of banks. According to the industry
participants, interest rate has already gone up by around 1% from October 2017. Upward pressure
on USD has also led to a critical scenario for retaining strong liquidity of BDT. Import of consumer
goods has surged to a massive level due to shortage of food supply. Furthermore, import of capital
machineries has also gone up as construction of large development projects are on the pipeline.
Unless strong interference is initiated by Government, USD may escalate further and lead to
squeezed liquidity. Interest rate is supposed to go up further in 2018.

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As to the capital market segment, Bangladesh is still at a nascent stage of capital market
development. It is well documented in the literature that a well-functioning capital market is of
great significance for a developing country like Bangladesh which is expected to help the
country’s development by channeling domestic saving to productive investments, attracting
foreign investors to the market, and allocating the national savings most efficiently, among others.

However, as in many other developing country equity markets, the Bangladesh equity market is
relatively underdeveloped, it is small, the market is thin and non-transparent, and it is quite
inefficient (Bashar, Hassan and Islam (2007). Bangladesh has two major exchanges, the Dhaka
Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE). In terms of regulatory
structure, the capital markets of Bangladesh received its first legal backing with the passage of
Securities and Exchange Ordinance in 1969. These empirical results suggest the lack of central
bank creditability, i.e., investors do not believe that central bank can carry out its policy objectives;
thus, they wait and see. The Bangladesh Bank (Central Bank of Bangladesh) may have personally
persuaded the commercial bankers to change their rate setting behavior because there are few of
them, and there may be some incentives for banks to listen. The Bangladesh Bank authority cannot
utilize the same tactic to deal with investors because there are more of them and they may not have
any incentive to listen. Further, there are many allegations of insider trading, market manipulation,
and corruption in the equity market, leading to demonstrations by investors in the country on a
number of occasions, eroding confidence in the equity market. Unfortunately, neither the
government including the Securities and Exchange Commission, nor any regulatory authorities
including the Bangladesh Bank had taken serious steps to deal with these allegations in a serious
and effective manner to restore investor confidence in an already small and unstable market
environment.

n Bangladesh there are mainly four types of institutions involved in micro-finance activities. These
are 1) Grameen Bank (GB), a member owned specialized institution, 2) around 1500 Non-
Governmental Organizations (NGO) like BRAC, Proshika, ASA, BURO-Tangail, BEES,
CODEC, SUS, TMSS, Action- Aid etc. 3) Commercial and Specialized banks like Bangladesh
Krishi Bank (BKB), Rajshahi Krishi Unnayan Bank (RAKUB) and 4) Government sponsored
micro finance projects/ Programs like BRDB, Swanirvar Bangladesh, RD-12 and others which are
run through several ministries viz., Ministry of Women & Children Affairs, Ministry of Youth &
Sports, Ministry of Social Welfare etc. All the programs are targeted at the functionally landless
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rural poor. All the MFIs provide mostly small, un-collateralized one-year term loans to individuals
belonging to jointly liable peer groups, and they use similar on-site loan disbursement and weekly
collection methods by forming village organizations or centers.

A research reveals that NGOs started credit program in mid-eighties and their activities increased
noticeably higher after 1990 (CDF, 2000). With the increasing number of collateral free micro
credit disbursement by MFIs, some Nationalized Commercial Banks (NCBs), and Specialized
Banks like BKB and RAKUB have been encouraged to provide a considerable amount of their
rural credit to the poor without security. However, the amount is much less compared to the deposit
mobilization from the rural sector of the country. Today, some of the Private Commercial Banks
(PCBs) have also started direct and linkage programs with NGOs. Total loan disbursement
(cumulative) by these four kinds of institutions till December 2001 was taka 434.55 billion; of
which disbursement under Government program was taka 37.77 billion (8.69%), Grameen Bank
disbursed taka 154.11 billion (35.46%), other Banks and MF-NGOs disbursed taka 78.41 billion
(18%) and taka 164.26 billion (37.80%) respectively (figure-1). Recovery rate of all these
organizations excluding formal banks and government sponsored programs stood at 95 percent.

Banking sector impact on Bangladesh:

Banks are mainstream of the financial system of a country. Our government has taken various
types of reform programs time to time making banking system more effective so that positive
impact of banking system on our everyday life in economic activities can be more realized.

Bank have played a vital role in economy by providing credit for performing economic activities
and at the sometime conglomerate the surplus capital from general public through different types
of depository incentives. Hence we discuss the major sectors of economy like agriculture, industry,
business mentioned by Bangladesh Bank and how much wells banks perform these sectors.

Agriculture is the main sector of our economy. According to the new GDP measurement system,
it provides about 22 percent of our GDP. Though the total amount of credit increases day by day,
the portion of credit has decreased in agriculture, fishery and forestry sector whether it has reduced
into half at percent. The rescue of agriculture revenue is hearty than other sectors and this credit
directly affects the agricultural production. At present 44 private and foreign commercial banks
have to continue their activities. They contain collectively TK 20,365 crore as a deposit which is

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35 percent of total credit. But Unfortunately, they don't give any single coin to agriculture sector,
as a credit.

Industrial sector acts as a main sector of GDP in the developed countries but unfortunately, this
sector performance is very weak in our country and participation of GDP in this sector is 17.79
percent. This sector gets the highest credit from commercial banks.

Business sector has become major role-playing sector in our economy. Now-a-days almost 14.47
percent of GDP comes from merchandise sector, which is lucid from different statistical data. In
1981, One reason of gets more credit in business sector is that the probability of default loan is
comparatively low vis-a-vis other sectors. But now-a-days, default culture has also increased in
trading sector. Only garments artistry takes on prominent credit is TK 786 crore and TK 878 crore
respectively provided by private and national commercial banks provide 24 percent of total credit
in business sector and it is only 14.31 percent in case of foreign banks.

Bank is one of the main means of government by which government can implement different types
of step for eradicating poverty. As the branches of bank are available everywhere from downtown
area to remotest rural area government uses this channel to provide any financial benefit quickly.
Foreign Commercial Banks have provided 39.9 percent of total credit in other sectors. In this time
National Commercial Banks and PCB's provided 7.15 percent of their total credit and Private
Commercial Banks provided 10.21 percent of total credit in other sectors. Though banking sector
is the lifeblood of our financial system, functional arena of bank is rather narrow than wide range
and performance of handsome banks is not quite good.

Important data charts and figures to support

On June 10, the central bank instructed to banks to collect the suspended interest of the two months
– April and May – in equal monthly instalments in twelve months starting from July 2020.
However, the dearth happened in the meantime won’t be recovered soon.

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 Y-Values
3.5

2.5

1.5

0.5

0
0 0.5 1 1.5 2 2.5 3

Figure: Interest Rate Spread Is in Decreasing Trend

Due to the current COVID-19 situation deposit growth will remain slow as people are withdrawing
money to tackle the ongoing situation. This tendency of consumer behavior is observed due to the
low reliance over banks for future uncertainties of liquidity position; it also gives people a sense
of control over the situation.

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 Chart Title
6

4
Axis Title

0
Category 1 Category 2 Category 3 Category 4

Series 1 Series 2 Series 3 Series 32

Figure: Monthly Deposits & Advances

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Bangladesh’s GDP growth to be nearly 2% for 2019-20—The World Bank and IMF have both
forecast Bangladesh GDP growth for 2019-20 to be 1.6% and 2% respectively. Before the
pandemic, WB had forecast Bangladesh GDP growth to be 7.20%. Bangladesh Bank is more
optimistic, forecasting GDP growth to be 3.8% in the 2019-20 fiscal year before recovering to
5.7% in 2020-21. The actual GDP growth rate for 2020-21 is difficult to predict as a lot depends
on the outcome of the pandemic.

Figure : Bangladesh GDP Growth Forecast

Chart Title

4.4 4.5
4.3

3.5

2.8
Axis Title

2.4 2.5
Series 1

1.8 Series 2
Column1

Category 1 Category 2 Category 3 Category 4

Axis Title

For the last couple of years Bangladesh maintained an impressive GDP growth rate. However, in
the face of the global Covid 19 pandemic, GDP growth is expected to slow down significantly.

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 Y-Values
4

3.5

2.5

1.5

0.5

0
0 0.5 1 1.5 2 2.5 3

Y-Values
4

3.5

2.5

1.5

0.5

0
0 0.5 1 1.5 2 2.5 3

Export & Import Outlook

This is due to the damaging effects of the novel coronavirus around the world. In February, too,
imports had fallen by 16% from January, according to analysis by the customs value data of

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imported and export- ed goods available at the port city's customs house. In March, the country
imported goods worth BDT 31,617 crore as per the customs value, about BDT 4,500 crore less
than that in the previous month. Ex- port earnings saw a steep 83% fall year-on-year in April due
to halted production and order cancellations in the apparel sector brought on by a countrywide
shutdown and the global economic fallout from Covid- 19.

Remittance Outlook:
•Remittance in one of the major sources of foreign exchange reserve. For last couple of years,
Bangladesh passed a golden era in terms of remittance.

•On May remittance showed some improvements by 38% thanks to the occasion of Eid-ul-Fitr.
Inflow of remittance dropped to a three-year low to $1.08 billion in April following coronavirus
outbreak in different parts of the world. Remittance inflow in April of this year was the lowest
since May of 2017 when the country received $1.077 billion in remittance. It dropped nearly about
12% in March.

•Remittance inflow which usually sees a jump before any festival saw negative growth during
Ramadan as a large number of migrant workers lost their jobs under the impact of the Covid-19
outbreak. In the first 14 days of May, remittance growth fell by 8.15% year-on-year as expatriates
sent less money home even before Eid.

•Banking industry will face a direct hit on fee-based income due to the decreasing remittance.

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 Y-Values
3.2

2.7

0.8

0 0.5 1 1.5 2 2.5 3

The potential and challenges of the banking sector of Bangladesh

The banking sector in Bangladesh has immense potential Bangladesh's banking sector has an
excellent potential to become a major sector of the country's economy. Bangladesh has a
significant number of populations. This advantage could help Bangladesh's banking sector expand
and grow faster. Islami Bank has more than 33,000 clients. Bangladesh's banking sector is very
effective in ensuring proper quality of product services in accordance with international market
requirements. Standard Chartered Bank has AAA credit ratings for 10 years now. Information
technology is expected to play a larger role in many areas of banking, particularly in cost control
and innovative technology. Dutch-Bangla Bank Ltd aims to provide Bangladesh with the most
innovative and cost-effective banking products. There are ten foreign banks operating in
Bangladesh, but still no Japanese banks. They are yet to open. As a result, Japanese banks have a
wonderful opportunity to open a branch in Bangladesh. Some of the foreign banks are Citibank
N.A., Commercial Bank of Ceylon., Standard Chartered Bank., HSBC (The Hongkong and
Shanghai Banking Corporation Limited), Woori Bank.

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Challenges of this industry
Bangladesh's banking sector faces a major challenge in finding skilled and efficient bankers. More
preparation is preferred by banks over learning book awareness to ensure that workers are inspired
and have learned appropriate skills to do their jobs confidently. Successful preparation improves
employee productivity, customer loyalty, employee engagement, work performance, professional
knowledge, and employee retention, all of which contribute to increased productivity. In
comparison to other entities, managing a bank has been more difficult over the last two decades.
Banking is a heavily regulated industry of every organization. To survive and expand in the future,
it will take advanced and qualified personnel. As a result, human capital management is a critical
component of finance, as it enables a well-developed banking network in the industry.

The country's banking system, already strained by bad debts and other inconsistencies, is now
faced with new challenges as the ongoing pandemic takes a toll on the financial sector. This new
reality is causing concern among senior bank executives because the outlook for a variety of
performance criteria, including profitability, liquidity, and capital, is depressing for the coming
years.

The current vulnerable state of Bangladesh's banking sector, which is overflowing with default
loans, poses a major threat to the country's tremendous growth momentum. As per latest central
bank data, which is of September last year, default loans in the banking sector stood at Tk 116,288
crore, which is an all-time high. Non-performing loans (NPLs) are among the most serious threats
to banks' financial health and stability. As per Bangladesh Bank data, the percentage of bad loans
increased to 11.23 percent at the end of the third quarter of last year. NPLs now make up 11.45
percent of total loans, up from 10.41 percent in June of last year. A significant challenge would be
to slow down the upward trend of NPLs as early as possible. The National Bank of Pakistan has
the highest ratio of 97.76%, followed by ICB Islami Bank at 80.82%, Padma Bank at 66.33%,
BASIC Bank at 51.55%, Bangladesh Commerce Bank at 47.76%, Bangladesh Development Bank
at 39.22%, and Rajshahi Krishi Unnayan Bank at 30.82%.

Excess dollars in the banking sector cause a dollar rate imbalance by strengthening the national
currency. Remittances increased dramatically last year, most likely as a result of increased global
economic uncertainty. It is expected to increase by more than 40% this year compared to last.
However, in order to give local exporters an advantage, the price must remain stable. As a result,

29 | P a g e
Bangladesh Bank purchased approximately 5 billion dollars from the regular market in order to
maintain the dollar's stability, which is required in order to maintain the export-import balance. It
also resulted in increased market liquidity.

Another critical issue that our banking sector lacks is good governance. When one or more banks
lack transparency, accountability, and compliance, corporate governance suffers. The quality of
governance can have an impact on financial soundness indicators like asset quality, capital
adequacy ratio, liquidity, earning capacity, and others. To ensure corporate governance within the
organization, management in these banks should keep a close eye on the operation of the bank and
its branches.

Bangladesh has a population of 170 million people, and half of them do not have a bank account.
This runs counter to the national financial inclusion strategy (NFIS). There are currently less than
10,000 bank branches in the nation. To bring more people into the banking sector, the number of
bank branches must be increased. There is only total 13 branches of The Hongkong and Shanghai
Banking Corporation Limited (HSBC) situated in 5 districts in Bangladesh. Whereas it is one of
the top 10 popular banks in Bangladesh in maintaining international transactions, they also offer
friendly financial services to their clients and support to the Bangladeshi people in international
banking.

Conclusion
Because the Bangladeshi financial system is heavily reliant on banks, a stable and effective
banking system is one of the primary concerns for Bangladesh's economic growth. Recognizing
the bank's success entails understanding profitability and the relationships between variables such
as organizational size, financial leverage, and profit market growth. The main objective of this
sector is to keep the customer’s money safe, help them earn interest on deposits, which helps to
protect their money from losing value due to inflation, making loans to businesses, customers, and
homebuyers, providing them with financial advice and related financial services, such as
insurance. There are four categories of banks which has a total number of 61 banks. Banks have
also played an important role in Bangladesh's three major economic development factors. The
Bangladesh Bank has encouraged banks and non-bank financial institutions (NBFIs) to make low-
interest loans, provide credit, and new loan loans that require only a personal guarantee and no

30 | P a g e
collateral to female entrepreneurs. The ongoing pandemic has forced businesses to take out large
sums of deposits to pay their dues to employees other operating expenses. Things have changed
quickly, and many banks now keep track of their customers using an online system. Currently
there are two types of banks operating in Bangladesh. They offer various features and benefits to
the customers to open accounts as per their necessitates. The most recent method of delivering
banking services is e-banking. There are various factors that effects the Bangladesh banking sector.
The financial sector is a sector of the economy composed of businesses and institutions that
provide financial services to commercial and retail customers. Even though both are quite
underdeveloped in international comparison, the banking sector in the country is relatively more
developed than the equity market segment. Bangladesh's money market has seen some rapid
changes as a result of the liquidity backlash. In terms of the capital market, Bangladesh is still in
its early stages of development. In Bangladesh, there are four main types of institutions involved
in microfinance. These have several programs which are targeted mainly for the rural poor people.
Banks have played an important role in the economy by providing credit for economic
activities, aggregating surplus capital, for which the major sectors of economy; agriculture,
industry& business are discussed by Bangladesh Bank and how much wells banks perform these
sectors. Important data charts and figures are discussed to have an overview of the industry as per
the current ongoing pandemic. The potentials are very large for this sector but it is also faced with
various challenges. Bangladesh economy is expected to perform strongly this year, according to
the latest figures from the Asian Development Bank (ADB). We have one of the world's fastest
growth rates in recent years, with a stable economic performance that has helped to reduce poverty
and social inequalities. Despite the international impact of the COVID-19 pandemic, GDP growth
was estimated to be 8.2 percent in 2019 and 3.8 percent in 2020.

31 | P a g e
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