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Financial System in Bangladesh

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Financial System in Bangladesh

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  • Feb. 12, 2013
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Abstract:
Without a sound financial system it is quite difficult and expensive to allocate resource and shift risks to its lowest level (low economic development). Financial system plays an important role in the economic development and it is divided into financial markets and institutions. The role of the financial system is to gather or pool money from people and businesses that have more than they need currently and transmit those funds to those who can use them for either consumption or investment. A healthy economy is dependent on efficient transfers of resources from people who are net savers (surplus) to firms and individuals who need capital. Without efficient transfers, the economy simply could not function. Obviously, the level of employment and productivity, hence our standard of living, would be much lower. Therefore, it is absolutely essential that our financial market functions efficiently, not only quickly, but also at a minimal cost. The financial system in Bangladesh includes Bangladesh Bank (the Central Bank), scheduled banks, non-bank financial institutions, microfinance institutions (MFIs), insurance companies, co-operative banks, credit rating agencies and stock exchange. Among scheduled banks there are 4 nationalized commercial banks (NCBs), 5 state-owned specialized banks (SBs), 30domestic private commercial banks (PCBs), 9 foreign commercial banks (FCBs) and 29 nonbank financial institutions (NBFIs) as of December 2006. However, Rupali Bank,an NCB is being sold to a foreign buyer, and once this transaction is completed, the country will have only 3 NCBs, which are being corporatized. Over and above the institutions cited above, three development financial institutions namely House Building Finance Corporation (HBFC), Ansar- VDP Unnayan Bank and Karma Shangsthan Bank are operating in Bangladesh, all of which are state owned. Introduction:

Financial system is a system which tones up the savings-investment process of a country. Financial...