CHAPTER # 02
THE CITY BANK LIMITED
* History of Banking in the world
* Scenario of Banking in Bangladesh
2.1 THE HISTORY OF BANKING IN THE WORLD
When money became an accepted medium of exchange, the need arose to keep the money safe. In addition, some people needed to borrow money. These needs led to the development of banks. The earliest banking records, dated around 2000 B.C., indicate that Babylon had a highly developed banking system. Babylonian banks were not unlike the banks of today, except that you might say they had a monopoly. Many years later, in the sixth century B.C., the first private bank emerged-the Igibi bank. Like today's bank, it accepted for deposit money on which it paid interest. It also lent money to persons who needed the money for worthwhile purposes and who repaid the borrowed funds with interest. By the fourth century B.C., Greece was the dominant nation in the world. Private and city-state-owned banks existed in the outlying lands of the Greek Empire, but only privately owned banks were allowed in Greece. Government to a great extent regulated those banks; however, Rome then became the dominant empire. Under early Roman law, banks could only be privately owned, but they were regulated by law. With the fall of the Roman Empire, banking became essentially illegal until the third century A.D. By the fourteenth century, when trade routes were being developed, privately owned banks were once again allowed. And by the fifteenth century, banks were needed to advance the huge sums of money required to send out ships to bring back valuable commodities such as spices, silk and gold. At this time in history, banking was big business.
2.2 SCENARIO OF BANKING IN BANGLADESH
The banking in Bangladesh has passed three decades through different policy environments and comprises central bank at the apex, nationalized commercial banks (NCBs), private commercial banks (PCBs), foreign commercial banks (FCBs) and specialized financial institutions. In the decade of seventies, in an atmosphere of fully regulated banking, the nationalized commercial banks played the active role in intermediation and allocation of credit along with the specialized financial institutions. The decade of the eighties witnessed the active operation of both the NCBs and PCBs (local and foreign) in the banking sector. Before liberation of Bangladesh in 1971, the total banking system was private owned, urban-based and profit oriented. But after the liberation, the Government of Bangladesh nationalized all the banks operating in Bangladesh in 1972, except a few foreign banks branches. It was due to the economic policy of Pakistan Government that we were having a privatized banking structure, till the independence of Bangladesh in 1971. After the separation from Pakistan the party, which came to power was politically committed to adopt such an economic policy which would endure social control and ownership of large industries, banks, insurance companies etc. Moreover, the ownership of those enterprises (including the banks) was largely controlled by west-Pakistani entrepreneurs who left Bangladesh after its independence. Following nationalization, the government also recognized the existing commercial banks into six (6) distinct new banks in the following manner in terms of the Bangladesh Banks (Nationalization) Order, 1972: Existed Banks
| Reorganized Bank
The National Bank of PakistanThe Bank of Bahawalpur Ltd.
| Sonali Bank
| The Premier Bank Ltd.The Habib Bank Ltd.The Commerce Bank Ltd.
| Agrani Bank
| The United Bank Ltd.The Union Bank Ltd.
| Janata Bank
The Standard Bank Ltd.
The Australasia Bank Ltd.
| Rupali Bank
| The Eastern Mercantile Bank Ltd.
| Pubali Bank
The Eastern Banking Corporation Ltd.
| Uttara Bank
Table 3.1: Reorganization of the commercial banks of Bangladesh in 1972 Source: Khan, Mohammad Khalid, “Banking System in Bangladesh: 1972-1982”. The Bangladesh Times,...
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