AN ASSIGNMENT

ON
MONEY AND BANKING

SUBMITTED TO

M. KAZI TAMIM RAHMAN

Lecturer
Department of Agricultural Economics and Rural Sociology
Faculty of Business Administration and Management

SUBMITTED BY

Shofiq Uddin khan

Reg. No. 00682; Roll No. 023
Level-3; Semester-1
Faculty of Business Administration and Management

Date of Submission: 26 April 2008

PATUAKHALI SCIENCE AND TECHNOLOGY UNIVERSITY

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 Contents

Topics Page No
Introduction 3
History of Bangladesh Bank 3
Objectives of Bangladesh Bank 3
Visions of Bangladesh Bank 3
Missions of Bangladesh Bank 4
Functions of Bangladesh Bank 5
Current Board of Directors 6
Current Executive Staff 8
Conclusions 8

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Introduction
Bangladesh Bank the central bank and 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. The powers and functions of Bangladesh Bank are governed
by various laws and acts including the Banker's Books Evidence Act 1891,
Insolvency Act 1920, Banking Companies Ordinance 1962, Bangladesh Bank
Order 1972, Foreign Exchange (Regulation) Act 1986, Money Loan Court Act
1990, Banking Companies Act 1991, Financial Institutions Act 1993 and Rules
1994, Companies Act 1994 and Bankruptcy Act 1997.

History of Bangladesh Bank

After the liberation war, and the eventual independence of Bangladesh, the
Government of Bangladesh reorganized the Dhaka branch of the State Bank of
Pakistan as the central bank of the country, and named it Bangladesh Bank. This
reorganization was done pursuant to Bangladesh Bank Order, 1972, and the
Bangladesh Bank came into existence with retrospective effect from 16th
December, 1971.
The highest official in the bank is the Governor (currently Salehuddin Ahmed).
The Governor chairs the Board of Director. The Executive Staff, also headed by
the Governor, are responsible for the day to day affairs.
Objectives of Bangladesh Bank
As the central Bank of Bangladesh, the broad objectives of the Bank are:
a) To regulate currency issuance and to keep foreign exchange reserves;
b) To 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.

Visions of Bangladesh Bank

The Bangladesh Bank (BB), through ensuring the quality of services and the
competence of its staff, shall operate as a modern, dynamic, effective, and
forward-looking central bank to manage the country’s monetary and financial
system with a view to stabilizing the internal and external value of Bangladesh
Taka conducive to rapid growth and development of the economy.

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Missions of Bangladesh Bank

To uphold the vision and in pursuant with the Bangladesh Bank Order of 1972,
Bangladesh Bank’s mission is to promote and maintain macroeconomic and price
stability through:

Formulating and implementing appropriate monetary policy consistent

with the country’s national development goals;
Pursuing prudent policies to ensure stable internal and external value of
Taka;
Identifying policy priorities for implementation by the Government
through assessing the transmission channels and the interactions of
monetary policy with fiscal, exchange rate, and other macroeconomic
policies and their impact on the economy;
Proposing necessary legislative measures to attain the central bank’s
objectives and perform its functions including strategies and regulations
for and supervision of banking companies and financial institutions with
the aim to providing efficient financial intermediation and financial
services to large, medium, small, and micro enterprises and to pro-poor
activities ;
Promoting, regulating and ensuring a secure and efficient payment
system, including the issue of Bank Notes;

To this end, BB would ensure that it has the requisite human and infrastructural
resources and build its capability to promote and ensure a robust and well-
functioning financial sector. This mission statement pledges that the guiding
philosophy of Bangladesh Bank’s operations would be sound regulatory
framework conducive to the operation of efficient market mechanism along with
transparency and accountability, professionalism, ethical standards, adoption of
modern technology in operational and decision making processes, and trust and
respect in all relations. Periodic strategic planning would serve to identify the
emerging challenges, key changes affecting Bangladesh Bank’s internal and
external environment and set its strategic guidelines, set priorities, promote
improvements in management practices, and induce necessary changes in
organizational culture. To fulfill its mission, BB would undertake activities related
to developing the national financial system and management of monetary, foreign
exchange, and credit policies. The Bangladesh Bank’s core mission strategies
cover both monetary policy and financial sector developments.

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Functions of Bangladesh Bank
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.
The highest official in the bank is the Governor (currently Salehuddin Ahmed).
The Governor chairs the Board of Director. The Executive Staff, also headed by
the Governor, are responsible for the day-to-day affairs.
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.
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. It makes ways and means for
advances to the government, which are repayable not later than three months. It
acts as the public debt manager and runs a public debt office (PDO) within itself.
The bank also sells government treasury bills on tender, prize bonds and different
types of saving certificates (sanchayapatra). The bank acts as the clearing house of
the scheduled banks. The purchase, sale and rediscount of bill of exchange and
promissory notes drawn on and payable in Bangladesh are also included in the
activity of the bank.

The bank acts as the lender of last resort for the government as well as for the
country's scheduled banks. All scheduled banks are required to maintain a
minimum reserve with the Bangladesh Bank. The present statutory liquidity
reserve (SLR) requirement is 20% of total demand and time liabilities, 4% of
which is to be maintained as cash reserve ratio (CRR), and the rest 16% as
approved securities. The SLR requirement for Islamic banks is 10% and they are
to keep 4% of this reserve as CRR and the rest 6% in approved securities.

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Bangladesh Bank exercises its wide range of power in credit control through
different types of traditional and non-traditional methods. In addition to bank rate
and open market operations, it uses a number of other weapons. It can vary the
minimum reserve requirements of scheduled banks whenever circumstance so
warrant. Being responsible for maintaining external value of Bangladesh currency,
the bank also handles the exchange control. It ensures that all foreign exchange
inflows are accounted for, and surrendered to the authorized dealers. It allocates
and rations foreign exchange in line with the set priorities.
Bangladesh Bank is empowered to manage the country's international reserves,
which represent aggregate of its holding of gold, foreign exchange, SDR and
reserve position in the IMF. The bank also acts as the representative of the
government in different international agencies and other forums such as World
Bank, IMF, Asian Clearing Union, ADB, etc.
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.
Bangladesh Bank runs a Deposit Insurance Scheme established under the Deposit
Insurance Ordinance 1984. The objective of the scheme is to safeguard the
deposits of the customers with both local and foreign deposit money banks doing
business in Bangladesh. The deposits amounting up to Tk 100,000 of all customers
in a scheduled bank are insured under the scheme. All scheduled banks in
Bangladesh are required to be members of the scheme and pay premium on their
deposits at a rate determined by the Bangladesh Bank from time to time.
Bangladesh Bank accumulates the premiums in the Deposit Insurance Fund.
The paid up capital of Bangladesh Bank is tk, 30 million divided into 300,000
shares of tk. 100 each that are fully paid up by the government. A nine-member
board of directors comprising the governor as chairperson, one deputy governor
and seven members oversees the affairs of the bank. The governor and the deputy
governors of the Bank are appointed by the government for a period not exceeding
five years and are eligible for reappointment.
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. The
departments are International, Law, Financial Institutions, Computer (2),
Agricultural Credit, Agricultural Credit Inspection, Agricultural Credit Project,
Credit Information Bureau, Research (3), Public Relations and Publications, Audit
and Inspection, Statistics (2), Engineering, Problem Bank Monitoring,
Administration, Training Academy, Foreign Exchange Policy, Foreign Exchange
Inspection, Foreign Exchange Investment, Administration and Expenditure,
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Banking Inspection, Banking Regulation and Policy, Banking Operation and
Development, Monetary Management and Technical Unit, Currency Management
and Accounts, Industrial Credit, and Security Management.

Bangladesh Bank has correspondent relationships with one international and 8

foreign central banks viz., the Federal Reserve Bank of New York, Bank of
Canada, Bank of England, Bank De France, Deutsche Bundes Bank, Bank of
Japan, Svereges Riks Bank of Stockholm, Reserve Bank of India and the Bank for
International Settlements, Basle. Besides, Bangladesh Bank has now invested its
foreign exchange reserves with 14 banks at different international financial
centres.
To reduce the huge costs of printing currency notes from foreign countries
Bangladesh Bank had initiated a Security Printing Project, which was converted
into a limited company of the name The Security Printing Corporation
(Bangladesh) Ltd. on 18th October 1992. The corporation is now working as a
commercial concern and prints all currency and bank notes in Bangladesh. Other
security papers, such as judicial and non-judicial stamps, prize bonds, revenue
stamps, postal envelope and stamps, band rolls for customs and excise department,
and cheque books of different private banks in Bangladesh are also printed by this
company. The company however, does not have a minting plant and the country
still remains dependent on foreign mint companies for minting the coinage.

The powers and functions of Bangladesh Bank are governed by various laws and
acts including the Banker's Books Evidence Act 1891, Insolvency Act 1920,
Banking Companies Ordinance 1962, Bangladesh Bank Order 1972, Foreign
Exchange (Regulation) Act 1986, Money Loan Court Act 1990, Banking
Companies Act 1991, Financial Institutions Act 1993 and Rules 1994, Companies
Act 1994 and Bankruptcy Act 1997.
Current Board of Directors
Chairman
Dr. Salehuddin Ahmed
Director
Md. Nazrul Huda
Dr. Wahid Uddin Mahmud
Dr.Momtaz Uddin Ahmed
Dr.Sufia Ahmed
Dr. Hossain Zillur Rahman
Dr.Mohammad Tareque
Mr.Jafar Ahmad Chowdhury
Mr. Muhammad Abdul Mazid
Secretary
A.T.M. Nasiruddin
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Current Executive Staff
Governor
Dr. Salehuddin Ahmed
Deputy Governor
Md. Nazrul Huda
Ziaul Hasan Siddiqui
Md. Murshid Kuli Khan
Executive Director
Md. Nazmul Hoque
Md. Asaduzzaman Khan
Khandakar Muzharul Haque
Md. Abul Quasem
Nazir Ahmed Khan
Habib Ullah Bahar
Md. Yasin Ali
A.T.M. Nasiruddin
Md. Abdul Matin

Conclusion
In order to uphold the mission, Bangladesh Bank’s aim would be to provide the
required leadership by discharging its duties in a manner that shows a clear vision,
is watchful, far-sighted, intelligent and responsive based on an effective and
efficient communication strategy. At all times, Bangladesh Bank’s aim would be
to remain committed, efficient, capable, logistically supported, speedy, focused,
and aggressive where necessary in order to ensure that the Bangladesh Bank
always remains a credible and prestigious institution with an efficient
organizational structure committed to achieving its goals.