Overview of Financial system of Bangladesh

The financial system of Bangladesh is comprised of three broad fragmented sectors:

1. Formal Sector,

2. Semi-Formal Sector,

3. Informal Sector.

The sectors have been categorized in accordance with their degree of regulation.
The formal sector includes all regulated institutions like Banks, Non-Bank Financial Institutions
(FIs), Insurance Companies, Capital Market Intermediaries like Brokerage Houses, Merchant
Banks etc.; Micro Finance Institutions (MFIs).

The semi formal sector includes those institutions which are regulated otherwise but do not fall
under the jurisdiction of Central Bank, Insurance Authority, Securities and Exchange
Commission or any other enacted financial regulator. This sector is mainly represented by
Specialized Financial Institutions like House Building Finance Corporation (HBFC), Palli
Karma Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., Non Governmental
Organizations (NGOs and discrete government programs.

The informal sector includes private intermediaries which are completely unregulated.

The financial market in Bangladesh is mainly of following types:

1. Money Market: The primary money market is comprised of banks, FIs and primary
dealers as intermediaries and savings & lending instruments, treasury bills as instruments.
There are currently 15 primary dealers (12 banks and 3 FIs) in Bangladesh. The only
active secondary market is overnight call money market which is participated by the
scheduled banks and FIs. The money market in Bangladesh is regulated by Bangladesh
Bank (BB), the Central Bank of Bangladesh.

2. Capital market: The primary segment of capital market is operated through private and
public offering of equity and bond instruments. The secondary segment of capital market
is institutionalized by two (02) stock exchanges-Dhaka Stock Exchange and Chittagong
Stock Exchange. The instruments in these exchanges are equity securities (shares),
debentures, corporate bonds and treasury bonds. The capital market in Bangladesh is
governed by Securities and Commission (SEC).

3. Foreign Exchange Market: Towards liberalization of foreign exchange transactions, a

number of measures were adopted since 1990s. Bangladeshi currency, the taka, was
 declared convertible on current account transactions (as on 24 March 1994), in terms of
Article VIII of IMF Article of Agreement (1994). As Taka is not convertible in capital
account, resident owned capital is not freely transferable abroad. Repatriation of profits
or disinvestment proceeds on non-resident FDI and portfolio investment inflows are
permitted freely. Direct investments of non-residents in the industrial sector and portfolio
investments of non-residents through stock exchanges are repatriable abroad, as also are
capital gains and profits/dividends thereon. Investment abroad of resident-owned capital
is subject to prior Bangladesh Bank approval, which is allowed only sparingly.
Bangladesh adopted Floating Exchange Rate regime since 31 May 2003. Under the
regime, BB does not interfere in the determination of exchange rate, but operates the
monetary policy prudently for minimizing extreme swings in exchange rate to avoid
adverse repercussion on the domestic economy. The exchange rate is being determined in
the market on the basis of market demand and supply forces of the respective currencies.
In the forex market banks are free to buy and sale foreign currency in the spot and also in
the forward markets. However, to avoid any unusual volatility in the exchange rate,
Bangladesh Bank, the regulator of foreign exchange market remains vigilant over the
developments in the foreign exchange market and intervenes by buying and selling
foreign currencies whenever it deems

Payment and Settlement System:

A country's payment system is the channel through which the central bank passes financial
transaction part of its monetary policy. Central banks' functions in the area of payment systems
are very closely related to their functions in the areas of monetary policy and financial stability.
Monetary stability supports sound investment and sustainable economic growth, which in turn
are conducive to financial stability and support the smooth operation of payment systems.

Well-functioning payment systems ensure the efficient and safe execution of monetary policy
operations and facilitate the smooth and homogenous transmission of monetary impulses. The
smooth functioning of payment systems is a precondition for users' confidence in these systems
and, ultimately, public confidence in the currency. Central banks would extend their concern
toward the safe and efficient use of payment instruments with a view to maintain public
confidence in the currency and ensure its smooth circulation. Central banks have a strong interest
in promoting safety and improving efficiency in payment systems as part of their overall concern
with financial stability. The importance that central banks attach to the stability of financial
markets derives from the possibility that financial institutions' actual or perceived inability to
settle their obligations in distressed market conditions could contribute to a loss of confidence
and could also have a negative effect on the stability of financial markets and the economy as a
whole.

In systemically important payment systems, disruption caused by one participant in the

infrastructure can cause disruptions for other participants, propagate financial disturbances and
possibly even amplify such disturbances by inducing chain reactions that might contaminate the
whole financial system. In such systems, central banks aim mainly to:
 prevent systemic risk, thereby maintaining financial stability;

promote the efficiency of payment systems and instruments;

ensure the security of and public trust in the currency as the settlement asset; and

safeguard the transmission channel for monetary policy.

According to the Section 7A(e) of the Bangladesh Bank Order, 1972; one of the main functions
of the Bangladesh Bank is - "to promote, regulate and ensure a secure and efficient payment
system"

In fulfilling this mandate and considering the importance, Payment Systems Department (PSD)
has been formed on 26 July 2012, prior to this it was a section under Department of Currency
Management and Payment Systems.

Follow the links below to have an overview of the prevailing payment and settlement systems in
Bangladesh -
Payment Systems Department's Activities National Payment Switch(NPS)
Payment Systems Strategy e-Commerce & m-Commerce
Bangladesh Automated Clearing House (BACH) Legal & Regulatory Framework
Bangladesh Automated Cheque Processing Systems (BACPS) Real Time Gross Settlement (RTGS)
Bangladesh Electronic Funds Transfer Network (BEFTN) Payment Systems Oversight
Mobile Financial Services Online Payment Gateway Service Provider

Deposit Insurance

Deposit Insurance Systems (DIS) is now protecting your Deposits in the Bank and insurance
benefits in the unlikely event of a number of Banks. Deposit insurance is a system established by
the Government of Bangladesh to protect depositors against the loss of their deposits in the event
that a scheduled bank is unable to meet its obligations.

Deposit Insurance Systems (DIS)

A sound, competitive banking system is important to a nation's economic strength.

Every scheduled Bank plays an important role as the intermediation of funds from
depositors to consumers and investors as well as in the transmission of monetary
policy. So, public confidence in banking sectors is very crucial. Deposit Insurance
Systems (DIS) is the key element in maintaining confidence and promoting financial
stability through increasing saving in the banking sectors.
 Deposit Insurance Systems is a measure to protect bank depositors, in full or in part, from
losses caused by a bank's inability to pay its debts when owing. Deposit Insurance Systems is
one of the components of financial safety net that is meant to promote financial stability.

Importance of DIS:
Deposit Insurance plays a key role in maintenance of financial stability by
sustaining public confidence in the banking system through protecting
depositors, especially small and less sophisticated depositors, against loss of
deposit to a significant extent.

out DIS in Bangladesh Public Awareness

erational Procedure Communications & Affiliation

Regulators of the Financial System

Central Bank
Bangladesh Bank acts as the Central Bank of
Bangladesh which was established on December 16,
1971 through the enactment of Bangladesh Bank Order
1972- Presidents Order No. 127 of 1972 (Amended in
2003).
The general superintendence and direction of the affairs
and business of BB have been entrusted to a 9 members'
Board of Directors which is headed by the Governor
who is the Chief Executive Officer of this institution as
well. BB has 40 departments and 9 branch offices.
In Strategic Plan (2010-2014), the vision of BB has
been stated as, To develop continually as a forward
looking central bank with competent and committed
professionals of high ethical standards, conducting
monetary management and financial sector supervision
to maintain price stability and financial system
robustness, supporting rapid broad based inclusive
economic growth, employment generation and poverty
eradication in Bangladesh.
The main functions of BB are (Section 7A of BB Order,
1972) -

1. to formulate and implement monetary policy;

2. to formulate and implement intervention policies

 in the foreign exchange market;

3. to give advice to the Government on the

interaction of monetary policy with fiscal and
exchange rate policy, on the impact of various
policy measures on the economy and to propose
legislative measures it considers necessary or
appropriate to attain its objectives and perform
its functions;

4. to hold and manage the official foreign reserves

of Bangladesh;

5. to promote, regulate and ensure a secure and

efficient payment system, including the issue of
bank notes;

6. to regulate and supervise banking companies and

financial institutions.

Core Policies of Central Bank

Monetary policy
The main objectives of monetary policy of Bangladesh Bank are:

Price stability both internal & external

Sustainable growth & development

High employment

Economic and efficient use of resources

Stability of financial & payment system

Bangladesh Bank declares the monetary policy by issuing Monetary Policy Statement (MPS)
twice (January and July) in a year. The tools and instruments for implementation of monetary
policy in Bangladesh are Bank Rate, Open Market Operations (OMO), Repurchase
agreements (Repo) & Reverse Repo, Statutory Reserve Requirements (SLR & CRR).

Reserve Management Strategy

Bangladesh Bank maintains the foreign exchange reserve of the country in different currencies
to minimize the risk emerging from widespread fluctuation in exchange rate of major
currencies and very irregular movement in interest rates in the global money market. BB has
established Nostro account arrangements with different Central Banks. Funds accumulated in
these accounts are invested in Treasury bills, repos and other government papers in the
respective currencies. It also makes investment in the form of short term deposits with
different high rated and reputed commercial banks and purchase of high rated
sovereign/supranational/corporate bonds. A separate department of BB performs the
operational functions regarding investment which is guided by investment policy set by the
BB's Investment Committee headed by a Deputy Governor. The underlying principle of the
investment policy is to ensure the optimum return on investment with minimum market risk.

Interest Rate Policy

Under the Financial sector reform program, a flexible interest policy was formulated.
According to that, banks are free to charge/fix their deposit (Bank /Financial Institutes) and
Lending (Bank /Financial Institutes) rates other than Export Credit. At present, except Pre-
shipment export credit and agricultural lending, there is no interest rate cap on lending for
banks. Yet, banks can differentiate interest rate up to 3% considering comparative risk
elements involved among borrowers in same lending category. With progressive deregulation
of interest rates, banks have been advised to announce the mid-rate of the limit (if any) for
different sectors and the banks may change interest 1.5% more or less than the announced
mid-rate on the basis of the comparative credit risk. Banks upload their deposit and lending
interest rate in their respective website.

Capital Adequacy for Banks and FIs

With a view to strengthening the capital base of banks & FIs, Basel-II Accord has been
introduced in both of these sectors. For banks, full implementation of Basel-II was started in
January 01, 2010 (Guidelines on Risk Based Capital Adequacy for banks). Now, scheduled
banks in Bangladesh are required to maintain Tk. 4 billion or 10% of Total Risk Weighted
Assets as capital, whichever is higher. For FIs, full implementation of Basel-II has been started
in January 01, 2012 (Prudential Guidelines on Capital Adequacy and Market Discipline
(CAMD) for Financial Institutions). Now, FIs in Bangladesh are required to maintain Tk. 1
billion or 10% of Total Risk Weighted Assets as capital, whichever is higher.

Deposit Insurance
The deposit insurance scheme (DIS) was introduced in Bangladesh in August 1984 to act as a
safety net for the depositors. All the scheduled banks Bangladesh are the member of this
scheme Bank Deposit Insurance Act 2000. The purpose of DIS is to help to increase market
discipline, reduce moral hazard in the financial sector and provide safety nets at the minimum
cost to the public in the event of bank failure. A Deposit Insurance Trust Fund (DITF) has also
been created for providing limited protection (not exceeding Taka 0.01 million) to a small
depositor in case of winding up of any bank. The Board of Directors of BB is the Trustee
Board for the DITF. BB has adopted a system of risk based deposit insurance premium rates
applicable for all scheduled banks effective from January - June 2007. According to new
instruction regarding premium rates, problem banks are required to pay 0.09 percent and
private banks other than the problem banks and state owned commercial banks are required to
pay 0.07 percent where the percent coverage of the deposits is taka one hundred thousand per
depositor per bank. With this end in view, BB has already advised the banks for bringing DIS
into the notice of the public through displaying the same in their display board.

Insurance Authority
Insurance Development and Regulatory Authority (IDRA) was instituted on January 26, 2011
as the regulator of insurance industry being empowered by Insurance Development and
Regulatory Act, 2010 by replacing its predecessor, Chief Controller of Insurance. This
institution is operated under Ministry of Finance and a 4 member executive body headed by
Chairman is responsible for its general supervision and direction of business.
IDRA has been established to make the insurance industry as the premier financial service
provider in the country by structuring on an efficient corporate environment, by securing
embryonic aspiration of society and by penetrating deep into all segments for high economic
growth. The mission of IDRA is to protect the interest of the policy holders and other
stakeholders under insurance policy, supervise and regulate the insurance industry effectively,
ensure orderly and systematic growth of the insurance industry and for matters connected
therewith or incidental thereto.

Regulator of Capital Market Intermediaries

Securities and Exchange Commission (SEC) performs the functions to regulate the capital
market intermediaries and issuance of capital and financial instruments by public limited
companies. It was established on June 8, 1993 under the Securities and Exchange Commission
Act, 1993. A 5 member commission headed by a Chairman has the overall responsibility to
administer securities legislation and the Commission is attached to the Ministry of Finance.
The mission of SEC is to protect the interests of securities investors, to develop and maintain
fair, transparent and efficient securities markets and to ensure proper issuance of securities and
compliance with securities laws. The main functions of SEC are:

Regulating the business of the Stock Exchanges or any other securities market.

Registering and regulating the business of stock-brokers, sub-brokers, share transfer

agents, merchant bankers and managers of issues, trustee of trust deeds, registrar of
an issue, underwriters, portfolio managers, investment advisers and other
intermediaries in the securities market.

Registering, monitoring and regulating of collective investment scheme including all

forms of mutual funds.

Monitoring and regulating all authorized self regulatory organizations in the securities
 market.

Prohibiting fraudulent and unfair trade practices in any securities market.

Promoting investors education and providing training for intermediaries of the

securities market.

Prohibiting insider trading in securities.

Regulating the substantial acquisition of shares and take-over of companies.

Undertaking investigation and inspection, inquiries and audit of any issuer or dealer of
securities, the Stock Exchanges and intermediaries and any self regulatory
organization in the securities market.

Conducting research and publishing information.

Regulator of Micro Finance Institutions

To bring Non-government Microfinance Institutions (NGO-MFIs) under a regulatory
framework, the Government of Bangladesh enacted "Microcredit Regulatory Authority Act,
2006" (Act no. 32 of 2006) which came into effect from August 27, 2006. Under this Act, the
Government established Microcredit Regulatory Authority (MRA) with a view to ensuring
transparency and accountability of microcredit activities of the NGO-MFIs in the country. The
Authority is empowered and responsible to implement the said act and to bring the microcredit
sector of the country under a full-fledged regulatory framework.
MRAs mission is to ensure transparency and accountability of microfinance operations of
NGO-MFIs as well as foster sustainable growth of this sector. In order to achieve its mission,
MRA has set itself the task to attain the following goals:

To formulate as well as implement the policies to ensure good governance and

transparent financial systems of MFIs.

To conduct in-depth research on critical microfinance issues and provide policy inputs
to the government consistent with the national strategy for poverty eradication.

To provide training of NGO-MFIs and linking them with the broader financial market
to facilitate sustainable resources and efficient management.

To assist the government to build up an inclusive financial market for economic

development of the country.
 To identify the priorities in the microfinance sector for policy guidance and
dissemination of information to attain the MRAs social responsibility.

According to the Act, the MRA will be responsible for the three primary functions that will
need to be carried out, namely:

Licensing of MFIs with explicit legal powers;

Supervision of MFIs to ensure that they continue to comply with the licensing
requirements; and

Enforcement of sanctions in the event of any MFI failing to meet the licensing and
ongoing supervisory requirements.

Banks
After the independence, banking industry in Bangladesh started its journey with 6 Nationalized
commercialized banks, 2 State owned Specialized banks and 3 Foreign Banks. In the 1980's
banking industry achieved significant expansion with the entrance of private banks. Now, banks
in Bangladesh are primarily of two types:

Scheduled Banks: The banks which get license to operate under Bank Company Act,
1991 (Amended in 2003) are termed as Scheduled Banks.

Non-Scheduled Banks: The banks which are established for special and definite objective
and operate under the acts that are enacted for meeting up those objectives, are termed as
Non-Scheduled Banks. These banks cannot perform all functions of scheduled banks.

There are 56 scheduled banks in Bangladesh who operate under full control and supervision of
Bangladesh Bank which is empowered to do so through Bangladesh Bank Order, 1972 and Bank
Company Act, 1991. Scheduled Banks are classified into following types:

State Owned Commercial Banks (SOCBs): There are 4 SOCBs which are fully or
majorly owned by the Government of Bangladesh.

Specialized Banks (SDBs): 4 specialized banks are now operating which were
established for specific objectives like agricultural or industrial development. These
banks are also fully or majorly owned by the Government of Bangladesh.
 Private Commercial Banks (PCBs): There are 39 private commercial banks which are
majorly owned by the private entities. PCBs can be categorized into two groups:

Conventional PCBs: 31 conventional PCBs are now operating in the industry. They
perform the banking functions in conventional fashion i.e interest based operations.

Islami Shariah based PCBs: There are 8 Islami Shariah based PCBs in Bangladesh and
they execute banking activities according to Islami Shariah based principles i.e. Profit-
Loss Sharing (PLS) mode.

Foreign Commercial Banks (FCBs): 9 FCBs are operating in Bangladesh as the branches
of the banks which are incorporated in abroad.

There are now 4 non-scheduled banks in Bangladesh which are:

Ansar VDP Unnayan Bank,

Karmashangosthan Bank,

Probashi Kollyan Bank,

Jubilee Bank

FIs
Non Bank Financial Institutions (FIs) are those types of financial institutions which are regulated
under Financial Institution Act, 1993 and controlled by Bangladesh Bank. Now, 31 FIs are
operating in Bangladesh while the maiden one was established in 1981. Out of the total, 2 is fully
government owned, 1 is the subsidiary of a SOCB, 13 were initiated by private domestic
initiative and 15 were initiated by joint venture initiative. Major sources of funds of FIs are Term
Deposit (at least six months tenure), Credit Facility from Banks and other FIs, Call Money as
well as Bond and Securitization.
The major difference between banks and FIs are as follows:

FIs cannot issue cheques, pay-orders or demand drafts.

FIs cannot receive demand deposits,

FIs cannot be involved in foreign exchange financing,

FIs can conduct their business operations with diversified financing modes like
syndicated financing, bridge financing, lease financing, securitization instruments, private
placement of equity etc.

Capital Market:
After the independence, establishment of Dhaka Stock Exchange (formerly East Pakistan Stock
Exchange) initiated the pathway of capital market intermediaries in Bangladesh. In 1976,
formation of Investment Corporation of Bangladesh opened the door of professional portfolio
management in institutional form. In last two decades, capital market witnessed number of
institutional and regulatory advancements which has resulted diversified capital market
intermediaries. At present, capital market intermediaries are of following types:

1. Stock Exchanges: Apart from Dhaka Stock Exchange, there is another stock exchange in
Bangladesh that is Chittagong Stock Exchange established in 1995.

2. Central Depository: The only depository system for the transaction and settlement of
financial securities, Central Depository Bangladesh Ltd (CDBL) was formed in 2000
which conducts its operations under Depositories Act 1999, Depositories Regulations
2000, Depository (User) Regulations 2003, and the CDBL by-laws.

3. Stock Dealer/Sock Broker: Under SEC (Stock Dealer, Stock Broker & Authorized
Representative) Rules 2000, these entities are licensed and they are bound to be a
member of any of the two stock exchanges. At present, DSE and CSE have 238 and 136
members respectively.

4. Merchant Banker & Portfolio Manager: These institutions are licensed to operate under
SEC (Merchant Banker & Portfolio Manager Rules) 1996 and 45 institutions have been
licensed by SEC under this rules so far.

5. Asset Management Companies (AMCs): AMCs are authorized to act as issue and
portfolio manager of the mutual funds which are issued under SEC (Mutual Fund) Rules
2001. There are 15 AMCs in Bangladesh at present.

6. Credit Rating Companies (CRCs): CRCs in Bangladesh are licensed under Credit Rating
Companies Rules, 1996 and now, 5 CRCs have been accredited by SEC.

7. Trustees/Custodians: According to rules, all asset backed securitizations and mutual

funds must have an accredited trusty and security custodian. For that purpose, SEC has
licensed 9 institutions as Trustees and 9 institutions as custodians.

8. Investment Corporation of Bangladesh (ICB): ICB is a specialized capital market

intermediary which was established in 1976 through the ordainment of The Investment
Corporation of Bangladesh Ordinance 1976. This ordinance has empowered ICB to
perform all types of capital market intermediation that fall under jurisdiction of SEC. ICB
has three subsidiaries:

8.1. ICB Capital Management Ltd.,

8.2. ICB Asset Management Company Ltd.,
8.3. ICB Securities Trading Company Ltd.
 Insurance Industry

Insurance sector in Bangladesh emerged after independence with 2 nationalized insurance

companies- 1 Life & 1 General; and 1 foreign insurance company. In mid 80s, private sector
insurance companies started to enter in the industry and it got expanded. Now days, 62
companies are operating under Insurance Act 2010. Out of them-

18 are Life Insurance Companies including 1 foreign company and 1 is state-owned

company,

44 General Insurance Companies including 1 state-owned company.

Insurance companies in Bangladesh provide following services:

1. Life insurance,

2. General Insurance,

3. Reinsurance,

4. Micro-insurance,

5. Takaful or Islami insurance.

Microfinance Institutions (MFIs)

The member-based Microfinance Institutions (MFIs) constitute a rapidly growing

segment of the Rural Financial Market (RFM) in Bangladesh. Microcredit programs
(MCP) in Bangladesh are implemented by various formal financial institutions
(nationalized commercial banks and specialized banks), specialized government
organizations and Non-Government Organizations (NGOs). The growth in the MFI
sector, in terms of the number of MFI as well as total membership, was phenomenal
during the 1990s and continues till today.

Despite the fact that more than a thousand of institutions are operating microcredit
programs, but only 10 large Microcredit Institutions (MFIs) and Grameen Bank
represent 87% of total savings of the sector and 81% of total outstanding loan of
the sector. Through the financial services of microcredit, the poor people are
engaging themselves in various income generating activities and around 30 million
poor people are directly benefited from microcredit programs.

Credit services of this sector can be categorized into six broad groups: i) general
microcredit for small-scale self employment based activities, ii) microenterprise
loans, iii) loans for ultra poor, iv) agricultural loans, v) seasonal loans, and vi) loans
for disaster management. Currently, 599 institutions (as of October 10 2011) have
been licensed by MRA to operate Micro Credit Programs. But, Grameen Bank is out
of the jurisdiction of MRA as it is operated under a distinct legislation- Grameen
Bank Ordinance, 1983.

Recent Developments in Financial Sector of

Bangladesh Related links
Automation and Technological Development: Financial system overview
Banking sector experienced remarkable progress in About financial markets
respect of automation in functioning in last several Regulators
years. For the pro-active and forward-visioning Bank & FIs
approach of Bangladesh Bank, numbers of automation
Capital market
initiatives have been implemented in banking sector.
These initiatives include: Insurance
Micro Finance Institutions (MFIs)
To create a disciplined environment for Key financial indicators
borrowing, the automated Credit Information Print this page
Bureau (CIB) service provides credit related
information for prospective and existing
borrowers. With this improved and efficient
system, risk management will be more
effective. Banks and financial institutions may
furnish credit information to CIB database 24
by 7 around the year; and they can access
credit reports from CIB online instantly.

L/C Monitoring System has been introduced

for preservation and using the all necessary
information regarding L/C by the banks
through BB website. This system allows the
authorized users of banks to upload and
download their L/C information.

In terms of article 36(3) of Bangladesh Bank

Order, 1972, all scheduled banks are subject to
submit Weekly Statement of Position as at the
close of business on every Thursday to the
Department of Off-site Supervision. This
statement now is submitted through on-line
using the web upload service of BB website
within o3 (three) working days after the
reporting date which is much more time and
 labor efficient that the earlier manual system.

The e-Returns service has been introduced

which is An Online Portal Service for
Scheduled Banks to submit Electronic Returns
using predefined template for the purpose of
Macro Economy Analysis through related BB
Departments.

Online Export Monitoring System is used for

monitoring export of Bangladesh. Through
this service, Banks and AD Branches of Banks
issue & reports export report.

Bangladesh Automated Clearing House

(BACH) started to work by replacing the
ancient manual clearing system which allows
the inter-bank cheques and similar type
instruments to be to settled in instant manner.

Electronic Fund Transfer (EFT) has been

introduced which facilitates the banks to make
bulk payments instantly and using least paper
and manpower.

The initiation of Mobile Banking has been one

of the most noteworthy advancement in
banking. Through this system, franchises of
banks through mobile operators can provide
banking service to even the remotest corner of
the country.

Almost every commercial bank is now using

their own core banking solution which has
made banking very faster and efficient. Usage
of plastic money has much more increased in
daily life transactions. Full or partial online
banking is now being practiced by almost
every bank.

Inauguration of internet trading in both of the bourses

(DSE & CSE) in the country is the most significant
advancement for capital market in last several years.
Micro Finance Institutions submit their reports to the
regulator through the Online Report Submission Tools
for MFIs.

Institutional Development:
Through the Central Bank Strengthening Project, there have been a good number of
achievements regarding the institutional development in BB which can be observed below:

The implementation of Enterprise Resource Planning (ERP) has been a big step in
automation of operational structure of BB.

The establishment of Enterprise Data Warehouse (under process) will bring the whole
banking and FI industry under a single network through which data sharing, reporting and
supervision will enter in a new horizon.

Bangladesh Bank now possesses the most informative and resourceful website of the
country regarding economic and financial information.

Internal networking system with required online communication facilities have been
developed and in operation for the officers of BB.

BB has hosted number of international seminars on different economic and financial

issues over last several years.

MRA was established in 2006 for bringing NGO-MFIs under supervision. For the pro active role
of MRA, this sector (MFI) is now in a good shape regarding the accountability and regulation.
For abolishing anomaly and fetching discipline in insurance industry, IDRA was established in
2011. In one year, IDRA has taken number of appreciable steps to regularize this industry.
After the massive crash of local bourses in 2010-2011, the executive body of SEC was
redesigned in full and some good results have come after that.

Regulatory Development:
Banking and FI industries have experienced diversified regulatory development over last few
years:

Full implementation of Basel-II (International capital adequacy standard) accord has been
in effect in both banking and FI industry.

Guidelines on Environmental and Climate Change Risk Management for banks and FIs
have been circulated. Policy guidelines on Green Banking also have been issued.

Guidelines on Stress Testing for banks and FIs have been issued which is aimed to assess
 the resilience of banks and FIs under different adverse situations.

Number of Policy initiatives for Financial Inclusion has been undertaken.

Banks have been asked to build up separate Risk Management Unit for comprehensive
and intensive risk management.

Banks have been instructed to create separate subsidiary for capital market operations and
capital market operations of banks are now minutely monitored.

Supervision has been intensified to increase the participation of banks in Corporate Social
Responsibility (CSR).

For the efficient and timely action of BB, foreign exchange reserve of Bangladesh did not
face any adversity during global financial turmoil of 2007-09.

To meet international standard on Anti Money Laundering (AML)/Combating Financing

of Terrorism (CFT) issues, guidelines for Money Changers, Insurance Companies and
Postal Remittance have already been circulated.

SEC has updated Public Issue Rules, 2006 and Mutual Fund Rules, 2001. Apart from that,
numbers of AMCs, merchant banks and are Mutual Funds are permitted by SEC which has
increased the participation of institutional investors. The trend of capital market research has
been upward which indicates the potential of analytical investment decision.

Insurance Act 2010 was formulated to meet demand of concurrent time for shifting the insurance
industry in a better shape. Apart from that, several initiatives have been undertaken by IDRA for
prohibiting the malpractices in the industry regarding insurance commission, agent, premium etc
and corporate governance issues.