‘Overview of financial system in Bangladesh’

Jasfia Khanam FamaID:133200105

Functions of Financial Market

Financial market in Bangladesh essentially consists of banks and non-bank financial institutions and capital market

4 state owned commercial banks (SCBs), 30 private commercial banks (PCBs), 9 foreign commercial banks (FCBs), 4 government owned specialized banks, 29 non-banking financial institutions (NFIs).

Besides, several non-scheduled banks like, Investment Corporation of Bangladesh (ICB), House Building Finance Corporation (HBFC), Dhaka Stock Exchange (DSE), and Chittagong Stock Exchange (CSE)

Non-bank Financial Institutions

• 30 licensed non-bank financial institutions in the country until 30 June 2014

• Total paid up capital and reserve of these institutions stood at Tk.5,098.77 crore as on 30 June, 2014, in which paid up capital was Tk.2,200.50 crore.

Structure Of Financial Market

Debt and Equity Market

An amount of money borrowed by one party from another. Many corporations/individuals use debt as a method for making large purchases that they could not afford under normal circumstances

A stock or any other security representing an ownership interest

Primary and Secondary Market

A market that issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities

A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves

Foreign exchange market: The foreign exchange market is where currencies are traded.

OTC market: The over-the-counter (OTC) market is a type of secondary market also referred to as a dealer market.

Money market Capital Market

Treasury BillsCommercial PaperNegotiable Certificate of depositsBanker Acceptances

Share: Ordinary Share, Preference ShareMutual FundDebt SecuritiesDebentureBond

Internationalization of Financial Market

Banglalink Digital Communications issued five year dollar transaction

Bangladesh offers generous opportunities for investment

The Board of Investment (BOI),

Prizebond and Shanchaypatra are two facilities for local Bangladeshi citizens.

Eurobond and Eurocurrencies

Exchange rates of Taka for inter-bank and customer transactions are set by the dealer banks, based on demand-supply interaction.

The U.S. Dollar Investment Bond(By Bangladesh Bank)

Bond Type : Bangladesh Government Savings Bond

Bond Denomination : $ 500$ 1,000$ 5,000, $ 10,000 and $50,000

Maturity Period : 3 yrs

Interest Rate : 6.5% on Maturity (in US $)

Eligible Purchaser : Bangladeshi Nationals & Foreign Nationals residing abroad

Special Benefits

The functions of Financial Intermediaries

General Functions

Creation of medium of exchange Central Bank has got exclusive right to issue notes.

Contribution in foreign tradeCommercial Bank plays a vital role in expediting foreign exchange and foreign trade business e.g. import, export etc.

Receiving Deposits

The first and foremost function of commercial bank is to receive or collect deposits from the public in different forms of accounts e.g. current, savings, term deposits.

Public Utility Functions

Remittance of Money

Help in trade and commerce

Safe custody of valuables

Remittance of money to the public from one place to another is one of the functions of commercial bank

Commercial Bank helps expand trade and commerce by allowing credit accommodation in the form of letter of credit, bill purchased and discounted etc

Commercial Bank introduces ‘locker’ services to the customers for safe custody of valuables e.g. documents, shares, securities etc.

Agency Functions

Collection and paymentCommercial Bank is engaged in collection and payment of cheque, bill of exchange, promissory notes, pension, dividends, subscription, insurance premium, interest etc. on behalf of the clients.

Maintenance of secrecy

Economic Development and Welfare activities

Maintenance of secrecy is one of the most important functions of commercial bank.

Commercial Bank contributes much for the welfare and economic development of the country

Contractual Savings Institutions

Types of Financial Intermediaries

Fire and Casualty Insurance Companies

Investment Intermediaries

Life insuranceAmerican Life Insurance Company (Foreign Company) Farest Islami Life Insurance Co. Ltd. Meghna Life Insurance Company Ltd.

Stock ExchangesCentral DepositoryCentral Depository Bangladesh Ltd (CDBL)Stock Dealer/Sock Broker:Asset Management Companies (AMCs):Credit Rating Companies (CRCs

liability coverage of an individual or organization for negligent acts or omissions.

Pension System

Finance Companies Mutual Fund

Leave Preparatory to Retirement (LPR) Gratuity Family Pension Government Accommodation Benevolent Fund Group Insurance

Depositary Institutions Contractual Institutions Investment Institutions

Three major types Open-ended fund operated by an investment company

Mutual funds raise money by selling shares of the fund to the public

QUESTIONS?