Md.

Rakibul Hasan Rony

The Functions of Bangladesh Bank

BBA in Marketing JAGANNATH

UNIVERSITY
 Contents
INTRODUCTION 1
STANDARDCHARTEREDBANK 1 HONGKONGANDSHANGHAIBANKINGCORPORATION 11
STANDARDCHARTEREDBANKINBANGLADESH 2 HSBCINBANGLADESH 11
BranchesandofficesinBangladesh 2 KeyBusinessAreas 12
Business&Strategy 2 BranchesandofficesinBangladesh 12
Pers onal B ank ing 2 Business&StrategyofHSBC 12
Priority B ank ing 2 Pers onal B ank ing 13
ProductsandServices 3 Commercial B ank ing 13
Loa ns 3 Cor p orate and In stit utional B ank ing 13
Auto Loan 4 HSBCnet 13
Personal Loan & Flexi Loan 4 Trade & Supply Chai ns 13
Home Loan 4 Pay ment s and Ca sh Manage ment 13
Accounts 4 C ust ody and Cl e ar i ng 13
Super Savers Account 4 In vest men t B ank ing and Markets 14
eSavers Account 5
VIP Current Account 5
Tr e asur y an d Capi tal M ar k e ts 14
Foreign Currency (FCY) Current Account 5 ProductsandServicesofHSBC 14
Convertible & Non-Convertible Current Account 5 Loa ns 14
Credit Card 5 Sa vings Plan 14
Debit Card 6 Services f or n on -residen t B angladeshis 15
Prepaid Gift Card 6 Pers onal Fi nancial Services 15
ATM Cards 6 Power Vantage Acc ount 15
SMEBanking 6 HSBC Select 15
B usi ne s s In stal l me nt L oan 7 B usi ne s s B ank i ng 16
Orjon 7 Cor p orate Credit 16
Transacti on Ser vice in SME B ank ing 7 Exp ort Services 16
Straight 2 Bank 7 Imp ort Services 16
Door Ste p B ank ing 7 Trade Expres s 17
Saadiq”ForIslamicBanking 8 “Amanah”ForIslamicBanking 17
Saadiq Deposit Accounts 8 Ama nah C ur r e nt Ac c ount 17
Saadiq Current Account 8 Ama nah I mp ort Fina nce 18
Saadiq Savings Account 8 OthersServices 18
Saadiq Term Deposits Account 8 C ust ome r Se r vi c e Ce ntr e 18
Saadi q Fi nanc i ng Pr od uc t s 9 Easy Pay 18
Saadiq Auto Finance 9 Call Centre 19
Saadiq Personal Finance 9 ATM Card 19
Saadiq Home Finance 9
Phone B anking 19
Saadiq Cards 9
Saadiq Debit Card 9
CONCLUSION 20
Saadiq Credit Card 9
OthersServices 10
24- h our C on tac t Ce ntr e 10
B ills Pay Centre 10
Internet Banking 11
SMS Banking 11
E-State ments 11
This paper provides you a clear concept of several functions of Bangladesh Bank.
You also clarified about central bank and Bangladesh Bank as a central bank of
Bangladesh government. Here we have tried to accumulate all sorts of key functions
of Bangladesh Bank as a bank of Bangladesh government. Also we discuss what
Bangladesh Bank does as a leader of all banks in Bangladesh.

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. 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.

A central bank, reserve bank, or monetary authority is a banking institution granted

the exclusive privilege to lend a government its currency. Like a normal commercial
bank, a central bank charges interest on the loans made to borrowers, primarily the
government of whichever country the bank exists for, and to other commercial banks,
typically as a 'lender of last resort'. However, a central bank is distinguished from a
normal commercial bank because it has a monopoly on creating the currency of that
nation, which is loaned to the government in the form of legal tender. It is a bank that
can lend money to other banks in times of need. Its primary function is to provide the
nation's money supply, but more active duties include controlling subsidized-loan
interest rates, and acting as a lender of last resort to the banking sector during times of
financial crisis (private banks often being integral to the national financial system). It
may also have supervisory powers, to ensure that banks and other financial
institutions do not behave recklessly or fraudulently.

Most richer countries today have an "independent" central bank, that is, one which
operates under rules designed to prevent political interference. Examples include the
European Central Bank (ECB) and the Federal Reserve System in the United States.
Some central banks are publicly owned, and others are privately owned. For example,
the United States Federal Reserve is a quasi-public corporation.

Bangladesh Bank is the Central bank of Bangladesh. It is the 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.

Bangladesh Bank headquarters in Motijheel. 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.
Bangladesh Bank performs all the functions that a central bank of any country is
expected to perform. But here is some major objective in the bank;

a) To regulate the issue of the currency and the keeping of reserves;

b) 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 for the national interest.

The first and most important function of a central bank is to accept responsibility for
advising the government on the making of the country’s financial policy, and thus to
see that it is carried out. The government must decide how much money there shall be
in the country at a given time, and the central bank must take steps to increase or
decrease the supply accordingly. Then provide money for the government during the
time when public expenditure had become too expensive to be financed out of current
taxation. Its business at first was the receiving of money on deposit and lending of
money against satisfactory security. Now let’s look at little brief of some of them:

 Supervision of the banking system

 Advising the government on monetary policy
 Issue of banknotes
 Acting as banker to other banks
 Acting as banker to government
 Raising money for the government
 Controlling the nation’s currency reserves
 Acting as “ lender of last resort”
 Credit control
  Money market control
 Foreign exchange control
 Determination of foreign exchange rate
 Maintaining foreign exchange reserve
 Keeping the gold standard
 Creating job opportunity
 Maintain of government’s fund
 Received and transfer of money
 Keeping the government account
 Foreign financial transaction
 Loan issue and supervision
 Maintenance of relationship with foreign bank
 Counselor and representative of government
 Implementation of financial policy of government
 Revenue collection
 Maintenance of information
 Co-coordinator
 Formation & expansion of bank
 Enlistment of commercial bank
 Custodian of the cash reserve of the commercial banks
 Clearing house
 Audit of accounts
 Maintenance of deposit
 Act as an advisor
 Assist to collect credit
 New branches
 Control
 Representative of other banks

The Central Bank is a financial institution charged with several functions: Let’s do a
little bit of discussion on it:

Supervision of the Banking System

Central Bank is the leader of all banks in Bangladesh. It supervises the banking
system of the country. Why not Central may be responsible for banking system. They
collect information from commercial bank and take necessary decision by two ways-
a) bank examine and b) bank regulation. When a bank takes decision for customer or
others, Central Bank examines it and gives permission for implement or eliminates
the project. Central Bank also make project for customer and advice to implement in
Other Banks.

Advising the Government on Monetary Policy

Monetary policy is a most important issue for economic. The decision on monetary
policy may be taken by the central bank. Monetary policy refers to interest rates and
money supply. The central bank will corporate with the government on economic
policy generally and will produce advice on monetary policy and economic matters,
including all the statistics.

Issue of Banknotes
Money is a key of economy. The central bank controls the issue of banknotes and
coins. Most payment these days does not involve cash but cheques, standing order,
direct debit, credit cards and so on. Nevertheless, cash is important as bank’s cash
holdings are a constraint on creation of credit, as we have seen.

Acting as Banker to Other Banks

The Central bank will act as banker to the other banks in the country. As well as
holding accounts with international bodies like IMF World bank. It is a common habit
for the central bank to insist that the other banks hold non-interest bearing reserves
with in proportion to their deposit.

Acting As Banker to Government

Normally a central bank acts as the government’s banker. It receives revenues for
Taxes and other income and pay out money for the government’s expenditure.
Usually, it will not lend to the government but will help the government to borrow
money by the sales of its bill and bonds.

Raising Money for the Government

The government Treasury bill and bond markets are covered by the central bank.
While sometimes the treasury or ministry of finance handle.

Controlling the Nation’s Currency Reserves

Another main function of Bangladesh Bank is to control the nation’s currency
reserves. Again by controlling the exchanging rate, it protects the value of national
currency in international market. So in a short, Bangladesh Bank always attempts to
maintain the value of national currency steady.

Acting as “Lender of Last Resort”

When all kinds of enlisted bank or govt. cannot collect loans in times of their
economical crisis from anywhere, then Bangladesh Bank is only the bank which helps
as the lender of last resort.

Credit Control
To solve the problem of inflation and deflation, Bangladesh Bank takes the task of
credit control as the guardian of country’s money market and bank management. For
controlling credit central bank uses the method of opening market policy, credit
budgeting policy.

Received and Transfer Of Money

As the bank of Bangladesh government, Bangladesh Bank collects money from
different sectors and deposit these is various accounts without interest not only
deposit these money but also transfer these fund from one place to another and one
sector to another according to the instruction of Bangladesh government

Money Market Control

Bangladesh Bank acts as the guardian of country’s money market as the director and
controller of money market. It also controls the money currency, controls credit,
stability in money supply and exchange rate of foreign currency etc. It establishes a
country’s well organized and develops money market.
Foreign Exchange Control
The country’s export and import as well as international trade success rate largely
depend on the good conduct and control of foreign exchange. So foreign exchange
system is also controlled by Bangladesh.
Determination of Foreign Exchange Rate
By purchasing commodities from other country one country paid its value through
foreign currency. The value of all foreign currency is not same, so right determination
of foreign exchange rate is needed by performing this task central bank made easy the
foreign trade.

Maintaining Foreign Exchange Reserve

High level of crisis and abundance of foreign exchange are harmful for economy. So
this reason Bangladesh Bank maintains sufficient foreign exchange, so that there is no
problem in case of export and import trade.

Keeping the Gold Standard

The precondition of country’s economic stability is to control countries gold standard.
If the money market is stranded on the basis of gold standard, the main task of central
bank is to keep gold standard.

Creating Job Opportunity

By permitting and adopting developing project for opening new bank and branch,
Bangladesh Bank creates enormous opportunity for employment in Bangladesh.

Maintain of Government’s Fund

As Bangladesh Bank is the bank of Bangladesh government. So it protects all sorts of
government’s fund as a bank of government, Bangladesh Bank keeps to itself the
whole amount of government’s income and expenditures from this fund according to
government needs.

Keeping the Government Account

Besides receiving and transferring government fund, Bangladesh Bank maintains the
account of various government’s division, ministry and organizations i.e. Bangladesh
Bank keeps the account of all monetary and economical transactions.
Foreign Financial Transaction
On behalf of the Bangladesh government Bangladesh Bank accomplish all sorts of
foreign financial transaction. It purchases and sells foreign currency and collects
foreign currency on behalf of the Bangladesh government in a word Bangladesh Bank
perform all sorts of financial transaction with abroad on behalf the Bangladesh
government.

Loan Issue and Supervision

This bank issue loan in case of crisis of government in different terms and also helps
in case of collecting loan from different sectors.

Maintenance of Relationship with Foreign Bank

To make and maintains a good relationship with other foreign country. This is also a
function of Bangladesh Bank. Bangladesh Bank does this task on behalf of the
Bangladesh government. Without this, Bangladesh Bank also maintain good
relationship with others regional and international organization, such as World Bank,
IMF, A.D.B, I.D.B etc.

Counselor and Representative of Government

This bank suggests and advices government in various behinds of economical issues
such as-import and export polices, investment polices etc. Bangladesh Bank acts as
the financial adviser of Bangladesh government. Not only as adviser but also
Bangladesh Bank acts as the agent of Bangladesh government. It performs various
kinds of contracts and transactions with foreign and abroad.

Implementation of Financial Policy of Government

It doesn’t merely give advice to government. It also helps in implementing of
different types of financial policy without the help of Bangladesh Bank it is much
more complicated for the Bangladesh government to implement financial policies and
economic developments.

Revenue Collection
As the bank of govt. Bangladesh Bank helps to collect revenue by collecting different
types of tax, duty.

Maintenance of Information
Bangladesh Bank does the task of collecting and reserving all sorts of information’s
which are much helpful in case of various governmental planning.
Co-coordinator
Bangladesh Bank plays the role of co-coordinator by maintaining relationship with
others foreign banks & international economical organizations.
Enlistment of Commercial Bank
Through enlistment commercial banks take various privileges of Bangladesh Bank,
There is need of permission of Bangladesh Bank for establishing conducting &
enlisting any other kind of banks

Custodian of the Cash Reserve of the Commercial Banks

Every enlisted bank deposit a certain amount of their cash reserve compulsorily
according to low. In Bangladesh this rate is 8%. As a result, Bangladesh Bank
supervises all kinds of commercial banks & helps by profiling loan & distributing bill
in times of economical crisis.
Formation & Expansion of Bank
Bangladesh Bank plays a vital role in case of formatting & expanding any kinds of
new & old bank in our country. Actually without the permission of Bangladesh Bank,
no new bank can be formatted as well as no branch of old bank can be opened.

Clearing House
Among various functions of central bank, the most one is accomplishing the internal
transactions of all enlisted bank. For this purpose Bangladesh Bank mange a clearing
house by the coordination of all member banks. Bangladesh Bank meets up the all
sorts of relative/reciprocal transactions with in the banks.

Audit of Accounts
For building fair banking environment in the country and for controlling all other
banks Bangladesh Bank arranges the accounts of audit for several times for all kinds
of enlisted and all other banks.

Maintenance of Deposit
Bangladesh Bank deposits a certain amount of their reserve so that commercial banks
cannot use this fund as their awards.

Act As an Advisor
Bangladesh Bank delivers’ suggestions or an instruction to commercial banks by
providing various kinds of financial information. Bangladesh Bank helps the
commercial banks as well.
Assist To Collect Credit
Bangladesh Bank assists to collect credit through commercial bank. Regarding this,
Bangladesh Bank suggests the government apply law at a time, it also take lawful
schemes. It makes a list of countries bankrupts & assists government to collect credit.

After a little bit of discussion on the function of Bangladesh Bank as a central bank of
Bangladesh government, we can easily understand about the whole activities of
Bangladesh Bank relating to banking, economic development, making policies, doing
job for the government, making rules and regulation for several financial
organizations, controlling the money market and social development works etc. 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. 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.
BBAMBA, (2010). Functions-of-Central-Banks, taken from an undefined article,
available at http://bbamba.info/Articles/Business/Functions-of-Central-
Banks.html.

Khalekkuzzaman, M. (2007). Functions of Central Bank, Banking & Insurance, The

Jomuna Pablisers.

Ullah, P.A., Jui, R. P. and Kalam, M. A. (2002). Functions of Central Bank, Central
Banking Theory, Banking & Insurance, Commerce Publications. pp. 231-234.