Welcome to our Presentation

Influences of reforms in banking sector of bangladesh.

Group 10

Group members
Name Sanjana Haque Tauhidul Islam Priyanka Choudhury Saiful Islam Sohel Mia Inur Nahar Lipi Mir Ehsanul Haque Nazmul Islam Mohammad Kawser Hasan ID 16070 16071 16073 16072 16074 16019 16068 16069 16020

Reforms
Unified secondary
exchange market rate- 1991

Influence
Increase in foreign reserve Tk.7485crore in 9697 from Tk.452 in 80-81.

Scope
Rapid expansion of external sector of our economy.

Foreign can invest in capital market.

Reforms in fiscal policy

Raise revenue GDP by 1.5% by 97-98. Increase in the rate of investment to around 18%20%.

Increased

domestic
resource mobilization.

Reform

Influence
Expansion in the monetary aggregate. Contraction of credit to private sector.

Scope
Broaden the scope of borrowing by Govt. Provides short term investment by banks.

Development of bond market

Capital market
development

After 1996 declining price index. Ratio of loan from ICB raised from 1:2 to 1:3.

Entry of merchant bank.

Attract foreign capital.

Monetary Policy reforms

Situation
In the first years after liberation, the primary target of monetary policy was to regulate the direction of the flow of money and credit

Reforms
In 1975, Bangladesh entered into a standbyarrangement with IMF and the country's monetary policy got a changed shape

Influence
Bangladesh Bank started setting short-term objectives of monetary policy in close collaboration of the government

Scope
The banking system could not play its role as an effective financial intermediary for the 1975 reforms

Until 1990, the lending rate of the central bank for borrowings of the commercial banks to meet their temporary needs was non-existent

In 1989, the government adopted a comprehensive Financial Sector Reform Program

The monetary policy therefore, could not function in its true sense

Bangladesh Bank started moving away from direct quantitative monetary control to indirect methods of monetary management since the beginning of 1990.

Situation
At present, the money supply is regulated through indirect manipulation of reserve money instead of credit ceiling

Reforms
From 2000- 2010 banks have been instructed to prepare their financial statements on accrual basis, banks are advised to operate merchant banking activities ,Guideline on Risk Based Capital Adequacy for Banks (Basel II) was introduced

Influence
Bangladesh bank will focus more on interest rate spread to keep it below 5%

Govt. is trying to raise funds

The capital market is having a huge crash

In 2012 contractionary monetary policy has been taken

Govt. is urged to lower borrowing from banking sector by increasing interest rates

Situation
Financially depressed in1980s

Reform s
Privatizatio n

Influenc e
More efficiency in deposit mobilization More competitiveness in providing better services Concentration of operations in the urban Charge different interest rate based on period & risk(1980s-1990s) Reduction of Bank Rate and Lending Rate (2001 )

Scope
Expansion Better services to compete Merger

Liberalizati on of interest rate

Choose to select deposits on basis of interest rate

Situatio n Disburse of loan

able fund of banks in publicly directed sectors

Reform CIB & s Measures

for Loan Recovery(19971999)

Influence

Scope

Collect all credit information of the borrowers Provide credit information to all banks Prepare credit reports Provide relevant data on bank credit Prepare & provide credit risk rating Classify of bad & non performing loans Keep provisions for banks Linking Classified Loan Level to Large Loan Sanctioning The risk of default Sustain operating losses

Chance to overview banks all credit information

New loan classification

Effective loan identifying and implementation

Proper capital positioning

Capital adequacy requirement

Situatio n
The weakness of internal control system

On site & off site supervision Decision on CRR & SLR Merger of Loss Incurring Branches(2002).

Reform s

Influenc Continuously incurring losses for e last five the

years keep at least one branch within five kilometer radius Loan sanctioning power to the MDs (7.5% of capital ) The banks' budget, employment and transfer policy, training policy, business risk & management policy etc on the Board Monitoring the internal control system on Board

Scope
Dropping the chance to minimize loss

Delegation of Power and Responsibility(2002)

New and effective authority to implement budget and corporate goals.

Capital market reforms:

Fiscal incentives. Establishment of SEC as regulatory body. Capital gains from bank share made tax free. An allocation of 5%share of new IPO for non residents.

Influence of these reforms:

Existing

company can not take the opportunity of fiscal incentives. Only listed company can invest in the capital market. Bank can finance loans against share and debenture. The ratio of loan from ICB has been raised from 1:2 to 1:3.

Scope:
1)The outflow on account of portfolio investment was much higher than the inflow.
2) Make quick profit by exploiting the manipulated stock market. 3)More liberal policies have been put forward to issue licenses to new merchant banks. 4)Make more opportunity for banks and foreign investor.

References:
www.bangladesh-bank.org http://www.tradingeconomics.com/bangladesh/ indicators http://en.wikipedia.org/wiki/Economy_of_Bangl adesh

Thank you