Accountant January-March 2013

January - March 2013
Bank
Audit
How much is Enough?
BANK AUDIT: HOW MUCH IS ENOUGH!
CONTENTS
EDITORIAL BOARD
ISSN 1993-3649
Editorial
Presidents Desk
2
3
ARTICLES
Green Banking and Sustainable Development: 5
the Case of Bangladesh
- Atiur Rahman Ph.D
Md. Abdus Salam FCA
Gopal Chandra Ghosh FCA
Akhtar Sohel Kasem FCA
Masih Malik Chowdhury FCA
Nasir Uddin Ahmed FCA
Sabbir Ahmed FCA
Md. Sayeed Ahmed FCA
Mahmudul Hasan Khusru FCA
Md. Abu Bakar FCA
Md. Mahamud Hosain FCA
Mohammed Jashim Uddin FCA
Snehasish Barua FCA
Ajit Kumar Paul FCA
Md. Abid Hossain Khan FCA
Muhammmad Aminul Hoque ACA
Zareen Hosein ACA
Md. Shahidul Islam ACA
Dipok Kumar Roy ACA
Chairman DRC-ICAB
Chairman CRC-ICAB
S M Abu Nayem Ahmed, psc

Sqn Ldr (Retd.)
Senior Deputy Secretary-ICAB
Bank Audit How Much should it be enough; 9

in light of relevant Auditing Standards and
Auditing Practice Statements
- Sabbir Ahmed FCA
Audit of Local and International

Commercial Banks:
15
Profitability Trend in the Banking Sector of

Bangladesh- a Comparative Study of
Islamic and Conventional Banks
22
an overview of Practices and Procedures

- M Jalal Hussain FCA
- Ishter Mahal1
- Benazir Rahman2
Laws and regulations for accounting system 36

- Md Shahadat Hossain FCA
Recent Monetary Policy & Economic Trends 41

- Ahmad Dawood FCA, FCMA
National Finance Performance & Stability
49
A Tribute to Late Mufazzal Hossain

Chowdhury FCA
71
- an Analysis to Reform & Retreat with Integrated Policy

- Dipok Kumar Roy ACA
- Parveen Mahmud FCA
Preparing Accountants for Future Challenges 77

- ICAB Presidents interview with the Daily Star
Proposals from ICAB on National Budget

2013-14
79
DISCLAIMER
"The opinions expressed in this publication are those of the
respective authors themselves and do not necessarily reflect the
views of the Editorial Board of the Institute of Chartered Accountants of Bangladesh (ICAB) or the ICAB itself."
EDIT ORIAL
As the technological
improvements and competitive
environment changes, so is the
risk of financial markets and
economic fraud all around the
world. As an answer to these
new threats, the need to ensure
transparent accounting and
reporting standards cannot be
overstated for the overall
economic success of a country.
To cope up, auditors need to
adapt with the rapidly changing
banking industry and the
present concerns including:
continuous auditing, regulatory
changes, fraud, Enterprise Risk
Management, social media and
internet risks. Inview of this,
the issue would offer an
opportunity to gain insights into
the current hidden and
unknown facts and anomalies
centering Bank that is haunting
public perception with a sense
of insecurity. The issues are not
unknown to the world history.
The best recognized bank
offered best report even gave
rise to corporate fraud shaking
the country's financial sector.
For our country, the dimension
may vary compared to other
modern economy. We tend to
forget once it is over. The real
perpetrator sometimes remains
beyond touch.
On the recent financial
irregularities of some
Companies; the issue has come

forefront. It is surprising that
how a company
misappropriated more than Tk
2,500 crore from a Bank. The
banks internal audit department
could not spot any irregularity.
This could have been otherwise,
if the Banks would appoint the
right professional in their
branches. On the other hand,
many thought that it is not
possible to audit all the offices
or branches of an office,
company or bank. The audit is
done randomly, on a
risk-weighted basis. So, one is
ikely to ponder about the
process of bank audit; what and
how much is feasible?
It is imperative to think about
Banks Audit in the present
context as it is experiencing
rising trend of financial frauds.
The depositors are likely to lose
their confidence in the banks as
some major of irregularities in
the banking sector has recently
been surfaced by the
newspapers and electronic
media reports. New banks are in
the line. In this context, the
banks audit reports are
considered very important to
seal the possibility of recurrence
of such misappropriation and to
bring back peoples confidence.
As we know, in the present free
trade market economy, the
banking sector is the backbone
of economy. Bank is the media
to accelerate the trade and
commerce including export and
import of the country. In the
global context, the role of banks
is far-reaching and more
penetrating in the economic
arena more than that of past.

Bangladesh has a mixed
banking system. Different types
of audits have been carried out
in the banks considering
auditing rules. Every country
has specific laws, rules and
regulations on Banking
Company. Generally, the
Auditors follow the local and
international standards and
guide lines while conducting
an audit of a bank.
Recently, the Cabinet approved
in principle the draft of the
Bank Company (Amendment)
Bill, 2013. I believe, it will
strengthen the country's
banking system. It is true that
the Banks are facing
unprecedented change in
technology and regulation,
Social networking, eBanking
and regulatory reform are just a
few of the current challenges
bank auditors must tackle.
Critical to the auditors ability
to deal with these changes is
probably a flexible audit plan
and right input from
management. Failure to deal
with the malpractices can be
fatal for the financial health of
the country.
In fine, I would, as usual, look
forward to feedbacks from our
esteemed readers, the valuable
suggestions and opinions
would greatly help to add the
quality of our journal.
M. Farhad Hussain FCA

Chairman, Editorial Board
The Bangladesh Accountant
PRESIDENTS DESK
Instilling more Trust
and Confidence
As I take over the presidency, I
consider it to be a sacred duty to
uphold the interests of the
Profession and contribute to the
Accounting and private sector
Auditing. We cannot stop till we
get the result, we expect. To
hold the continuity of our
progress and advancement, I will
not leave any dearth of my effort
to discharge my function as the
President of the Institute. I must
be able to do justice to the trust
and confidence bestowed upon
me by the members.
In this quarter, I raised different
pending issues with the
Minister/Secretary/Officials of
Regulatory Bodies and convey
different contentious issues to
them like utilization/
engagement of more Chartered
Accountants in different
Division/Bodies/Projects under
the Ministries, allocation of land
for ICAB Academic Campus,
approval of the ICAB submitted
Project proposal lying in the
Planning Commission, engaging
more Chartered Accountants in
the banking sector etc. We
pointed out contradiction
between IFRSs & IASs and Bank
Company Act, 1991 & some
BRPD circulars of Bangladesh
Bank which is required to be
amended for the sake of
exercising sound accounting
practices in Bangladesh.
According to the proposal of Mr.
Wilson Vargheso, Senior

Economist, Monetary and Capital
Markets Development, Technical
Assistance Division, International
Monetary Fund (IMF), ICAB is
working closely with Bangladesh
Bank for the sake of
strengthening the internal control
of the central bank to arrange at
least 6-months training for newly
qualified CAs in Bangladesh
Bank and other commercial
banks to attract more CAs in the
banking profession, encourage
Bangladesh Bank to prefer
accounting background
professionals during their new
recruitment etc. We truly believe
that CA firms can play a
significant role in thorough
auditing the functions of the
branches of the banks. It will
undoubtedly, bring good result,
if we could involve the adequate
number of Chartered
Accountants, aiming towards
minimizing
embezzlement/fraudulence.
As part of their expression of
trust and confidence on ICAB,
the NBR officials in this year also
continued to take training on
Tax Audit for Tax Officials for
5th batch and 6th batch in the
month of January 2013 under the
TACTS project in collaboration
with DFID, a UK based
development assistant partner.
As we keep extending our good
wishes and expertise
cooperation, ICAB conducted
Training on IFRS and IAS for

Bangladesh Bank officials in the
month of February and March
2013. ICAB, first time of its kind,
organized this training and a
total of 35 mid level Bangladesh
Bank Officials Comprising Joint
Directors, Deputy Directors and
Assistant Directors participate in
the training. Topics ranging from
Financial Reporting, Financial
Statements, Accounting Policy,
Statement of Cash Flow and
Adaptation of International
Financial Reporting Standards
are interacted on the 25-days
training programme. ICAEW
ACA Advanced Stage Classes,
first time in Bangladesh held in
the first quarter of 2013. We
were encouraged that 32 ICAB
Members registered to undergo
these classes.
As we hold our ties with the
ICAEW, a learning partner of
ICAB, we met ICAEW high
officials and sought ICAEWs
support for strengthening our ties
under World Bank financed
Twinning Project on a range of
issues like Updating the
Curriculum of ICAB and Study
Materials, ICAB Case Study
Exam, arrangement of
Workshop, updates of
ICAB-ICAEW, joint Online IFRS
Training and Certificate
Programme, arrangement of
tuition facilities for ICAB
Members registered with
ICAEW, publication of ICAEW
3
Advanced Stage Study Manuals

etc.
It is a matter of great pride that in
the prestigious recent SAFA BPA
Awards, beside other prizes,
IDLC Finance Ltd and Prime
Bank Ltd of Bangladesh won the
first and second prize
respectively on 'overall
categories', while, Rupali Bank
Ltd and Islami Bank Bangladesh
Ltd have been adjudged as the
winners in the category of
'Public Sector Banking
Institutions' and 'SAARC
Anniversary Awards for
Corporate Governance',
respectively. IDLC Finance
Limited and Prime Bank Limited
were adjudged as an Overall
Winner along with Sri Lanka
Telecom. A total of 85 awards
were given out, while
Bangladesh won 19 awards and
the remaining awards were
shared between companies from
India, Pakistan, Sri Lanka and
Nepal. This is a manifestation of
ICAB's sincere commitment
which is paying dividend for
holding the Best Annual Report,
which is scrutinising and thereby
best of the best receiving the
SAFA Awards.
To heighten the professional
image, I, as President of the
Institute, took the opportunity to

speak on the country perspective
of the theme 'Professionalism as
a Tool to Economic Growth' in
the ICAI International
Conference titled Accountancy
Profession: Enablers of Economic
Growth' hosted by Indian
Institute.
ICAB is well aware of its true
responsibility; the Institute
submitted its primary
observation on Draft Company
Bill 2013 to the Ministry of
Commerce of the Govt. of
Bangladesh on 25 March 2013.
ICAB Experts Team reviewed
new Draft Company Bill 2013
prepared in Bengali and
identified some clauses which
would create complexity and
broaden cost of business. ICAB
also was critical that this might
leave negative impact on the
overall economic activities of the
country, if enforced. ICAB team
also identified some clauses of
the new Act to be in
duplication/contradictory to the
existing laws/laws.
ICAB holds Continuation of
training of its members on the
urgent issues like
Harmonization of Financial
Reporting and Audit Practices:
Bangladesh Perspective in
February, 2013. ICAB organized

a Members Conference titled
Harnessing Technology in CA
Firms in February . Mr. Guru
Parasad, Partner, Guru and Jana,
Chartered Accountants, India, in
his presentation described how
to use the new information
technology in CA Firms and
projected some common
delivery models for many
business applications like
customer Relation Management
(CRM), Management Information
Systems (MIS), Enterprise
Resource Planning (ERP),
Invoicing, Human Resource
Management (HRM), Content
Management (CM) and Service
Desk Management. A CPD
Seminar on Recent Monetary
Policy & Economic Trends was
held in March 2013 by ICAB
Chittagong Regional Office.
Now, let me be frank with all to
acknowledge that the unrest and
political impasse is harnessing us
to take our activities in full
swing. However, I re-assure that
the path of progress and
advancement; building more
trust and confidence will not
stop till we achieve our
purpose.In fine, I hope that this
issue of the journal addressed
much needed issue, though
sensitive one, to the readers and
anyone reading it would be
tremendously benefitted,
undoubtedly.
I thank everyone associated with
this publication.
Md Abdus Salam FCA

President, ICAB
Green Banking and Sustainable Development:

the Case of Bangladesh
Atiur Rahman Ph.D
The development strategies of
Bangladesh Government, as laid down in

the Perspective Plan and the Sixth Five
Year Plan, clearly spell 'out the
commitment of pursuing sustainable
growth. The country's vulnerability to
floods, cyclones and to the threat of
inundation of large coastal areas from
global warming driven sea level rise
makes sustainability a prime development
concern.
Over the past 4 decades since liberation,
national income of Bangladesh has
increased more than eighteen-fold, while
the population has increased a little over
two-fold. Real GDP growth averaged at
around 6.0 percent annually over the last
10 years. Trade openness has integrated
Bangladesh with global economy with
trade/GDP ratio rising from around 20.0
percent during the 1970s and 1980s to
more than 60 percent in FY12. Poverty
has come down to around 30 percent of
the population now, from around 57.0
percent in the 1990s.
As you all are aware that Bangladesh falls
into the group of most climate change
vulnerable countries in the world despite
her insignificant share of global
greenhouse gas (GHG) emission in
comparison with other developing and
developed countries. However,
Bangladesh has made notable contribution

towards establishing 'Green Climate Fund'
alongside documenting the Renewable
Energy Policy in 2008 & Environmental
preservation Act in 1997. Accordingly, the
government of Bangladesh has decided to
produce 5 percent of total power
generation from renewable energy sources
like solar energy, air & waste by 2015 &
10 percent by 2020 with the above Policy
& Act. To protect our environment from
industrial pollution a guideline is
formulated under this act, which requires
Effluent Treatment Plant mandatory for
those Industries that emit liquid effluent.
Around 60 percent people in Bangladesh
are outside of the electricity facility while
around 90 percent are outside of the
natural gas network. Renewable energy,
especially solar energy and biogas can
provide a sustainable and environment
friendly solution to reduce the
demand-supply gap of energy in the
country.
BB has issued guidelines for
environmental risk management and
green banking in 2011 and is probably the
only central bank, which has issued such
an indicative guideline for green banking.
The guidelines aim to ensure environment
friendly business practices by banks and
financial institutions, to incorporate
environmental risks into Core Risk
Management (CRM) and to promote
05
BB FORMULATED
GREEN BANKING POLICY
GUIDELINE IMPLEMENTED
IN 3 PHASES FROM 2011 TO
2013. BY FOLLOWING THESE
GUIDELINES, BANKS WILL
BENEFIT IN TERMS OF
IMPROVED CAMELS
RATING. BESIDES, BB WILL
DECLARE THE NAMES OF
THE TOP 10 BANKS
REGARDING THEIR
OVERALL PERFORMANCE IN
GREEN BANKING
sustainable financial and economic
growth. Bangladesh Bank has also
issued a common format to all the
commercial banks to report green
banking activities including the extent
of carbon footprint in a structured
way. Banks and financial institutions
enthusiastically responded to this
'Green Banking' drive. Now they
regularly submit a quarterly report to
Bangladesh Bank on their
performance of green banking
activities.
BB formulated green banking policy
guideline implemented in 3 phases
from 2011 to 2013. By following
these guidelines, banks will benefit in
terms of improved CAMELS rating.
Besides, BB will declare the names of
the top 10 banks regarding their
overall performance in green banking
activities and will actively consider
green banking activities of banks
while according permission for
opening new branch. BB has decided
to accord permission for SME branch
subject to installation of solar panel in
06
place. Banks will also receive

separate treatment in existing
guidelines for Environmental Risks in
computation of Adequate Capital by
BB. To promote green energy, BB
advised banks to facilitate clients to
open L/Cs for installation of ETP in
industrial units, to finance Solar
Energy, Biogas and ETP projects, to
comply with CSR guidelines for
ingraining environmentally and
socially responsible practices with the
instructions stipulated in Green
Banking Policy.
ACTIVITIES AND WILL

ACTIVELY CONSIDER
GREEN BANKING
ACTIVITIES OF BANKS
WHILE ACCORDING
PERMISSION FOR OPENING
NEW BRANCH.
Besides these, BB introduced a

Refinance Scheme (revolving) for
Solar Energy, Biogas, and Effluent
Treatment Plant (ETP) of Taka 200
Crore in August 2009. From this
revolving fund, refinance facilities are
allowed for banks/FIs against lending
in the Solar Energy, Biogas Treatment
Plant sectors on terms and conditions
set forth in a BB's ACSPD Circular. By
now, 27 banks & 1 Financial
Institution have signed the
participation agreement with BB to
avail the refinance facility for Solar

Energy, Biogas & Effluent
Treatment Plant. As per another
ACD Circular, refinances were
allowed at limited scale up to Taka
300 million from this fund to
establish Hybrid Hoffman Kiln
(HHK)/equivalent technology in
brick manufacturing industry with
a view to reduce carbon &
suspended particulate matter in the
atmosphere.
Notwithstanding the insignificant
amount relative to the overall
country's demand, the
achievements of green banking in
the renewable energy sector are
worth mentioning.
As of December 2012:
An amount of Tk. 103.72
million has been disbursed
under the refinance program of
Solar Home System (SHS) to
establish 3763 units SHS. These
solar home systems are situated
at off-grid areas of the country
benefiting at least 3763 families
with the production capacity is
164100 KW/day.
An amount of Tk. 23.9 million
disbursed for 8 solar energy
driven irrigation pumps. No. of
beneficiary farmers are 618 and

bringing 920 bighas of land
under cultivation with
uninterrupted water flow
enhancing the productivity and
cropping intensity. Besides, an
amount of Tk. 248.80 million
disbursed for establishing Solar
PV Module Assembly Plant. In
the sub sector of Integrated
Cow Rearing and Biogas Plant,
an amount of Tk. 262.13
million refinanced in 820
numbers of Integrated Cow
Rearing and Biogas plant.
An amount of Tk 90.36 million
disbursed for establishing 8 ETP
with effluent treatment capacity
of 18000 cubic meter per day
contributing significantly in
limiting environmental
pollutions, while an amount of
Tk. 124.47 million disbursed
for establishing Hybrid Hoffman
Kiln (HHK) technology in 3
brick manufacturing industries
which reduces carbon emission
in the brick manufacturing
plants.
I would like to take this
opportunity to share the green
initiatives taken by BB. The central
bank of Bangladesh is responding
to climate change in a diverse of
ways. With a move towards

encouraging green banking in
Bangladesh, BB installed a
8-kilowatt solar power system on
its rooftop in March 2010, which
has been providing necessary
energy supply for the executive
floor along with emergency
security lights in the BB premises.
This is now being extended to
cover more areas. A recent
initiative has been taken to convert
the 30-storied building of the bank
into a 'Green Building' with the
modern facilities of rain water
harvesting, waste water recycling
and motion sensor energy efficient
bulbs supported by window based
solar panels. Besides, BB is
arranging an international
conference on 'Green Banking'
jointly with IFC in March 2013 in
line with the outcome document of
Rio+20 called 'The Future We
Want," and COP meetings of the
UNFCCC, especially COP 18
including the 'Kyoto Protocol' in
combating various vulnerabilities
due to climate change.
Bangladesh Bank has been
working for last four years to
establish a completely IT based
banking system in the country.
Various IT based initiatives of BB
have been helping to move
07
towards the paperless green

banking. In view of ensuring
low-carbon green development
without compromising the
imperative of faster economic
growth and social development, IT
infrastructure of the financial sector
has undergone vast improvements
in recent years. It has been
facilitating countrywide automated
online connectivity of banks with
the BB for supervisory reporting,
National Payments Switch and
fully automated inter bank clearing
and settlement platforms for paper
based and electronic fund transfers,
and a credit information bureau
accessible online by users.
08
Despite all these achievements, the

prospect of achieving sustainable
development is not free of
challenges. Future challenges
include formulation of sector
specific environment polices,
coordination among concerned
authorities to build up a green
economy, speeding up proper
awareness and effective capacity
building, application of
quantitative approach for more
justified ratings of banks. We
envision Bangladesh as a mature
advanced economy in 2050, with
levels of human development and
technological advancement
sufficient to place her among
leading Asian nations in terms of

financial prosperity as well as
social and environmental
responsibility.
To conclude, I would like to thank
the organizer for initiating the
discussion on such an important
issue like green banking. I hope
you all will have very productive
deliberations and find this seminar
very useful.
(The Article was presented in a
seminar on 02 February 2013)
The Author is the Governor,
Bangladesh Bank
Bank Audit How Much should it be enough;

in light of relevant Auditing Standards and
Auditing Practice Statements
Sabbir Ahmed FCA
Introduction
I would like to start this article with a very
famous quote that came to my attention
many years ago while reading an
interview of a Global Banks CEO. The
quote I am referring here is Banking is
such a unique industry where you do not
want your competitor to fail. Honestly
speaking it did not make much sense at
that time. However, after working as a
professional accountant for many years the
perspective of the comment is quite vivid.
Why it is so that a Bank would not like to
see his fellow competitor Bank to fail? The
simplest and shortest answer is Banking
business is based on Trust and failure of a
Bank severely dents that Trust and it
affects not only other Banks but the whole
economic systems bears the brunt.
It is an undeniable fact that Banks play a
central role in the economy. They hold
the savings of the public, provide a means
of payment for goods and services and
finance the development of business and
trade. To perform these functions securely
and efficiently, individual banks must
command the confidence of the public
and those with whom they do business.
The stability of the banking system, both
nationally and internationally, has
therefore come to be recognized as a
matter of general public interest. This
public interest is reflected in the way

banks in almost all countries, unlike most
other commercial enterprises, are subject
to multiple prudential supervisions by
central banks and/or other specific official
regulators/agencies.
As part of this confidence building
measure on Banks, its financial statements
are subject to audit by multiple auditors
including external or statutory auditors.
The external auditor conduct the audit in
accordance with applicable ethical and
auditing standards, including those calling
for independence, objectivity, professional
competence and due care, and adequate
planning and supervision. The auditors
opinion lends credibility to the financial
statements and promotes confidence in
the banking system.
However, what is also very important to
note is the fact that the quality of the
external auditors opinion would also be
influenced by multiple elements, notable
amongst those are the proper observance
of various roles and responsibilities of not
only external auditors but the following
parties as well:
-
the Banks Board of Directors (those

charged with Governance);
the Banks Management; and
the supervisor (i.e. Central Bank) and
other regulators.
09
THEY HOLD THE

SAVINGS OF THE PUBLIC,
PROVIDE A MEANS OF
PAYMENT FOR GOODS
AND SERVICES AND
FINANCE THE
DEVELOPMENT OF
BUSINESS AND TRADE. TO
PERFORM THESE
FUNCTIONS SECURELY
AND EFFICIENTLY,
INDIVIDUAL BANKS MUST
COMMAND THE
CONFIDENCE OF THE
PUBLIC AND THOSE WITH
WHOM THEY DO
The roles and responsibilities of the
above parties could be different in
various countries based on applicable
law, regulation and custom, however
it is true that proper observance of
these roles and responsibilities by
those parties would eventually
support/complement fulfilment of
each others duties and obligations.
Various auditing standards and audit
practice statements provided
guidance on respective roles and
responsibilities of banks board of
directors, management, banking
supervisors and external auditors to
avoid misconception about such roles
that could lead to inappropriate
reliance being placed by one party on
the work of another. Those standards
and statements also sets out
responsibilities of the board of
directors and management, essential
features of the role of banking
supervisors and external auditors and
what should be the relationship
between the banking supervisor and
the banks external auditors. We shall
10
aim to analyze those roles and

responsibilities before focusing in
detail on what need to be considered
by an external auditor at the time of
doing the audit of a bank.
The Responsibility of the

Banks Board of Directors and
the Management
The primary responsibility for the
conduct of the business of a bank is
vested on the board of directors and
the management appointed by it. This
responsibility includes, among other
things, ensuring that:
Those entrusted with banking

tasks have sufficient expertise and
integrity and that there are
experienced staff in key positions;
Adequate policies, practices and

procedures related to the different
activities of the bank are
established and complied with,
including the following:
BUSINESS. THE STABILITY

OF THE BANKING SYSTEM,
BOTH NATIONALLY AND
INTERNATIONALLY, HAS
THEREFORE COME TO BE
RECOGNIZED AS A
MATTER OF GENERAL
PUBLIC INTEREST.
responsibility to provide all

information to the supervisory
agencies that such agencies are
entitled by law or regulation to
obtain.
The promotion of high ethical

and professional standards.
Systems that accurately identify
and measure all material risks
and adequately monitor and
control these risks.
Adequate internal controls,
organizational structures and
accounting procedures.
The evaluation of the quality of
assets and their proper
recognition and measurement.
Know your customer rules
that prevent the bank being
used, intentionally or
unintentionally, by criminal
elements.
The adoption of a suitable
control environment, aimed at
meeting the banks prescribed
performance, information and
compliance objectives.
The testing of compliance and
the evaluation of the
effectiveness of internal
controls by the internal audit
function.
Appropriate management
information and information
technology systems are
established;
The bank has appropriate risk

management policies and
procedures;
Statutory and regulatory

directives, including directives
regarding solvency and
liquidity, are observed; and
The interests not only of the

shareholders but also of the
depositors, employees and
other creditors are adequately
protected.
Management is responsible for

preparing financial statements in
accordance with the appropriate
financial reporting framework and
for establishing accounting
procedures that provide for the
maintenance of documentation
sufficient to support the financial
statements. This responsibility
includes ensuring that the external
auditor who examines and reports
on the financial statements has
complete and unhindered access
to, and is provided with, all
necessary information that can
materially affect them and,
consequently, the auditors report
on them. Management also has the
Management is also responsible for

the establishment and the effective
operation of a permanent,
continuous and adequate internal
audit function that should also be
independent of the organizational
activities it audits or reviews and
every day internal control process.
Every activity and every division,
subsidiary or other component of
the banking organization should
fall within the scope of the internal
audit functions review and the
internal audit function should be
adequately staffed with persons of
the appropriate skills and technical
competence who are free from
operating responsibilities.
The Role of the Banking

Supervisor (i.e. Central
Bank)
The key objective of prudential
supervision is to maintain stability
and confidence in the financial
system, thereby reducing the risk
of loss to depositors and other
creditors. In addition, supervision
also is often directed toward
verifying compliance with laws
and regulations governing banks
and their activities. Although these
compliance requirements may
differ from country to country but
the following basic requirements
are ordinarily found in most
systems of supervision:
The bank must have suitable

shareholders and members of
the board (this notion includes
integrity and standing in the
business community as well as
the financial strength of all
major shareholders).
11
The banks management must

be honest and trustworthy and
must possess appropriate skills
and experience to operate the
bank in a sound and prudent
manner.
The banks organization and
internal control must be
consistent with its business
plans and strategies.
The bank should have a legal

structure in line with its
operational structure.
The bank must have adequate

capital to withstand the risks
inherent in the nature and size
of its business.
The bank must have sufficient

liquidity to meet outflows of
funds.
The bank must have a robust

risk management framework to
cover various banking risks,
such as credit risk, market risk
(including interest and foreign
exchange risk), liquidity and
funding risk, operational risk,
legal risk and reputational risk
and regularly monitor, measure
and limit its risk exposures to
the prescribed internal and
external limits.
may not be the banking

supervisors role to direct
banks lending policies, but it is
essential for the supervisor to
be confident that the bank has
adopted a sound system for
managing credit risk.
12
The bank is applying right

methods and fair judgments to
calculate specific and general
allowances that are adequate to
absorb estimated credit losses,
on a timely basis, in
accordance with appropriate
policies and procedures. In
addition, the supervisor also
seeks to ensure that credit risk
is adequately diversified by
means of rules to limit
exposures, whether in terms of
individual borrowers, industrial
or commercial sectors or
particular countries or
economic regions. Although it
The development of
sophisticated real-time
computerized information
systems has greatly improved
the potential for control, but in
turn has brought with it
additional risks arising from the
possibility of computer failure
or fraud. The introduction of
electronic commerce has also
introduced significant new risks
and requires, in turn, additional
controls. From supervisory
point of view these are very
critical element.
Supervisors are concerned to
ensure that the quality of
management is adequate for
the nature and scope of the
business and try to understand
managements business plans
and strategies and how it
expects to achieve them.
Similarly, the supervisor seeks
to discover whether the bank is
properly equipped to carry out
its functions in terms of the
skills and competence of its
staff and the equipment and
facilities at its disposal.
The Role of the Banks

External Auditor
The objective of an audit of a
banks financial statements by an
external auditor is to enable an
independent auditor to express an
opinion as to whether the banks
financial statements are prepared,
in all material respects, in
accordance with the applicable
financial reporting framework (i.e.
Bangladesh Financial Reporting
Standards) and in accordance with
any relevant regulations laid down
by regulators in that country (i.e.

the Bank Company Act 1991).
As stated earlier, the auditors
opinion helps to establish the
credibility of the financial
statements. The auditors opinion,
however, should not be interpreted
as providing assurance on the
future viability of the bank or an
opinion as to the efficiency or
effectiveness with which the
management has conducted the
affairs of the bank, since these are
not objectives of the audit.
The auditor designs audit
procedures to reduce to an
acceptably low level the risk of
giving an inappropriate audit
opinion when the financial
statements are materially misstated.
The auditor assesses the inherent
risk of material misstatements
occurring (inherent risk) and the
risk that the entitys accounting and
internal control systems will not
prevent or detect and correct
material misstatements on a timely
basis (control risk). Based on the
assessment of inherent and control
risk, the auditor carries out
substantive procedures to reduce
the overall audit risk to an
acceptably low level.
The auditor considers how the
financial statements might be
materially misstated and considers
whether fraud risk factors are
present that indicate the possibility
of fraudulent financial reporting or
misappropriation of assets. The
auditor designs audit procedures to
reduce to an acceptably low level
the risk that misstatements arising
from fraud and error that are
material to the financial statements
taken as a whole are not detected.
What are the additional

audit risk factors
As all we know, Banks have the
following characteristics that
generally distinguish them from

most other commercial enterprises
and hence external auditors need
to consider appropriate additional
audit procedures:
capital to total assets is low), which

increases banks vulnerability
to adverse economic events
and increases the risk of failure.
They have custody of large

amounts of monetary items,
including cash and negotiable
instruments, whose physical
security has to be safeguarded
during transfer and while being
stored. They also have custody
and control of negotiable
instruments and other assets
that are readily transferable in
electronic form. The liquidity
characteristics of these items
make banks vulnerable to
misappropriation and fraud.
Banks therefore need to
establish formal operating
procedures, well-defined limits
for individual discretion and
rigorous systems of internal
control.
They often engage in

transactions that are initiated in
one jurisdiction, recorded in a
different jurisdiction and
managed in yet another
jurisdiction.
They operate with very high

leverage (that is, the ratio of
They have assets that can

rapidly change in value and
whose value is often difficult to
determine. Consequentially a
relatively small decrease in
asset values may have a
significant effect on their capital
and potentially on their
regulatory solvency.
They generally derive a

significant amount of their
funding from short term
deposits (either insured or
uninsured). A loss of
confidence by depositors in a
banks solvency may quickly
result in a liquidity crisis.
They have fiduciary duties in

respect of the assets they hold
that belong to other persons.
This may give rise to liabilities
for breach of trust. They
therefore need to establish
operating procedures and
internal controls designed to
ensure that they deal with such
assets only in accordance with
the terms on which the assets
were transferred to the bank.
They engage in a large volume

and variety of transactions
whose value may be
significant. This ordinarily
requires complex accounting
and internal control systems
and widespread use of
information technology (IT).
They ordinarily operate

through networks of branches
and departments that are
geographically dispersed. This
necessarily involves a greater
decentralization of authority
and dispersal of accounting and
control functions, with
consequential difficulties in
maintaining uniform operating
practices and accounting
systems, particularly when the
branch network transcends
national boundaries.
Transactions can often be

directly initiated and completed
by the customer without any
intervention by the banks
employees, for example over
the Internet or through
automatic teller machines
(ATMs).
They often assume significant
commitments without any
13
initial transfer of funds other than,

in some cases, the payment of
fees/margins. These
commitments may involve only
memorandum accounting
entries. Consequently their
existence may be difficult to
detect.
They are regulated by

governmental authorities,
whose regulatory requirements
often influence the accounting
principles that banks follow.
Non-compliance with
regulatory requirements, for
example, capital adequacy
requirements, could have
implications for the banks
financial statements or the
disclosures therein.
Customer relationships (i.e.

loans, deposits) that the auditor,
assistants, or the audit firm may
have with the bank might affect
the auditors independence in a
way that customer relationships
with other organizations would
not.
They generally have exclusive

access to clearing and
settlement systems for checks,
fund transfers, foreign
exchange transactions, etc.
They are an integral part of, or

are linked to, national and
international settlement systems
and consequently could pose a
systemic risk to the countries in
which they operate.
They may issue and trade in

complex financial instruments,
some of which may need to be
recorded at fair values in the
financial statements. They
therefore need to establish
appropriate valuation and risk
management procedures. The
effectiveness of these
procedures depends on the
appropriateness of the
14
methodologies and mathematical

models selected, access to
reliable current and historical
market information, and the
maintenance of data integrity.
In view of the above, it is
agreeable that in addition to the
usual competency of auditing and
accounting standards, statutory or
external audit of a Bank also
require additional knowledge and
understanding on areas like
banking products/services, various
macro and micro economic
indicators, applicable regulations
etc.
Also equally important to note that
an auditor can only effectively
discharge their responsibilities
when other functionaries like
board, management and
regulator/supervisors are also
properly and diligently following
their own roles and responsibilities.
If any one party is falling behind in
following its roles and
responsibilities the work of other
would suffer.
Conclusion
The key theme of this issue of the
Bangladesh Accountant is very
topical, as hardly any single day
has been passed during the last few
months where not only business
and finance section, but even
headlines of local dailies were not
free from news about banking
sector in Bangladesh. Many of
those articles also touched upon
the performance of external
auditors in their audit of banks.
Therefore, an attempt has been
made through this article to reflect
respective roles and responsibilities
of auditors as well as other
stakeholders like board,
management and supervisors for
the conduct of a successful audit as
all are quite interrelated.
When I was discussing the draft of

this article with a very senior
chartered accountant with few
decades of experience in bank
audit, he jokingly told me that
some people may interpret this
article as my effort to defend
auditors or dilute auditors
responsibilities by highlighting
roles of other stakeholders.
Although his comment was a
lighthearted one without much
seriousness attached to it, but
taking the hint, for the purpose of
this article, I have extensively used
relevant auditing standards and
audit practice statements in its
original form without much
alteration. This way I have
attempted to eliminate subjectivity
and reflected what requires as per
standards for a bank audit that can
be termed as sufficient and
appropriate. As this article has
already highlighted, fulfilling of all
requisite roles and responsibilities
by only the auditor would not
result in sufficient and appropriate
audit if all other stakeholders are
not fulfilling their mutual
responsibilities.
No doubt time has come for self
assessment by auditors as to
whether they are performing Bank
audits as required by standards or
this has become just a routine
matter. At the same time it also
needs to be ensured that all other
stakeholders are also fulfilling their
respective responsibilities as
without which an audit would not
be adequate (i.e. sufficient and
appropriate).
The Author is a Fellow Chartered

Accountant and Director,
Hoda Vasi Chowdhury & Co.
Audit of Local and International

Commercial Banks:
an overview of Practices and Procedures

M Jalal Hussain FCA
Introduction
Commercial Bank (Bank), either local or
international, is required to be
incorporated under the laws of the land
where they are incorporated as Banking
Companies. Every country has its specific
laws, rules and regulations on how to
incorporate Banking Company, how it will
be run, what are the requirements for
audit, who will conduct the audit, what
guidelines are to be followed and so on.
Generally the Auditors follow the local
and international standards and guide
lines while conducting an audit of a
commercial bank. There are different
types of audit of banks: internal, external,
statutory, special and compliance audit.
External audit may be from the Central
Bank, from the government auditors, from
the management on specific purposes,
from the parliamentary audit committee.
Bank audit is completely different and
unique in itself because banking
businesses are different from other
ordinary businesses. The importance of
banks audit has been increased
tremendously after the Global Financial
and Economic Crisis started from the giant
economy of the United States since 2007.
In Bangladesh, special audit consideration
has been provided by various authorities
including the stakeholders, the central
bank and the government, after the
exposure of Sonali Banks (a local state

owned commercial bank) loan scandal
with Hall Mark Group of Industries and
Destiny Group of industries.
Why Bank audit is different from

other business entities?
Commercial banks have the following
distinctiveness which generally
distinguishes them from most other
commercial enterprises:
Commercial banks of any country

need special license from the Central
Bank to run the operations of the
bank and strictly follow the rules,
regulations and guidelines of the
Central bank.
They are the custodian of large

volumes of monetary items, including
cash and negotiable instruments,
whose physical security has to be
assured. This applies both to the
storage and the transfer of monetary
items and makes banks vulnerable to
misappropriation and fraud. Banks
therefore need to establish and
upgrade formal operating procedures,
well defined limits for individual
discretion and effective systems of
internal control.
15
Banks engage in a large volume

and variety of transactions both
in terms of quantity and value.
This necessarily requires strong
internal control and in particular,
the Banks management
information system and related
business processes relevant to
financial reporting and
widespread use of electronic data
processing.
Banks normally operate through
a wide network of branches and
departments which are
geographically located in
different parts of the country.
This necessarily involves a
greater decentralization of
authority and dispersal of
financial reporting and internal
control functions, with
consequent difficulties in
maintaining uniform operating
practices and information
systems, particularly when the
branch network covers national
and international boundaries.
Banks often times assume
significant commitments without
any transfer of funds. These
items, normally called
off-balance-sheet items, may
not involve accounting entries
and consequently the failure to
record such items may be
difficult to detect.
They are regulated by
governmental authorities and the
resultant regulatory requirements
often influence generally
accepted accounting principles
and auditing practices within the
Banking sector.
Why special audit

considerations arise in the
audits of banks?
As mentioned earlier, Banks do
business transactions which are
different from other commercial
16
enterprises; special considerations are

required for the following reasons:
Since Banks operate the

businesses where risks are
involved in many ways, special
concentration of auditors have
become material;
the particular nature of the

business risks associated with the
transactions undertaken by
banks;
the scale of banking operations

and the resultant significant
exposures which can arise within
short periods of time;
the extensive dependence on

computerized systems to process
transactions;
the outcome of the regulations in

the various jurisdictions in which
they operate; and
the ongoing development of new

products and banking practices
which may not be matched by
the concomitant development of
accounting principles and
auditing practices.
International and Local

Standards for conducting audit
of Banks:
The International Auditing Practices
Committee (IAPC) of the International
Federation of Accountants (IFAC)
issues standards (ISAs) on generally
accepted auditing practices and on
related services and on the form and
content of the auditors reports. These
standards are intended to improve the
degree of uniformity of auditing
practices and related services
throughout the world. In addition to
the international standards, there are
various standards framed by the local
authorities, need to be followed by
the auditors. In addition, Banks are
required to follow the local standards,
IN MANY CASES OF
AUDIT: INTERNAL,
EXTERNAL, STATUTORY
AND OTHER TYPES, FAIL
TO DETECT AND CONTROL
FRAUD, ERRORS,
NEGLIGENCE,
MISAPPROPRIATION OF
FUND, LOAN SCAMS, ETC.
IN LARGE BANKS. IN
BANGLADESH, AUDIT
JOBS ARE CONDUCTED BY
VARIOUS AUDITORS AND
THERE ARE INTERNAL
CONTROL SYSTEMS IN
EXISTENCE BUT THE LOAN
SCAMS OF HALL MARK
AND DESTINY GROUPS
PROVE THAT BOTH
INTERNAL CONTROL AND
VARIOUS AUDITS FAIL TO
CONTROL AND PREVENT
THE EMBEZZLEMENT OF
HUGE FUND. FROM THE
VARIOUS ANALYSIS AND
INVESTIGATION IT IS
EVIDENCED THAT THERE
ARE MANY LAPSES AND
WEAKNESSES IN THE
INTERNAL CONTROL
SYSTEMS OF BANKS
WHICH ARE NOT
DETECTED WHILE
CONDUCTING AUDITS BY
THE AUDITORS.
procedures and programs as

embodied by the local authorities
and the central banks.
Why reliance on the Internal

Control System of banks is
so important?
Effective internal control system in
banking sector is a must. A system
of effective control is a choleric
and diagnostic component of bank
management and a foundation for
the safe and sound operation of
banking organizations. A system of
strong internal controls can help
ensure that the goals and
objectives of a banking
organization will be met, that the
bank will achieve long-term
profitability targets, and maintain
reliable financial and managerial
reporting. Such a system can also
help ensure that the bank will
comply with laws and regulations
as well as policies, plans, internal

rules and procedures, and decrease
the risk of unexpected losses or
damage to the banks reputation
due to corruption, baloney and
malpractices by the employees of
the bank.
Establishing degree of
Reliance on Internal control:
Managements responsibilities
include the maintenance of
adequate internal control, the
selection and application of
accounting policies, and the
safeguarding of the assets of the
entity.
The auditor is required to obtain a
sufficient understanding of the
internal control to plan the audit
and develop an effective audit
approach. After obtaining the
understanding, the auditor should
consider the assessment of control

risk to determine the appropriate
detection risk to accept for the
financial statement assertions and
to determine the nature, timing and
extent of substantive procedures
for such assertions. Where the
auditor assesses control risk at a
lower level, substantive procedures
would normally be less extensive
than would otherwise be required
and may also differ as to their
nature and timing. Identifying,
documenting and testing the
operating effectiveness of control
procedures
Who is responsible to introduce
effective and strong internal
control system in banking
industries? The answer is simply
the Board of Directors of the bank.
The Board of Directors of a bank
provides governance, guidance
and oversight to senior
management. Board members
17
the bank. Such procedures may be

operated hourly, daily,
weekly, or monthly,
depending on the volume,
nature of the transaction, level
of risk, and transaction
settlement time-frame.
should be professional, objective,

capable, and inquisitive, with a
knowledge or expertise of the
activities of and risks run by the
bank. The Board should consist of
some members who are
independent from the daily
management of the bank. A strong,
active board, particularly when
coupled with effective upward
communication channels and
capable financial, legal, and
internal audit functions, provides
an important mechanism to ensure
the correction of problems that
may diminish the effectiveness of
the internal control system. The
Board of Director should realize
the importance of effective internal
control system as banks handle
billions of Taka of money that
belongs to individual depositors,
businesses and other entities.
Internal bank controls ensure that
account holders can safely deposit
money into banks without having
to contend with the risk that a bank
employee might misuse the money
or put it in jeopardy by recklessly
18
Many of the transactions

entered into by banks are
subject to particular
accounting rules. It will
therefore be necessary to have
control procedures in place to
ensure those rules are applied
in a manner and in a
time-frame which results in the
generation of accounting
entries that may be required
for the preparation of
appropriate financial
information for management
and external reporting.
Examples of such control
procedures are those which
result in the market
revaluation of foreign
exchange and security
purchase and sale
commitments so as to ensure
that all unrealized profits and
losses are recorded.
Many transactions entered

into by banks are not
disclosed in the balance sheet
or even in the notes to the
financial statements.
Accordingly, control
procedures must be in place to
ensure that such transactions
are recorded and monitored in
a manner which provides
management with the required
degree of control over them
and which allows for the
prompt determination of any
change in their status which
needs to result in the
recording of a profit or loss.
New financial products and

services are constantly being
developed by banks. The
auditor needs to obtain
investing it. Additionally, bank

internal controls are necessary to
ensure that the bank employees
comply with the laws of the land
and the rules, regulations issued by
banks and the central bank.
In assessing the appropriateness of
the individual internal controls
used to ensure that all transactions
are properly recorded, the auditor
will need to take into account a
number of factors which are
especially important in a banking
environment. These are as follows:
Banks deal in large volumes of

transactions, which can
individually and cumulatively
involve large amounts of
money. Accordingly, the bank
will need to have balancing
and reconciliation procedures
which are operated within a
time-frame that provides the
ability to detect errors and
discrepancies so that they can
be investigated and corrected
with a minimal risk of loss to
reasonable assurance that

necessary revisions are made
in accounting procedures and
related internal controls.
End of day balances may not

be indicative of the volume of
transactions processed through
the systems or of the
maximum exposure to loss
during the course of a business
day. This is particularly
relevant in executing and
controls in these areas must
take into account the ability to
maintain control during the
period of maximum volumes
or maximum financial
exposure.
The majority of banking
transactions must be recorded in a

manner which is capable of
being verified both internally
and by the banks customers
and counterparties. The level
of detail to be recorded and
maintained on individual
transactions must allow for
bank management,
transaction. Counter parties,
and the banks customers to
verify the accuracy of the
amounts. An example of such
a control is the continuous
verification of foreign
exchange trade tickets by
having an independent
employee match them to
incoming confirmations from
counterparties.
Why audit is not enough to

detect and control fraud in
banks?
Although the audit of banks are
conducted by the professionals,
experts with due consideration to
internal control systems in banking
businesses, there are lots of frauds,
misappropriation and misuse of
fund, loans scam and on and on
remain unearthed and uncovered
around the modern world. In many
cases of audit: internal, external,
statutory and other types, fail to
detect and control fraud, errors,
negligence, misappropriation of
fund, loan scams, etc. in large
banks. In Bangladesh, audit jobs
are conducted by various auditors
and there are internal control
19
systems in existence but the loan

scams of Hall Mark and Destiny
Groups prove that both internal
control and various audits fail to
control and prevent the
embezzlement of huge fund. From
the various analysis and
investigation it is evidenced that
there are many lapses and
weaknesses in the internal control
systems of banks which are not
detected while conducting audits
by the auditors. Loopholes in the
existing legal system help the loan
defaulters and the criminals to
escape punishment. Banks, in most
of the cases, fail to realize loan
from the defaulting borrowers as
the borrowers come out by using
the legal network without paying
back the loan amount. As a result
the amount of classified loans
increases every year.
In USA the SEC has recently
charged three former executives of
a bank, Tier OneBank, responsible
for a fraudulent scheme.
New charges were also brought
against its auditors. The SECs
20
investigation found that the

auditors failed to appropriately
scrutinize managements estimates
of TierOnes allowance for loan
and lease losses (known as ALLL).
Due to the financial crisis and
problems in the real estate market,
this was one of the highest risk
areas of the audit, yet the auditors
failed to obtain sufficient evidence
supporting managements
estimates of fair value of the
collateral underlying the banks
troubled loans. Instead, they relied
on stale information and
managements representations, and
they failed to heed numerous red
flags when issuing unqualified
opinions on TierOnes 2008
financial statements and the banks
internal controls over its financial
reporting.
According to the SECs order, the
internal controls identified and
tested by the auditing engagement
team did not effectively test
managements use of stale and
inadequate appraisals to value the
collateral underlying the banks
troubled loan portfolio. For
example, the auditors identified

TierOnes Asset Classification
Committee as a key ALLL control.
But there was no reference in the
audit work papers to whether or
how the committee assessed the
value of the collateral underlying
individual loans evaluated for
impairment, and the committee did
not generate or review written
documentation to support
managements assumptions. Given
the complete lack of
documentation, the auditors had
insufficient evidence from which to
conclude that the banks internal
controls for valuation of collateral
were effective. The SECs order
alleges that the auditors engaged in
improper professional conduct as
defined in the securities laws. A
hearing will be scheduled before
an administrative law judge to
determine whether the allegations
contained in the order are true and
what, if any, remedial sanctions are
appropriate. The judge is expected
to issue an initial decision within
300 days from the date of service
of the order (Topbeancounter |
January 10, 2013).
Conclusion:
It has become conspicuously
evident that the banks are in no
way obviated of corrupt and
fraudulent practices after all.
Abundant facts in the recent
studies attest to this claim. The
banking sector in particular has
become a terrain for various
appalling corrupt and fraudulent
practices. In addition, the recent
studies noted that the internal
mechanisms in the banks are not
sufficient to guarantee transparent
and accountable service in the
conduct of official business in the
sector. Mere conventional audit is
not enough to protect the banking
industries from entwine of
corruption and fraud. The audit
procedures, plans and programs of
the auditors need to be

reorganized to cope with modern
complicated and electronic
banking system. Auditors should
give more emphasis on the internal
control system and evaluate the
effectiveness of the system. The
stakeholders and the management
of the bank must establish and
upgrade the transparency and
accountability in the banking
operation and management
system. Accountability and
transparency are celestially
considered to be the most

important contraptions for
protecting banks from
irregularities, frauds and
mismanagement. It is copacetic
from the present world economic
scenarios that the more
economically developed countries
have track record of strong and
effectual transparency and
accountability in banking sector
economy. The legal systems of the
developing economies like
Bangladesh need to be amended to
enable the banks to realize the

default loans and the defaulters get
punishment and cannot escape
punishment by using the laws of
the land.
The Author is the Group Financial

Controller of a private Group of
Industries and Fellow Chartered
Accountant of ICAB
21
Profitability Trend in the Banking Sector of

Bangladesh- a Comparative Study of
Islamic and Conventional Banks
1
Ishter Mahal | 2Benazir Rahman
Abstract
Profitability is the ultimate test of
managements operating effectiveness and
success of a financial institution.
However, profit is one of the quantitative
elements which reflect the bank
performance story. Baking industry of
Bangladesh has developed tremendously.
Among contributory financial
organizations both conventional and
Islamic banks of Bangladesh are making
significant contribution in economic
development of Bangladesh. But both
types of bank need to ensure sustainability
along with the profitability by maintaining
adequate liquidity. In the recent years
banks are developing at a high growth
rate. Both of these banks are concentrated
in their profitability trend for better
sustainability. Profitability depends on the
overall performance efficiency of the
bank. The study shows a comparative
study between conventional and Islamic
banking system of Bangladesh and reveals
the competitive scenario for both sectors.
Introduction
Banking is the backbone of national
economy. All sorts of economic and
financial activities revolve round the axis
of banks. In the global context, the role of
banks is far-reaching and more penetrating
22
in the economic and fiscal discipline,

trade, commerce, industry, export and
import. Banks are the only media through
which both national and international
trade and commerce emanated.
Bangladesh has a mixed banking system
comprising nationalized, private and
foreign commercial banks. Bangladesh
Bank is the central bank of the country
and is in charge of monetary policies of
the Government and all commercial
banks.
Now-a-days Commercial banks play a key
role in the economic development of a
nation through mobilization of savings
and allocation of credit to productive
sectors. Nevertheless, directed and
inefficient credit allocation by the
commercial banks of Bangladesh in
various economic sectors without
adequate credit appraisal and monitoring,
ultimately led to the widespread loan
delinquency, and deteriorating health of
the entire financial system. The
commercial banking system dominates
Bangladesh's financial sector. There are 54
banks performing their functions in
Bangladesh excluding Bangladesh Bank.
Out of these, 4 are nationalized
commercial banks, 29 are private
commercial banks (conventional), 7
Islamic banks, 9 are foreign commercial
banks and 5 are specialized development
banks. These banks are offering a variety
of products to their clients. In doing

their business most crucial part is to
manage their credit efficiently as their
profit mostly depends on the proper
management of credit. The next
session will focus on literature
review, third session focuses on
company analysis, fourth session will
include the analysis part and fifth
session will focus on conclusion.
Limitation of the study
Privacy of Information: All the 10

banks selected as a sample are
prominent banks of Bangladesh.
For maintaining privacy, only
limited information was available
to use in the project. Another
limitation of this study is banks
policy of not disclosing some
data and information for obvious
reason, which could be very
much useful.
Time Limitation: Such short time

period of 3-months is not enough
to learn everything about
banking sector. Time limitation
will also hinder the study.
Data Collection: collecting data

through all the filtering and
getting approval to use these data
was difficult. The main constraint
of the study is limited access to
information, which has
hampered the scope of analysis
required for the study.
Sampling Problem: We have just

worked with 10 banks amongst
all the commercial banks which
is so small as a sample.
Objective
Broad Objective
The main objective is to focus on the
profitability trend of both
Conventional and Islamic banking
system in Bangladesh taking 5 banks
from each category and comparing
them by applying appropriate tools.
Specific Objectives
The specific objectives of this paper
are the following:
To study the Overall profitability

trend of both Islamic banks and
Conventional banks in
Bangladesh based on their 5
years performance of selected
banks.
To find out the impact of

profitability of these banks to the
overall banking sector in last 5
years.
To show the impact of deposits

and Loans/investments on
profitability of banks selected
from two sectors through
regression analysis for 5 banks
from each sector.
Literature Review
To show a comparative analysis

of two sectors of banking in the
light of selected 10 banks.
To point out the lacking that

reflects in different banks
performance.
To focus on factors influencing

the growth as well as profitability
of these two sectors of banking.
Bader et al (2008) measured and

compared the cost, revenue and
profit efficiency of 43 Islamic and 37
conventional banks over the period
1990-2005 in 21 countries using Data
Envelopment Analysis. They assessed
the average and overtime efficiency
of those banks based on their size,
age, and region using static and
dynamic panels and suggested that
there are no significant differences
between the overall efficiency results
of conventional versus Islamic banks.
Abdul & Azmi (2011) found in their
AFTER ANALYZING
THE AVERAGE
PROFITABILITY RATIOS IT
IS FOUND THAT BOTH THE
SECTORS ARE DOING WELL
BUT THEIR CLASSIFIED
LOANS/INVESTMENTS
AMOUNT SHOULD BE
MAINTAINED AT A
TOLERABLE LEVEL. AFTER
THE COMPARATIVE STUDY
IT IS FOUND THAT
PROFITABILITY TREND OF
SELECTED ISLAMIC BANKS
ARE HIGHER BUT AVERAGE
PROFITABILITY RATIOS OF
CONVENTIONAL BANKS
SHOWS BETTER POSITION.
THOUGH ISLAMIC
BANKSGROWTH RATE IS
BETTER BUT
CONVENTIONAL BANKS
RATIOS ARE IN BETTER
POSITION. IT MAY
BECAUSE OF THESE
BANKS HAVE BETTER RISK
MANAGEMENT
TECHNIQUES AND ALSO
DIVERSIFIED RANGE OF
INVESTMENTS. IN SHORT,
IT CAN BE SAID THAT
BOTH SYSTEMS HAVE
DIFFERENT COMPETITIVE
ADVANTAGES IN THEIR
FIELD WHICH INFLUENCE
THEIR PROFITABILITY.
23
any differences of profit rate on

investments of Islamic Bank against
fixed lending rate of local
conventional banks, foreign
conventional banks and state
owned commercial banks in
Bangladesh. Analysis revealed that
the foreign commercial banks
charged the highest rate on the
borrowers during the selected
periods. It has also been found that
there is a significant difference in
mean return among Islamic banks,
local conventional banks, foreign
conventional banks and state
owned commercial banks.
study that while there are no
significant difference in
profitability during these two
periods, Bank Islam Malaysia
Berhad (BIMB) is relatively more
liquid and less risky as compared
to conventional banks. On top of
that, basic modes of Islamic
banking, i.e. mudharabah and
musyarakah, are not of significant
financing portfolio for Bank Islam
Malaysia Berhad (BIMB). Usman &
Khan (2012) have done a research
on Financial Performance of
Islamic and Conventional Banks of
Pakistan and concluded that
Islamic banks have high growth
rate and profitability over the
conventional banks. Moreover the
Islamic banks have high liquidity
power over conventional banks.
Alani, Yaacob & Hamdan (2013)
mentioned in their research
perhaps the most important of the
current analysis used in traditional
banks are irrelevant in assessing
the efficiency of the financial
performance of Islamic banks
because of their privacy. They
urged researchers to focus on
formulation of new analysis tools
with focusing on Islamic banks.
Hanif (2011) depicted based on his
research Islamic banking is very
much practiced like modern
conventional banking with certain
restrictions imposed by Sharia and
24
addresses the large number of

business requirements successfully
hence perceiving Islamic banking
as totally foreign to business world
is not correct. Islamic banking is
not a mere copy of conventional
practices rather major differences
exist in the operations of Islamic
Financial Institutions (IFIs) in
comparison with conventional
banking. IFIs have succeeded in
creating trust in the eyes of
depositors and receive deposits on
profit and loss sharing basis
however investment and financing
options available to Islamic banks
are limited in comparison of
conventional banks.
Shamsher, Taufiq & Khaled
measured and compared the cost
and profit efficiency of 80 banks in
21 of Organization of Islamic
Conference (OIC) countries:
comprising of 37 conventional
banks and 43 Islamic banks, using
the Stochastic Frontier Approach
(SFA). The findings suggest that
there are no significant differences
between the overall efficiency
results of conventional versus
Islamic banks. However, there is
substantial room for improvement
in cost minimization and profit
maximization in both banking
systems. Kabir, Hafiz and Musa
(2012) did a study which was an
attempt to find whether there are
Selection of Banks / Samples

In this study the focal point is to
make a comparative analysis
between conventional and Islamic
banking sector. For the study
purpose we have selected 10
banks of Bangladesh as our
sample; 5 banks from each sector.
This study will focus on the
profitability trend of these two
sectors in the light of recent
(2006-2011) 5 years performance
of selected 10 banks. For the
research selected banks are as
follows-
Conventional Banks
Islamic Banks
Comparison between Conventional & Islamic Banking in Bangladesh

After ananlyzing the recent 5 years senario of selected 10 banks we have got following result;
General Distinctions
Conventional Banks
Distinction of Product /Service :
Deals with man-made principles or principles
Principles of
business
provided by BB .
Variation in
goals
Conventional goals are almost similar as

Islamic ones in case of profitability &
improving shareholders earnings. But now
these banks are also concentrated in CSR
such as environment consciousness and
developing advanced technology as well.
Variation in
Deposit
Conventional banks maintains following

schemes generally but used different names
for the schemes to distinguish from each
others products
Fixed Deposit (FDR)
Savings or Short notice Deposit(SND)
Current Deposit(CD)
Conventional banks believe in Letter of
Credit ( L/C) most .
Other
Facilities
Business Efficiency:
Profitability of conventional banks depends
Profitability
on Loans and investments both.
These banks have to maintain more SLR that
Liquidity &
is 19% now.
Solvency
Conventional banks use deposits as a core
Sources of
source of banks in exchange of fixed deposit
Funds
interest.
These banks mainly invest in loans &
Uses of Funds
advances as a core function of the banks &
also invest in many sectors on term basis.
The growth profile of selected conventional
Business
banks indiates better positon.
development
The selected conventional banks shows
Efficiency
efficiency and productivity in the recent
&Productivity
years.
Commitment
to Economy
&Community
These banks are in better situation as they

have handsome amount that is invested in
long-term investments.
Islamic Banks
Deals with Shariah based principles o n the
basis of Islamic Shariah under the
supervision of BB.
Islamic banks mainly providing
concentration on improving profit margin as
well as increasing shareholders equity. But
now these banks also improving their
technology and concentrated in CSR
activities but these are left behind than
conventional ones.
Islamic banks receive deposits under two
principles:
Al-Wadeeah principle
Mudaraba prin ciple
Islamic banks issues letter of guarantee most.
Profitability of Islamic banks depends on

only investments sectors.
These banks have to maintain SLR 10.5%
which is lower than conventional ones.
Islamic banks also collect funds through
deposits on the basis of profit & loss
Sharing (PLS).
These banks mainly invest as per Islamic
Shariah.
Growth rate of selected Islamic banks are
higher than the conventional ones.
The selected Islamic banks also shows better
efficiency & productivity in the recent years.
But the growth of these banks are higher
than conventional ones.
Islamic banks are not an exeption.
25
Comparative Financial Analysis(Statistical Calculation & its Interpretation)

Multiple Regression-1 (For Conventional banks): For the regression analysis we have selected following
variables;
Net Profit After Tax- Dependent Variable (Y)
Deposits- Independent variable (X1)
Loans & Advances- Independent variable (X2)
Descriptive Statistics
Mean
PROFIT
DEPOSIT
LOANS
1174.9340
48719.0000
41720.5640
Std.
Deviation
882.2125
16612.7650
15484.9360
Variables Entered/Removed
Model
Variables Variables
Entered Removed
1
LOANS,
.
DEPOSIT
Correlations
PROFIT
PROFIT
1.000
N
5
5
5
Pearson
Correlation
Sig. (1-tailed)
Method
Enter
a. All requested variables entered.

b. Dependent Variable: PROFIT
DEPOSIT
LOANS
PROFIT
DEPOSIT
LOANS
PROFIT
DEPOSIT
LOANS
.928
.951
.
.012
.007
5
5
5
DEPOSIT
.928
LOANS
.951
1.000
.994
.012
.
.000
5
5
5
.994
1.000
.007
.000
.
5
5
5
Model Summary
R
Model
1
Adjusted R
Std. Error of
the Estimate
Change Statistics
2
.964
.929
.859
331.6207
R Change
.929
F Change
13.154
df1
2
df2
2
Sig. F Change
.071
a. Predictors: (Constant), LOANS, DEPOSIT
Coefficient of correlation (R):
Adjusted R2:
It measures the degree of

relationship between the
dependent and independent
variables. Here, R = 0.964
indicates that there is a positive
correlation between the variables.If
the independent variable increases
then this will result the dependent
variable increase accordingly.
Here Adj. R2= 0.859. R square

shows the proportion of variability
in the dependent variable that can
be explained by multiple
regressions. Adjusted R Square is
the actual variability which is
adjusted for both the independent
variables. It is actual R2 needed
when we add the second
independent variable. It is found
after the analysis that the

proportion is 0.859 or 85.90%.
Standard Error of Estimate:
Standard error of estimate denotes
the error of overall estimation of
the multiple correlations. Here the
error is 331.6207 which indicate
the variability between the
expected and actual value.
Coefficient of Determination(R2):
R2 shows the proportion of the
variability in the dependent
variable that can be explained by
the estimated multiple regression
equation.Here R2 is equal to 0.929
(92.9% expressed in percentage)
indicates 92.9% of the variability
in Profit after tax is explained by
the input variables.
26
ANOVA
Model
Sum of Squares
1
Regression 2893250.743
Residual
219944.545
Total
3113195.288
df Mean Square
F
Sig.
2 1446625.372 13.154 .071
2 109972.273
4

Here
t-Test:
t- Test is used to determine
whether each of the independent
variable is significant. We refer to
each of the separate T Test for each
of the independent variable as a
test for individual significance.
Sum of squares due to regression, (SSR) = 2893250.743

Sum of square due to error, (SSE) = 219944.545
Total sum of square (SST) = 3113195.288
F-Test:
The F Test is used to determine whether a significant relationship
prevails between the dependent variable and independent variables. It is
considered as the test for overall significance. Here the hypothesis for
the F test is deemed as there is no significant relationship between
dependent and independent variables. The alternative hypothesis is vice
versa.
Therefore the null hypothesis is:
All the t values of our variables are

(-1.239), (-0.850) and 1.396 and
using
=.50, t0.25 = 0.816
Since 1.239>0.816 we reject H0:
1=0
2=0
Ho: 1 = 2 = 0
Similarly 1.396>0.816 we reject

H0: 3=0
Ha: one of the parameters is not equal to zero

If null hypothesis is rejected we can conclude that the overall
relationship between Y(PAT) and independent variables X1(Deposits) &
X2 (Loans) is significant.
Test Statistic, F= MSR/MSE
13.154
And the given table value is 9.00 with the level of significance,
= 0.10
As 13.154 is higher than table value so we certainly derive that the null
hypothesis is rejected. So, the overall relationship is significant.
Hence there is a significant

relationship between PAT and
deposits & Loans at significance
level of 0.50.
Regression Analysis:
Here,
Dependable VariableProfit after Tax (PAT)
Independent VariablesDeposits (X2)
Calculation of Coefficient Annexure I
Loans & Advances (X3)
Coefficient Correlations
Model
1
Correlations
Findings:
From the output above we can
bring out an equation that is like:
LOANS
DEPOSIT
Co variances
LOANS
DEPOSIT
a. Dependent Variable: PROFIT
LOANS
1.000
-.994
9.679E-03
-8.968E-03
DEPOSIT
-.994
1.000
-8.968E-03
8.409E-03
Collinearity Diagnostics
Eigen value Condition Variance
Index Proportion
s
Model Dimensio
(Constant) DEPOSIT LOANS
n
1
1
2.937
1.000
.01
.00
.00
2
6.280E-02 6.838
.63
.00
.00
3
5.426E-04 73.565
.36
1.00
1.00
Y= a+2X2+3X3
PAT =-755.208-7.799 Deposits
+0.137Loans & Advances
Here (-7.799) represent an
estimate of the changes
corresponding to single quantity
changes in deposit volume which
is in inverse relation that for 1
increasing or decreasing
arrangement with deposit volume
results 7.799 decrease or increase
the PAT.Similarly 1 increasing or
decreasing arrangement with loans
27
& advances results 0.137 likelihood to increase or decrease the PAT which is in positive relationship.
(-0.755.208) represent the value of 1 which is constant coefficient that shows the reduction of PAT when two
independent variables are zero (0).
If we calculate regression from different samples we can get the following standard errors of Y intercept 1, 2
and 3for deposits & loans are 609.691, 0.092 & 0.098.
Multiple Regression-2 (For Islamic banks) :
For the regression analysis we have selected following variables;
Net Profit After Tax- Dependent Variable (Y)
Deposits- Independent variable (X1)
Investments- Independent variable (X2)
Descriptive Statistics
Mean
PROFIT
DEPOSIT
1253.6780
74078.9240
LOANS
68401.7600
Std.
Deviation
769.4472
27057.356
3
28159.013
2
Variables Entered/Removed
Model
Variables
Variables
Entered
Removed
1
LOANS,
.
DEPOSIT
a. All requested variables entered.
N
5
5
Pearson
Correlation
5
Sig. (1tailed)
Method
Enter
Correlations
PROFIT
PROFIT
1.000
DEPOSIT
.978
LOANS
.981
DEPOSIT
LOANS
PROFIT
.978
.981
.
1.000
.998
.002
.998
1.000
.002
DEPOSIT
LOANS
PROFIT
DEPOSIT
LOANS
.002
.002
5
5
5
.
.000
5
5
5
.000
.
5
5
5
Model Summary
R
Model
1
.98
2
R2
.963
Adjusted R2
.927
Std. Error of
the Estimate
207.9287
Change Statistics
R2Change
.963
F Change
26.388
df1
2
df2
2
Sig. F Change
.037
28
Coefficient of correlation (R):

It measures the degree of relationship between the dependent and independent variables. Here R= 0.982
indicates that there is a positive correlation between the variables. If the independent variable increases then
this will result the dependent variable increase accordingly.
Coefficient of Determination (R2):
Here R2 is equal to0.963 (96.30% expressed in percentage) indicates 96.30% of the variability in Profit after
tax is explained by the input variables.
Adjusted R2:
Here Adj. R Square= 0.927
It is found after the analysis that the proportion is 0.927or 92.70%.
Standard Error of Estimate:
Standard error of estimate denotes the error of overall estimation of the multiple correlations. Here the error
is 207.9287 indicates the variability between the expected and actual value.
Here,
Sum of square due to error, (SSE) =86468.688
ANOVA
Model
Sum of Squares df Mean Square
F
Sig.
1
Regression 2281727.338
2 1140863.669 26.388 .037
Residual
86468.688
2
43234.344
Total
2368196.025
4
F-Test:
The F Test is used to determine whether a significant relationship prevails between the dependent variable
and independent variables. It is considered as the test for overall significance. Here the hypothesis for the F
test shows significant relationship between dependent and independent variables. The alternative hypothesis
is vice versa.
H o: 2 = 3 = 0
If null hypothesis is rejected we can conclude that the overall relationship between Y (PAT) and independent
variables X1 (Deposits) & X2 (Investments) is significant.
= 26.388
= 0.10
As 26.388 is higher than table value so we certainly derive that the null hypothesis is rejected. So, the overall
relationship is significant.
29
Here
t-Test:

Sum of square due to error, (SSE) = 219944.545
t- Test is used to determine

whether each of the independent
variable is significant. We refer to
each of the separate T Test for each
of the independent variable as a
test for individual significance.
F-Test:
The F Test is used to determine whether a significant relationship
prevails between the dependent variable and independent variables. It is
considered as the test for overall significance. Here the hypothesis for
the F test is deemed as there is no significant relationship between
dependent and independent variables. The alternative hypothesis is vice
versa.
Allthe t values of our variables are

(-0.857), (-0.168) & 0.632 and
using
=.50, t0.25 = 0.816
1 = 0
Since 0.968<0.816 we reject H0:
2 = 0
Ho: 1 = 2 = 0
Similarly 1.632<0.816 we reject

H 0: 3 = 0

If null hypothesis is rejected we can conclude that the overall
relationship between Y(PAT) and independent variables X1 (Deposits) &
X2 (Loans) is significant.
13.154
= 0.10
As 13.154 is higher than table value so we certainly derive that the null
hypothesis is rejected. So, the overall relationship is significant.
Hence there is significant

relationship between PAT and
deposits & Investments.
Regression analysis:
Here,
Dependable Variable - Profit after
Tax (PAT)
Independent Variable- Deposits
(X2)
Investments(X3)
Finding:
Calculation of Coefficient Annexure II

Coefficient Correlations
Model
1
Correlations
LOANS
DEPOSIT
Covariances
LOANS
DEPOSIT
LOANS
1.000
-.998
3.340E-03
-3.469E-03
DEPOSIT
-.998
1.000
-3.469E-03
3.618E-03
Collinearity Diagnostics
Eigenvalue Condition Variance
Index Proportions
Model Dimension
(Constant) DEPOSIT LOANS
1
1
2.926
1.000
.00
.00
.00
2
7.417E-02 6.281
.23
.00
.00
3
2.165E-04 116.234
.76
1.00
1.00
30
From the output above we can

bring out an equation that is like:
Y= a+2X2+3X3
PAT = -494.547-1.012 Deposits
+3.652 Investments
Here (-1.012) represent an estimate
of the changes corresponding to
single quantity changes in deposit
volume which is in inverse relation
that for 1 increasing or decreasing
arrangement with deposit volume
results 7.799 decrease or increase
the PAT.Similarly 1 increasing or
decreasing arrangement with loans
& advances results 3.652
likelihood to increase or decrease
the PAT which is in positive relationship. (-494.547) represent the value of 1 which is constant coefficient that
shows the reduction of PAT when two independent variables are zero (0).
If we calculate regression from different samples we can get the following standard errors of Y intercept 1, 2
and 3 for deposits & loans are 577.084, 0.060 & 0.058.
Comparative position of both regression analysis
Both the systems are in almost similar situation as per the analysis. Wehave used only the average of selected
banks &found that profit of both banking systems are influenced by deposits and Loans/Investments.
SWOT Analysis
For Conventional Banks
Strengths
Huge product line
Fixed rate of return
Have various management skills to be utilized
Weaknesses
Strict regulations provided by BB than Islamic
ones
Greater rate of loan default
Opportunities
Diversed loan facilities or options can be created
Easy access in money market/ interbank borrowing
Strong customer background
Can invest in those sectors which are prohibited by
Islamic Shariah
Threats
Huge credit risk
Demand of clients change frequently
May more restrictions imposed by BB
For Islamic Banks

Strength
Strong Shariah based product lines
Less credit risk than conventional ones
Flexible rules & regulations provided by BB
Weakness
Lack of Shariah manual or guidelines
Lack of linkages with training institutes and
Shariah supervisory bodies
Lack of managements commitment in strictly
following the Shariah guidelines
Opportunities
Huge investment opportunities
Strong religious influence
Threats
Insufficient legal protection
Market demand may change
Lack of unified Shariah rulings
Shortage of supportive and link institutions; and
Shortage of skilled and trained manpower in
Islamic Shariah banking.
Lack of linkages with other Islamic banks and
Islamic NGOs for extending micro credit.
31
PEST Analysis
This analysis mainly deals with macro environment that affect banks.
Factors
Political
Economic
Socio-cultural
Technological
Conventional Banks
As our economy greatly influenced by political
instability, our commercial banks are also
affected by this issue.
Commercial banks are highly affected by
monetary and fiscal policies. Tax rate for banks
are 42.50%. Any change in these policies will
affect banks significantly.
Many people avoid commercial banking
products due to presence of interest.
But conventional banks have strong reputation
in corporate world than Islamic banks as most
of them are old and experienced players.
Conventional banks are now providing
e-services frequently to capture the market
especially the corporate clients and the
youth. Now-a-days these banks also providing
debit card facilities which facilitate instant
cash needs such as in time of shopping.
Concluding Remarks
Statutory Liquidity Reserve(SLR) is
the reserve that every scheduled
bank in Bangladesh must maintain
with Bangladesh Bank (BB).
Conventional banks have to
maintain more reserve than Islamic
ones. So they face more difficuty to
balance between liquidity &
profitability.
SLR-19.0% For Islamic Banks
SLR-10%
(Banglapedia: Bangladesh Bank,
accessed 2011)
Islamic banks have flexible
regulations than conventional ones
in case of SLR. So these banks can
invest more funds in market.
Islamic banks have to follow
Shariah principles according to
Islamic Shariah. So these banks
need to improve their efficiency by
maintaining such laws. As
Bangladesh is a Muslim country, so
many people like to get Islamic
32
Islamic banks
Islamic banks are not exceptions.
Same goes for Islamic banks.
Islamic banks have strong cultural &

religious background in Muslim country like
Bangladesh as many people avoid interest
due to religious issue. So Bangladesh are
getting Islamic banking facilities.
But except IBBL most of them are new
players in the market.
Islamic banks are also trying to cope with
the change by providing e-services to their
clientele.
banking facilities due to religious

influence. Many of us dont
appreciate interest as Islam
prohibits interest.
Need to take necessary steps

to balance between Liquidity
& solvency and profitability.
Must prepare for sudden

shocks so that no crisis arises
in time of uncertain situations
like seasonal demand.
Must ensure easy access in

money market & ability to
meet up problems by avoiding
short-term inter-bank
borrowing arrangement when
money rate is too high.
Should try to make their

schemes terms & conditions
flexible.
Should concentarte on CSR

activities to create public
awareness.
For concluding the study some

recommendations have been listed
as follows;
Conventional banks have

lucrative ratio. They must try
to maintain this in future.
These banks have huge credit

risks as Loans are their main
product. So they need to
maintain risk management
process so that they could
avoid high risky situations.
They have vast invetment

opportunity so they should try
to utilize such opportunity.
Must concentrate in risk
management system more
efficiently.
For Islamic Banks
Islamic banks have good

potential in Bangladesh as it is
a Muslim Country. They must
try to improve more and more their

services to retain the market as
well as create new demand.
As Islamic banks need to

invest according to Islamic
Shariah. They need to
concentrate more on those
sectors where they have huge
opportunity.
These must concentrate to

enrich their product line.
Must improve their risk

management process as per
BB guidelines.
Must concentrate on
promotional activities to
attract new customers.
As these need to maintain

lower reserve than
conventional ones, they must
invest the excess amount
efficiently to increase
profitability.
Need to improve customer
care services to enhance more
and more customer
confidence.
Should try to improve

business efficiency as well for
the future betterment.
Should concentarte on CSR

activities to create public
awareness.
As these face difficulty to

access short-term borrowing
sources these need to prepare
for such uncertain situations.
Among all the contributory

organizations in financial system
commercial banks both
conventional & Islamic banks are
making significant contribution in
the economic development of
Bangladesh. Profitability of
banking industry has significant
contribution in our Countrys
Gross Domestic Product (GDP).
Banks are developing rapidly
now-a-days. Both the banking
systems are improving in their own
field. Our traditional/cultural as
well as religious values allow us to
accept & depend on Islamic
banking gradually as our religion
Islam prohibits Riba or interest.
On the other hand, corporate
world generally maintain
relationship with conventional
banks & also people trust these
banks due to their glorious history

of business since liberation.
Throughout the study it is found
that both the sectors are
developing & profitability trends
are in increasing mode. As in this
study we have worked on only 10
banks, 5 banks from each sector.
The performance study concludes
that Islamic banks are superior to
conventional banks. But it is not
likely that solely Islamic banks are
better performing organizations
rather conventional banks have
also noteworthy performance and
significant contribution in different
economic segments. After
analyzing the average profitability
ratios it is found that both the
sectors are doing well but their
classified loans/investments
amount should be maintained at a
tolerable level. After the
comparative study it is found that
profitability trend of selected
Islamic banks are higher but
average profitability ratios of
conventional banks show better
position. Though Islamic banks
growth rate is better, conventional
banks ratios are in better position.
It may be because these banks
have better risk management
techniques and also diversified
range of investments. In short, it
can be said that both systems have
different competitive advantages in
their field which influence their
profitability.
Bibliography
DAMODAR N.
GUJARATI(2006) Essentials of
Econometrics, 3rd ed., USA:
Mc Graw-Hill Irwin.
JAMES C. VAN HORNE,

JOHN M. WACHOWICZ, JR.
(2006-07) Fundamentals of
Financial Management, 12th
ed.,England: Financial Times
Prentice Hall.
33
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1833-3850 E-ISSN 1833-8119,
Published by Canadian Center
of Science and Education,
http://journal.ccsenet.org/inde
x.php/ijbm/article/viewFile/21
848/15420
34
Mohammed Khaled i. Bader,

Shamsher Mohamad,
Mohamed Ariff & Hassan
Taufiq, Cost, Revenue, and
Profit Efficiency of Islamic
Versus Conventional Banks:
International Evidence Using
Data Envelopment Analysis,
Islamic Economic Studies, Vol.
15, No. 2, January 2008.
Muhammad Hanif,
Differences and Similarities in
Islamic and Conventional
Banking, International Journal
of Business and Social
Science, Vol. 2 No. 2;
February 2011,
http://www.ijbssnet.com/journ
als/Vol._2_No._2;_February_2
011/20.pdf
Usman Abid & Khan

Muhammad Kashif, Evaluating
the Financial Performance of
Islamic and Conventional
Banks of Pakistan: A
Comparative Analysis,
International Journal of
Business and Social Science
Vol. 3 No. 7; April 2012.
http://www.ijbssnet.com/journ
als/Vol 3 No 7
April_2012/27.pdf
Farooq Alani, Hisham Yaacob
& Mahani Hamdan, The
Comparison of Financial
Analysis Tools in
Conventional and Islamic
Banking: Evidence from
Kuwait, International Journal
of Business and Management;
Shamsher Mohamad, Taufiq

Hassan & Mohamed Khaled I.
Bader, Efficiency of
Conventional versus Islamic
Banks: International Evidence
using the Stochastic Frontier
Approach (SFA), Journal of
Islamic Economics, Banking
and Finance,
http://ibtra.com/pdf/journal/v4
_n2_article5.pdf
Kabir Mohammad Rokibul ,

Ullah Md. Hafiz and Khan
Md. Musa, Comparative
Analysis of Profit Rate of
Islamic Banks on Investment
(ROI) and Fixed Rate of
Interest on Loan of
Conventional Banks in
Bangladesh, World Journal of
Social Sciences, Vol.2. No. 6,
September 2012 Issue. Pp. 39
48.
http://wbiaus.org/4.%20Rokib
ul.pdf.
Hamid Mohamad Abdul,

Azmi Shaza Marina, The
Performance of Banking
during 2000-2009: Bank Islam
Malaysia Berhad and
Conventional Banking in
Malaysia, International Journal
of Economics and
Management Sciences , Vol.
1, No. 1, 2011, pp. 09-19,
ISSN: 2162-6359.
35
755.208
7.799 E-02
137
(Constant)
DEPOSIT
LOANS
-1.012E-02
3.652E-02
DEPOSIT
71(076(91
.058
.060
577.084
Std. Error
.098
.092
609.691
2.411
-1.469
Beta
1.337
-.356
Beta
Standardized
Coefficients
Std. Error
Sig.
1.396
-.850
-1.239
1.632 .592
-.968 .882
-.857 .482
Standardized
Coefficients
-.212
-.269
-2977.565
.285
.249
.981
.978
.408
-.118
Partial
.951
.928
Zero-order
Correlations
.561
.317
1868.109
Upper
Bound
Correlations
Upper Zero-order
Bound
1988.471
-.286
-.473
-3378.526
95%
Confidence
Interval for B
Lower Bound
95%
Confidence
Interval for B
Lower Bound
.297
.485
.341
Sig.
The Author are

1
Lecturer, Department of Accounting and Information System, University of Dhaka
2
Lecturer, Faculty of Business Administration, Northern University Bangladesh
Dependent Variable: PROFIT
-494.547
(Constant)
a.
Unstandardized
Coefficients
Model
Coefficients
Annexure - II
Unstandardized
Coefficients
Model
Coefficients
Annexure - I
.085
-.023
Part
.262
-.160
Part
.004
.004
Tolerance
Collinearity
Statistics
.012
.012
Tolerance
VIF
84.412
84.412
),9
245.031
245.031
Collinearity
Statistics
Laws and Regulations for

Accounting System
Md Shahadat Hossain FCA
According to the law, each and every
company is to prepare its financial

statements at the end of a particular
period. The objective to prepare such
financial statements is to provide financial
information about the company that is
useful to existing and potential investors,
lenders and other creditors in making
decisions about providing resources to the
company. These decisions involve buying,
selling or holding equity and debt
instruments, and providing or settling
loans and other forms of credit.
The financial statements are prepared
following some norms, rules and
regulations such as Companies Act,
Banking Companies Act, other different
Acts, accounting principles and standards
etc. Preparation of financial statements
also depends on some basis, assumptions
and estimates. Since there is a scope of
applying assumptions and estimate for
preparing financial statements, the
preparer as well as the auditor of financial
statements will have to apply utmost skill,
competence, professionalism and integrity
to save the users of these financial
statements from any loss or damage.
But there is no scope to deny that due to
not performing the professional duties, in
some cases, with sufficient skill,
competence and integrity the users of
36
financial statements suffer for loss. Now a

day, in the name of protection of the
investors and other users of financial
statements, regulators are establishing
barrier in the way of accounting theory
and standards. Some examples are
presented below; Firstly, in the draft
companies act net worth has been defined
as the aggregate value of the paid-up share
capital and all reserves created out of the
profits and securities premium account,
after deducting the aggregate value of the
accumulated losses, deferred expenditure
and miscellaneous expenditure are not
written off, as per the audited balance
sheet, but do not include reserves created
out of revaluation of assets, write-back of
depreciation and amalgamation.Net worth
is an important determinant of the value of
a company and it is used to determine
creditworthiness because it gives snapshot
of the companies investment history.
Considering the use and importance of
term net worth, it should be defined in
such a manner so that no confusion or
ambiguity may arise. But in the draft
companies act the definition of net worth
which has been proposed is not in line
with the definition of accounting standards
because one of the important elements i.e
surplus on assets revaluation has been
excluded. Basically, as per accounting
standard, net worth means total assets
minus total liabilities. Along with this it
may be mentioned that according to

International Financial Reporting
Standards (IFRS), an entity shall
choose either the cost model or the
revaluation model as its accounting
policy and shall apply that policy to
an entire class of property, plant and
equipment.
After recognition as an asset, an item
of property, plant and equipment
whose fair value can be measured
reliably, shall be carried at a revalued
amount, being its fair value at the
date of the revaluation less any
subsequent accumulated depreciation
and subsequent accumulated
impairment losses. As caution in IFRS
it has also been mentioned that
revaluations shall be made with
sufficient regularity to ensure that the
carrying amount does not differ
materially from that which would be
determined using fair value at the end
of the reporting period. If an asset's
carrying amount is increased as a
result of a revaluation, the increase
shall be recognized in other
comprehensive income and
accumulated in equity under the
heading of revaluation surplus. So,
from the contents of IFRS it is clear
that revaluation reserve is
undoubtedly a part of net worth.
Legal base of revaluation surplus
raised due to revaluation of fixed
assets from one of the important case
reference named Ammonia Soda Co
Ltd vs Arthur Chamberlain and
Others (1918) may be observed.In
this case reference, the profit and loss
account of the defendant company
showed a debit balance of 19,028.
Upon a boring made by the company
to reach water a layer of rock salt was
discovered.
The directors of the company, Mr
Chamberlain and Mr Cocking,
consequently appreciated the value of
the land held by the company as, in
their opinion, it was a reasonable
ground to write up the value of the
land, In the Balance Sheet for 31st
July 1911, 20,542 was added to

the value of the land and this sum
was credited to a reserve account.
The appreciation in the value of land
was then used to cancel the debit
balance of profit and loss account to
the tune of 16,451, thereby leaving
a balance of 4,091 to the credit of
reserve account.
In a subsequent year, a dividend was
paid in respect of preference shares
out of the current profits, yielded by
the company. The plaintiffs alleged
that the dividends was improperly
paid and made them (the directors)
liable for paying dividends out of
capital. They argued that the amount
2,577 standing to the debit of profit
and loss should have been wiped out
before dividends were paid. The
court rejected the plea holding that
revaluation of the property was
genuine and the directors had
concealed no material fact. Judgment
held that a company may write up its
assets as the result of a bonafide
revaluation and may divide current
profits without first writing off prior
losses. It is pertinent to mention that
from revaluation surplus declaring
cash dividend may not be logical but
dividend in the form of bonus share
will not be harmful. For example,
suppose, five years back company P
was formed with paid up capital Tk
100,000 (1000 ordinary share of Tk
100 each) and land was purchased by
Tk 100,000 for the company. After
five years same industry company Q
was established by purchasing a land
of Tk 500,000 which was funded by
issuing capital of 5000 ordinary share
of Tk 100 each. In this situation, if
previous company i.e company P
revalues its land and issues bonus
shares from revaluation surplus that
will be logical. From the content of
above case reference and example it
is clear that revaluation surplus is one
of the elements of net worth.
THE FINANCIAL
STATEMENTS OF PUBLIC
BUT NOT LISTED AND
PRIVATE LIMITED
COMPANIES ARE
PREPARED ON THE BASIS
OF THE GUIDELINE GIVEN
IN THE COMPANIES ACT.
IN ONE HAND, THIS
GUIDELINE IS NOT IN
LINE WITH THE
BANGLADESH FINANCIAL
REPORTING STANDARDS;
ON THE OTHER HAND,
THIS GUIDELINE IS NOT
COMPLETE AND
COMPREHENSIVE. DUE
TO HAVING NO
COMPLETE AND
COMPREHENSIVE
GUIDELINE, THE
FINANCIAL STATEMENTS
OF THOSE NON LISTED
AND PRIVATE LIMITED
COMPANIES ARE NOT
BEING PREPARED IN
UNIFORM AND
SYSTEMATIC
MANNER.
Secondly, one of the important issues

of accounting is deferred tax. As per
International Accounting Standards
37
one of the elements of deferred tax

is deferred tax assets which are the
amounts of income taxes
recoverable in future periods in
respect of deductable temporary
differences, the carry forward of
unused tax losses and the carry
forward of unused tax credits.
This deferred tax asset is accounted
for through crediting income, in
the financial statements. Since
deferred tax asset is recognized
through crediting income
therefore, sufficient amount of
conditions have been given in
International Accounting Standards
before recognizing and measuring
the deferred tax asset. Such as, the
carrying amount of a deferred tax
asset shall be reviewed at the end
of each reporting period and the
company shall reduce the carrying
amount of a deferred tax asset to
the extent that it is no longer
probable that sufficient taxable
profit will be available to allow the
benefit of part or all of that
deferred tax asset to be utilized.
Despite having sufficient amount
of conditions central bank of our
country has issued restrictions for
38
all the banks and financial

institutions on recognizing,
measuring and utilizing the
corresponding credit of deferred
tax assets. In the circular it has
been mentioned that if deferred tax
is calculated and recognized based
on the provisions against classified
loan, advances the amount of the
net income after tax increased due
to recognition of deferred tax assets
on such provisions will not be
distributed as dividend and the
amount of deferred tax assets
recognized on such provisions
should be deducted while
calculating the regulatory eligible
capital of the statement of capital
adequacy requirement of annual
financial report and statement
submitted to Bangladesh Bank. If
we analyze the contents of this
circular it can be observed that it
will be all the same to account for
or not account for the deferred tax
asset as per International
Accounting Standards by the banks
and financial institutions.
Thirdly, according to subsection (4)
of section 82 (C) of income tax
ordinance income for tax purpose
of the company which is engaged

in some selected activities shall be
determined on the basis of the tax
deducted or collected at source
from revenue and the rate or rates
of tax applicable for the assessment
year. In a nut shell, this provision
of tax law indicates that tax is not
determined on the basis of profit of
the company; rather profit is
determined on the basis of tax.
The tax which is being collected in
the name of direct tax is also
contributing a negative impact in
the society as an indirect tax only
because of its collection
procedure. We know that the
main characteristic of direct tax is,
it is progressive and cannot be
shifted on others. But in many
cases the present collection
procedures of direct tax are
facilitating to shift tax payers tax
liability to others. An example may
be presented to make it clear.
According to the fundamental
principles of tax law, tax payable
amount of a company will be
determined based on its net profit
as presented in its annual audited
financial statements. If the
company earns a net profit, it will
have to pay tax at a determined

rate. On the contrary, if the
company incurs a loss for a
particular period of time, it will not
have to pay any tax. Suppose a
company X earned Tk.200 net
profit in the year 2012. In that case
it will not be able to distribute full
amount of Tk.200 as dividend
among its shareholders. It will have
to pay Tk.75 as tax (assuming tax
rate is 37.5%) to the government
and the balance Tk.125 may be
distributed among its shareholders
as dividend. So, according to
principle of direct tax the excess
purchasing power will be taken
away by the amount of Tk.75 from
the shareholders of the company.
There is no scope to shift this tax
liability on others by the
shareholders of the company X.
But by dint of tax law as
mentioned above tax of the
company X is not collected based
on net profit, it is collected on
turnover/revenue of the company.
Suppose the company X is selling
its goods to the company Y
(customer). Under the tax law, the
company Y is given the
responsibility to deduct tax from

the sales price of the company X
which is considered as the final tax
irrespective of year-end profit or
loss. Under this system if the
company X sells goods of Tk.100
to the company Y, tax of Tk.4
(assuming rate of tax deduction at
source is 4%) will be deducted by
the company Y and Tk.96 will be
paid to the company X. The
company X knows that Tk.4 which
has been deducted by the
customer will not be refunded
despite incurring the loss at the
end of the year. Therefore, it will
be considered as cost not as tax
payment in advance. Since this tax
will be considered as cost,
subsequently the company X will
increase the sale price of the
product to Tk.104 as against
Tk.100 so that after deducting tax it
can get Tk.100 as before. By this
manner the company X gets
opportunity to shift its tax liability
to its customers and according to
principle of indirect tax it is
contributing to increase the rate of
inflation as well as inequality in
the society.
It is relevant to raise a question

why the regulators and others are
introducing laws which create
barriers on accounting system. As
answer of this question it may be
mentioned that in first and second
cases the lack of reliability of
measuring revaluation surplus and
deferred tax asset.There is no
scope to deny that in the past in
many cases share price had been
affected due to measuring revalued
amount of fixed assets at much
higher than actual. In third case the
financial statements, specially
financial statements of private
limited companies do not seem to
be reliable. It will not be baseless if
it is assumed that in some cases
financial statements of private
limited companies are prepared
showing weaker result than its
actual operational result. Due to
following this practice it is
mentionable that in our country
there is a common voice about
non- preparation of financial
statements correctly. One of the
reasons behind such incorrect
financial statements is lack of
proper sufficient legal guidance.
The financial statements of public
but not listed and private limited
companies are prepared on the
basis of the guideline given in the
companies act. In one hand, this
guideline is not in line with the
Bangladesh Financial Reporting
Standards; on the other hand, this
guideline is not complete and
comprehensive. Due to having no
complete and comprehensive
guideline, the financial statements
of those non listed and private
limited companies are not being
prepared in uniform and systematic
manner. Some instances are given
below: Firstly, revenue is one of
the most important elements for
the financial statements. Overall
financial performance of a
company for a particular period
substantially depends on correct
recognition, measurement,
presentation and disclosure of
39
revenue. As regards to presentation

and disclosure of necessary
information of revenue, necessary
guidelines have been mentioned in
the companies act but nothing has
been mentioned about recognition
and measurement of revenue. For
example goods are shipped subject
to installation and the installation is
a significant part of the contract
which has not yet been completed
by the company. In this case, this
shipment of goods will not be
recognized as revenue as per
Bangladesh Accounting Standards
because the company retains
significant risks of ownership but
no guideline in the companies act
has been given in this regards.
Secondly, recognition of revenue
40
of the company which is engaged

in construction business is
complicated and technical.
Revenue for the construction
business shall be recognized by the
reference to the stage of
completion of the contract activity
at the end of the reporting period
which has been mentioned in the
Bangladesh Accounting Standards,
but in the companies act no such
guideline has been given. Thirdly,
now a days lots of companies
obtain machinery and other fixed
assets items on lease from the
leasing company. As security of the
financing all assets are registered in
the name of lease providing
company i.e lessor. Due to not
having registration in the name of
the company, those assets despite

having ownership are not
considered their assets by the
lessee and due to transferring,
substantially all the risks and
rewards are incidental to
ownership to the lessee but the
assets are not also shown in the
books of the lessor company. As a
result, there remains a chance of
assets procured under the lease
finance out of books of accounts.
In this circumstance for ensuring
financial discipline in the private
sector of the country and for the
betterment of the national
economy, all barriers from the way
of accounting need to be removed.
Again, to remove all those barriers,
in one hand during preparation
and audit of the financial
statements by the accountant and
auditor respectively should
perform their duties with utmost
integrity, on the other hand
regulatory authority should also be
more active instead of imposing
barrier to make their regulatory
activity easy. Mandatory
compliance of Bangladesh
Financial Reporting Standards for
all types of companies is also
essential and can be ensured only
by incorporating the necessary
provisions in the companies act.
The Author is Council Member and

ex Vice-President, The Institute
of Chartered Accountants
of Bangladesh
Recent Monetary Policy

& Economic Trends
Ahmad Dawood FCA, FCMA
Monetary Policy in international
economic growth. A Neutral Monetary

Policy is intended neither to create growth
nor combat inflation.
Globally monetary policy is adopted to

control money supply in the economy.
Depending on the control exercised over
money supply, two types of monetary
policy are found. One is Expansionary
Monetary Policy & the other is
Contractionary Monetary Policy.
In the recent years, Inflation Targeting

Monetary Policy has been adopted in
various countries including Bangladesh,
Australia, Brazil, Canada, Chile, Czech
Republic, Colombia, New Zealand,
Norway, South Africa, Switzerland &
Turkey. On the other hand, Singapore &
Hong Kong adopted Currency Targeting
Monetary Policy. Chinas Monetary Policy
is termed as Monetary & Currency
Targeting. Sri Lanka adopts Monetary
Targeting Policy while India uses Multiple
Indicator Approach. USA adopts Mixed
Policy dedicated to maximum
employment & stable prices.
landscape
An Expansionary Monetary Policy

increases the size of money supply more
rapidly than usual, or decreases the
interest rate. It is used to combat
unemployment by lowering interest rates
in the hope that easy credit will entice the
business into expanding.
In contrast, a Contractionary Monetary
Policy reduces the size of money supply
or increases it slowly or rises the interest
rate. It is intended to slow inflation to
avoid resulting distortions & deterioration
of asset values. It is sometimes referred to
as Tight Monetary Policy.
European Central Bank adopts monetary

policy for European nations under
common currency Euro with the main
objective of maintaining price stability and
lower inflation rate, close to 2%.
Apart from these two, monetary policies

are often termed in different names
because of their varying character. For
example, in Accommodative Monetary
Policy, interest rate set by central
monetary authority is intended to create
The Bangladesh Bank is legally mandated

to formulate & implement monetary
policy. It is also mandated to advise the
Government on interaction of monetary
policy with fiscal & exchange rate policy,
impact of the policy measures on
The BB mandate
41
economy & propose legislative

measures to attain its objectives or
perform its functions.
The core policies formulated by BB
include Monetary Policy, Reserve
Management Strategy, Interest Rate
Policy, Capital Adequacy for Banks &
FIs, Deposit Insurance etc.
Main focus of MPS

Generally main focus of our
monetary policy is on price stability,
sustainable growth & development,
high employment, economic &
efficient use of resources & Stability
of financial & payment system.
Tools & instruments in the

hands of regulator for
implementing monetary policy
There are few tools & instruments in
the hand of central bank to
implement the monetary policy it
adopts. These include Bank Rate,
Open Market Operations (OMO),
Repo & Reverse Repo, Statutory
reserve (SLR & CRR). OMO allows
central bank to manage quality of
money in circulation through buying
& selling of various financial
instruments, e.g. treasury bills,
corporate bonds & foreign currencies.
Repo is the rate at which central bank
lends the commercial bank while
Reverse Repo is the rate at which
commercial banks park their
short-term excess liquidity to central
bank.
Backdrop of Monetary Policy

in Bangladesh
The declaration of monetary policy
by the BB started in January, 2006.
They declare the monetary policy
twice a year, in January & July. This is
the 15th Monetary Policy of
Bangladesh.
42
About the 15th MPS of BB

This time, the monetary policy
statement (MPS) aimed at attaining
maximum economic growth.
It also sought to ensure sufficient
credit flow for productive sectors and
bring down inflation to 7.5 per cent
by the on-going fiscal year. The
Bangladesh Bank (BB) Governor Atiur
Rahman while declaring the MPS
termed it as a balanced monetary
policy to minimize excessive
volatility of the exchange rate. These
objectives involve trade-offs and the
balance between BB's instruments.
THE COUNTRY'S
INFLATION, AS MEASURED
BY CONSUMERS' PRICE
INDEX (CPI), MOVED
SLIGHTLY IN DECEMBER
2012 ON POINT-TO-POINT
BASIS. THIS IS MAINLY
BECAUSE OF INCREASE IN
PRICES OF FOOD ITEMS.
THE INFLATION RATE
MOVED UP TO 7.69 PER
This monetary programme takes into

account various global and domestic
risks for H2 of FY13 and has built-in
degree of flexibility to take into
account changed circumstances. The
main challenge of the central bank in
future would be how to control
inflation and, at the same time,
ensure higher economic growth. The
key areas of the MPS have been
discussed below:
CENT IN DECEMBER LAST
Growth Strategy
(BBS). ON THE OTHER
The MPS is designed to ensure that

the credit flow is sufficient for
productive investment. It will support
attainment of the government's FY13
real gross domestic product (GDP)
growth target (which is 7.2%).
The BB has also revised its monetary
programme with increased private
sector credit growth target. The target
has been set at 18.50 per cent for the
second half (H2) of this fiscal year
from 18.0 per cent of the original
programme. On the other hand,
broad money growth target has been
increased. It will rise to 17.7 per cent
during the period under review from
16.5 per cent of the original target.
BB vies to alleviate poverty by
achieving maximum economic
growth. The Central Bank has taken
FROM 7.41 PER CENT OF

THE PREVIOUS MONTH ON
THE POINT-TO-POINT
BASIS, ACCORDING TO
THE BANGLADESH
BUREAU OF STATISTICS
HAND, THE INFLATION
RATE CAME DOWN TO 8.74
PER CENT ON ANNUAL
AVERAGE BASIS IN
DECEMBER FROM 8.98 PER
CENT IN NOVEMBER 2012.
BASED ON CURRENT
TRENDS, THE AVERAGE
INFLATION TARGET OF 7.5
PER CENT ANNOUNCED IN
THE FY13 BUDGET
APPEARS ACHIEVABLE,
THOUGH RISKS REMAIN.
into consideration the private

sector credit from overseas sources
while formulating the Monetary
Policy Statement for the ongoing
half year.
Control over Inflation

The BB remains committed to
bring inflation down further, and
also to avoid asset price bubbles.
As such, the Bank continues to
encourage banks to use the space
for private sector growth for
productive, and not speculative,
purposes. The BB will continue to
focus on ensuring that credit is
used for productive purposes
consistent with financial inclusion
goals. The BB plans to review the
monetary policy each month
considering both the global and
national perspectives.
The country's inflation, as
measured by consumers' price
index (CPI), moved slightly in
December 2012 on point-to-point
basis. This is mainly because of
increase in prices of food items.
The inflation rate moved up to
7.69 per cent in December last
from 7.41 per cent of the previous
month on the point-to-point basis,
according to the Bangladesh
Bureau of Statistics (BBS). On the
other hand, the inflation rate came
down to 8.74 per cent on annual
average basis in December from
8.98 per cent in November 2012.
Based on current trends, the
average inflation target of 7.5 per
cent announced in the FY13
budget appears achievable, though
risks remain. These risks stem from
volatile global commodity prices
and particularly, the food prices.
Any further administered price
increases in the energy sector, as
well as sharp rise in remittance
inflows will put upward pressure
on asset prices and non-food
inflation, it pointed out.
declining steadily over the past

nine months. The fall was from a
peak of 10.96 per cent in February
to 8.74 per cent in December and
within reach of the FY13 CPI
inflation target of 7.5 per cent. This
decline has been due both to lower
food and non-food price inflation.
The point-to-point non-food
inflation declined from a peak of
13.96 per cent in March to 8.43
percent in December 2012.
Interest Rate
The interest rate spread has marked
a declining trend in recent months.
The BB predicts that it would
continue in the near future through
their monitoring and supervision.
Private Sector Credit Flow

The expanded monetary base is
largely due to the
higher-than-expected remittance
growth this year. The BB has
created some additional rooms for
this liquidity to be used for private
sector credit. This should benefit
growth without unduly disrupting
the downward inflation trend.
Reducing REPO
Falling inflation has created the
space for the repo rate reduction. It
should have an impact on lending
rates. It will also stimulate more
growth-enhancing investments. At
the same time, the BB is mindful of
inflation risks. This is why it has
calibrated the rate cut accordingly.
Balance of Payment
The BB projected that the country's
overall balance of payments (BoP)
would be in surplus to the tune of
$2.226 billion by the end of this
fiscal from $494 million in FY'12.
The current account balance is
likely to rise to $1.075 billion in
FY'13 from $151 million in FY'12.
The average inflation has been
The country's trade balance may

come down to the negative level of
$8.637 billion by the end of FY13
from $9.317 billion (in the
negative) in the previous fiscal.
Comments/
recommendations on few
specific points
(i) Last two MPS
The monetary growth targets set in
January 2012 were met by the end
of FY12 and key outcomes falling
inflation and easing of external
sector pressures were achieved.
The July 2012 MPS had as its core
objectives (i) limiting domestic
credit growth to levels consistent
with the FY13 single digit CPI
inflation target (ii) ensuring that
productive growth-conducive
activities are not hampered by
access to credit and (iii) preserving
external sector stability including
building reserves to more
comfortable levels. Average
inflation has been declining
steadily over the past nine months,
from a peak of 10.96% in February
to 8.74%in December and within
reach of the FY13 CPI inflation
target of 7.5%.
The above achievements are
appreciable. However, statistics of
import of capital machinery and
industrial raw material indicate
negative trend which will lead to
lower production and hamper
employment generation.
(ii) Growth
In 2013, global growth is expected
to be 3.6% with the average for
developing countries projected at
5.6% and high income countries at
1.5%.
The targeted GDP growth of 7.2%
in FY13 is unlikely to be achieved.
43
This will be helpful in bringing

dynamism. Its effectiveness/
success still to be reviewed.
Recent measures include
tightening loan classification and
provisioning requirements towards
convergence with global best
practices, introducing online
supervisory reporting requirements
on financial transactions and
strengthening onsite and offsite
vigilance. Various measures to
detect fraud have been
implemented; BB has strengthened
its supervision capacity as well as
reiterated the role that bank boards
and management play in this
regard. BB will focus on improving
the quality, timeliness and
transparency of reporting from the
financial sector.
However, BB projects the real

GDP growth this year to be the
average of last 10 years which is
around 5%.
(iii) Foreign reserve & value of
Taka
Gross foreign reserves were US$
12.8 billion in end December
2012 and equivalent to about 4
months of import cover.
The Taka: USD exchange rate has
remained largely stable with the
Taka appreciating by 2.6%
between July 1st - December 31st.
Foreign currency reserve of the
country has recently crossed $ 14
billion-mark. Continuity of
remittance flow will be necessary
to maintain it.
(iv) Key developments related to
monetary policy in H1FY13 &
future outlook
There were three key
44
developments related to monetary

policy in H1FY13. First the sharp
increase in foreign remittances
(22% in H1FY2013) and lower
imports contributed to a sharp
increase in Net Foreign Assets. The
second key development relates to
the sharp decline in inter-bank
rates which fell from a peak of
around 20 percent in January 2012
to around 12% a year later. The
third development centers around
the healthy growth in private sector
credit which grew by 17.4% in
November 2012, while public
sector credit growth was only 5%.
BB is intensifying its focus on
improving the transmission of
monetary policy by strengthening
market mechanisms and a key area
is strengthening secondary market
trading in government securities.
Measures taken to this end include
enhancing the shorter-dated
portion of bills/bonds issues, where
there is greater investor appetite,
and launching an electronic
trading window on BBs website.
These measures will contribute

towards discipline & stability in
financial sector.
BB will also commence special
diagnostic examinations at the four
SOCBs in early 2013 and will
begin publishing a set of quarterly
performance indicators on these
banks. BB will continue to focus
on ensuring that credit is used for
productive purposes consistent
with financial inclusion goals.
These measures will significantly
contribute to restore confidence on
SOCBs that had shaken by recent
Hallmark scandal.
BBs policies have also contributed
to stabilizing the capital market
and BB will continue to collaborate
with the BSEC.
The approach of BB is highly
appreciable. It is to be ensured that
BB holds dialogue with the
stakeholders of capital market,
particularly with the stock
exchanges while deciding the
issues that might have impact on
capital market.
(viii) Stringent supervision
Recent shift in exposure of banks

to capital market from 10% of
liability to 25% of equity will
shrink the exposure by Tk 4,654
crore (Tk 46 billion) over next
three years according to the
exposure statistics of 29 listed
banks.
The FY13H2 monetary policy
stance is designed to ensure that
the credit envelope is sufficient for
productive investments to support
the attainment of the governments
FY13 real GDP growth target while
keeping it consistent with the
targeted 7.5% average inflation
rate for FY13. In view of the risks
to output growth due to the
uncertainties around the global
economy, BB will reduce all repo
rates by 50 basis points effective
immediately.
This is going to be a very effective
tool to manage growth risk.
Reserve Bank of India recently
reduced repo twice and received
benefit out of such reduction.
(v) Cohesiveness of monetary
policy with other policies
Since some common goals of both
fiscal and monetary policies are
price stability, GDP growth and
full employment, it is important
that fiscal policy and monetary

policy function in the same
direction and are complementary
to each other. A mismatch may, in
fact, result in economic disaster.
Bangladesh Bank, NBR and BSEC
should work in a well coordinated
and harmonious way. The various
policy instruments like fiscal
policy, monetary policy, industrial
policy, commercial policy, etc.
should be harmonized with each
other so that our economy can
achieve the desired growth.
(vi) Easing foreign exchange laws
Foreign exchange laws and rules
should be critically examined in
the context of present day global
and local economic scenarios, and
the same should be updated to
facilitate business and not to
hinder the same. Business should
not be for rules; rather rules should
be for business.
(vii) Enforcement of Anti Money
Laundering law
The Anti Money Laundering law
should be vigorously enforced.
This will ensure accountability and
help combat financial crimes. In
this regard, training and awareness
for the people in the real business
can be very useful.
In the backdrop of recent

unearthing of increasing bank
scams, supervision, inspection and
audit of commercial banks by
Bangladesh Bank should be
widened and strengthened. Since
Bangladesh Bank lacks inadequate
number of skilled/trained
manpower to provide such services
widely and effectively, Bangladesh
Bank may take the professional
services from the firms of chartered
accountants in order to widen and
strengthen its supervision,
inspection and audit net in the
banking sector. The above PPP
model of audit work will enhance
and strengthen the Supervisory role
of Bangladesh Bank who as a
regulator oversees the entire
banking mechanism.
(ix) Issuing bond, debenture &
treasury bills to substitute Govt.
borrowing
Government should reduce bank
borrowings, and may meet a
significant part of its deficit budget
financing by issuing government
bonds. Banks may be allowed to
issue bonds to raise fund.
Bangladesh Bank should allow and
encourage long-term bonds,
debentures and treasury bills to be
traded in the secondary market.
(x) Foreign investment by
Bangladeshi companies
Bangladesh Bank may think of
allowing investment by
Bangladeshi Companies in certain
projects in foreign countries in a
limited scale. The following
conditions need to be fulfilled for
such investments:
a.
The proposed project should

be feasible and should have
adequate profit potentials.
b.
There should be an adequate
45
scope for employment of

professionals and skilled
manpower from Bangladesh in
the project.
c.
d.
e.
Profit should be repatriable

from the investee country (as
per law/regulation of that
country) and should be
remitted to Bangladesh as
soon as possible.
The pay back into Bangladesh
of the remitted fund invested
abroad should be realistically
projected to be maximum
seven years.
Any other realistic conditions
as Bangladesh Bank thinks
proper, considering the
interest of Bangladesh.
(xi) Financing against listed

securities
Commercial banks may extend
loan against listed securities upto
50% of the face value or market
value, whichever is lower.
Bangladesh Bank should refinance
46
50% of this loan amount at the

bank rate for eventual lending by
the commercial banks at maximum
4% margin. In this respect
Bangladesh Bank may create a
Capital Market Development Fund
and allocate a sizeable amount for
the Fund. It may make a regulation
whereby any dividend of a listed
company, remaining undisbursed
for more than 5 years, will be
deposited to Bangladesh Bank
against the Capital Market
Development Fund created for
refinancing of loans to Capital
Market by Commercial banks.
It may worth mentioning that
recently BB issued a circular
whereby the commercial banks
may finance a stock dealer for
transacting A & B category shares
upto 70% and 60 % of average
market value respectively subject
to maximum Tk 3 crore. Practically
it is not being available due to
many constraints.
Recent Economic Trends of

Bangladesh
Highlights on some of the

significant economic indicators
are provided below:
GDP: Our GDP size during
2011-12 at current price was $112
bn.
Bangladesh GDP grew by

6.30 % in 2012. It has
managed to keep the GDP
growth above 5 % over the
last decade through the
development of micro credit
and garments industry.
IMF projects a robust GDP

growth in coming years, i.e.
6.05 %, 6.10 % and 6.7 % in
the 2012, 2013 and 2014
calendar year.
National savings increased

from 28.78 % of GDP in
FY2011 to 29.40 % of GDP in
FY2012 due to increase in
remittance. Investment also
increased from 25.15 % of
GDP in FY2011 to 25.45 % of
GDP in FY2012.
GDP Trend of Bangladesh

Inflation: General inflation (annual
average) rate reached 10.6 % in
FY2012 which was 8.8 % in
FY2011. Food inflation started to
somewhat slow down since
January 2012 while nonfood
inflation was on the rise since July
2011 and at the end of the fiscal
year, annual average nonfood
inflation reached as high as 11.2%.
Trade: During 2011-12, total
export was $ 24.3 bn and import $
35.4 bn
Overall export growth stood at

5.9% in FY 2012 which was
only 86.5% of the target (USD
26,500 mn). During the last
ten months of FY 2012, export

earnings increased by only
1.3% compared to the same
period of FY 2011.
Imports decreased to 2,640.50

USD mn in October 2012
from 2,976.90 USD mn in
September 2012. Historically,
from 1995 until 2012,
Bangladesh Imports averaged
4,628.72 USD mn.
In November 2012, total

remittance inflow was USD
1,098.25 mn. The rates of
growth in remittance were
-24.45%, 24.04%, -0.57% and
-1.87% in November,
October, September and August of

the 2012 year.
At the end of April, the overall

balance was in the negative
terrain. However, during the
last two months of FY2012,
trade balance remained under
control due to falling import
payments and the BoP
situation began to see some
positive turn.
Reserve: The average rate of

growth in reserves was 13.4%
during FY 2009/10 to FY 2011/12,
despite the negative rate of growth
in reserves in FY 2011-12.
Month-wise comparison
of reserves among the
three fiscal years
47
Capital Market: The daily average

turnover in Bangladesh capital
market reduced to Tk 275 crore in
2013 from Tk 1,783 crore in 2010
(about 85% fall). The capital
market experienced a hard time
with DSE market capitalization has
reducing to Tk. 2,40,000 cr in
2012 from Tk. 2,61,000 cr of
2011. DSE all share price index
has also declined and reached to at
3,577.21 in 2012 from 4,383.94 of
2011.
In order to ensure transparency
and accountability in the capital
market, efforts have been given to
restructure the capital market.
Initiatives have been taken to
amend the securities laws. The Act
of parliament to demutualize the
stock exchanges of the country has
been passed this year. A ten-year
master plan has been approved for
the capital market.
Apart from these, several other
economic reform initiatives have
been taken by the Government to
ensure sustained economic
development which includes
strengthening the public financial
management through proper
implementation of the ADP,
Ensuring Private Participation in
Infrastructure Sector under PPP,
reforming the financial sector by
amending Banking Companies
Act.
48
Concluding remarks
References:
Against the backdrop of the global

economic slowdown, the
Bangladesh economy performed
strongly over the past few years.
Compared to the global average,
Bangladesh has witnessed higher
GDP growth rates. Despite a fall in
world output during the immediate
aftermath of the financial crisis in
2009, Bangladesh has consistently
exceeded growth rates of five
percent since 2009. Goldman
Sachs has placed Bangladesh on its
"Next-11" list in 2005. The United
Nations has listed Bangladesh as
one of the 18 countries in the
world that have made rapid
progress in human development in
the last three decades.
Bangladeshs per capita income
had also increased by about 175
percent between 1980 and 2012.
All what Bangladesh needs is
pursuing consistent, balanced and
transparent economic policies and
good governance practice in all
respects to open up doors of
unbound potentials.
Analytical Review of
Bangladeshs Macroeconomic
Performance in Fiscal Year
2013- Centre for Policy
Dialogue (CPD)
Bangladesh Economic Update

Half-Yearly Assessment of the
Economy of Bangladesh
December 2012 Unnayan
Onneshan
www.tradeeconomics.com
and Bangladesh Bank website.
Dhaka Stock Exchange and

Chittagong Stock Exchange
websites
The Author is currently working as

CFO, Chittagong Stock Exchange
National Finance Performance & Stability
-an Analysis to Reform & Retreat with Integrated Policy

Dipok Kumar Roy ACA
The sustainability of economic
development largely depends on effective

and efficient financial systems of a
country. The development without strong
national financial systems could be
development by chance and would not
last long. National Financial System is a
machine of allocating resources amongst
peoples to turn the wheel of national
economy. The larger flow of funds and
efficient allocation thereof would register
a healthy economic output. So, it is a fuel
to convert into power of national
economy and it needs to be handled
carefully with efficient hands so that it
could generate national economic power
without burning the machine, the driver
and owner of the machine. With the
changing scenario of the world business
and economy, financial systems have
been shaping globally with reforms &
retreat for moving forward with integrated
policy encompassing new ideas, thoughts
and concepts day by day. In the backdrop
of Bangladeshs weak financial systems,
Bangladesh government has sincerely
identified the major problems in the
financial systems and finally a number of
reform measures were initiated broadly
under the Financial Sector Reform
Program (FSRP) and subsequently under
Banking Reform Committee (BRC) and
Commercial Bank Restructuring Project
(CBRP) in different phases commencing
from 1990. The banking sector has been

well regulated and efficient to some extent
compared to other components of
financial systems. After the debacle of
capital market in 1996, reforms were
made substantially like introducing the
circuit breaker or each share,
dematerialization of shares, updating of
laws and regulation for ensuring control
etc. Nevertheless, some incidents make
questionable the efficiency of the banking
systems, cause the financial system and
economy to tremble and make the
experts, regulators and government
distracted from reform and retreat again
for suitability of GDP. Recent incidents of
Hallmark and some more in banking
systems, capital market debacle in 2010
bring the issue ahead to review the
systems again for finding out the way to
resolve & control it prudently. Sometimes,
some semiformal sectors like specialized
four banks for providing industrial &
agricultural financing, other specialized
banks and corporations like House
Building Finance Corporation, Samabay
Bank, private cooperative banks have
fallen under question of role &
performance and some informal sectors
like destiny and others post threats to the
economy for illegal financial operation
cheating general peoples. All formal &
semiformal sectors of financial systems
could not be stringed together on a thread
to move the wheel of national economy
49
with a smooth speed towards

sustainable development. We have
inducted mutual fund management
by asset Management Companies to
make the capital market efficient but
the role of mutual fund as well is still
under a question mark & operational
performance is inefficient. In spite of
focusing target based SMEs and
agriculture investment by banks and
financial institutions, we could not
serve SMEs to bring them in line with
large enterprises capable to enter into
capital market. We could not add the
Venture capitalists in the financial
systems yet with a legal frame, policy
and fund assistance to serve SMEs
with financial and technical business
support services for emerging as
larger industry and services for
bringing them in capital market. Our
micro finance has extensive role in
access to finance of asset less people
and change their economic
conditions and living standard but its
operation and monitoring are not
well regulated as the lender does not
use the loan fund for economic
activities properly and use it for
otherwise non-income generating
purpose. As such, same person is
availing the credit facility with
different micro financiers without any
financial needs of economic activities
which has made the micro credit
system and its effective and efficient
operation questionable. The growth
of both the general insurance
companies and life insurance
companies are not strong and
premium is below 1% of GDP where
in India and Sri Lanka it is 5.10% and

3% of GDP respectively. Cooperative
society could be a strong productive,
marketing and financing base in rural
area or the areas where formal
financial systems do not work well.
The Cooperative societies in our
country could not reach a satisfactory
level and failed to create public
movements towards its formation and
successful operation.
The Bangladesh Economic Update for
October 2012 issued by the World
Bank projects that GDP will grow at
around 6% in FY 13 despite an
unfavorable global economy. The
noteworthy achievements are (i)
Bangladeshs reaching among the top
35 out of 150 countries in IMFs
October 2012 World Economic
Outlook and (ii) registering 6% plus
consistent growth over most of the
last ten years through strong exports
and inward remittance growth.
Service sectors growth rate is more
than 6% and occupies about 50% of
GDP where financial systems register
growth rate generally 9% to 11%
over the years and share about 2% of
GDP. If we review cross country
comparison especially with India, it is
observed that financial sector growth
in India is more than 10%, almost
close to us, but its share in GDP is
more than 5%. So, the growth rate of
financial sector together with the
sectoral shares of GDP of Bangladesh,
it is evident that Bangladesh is less
efficient to contribute to GDP.
6
4
2
INDEX (CPI), MOVED

SLIGHTLY IN DECEMBER
2012 ON POINT-TO-POINT
BASIS. THIS IS MAINLY
BECAUSE OF THE
INCREASE IN PRICES OF
FOOD ITEMS. THE
INFLATION RATE MOVED
UP TO 7.69 PER CENT IN
DECEMBER LAST FROM
7.41 PER CENT OF THE
PREVIOUS MONTH ON THE
POINT-TO-POINT BASIS,
ACCORDING TO THE
BANGLADESH BUREAU OF
STATISTICS (BBS). ON THE
OTHER HAND, THE
INFLATION RATE CAME
DOWN TO 8.74 PER CENT
ON ANNUAL AVERAGE
BASIS IN DECEMBER
FROM 8.98 PER CENT IN
NOVEMBER 2012. BASED
TARGET OF 7.5 PER CENT
9.6
ANNOUNCED IN THE FY13

BUDGET APPEARS
11.6
1.9
9.5
1.9
Financial Sector Growth

2008-09
50
BY CONSUMERS' PRICE
AVERAGE INFLATION
14
10
INFLATION, AS MEASURED
ON CURRENT TRENDS, THE
Financial Sector Growth Rate and Share of GDP, Source, Annual Report 2011-12, Bangladesh Bank
12
10
8
THE COUNTRY'S
2009-10
2.1
Financial Sector Share of GDP

2010-11
ACHIEVABLE, THOUGH
RISKS REMAIN.
2011
-12
If we consider the three aggregate indicators, such as,

domestic credit to the private sector as a ratio of GDP
(cr_y), Average annual lending rate on lending by
banks (Ir) and broad money to GDP (m2-y) ratio in
comparison with other countries in South Asia, it is

observed in 2011, as per World Bank data source, that
the ratios of Bangladesh are comparably at satisfactory
level and fairly close to India.
Financial Development Indicators:
18.4
cr_y
30.6
50.6
48.8
Sri Lanka
9.4
14.4
10.2
13.3
Ir
Pakistan
38.01
38
m2_y
50
However, in the year 2013 as well,

the financial sectors specially the
banks and FIs may remain in stress
due to accommodative liquidity
policy (something seems to be
balanced between expansionary
and Contractionary monetary
policy), stress of capital market and
merchant banks. The
implementation of accommodative
Monetary Policy would say how
the supply of money could be
accommodative with demand and
support its growth and control
inflation.
Performance
Banking sector: Bangladesh
banking sector has shaped with the
size of total assets of BDT 5867.6
billion & loan and advances of
BDT 3792.5 billion against deposit
of BDT 4509.7 billion as on 31
December 2011, where loan
deposit ratio is 84%, as per Annual
Report 2011-12 of Bangladesh
Bank. Growth rates of total assets
and loan are 27% and 22%
India
77.8
68.7
Bangladesh
100
respectively where as in 2010,

these growths were 24% and 20%
respectively. The growth of
balance sheet size is steady over
the years. Efficiency and stability of
financial systems would register
satisfactory performance with
sustainable development. To
understand how the banking sector
is performing over years, we need
to review the CAMELS rating of the
banking sector as whole.
Capital Adequacy Ratio (CAR):
Banking sector of Bangladesh is in
a healthy state in terms of capital
adequacy if the Non-performing
Loan (NPL) could be controlled
and restricted from moving it up
maintaining good asset quality.
Capital adequacy ratio related
BASEL-II has been implemented
fully. As per Bangladesh Bank
Report actual risk based capital of
all banks was 11.31% in 30 June
2012 and 10.85% in 30 September
2012 as against required level of
10% as described in BASEL-II.
Non Performing Loan (NPL) in the
cr_y= Domestic credit to

private sector as percentage
of GDP
Ir = Average annual lending
rate on lending by banks
m2_y=Board money as a
percent of GDP
Source: The World Bank
banking sector declined to 7.2% in

June 2012 from 13.60% on 30
December 2005, which increased
to 8.75% in September 2012. Due
to Capital market debacle at the
end of 2010 and non-performing of
investors loan with merchant
banks, experts project that the rate
of NPL may go up unless liquidity
inflows and capital market turns
around. Currently, liquidity and
exchange rate in the interbank
money and foreign exchange
markets are in stable condition. As
per the said report differences in
deposit growth and lending growth
have been lowering lately,
loan-deposit ratio is currently
77.66% (08 November) and
weighted average exchange rate is
now Tk. 79.60/US dollar. Banks
are preparing to adopt and
implement the BASEL-III, Capital
Requirement principles in near
future.
51
Year-wise CAR & Cross Country Comparison:

Banks
Countries
Capital to risk weighted assets rao:

2008
2009
2010
2011
SCB
6.9
9.0
8.9
11.7
2012
(June)
11.2
DFIs
-5.3
0.4
-7.3
-4.5
-4.3
PCBs
11.4
12.1
10.1
11.5
11.4
FCBs
24.0
28.1
15.6
21
21.5
Total
10.1
11.6
9.3
11.4
11.3
The chart of the capital to risk

weighted assets represents that the
capital of FCBs and PCBs are
adequate against the 10% of the
risk weighted assets or Tk. 4 billion
whichever is higher with effective
from July- September 2011 quarter.
Subsequently it was lowered to 9%
of the risk weighted assets or Tk. 2
billion whichever is higher.
Excepting SCBs and DFIs, other
banks like PCBs and FCBs
maintained more than 12% and
banking industry as a whole more
than 11% and as on 30 September
10.85%. However, considering the
cross country comparison in south
Asia, Bangladesh is far below than
India, Sri Lanka and Pakistan. We
should develop our asset quality
and increase profitability to make
the capital adequacy ratio stable.
Aggregate Capital Adequacy Rao (%)

2009
2010
2011
2012(Sept.)
Bangladesh
11.7
9.3
11.4
10.85
India
14.0
14.6
13.5
Sri Lanka
16.1
16.2
14.3
Pakistan
14.0
14.0
14.1
Asset Quality: Asset quality is an

important indicator of banking
performance because of its
profitability and sustainability
depends on good quality asset.
Non-performing Loan (NPL) was
reduced year to year and it reached
to 7.2% from 10.8 % in 2008. Due
to capital market crash in 2010 its
ultimate effects came into banks
and NBFIs into two ways, one is
for direct investment by banks and
NBFI and another is for merchant
bank operations, the wholly owned
subsidiary of them, providing loan
to investors. In case of direct
investment, both banks and NBFIs
invested beyond their legal limit,
for banks 10% of liabilities and for
NBFIs 25% of equity. Once the
instructions came from Bangladesh
bank to maintain the legal limit of
capital market investment, huge

force sales placed causing gap of
demand and price fall took place
trending to downward by turns,
securities blocked in hands of
people and made the market
disaster on liquidity. Banks and
NBFIs loans became
non-performing due to liquidity
blocked of its own, different
organizations and individuals
invested in securities and started to
affect repayment of loan or
recycling of loan. NPL gradually
reduced but in 2012 it again
started to rise creating concern on
the performance stability and
development of banking sector.
Rao of NPL and Statement of Provision

Banks
Banks
NPLs (%) to total loans
2008
2009
2010
2011
2012
(June)
NPL
224 8
224.8
227.1
226.4
290
23.8
Req. Prov.
136.1
134.8
149.2
148 2
178.4
3.8
Prov. Made
126 2
137.9
142.3
152.7
167.5
3.2
Excess/(shor all)
-9.9
3.1
-6.9
4.6
-10.9
7.2
Prov. Maint. ra o
92.7
102.3
95.4
103
93.9
2008
2009
2010
2011
2012
(June)
SCB
25.4
21.4
15.7
11.3
13.5
DFIs
25.5
25.9
24.2
24.6
PCBs
FCBs
Total
4.4
19
10.8
3.9
2.3
9.2
3.2
3.0
7.3
2.9
2.9
6.1
Amongst all, DFIs and PCBs are

main concern for bad asset quality
and they pose threat to banking
sector as a whole. Based on banks
own assessment of NPL and
required provisions, the shortfall of
on provision was BDT 10.9 billion
as on 30 June 2012.
52
Required provisions and provision maintained (BDT Million)
Management Soundness and

Efficiency: It is very difficult to
measure management soundness
and efficiency but is most essential
for banking sectors strength and
growth. If the Board is leader, then
the management is associate of

leader and follower of them to
implement. No desired output
would come unless the
management is efficient.
Income earned to expenses made i.e, income expense ratio could be the
measurement of management efficiency. The total expenditure to total income,
operating expenses to total expenses, earnings and operating expenses per
employee, and interest rate spread are generally used to expose management
soundness and efficiency. Technical competence & leadership of mid and senior
level management, compliance with banking laws and regulations and
compliance of all policies including sound internal policies with adequately and
appropriately, ability to plan and respond to changing circumstances etc. are also
taken into consideration to demonstrate the quality of management.
Management of DFIs and PCBs

represents less efficient to generate
income compared to expenses.
Management efficiency of PCBs
was improving and reached to
67% level in 2010 near to level of
FCBs, but in 2011 it again reached
to 71.70% whereas FCBs improved
to 47% from 64.7% of 2010.
Surprisingly in 2011 the efficiency
of SCBs increased compared to that
in 2010. Corporate governance is
the main issue to register less
Banks
SCB
DFIs
PCBs
FCBs
Total
efficiency of the banks. The less

compliant of corporate governance
the less efficient is the
management. We dont need to
analyze, the norms and style of
corporate governance and its
efficiency is visible.
Earning Performance: ROA, ROE
and net interest income are
showing rising trend up to 2010. In
spite of increasing interest income
in 2011 to BDT 146.70 billion,
Return on Assets (ROA)

2008 2009 2010 2011
Return on Equity (ROE)

2008 2009
2010
2011
0.76
-0.63
1.49
2 92
1 27
22.55
-6.95
16.4
17.8
15.6
19.7
-0.9
15.7
16.6
17.0
0 96
0 37
1 55
3.18
1 37
1.14
0 23
2.11
2 93
1 81
1.3
0.1
1.6
3.2
1.5
Liquidity: FCBs hold highest

liquidity followed by SCBs. DFIs
and PCBs suffered huge liquidity
crisis. All conventional banks had
to maintain Statutory Liquidity
Reserve (SLR) 19% of total demand
26.15
-171.68
20.95
22.38
21.72
Expenses-income Rao
2008 2009 2010 2011
SCB
DFIs
PCBs
FCBs
Total
89.6
103.7
88 8
72 9
90.4
7.9
1.9
48.5
12.6
70.90
12.11
1.92
56.71
10.71
81.46
75.6
112.1
72.6
59.0
72.6
80.7
87.8
67.6
64.7
70.8
62.7
88.6
71.7
47.3
68.6
ROA and ROE in 2011 reduced to

1.5% and 17.0% from 1.81% and
21.0% respectively in 2010. So it
is evident that earning efficiency
was not proportionate to increase
of assets and equity. Within the
industry and even over the years
within same category of banks it
significantly differs & does not
provide a consistent growth of
earnings.
Net Interest Income (BDT Million

2008 2009 2010 2011
and time liabilities including 6%

Cash Reserve Requirement (CRR)
(at present 5.5%), Islamic banks
had to maintain these 11.5%
where as all specialized banks
excepting Basic Bank Ltd. are
All banks suffered liquidity constraints from 2008 to

2011. Amongst them, DFIs and PCBs suffered
extremely. The figures give us the liquidity picture
that led the money market to raise higher lending
rate of banks more than even 18%.
Over the years CAMELS rating of

most of the banks assessed by
Bangladesh Bank shows
satisfactory (rank 2) and fair (rank
18.43
-3.23
20.9
17.0
21.0
Banks
19.8
6.2
82.8
13.0
121.9
ROA and ROE of India in

2012 was below 1.5% and
15% respectively that
represent that
comparatively Bangladesh
banking sector earning
performance is better.
34.3
4.9
91.4
16.1
146.7
exempted from SLR. Lower surplus

created pressure the money market
in 2011 that led to higher call
money rate in 2011 and jumped to
more than 40% sometimes.
Banks
Liquid Assets/Deposits (%)
Excess Liquidity/Deposit (%)
2008
2009
2010
2011
2008
2009
2010
2011
SCBs
DFIs
PCBs
FCBs
Total
32.93
13.73
20.77
31.36
24.83
25.13
9.68
18.28
31.85
20.66
27.22
21.33
21.54
32.18
23.09
34.7
12.3
23.9
30.5
26.5
14.9
4.9
4.7
13.3
8.4
17.6
7.1
5.3
21.8
9.00
8.2
2.3
4.6
13.2
6.0
15.7
2.5
7.0
11.8
9.3
3) picture instead of strong (rank

1). The rating should be developed
from satisfactory to Strong whereas
3 banks dropped from strong
category in CAMELS of 2011. So

performance as a whole was
stagnant or stable as whole, not
remarkably improved.
53
1 or strong
2 or Sasfactory
2
3
5
2
28
32
32
33
CAMELS
2008
2009
2010
2011
If we review the above

performance indicators, we
observe that performance of PCBs
and FCBs as a whole provide
sound and healthy pictures where
SCBs and DFIs do not. The
substandard performance of them
reduced the performance of the
banking sector as a whole. It could
be said in other way, the banking
sector could be more vibrant,
strong and stable if SCBs and DFIs
could register good performance.
Amongst PCBs, some of them may
not be sound and strong on the
CAMELS rating assessment and
Bangladesh Bank should identify
those to regulate and nourish them
with SCBs and DFIs so that any
Performance Indicator
No. of Banks
3 or Fair
4 or Marginal
10
8
7
9
5 or Unsasfactory
4
4
2
2
4
1
1
1
unexpected incident does not

shake the banking sector as whole.
Non-Banking Financial
Institutions: Non banking financial
institutions are specialized in
leasing and hire purchase financing
in addition to restricted loan
facilities regulated under the
Financial Institutions Act 1993. At
present 29 NBFIs are in operation
holding BDT 309 billion total
assets aggregately as on 30 June,
2012. The investment and assets
growth of this sector show
moderately upper trends but the
performance of those investments
and assets deteriorated. As per
sector Report on NBFI of Lanka
Total Banks
48
48
47
47
Bangla Securities Ltd. published in

April 2012, Operating
performance of the leading NBFIs
were robust until 2011. After the
capital market debacle profit of
these NBFIs also declined
significantly. According to data
from the third quarter 2011
combined profit of major 6 NBFIs
declined by 56% compared to
98% growth in 2010.
If we review CAMELS rating of
NBFIs, we observe that maximum
companies of this sector had
deteriorated asset quality, earning
capability and management
efficiency and faced liquidity crisis.
Total
NBFI
1 (strong)
No. of NBFI obtained rang points
Capital Adequacy
29
18
Asset Quality
29
13
2 (sasfactory)
3 (fair)
4 (Marginal)
5 (unsasfactory)
Management Eciency
29
15
11
Earnings & Profitability
29
16
Liquidity
29
16
Virtually, the liquidity in NBFIs

was always constraint because of
not allowing to collect money
through saving or current accounts
excepting term deposits. NBFIs
face dilemma to attract term
deposit from mass people. In
addition to that, NBFIs use banking
sector as source of funds and due
to high cost of fund, cost of lending
is high as well. Banking lending
rate to NBFIs and other
commercial projects are almost
same where NBFIs lend the
54
borrowed money from banks at a

higher rate covering cost of fund
and profit. As a result, Banks and
NBFIs are in uneven competition
with the same projects. By
borrowing with a very high rate
from NBFIs, the project might not
be profitable and has always a risk
of deteriorated asset quality.
Taxation system for NBFIs in
Bangladesh is not in accordance
with international practice in case
of finance lease. As per income tax
law, the depreciation allowance is
given to lessee as allowable

expenses for finance lease to
determine the taxable income
where in India, Sri Lanka and
Pakistan and maximum countries
over the world such allowances
are provided to lessor, the leasing
company or NBFI, considering the
legal owner of the assets
irrespective of accounting
treatment as assets in lessees
book.
Capital Market: Lets review of the market structure and its price volatility in 2013:
Indicators
No. of listed securi es
As on 28
March-13
516
Indicators
Highest Records
DGEN index
8918
Recent records
20/3/2013
3939
Equi es
243
DSEX Index
4305
3857
3681.66
Mutual Fund
41
Market Cap. (BDT bn)
36807
2310.27
2242.37
Treasury Bonds
221
Market turnover (BDT mn)
32450
1.45
1.16
Corporate Bonds
Debenture
3
8
Annualized P/E
12.85
12.40
Market Cap as on 20 March 2013

Trave &
Leisure, 2.11
Service & Real
Estate, 0.52
& Miscellaneous, 2.57

IT Sector, 0.52 Jute, 0.02 prin Paper
ng, 0.02
Tannery, 0.63
Ceramic, 1.16
Mutual Fund, 1.84
Tex le, 4.67
Cement, 4.56
Bank, 26.02
Food & Allied, 3.96Engineering, 3.78

Insurances, 5.29
Telecommunica on, 12.11
Pharmaceu cals, 8 94
NBFI, 7 88
Capital market is always

speculative and risk driven. Hence,
volatility of the market is also a
very common feature even in the
efficient vibrant market. Such
speculation driven volatility could
not be avoided in a developing
country like Bangladesh by any
means because of individual rumor
based syndicated investment in the
open market transaction instead of
active role of professionally
managed mutual fund. In such a
market like Bangladesh, very few
investors consider business
fundamentals and invest analyzing
the financials intending to earn
expected rate of return even in the
worst scenario. When market
efficiency comes up in discussion,
it is said the financial reporting
transparency. True. Financial
Reporting transparency is must to
provide the reliable information to
the investors to consider while
investing. The reporting
transparency would not work for
good investments of investors
Fuel and Power, 13.6
unless they can be educated at

least on simple evaluation of
shares or professionally managed
mutual funds is to on the driving
seats of the investors. The
philosophy of making short term
profit makes them speculative and
decisive to move up the market
irrespective of real value of shares
turning it into gambling with
bubble. The expert say, the
expansionary monetary policy upto
2010 led to create the bubble more
due to availability of money where
banks, financial institutions and
merchant banks was open for
investing or providing greater size
of marginal loan to investors. As
such, the people unemployed or
employed or even the rural people
entered capital market to pocket so
easy income with all the cash,
bank balances or converting cash
from selling out the assets acquired
by inheritance. Merchant banks
provided loan to them in addition
to their own investment. At the end
of 2010, regulators were
Recent records
27/03/2013
3794.29
As to sector performance, there are no

significant reasons or fundamentals of
performances. Although it is said, the
market is truly priced now ; the price is
not affected based on sector based real
performance. At the week end of 27
March 2013, gaining sectors were
telecommunication 0.58%,
Pharmaceuticals -1.73%, Mutual Fund
-3.25%, Bank -4.41% and top losing
were travel & Leisure -8.69%, BFI
-6.25%, Cement -5.30 and
Engineering- 5.19% where at the week
end on 19 March 2013, top gainer
sectors were cement, bank,
engineering and tannery. So the market
performance is not consistently stable
and based on fundamentals.
concerned about the bubble of the

market and experts whispered
about collapse a sudden.
Bangladesh Bank had taken
measures to control the market
pulling down the inflation horse by
putting a leash on the liquidity.
Banks and financial institutions
were instructed to withdraw
investment and keep the
investment within the scope of
legal directions. The conservative
monetary policy and directions to
banks adversely affected the capital
market and day by day DGEN
index started to fall making
investors frustrated, aggrieved &
protesting. Index jumped up to
8918 points in December 2010
and then collapsed back to 3500
points in 2012. The regulators and
government worked together to
make the market bullish with the
policy and funds but failed to go
back. That did not restore the trust
of the investors and the bearish
behavior of the market has not yet
been removed. At present, it is said
55
the market is corrected and

balanced priced based on
valuation of shares. However, the
market is extreme volatile. The
confidence of investors is not being
restored due to losing money day
by day investing even in good
securities. Panic and the volatile
decision of investors both from
individual and institutions specially
banks and financial institutions,
merchant banks, policy makers &
regulators wounded the market
and made more bearish and as on
02 April, 2013 total transaction
was only BDT 1060 million.
Stock exchanges, the members of
them and merchant banks, the
other key players of the market
need to be effectively regulated
with the laws and rules BSEC has.
Lot of allegations are pertaining
against them by different quarters
for market manipulation or doing
unlawful works to influence price
of the securities. Efficient capital
market is must to mobilize
domestic savings and also to
ensure broadening the base of
industrial ownership.
Entrepreneurs get capital and
feasible project through a sound
capital market and ICB has
important role to speed up capital
market in Bangladesh by collecting
savings through unit funds, mutual
funds, underwriting, and bridge
financing and investing in any
other company listed or to be listed
with stock exchange and providing
capital support to investors and
Total Premium (BDT billion %)
entrepreneurs. The functions of

ICB have been limited at present
and should be further reviewed in
this crucial time to make the
market better performed and
controlled.
Insurance Companies: Insurance
companies deal with risk and
possibilities. Both for individual
and business, the insurance
company has pivotal role in
protecting them (individuals and
business) from unforeseen financial
loss. As such, the insurance is a
substance of indemnity excepting
the life insurance as the life cannot
be indemnified with value. In
Bangladesh at present a total of 62
insurance companies are in
operation consisting of 2
state-owned corporations, 43
general insurance companies and
17 life insurance companies
including only 1 foreign life
insurance company titled Metlife
Alico. The insurance industries has
reached current stage offer verious
steps: (i) The government
nationalized insurance industry
along with banks in 1972 by
President Order No. 95 and all
companies and organization
carrying on insurance business
came under nationalization order
(ii) The Insurance Corporation Act
(Act of VI), 1973 was enacted to
emerge two state owned
specialized corporation namely
Sadharan Bima Corporation (SBC)
and Jiban Bima Corporation (JBC)
(iii) The Insurance Corporations
Life Premium (BDT bilion, %)

3.08, 5%
(Amendment) Ordinance 1984 (LI

of 1984) was introduced to allow
private sectors to conduct
insurance business in addition to
the above SBC and JBC (iv) The
Insurance Act, 1938 and the Rules
made there under were
promulgated and administered by
Department of Insurance (DOI)
under Ministry of Commerce upto
2010 and finally (v) The Insurance
Act 2010 was enacted in 2010
with the suggested amendments by
consultant & study committee and
Insurance Development and
Regulating Authority (IRDA) started
operation to regulate insurance
companies from 2011. The Rules
under the act are to be made and
in process.
As stated earlier, the gross
premium of one year of
Bangladesh is still below 1% of
GDP. In comparison with other
countries it is observed that we are
far away from them. In India and
Sri-Lanka it is 5.10% and 3%
respectively where as in the
developed country generally it
varies from 9% to 15%. We have
ample scope to insure more people
and assets both with life and
non-life insurance respectively.
Lack of awareness and wrong
perception of the role of insurance
companies keep the people away
from insurance. On the basis of
gross premium as on 31
December, 2011, the structure of
insurance industry of Bangladesh is
as follows:
Non-Life Premium (BDT billion, %)

1.98, 10%
19.25, 2 3%
62.81, 77%
Life
56
Non-life
59.74, 95%
State Owned-JBC
Private
17.27, 90%
State-Owned SBC Private
In a study by a group of students of

Dhaka University in 2011 on life
insurance company in Bangladesh,
it was found that profitability of
most of the leading life insurance
companies are satisfactory in terms
of Return of Equity (ROE), Return
on Capital Employed (ROCE),
Return on Assets (ROA) and
Earning Per Share (EPS). In 2010
amongst leading 7(seven)
companies, ROE from 33.91% to
48.78%, ROCE from 15.63% to
21.40%, ROA from 14.23 to 16.32
and EPS from 720.11 to 18,289.78
are very standard record of

profitability. In 2011, life insurance
company earned income from
investment Tk. 14,194 million in
addition to create life fund and
non life insurance companies
earned net profit of Tk. 4,966
million with profit of all 44
companies.
The growths of premium, life fund,
investment and total assets in 2011
compared to those in 2010 for life
insurance companies were 8.00%,
20.18%, 23.54% and 21.18%
Life Insurance (BDT in million)
respectively and the growths of

premium, investment and total
assets in 2011 compared to those
in 2010 for non-life insurance
companies were 16.35%, 23.70%
and 24.37% respectively, which
are remarkably emerging both in
life and non-life insurance
business. Lack of awareness, lower
per capita income, inefficient
agent, religious superstition and
the organizational chaos in paying
claim allowed the industry slower
penetration in the market.
Non-Life Insurance (BDT in million)
100%
600,000
500,000
Total
Assets, 167,47
3
400,000
Investment, 12
4,102
300,000
200,000
Life Fund
147,600
Premium
, 58,159
100,000
-
Total
Assets, 202,94
6
80%
Total
Assets, 44580
60%
Investment, 15
3,318
Life Fund
177,381
Premium
, 62,814
40%
20%
Investment, 22
926
Premium, 165
44
0%
Premium, 192
49
2011
2011
Life Fund
Investment, 28
360
2010
2010
Premium
Total
Assets, 55444
Investment
In order to make the insurance

business more competent and
sound some issues like minimum
capital, use of account payee
check for commission, commission
ceiling to agents, restrictions of
directorship and setting premium
based on specified tariff rate etc.
The Insurance Act 2010 has been
enacted repealing the earlier
Insurance Act 1938. Addressing
the unhealthy competition existing
in the industry due to lack of
proper regulating with rules and
guidelines, Insurance Development
and Regulatory Authority (IDRA)
has been formed under Insurance
Regulatory Authority (IRA) Act
2010.
Total Assets
Premium
Credit Rating Agency: Credit rating

is the assessment of credit
worthiness of any individual or
corporations. The rating company
is a new dimension of financial
systems to rate the securities and
institutions for investing therein.
Credit rating is essential to assess
the investment due diligence of
individual, securities either debt or
equity of corporations and
institutions/companies as a whole
to reach a rank of credit viability.
The Investors or financer would
decide finally, based on the rated
rank provided by the rating
company, how they would invest
considering the risks associated or
what mitigating measure would be
Investment
Total Assets
taken in investing or financing in

that securities, individual or
corporations. The Credit Rating
Companies Rules 1996
(subsequently amended in 2009) of
Bangladesh Securities and
Exchange Commission (BSEC) is
the regulating rules of rating of
debt instruments & right offers of
equity shares of premium.
Meanwhile some more initiatives
are taken like direct listing rules of
Dhaka Stock Exchange (DSE) to
have at least BBB rating,
Bangladesh Bank made mandatory
for all banks with annual
surveillance in 2006 and the
insurance regulator also made it
mandatory through an SRO
57
annually for all general insurance

companies and biannually for all
life insurance companies. Banks
also use credit rating tools for
credit worthiness and risk
measurement to provide loans to
clients. At present, there are 8
(eight) credit rating companies in
Bangladesh whereas it is 5 in India,
2 each in Pakistan, Sri-Lanka and
Malaysia. Compared to small size
of the financial systems in
Bangladesh, 8 companies are too
many to survive with cost
efficiency should be rating of made
mandatory for all companies to
issue securities instruments and
avail credit lines to bring under
accountability about the
worthiness of issuing or availing to
protect public interest. These will
raise the competition amongst
them for professional works and
only quality service providers
would sustain in the market.
The rating is a tool to ensure sound
practice of financial systems. So, a
good quality of rating is very
essential so that eligible persons or
organizations or securities get
privilege to avail equity or debt
Type of co-operatives
National Co-operative Societies
Central Co-operative Societies
Primary Co-operative Societies
Co-operative Society: Cooperative

concept is very ancient and has
developed as modern cooperatives
for over 200 years. Cooperatives
have the immense opportunities to
mobilize resources for activating
rural economy and underserved
area or segment, where state and
public sector have failed or have
impediment to work, through
developing entrepreneurship,
community based programs and
activities and delivering goods &
services. Cooperatives can alleviate
poverty and can ensure food
security & employment generation
through the above economic
activities. As such, the mission
statement of the Department of
Co-operative Societies is The

Department of Co-operatives is
committed to poverty reduction
and socio economic development
of Bangladesh through strategic
management of human,
agricultural, natural, technical,
financial and other resources for
the sustainable development of
co-operatives as a
business-oriented unit. How far
we succeeded? Cooperatives have
not been added as stronger and
influential sector of financial
systems in spite of Govt. attempt in
policy & papers and establishing
national co-operatives and
department of cooperatives to
regulate them. Excepting Milk
Vita, one of the national
cooperatives, other national and
central cooperative are not
performing well to contribute to
GDP remarkably. We have three
types of co-operative as follows
from the record of department of
cooperatives, Rural Development
and Cooperation Division that
might differ to some extent with
annual report:
Basic fact
No. of Central Cooperative Societies: 21
Amongst them some of famous national Co-operatives are: Bangladesh Milk Producers Cooperative Union Ltd.
(Milk Vita), Bangladesh Samabaya Bank Ltd., Bangladesh Jatiya Samabaya Shilpa Samity Ltd., Bangladesh Samabaya
Shilpa Sangstha Ltd., The Eastern Cooperative Jute Society Ltd. etc.
No. of Central Cooperative Societies : 1,107
No. of Member of C
ooperative Societies : 1,33,188
Working Capital of Cooperative Societies: : Tk. 1,026.80 crore
Name?
No. of Primary Cooperative Societies : 163,408
No. of Member of Primary Cooperative Societies : 8,505,738
Working Capital foCooperative Societies : Tk.1,909 38 crore
Name?
Co-operative movements have not

been spread over and established
in rural areas so far the micro
finance occupied. Co-operative
movements can change the life of
poor or ultra poor people if the
following types of cooperative
could be run with the intended
objectives to achieve: (i)
Producers cooperatives- for
producing product and services to
sell to members and all (ii) Service
58
from public or financial institutions

or the organization dealing with
public money is under proper
control based on rating report. Our
regulators should ensure that
practice at a very starting age of
credit rating in Bangladesh before
involving any bad culture in
accomplishing rating process. They
should focus on the performance
in quality rather than fight on
profitability.
Cooperatives- for providing

services to its members (iii)
Financial Cooperatives or credit
union/cooperative banking- for
providing loan, investment and
insurance services (iv) Multi
Stakeholder cooperatives- for
providing common services to
members being different categories
and status (v) Consumer
cooperatives- for providing good
for consumption to members (vi)
Worker cooperatives- for providing

work to its members. The
producers cooperative could be
divided into (i) Agriculture
cooperatives (ii) Utility cooperative
(iii) Housing cooperative (iv)
Handicrafts cooperative etc.,
whatever the name is, the ultimate
objective is grouping the same
class of producers or service
providers with a view to bring
under one umbrella as cluster to
strengthen structurally, financially

and technically. In Bangladesh, in
urban area we see a lot of credit
cooperatives operated haphazardly
going beyond the cooperating
objectives and attainment of
resource mobilization.
peoples works to go ahead with

prosper and prospects.
Micro Finance: Bangladesh has
been widely known all over the
world as the successful country of
micro finance with group savings
model. As recognition of its
achievement, the nobel committee
jointly awarded Dr. Muhammad
Yunus and Grameen Bank Nobel
Peale Prise GB is a special bank
registered under Grameen Bank
Ordinance 1972. BRAC, another
big micro finance institution in
Bangladesh, has been shaped as
international institution. At present
microcredit programs in
Some projects and programs have

been undertaken by the
government that may have some
figures and facts in recording over
the years, but the performance of
them is not remarkable. As said
earlier, we need to establish
cooperative movements to get
together on specialization basis
and this will give synergy effect of
Particulars
No. of Licensed NGO-MFIs
No. of Branches
No. of Employees
No. of Clients (Million)
Total Borrowers (Million)
Amount of Loan
Outstanding (Tk., millions)
Amount of savings (Tk.
millions)
June, 2008
293
15,077
98,896
23.45
17.79
134,680.96
June, 2009
418
16,851
107,175
24.85
18.89
143,134.03
47,386.19
50.610.04
As per report of MRA on NGO- MFIs in Bangladesh,

Volume VIII, 2011 loans of the above amount are
classified into two groups; (i) Upto BDT 50,000 is micro
credit and (ii) above BDT 50,000 is micro enterprise
loan. Amongst the sectoral distribution, about BDT 135
billion (77%) is micro credit and the remaining 41 billion
is micro enterprise loan (23%). Out of these micro
enterprise loans of 41 billion, TOP ten NGO held 19%
and remaining 4% was held by the rest 576 NGOs.
Portfolio Yield
BRAC
ASA
Bureau Bangladesh
TMSS
Jagorani Chakra Foundation
Society for Social Services
Shakti Foundation for Disadvantage
Women
United Development Initiatives for
Programmed Actions- UDDIPON
Pdakkheo Manabik Unyan Kendra
RDRS Bangladesh
Average of TOP 10 NGOs
Average of 576 NGOs
June, 2010
516
17,252
109,597
25.28
19.21
145,022.66
June, 2011
576
158,066
111,828
26.08
20.65
173,797.60
51,362.93
63,304.44
MFIs Loan Outstanding Other than

Grameen bank (BDT, BN & %)
Micro
Enterprise
Loan, 41, 23%
Micro Credit, 135, 77%
Profitability of NGO-MFIs (ref, MRA Report, NGO_MFIs in

Bangladesh, June 2011)
Name of MFIs
Bangladesh are implemented by

NGOs, Grameen Bank,
state-owned commercial banks,
private commercial banks, and
specialized programs of some
ministries of Bangladesh
government. At present as on 30
June 2011, total outstanding micro
finance was BDT 248 million in
the hands of 35 million borrowers
(grameen bank 8.4 plus other MFIs
26.08) including BDT 72 billion of
Grameen Bank. Other than
Grameen Bank, all MFIs held BDT
173.79 billion. As per MRA, the
structure and growth of micro
finance in MFIs (other than GB) is
shown below:
Micro Enterprise Loan
Micro Credit
28.83
26.32
31.80
23.54
23.1
25.05
28.28
Interest
rate Spread
22.323
22.61
20.79
18.42
16.24
19.12
19.36
Return On
Assets
2.77
10.27
0.52
2.38
5.88
4.8
4.22
Operational
Self Sufficiency
111.09
159.26
95.93
105.58
135.87
118.25
118.07
24.67
18.96
1.8
103.12
21.84
23.72
25.72
20.33
15.42
19.36
19.26
16.26
1.12
3.53
3.73
1.18
92.67
99.07
113.89
102.88
59
Micro finance fund is comprised of generally fund from donors, Palli Karma Sahayak Foundation (PKSF), banks,
clients savings, surplus over expenses etc. The fund composition of micro fianc as per the said report is
below:
Fund Composition of micro credit (BDT, bn):
200
8.85
36.26
23.9
22.67
40.53
150
4.43
31.17
23.48
22.71
3 64
100
50
0
2008
Clients' Savings
2009
Loan from PKSF
Microcredit has extensive role (i)

for access to finance for poor or
ultra poor people to bring them
into economic activities and (ii) for
empowering women as majority of
clients are from poor families and
women. Now micro credit is
regulated by The Microcredit
Regulatory Authority (MRA) under
the "Microcredit Regulatory
Authority Act 2006 to promote
and foster sustainable development
of microfinance sector through
creating an enabling environment
for NGO-MFIs in Bangladesh.
Bangladesh is at 5th rank in the
indicator of Loan Accounts at
MFIs as assessed by World
Economic Forum in the report of
2012.
Stability:
IMF conducted the Financial
System Stability Assessment of
Bangladesh Financial system in
2009 based on the Financial Sector
Assessment Program (FSAP) and
published the report in February
2010. The key findings of that
report are:
60
The soundness of the

financial sector has been
23.58
31.77
63.3
2010
Loan from Commercial Banks
2011
Donors' Fund
strengthened since the 2003 FSAP.

Nonperforming loans in the
banking system have
decreased steadily since 2003,
and the stated capital position
of banks has strengthened.
Meanwhile, the total assets of
the banking system have
doubled during this period
and credit to the private sector
has risen threefold. The rapid
growth in non-traditional
banking activities in recent
years is generating new risks,
underlining the importance of
strengthening the regulatory
framework.
7.73
50.3
10.91
42.34
23.01
24.48
47.44
Nevertheless, significant
long-standing risks and
vulnerabilities remain. Loan
classification, provisioning,
and even capital remain
uneven in the banking sector,
creating potential
vulnerabilities. Non-prudential
government
interventionsuch as interest
rate ceilings, moral suasion,
directed credit and explicit
requirements to ease debt
service for some sectors of the
economyincreases risks,
reduces transparency, and
Cumultaive surplus
Other funds
creates inefficiencies. Moreover,

inadequate information,
attributable to non-transparent
accounting and reporting,
affects market discipline.
Stress tests suggest that credit

risk continues to have a larger
impact relative to other
single-factor shocks.
Exchange-rate risk does not
present a major threat because
the net open positions of
many banks are negligible.
Since the country relies
heavily on remittances and
exports, a protracted global
economic slowdown could
affect banksasset quality.
Although financial soundness
indicators are generally
favorable, the asset quality of
commercial loans portfolios
remains weak, with a large
share of loans classified in the
substandard, doubtful, and
loss categories. Despite the
major improvements resulting
from Bangladesh Banks
restructuring program
including the corporatization
of state banks, they remain
financially weak.
Bangladesh Bank also published

Financial Stability Report in August
2012 with an extensive analysis of
performance of financial sector
performance including banks, FIs,
capital market etc. The report
reveals all indicators positive
growth, reduction of NPL and
increase of provision surplus etc.
excepting reduction of the
profitability in 2011. This feature
reminds us of the point raised by
IMF in stability report on weak
loans portfolio, vulnerabilities of
loan classification & provisioning
and global meltdown affecting
adversely the profitability of the
banks. However, Bangladesh Bank
is aware of careful regulation.

Bangladesh Bank correctly
recognized that a liberalized,
market based, and effectively
supervised and regulated financial
sector is necessary in order to
promote and sustain rapid growth
in Bangladesh. As such, the
Bangladesh Bank, as the supervisor
of the country's financial sector,
should carefully supervise &
monitor the operations, liquidity
conditions and other financial
developments for taking
appropriate actions as required.
According to assessment of World
Economic Forum, Bangladesh is in
37th position in ranking for

financial stability pillar, the best
rank for Bangladesh amongst seven
pillars. The judgment of this pillar
was based on 16 (sixteen
indicators) where Bangladesh was
in very good position for (i)
Manageability of public debt (ii)
Output loss during bank crisis (iii)
frequency of banking crisis (iv)
External Debt to GDP (v) C/A
balance to GDP and finally (vi)
External Vulnerability Indicator.
Some of the indicators are not
applicable (N/A) as the financial
market is not yet expanded to that
level for happening anything so.
Stability Rank, Source: WEF

Credit default swap spread (N/A)
Manageaibility of public debt
Aggregate macroeconomic indicator
Foreign currency sovereign ra ng
Local currency sovereign ra ng (N/A)
Output loss during banking crisis
Tier 1 Capital Ra o
Aggregate measure of real estate bubbles (N/A)
Financial Strength Indicator (N/A)
Frequency of banking crisis
Net Interna onal Investment to GDP (N/A)
External Debt to GDP
Dolariza on Vulnerability Indicator (N/A)
C/A Balance to GDP
External Vulnerability Indicator
Change in Real eec ve Exchange Rate (N/A)
0
Good ranking in financial stability

may not represent a set of fit,
competent and well structured
financial systems but the systems
so far existence have the capability
10
20
30
to allocate funds efficiently and

absorb the shock as they arise. As
we are relatively stable with 37th
position out of 62, we need to
reform the areas (where we are
40
50
60
weak) to make such a set of fit,

competent and well structured
financial systems that can avail the
opportunities of emerging deterring
the threats using strength we have.
61
Reforms & Retreats with Integrated Policy

Bangladesh falls one step down in 2012 in ranking of Financial Development Index compared to that in 2011
as per report of World Economic Forum (WEF). The forum ranked 62 countries as top leading financial systems
where Bangladesh was ranked in 57 in 2012. Financial Development Index addressed 7 (seven) pillars grouped
into 3 (three) broad categories:
1.
Categories
Factors, Policies and Ins tu ons
1.
2.
3.
Pillars
Ins tu onal Environment
Business Environment
Financial Stability
2.
Financial Intermedia on
4.
5.
6.
Banking Financial Services

Non-banking Financial Services
Financial Markets
FINANCIAL
INTERMEDIARIES
3.
Financial Access
7.
Financial Access
END USERS OF CAPITAL
POLICY MAKERS
Each of above 7 pillars has equal weight of 14.29% (14.29x7=100%) and is sub categorized with weight
within each pillars weight of 14.29. However, the rank was finally awarded for a country based on the rank
and value of 7 pillars obtained from sub categories rank & value of seven pillars based on the value & rank of
121 indicators under sub categories (i.e, 121 Indicators ranking- 24 subcategories ranking-7 Pillars rankingCountry ranking). In 2012 amongst 62 countries, 20 countries of Asia were placed in the rank of worlds
leading financial systems and capital markets that may be presented below:
The Financial Development Index 2012-Asia Part, Source; WEF

7
Total Score
5.31
1. Hong Kong SAR

5.1
4. Singapore
4.9
7. Japan
4.42
15. Korea Repub.

4.24
18. Malaysia
4.03
21. Kuwait
23. China
24. Israel
3.94
25. Bahrain
3.93
3.84
26. UAE
3.68
31. Saudi Arabia

33. Jordan
3.56
34. Thailand
3.55
3.29
40. India
3.13
47. Kazakhstan
3.12
49. Phil ipines
2.95
50. Indonesia
2.92
52.Vietnam
57. Bangladesh
262
58. Pak istan
2.61
62
Hong Kong SAR is top 1 in the

world ranking followed by USA
and UK respectively. We are far
away from other countries in Asia
especially from India, Thailand,
Kazakhstan and Philippines. The
above financial development index
indicates that Bangladesh needs to
reform a lot. If we review
Indicators of each sub categories
under pillars we could find out our
loopholes and where reforms are
needed for sound and efficient

financial systems.
The 121 indicators under different
categories of seven pillars
represent the whole pictures
affecting the financial systems.
Hence, if we analyze the ranking
of each indicator, we may
conclude our decision on the area
where reforms are needed. With a
view to emphasizing immediate
reforms we may divide the rank

into three groups like rank 1-30
very good or good, rank 31-49
moderate where reforms need to
develop better and above 50 is
vulnerable where reforms are must
and immediate to develop. The
following table would analyze our
positions in financial systems and
the places where we need reforms:
Analysis of Bangladesh Financial Development Index awarded by World Economic Forum:

Sub
Ran
categories
k
1.Institutional -Financial
61
Environment
Sector
61
Liberalization 62
-Corporate
58
Governance
62
-Legal and
Regulatory
issues
-Contract
Enforcement
Pillars
Score
out of 7
2.5
1.1
3.3
2.9
2.6
Remarks
Each of four categories of
Bangladesh is about last ranked
from 58 to 62 out of total 62. 22
indicators out of 26 vulnerable and
hence, significant reforms are
needed to develop the following
indicators under the pillar
Institutional Environing:
-capital account liberalization
-Commitments to WTO
Agreements on trade Services
-Extent of incentive based
compensation
-Efficiency of corporate boards
Reliance on professional
management
-Willingness to delegate
-Ethical behavior of firms
-Protection of minority
shareholders interest
-Regulation of securities exchange
-Property rights
-Intellectual property protection
-Diversion of public funds
-Public trust in politicians
-Corruptions perceptions index
-Central bank transparency
-Judicial independence
-Irregular payments in judicial
decisions
-Time to enforce a contract
-Number of procedures to enforce
a contract
- Cost of enforcing contracts
Out of 26 Indicators of
four categories, only
three indicators such as
burden of government
regulation (33),
Strength of legal right
index (24) and Strength
of investor protection
index (17) have good
and moderate rank. One
indicator Domestic
financial sector
liberalization was not
applicable.
63
2.Business
Environment
-Human
Capital
-Taxes
-Infrastructure
-Cost of doing
business
62
62
55
62
57
2.7
2.8
3.4
1.4
3.1
3.Financial
Stability
-Current
Stability
-Banking
system
Stability
-Risk of
Sovereign
debt crisis
37
9
23
52
4.4
5.6
4.6
2.8
Each of four categories is about last

ranked from 57 to 62 out of total
62. 18 indicators out of 22
indicators were vulnerable and
hence, significant reforms are
needed to develop the following
indicators under Business
Environment :
-Quality Management School
-Quality of math and science
education
-Extent of staff training
-Local availability of specialized
research and training services
-Brain drain
-Tertiary enrolment
-Irregular payment in tax
collection
-Marginal tax variation
-Quality of overall infrastructure
-Quality of electricity supply
-Internet users
-Broadband Internet subscriptions
-Telephone subscriptions
-Mobile telephone subscriptions
-cost of starting a business
-cost of registering property
-Time to register property
Only one out of three categories
Risk of sovereign debt Crisis is
ranked 52 out of total 62.
4 indicators out of 16 were
vulnerable & should be taken as
reform measures to develop as
follows:
-Tier1 Capital Ratio
-Foreign currency sovereign
Rating
-Local currency sovereign rating
-Aggregate macroeconomic
indicator
64
Out of 22 indicators of
four categories only 5
indicators such as,
Distortive effective on
taxes (37), Time to pay
taxes (46), cost of
closing a business (17),
Time to start a business
(37) Time to close a
business (48) are in
moderate index where
reforms also required to
develop more.
We are best in stability

pillar amongst 7 pillars.
Out of 16 indicators, 6
indicators like, External
vulnerability indicator
(5), Current balance to
GDP (25), External Debt
to GDP (7), Frequency
in banking crisis (16),
Output loss during
banking crisis (top
ranked, 1!),and
manageability of public
debt (12) we are in good
ranked.
6 indicators not
applicable for
Bangladesh.
4.Banking
Financial
Services
-Size index
-Efficiency
index
-Financial
information
disclosure
50
41
35
59
3.00
2.00
5.00
1.00
Only one out of three categories

Financial Information Disclosure
is ranked 59 out of 62. Others two
are moderate ranking 41 and 35
respectively.
2 indicators out of 14 indicators
were vulnerable & hence, should
be taken as reforms measures to
develop as follows:
-Public ownership of banks
-Private credit bureau coverage
5.Nonbanking
financial
Services
-IPO activity
-M & A
activity
-Insurance
Securitization
60
35
61
59
58
1.2
1.3
1.0
1.4
1.0
Three out of four categories are in

last ranked from 58 to 61 where
one is in middle ranked(35) or
moderate.
Out of 14 indicators of four
categories, reforms measures
should be taken to develop the
following 7 vulnerable indicators:
-M & A activity
-M & A transaction value to GDP
-Share of total turnover of M& A
Deals
-Non-life insurance penetration
-Relative value added of insurance
to GDP
-Securitization to GDP
-Share of total number of
securitization deals.
Out of 14 indicators of
three categories, 2 have
very good ranked such
as, Central bank assets
to GDP (18) and
Aggregate profitability
indicator (2) and 9
indicators such as
deposit money bank
assets to GDP (43),
Financial systems
deposit to GDP (38). M2
To GDP (45), private
credit to GDP (45), Bank
deposit to GDP (39),
money market
instrument to GDP (33),
bank overhead costs
(37), bank operating
costs to assets (32) and
public credit registry
coverage (32) are seems
to be moderate where
development is also
needed.
Out of 14 indicators we
have 6 indicators good
and moderate rank on
Life Insurance Density
(15) IPO market share
(42), IPO access amount
(34), Share of world
IPOs (20), life insurance
penetration (43) and
non life insurance
density (33). Yet,
reforms are also needed
in these area to improve
the Non-banking
financial services pillar
One indicator is not
applicable for
Bangladesh.
65
6.Financial
Markets
7.Financial
Access
66
-Foreign
exchange
markets
-Derivatives
market
-Equity
market
development
-Bond
market
development
41
n/a
-Commercial
access
-Retail
excess
51
56
37
n/a
31
1.8
n/a
n/a
2.6
1.0
53
2.8
2.8
2.9
have only good ranked
on stock market
turnover ratio (4) and
another 3 have
Out of 17 indicators, reforms
moderate rank such as
measures should be taken to
Private domestic bond
develop on the following4
market capitalization to
vulnerable indicators:
GDP (42), stock market
value traded to GDP
-Stock Market capitalization to
(40) and Public domestic
GDP
bond market
-No. of listed companies per
capitalization to GDP
10,000 peoples
(45). 9 Indicators are
-Private international bonds to
related to derivatives
GDP
foreign exchange swap
-Public international bonds to
that are not related to
GDP
Bangladesh.
One category retail excess is
have very good ranked
ranked 37, seems to be moderate.
for 2 such as, Loan
Out of 12 indicators reforms
account to MFIs (5) and
measures should be taken to
Loan form a financial
develop the following 4 vulnerable institutions (3) and 6
indicators:
seem to be moderate
like ease of access to
-Financial market sophistication
credit (40), financing
-Venture capital availability
through local equity
-Foreign Direct investment to GDP market (34), ease of
-Debit card penetration
access to loans (48),
market penetration of
bank accounts (44),
commercial bank
branches (45) and total
number of ATMs (48)
where reforms are also
needed.
Out of four categories, bond
market development is ranked 53
and equity market development
seems to be moderate.
Major reforms so far taken by

Bangladesh Bank from 2009 to
September 2011 as per report of
Bangladesh Bank Recent Reform
Initiatives are : (i) Currency
management and payment
systems, in other way, countrywide
electronic payment infrastructure
replacing the traditional paper
based clearing and settlement
system (ii) Regulatory reforms like
liberalization of interest rate,
rationalization of charges,
prohibition on bank loan for
purchasing land, single borrower
exposure limit waived for power
sector, prudential regulation for
customer financing, guidelines on
Environment Risk Management
(ERM), Basel-II Implementation and
planning to implement Basel-III,
guideline on ICT Security for Banks
and Financial Institutions, 2010
(iii) Supervision of banks and
financial institutions like Stress
Testing became mandatory for the
scheduled banks , Published
Financial Stability Report for the

first time, Integrated Risk
Management Guidelines,
Established Risk Management Unit
(RMU) in banks , Risk Based
Capital Adequacy(RBCA) guideline
revised, Implementation of Basel II
accord, Safeguard policy for the
banks on capital market activities,
Accounting Guidelines for Repo
Transactions, Islamic Interbank
Fund Market (IIFM), Diagnostic
Review Report (DRR), Introduced
Digitized Data Reporting System
and Software, Expansion of
Non-Banking Financial Institutions,
Prudential Regulations for NBFIs,
Basel accord implementation for
NBFIs, (iv) Financial inclusionBank account for farmers, Bank
account for unemployed youth,
Bank account for hardcore poor,
Banking service for physically
handicapped people, Bank
accounts for Freedom Fighters,
Bank accounts for beneficiaries
under Social Security Program,
Bank account for distressed

people, Bank Account for Small
Life Insurance Policy Holder, Bank
Account for Aila Affected People,
Loans to farmers for spice
cultivation, Major Policy Reforms
in SME and Refinance Schemes,
Special Incentives and
Performances for Women
Entrepreneurs, Mobile Phone
based Financial Services, School
banking and many more on the
issue of Foreign exchange policy
and reserve management , Anti
Money Laundering and Combating
Financing of Terrorism , Central
Bank Strengthening Project,
Corporate Social Responsibility,
Green banking: Banking for
environmental protection, Digital
Bangladesh Bank and HR
Development and capacity
building through training and
Masters of Banking Management
(MBM) Course.
The indicators of the above tables
67
the year, the organizational own

strategy and policies should be
reviewed based on lesson learned
from past year and performance
through daylong session with
senior management, customers,
lenders, and all other stakeholders.
The issues affecting national policy
or regulations may be conveyed to
the regulator to reform or to take
necessary action after due
diligence when the central bank
chief sits with all bank and
financial institutions. In Japan,
kaizen is an idea of continuous
development and the kaizen is
Change for better where all
employees from cleaner to leading
crew of organization put
comments on the developments
which are taken into consideration
for a healthier organization and
happier workforce. The retreat
programs would help the banks
and all other financial institutions
for better planning and to reach the
target with efficiency and
efficiently.
are broad areas of financial

systems developments and
considering each indicators the
related factors are to be
identified, analyzed and then
reforms measures should be taken.
The identified and analyzed
factors of all indicators under
seven pillars would provide the
picture of whole financial systems
covering banks, financial
institutions, insurance companies,
venture capitalists, microcredit or
other financial institutions, capital
market and its intermediaries,
environment including human
capital, tax, infrastructure and
other laws and justice prevailing
in the systems, Corporate
68
Governance, equity market, bond

market, foreign exchange market,
its rate and operation, FDI, cost of
doing business, currency stability,
risk of sovereign debt crisis,
efficiency, financial information
disclosure, size and structure of
sector, securitization, IPO
activities, business merger and
acquisition, access to finance etc.
Retreat is organizational own
process to review the strategy and
policies and update thereof based
on the opinion and analysis of
stakeholders. We have no tradition
to organize retreat of each
organization. In Retreat program at
the end of the year or starting of
Financial systems development do

not depend only on the reforms
measures taken by central banks or
by Bangladesh Securities Exchange
Commission (BSEC) for capital
market. Financial systems and
macro economics are inter-related
and hence, in order to develop the
macroeconomic indicators we
musts develop the financial
systems indicators. We have to
tailor all components of both
formal and semiformal sectors of
financial systems on a thread
towards formation of capital and
circulation thereof for economic
activities. We need to ensure good
corporate governance, prudent
regulations, fair and equitable
justice, more financial inclusions
through cooperatives with a
suitable model of resources
utilization, venture capital with
SMEs friendly policies, rules and
regulations for vibrant SMEs,
effective operations of MFIs,
insurance companies & capital

market with proper regulation
under demutualized framework
with ensuring the role of ICB,
mutual fund, credit rating agency,
merchant banks, stock exchanges
etc.
The role is not only for Bangladesh
bank or other regulators; this role is
comprehensive role of the
government and us, the peoples, as
stakeholders. All sectors of
financial systems are inter-related
and keeping one sector weak, we
cannot make other sector
remarkably strong. At every level
financial institutions like
microcredit and micro enterprise

institutions, venture capitalists,
co-operatives, banks and NBFIs
should have integrated policy to
emerge industrial or any business
undertaking from micro level. On
the other hands, Insurance
companies, Capital market and its
all players & intermediaries and
credit rating agent must be efficient
to carry on the performance of
financial institutions to build a
strong base of countrys financial
systems. So, the policies should be
integrated encompassing all sectors
of financial systems. The ultimate
objective is to create a healthy
environment of macro economy
with the strong and sound financial

systems and we should integrate all
sectors of the systems in policy
papers for integrated efforts to
uplift our national opportunities.
Bangladesh is now in a discussion
as one of the most emerging
country in the world registering
more than 6% GDP growth
consistently over the last ten years
together with export and
remittance growth. Goldman Sachs
named it one of the Next Eleven.
In April 2010, Standard & Poors,
an American Financial services i.e.
rating company, awarded
Bangladesh a BB- Stable/B, the
69
sovereign credit rating, for a long

term in credit rating which is
below India but well over
Sri-Lanka and Pakistan in South
Asia. These are all words of hope
to move ahead. Yes, we have
strength to go beyond what we are
achieving now.
Where are we blocked? Analysts
70
and wise say, we are not poor, we

are poorly managed. World Bank
says, Among Bangladeshs most
significant obstacles to growth are
poor governance and weak public
institutions. We need to ensure
good governance in corporate as
well as in the state and to
strengthen our public institutions
including state owned banks, NFIs,
insurance companies, co-operative

societies and all others governing
sectors of the financial systems
with a view to harvesting handful
output.
The Author is an Associate

Chartered Accountants of ICAB
A Tribute to Late Mufazzal

Hossain Chowdhury FCA
Parveen Mahmud FCA
There are people, we can never forget;
they live by their words; their deeds are

the treasures of the future generation. I am
remembering a man having great virtues;
ICAB was in his heart-a legendary
accounting professional, for whom, we
can all be proud of. He is Mufazzal
Hussain Chowdhury FCA, known to us as
M H Chowdhury.
Md. Mufazzal Hussain Chowdhury FCA,
the second President of ICAB and the fifth
to be enrolled at ICAB, was a pioneer in
our profession. Mr. Chowdhury who
served ICAB as President from 1973 to
1974 passed away on August 2, 2011 in
the USA.
Mr. Chowdhurys career had spanned
almost half a century. In 1954, he was the
first in Chandpur district, and fourth in the
erstwhile East Pakistan, to qualify as a
Chartered Accountant. He joined as a
partner of A Qasem and Co. Chartered
Accountants in 1955 and left practice in
April 1958 to join as a covenanted officer
in the reputed multinational company
Duncan Brothers (Pakistan) Ltd. In 1965
he successfully completed the managers
course in Ashridge Management College,
Hertfordshire, U.K. In the same year he
was appointed Finance Director of the
company. He was elected a Fellow of the
British Institute of Management in 1966.
In 1971 he was transferred to his

employers head office in London, and
returned to Bangladesh in February 1972.
In that year he was appointed Chairman
and Managing Director of the company.
He resigned from Duncan Brothers in
December 1974 to join the National Oil
Corporation of Libya. He left the
corporation in June 1985 as its Financial
Advisor. Upon his return to Bangladesh he
set up a chartered accountancy firm under
the name and style of Chowdhury Hossain
Zaman Co. Due to illness he left practice
in October 2001 and moved to the USA to
live with his daughters.
During my tenure as President in 2011, I
took the initiative to gather the history of
ICAB from the Past Presidents and senior
members of the profession. Mr.
Chowdhury was one of those I had
reached out to as he was an icon in the
profession and had been involved with
both the Institutes of Chartered
Accountants of Pakistan and Bangladesh
since their inception. At that time he was
living in the USA. I telephoned him and
requested him to send a write up on ICAB.
Although he was unwell and had to be
hospitalized several times, he agreed to
send a write up.
Mr. Chowdhury became a member of the
first Council of the Institute of Chartered
71
THERE ARE
PEOPLE, WE CAN NEVER
FORGET; THEY LIVE BY
THEIR WORDS; THEIR
DEEDS ARE THE
TREASURES OF THE
FUTURE GENERATION.
I AM REMEMBERING A
MAN HAVING GREAT
VIRTUES; ICAB WAS IN
HIS HEART-A
LEGENDARY
ACCOUNTING
Accountants of Pakistan and was
continuously elected to the Council
until 1971. He was elected its Vice
President three times as well. In
recognition of his merit the erstwhile
government of Pakistan awarded him
the honorific title T. Pk., which he
relinquished in 1971. Upon
independence of Bangladesh, Mr.
Chowdhury was instrumental in
piloting the Institute of Chartered
Accountants of Bangladesh. He was
elected to the office of President of
the Institute upon its establishment in
January 1973.
Late Mufazzal Hussain Chowdhury
had paved the way for us in the
profession and always focused on its
advancement. He endowed two
scholarships for CA students, but did
not name these after him. It is only
after his death that the Article
Students Committee, decided to
name the scholarships as M. H.
Chowdhury Scholarship.
I was touched by his courteousness
and magnanimity despite his seniority
and iconic stature in the profession
when he e-mailed me to wish on
Eid-ul-fitr in August 2011. He wished
72
me from abroad, before I could have

wished him! During Eid-ul-Azha in
November 2011, he did not forget to
wish me. On 7th September 2011,
Mr. Chowdhury e-mailed me A Short
History of Accountancy Profession in
Bangladesh with the following
preface:
As promised earlier I enclose for
your proposed publication an article
on the captioned subject which I
sincerely trust will meet approval. I
would, however, request you to
check the Register of Members to
ascertain there from the correct
number of members enrolled on the
establishment of the ICAB and
replace my figure with the actual one.
For ascertaining the correct names
and numbers you may check the
Register of Firms and correct the
information given in the article.
PROFESSIONALS, FOR
WHOM WE CAN ALL BE
PROUD OF. HE IS
MUFAZZAL HUSSAIN
CHOWDHURY FCA.
KNOWN TO US AS M H
CHOWDHURY.
Please show this article to Mr.

Azizuddin FCA of ACNABIN to check
on the information I gave regarding
Auditors Certificate Rules 1932, and
the Pakistani laws, please correct the
information if necessary. I do not
have any of the said documents.
I am ever grateful to Mr.

Chowdhury for taking the pain to
send me the write up on 5th
January 2012, even in a deplorable
health condition. Along with that,
he sent me an e-mail. The words of
inspiration and feeling expressed
for the profession and its people
are really worth mentioning.
And those words of true
belongingness are only possible
from those who have a depth of
wisdom and knowledge gathered

over many years of their
contribution to their profession and
society. I was humbled by his
words, which only happens when
our near people who are far greater
in stature than ourselves.
which is attached here. I hope, this

write-up will be compiled with the
write-ups from other contributors,
and edited and published in one
cohesive narrative of the legacy
and history of our profession in the
country, in the near future.
After I heard about the passing away

of Mr. Chowdhury, I contacted Mr. The Author is Managing Director,
Azizuddin FCA, Past President of
Grameen Telecom Trust and
ICAB and obtained his permission
Past President, ICAB
to print Mr. Chowdhurys write-up,
73
A Short History of the

Accountancy Profession
in Bangladesh
By: Late Md. Mufazzal Hussain Chowdhury FCA (enrollment #05)
Prior to 1932, the government
used to control the accountancy

profession in British India through
the Ministry of Commerce. For this
purpose, the government
established a small number of
commercial colleges throughout
British India. A few of those
colleges would prepare students
for an annual examination known
as Government Diploma in
Accountancy (GDA) conducted by
the Ministry of Commerce. A
qualified GDA could practice as a
public accountant. Additionally,
those permitted to practice the
profession of accountancy in
British India were members of the
Institute of Chartered Accountants
in England & Wales (ICAEW), who
would use the initials ACA/FCA,
and designate themselves as
Chartered Accountants. As well as,
members of the Society of
Incorporated Accountants and
Auditors (ISAA), who went by the
initials ASAA/FSAA, and used the
designation Incorporated
Accountants & Auditors. Anyone
wishing to qualify in the
examinations of the ICAEW would
have to serve in the UK a certain
number of years as an article clerk
with a practicing Chartered
Accountant. On the other hand,
anyone wishing to qualify in the
examinations of the ISAA could
74
serve a number of years as either

an article clerk or audit clerk with
a practicing Incorporated
Accountant in either British India
or the UK. However, such a person
would have to take and pass the
required examinations held in the
UK.
In 1932, the government
promulgated the Auditors
Certificate Rules. Under the new
Rules, services as an article
clerk/audit clerk (three years/six
years) with a qualified practicing
accountant were obligatory before
one could take examinations
conducted annually by the
Ministry of Commerce. While an
article clerk was required to pay
non-refundable premium of sums
ranging from Rs.3000/- to
Rs.4000/-, an audit clerk would
not. An audit clerk would get a
certain amount of monthly
allowance not enough to make
both ends meet. The Rules
recognized qualification and
membership of five bodies of
accountancy within the British
Commonwealth, including the
ICAEW and ISAA, and permitted
members of those bodies to
practice the profession of
accountancy in British India on
payment of prescribed fees.
Additionally, certain senior officials
holding certain number of years

experience in particular position(s)
could practice after retirement.
Again, anyone holding 10 years
experience in Taxes Department
could take the Registered
Accountants examination without
requiring service of articles of
clerkship. Anyone qualifying in
such examinations was designated
Registered Accountant, could use
the initials RA and could practice
the profession of accountancy on
payment of prescribed fees. The
Ministry of Commerce was solely
responsible for regulating the
profession of accountancy in
British India. A Board of
Accountancy, consisting of
government nominated persons,
would render advices to the
Ministry on matters relating to the
Registered Accountants
examinations etc. On the
establishment of Pakistan on
August 14, 1947, the government
of Pakistan adopted the Auditors
Certificate Rules, 1932 and
continued to control the profession
of accountancy through the
Ministry of Commerce.
Around 1956, a few Registered
Accountants formed a body called
the Pakistan Institute of
Accountants with the objective of
establishing an Institute of
Chartered Accountants. On his

return in 1958 from the UK as an
Incorporated Accountant, Mr.
Rezaur Rahman joined Price
Waterhouse Peat & Co., Chartered
Accountants, in Chittagong. In the
early 1960s, Price Waterhouse
Peat & Co. closed its operations in
Pakistan, whereupon, Mr. Rezaur
Rahman set up Rahman Rahman
Huq & Co. (now Rahman Rahman
Huq) and took over its clientele.
He was an active member of the
Pakistan Institute of Accountants,
in the drafting of the Chartered
Accountants of Pakistan Ordinance
1961, and the by-law. The writer
gratefully acknowledges Mr.
Rezaur Rahman, who included his
name, as a member of the first
council of the Institute of Chartered
Accountants of Pakistan and
inspired him to serve the cause of
accountancy profession. In all
elections of the council, both Mr.
Rezaur Rahman and the writer
would win. Mr. A Qasem
continued to obtain nomination to
the council by government. The
head office of the Institute was in
Karachi. The Ordinance catered for
formation of Regional Committees
in Karachi, Lahore and Dhaka. The
government had power to
nominate one-third of the members
to the council. The Secretary to the
Ministry of Commerce was the
President of the Councilnone
would dare to oppose him. The
by-law, however, provided
election to that office by the
members of the Council. The
general members belonging to a
region elected certain number of
members of that Regional
Committee.
In 1963, to solve the problems of
the students living in Chittagong,
the writer established an unofficial
body known as Chittagong District
Association of Chartered
Accountants. The Council granted
a paltry sum of Rs.500/- to the
Association to establish a library.
The Chittagong Chamber of

Commerce graciously granted a
free space on top of its car garage
with electricity to accommodate
the library. The Association spent
the grant on purchase of one table,
two benches, one ceiling fan and
one bookshelf. The members and
the Asia Foundation donated
books. The ICAEW supplied its free
publications from time-to-time. In
1969, Mr. Faiz Ahmed FCA took
over charge of that library. In
Dhaka, the office of the Regional
Committee was set up in a
one-room rented space in the Red
Cross building at Motijheel
On December 16, 1971, upon the
independence of Bangladesh, the
government did not adopt the
of Pakistan Ordinance 1961.
Instead, it formed an Ad- hoc
Committee of 11 members
consisting of the members of the
ICAP with Mr. A. Qasem FCA as
President. The writer joined the
parent company of Duncan
Brothers (Pakistan) Ltd., in May
1971. He returned to Dhaka in
February 1972, when he learnt that
Mr. A Qasem had resigned from
the Ad-hoc Committee being
unable to face student
demonstration in front of his
residence for acceptance of certain
demands. Thereafter, neither did
Mr. Qasem attend any meeting of
the Ad-hoc Committee nor did he
visit the Institute. The writer also
learnt, during this time, of his

appointment as a member of the
Ad-hoc committee. The Ad- hoc
committee formed a
sub-committee to draft an
ordinance and the by-laws of the
proposed Institute and appointed
the writer chairperson.
Furthermore, it authorized him to
look after the day-to-day affairs of
the proposed Institute.
During the preparation of the draft
ordinance and by-law, I had
received considerable assistance
from Mr. Rafiqul Islam FCA and
valuable advice from Mr. Rezaur
Rahman who had settled in
London after his escape from
Pakistan in October 1971, but
would visit Bangladesh
occasionally. We made a good
number of amendments to the
Pakistani Ordinance and the
by-law inserting new provisions,
deleting some and amending a few
others. A few of those provisions
are:
I.
inserting a provision stating

that after expiry of the term of
the third Council power of the
government to nominate will
cease automatically,
II.
empowering the Council

solely to frame, re-frame,
cancel or amend the by-law
without prior or subsequent
approval of the government,
75
III. requiring private limited

companies to appoint auditors
only from members of the
ICAB,
IV. requiring ICAB members to
practice Management
Consultancy only with its
existing practices by
providing a new definition of
the word practice-old law
would allow practice of
Management Consultancy by
formation of unlimited
liability company,
V.
requiring a member intending

to practice to be engaged the
whole time in his practice
either as a sole proprietor or
by formation of partnership,
VI. totally forbidding a member to

become partner in more than
one firm,
VII. prohibiting a member to be in
full time employment and at
the same time to be engaged
in practice,
VIII. requiring ICAB members not
to charge premium for
engaging an article clerk;
IX. deleting the provision of
engaging audit clerks,
X.
changing the designation of

article clerk to article student,
XI. allowing formation of

association by article students
only under the supervision of
the Council,
XII. and inserting a new schedule
titled Schedule D regarding
ethical requirements for
practice of Management
Consultancy.
76
The draft was ready by September

1972 and placed before the
Ad-hoc Committee for approval.
Soon thereafter, the Ad-hoc
committee approved and sent the
draft of the ordinance and by-law
to Mr. M R Siddiqui, FCA, at the
time Minister of Commerce. Mr. M
R Siddiqui, without any delay,
obtained approval from the
Ministry of Law and sent it to the
President of Bangladesh who
promulgated, in January 1973, the
of Bangladesh Ordinance, 1973,
and the Institute of Chartered
Accountants of Bangladesh By-law,
1973. At this point, I must
acknowledge with gratitude the
provision free of charge of
stationery and typing assistance by
Duncan Brothers (Bangladesh) Ltd.,
as needed by the proposed
Institute.
The Ad-hoc Committee used the
Dhaka Regional Committees
one-room office cum-library at the
Red Cross building for its activities.
In or about June 1972, Mr. M
Yunus, who was an assistant
secretary of the ICAP, Karachi,
managed to escape from Pakistan,
joined the proposed Institute, and
became Secretary upon the
establishment of ICAB. The Ad-hoc
Committee after the formation of
the ICAB held an election of its
Council, which in its first meeting
unanimously chose the writer as
President. Since then the ICAB has
continued to grow to the position
where it is now under the
competent guidance, wisdom and
selfless diligent work of all the
subsequently elected Presidents.
After its establishment, the ICAB
granted membership to any
member of the ICAP present in
Bangladesh who applied to it and
paid the prescribed fees. As far as I

remember, number of such
members amounted to more than
40. Again, based on my memory,
the following firms obtained from
the ICAB certificates of practice on
application and payment of fees:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
A Qasem & Co.,

S F Ahmed & Co.,
M MRahman & Co.,
Ata Khan & Co.,
J A Gomes & Co.,
Rahman Rahman Huq.,
M J Abedin& Co., (successor
to A G Merchant & Co.),
S A Zaman& Co. (now
defunct)
Howlader Yunus & Co.,
A C Nath & Co. (successor to
Basu Banerjee & Co.)
Hoda Vasi Chowdhury & Co.
(successor to A F Ferguson &
Co.)
A Wahab & Co.,
Howlader Mahfel Huq & Co.,
Z U Ahmed & Co.,
Mufazzal Ali Mallick & Co.
Badrul Ahsan & Co.,
M A Jalil & Co.
K M Alam & Co.
H S Dhar & Co. (now defunct)
I would be failing in my duty if I

do not mention the late M M
Rahman FCA who, as a member of
the Board of Trustees of the Dhaka
Improvement Trust (now RAJUK),
obtained allotment of the land in a
prominent place where the
impressive building of the ICAB
now stands. I must also express
gratitude to the Government of
Bangladesh for providing generous
annual and other special grants
and assistances to the ICAB for
improvement of quality of training
and education of the members as
well as those of the article
students.
Preparing Accountants
for Future Challenges
ICAB President Md Abdus Salam in an interview with
the Daily Star States that existing curricula match global standards
Md. Abdus Salam FCA, President

of the Institute of Chartered
Accountants of Bangladesh (ICAB)
had conversation with Daily Star
Reporter Md Fazlur Rahman on
various professionals issues in an
exclusive interview that was
published in the Daily Star on 25
April 2013. The qualified
Chartered Accountants shared his
vast experience, knowledge and
his mission & vision with the
media in the interview. His
interview with Daily Star is a part
of his on-going activities to make
the Institute more vibrant and to let
the people know about the ICAB
curriculum that mach global
standard for creating CA
professionals to meet the future
challenges.
The Institute of Chartered

Accountants of Bangladesh (ICAB)
is integrating global practices and
ethics in its curriculum to prepare
accountants who will be able to
produce credible financial
statements and tackle future shocks
in the financial sector, its president
said.
ICAB President Md Abdus Salam
FCA said, since the devastating
economic and financial crisis of
2008-09, the national institute is
grooming its chartered accountants
to take on tough times in
protecting the companies they
work with.
We have incorporated curricula
and syllabus that match global
Md Abdus Salam FCA, President-ICAB in an

interview with The Daily Star
standards and meet demands of the
time, Salam told The Daily Star in
an interview at his office in Dhaka
last week.
accountancy and how people in

the profession could be
incorporated to foster national
development.
We are following the same

syllabus as in other countries. We
have incorporated the ethics of
International Federation of
Accountants, the global
organisation for the accountancy
profession, he said.
The ICAB has a strategic

partnership with Institute of
Chartered Accountants in England
and Wales (ICAEW), the worlds
oldest institution in the sector.
The ICAB is a professional

organisation, supporting more than
1,200 chartered accountants and
20,000 students. It provides insight
and leadership to the accountancy
and finance profession at home
and abroad.
The evaluation of the profession

has increased in the last five years
following the global financial
crisis, Salam said.
He said he does not think that top
leaders in the profession prepared
for the global economic storms,
which broke the financial systems
around the world.
Salam said a new kind of

awakening is going on globally on
the evaluation and standing of the
77
The top-brass should have

foreseen the crisis much before it
was unleashed. The debacle came
because it was not in their
planning process, he said.
Accountants play key roles in
ensuring financial transparency in
trade and commerce and the
financial sector. However, there is
mistrust in the profession as there
are allegations that CA firms help
prepare false balance sheets, have
the audit reports approved to
evade taxes, or flatter balance
sheets to attract investors.
Many generalise without
understanding the reality. Top
management of any company is
responsible for any false report, but
accountants are always blamed.
He said the CAs in Bangladesh and
around the world are now
prepared and have repositioned
themselves to counter any future
challenge.
We have asked our accountants to
remain alert as crisis can come any
time. It is now integrated in our
planning process.
He said they have arrangements
with countries like Ireland and
Australia so they accept ICABs
certification. The organisation is
also going to sign mutually
recognition arrangements with
developed countries, including
Canada.
Salam said there are a few
professions that can match the
potential of chartered accountancy
currently. Many of our students
78
have found jobs overseas. There is

even a possibility to send more
CAs to Africa.
Bank, Salam said a companys

internal audit department should
spot any irregularity.
He said the ICAB is overseeing

whether the CA firms are properly
auditing the balance sheets of
respective companies. We have a
quality assurance board, quality
assurance department and
technical and research committee.
We also have an investigation and
disciplinary committee.
The CAs also have limitations, said

Salam, also a council member of
the ICAB. The difficulty with
auditing is that auditors do not
audit all the offices or branches of
an office, company or bank. They
audit randomly, on a risk-weighted
basis.
We regularly monitor whether

audit reports have been prepared
in line with the set guidelines. The
ICAB takes action against the CA
firms that fail to stick to the
guidelines. Recently, we took
punitive measures against some
firms that were found guilty of
misconduct.
He said the ICAB is serious about
ethics and standards of the
International Federation of
Accountants.
Salam is satisfied with the quality
of audit reports being produced by
the local accountants and auditors.
They match international
standards and are in line with
corporate best practices.
We are proud that the audit
reports and financial statements
awarded by the ICAB have won
the highest number of South Asian
Federation of Accountant awards.
Everybody thinks that as CAs

certify the audit reports, they are
responsible for irregularities. But
that is not right.
They cannot go through thousands
of pages of company documents
dealing with thousands of crores of
taka within two months to unearth
irregularities. It is not possible for
them, he said.
The 57-year-old said the number of
students entering the accountancy
profession is increasing day by
day. On an average, 1,700
students enrol to study chartered
accountancy a year.
The ICAB has also partnered with
the Office of the Comptroller and
Auditor General in joining a Tk
450-crore World Bank project to
audit the spending of the countrys
union parishads, the last tier of the
local government.
(The interview was published in
the Daily Star on 25 April 2013)
On the recent financial

irregularities such as Hall-Mark
Group that misappropriated more
than Tk 2,500 crore from Sonali
The Institute of Chartered Accountants of Bangladesh (ICAB)

I Proposal for increase of Government Revenue
Section
Subject Matter
Existing provision/Situation
Proposal
Reasons/Justification
Reference
01. Reintroduction of Dividend distribution tax for non listed Companies with two tire and Exclusions of Dividend from total
income on which Dividend Distribution tax is payable.
Charge of
There is no control on the dividend A new section may be inserted after
It is necessary to have
Dividend
section 16CCC as follows:
with regards to paid up capital.
a reasonable capital
Distribution tax
base and reasonable
Withholding tax on Dividend to
payout
ratio
foreign shareholder is made subject Notwithstanding anything contained
particularly for FDIs
to DTA which varies within the in this Ordinance where a Company
registered under Kvvbx AvBb, 1994
range of 10% to 15%.
Tax burden of the
individual
Withholding
tax
rate
for (1994 mbi 18 bs AvBb) and not listed
shareholder for the
with any stock Exchange in
Bangladeshi shareholders is
Private
limited
Bangladesh
declares
dividend
For company
20%
Company needs to be
whether interim or otherwise on or
Other than company 10%
rationalized
as
Tax rate for dividend income for after the first day of July 2013, the
corporate tax rate is
company shall pay in addition to tax
Company is 20%.
37.50%.
For individual in line with payable under this Ordinance
dividend distribution tax at the
respective rate.
following rates on such dividend
within sixty days from the date of
such declaration:
Dividend
Dividend
distribution
tax
a) where declared dividend
does not exceed 50% of
Paid-up
capital...........................15%
b) Where declared dividend
exceeds 50% of the
Paid-up capital..........................
25%
Provided that the Provision of this
Section shall not apply in case of
dividend referred to in sub clause
(dd) and sub clause (e) of clause
(26) of Section 2 of the
Ordinance..
........................................................
...
New Para 21A with the following
provision may be inserted after
Para 21 of Part A of the Sixth
Schedule of the Ordinance.
Any income from dividend for
which dividend distribution tax
is payable by the company
02.
Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, errection, testing or commissioning
in connection with turnkey project
Page 1 of 12
Section
Reference
Subject Matter
Proposal
A new clause may be inserted u/s

28 of the Ordinance:
Notwithstanding anything to the
contrary
contained
in
this
the case of an
Ordinance in
assessee,
being
a
foreign
company, engaged in the business
of civil construction or the
business of erection of plant or
machinery
or
testing
or
commissioning
thereof,
in
connection with a turnkey project,
a sum equal to fifteen per cent of
the amount paid or payable
(whether in or out of Bangladesh)
to the said assessee or to any
person on his behalf on account of
such civil construction, erection,
testing or commissioning shall be
deemed to be the profits and gains
of such business chargeable to tax
under the head Profits and gains
of business or profession.
To increase Revenue
from foreign contractors
and justified imposition
of tax on contract under
turnkey project.
03. Increase of the rate of TDS under section 52.

Section 52 TDS from the
(Rule 16) suppliers, contractor, The existing rate of TDS under
Proposed to revise the rate as
subcontractors
follows:
section 52 (Rule 16) is as follows :
Sl.
Amount of
Rate of
Sl.
Amount of
Rate of
No.
payments
Deduction No
payments
Deduction
of tax at the .
of tax at To rationalize the rate of
the time of TDS and to increase
time of
Government Revenue.
making
making
payments.
payments.
1. Where the payment
Nil
Nil
does not exceed taka
does not exceed
2,00,000(two lakh)
taka 2,00,000(two
1%
lakh)
exceeds
taka
1%
2,00,000 (two lakh)
exceeds
taka
but does not exceed
2,00,000
(two
taka
5,00,000(five
lakh) but does not
lakh)
exceed
taka
2.5%
5,00,000(five lakh)
exceeds
taka
3. Where the payment 2.5%
5,00,000 (five lakh)
exceeds
taka
but does not exceed
5,00,000 (five lakh)
taka
but does not exceed
15,00,000(fifteen
taka
lakh)
15,00,000(fifteen
lakh)
3.5%
exceeds
taka
4. Where the payment 3.5%
15,00,000(fifteen
exceeds
taka
lakh) but does not
15,00,000(fifteen
exceed
taka
lakh) but does not
25,00,000(twenty
exceed
taka
lakh)
25,00,000(twenty
4%
lakh)
exceeds
taka
5%
25,00,000
(twenty
exceeds
taka
five lakh)but does not
25,00,000 (twenty
exceed
taka
five lakh)but does
3,00,00,000
(three
not exceed taka
Page 2 of 12
Section
Reference
Subject Matter
crore)
5%
exceeds
taka
3,00,00,000
(three
crore)
7. In case of oil supplied by oil
marketing companies(a) Where the payment does not
exceed taka 2,00,000 (two
lakh)..............................................
Nil
(b) where the payment exceeds
taka 2,00,000 (two
lakh).......................0.75%
Proposal
3,00,00,000 (three
crore)
6%
exceeds
taka
3,00,00,000 (three
crore)
7. In case of oil supplied by oil
marketing companies(a) Where the payment does
not exceed taka 2,00,000 (two
lakh)..........................................
...Nil
(b) where the payment exceeds
taka 2,00,000 (two
lakh).................0.75%
04. To introduce higher rate of TDS if the person receiving payment does not have TIN certificate and VAT registration certificate.
52A &
52AA
Deduction of tax Existing Rate of TDS is 10%

at source from
professional fees
&
Technical
services and from
certain services.
Apart from the existing rate of

10% TDS, higher rate of TDS
@15% may be introduced if the
Payee fails to furnish TIN, VAT
registration certificate to the
payer.
Expansion of Tax net

Increase of Govt.
revenue.
05. Introduction of withholding tax @ 1% from gross payment to freight forwarders against any sea freight, Airfreight, other
charges and commission etc. and deletion of existing section 52M.
52M
Connection of tax U/S 52M Freight forwarding agency As worldwide freight forwarding
Enhancement of
from
freight commission is subject to deduction of business run on revenue sharing
revenue
forwarders
tax at source @ 15%
basis, rather than commission
Control of tax
basis hence to ensure revenue
evasion
collection and control on the
expenditure
claim,
it
is
recommended that :
TDS will be on gross
amount payable to freight
forwarder @ 1%.
Existing provision u/s-52M
may be deleted.
06. Introduction of collection of tax at source from subcontractors of RMG by the Industrial exporters @ 0.8% where the
payment is made without establishing any Back to Back letter of credit or local letter of credit and consider such income u/s
82 (C).
Technically subcontract is included Collection of tax at source from To ensure revenue from
under section 52 for deduction of tax subcontractors of RMG by the this sector.
at source.
Industrial exporters @ 0.8% is
recommended where the payment
Practically the above situation of is made without establishing any
subcontractors of RMG is not always Back to Back letter of credit or
considered
local letter of credit and such
income may be considered for
assessment u/s 82(C).
07. Increase of rate of TDS from agent of foreign buyer @10% instead of existing 7.5%
Page 3 of 12
Section
Reference
53EE
Subject Matter
Proposal
Where, in accordance with the terms The rate of seven and a half
of the letter of credit or under any percent may be increased to ten
other instruction, a bank, through percent
which an exporter receives payment
for export of goods, pays any amount
out of the export proceeds to the credit
of any person being an agent or a
representative of the foreign buyer, as
commission, charges or remuneration
by whatever name it may be called,
the bank shall deduct or collect tax in
advance at the rate of [seven and a half
percent] on the commission, charges
or remuneration so paid at the time of
such payment.
08. To introduce TDS from payment of signing money by the real estate developers.
The developer shall deduct tax
Collection of tax
@10% at the time of payment
from
signing
from the person receiving such
money
money.
Deduction of tax
from commission
or remuneration
paid to agent of
foreign buyer
Stream of revenue will
be increased.
To ensure collection of
Govt. revenue.
Credit of such tax should be

allowed in the year of completion
of transfer of the property.
09. To introduce Collection of tax at source from payment of booking money to hotel, community centre, convention hall,
conference centre etc.
Collection of tax
Hotel,
Community
Centre, To ensure collection of
from
booking
Convention hall, Conference Govt. revenue.
money
centre run by company shall
collect tax @10% at the time of
receiving booking money from
the person against conference,
meeting etc.
Collected tax shall be deemed to
be an advance payment of tax by
the person from whom tax has
been collected at source and
shall be given credit for in the
assessment of his tax.
10. Imposition of tax on income from ITES and software development business.
6th
Income
derived Income derived from the business of To impose tax @ 5% on income
Schedule, from the business software development & ITES is derived from the business of ITES
of
software exempt from tax .
and software development except
Part-A,
development
&
export
Para-33
ITES
11. Imposition of tax on income from poultry firming withdrawing the exemption.
6th Schedule, Income
from Income from poultry farming is Tax @ 5% on income from
Part-A, Para- poultry farming
exempt from tax under certain poultry
farming
may
be
42
conditions
imposed.
12. Imposition of tax on capital gain earned by nonresident assessee withdrawing the exemption.
6th Schedule Capital gain arising Capital gain of nonresident assessee is Recommended to withdraw the
Part A,
from transfer of exempted
provided
that
such exemption for imposition of tax on
Para 43
share of a public exemption is also available in the capital gain of nonresident
company listed in country in which the assessee is assessee
any Stock Exchange resident
by non resident
To increase tax net and

Government revenue
as the exemption in this
sector is continuing for
a long time.
It will increase the
stream of revenue and
be rational with similar
others sectors.
To
remove
the
discrimination between
resident & nonresident
assessee
13. Change of Rule 33B to impose higher tax on rent free accommodation.
Rule 33B Rent
free For rent free accommodation, the Proposed to change the Rule as To maintain relevance
accommodation
rental value of the accommodation or follows:
with Rule 33A.
25% of the basic salary whichever is
Page 4 of 12
Section
Reference
Subject Matter
Proposal
less is included in income of the For rent free accommodation, the

employee.
rental value of the accommodation
or 25% of the basic salary
whichever is higher is to be
included in income of the
employee.
14. To increase the percentage of deemed income under Rule 39 from 10% to 16%
Rule 39
Computation of Under Rule 39 income, profit and Proposed that under Rule 39
income
of gains derived from such operation income, profit and gains derived
contractor, etc., shall, subject to provision of this from such operation shall,
of an oil company rule ,be deemed to be an amount subject to provision of this rule ,
residing outside equivalent to ten percent of the be deemed to be an amount
Bangladesh
gross earnings from such operation equivalent to sixteen percent of
the gross earnings from such
operation
15. Imposition of tax on actual income basis withdrawing presumptive income from transport sector.
S.R.O No- Presumed income According to the SROs fixed rates of The system of presumptive tax for
220/222/22 for
transport tax are imposed for vehicle like bus, these sectors causes substantial
4/
vehicle,
lorry, minibus, truck and vessel, lorry, etc. revenue leakage. This sectors
should be brought under normal
regardless of their actual income.
cargo, etc.
system
of
assessment
by
withdrawing relevant SROs.
This
will
remove
unnecessary
complication in the
process of assessment.
This would be helpful

for revenue collection.
This would also ensure
transparency
in
the
sectors.
Suitable provision for collection of

tax at source may be introduced in
Chapter VII of the Ordinance.
16. To include a proviso for imposing higher tax on income from Fish Farming, Dairy etc.
Considering
industry
SRO :
Reduced Tax Rate Up to 30.06.2013
To include a condition
238/2011, of 5% on Income
Provided that if any income specific character.
dated
from Fish Farming
derived from such head is
06.07.2011 Dairy, etc.
invested other than the said
area than additional 5% tax is
to be paid in the year of such
investment by the company
To extent the time up to 2015
Page 5 of 12
II.
Proposal for Changes on the ground of natural justices and reasonability
Section
Reference
Subject Matter
17. Effective constitution of the Tribunal bench.

Section-11 Establishment of There are provisions for appointment of non
departmental personnel as member of the
and Section Appellate
Tribunal (e g Chartered Accountant, Cost
12
Tribunal and
and Management Accountant, Income tax
Excercise of power
practitioner, legislative expert, Advocate and
of the Tribunal by
Distric Judge
Benches
Presently almost all benches are run by the
departmental personnel
Proposal
To make the Tribunal more effective it

a non- This would make the
is proposed to include
departmental member in each Tribunal effective and
bench
assessees confidence level
will improve
Alternatively,the provisions of judicial
member and accountant member which
was deleted by Fiance Act 2002 may be
reintroduced
18. Charge of Mimimum tax for company should be withdrawn

Section
Notwithstanding anything contained in Removal of Section 16CCC of ITOCharge of
16CCC
minimum tax
any other provisions of this Ordinance, 1984 is recommended
every company shall, irrespective of

its profits or loss in an assessment year
for any reason whatsoever, including
the sustaining of a loss, the setting off
of a loss of earlier year or years or the
claiming of allowances or deductions
(including depreciation) allowed under
this Ordinance, be liable to pay
minimum tax at the rate of zero point
five zero (0.50%) per cent of the
amount representing such company's
gross receipts from all sources for that
year.
Income tax should be based

on income, not on revenue
Income is computed by
deducting allowable
expenses from revenue This
basic prinviple is ignored in
formulating this section
Company may incur loss and
carry it forward Charging of
minimum tax is a restriction
on the fundamental principle
for set off of loss and carry
forward Moreover,
some
times it may lead payment of
tax out of equity
19. Modification of provisions for Charge of Mimimum tax for company to enjoy the previlge of reduced or special rate of taxes granted under
different provisions of the Ordinance unless the provisions of Section 16CCC are removed.
Section
1 Notwithstanding anything contained To facilitate the exemptions granted
As
the
companies,
Charge of
16CCC
in any other provisions of this under Part A of Sixth Schedule of ITO- enjoying tax holiday and
minimum tax
Ordinance, every company shall, 1984 and benefit of reduced rate of
the
tax
exempted
taxes and exemptions and concessions
irrespective of its profits or loss in an under different SROs or orders issued
companies have no tax
while there are several
assessment year for any reason by NBR, it is necessary to introduce a
whatsoever, including the sustaining provisio before the word Explanation implication payment of
minimum tax in field
of a loss, the setting off of a loss of of Section 16CCC
earlier year or years or the claiming of Provided that nothing contained in this level, an explanation is
allowances or deductions (including section shall apply to classes of income required on the issue
referred in section 82(C) of the
regarding payment of
depreciation) allowed under this ordinance, Part A of Sixth Schedule of
minimum tax.
Ordinance, be liable to pay minimum the ordinance and the reduced rate of
tax at the rate of zero point five zero taxes referred under different SROs or
For instances, some
(0.50%) per cent of the amount General Order for the time being in
companies are paying
representing such company's gross force
receipts from all sources for that year.

Explanation For the purposes of this
section, 'gross receipts' means(a) all receipts derived from the sale of
goods;
(b) all fees or charges for rendering
services or giving benefits including
commissions or discounts; (c) all
receipts derived from any heads of income
While Paripatra-1(Incometax)/2011 of NBR
has a clarified that income stream that will be
assessed u/s 82(C){Final discharge of tax
liability} shall not be under the ambit of
minimum tax under section 16CCC
Page 6 of 12
tax at reduced rate.

Hence, the companies,
paying tax at reduced
rate, should be excluded
from the application of
section
16CCC
considering justice to
those companies
Section
Reference
Subject Matter
Proposal
20. Amendment to allow the subsequent refund of relevant loans as allowable deduction in the year of repayment if made
through Account Payee Cheque or bank transfer.
19(26)
Receiving loan Where an assessee, being a company, New proviso may be inserted
Fundamental principle of
by company
receives any amount as loan from any
Single point tax to be
other person otherwise than by a Provided that where the loan in established.
crossed cheque or by bank transfer, this sub section is paid back in
the amount so received shall be subsequent income year, the
deemed to be the income of such amount so paid through account
assessee for that income year in which payee cheque or bank transfer
such loan was taken and shall be shall be deducted in computing the
classifiable under the head "Income income in respect of that
from other sources"
subsequent year
21. Amendment to allow the subsequent refund of relevant loans as allowable deduction in the year of repayment if made
through Account Payee Cheque or bank transfer.
19(28)
Receiving loan & Where an assessee being an individual

gift by individual receives any any sum, or aggregate of
assessee
sums exceeding taka five lakh as loan
or gift from any other person
otherwise than by a crossed cheque or
bank transfer, the amount so received
shall be deemed to be the income of
the such assessee for that income year
in which such loan or gift was taken
and shall be classifiable under the
head "Income from other sources":
New proviso may be inserted
Fundamental principle of
Single point tax to be
Provided that where the loan in established.
this sub section is paid back in
subsequent income year, the
amount so paid through account
payee cheque or bank transfer
shall be deducted in computing the
income in respect of that
subsequent year
22. NBFIs Interest income in relation to classified loan should be treated in consistent with commercial and specialized banks.
Section
Income
from Existing Section: 28 (3) reads as The word and after the words All the activities of Non
Bangladesh Krishi Bank may be Banking
28(3) of
business
or follows:
Financial
replaced with a coma and the Institutions (NBFIs) are
ITO 1984 profession.
Notwithstanding anything to the words and any Non Banking supervised and controlled
contrary contained in any other Financial institutions may be by Bangladesh Bank
provisions of this Ordinance, in the inserted after the words Rajshahi similar to commercial
banks. Like commercial
case of Bangladesh Shilpa Bank, Krishi Unnayan Bank.
banks, NBFIs are required
Bangladesh Shilpa Rin Sangstha,
to comply more or less
Investment Corporation of Bangladesh
with all the regulatory
and any commercial bank including
requirements particularly
the Bangladesh Krishi Bank and
in terms of lending, capital
Rajshahi Krishi Unnayan Bank, the
adequacy,
risk
income by way of interest in relation
management,
to such categories of bad or doubtful
provisioning, etc. As
debts as the Bangladesh Bank may
NBFIs are regulated by the
classify in the income year in which it
same
authority
and
is credited to its profit and loss
through similar regulations
account for that year or, as the case
like commercial banks, tax
may be, in which it is actually
treatment for same issue
received, whichever is earlier.
should be done in the
similar way.
23. Increase of allowable limit of perquisite to Tk. 3,50,000 from Tk. 2,50,000 (Per person per year)
30(e)
Deduction
not The maximum limit of allowable The amount may reasonably be Taka
250,000
as
admissible
in perquisite is Taka 250,000.
increased to Taka 350,000
allowable limit is quite
certain
inadequate considering
circumstances
the present economic
situation.
24. Enhancement of rate of investment tax credit to 15% instead of 10%
Section
Investment
tax Present rate of investment tax credit is Proposed to increase the rate to It was 15% up to the
44(2)(b)
credit
10%
15% to encourage investment
year 2007 now to be
reintroduced considering
general
growth
of
Page 7 of 12
Section
Reference
Subject Matter
Proposal
investment trend.
25. Extension of exemption of tax of newly established industrial undertaking setup between the period July 2011 to June 2015
instead of July 2011 to June 2013.
Section - Exemption from Specified Industrial Undertaking setup Such exemption may be extended Considering
industry
46B
tax of Newly between the period of 1st day of July to the new industrial undertaking specific incentive
Established
2011 and 30th June 2013 are eligible setup by June 2015.
for exemption of tax for five years at
Industrial
different rates based on location and
Undertakings.
year as well.
26. Extension of exemption of tax of newly established physical infrastructure facility setup between the period July 2011 to June
2015 instead of July 2011 to June 2013.
Section - Exemption from tax Newly
established
physical Such exemption may be extended To encourage the sector
46C
of
Newly infrastructure facility set up between to the new physical infrastructure and
infrastructure
Established Physical the period of 1st day of July 2011 and facility setup by June 2015.
development
of the
30th June 2013 are eligible for
Infrastructure
country.
exemption of tax for five years at
Facility.
different rates.
27. Timing and audit of return U/S 75A.
75(A) 2(C) Return
of Return under Section 75A is to be Proposed that the return along To ensure reliability of
withholding tax filed by the fifteenth day of October, with certificate from a Chartered the return and to make
January, April and July of the Accountants is to be filed by the the submission more
financial year for which the tax is next thirty days from the end of easy.
deducted or collected;
the quarter.
28. To make exercise of section 82C optional and to delete sub section (6), (7) and (8) u/s 82 (C)
82(C)
Tax on income of The provision of sub-section (6) (7) a) To include the following
certain persons
and (8) of section 82C provide for
sections for final discharge of
imposition of additional tax over and
tax: 52A, 53BBBB, 53E, ;
above the tax deducted at source.
b) Sub sections (6), (7) and (8) of
section 82C may be deleted in
order to restore the original
idea of final settlement.;
c) The assesses eligible for final
discharge of tax liability under
section 82(C) may exercise the
option for final settlement or
not.
29. To make ADR effective and efficient

SectionAlternative
The ADR was introduced in 2011 and The system of Alternative Dispute
152F to
dispute resolution was expected to Act as an alternative Resolution (ADR) has not yet
152S
to the normal appeal system.
gained the expected popularity.
NBR should launch a vigorous
and effective campaign to make it
more popular and easier.
30. Reduction of rate of tax payment for filing Reference Application to High Court.
160(1)
Reference
to In case of making Reference The provision of paying at least
High
Court Application to the High Court tax 25% or 50% (as may be
Division
payers has to pay:
applicable) of the demanded tax
for
making
a
Reference
a) 50% of the net tax payable after application to High Court (sec-160
the Tribunals order if the of ITO 1984) causes genuine
amount of tax payable exceeds hardship and hassle for the
Taka 10 lakh; and
taxpayer.
b) 25% if the amount does not As such we propose to fix the flat
exceed Taka 10 lakh
rate of 25% for all cases.
Page 8 of 12
This
is
obviously
unreasonable and against
the basic principle of
Final Settlement. and
self-contradictory. This
self-contradiction may
be removed by deleting
those
sub-sections.
Moreover, basically at
present there are
no
difference
between
normal assessment and
assessment under section
82C. Hence assessment
under
section
82C
should be optional.
This is a tax-payer
friendly measure and its
progress would promote
tax-payers confidence as
well as improve revenue
collection.
This amount can be quite

large in some cases and a
heavy burden for the tax
payer. Seeking justice at
the High Court level
should be made easier
for the tax payers.
Section
Subject Matter
Proposal
Reference
31. Revision of the allowable limit of Motor Vehicle for claiming normal depreciation.
3rd Schedule Maximum
At present the ceiling is Tk. 20 Lakh
Recommended to increase the
11(6) (a)
Allowable Cost
limit to Tk. 40 Lakh
of
a
Motor
Vehicle
for
Normal
Depreciation
Allowance
32. Allowance of amortization/depreciation on intangible assets.
To
Allow
Amortization/De
Amortization/Depreciation
on
preciation
on
Intangible Assets like License fee,
Intangible Assets
etc. as Deductible Expenses in
case of Information Technology
Related Companies including
Mobile Operator and other
Telecom Companies, a new
provision may be included in 3rd
Schedule
33. Extension of time for exemption to handicraft exporters
6th
Exemption
of Exempted up to 30.06.2013
May be extend to 30.06.2015
Schedule, Income
from
of
Part-A, Para Export
- 35,
Handicrafts.
34. Enhancement of limit of yearly turnover of SME and clear definition of SME may be introduced.
6th
Exclusion
of Presently, Maximum Yearly Turnover Recommended to increase the
Schedule, SME
income of Tk. 24 lakh is set as pre-condition limit of Maximum Yearly
Part-A, Para from the total for exclusion of Income of Small and Turnover to 50 Lakh as a pre- 39
income
Medium Enterprise (SME).
condition for exclusion of Income
of Small and Medium Enterprise
(SME). Further separate definition
of SME should be introduced.
35. Exemption to commercial producer of Biogas.
Production of
To include in the Sixth schedule
Biogas
to extend the exemption facility to
commercially
the producers of
Biogas
commercially
36. Time limit to deposit TDS to be specific
Rule 13
Time limit for
Income tax deducted at source is to be Proposed to change the Rule to
payment of tax
deposited within three weeks from the allow deposit of withholding tax
deducted at source date of deduction or collection
within the immediate next month
of deduction.
37. Enhancement of exemption limit of house rent allowance from Tk. 15,000 to Tk. 25,000 per month
Rule-33A House
rent The limit for exempted house rent This may reasonably be increased
allowance
allowance for an employee is Taka to Taka 25,000 per month.
receivable in cash 15,000 per month.
37. Increase of exemption limit in respect of conveyance allowance from Tk. 24,000 to Tk. 48,000 p.a.
Rule - 33C Maximum
Existing limit is Tk. 24,000 (Tk. 2,000 Proposed to increase the same to
Exemption Limit per month)
Tk. 48,000 (Tk. 4,000 per month)
of Conveyance
Allowance
receivable in cash
Considering increased
price of motor vehicle
Considering the cost of

intellectual
property
used in such businesses
and allow ability of such
cost.
Considering
industry
specific incentive
This limit was fixed in

the year 2008 (4 to 5
years before) which may
now
be
revised
considering inflation.
The investor will be

motivated
to
make
investment in this sector
This is not practical to

identify each deduction or
collection and deposit the
same within three weeks.
Deduction or collection at
source is a continuous
process, hence it should
not be from the date of
deduction rather it should
be on calendar month
basis.
This
amount
is
unchanged since 2002.
This
amount
is
unchanged since 2008
and quite low.
39. Enhancement of rate of allowable expenditure on distribution of free sample.

Rule 65C Allowance
in Based on the limit of turnover, rates Proposed to raise the rates as 3%, Considering nature of
respect
of allowable for free sample are 2%, 1% 1% & 0.50% in the case of a market competition in
Page 9 of 12
Section
Reference
Subject Matter
Proposal
Expenditure on & 0.50% respectively in the case of a Pharmaceutical Industry and to businesses
Distribution
of Pharmaceutical Industry and 1.5%, 2%, 0.75% & 0.375% in the case
0.75% & 0.375% respectively in the of Other Industries.
Free Samples
case of Other Industries.
40. Increase of the limit of total income for individuals from Tk. 2,00,000 to Tk. 2,50,000 for tax imposition.
Finance
Threshold
for The exempted income for individuals Tax exempted income for General price index has
Act, 2012 exempted income is Taka 200,000
individuals should be raised from gone up significantly
Taka 200,000 to at least 250,000. during the year. This
justifies the increase.
41. Enhancement of limit of net wealth imposing surcharge
Finance
Surcharge
in The minimum limit for imposition of This amount may be increased This amount is rather
low in view of the fact
Act, 2012 addition
to surcharge is Taka 2 crore of net reasonably
that value of property
wealth.
assessed tax
has gone up remarkably
in recent years
42. Corporate tax rate of banks and financial institutions may be reduced to 40% instead of 42.5%
Finance
Corporate tax rate Corporate tax rate is quite high Corporate tax rate may be reduced Our corporate tax rate is
Act, 2012
compared to other regional countries, to 40% particularly for the much higher compared
particularly the rate for banks and financial institution, banks.
to
other
regional
financial institutions 42.5% is
countries. This is a
unusually high
discouraging factor for
corporate growth and
FDI
43. Corporate Tax Rate for trading and manufacturing company should be different
Finance
Corporate tax rate There is no difference in Tax rate for There should be at least difference The
manufacturing
Act, 2012
trading and manufacturing companies of 2.5% in corporate Tax rate, companies add more
manufacturing companies being @ value and employment to
35% and trading company @ 35% the economy.
43. Corporate Tax Rate for mobile phone operating companies should be lesser than cigarette manufacturing companies
Finance
Corporate tax rate Tax Rate for mobile phone operating Tax rate for both mobile phone Health
and
Act, 2012
companies-45%
operating companies and cigarette environmental reasons.
manufacturing companies should
Tax Rate for cigarette manufacturing be 42.5%.
companies -42.5% for non-publicly
trading company.
44. Corporate Tax Rate should not be higher than individual Tax rate
Finance
Corporate tax rate Base Corporate tax rate -37.5%
Corporate Tax Rate should not be High corporate Tax rates
Act, 2012
Corporate tax rate for Publicly Traded higher than individual Tax rate.
discourage FDI and also
Company declaring dividend more
local investment.
than @20% - 24.75%; if dividend is
declared@10% to 20% - 27.5%; and if
dividend is declared less than @10% 37.5%
Highest individual Tax rate -25%.
45. Tax rebate for dividend shall be eligible for all companies
Finance
Corporate tax rate 10% Tax rebate available for publicly Tax rebate for dividend shall be To be Just and fair.
Act, 2012
traded companies for declaring eligible for all companies and
dividing more than @ 20% is not penalty for non-payment of
available for bank, insurance and dividend minimum @10% should
financial institutions. There is no also be applicable for mobile
conditionality of declaring dividend phone and cigarette manufacturing
for mobile phones and cigarette companies.
manufacturing companies for reduced
Tax rate of @35% from their base rate
of @45% and 42.5%.
46. Introduction of progressive tax rate for SMEs
Finance
Corporate tax rate None
A progressive tax rate for SMEs To encourage the SMEs
Act, 2012
either base on turnover or profit
and
employment
may
be
introduced
47. Interest payable by the assessee on deficiency in payment of advance tax
Section
Interest payable The period for which interest under The period for which interest Income Tax Ordinance
73(2)
by the assessee sub-section (1) shall be payable shall under sub-section (1) shall be prescribes
uniform
Page 10 of 12
Section
Reference
Subject Matter
on deficiency in be the period from the (first day of

payment
of April) of the year in which the
advance tax
advance tax was paid to the date of
regular assessment in respect of the of
the income of that year or a period of
two years from the said (first day of
April), whichever is shorter
Proposal
payable shall be the period from

the (first day of April) of
preceding the assessment year in
which the advance tax was paid to
the date of regular assessment in
respect of the of the income of that
year or a period of two years from
the said (first day of April),
whichever is shorter
assessment year for all

tax payers. That is, all
tax payers pay tax as per
rates and laws applicable
for same assessment year
irrespective
of
the
different ending day of
their financial year (any
date between July 1 to
June 30 preceding to the
assessment year).
Therefore, to remove the
confusion
and
for
ensuring uniformity in
calculating interest on
deficiency in payment of
advance tax for all tax
payers, first day of April
should be the preceding
the assessment year
48. To Extend upto 30 June 2015 the Incentives expiring on 30.06.2013

SRO : 221/2011, 15% Reduced Tax Rate for Textile To Extend upto 30 June 2015 the To relieve to the
dated 04.07.2011 Industries.
Incentives expiring on 30.06.2013 Industries concerned
SRO : 220/2011, 15% Reduced Tax Rate for Jute
dated 04.07.2011 Industries
Para - 35, Part Exemption of Income from Export of
A, 6th Schedule
Handicrafts
Section - 46B.
Exemption from tax of Newly
Established Industrial Undertakings.
Section - 46C.
Exemption from tax of Newly
Established Physical Infrastructure
Para - 42, Part - Facility.
A, 6th Schedule.
Exemption of Income from Poultry
SRO: 238/2011, Farming.
dated 06.07.2011.
Reduced Tax Rate of 5% on Income
SRO: 218/2012, from Fish Farming Dairy, etc.
dated 27.06.2012)
&
(SRO:
21/2012,
dated Reduced Tax Rate of 10% on
Investment of untaxed legal income in
11.01.2012.
shares of listed companies
49. Disallowances of Expenses claimed in the Trading Account and Profit & Loss Account in violation of Provision of Section 30A
Section 30A Disallowances of Notwithstanding anything contained To Issue a General Direction to To avoid dispute and
and
Expenses claimed in sections 28, 29 and 30, the Deputy the Assessing Officers to strictly delay in collection of
in the Trading Commissioner of taxes shall not make comply with the provisions of revenue.
Paragraph
and any disallowance or deduction for any Section - 30A in respect of
29 (3) of Account
Paripatra 1 Profit & Loss year from any claim made by an Disallowance of Expenses claimed
Account
in assessee in the trading account or in the Trading Account and Profit
(Income
of profit or loss account without & Loss Account and not to make
Tax) dated violation
of specifying
reason
for
such disallowances on estimate and on
27.07.2002 Provision
Section 30A
disallowance or deduction.
surmise or suspicion without
citing any specific instance of unverifiability.
Page 11 of 12
Section
Subject Matter
Reference
50. To remove the Conflicting provisions
SRO
No. To remove the The SRO provides that the tax rate for
269/2010,
conflicting
a Company being a Sponsor
dated
provisions
Shareholder is 10% whereas the
01.07.2010
Section 53M provides that the 5%
and of the
TDS on such income is Final Tax
Section
liability U/S 82C.
53M
The SRO provides Nothing whether it

SRO
No.
is applicable for both Residents and
269/2010,
Non - Residents. However, such
dated
income of Non - Residents is Exempt
01.07.2010
from tax as per Para 43 of Part - A of
and of the
Sixth Schedule if, exemption is
Para 43 of
allowed in his/her country.
Part - A of
the
Sixth
Schedule
51. To delete Para 1(A) of 6th Schedule Part A
Para 1(A) of Income derived "Any income derived from the
6th
from operation of operation of the microcredit by a nonSchedule
microcredit
by government organization registered
Part A and the NGOs
with NGO Affairs Bureau" is excluded
Section 44
from total income
(1)
Page 12 of 12
Proposal
To remove the conflicting To

remove
the
provisions of the SRO No. conflicting provisions
269/2010, dated 01.07.2010 and of
the Section 53M in respect of Tax
Rate for a Company being a
Sponsor Shareholder on Profit on
Sale of Shares of a Listed
Company.
To remove the conflicting

provisions of the SRO No.
269/2010, dated 01.07.2010 and of
the Para 43 of Part - A of the Sixth
Schedule relating to tax of NonResidents on income from sale of
shares of a Listed Company.
This should be withdrawn.

To be just and fair and
Instead, income derived from the increase Tax GDP ratio.
operation of the microcredit by a
non-government
organization
registered with NGO Affairs
Bureau may be given rebate or
may be assessed under regular
provisions at reduced rate of
income tax
2
2
2
2
3
3
3
3
4
5
5
6
7
8
8
9
10
11
12
12
12
13
13
14
14
14
15
15
15
Sl.
No.
Reference
Section/Rule/
SRO/Order
Existing
Provision/Situation
Proposal
Reasons / Justifications
K) miKvii ivR^ Avq ew msvt

Drm g~mK KZbi AvIZv ewi Rb RqU fvi, Gmvwmqkb, we`kx Kvvwbi kvLv I wjqvRv AwdmK Drm g~mK KZbKvix wnmve Af~KiY
cm t
o eZgvb GKvwaK wVKvavixi
Kvvbx RqU fvi Pzwi
gvag AbK wVKvavix KvR
wbhy nb| Zvì RqU
K KvvbxR G dvgm Gi
wbeb cqvRb nq bv Ges
mieivn MnYKvix KZK Drm
RqU
fviwU
wjwgUW
g~j mshvRb Ki KZb|
Kvvbx wnme MY nq bv|
wK, Zviv UW jvBm, AvqKi
(1) wbwjwLZ
msv
ev
mb` I g~mK wbeb wbq eemv
cwZvbK, AZtci Drm
Kib| m Zvì wewa
g~j
mshvRb
Ki
18K Abyhvqx Drm g~mK
KZbKvix ewjqv Dwj-wLZ
KZbi gZv bvB| Abw`K
mieivn
mev MnYi mgq Drm g~j wjwgUW Kvvwb kjvi
wVKvavix eemvq gvjvgvj ev
1
MnbKvix KZK
mshvRb Ki KZb KwiZ cwieZ AvqKi Aav`k,
wewa (18K) Gi
mev mieivnKvixMYi h_vh_
Drm g~j
1984
Gi
aviv
2(20)-G
nBe, h_vtDc-wewa (1)
KvVvgvMZ wfw bvB Ges Zviv
mshvRb Ki
msvwqZ Kvvwb kjv
g~mK mwVKfve cwikva Kib
KZb
cwZvwcZ Kiv AvekK|
(K) miKvwi, AvavmiKvwi ev
bv|
^vqkvwmZ cwZvb;
(L) GbwRI;
ZvB miKvii ivR^ AvniY ew
(M) evsK, exgv cwZvb, ev
Kivi j D cwieZb
AbKvbv Avw_K cwZvb;
/mskvab Riix|
(N) wjwgUW Kvvwb; ev
(O) wkv cwZvb|
o ivR^ AvniYi ^v_ we`kx
Kvvwbi kvLv Awdm ev
wjqvRv
Awdm
mg~nK
myfve Drm g~mK KZbKvix
cwZvb wnmve wPwZ Kiv
cqvRb|
hvnv
cvweZ
mskvabi gvag wbwZ nBe|
Avg`vwb chvq g~mK AevnwZi myweav evwYwRK Avg`vwbKviKi Rb evwZj c`vb cm t
o Avg`vwb cieZx weqi
AbK evwYwRK Avg`vwbKviK
Afixb m` Avg`vwb chvq
eZgvb D GmAviI Gi
AvBb Abyhvqx g~j NvlYv bv
wefvM, A_
(Uwej-1),
Uwej-1 G hmKj cY mg~n
w`q cY weq Ki| dj
gYvjq,
Avg`vwb I
Afy AvQ Zvì
Zvì weq g~j Kg nq|
Avg`vwb chvqi (Uwej-1)
MYcRvZx
Drcv`b chvq
Avg`vwb
chvq
g~mK
Avevi hvnviv g~j NvlYv w`q
mKj
cYK
evwYwRK
evsjv`k
(Uwej-2),
AevnwZcv wK, eemvqx
g~mK c`vb Ki weq Ki
Avg`vwbKviK KZK Avg`vwbi
miKvii
Drcv`b chvq
2
chvq KwZcq cY ewZZ
Zvì weq g~j ekx nq|
g~mK AevnwZ c`vb Kivi
GmAviI bs(Uwej-3),
Abvb cYi g~mK
dj Zviv Kg g~ji
myweav evwZj Kivi cve Kiv
180c` mev
AevnwZcv bq Ges mmKj
mieivnKvixi wbKU _K cY
nBjv|
AvBb/2012/63 (Uwej-4) Ges
cY Avg`vwbi Avg`vwb
q KwiZ Dz nq Ges
8-g~mK ZvwiL
eemvqx chvq
chvq AMxg g~mK Av`vq Kiv
G ivR^ AvniY nq bv|
07 Ryb, 2012
(Uwej-5) g~mK
nq|
ZvB AvBbi D cvewU ivR^
wLv
AevnwZ|
AvniYi ^v_ evevqb Kiv
Riix|
mdU&Iqvi Avg`vbxi g~j mshvRb Ki Aivc cm t
o e`wkK gy`v wbqb mnvqK
Uwej 2 Abyhvqx Avg`vbx I
AfixY m`
Avg`vbx I
fwgKv ivLe|
Drcv`b chvq mdU&Iqvi
wefvM, A_
mdU&Iqvi Avg`vbxi g~j
Drcv`b chvq
3 gYvjq,
(H.S. Code 8523.29.12
o
ivR^ ew cvBe|
mshvRb Ki Avivc Kiv DwPZ|
g~j mshvRb Ki
MYcRvZx
Ges 8523.49.20) g~mK
o `kxq mdUIqvi Indurstiry
AevnwZ msv
evsjv`k
AevnwZ cv|
i Dbqb
cv - 2
Sl.
No.
Reference
Section/Rule/
SRO/Order
Existing
Provision/Situation
Proposal
miKvii -Gi
GmAviI bs180/AvBb/
2012/638g~mK| ZvwiL 7
Ryb, 2012
wLv
L) Abvb t
eemvqx KZK cY, Avg`vwb ev q ev ARb ev msMn I cY weqi mv_ m mevi Dci iqvZ Mnbi myweav_ DcKiYi msv cwieZb t
o eemvqxi cY msMn Ges
wewi Z_v eemv
cwiPvjbvi Rb wewfb mev Mnb
Riix (hgb wevcb, exgv,
dBU divqvwWs, wKqvwis I
aviv (2) Gi `dv (M) Gi DcdivqvwWs, cwienb wVKv`vi,
`dv (Av) Gi wbic cwZvcb
evsK KZK Fbc mev
Kivi cve Kiv njt
BZvw`)| eZgvb D mev
(Av) eemvq cwiPvjbvi ,
mg~ni Dci cwikvwaZ g~mKi
DcKiY
weq, wewbgq ev cKvivi n (Av) eemvq cwiPvjbvi ,
iqvZ Mnb meci nq bv| hvnv
aviv (2) Gi
1
vii Dk Avg`vbxKZ, weq, wewbgq ev cKvivi
(Input) Gi
`dv (M)
eemv cwiPvjbvi Cost
qKZ, AwRZ ev Ab Kvbfve nvii Dk Avg`vwbKZ,
msv
of Doing Business-K ew
msMnxZ cY;
qKZ, AwRZ ev AbKvbfve
KiQ Ges DcKiY Ki iqvZ
msMnxZ cY Ges cY, Avg`vwb
Mnbi g~mKi gwjK
ev q ev ARb ev msMn I cY
bxwZi mv_ mvsNwlKI eU|
weqi mv_ m mev|
ZvB eemv cwiPvjbv eq
nvmKiY Ges g~mKi gwjK
bxwZi evevqbi Rb AvBbi
cvweZ mskvabx AZxe Riix|
mev ivwbi ivwbi cwZ mywbw`KiY t
wewa 27 Gi Dc-wewa 10-G ev
bZzb Dc-wewa 11 mshvRbi
gvag mev ivwbi
wbwjwLZ welqjv Afy Kiv
hZ cvi t
(K) mev ivwbi Rb mev
mieivnKvix
Ges
mev
wewa-27-G cY ivwbi cwZ MnYKvixi
ga
^vwiZ
wevwiZfve eYbv Kiv AvQ AxKvic
(jUvi
Ae
2 wewa 27
ivwb cwZ
wKmev ivwbi cwZ we GbMRgU) _vKZ nBe;
vwiZfve Dj-L Kiv bB|
(L) mev ivwbi g~mK
Pvjvbc c`vb KwiZ nBe;
(M) mev ivwbi wecixZ
e`wkK
gy`v
evsjv`k
cZvevwmZ nBZ nBe; Ges
(N) e`wkK gy`v cvwi `wjj
`vwLjci mwnZ mshy KwiZ
nBe|
KUvi KZK mve-KUviK mev g~j ev Kwgkb cwikvai mgq g~mK Drm KZb bv Kiv cm t
GB avivi Abvb weavbvejx e`wkK mvnvhc~ kjv
mI, Kvb wbewZ ew KZK wejy Kivi Rb cve Kiv nj|
c`q g~j mshvRb Ki evW aygv e`wkK mvnvhcy cK
aviv (6) Gi
cwikvai mgq KZK, wewa viv wbavwiZ bq, eis Abvb cKI Gic
3 Aaxb Dc-aviv
I cwZ
cwZZ, mev MnYKvix ev, myweav cvIqvi AwaKvix nIqv
(4KK)
gZ, mevi g~j ev Kwgkb DwPZ| G aviv 6(4KK)
cwikvaKvix KZK mevi g~j ev Gi Abvb mKj kZ AcwiewZZ
Kwgkb cwikvaKvj Drm _vKv DwPZ|
cv - 3
o ivwb bxwZZ mywbw` mev

ivwbi LvZ wbavwiZ AvQ|
o evsjv`k _K eZgvb mev

o
ivwbi msLv evcK nvi ew

cvQ|
mywbw` w`K wb`kbv _vKj
mev ivwbi mKj cKvi
wevwi wbimb nBe Ges mev
ivwb DrmvwnZ nBe|
o g~mK w`Z nq g~j mshvRbi

Dci Ges hLb KUviK
mevg~j ev Kwgkb cwikva Kiv
nq ZLb m~Y mevg~ji ev
Kwgkbi Dci mevMnYKvix
g~mK Drm KZb Ki ivLb|
hw` KUvi mev c`vbi Rb
mve-KUvi, GRU ev AbKvb
Sl.
No.
Reference
Section/Rule/
SRO/Order
Existing
Provision/Situation
Av`vq ev KZbc~eK miKvix
URvixZ Rgv KwiZ nBet
Proposal
mev mieivnKvix ewK
wbqvM `b Ges mevg~j ev
Kwgkb c`vb Kib ZLb mgy`q
mevg~j _K g~j weqvRb
nq| G g~j mshvRb nq
bv|
Ze kZ _vK h, e`wkK
mvnvhc~ Kvb cKi AvIZvq
Kvb mev MnYKvix KZK c`q
g~j mshvRb Ki hw` mev
MnYKvix ev, gZ, mevi
o weqvRbi Dci g~j mshvRb
g~j ev Kwgkb cwikvaKvix
Ki Avivc Kiv g~mK bxwZi
ew mevi g~j ev Kwgkb
mv_ mvsNwlK| Z_v AwaK g~mK
cwikvaKvj evW KZK, wewa
Avivc/cwikva Kiv nQ hv
viv wbavwiZ cwZZ Drm
eemv cwiPvjbv eqK ew
Av`vq ev KZbc~eK miKvix
KiQ,
`ki
A_bwZK
URvixZ Rgv Kib Ges D
AeKvVvgv wbgvYi weic
mev mieivnKvix ew KZK
cwZwqv mw KiQ Ges Ki
D mgy`q mevi Askwekl
duvwKi cebZv ew KiQ|
mieivni Kvb mve-KUvi,
GRU ev Ab Kvb mev
o hnZz KUvii m~Y mevg~j
mieivnKvix ewK wbqvM
ev Kwgkbi Dci g~mK Drm
Kib, mB D mev
KZb Kiv nQ Ges miKvix
mieivnKvixi
mve-KUvi,
KvlvMvi Rgv c`vb KiQ,
GRU ev wbqvMKZ Ab Kvb
mnZz mve-KUvii Dci g~mK
mev mieivnKvix ewi wbKU
Avivc Kiv g~mK Gi gwjK
nBZ, D mevi Dci cv_wgK
bxwZi mv_ mvsNwlK|
chvq chvR g~j mshvRb Ki
Av`vq ev KZb Ges miKvix
URvixZ Rgv c`vbi `vwjwjK
cgvYvw` Dcvcb mvc
cybivq Drm g~j mshvRb Ki
Av`vq Kiv hvBe bv|
DcKiYi qg~j ev g~j mshvRbi cwieZbi cwigvY NvwlZ gybvdvi mv_ mg^qi myhvM _vKv mvc g~j NvlYv bv Ìqv Ges iqvZ KZb bv Kiv
cm t
o DcKiYi g~j ev g~j
aviv (9) Gi Aaxb Dc-aviv (1) aviv (9) Gi Aaxb Dc-aviv (1)
mshvRbi cwigvY ew cj
Gi
`dv
(QQ)
Z
ejv
nqQ
h
Gi `dv (QQ) t
hw` cYi weqg~j ew bv Kiv
DcKiYi bvg g~j wfwi ga
nq Zvnj ewcv AskUzKz
Afy _vKj mB DcKiYi
aviv 5 Gi
gybvdvi mv_ mg^q nq| ZvB
Dci iqvZ cv nBe Ges
Dc-aviv (2) G G g~j NvlYvq c`wkZ
weq g~j ew bv cj
Dwj-wLZ
cYi DcKiY g~ji nvm ew iqvZ
mskvwaZ g~j NvlYvi cqvRb
KihvM
g~j MnYi wfw nBe bv|
bvB| G g~mK KZc
aviv (9) Gi
wfwi ga Afy Abvw`K, wewa (3) Gi Aaxb
ewaZ DcKiY g~j Ges g~j
Aaxb Dc-aviv
bq Ggb DcKiYi Dc-wewa (2L) Abyhvqx g~j
04
Ki iqvZ
mshvRbi cwigvY NvwlZ
(1) Gi `dv
wecixZ
g~bvdvi mv_ mg^q nq wKbv Zv
mshvRbi
cwieZ
bi
nvi
cu
v
P
(QQ)
cwikvwaZ
g~j kZvski ekx nj mskvwaZ
`LZ cvi Ges mg^q bv nj
mshvRb Ki;
AwZwi DcKiY g~j ev g~j
g~j NvlYv `vwLj KwiZ nBe|
mshvRbi cwigvYi Dci
iqvZ evwZj KiZ cvi|
(Av) Dc-aviv (2) Gi wZxq Abw`K, aviv (9) Ges wewa
kZvsk Dwj-wLZ eemvqx KZK (19) G h_vg Ki iqvZ Ges
qKZ
DcKiYi
Dci DcKiY Ki iqvZ cwZi o DcKiY g~j ew cjI, weq
kZjv ewYZ AvQ| wK,
g~j ew bv cj Ges ewcv
cwikvwaZ DcKiY Ki;
NvwlZ DcKiYi q g~j ew
DcKiY g~j NvwlZ gybvdvi
cv - 4
Sl.
No.
Reference
wewa (3) Gi
Dc-wewa (2L)
Section/Rule/
SRO/Order
g~j mshvRb
Ki ev, gZ,
g~j mshvRb
Ki I m~iK
avhi Rb
g~j NvlYv
Existing
Provision/Situation
wewa (3) Gi Dc-wewa (2L)

Zvi wbKU nBZ cvc cYi
cwieZb bv NwUj Ges g~j
mshvRb cwieZbi nvi cuvP
kZvski Kg nBj, Dc-wewa
(2) Ges (2K) Gi weavb
Abyhvqx NvlYv c`vbi cqvRb
nBe bv:
Ze kZ _vK h, GB weavbi
KviY Dc-wewa (3) G ewYZ
Zèv Rwic msv Kvhgi
GLwZqvi zY nBe bv|
Proposal
nj Ges q g~j ewi cwigvY

cuvP kZvski AwaK nj Zvi
wfwZ mskvwaZ g~j NvlYv
`vwLj bv Kwij AwZwi
DcKiY Ki Aea wnme MwnZ
nBe Gic kZ aviv (9) Ges
wewa (19) G ewYZ bB| GB
BmywU weePbv bv Ki g~mK
KZc iqvZ evwZj KiQ hv
AvBb mZ bn| Bnv weePbv
Kwiqv wewa (3) Gi Aaxb Dcwewa (2L) wbic cwZvcb
Kiv cqvRb t
mwnZ mg^qi myhvM _vKj

iqvZ evwZj Kiv AhwK Ges
aviv (9) Gi Aaxb Dcaviv (1)
Gi `dv (QQ) cwicx|
Zvi wbKU nBZ cvc cYi

cwieZb bv NUj Ges DcKiY
g~j ev g~j mshvRbi
cwieZbi cwigvb c~e NvwlZ
g~j NvlYvi gybvdvi mv_
mg^qi myhvM _vKj, Dc-wewa
(2) Ges (2K) Gi weavb
Abyhvqx NvlYv c`vbi cqvRb
nBe bv|
Ze kZ _vK h, GB weavbi
KviY Dc-wewa (3) G ewYZ
Zèv Rwic msvKvhgi
GLwZqvi zb nBe bv|
mev c`vbKvixi AbZg DcKiY weePbv Ki AeKvVvgvi wbgvY, fvov BZvwì Dci c` g~mKi Dci iqvZ Mnbi myhvM c`vb cm t
aviv (9) Gi Aaxb Dc-aviv (1)
Gi `dv (O) Abymvi wb ewYZ
mg~ni DcKiY Ki
iqvZ Mnb Kiv hvq bv t
aviv (9) Gi
05 Aaxb Dc-aviv
(1) Gi `dv (O)
Ki iqvZ
KihvM cY Drcv`b ev
KihvM mev c`vbi mwnZ
mivmwi m nBjI Kvb
`vjvb-KvVv ev AeKvVvgv ev
vcbv
wbgvY,
mylgxKiY,
AvaywbKxKiY,
cwZvcb,
mcmviY, cybtmsviKiY I
givgZKiY,
mKj
cKvi
Avmevec, kbvix èvw`,
GqviKwkbvi, dvb, AvjvK
mivg, RbviUi BZvw` q ev
givgZKiY, vcZ cwiKbv I
bKkv, hvbevnb, BZvw` fvov ev
jxR MnY, BZvwì mwnZ
mswk- cY Ges mevi Dci
cwikvwaZ g~j mshvRb Ki;
o AeKvVvgv
Gi `dv (O) Gi ev AeKvVvgv
kwj wejy Kivi cve Kiv
nBjv|
AbK mev
c`vbKvix cwZvbi mev
c`vbi Rb iZc~Y DcKiY|
Kbbv AeKvVvgv wbgvY ev fvov
Ki AbK mev c`vbKvix mev
c`vb Ki _vK|
myZivs AeKvVvgv wbgvY, fvov

BZvwì Dci cwikvwaZ g~mK
DcKiY Ki wnmve iqvZ c`vb
KwiZ nBe|
GKB ew/cwZvbi wewfb weq Kì ga cY mieivni Rb qg~j evswKs ev BjKUwbK gvag cwikvwaZ bv nj iqvZ KZb bv Kiv cm t
aviv (9) Gi
06 Aaxb Dc-aviv
(1) Gi `dv (X)
Ki iqvZ

Gi `dv (X) Abymvi wb ewYZ
DcKiY Ki iqvZ Mnb
Kiv hvq bv t

Gi `dv (X) wbic cwZvcb
Kivi cve Kiv nBjv t
cY
cv - 5
ev
mevi
DcKiYi
o g~j mshvRb Ki AvBb, 1991

Abyhvqx Drcv`bKvix / eemvqx /
evwYwRK Avg`vwbKviKMY hw`
cY Drcv`b/msMn Kivi ci Zv
GK ev GKvwaK weq K`
Sl.
No.
Reference
Section/Rule/
SRO/Order
Existing
Provision/Situation
cY ev mevi DcKiYi
q g~j GK j UvKv ev
Z`~a nBj Ges Dnvi
mgy`q ev AvswkK q g~j
evswKs ev BjKUwbK
gvag ewZZ cwikvwaZ
nBj,
m
D
qg~ji Dci cwikvwaZ
DcKiY Ki|
Proposal
qg~j GK j UvKv ev Z`ya
nBj Ges Dnvi mgy`q ev
AvswkK qg~j evswKs ev
BjKUwbK
gvag
ewZZ
cwikvwaZ nBj, m D
qg~ji Dci cwikvwaZ
DcKiY Ki| Ze D weavb
GKB ewi/cwZvbi Aaxb
GKwU wbewZ vb nBZ Ab
GKwU wbewZ vb mieivni
chvR nBe bv|
nBZ weq KwiZ Pvb, Zvnj
cwZwU weq Kì Rb
Avjv`v Avjv`vfve wbewZ
nBZ nq Ges g~mK cwikva
KwiZ nq (K`xq wbeb
eZxZ)| hwÌ Zvnv wnmve iY
bxwZ Abyhvqx weq bq eis
K/gRy` vbvi| Aciw`K
Kvvbxi
evsK
GKvDU
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GjvKvwfwK nq bv Ges
AbjvBb evswKs Gi Rb `ki
wewfb cv_K GKwU evsK
GKvDUi gvag jb`b mb
KwiZ cvi| GgZvevq, wewfb
weq K` g~mK AvBb Abyhvqx
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wewfb wbebi AKvhKi
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AvjvPbv Kwij evweK A_
GB weavb GKB ewi
mieivn weePbv Kwiqv evevqb
Kiv me bn|
`wjjvw` I wnmvec mdU&Iqvii gvag msiY cm t

aviv (31),
wewa 22 Gi
Dc-wewa (3),
RvZxq ivR^
evWi mvaviY
Av`k bs64/g~mK/2011
ZvwiL - 29 Ryb
2011 wLv,
RvZxq ivR^
evWi mvaviY
07 Av`k bs14/g~mK/2012
ZvwiL - 05
RyjvB 2012
wLv Ges
RvZxq ivR^
evWi bw_ bs08.01.0000.0
73.
01.001.12-74
ZvwiL - 01
Avei,
2012Bs|
wnmveib
g~j mshvRb Ki AvBb, 1991

(1991 mbi 22 bs AvBb) Gi aviv
31, g~j mshvRb Ki wewagvjv,
1991 Gi wewa 22 Gi Dc-wewa (3)
Ges wewa 38 G c` gZvej,
RvZxq ivR^ evW, mswk-
Kwgkbvi, Kvgm&, GvBR Gv
fvU KwgkbviU KZK wbevwPZ
wbewZ cwZvb, hvì mekl
c~eeZx Avw_K ermi c`q g~j
mshvRb Ki ev gZ g~j
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cwigvb cvk (50) j UvKv ev
Zvi
AwaK,
Zvì
evaZvg~jKfve g~jmshvRb Ki
msv`wjjvw` I wnmvec RvZxq
ivR^ evW KZK wbavwiZ
mdUIqvii gvag msiYi Ges
chvR g~mK Kvhvjq
ciYi Av`k ejer AvQ| G
Dk hvMZv mb mdUIqvi
wbgvYKvix I mieivnKvix GK ev
GKvwaK cwZvbK miKvix wewaweavbi
AvjvK
ZvwjKvfz
(Enlistment)
KwiZ
Ges
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cwZvb Zvi g~j mshvRb Ki
msv`wjjvw`
I
wnmvec
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Dk
Kej
ZvwjKvfz hKvb mdUIqvi
wbgvYKvix I mieivnKvix cwZvb
_K Zvi cwZvbi DchvMx
o hme
cwZvb
BwZc~e
Dj-LhvM wewbqvMi gvag
I
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KvwiMix
mnvqZvq mdU&Iqvi Wfjc
Ki wnmve msiY KiQ
Zvì G aibi
evaZvg~jK
mdU&Iqvi
eenvi nBZ AevnwZ Ìqv
cqvRb|
o `wjjvw`
cv - 6
o mdU&Iqvi eenvKvixi msLvi

Zzjbvq mieivnKvix LyeBKg
Ges weqvi mev AwbZ|
o mdU&Iqvi
eenviKvixì
mgmv mgvavb AmsLK
mieivnKvix AbK mgq bq
dj eenviKvixì eemvq
mgmv nq|
I
wnmvec o mdU&Iqvi mieivn Kivi Rb
mdU&Iqvii
gvag
mieivnKvixiv cPzi mgq bq|
msiYi ii ZvwiL b~bZg
30k Ryb, 2014 chew
Kiv cqvRb|
GB cwZ wbavwiZ mgqmxgv Ges
mdU&Iqvi mieivnKvixi msLv ew
g~mK wbewZ evwiv Zvì LyeB Riix|
wbRi
cQ`
Abyhvqx
mdU&Iqvi Wfjci o GQvovI hmKj g~mK wbewZ
Zvì cQ`K cvavY w`Z
ewiv Zvì wbRì AvBwU
nBe Ges Zvì Pvwn`v
`ji `Zv viv mdU&Iqvi
Abyhvqx Ab~b 6gvm mgq
Wfjc Kie, Gic NvlYv
c`vb Kiv AvekK|
c`vb Ki RvZxq ivR^ evWi
wbKU mgq cv_bv Ki Zvì
eZgvb Abygvw`Z mdU&Iqvi
mgq Abygv`b Kij m
eZgvb
mdU&Iqvi
mieivnKvixì mv_ bZzb
mieivnKvixì Dci Pvc
mdU&Iqvi mieivnKvixì
Kge|
Abygv`b Ìqv evbxq|
Sl.
No.
Reference
Section/Rule/
SRO/Order
Existing
Provision/Situation
Proposal
(Customized)
evW
KZK
ZvwjKvfz hKvb mdUIqvi
msMnc~eK eenvi KwiZ cvwie|
Avevi evW KZK wbevwPZ
mdUIqvi, m s w k - Kwgkbvi KZK
wbevwPZ wbewZ cwZvb mg~n KZK
1 RyjvB, 2012 ZvwiL nZ eenvi
Kiv evaZvg~jK nBe| cieZxZ
RvZxq ivR^ evWi mvaviY Av`k
bs-14/g~mK/2012, ZvwiL - 5
RyjvB, 2012 wLv Gi gvag
D mgqmxgv cybtwbaviY Kwiqv 1
Rvbyqvwi, 2013 Kiv nq|
Aciw`K, RvZxq ivR^ evW bw_
bs-08.01.0000.073.01.001.1274 ZvwiL - 1 Avei, 2012 Gi
gvag wb Dwj-wLZ 5 (cuvP)wU
mdUIqvi (Software) wbgvYKvix
I
mieivnKvix
cwZvbK
ZvwjKvfz KwiqvQbt
(K)
SYMPHONY Softech
Ltd., 1st Floor, 160 Lake
Circus,
Kalabagan,
Mirpur Road, Dhaka1205.
(L)
UNISOFT
Systems
Limited, A/2 Rupsha
Tower, 7 Kamal Ataturk
Avenue, Banani, Dhaka1213.
(M) UY Systems Ltd., House:
289, Road: 19/B, New
DOHS,
Mohakhali,
Dhaka-1206.
(N) Ennovia Technologies
Ltd., House # 279 (G.F),
Road # 19, New DOHS,
Mohakhali,
Dhaka1206.
Dhrupadi
Techno
(O)
Consortium
Limited,
House # 375/A (1st
Floor), Road# 28, New
DOHS,
Mohakhali,
Dhaka-1206.
Avwcji Av`k cvwi ZvwiL _K Avwcj Ave`bi mgq wbaviY Kiv t
(1) h Kvb g~j mshvRb Ki
08
aviv (42) Gi
Dc-aviv (1)
Avwcj
KgKZv ev h Kvb ew
Kvb g~j mshvRb Ki
KgKZvi GB AvBb ev
Kvb wewai Aaxb c`
Kvb wmvev Av`k viv
msz nBj wZwb D
wmvev Av`ki wei,
cYi mieivn ev c`
mevi aviv 56 Gi
Aaxb c` Kvb AvUK ev
weq Av`k A_ev cY
Avg`vwbi
o Av`k Rvwii evLv aviv (57)
D wmvev Av`k c`vbi

ev, gZ, Av`k Rvwii
kjvi cwieZ D wmvev
Av`k
cvwi
kjv
cwZvwcZ Kiv cqvRb|
cv - 7
Z Ìqv AvQ Ges Zvnv

Abyhvqx Av`k Rvwii A_ GB
bq h, hvi Dk Av`kwU
Rvwi Kiv nqQ m Zv mK
AewnZ nqQ A_ev Av`kwU
MnY KiQ|
o evsjv`ki cvcUK weePbv

Kij Rvwii ZvwiL Avi cvwi
ZvwiLi ga evcK cv_K
_vK| Kbbv AbK mgq
Av`kwU g~mK wbewZ ew cvq
Sl.
No.
Reference
Section/Rule/
SRO/Order
Existing
Provision/Situation
Customs Act Gi
section 82 ev section
98 Gi Aaxb Kvb Av`k
eZxZ, D wmvev
Av`k
c`vbi
ev,
gZ, Av`k Rvwii
beB w`bi ga|
cvKwUwms PvUvW GvKvDUUì bvwbZ AskMnYi gZv c`vb cm t

o GB AvBb ev wewai Aaxb
Kvb Kvhaviv Dcj Kvb
g~j mshvRb Ki KgKZv,
AvcxjvZ KZc, evW ev
miKvii wbKU DcwZ
nBevi AwaKvix ev DcwwZi
gZvcv
Rb ZjeKZ Kvb ew
cwZwbwa I g~mK
aviv (46) Gi
Customs
Act-Gi
civgkKi
Dc-aviv (1)
section
196K
Z
ewYZ
gvag DcwwZ
Kvb ewi gvag DcwZ
BZvw`|
nBZ cvwieb Ges D
Section Gi weavbvejx
Zvnvi Dci GBic chvR
nBe hb Dnv GB avivi
Aaxb DcwwZi Rb GB
AvBbi Aaxb cYxZ nBqvQ|
09
Section
196K of the
Customs
Act, 1969
Notwithstanding
anything
contained in this Act, any
person, who is entitled or
required to attend before any
officer of customs, an
appellate
authority,
the
Board or the Government in
any proceedings under this
Act or any, rules made
attend in such proceedings
Appearance by by a person authorised by
the authorised him in writing in this behalf,
representative being a relative of or a
person regularly employed
be, the aggrieved person, or
an advocate who is entitled
to plead in any Court of
Law,
or
a
Customs
Consultant as defined and
licensed
under
rules
prescribed in this behalf, and
not being disqualified under
sub-section (2).
Proposal
bv|
aviv (46) Gi Dc-aviv (1) G

DcwwZi
Rb
Dj-wLZ
ZjeKZ Kvb ew kjvi
ci PvUvW GvKvDUU Gi
gvag ev kjv mshvRb
Kiv cqvRb Ges aviv (2)-Z
PvUvW GvKvDUU Gi wbic
msv Af~ Kivi cve Kiv
nBjv t
PvUvW
(Chartered
GvKvDUU
Accountant)
A_ PvUvW GvKvDUU Av`k,

1973 G msvwqZ Kvb PvUvW
GvKvDUU|
g~j NvlYvi wecixZ Abygv`bi Av`k cvwi ZvwiL nBZ Avwcj Ave`bi mgq wbaviY Kiv t
(7) Dc-wewa (1) nBZ (6) G
hvnvB _vKzK bv Kb, Kwgkbvi
g~j mshvRb
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Ki ev, gZ, ^^Ztce nBqv ev wefvMxq g~j wbicYi ZvwiL nBZ wk
KgKZvi Abyivag cYi Kvh wèmi cwieZ g~j
g~j mshvRb
wewa (3) Gi
10
evRvig~j DVv-bvgvi KviY ev wbicYi Av`k cvwi wk Kvh
Ki I m~iK
Dc-wewa (7)
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avhi
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kwYi Ki wbicYi Rb
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Ze kZ _vK h, wefvMxq
cv - 8
o cvKwUwms
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wekevwc ^xKZ|
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gZv
o hnZz g~j mshvRb Ki AvBb

g~j mshvRb Ges Drcv`b eq
wfwK AvBb Ges GB evcvi
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^xKZ
mnZz
PvUvW
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gZvcv
cwZwbwa wnmve DcwZ nIqvi
AwaKvi ivL|
o g~j wbicb Kivi A_ GB bq

h, hvi Rb GwU Kiv njv m
Zv mK AewnZ nBqvQ A_ev
wbicYi
Av`kwU
MnY
KwiqvQ|
o evweK Aev weePbv Kwij

`Lv hvq h wbicbi ZvwiL
Avi cvwi ZvwiLi ga evcK
cv_K _vK| Kbbv AbK mgq
Sl.
No.
Existing
Proposal
Provision/Situation
KgKZv NvwlZ g~j Acv
g~j wbicYi Av`kwU g~mK
DPZi g~jwfw wbicY Kwij
wbewZ ew cvq bv|
m s w k - wbewZ ew D
DPZi g~j wbicYi ZvwiL
nBZ wk Kvhwèmi ga D
wbiwcZ g~jwfw cybweePbvi
wbwg Kwgkbvii wbKU Ave`b
`vwLj KwiZ cvwieb Ges
Ave`b cvwi ZvwiL nBZ
cbi Kvhwèmi ga Kwgkbvi
D Ave`bi Ici wmvc`vb
KwiZ e_ nBj wZwb Ave`bwU
gyi KwiqvQb ewjqv MY nBe:
wwfwK Drcv`bi DcKiY ^vwaKvixi wbewZ wVKvbvq bv Avwbqv mivmwi PzwwfwK Drcv`Ki wVKvbvq ciYi gZv c`vb Kiv Ges cwqvKZ
DcKiY mieivni eevi weavb Kiv t
wewa (16) Gi Dc-wewa (3M) Gi
o AbK hnZz qKZ
wbic cwZvcb Kivi cve
DcKiYi cwieZbi Rb Kvb
Kiv nBjv t
cwqv ^vwaKvixi wbewZ
KviLvbvq nq bv mnZz
Pzw wfwK Drcv`bi AvIZvq
^vwaKvixi wbewZ wVKvbvq bv
cYi ^vwaKvix Drcv`Ki
Avwbqv mivmwi PzwwfwK
wbKU DcKiY ev cwqvKZ
Drcv`K Gi wbKU mieivn
DcKiY mieivni mgq ev
Kwij wbv NVbvjv _K
DcKiY mieivni Rb dig
AevnwZ cvIqv hvBet
g~mK-11M G wgyLx Kveb eenvi
Kwiqv GKwU Pvjvbc c`vb
1. DcKiY
mivmwi
Kwieb Ges Pvjvbci wZxq
mieivnKvix
_K
AbywjwcwU Pvjvbc cyK mshy
PzwwfwK
Drcv`Ki
Aevq eemvqj Ab~b Pvi
wVKvbvq cvVvj mgq
ermi msiY Kwieb|
AcPq iva nBe;
2. AwZwi cwienb LiP
(3M) PzwwfwK Drcv`bi Ze kZ _vK h, cYi
Kwge;
Zvnvi
qKZ
AvIZvq cYi ^vwaKvix ^vwaKvix
3. cYi DVvbvgv msvwZ
Drcv`Ki
wbKU
DcKiY DcKiY Zvnvi g~mK wbewZ
_K iv nBe;
KihvM cYi
mieivni mgq dig g~mK- wVKvbvq bv Avwbqv mivmwi
4. `vgRvZ Kivi LiP nvm
wewa (16) Gi
mieivn I
11M-G wgyLx Kveb eenvi PzwwfwK Drcv`Ki wbKU
cvBe|
11
Dc-wewa (3M)
ivwbi
Kwiqv GKwU Pvjvbc c`vb mieivn KwiZ cvwieb|
Pvjvbc c`vb| Kwieb Ges Pvjvbci wZxq
o GKB mv_ aviv (9) Ges wewa
AbywjwcwU Pvjvbc cyK Aviv kZ _vK h, hB ZvwiL
(19) Gi iqvZ MnY msv
DcKiY
PzwwfwK
mshy Aevq eemvq j Ab~b D
weavbvewj ^vwaKvixi Rb
Drcv`Ki
g~mK
wbewZ
Pvi ermi msiY Kwieb|
cwieZb KwiZ nBe| Kbbv
KviLvbvq cek Kwie mB
aviv (9) Abyhvqx iqvZ MnYi
ZvwiLi
wfwZ
DcKiY
Rb cY ev mev ^vwaKvixi
ceki wZb Kvh wèmi ga
wbewZ wVKvbvq AvmZ nq|
^vwaKvixK g~mK-11M Pvjvb
Bmy KwiZ nBe Ges g~mK-11M
Gi wfwZ PzwwfwK Drcv`K o eq msKvPbbxwZi ev cqvRbi
ZvwM` aygv cvwKs/GKwU
wnmve msib Kwieb|
cwqv Pzwi gvag AbKvb
Drcv`K cwZvbi KvQ _K
aviv 9 Gi Dc-aviv (1) Gi
mb Kiv AbK
mwnZ wbic kZ mshvRb Kivi
AvekKxq
nq
hvq|
cve Kiv nBjv t
GgZvevq, cwqvKZ DcKiY
^vwaKvix _K PzwwfwK
Aviv kZ _vK h, aviv 5(2K)
Drcv`Ki wbKU g~mK-11M
Abyhvqx Kvbv wbewZ Drcv`K
Gi gvag mieivni eev
KZK Pzwi wfwZ Ab Kvb
_vwKZ nBe|
wbewZ Drcv`Ki evhy cY
Reference
Section/Rule/
SRO/Order
cv - 9
Sl.
No.
Reference
Section/Rule/
SRO/Order
Existing
Provision/Situation
Proposal
Drcv`bi , evW, wewaviv

D jb`bi iqvZ
MnYi cwZ Ges mgq wbaviY
KwiZ cvwieb|
wewa 19 Gi Dc-wewa (7) Gi
mwnZ wbic kZ mshvRb Kivi
cve Kiv nBjv t
Drcv`bi , ^vwaKvix,
Zvnvi Drcv`bj eZxZ, Zvnvi
DcKiY mieivnKvixi wbKU
_K A_ev DcKiY Avg`vbxi
chvR DcKiY Avg`vbx
eì _K mivmwi Pzw wfwK
Drcv`Ki wbKU mieivni
eev KwiZ cvwieb| m
^vwaKvixi qi wecixZ h
Ki gqv` Pvjvbc c`vb Kiv
nBe A_ev h Ki gqv` cY
Avg`vbxi vqY mgvw nBe,
^vwaKvix m Ki gqvì A_ev
cieZx Ki gqvì hKvbv
ZvwiL Zvnvi Drcv`bj
DcKiY Ki iqvZ MnY Kwieb
Ges Z`vbyhvqx Abvb wnmve
iY Kwieb|
PzwwfwK Drcv`bi Drcvw`Z cY PzwwfwK Drcv`bKvix KZK ^vwaKvixi wVKvbvq ciY bv Kwiqv Zvnvi wb`wkZ vb ciY cm t
o hnZz PzwwfwK Drcv`K
KZK cY Drcv`bi ci AbK
wewa (16) Gi Dc-wewa (3N) Gi
Avi Kvb Drcv`bi
wbic cwZvcb Kivi cve
cwqv Aewk _vK bv mnZz
Kiv nBjv t
PzwwfwK Drcv`K Gi vb
_K ^vwaKvixi Drcv`bKvix
PzwwfwK Drcv`K Pzwi
wnme wbewZ vb cY vbv
wfwZ
Drcvw`Z
cY
i bv Ki mivmwi ^vwaKvix
^vwaKvixi Pvwn`v gvZveK h
KZK wb`wkZ Ab wVKvbvq
Kvb wbewZ wVKvbvi AbyKyj
PzwwfwK
Drcv`K Pzwi mieivn KwiZ cvwieb Ges
mieivn
Kwij
wbv
wfwZ Drcvw`Z cY Kejgv cY mieivni Dc-wewa
NVbvjv _K AevnwZ cvIqv
KihvM cYi
wewa (16) Gi
^^ZvwaKvixi wbewZ wVKvbvi (1) Gi weavb AbymiY Kwieb|
hvBet
mieivn I
12 Aaxb Dc-wewa
AbyKj mieivn KwiZ cvwieb
2. PzwwfwK Drcv`K _K
ivwbi
(3N)
Ges cY mieivni Dc- Ze kZ _vK h, ^vwaKvixi
^vwaKvixi
wVKvbvq
Pvjvbc c`vb|
wewa (1) Gi weavb AbymiY Pvwn`v gvZveK hKvbv
cvVvbvi mgq AcPq iva
wbewZ wVKvbvi AbyKj cY
Kwieb|
nBe;
mieivni mgq PzwwfwK
3. AwZwi cwienb LiP
Drcv`K Dc-wewa (1) Gi weavb
Kwge;
AbymiY Kwiqv Pvjvbc c`vb
4. cYi DVvbvgv msvwZ
_K iv nBe|
Kwieb Ges mRb c_K wnmve
msiY Kwieb| Pvjvbc o GKB mv_ aviv (9) Ges wewa
c`vbi , ^vwaKvixi
(19) Gi iqvZ MnY msv
m s w k -
weavbvewj ^vwaKvixi Rb
KgKZv KZK Abygvw`Z g~mK
cwieZb KwiZ nBe| Kbbv
AvivchvM g~ji wfwZ
aviv (9) Abyhvqx iqvZ MnYi
cv - 10
Sl.
No.
Reference
Section/Rule/
SRO/Order
Existing
Provision/Situation
Proposal
A_ev chvR , ^vwaKvix
KZK `vwLjKZ g~j NvlYvi
g~mK AvivchvM g~ji wfwZ
Pvjvbc c`vb Kwieb|
Rb cY ev mev ^vwaKvixi
wbewZ wVKvbvq AvwmZ nq|
aviv 9 Gi Dc-aviv (1) Gi

mwnZ wbv kZ mshvRb Kivi
cve Kiv nBjv t
Drcv`bi , evW, wewaviv
D jb`bi iqvZ
MnYi cwZ Ges mgq wbaviY
KwiZ cvwie|
wewa 19 Gi Dc-wewa (7) Gi
ci wbic bZyb Dc-wewa (8)
mshvRb Kivi cve Kiv
nBjvt
(8) aviv 5(2K) Abyhvqx, Pzwi
wfwZ cYi Drcv`bKvix
A_vr PzwwfwK Drcv`K wewa
16(3N) Abyhvqx ^vwaKvixi
Pvwn`v gvZveK h Kvb
wbewZ wVKvbvi AbyKj cY
mieivn
Kwieb|
wK
^vwaKvix Zvi Drcv`bj
PzwwfwK
Drcv`K
KZK
Pvjvbc c`vbi wfwZ aviv 9
Gi Dj-wLZ gqvì ga
chvR iqvZ MnY Kwieb Ges
Z`vbyhvqx Abvb wnmve iY
Kwieb|
Ze kZ _vK h, ^vwaKvixi
Pvwn`v gvZveK hKvbv
wbewZ wVKvbvi AbyK~j cY
mieivni , PzwwfwK
Drcv`K KZK wewa 16 (1)
Abyhvqx Pvjvbc c`vbi 24
Nvi ga ^vwaKvix cY
mieivni chvR Ki PjwZ
wnmve mg^q mvab Kwiqv wewa
16 (1) Abyhvqx Pvjvbc c`vb
Kwieb|
cY ev mev diZi c` g~mK mg^qi mgq ew msvt
h Kvbv wbewZ ew
KZK Pvjvbvc c~iY ev c`vbi
wewa (17K)
ci ev PjwZ wnmve c`q Ki
wWU bvU I
13
Gi Dc-wewa
mgw^Z Kivi ci Zvnv evwZj
WweU bvU
(1)
Kivi cqvRb nq, wKsev cY
mieivni ev mev c`vbi ci
Zvnv m~Y ev AvswkKfve
cv - 11
o evsjv`ki eemvi cvcU

beB kwUi cwieZ
GKkZ
Avwk
kwU
cwZvwcZ Kiv AvekK|
weePbv Ki `Lv hvq h 90

w`b ciI AwaKvsk cY ev
mev diZ Avm Ges m
cY ev mevi Dci c` g~mK
mg^qi myhvM bv _vKj
eemvq wZ mvwaZ nq Ges
Sl.
No.
Existing
Proposal
Provision/Situation
diZ c` nq wKsev cY
eZgvb cwZhvMxZvg~jK eemvq
mieivni ev mev c`vbi
wUK _vKv K`vqK nq|
cKwZ gwjKfve cwiewZZ nq
wKsev Pvjvbc cKZ c`q
Kii Zzjbvq AwaK Ki Dwj-wLZ
nq, mB wZwb evwZjKZ
Pvjvbc c`wkZ Ki wKsev
diZ c` cY ev mevi
wecixZ c` Ki wKsev
Pvjvbc AwaK c`wkZ Ki
PjwZ wnmve I chvR
cieZx `vwLjc mg^qi
Dk PvjvbcwU evwZj Kwiqv
cY ev mevi MnxZvi AbyKj
dig g~mK-12-G GKwU
wWU bvU Bmy Kwieb Ges
cieZx Kvhw`mi ga mswk-
mvKj ivR^ KgKZvi wbKU
Dnvi GKwU Abywjwc `vwLj
Kwieb:
Ze kZ _vK h,
(K) cY mieivn ev mev
c`vbi ci Zvnv m~Y ev
AvswkKfve diZ MnYi
cY ev mev KviLvbv ev
eemvqj nBZ AcmviYi
beB w`b ci diZ MnxZ
nBj;
(L) cYi YMZgvb Lvivc
nIqvi KviY mieivnKZ cY ev
mev cZvnvi Kiv nBj;
D wbewZ ewi GB
wewa chvR nBe bv|
Drm g~mK KZbi AvIZvaxb mev mieivnKvix KZK iqvZ Mnb Kij Ges 15% nvi g~mK c`vb Kij, Drm g~mK KZb bv Kiv cm t
35wU mev c`vbKvix KZK mev
RvZxq ivR^
o DcKiY Ki iqvZ bIqv
c`vbi wecixZ Drm g~mK
evWi mvaviY
nj m megvU cvwi
KZbi wb`kbv Ìqv AvQ|
Av`k bsDci 15% nvi g~mK _K
Abvw`K 35wU mev c`vbKvixi D 35wU mev c`vbKvixi ga
09/g~mK/2011
DcKiY Ki iqvZ mg^q
ZvwiL: 12
ga S007.00 wevcbx hw` Kvb mev c`vbKvix 15%
g~mK Drm
Ki Aewk Ask c`vb Kiv
Avei, 2011
msv mg~n h vbxq g~j nvi g~mK c`vb Ki Ges
Av`vq/KZb Ges
nq| wK hw` 15% Gi
mshvRb Ki Kvhvjqi ivR^ DcKiY Ki iqvZ Mnb Ki
14
cieZx KiYxq
mgy`q Ask Drm KZb Kiv
RvZxq ivR^
KgKZv/mnKvix ivR^ KgKZv _vK, Zvì Drm g~mK
mK w`K
nq m mev c`vbKvix
evWi mvaviY
KZK cZvwqZ g~mK-11 KZb chvR nBe bv Ges
wb`kbv msv|
KZK c` g~mK diZ `vwe
Av`k bsPvjvbc ev g~mK-11 wnme wevcbx msvi Abyic weavb
KiZ ne| diZ cvIqv ev
01/g~mK/2012
weewPZ Kvb Pvjvbc c`vb Zvì Af~ Kiv DwPZ|
weK A_ LyeB KKi Ges
ZvwiL: 28
Kie, m g~j mshvRb
hbv`vqK|
AbK
deqvwi,
Ki (g~mK) Drm KZbi
diZ cvIqvI hvq bv|
2012
AvekKZv bB|
^vwaKvix KZK PzwwfwK Drcv`Ki wbKU ciYKZ DcKiY diZ c`vbi weavb Af~KiY t
Pzw evwZj ev AbKvb Kvib ^vwaKvix KZK PzwwfwK
o eemvqxK
Kvib,
gvbDrcv`Ki wbKU cwiZ DcKiYi _K AeeZ DcKiY diZ
wbqb/eveZv
wbix
15 eZgvb GB msvKvbv weavb bvB Ìqvi cqvRb nBj g~mK-11M Gi Abyic Pvjvbci gvag
mieivnKZ DcKiY diZi
D DcKiY aygv ^vwaKvixi wbKU diZ c`vbi weavb Kiv
weavb _vKv AZvekK|
AvekK|
KwZcq mevi Dci c`q Kii m~b Ask iqvZ Mnb cm t
wewa (19) Gi
DcKiY Ki
(1K) Dc-wewa (1) G hvnv wKQyB hnZz wbv mev mg~n D mevmg~n ewMZ eenvii
16
Dc-wewa (1K)
iqvZ cwZ|
_vKzK bv Kb, KihvM cY Drcv`b ev eemvqi mv_ m~Y mv_ RwoZ bq eis Drcv`b ev
Reference
Section/Rule/
SRO/Order
cv - 12
Sl.
No.
Reference
Section/Rule/
SRO/Order
Gi `dv (K)
Ges (L)
Existing
Provision/Situation
Drcv`b evmieivn ev KihvM
mev c`vbi mwnZ mc
GBic vb, vcbv ev Ab
eeZ
(K) exgv, Mvm I we`yr
weZiYi Ici cwikvwaZ g~j
mshvRb Kii AvwkkZvsk; Ges
Proposal
RwoZ Ges ewMZ chvq

eenvii mv_ RwoZ bq t
1. exgv;
2. dBU divqvWvm;
3. cwienb wVKv`vi;
4. wKqvwis I divqvwWs GRU;
5. Fbc mev c`vbKvix;
6. AwWU I GKvDwUs dvg;
(L) Uwjdvb, UwjwcUvi, 7. AvBb civgkK;
dv,
BUvibU,
dBU 8. wmwKDwiwU mvwfm|
divqvWvm, wKqvwis I divqvwWs
GRU, Iqvmv, AwWU I mnZz Dciv mev mg~ni
GKvDwUs dvg, hvMvb`vi, wecixZ c` g~mKi mgy`q
wmwKDwiwU
mvwfm,
AvBb Ask iqvZ hvM| Z`vbyhvqx
civgkK, cwienb wVKv`vi I wewa (19) Gi Dc-wewa (1K) Gi
FYci Ici cwikvwaZ g~j `dv (K) _K exgv mev Ges
mshvRb Kii lvU kZvsk, wewa (19) Gi Dc-wewa (1K) Gi
cwigvY iqvZ MnY Kiv hvBe| `dv (L) _K wKqvwis I
divqvwWs GRU, Fbc mev
c`vbKvix, dBU divqvWvm,
AwWU I GKvDwUs dvg, AvBb
civgkK, wmwKDwiwU mvwfm Ges
cwienb wVKv`vi mev wejy Kiv
mgxPxb|
eemv cwiPvjbvi mv_ mivmwi
m myZivs g~mKi gwjK bxwZ
Abyhvqx GmKj mev mg~ni Dci
c` mgy`q g~mK, DcKiY Ki
iqvZ wnmve mg^qhvM nIqv
DwPZ| Ab_vq eemv cwiPjbv eq
ew cve|
`vwLjc ckKiYi mgq ew msvt
17
wewa (24)
Gi Dc-wewa
(1)
cZK
KihvM
cYi
cZKviK ev Drcv`K ev
eemvqx ev KihvM mev
c`vbKvixK cwZwU Ki gqvì
Rb dig g~mK-19 G
`vwLjci `yBwU Abywjwc Ki
gqv` cieZx gvmi 15 (cbi)
ZvwiLi ga vbxq g~j
mshvRb Ki Kvhvjq Rgv w`Z
nBe
`vwLjc
ckKiY
Ze kZ _vK h, 15 (cbi)
ZvwiL miKvwi QywU _vwKj
AekB Zrc~eeZx Kvhwèm
h_vwbqg dig g~mK-19 G
`vwLjc Rgv c`vb KwiZ
nBe|
Ze AviI kZ _vK h, Kvbv

exgv Kvvwb Ki gqvì
cieZx gvmi wek ZvwiLi ga
`vwLjc Rgv w`Z cvwie|
KwZcq mevK g~j NvlYv _K AevnwZ c`vb cm t
g~j mshvRb Ki AvBb, 1991
Gi aviv 5(4) I aviv 7 Gi
mevc`vbKvix
RvZxq ivR^
Dkc~iYK KwZcq wbewZ
wbewZ ew
evWi mvaviY
ew KZK meivnhvM mevi
KZK
Av`k bs18
Ici c`q g~j mshvRb Ki,
mieivnKZ
06/g~mK/2012
ev, gZ, g~j mshvRb Ki I
mevi g~jwfw
ZvwiL: 7 RyjvB,
m~iK avhi j mswk-
NvlYv c`vb
2012
mevi g~jwfw mwKZ NvlYv
cm|
`vwLj Kwievi Rb KwZcq
eZgvb wewawU evwZj Kwiqv

wbic cwZvwcZ Kiv hwK
ej gb nq t
KihvM
cYi
cZK
cZKviK ev Drcv`K ev
eemvqx ev KihvM mev
c`vbKvixK cwZwU Ki gqvì
Rb dig g~mK-19 G
`vwLjci `yBwU Abywjwc Ki
gqv` cieZx gvmi 30 (wk)
ZvwiLi ga vbxq g~j
mshvRb Ki Kvhvjq Rgv w`Z
nBe
o eZgvb wbavwiZ mgq mKj

AvBb I wewa gb `vwLjc
Rgv Ìqv LyeB KwVb;
o Kvb Kvb gvm ek KqKw`b

miKvix QzwU hgb C`, c~Rv
BZvwì Kvib Kgwèm Kg
cvIqv hvq, hvi dj wbavwiZ
mgqi ga `vwLjc ck Kiv
hvq bv|
o hnZz, `vwLjc GKevi Rgv
Ze kZ _vK h, 30 (wk)
ZvwiL miKvwi QywU _vwKj
AekB Zrc~eeZx Kvhwèm
h_vwbqg dig g~mK-19 G
`vwLjc Rgv c`vb KwiZ
nBe|
w`j ZvZ Kvbic cwieZbi

cqvRb nj cybivq Zv Rgv
Ìqv me bq| mnZ,z wbfj
~
`vwLjc Rgv Ìqv ew Kivi
j Dciv cwieZb Riix|
Av`kwUi Uwej _K wbv

mevjv wejy Kivi cve Kiv
nBjv t
1. S028.00 Kzwiqvi I
Gcm gBj mvwfm
2. S034.00 AwWU G
GvKvDwUs dvg
3. S040.00
wmwKDwiwU
mvwfm
o Me, IRb Ges MvnKi
cv - 13
cKvif` Kzwiqvi I Gcm

gBj mvwfmi g~j c_K nq
_vK, mnZz g~j NvlYv me
bn|
AwWU G GvKvDwUs dvg,
AvBb civgkK, wmwKDwiwU
mvwfm Ges evswKs I bbevswKs mev c`vbKvixi
Sl.
No.
Reference
Section/Rule/
SRO/Order
Existing
Provision/Situation
mevmg~nK wbaviY Kwij|
Proposal
4.
5.
S045.00
AvBb
civgkK
S056.00 evswKs I bbevswKs mev c`vbKvix
Avg`vwbKZ Jlai Dci g~mK c`vb cwZ mywbw`KiY Ges cvBKvix I LyPiv chvq g~mK AevnwZ c`vb KiY t
`k
Drcvw`Z
Jlai
g~mKhvM g~j I c`q g~mK
`k Drcvw`Z Jlai wbavibi AbymZ RvZxq
cvBKvix I LyPiv chvq chvR ivR^ evWi bw_ bs-8(15)
RvZxq ivR^
g~mK AevwnZ `qv mvc g~mK (bx: I ev:)/95 ZvwiL : 4
`k Drcvw`Z
evWi bw_ bsDrcv`b chvq eemvq chvqi Ryb, 2001 Gi Abyic Av`k /
Jlai
8(15) g~mK
19
wb`kbvi gvag Avg`vwbKZ
g~mK c`vb Kivi weavb AvQ|
g~mKhvM g~j
(bx: I ev:)/95
Jla, wUKv BZvwì
I c`q g~mK
ZvwiL : 4 Ryb,
wK Avg`vwbKZ Jla, wUKv Avg`vwbKviKi nvZB mgy`q
wbaviY cm|
2001
BZvwì Abyic mywbw` g~mK Av`vqi weavb Ges
w`K wb`kbv bB|
cvBKvix I LyPiv chvq chvR
g~mK AevnwZ Ìqvi weavb
Kiv cqvRb|
c Lvì cyw wcwgK g~j mshvRb Ki nZ Drcv`b chvq AevnwZ c`vb cm t
Afixb m`
wefvM, A_
gYvjq,
MYcRvZx
evsjv`k
miKvii
20
GmAviI bs180AvBb/2012/63
8-g~mK ZvwiL
07 Ryb, 2012
wLv
hnZz wdm wbw` _vK bv Ges

KvRi
aiY,
mgqi
cqvRbxqZv, `Zv, KvRi
cwiwa BZvw` weePbv Kwiqv
wdm wbavib Kiv nq mnZz g~j
NvlYv me bn|
D mevmg~ni g~j NvlYv
miKvii ivR^ Av`vq Kvb
cfve dj bv| Bnv g~mK
KgKZvi Ges mev c`vbKvixi
ay mgqB b Ki bv eis
AcqvRbxq kgI eq nq|
o eZgvb eemvqxK chvqi (1g
o
o
i cieZx) g~mK Av`vq

m`nfvRb nIqvq GKw`K
miKvwi ivR^ Kg Av`vq nIqvi
AvksKv iqQ Zv `~ixfZ ne
Ges ivR^ Av`vq ew cve|
ivR^ wbqY mnRZi ne Ges
nqivwbi AvksKv nvm cve|
`k Drcvw`Z I Avg`vwbKZ
Jlai mgRvZxq weavb
nIqvB Kvg|
o `k G wki msLv `Z
evoQ|
Avg`vwb chvq,
Avg`vwb I
Drcv`b chvq,
Drcv`b chvq,
c` mev Ges
eemvqx chvq
g~mK AevnwZ|
o Avg`vbxK wbirmvwnZ Kivi

mvgmc~Y bvgKiY KvW (H.S.
Code) 2309.90.10 (c
Lvì cyw wcwg) Gi Dci
AvivcYxq mgy`q g~j mshvRb
Ki Avg`vbx chvq Ges eemvqx
chvq AevnwZ c`vb Kiv AvQ|
mvgmc~Y bvgKiY KvW (H.S.

Code) 2309.90.10 Gi Aaxb
c Lvì cyw wcwg Drcv`b
chvq AevnwZ c`vb Kiv
DwPZ|
j Drcv`b chvq AevnwZ

Riix|
eZgvb eevq Drcv`bK
wbirmvwnZ Ges Avg`vbxK
DrmvwnZ Kiv nQ| hv `ki
eni ^v_ wZKvKiK|
o eemvqx chvq AevnwZi

wbtm`n Drcv`b
AevnwZ Kvg|
chvqi
AevnwZcv cY ev mevK hvMvb`vi mevi AvIZvgyKiY t
o aviv 3 Gi Dcaviv (1) Abyhvqx,
RvZxq ivR^
evWi GmAviI
bs-17521
AvBb/2011/59
8-g~mK ZvwiL 9
Ryb, 2011
KihvM mevi
cwiwa wbaviY
S037.00
hvMvb`vi-A_
KvUkb
ev
ìc
ev
Abweafve wewfb miKvix,
AvavmiKvix,
^vqZkvwmZ
cwZvb,
emiKvix
msv
(GbwRI), evsK, exgv ev
AbKvb
Avw_K
cwZvb,
wjwgUW
Kvvbx
ev
wkvcwZvbi wbKU cYi
wewbgq hKvb cY ev mev ev
DfqB mieivn Kib Ggb Kvb
ew, cwZvb ev msv|
hKvb cY ev mev ev DfqB

Gi cwieZ Ki hvM cY ev
mev ev DfqB Afy Kivi
cve Kiv nBjv|
cv - 14
c_g Zdwmj Dwj-wLZ cY mg~n

eZxZ evsjv`k Avg`vwbKZ
mKj cY Ges D Zdwmj
Dwj-wLZ cY mg~n eZxZ mKj
cYi mieivni Dci Ges
wZxq Zdwmj Dj-wLZ mev
mg~n
eZxZ
evsjv`k
Avg`vwbKZ ev evsjv`k c`
mKj mevi Dci aviv 5 G
ewYZ g~ji wfwZ cbi
kZvsk nvi g~j mshvRb Ki
avh I c`q nBe| mnZz
hvMvb`vi Gi mevi cwiwaZ
KihvM cY ev mev ev
DfqB Afy nIqv DwPZ|
Sl.
No.
Reference
Section/Rule/
SRO/Order
Existing
Provision/Situation
Proposal
we`gvb weavb aviv (3) Gi
mwnZ mvsNwlK|
hvMvb`vi mevi evLv evwZj KiY cm t

S037.00
hvMvb`vi-A_
KvUkb
ev
ìc
ev
Abweafve wewfb miKvix,
RvZxq ivR^
AvavmiKvix,
^vqZkvwmZ
evWi GmAviI
cwZvb,
emiKvix
msv
bs-175KihvM mevi
(GbwRI), evsK, exgv ev
22
AvBb/2011/59 cwiwa wbaviY
AbKvb
Avw_K
cwZvb,
8-g~mK ZvwiL 9
wjwgUW
Kvvbx
ev
Ryb, 2011
wkvcwZvbi wbKU cYi
wewbgq hKvb cY ev mev ev
DfqB mieivn Kib Ggb Kvb
ew, cwZvb ev msv|
Z_-chyw wbfi mevi evLv cwieZb cmt
RvZxq ivR^
evWi GmAviI
bs-175AvBb/2011/59
8-g~mK ZvwiL 9
Ryb, 2011 Ges
23
RvZxq ivR^
evWi GmAviI
bs-181AvBb/2012/63
9-g~mK ZvwiL
7Ryb, 2012
KihvM
mevi cwiwa
wbaviY
o hnZz mevi KvW S099.20

hvMvb`vi mevwU evwZj Kiv
DwPr|
Infrastructure
development
(Combination
of
Hardware & Software)
mshvRb Kwiqv Z_-chyw
wbfi mevi cwiwa wbic
Kivi cve Kiv nBjv t
S099.10 Z_-chyw wbfi mev

(Information Technology
Enabled Services) A_
Digital
Content
Development
and
Management, Animation
(both 2D and 3D),
Geographic Information
Services
(GIS),
IT
Support and Software
Maintenance
Services,
Web
Site
Services,
Business
Process
Outsourcing, Data Entry,
Data Processing, Call
Centre, Graphics Design
(digital service), Search
Engine
Optimization,
Web Listing, E-commerce
and Online Shopping,
document
conversion,
imaging and archiving.
KwZcq cY I mev qK g~mK nZ AevnwZ cm t

o kZfvM
ivwbKviK,
AfixY m`
kZfvM cQb ivwbKviK,
wefvM, A_
ivwb cwqvKiY Aj
gYvjq,
(BwcRW) G AewZ
MYcRvZx
KwZcq
cwZvb KZK KwZcq
evsjv`k
mev qK
mevi qi g~mK
miKvii
GmAviI
24
g~mK nZ
AvswkK ev m~Y AevnwZ
154AevnwZ Ìqv
Ìqv AvQ| ZvQvov
AvBb/2005/445 AvQ
hnZz HmKj cwZvb cY
-g~mK, ZvwiL 9
ivwb Ki mnZz Zvì
Ryb, 2005
cY mieivni Dci
AfixY m`
k~Y nvi g~mK AvivwcZ
Gi Aaxb Abvb wewea mev

Gi cwiwa wbavwiZ AvQ, mnZz
hvMvb`vb mevi cwiwa Abvb
wewea mev Gi mv_ mvsNwlK|
gvV chvq G evcvi evcK
wePzwZ iwnqvQ|
Digital
Content
Development
and
Management, Animation
(both 2D and 3D),
Geographic Information
Services
(GIS),
IT
Support and Software
Maintenance
Services,
Infrastructure
Development
(Combination
of
Hardware & Software),
Web
Site
Services,
Business
Process
Outsourcing, Data Entry,
Data Processing, Call
Centre, Graphics Design
(digital service), Search
Engine
Optimization,
Web Listing, E-commerce
and Online Shopping,
document
conversion,
imaging and archiving.
o eZgvb D mevK wbgvY

weePbv Ki mevi KvW
S004.00-G Af~ Kiv
AvQ| hnZz, Z_-chyw wbfi
mevi c_K cwiwa iqQ mnZz
D mevK mevi KvW
S004.00-G weePbv bv Kwiqv
mevi KvW S099.10-G A
f~ KivB hywhy|
o g~mK hnZz fvvi Dci
wbw` mev mg~nK bq eis

Zvì mKj mev qi
Rb m~Y nvi g~mK AevnwZ
c`vb Kiv DwPZ|
cv - 15
Avivcbxq Ges kZfvM

ivwbKviK, kZfvM cQb
ivwbKviK, ivwb cwqvKiY
Aj (BwcRW) G AewZ
cwZvb mg~n cY ivwb Ki
weavq cY mieivni Dci
k~Y nvi g~mK AvivwcZ nq
Ges Zvì g~mK
mg^qi myhvM bvB, mnZz
HmKj cwZvb mg~n KZK
mev qi Dci g~mK
Sl.
No.
Reference
Section/Rule/
SRO/Order
wefvM, A_
gYvjq,
MYcRvZx
evsjv`k miKvii
GmAviI 72AvBb/95/113g~mK ZvwiL 8 g,
1995
RvZxq ivR^
evWi wekl
Av`k bs18/g~mK/2004
ZvwiL 10 Avei,
2004
Existing
Provision/Situation
nq|
Proposal
AevnwZ cqvRb|
o `~Zvevm, KUbxwZwe` I
o g~mK hnZz fvvi Dci
KgPvixe`,
iv`~Zi
evmvb, RvwZmsNi wewfb
A cwZvb, wek Lv`
msv, wek evsK, wek ^v
msv, AvRvwZK kg
msv, Gkxq Dbqb evsK
BZvw` KZK KwZcq
mevi qi g~mK
AvswkK ev m~Y AevnwZ
Ìqv AvQ|
Avivcbxq Ges `~Zvevm,

KUbxwZwe` I KgPvixe`,
iv`~Zi evmvb, RvwZmsNi
wewfb A cwZvb, wek Lv`
msv, wek evsK, wek v^
msv, AvRvwZK kg msv,
Gkxq Dbqb evsK BZvwì
Rb KwZcq mev
MnYi Rb g~mK AevnwZ
cv Ges Zvì Drcv` g~mK
c`vb KwiZ nq bv, mnZz
mivmwi HmKj msv ev
cwZvb mg~n KZK mev
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107
108

Accountant January-March 2013

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Accountant January-March 2013

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January - March 2013

BANK AUDIT: HOW MUCH IS ENOUGH!

January - March 2013

S M Abu Nayem Ahmed, psc

Bank Audit How Much should it be enough; 9

Audit of Local and International

Profitability Trend in the Banking Sector of

an overview of Practices and Procedures

Laws and regulations for accounting system 36

Recent Monetary Policy & Economic Trends 41

National Finance Performance & Stability

A Tribute to Late Mufazzal Hossain

- an Analysis to Reform & Retreat with Integrated Policy

- Parveen Mahmud FCA

Preparing Accountants for Future Challenges 77

Proposals from ICAB on National Budget

Companies; the issue has come

January - March 2013

arena more than that of past.

M. Farhad Hussain FCA

The Bangladesh Accountant

Wilson Vargheso, Senior

Training on IFRS and IAS for

Advanced Stage Study Manuals

Institute, took the opportunity to

January - March 2013

February, 2013. ICAB organized

Md Abdus Salam FCA

The Bangladesh Accountant

Green Banking and Sustainable Development:

The development strategies of

Bangladesh Government, as laid down in

The Bangladesh Accountant

January - March 2013

Bangladesh has made notable contribution

place. Banks will also receive

ACTIVITIES AND WILL

Besides these, BB introduced a

January - March 2013

The Bangladesh Accountant

avail the refinance facility for Solar

The Bangladesh Accountant

beneficiary farmers are 618 and

January - March 2013

ways. With a move towards

towards the paperless green

Despite all these achievements, the

January - March 2013

leading Asian nations in terms of

The Bangladesh Accountant

Bank Audit How Much should it be enough;

The Bangladesh Accountant

January - March 2013

public interest is reflected in the way

the Banks Board of Directors (those

THEY HOLD THE

aim to analyze those roles and

The Responsibility of the

Those entrusted with banking

Adequate policies, practices and

January - March 2013

BUSINESS. THE STABILITY

The Bangladesh Accountant