Report on

Bangladesh Bank

Submitted by
Group Name:
Sl Name
.
01 SAIF MUHAMMAD FAHAD

ID

PROGRAM

152-14-595

MBA

Department of Business Administration

Daffodil International University

August 10, 2015

Report on

Bangladesh Bank

Submitted to

Tanzina Hossain
Department of Business Administration
Daffodil International University

August 10, 2015

Letter of Transmittal
Date: August 10, 2015
Tanzina Hossain
School of Business Administration
Daffodil International University
Dhaka.
Subject: Transmitting the report on Bangladesh Bank
Dear Madam,
It is our pleasure to submit this report on the topic Bangladesh Bank
We have tried our best to analyze all necessary information related to our topic and present as
affectionately as possible. It is not impossible that there will be minor mistakes in this report. But
still we hope that this report will provide the appropriate analysis on the topic of Bangladesh
Bank
In conclusion, We want to express our thanks to you, as without your co-operation it would
barely impossible for us to prepare this report related to our subject. If you need any help to
interpret anything of this report, please let us inform.
Thanking you
Group Name: X

TABLE OF CONTENT

Sl

Topic

Latter of Transmittal
Introduction
History
Objective of Bangladesh Bank
Vision of Bangladesh Bank
Mission of Bangladesh Bank

Page No.

INTRODUCTION
Bangladesh Bank the central bank and monetary authority of the country. It came into existence
under the Bangladesh Bank Order 1972 (Presidential Order No. 127 of 1972) which took effect
on 16 December 1971. Through this order, the entire operation of the former State Bank of
Pakistan in the eastern wing was transferred to Bangladesh Bank. The powers and functions of
Bangladesh Bank are governed by various laws and acts including the Banker's Books Evidence
Act 1891, Insolvency Act 1920, Banking Companies Ordinance 1962, Bangladesh Bank Order
1972, Foreign Exchange (Regulation) Act 1986, Money Loan Court Act 1990, Banking
Companies Act 1991, Financial Institutions Act 1993 and Rules 1994, Companies Act 1994 and
Bankruptcy Act 1997.

HISTORY
After the liberation war, and the eventual independence of Bangladesh, the Government of
Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of
the country, and named it Bangladesh Bank. This reorganization was done pursuant to
Bangladesh Bank Order, 1972, and the Bangladesh Bank came into existence with retrospective
effect from 16th December, 1971.
The highest official in the bank is the Governor (currently Dr. Atiur Rahman). The Governor
chairs the Board of Director. The Executive Staff, also headed by the Governor, are responsible
for the day to day affairs.

OBJECTIVES OF BANGLADESH BANK

As the central Bank of Bangladesh, the broad objectives of the Bank are:
To regulate currency issuance and to keep foreign exchange reserves.
To manage the monetary and credit system of Bangladesh with a view to stabilizing
domestic monetary value.
To preserve the par value of the Bangladesh Taka.
To promote and maintain a high level of production, employment and real income in
Bangladesh; and to foster growth and development of the country's productive resources.

VISIONS OF BANGLADESH BANK

The Bangladesh Bank (BB), through ensuring the quality of services and the competence of its
staff, shall operate as a modern, dynamic, effective, and forward-looking central bank to manage
the countrys monetary and financial system with a view to stabilizing the internal and external
value of Bangladesh Taka conducive to rapid growth and development of the economy.

MISSIONS OF BANGLADESH BANK

To uphold the vision and in pursuant with the Bangladesh Bank Order of 1972, Bangladesh
Banks mission is to promote and maintain macroeconomic and price stability through:
Formulating and implementing appropriate monetary policy consistent with the countrys
national development goals.
Pursuing prudent policies to ensure stable internal and external value of Taka.
Identifying policy priorities for implementation by the Government through assessing the
transmission channels and the interactions of monetary policy with fiscal, exchange rate,
and other macroeconomic policies and their impact on the economy.
Proposing necessary legislative measures to attain the central banks objectives and
perform its functions including strategies and regulations for and supervision of banking
companies and financial institutions with the aim to providing efficient financial
intermediation and financial services to large, medium, small, and micro enterprises and
to pro-poor activities.
Promoting, regulating and ensuring a secure and efficient payment system, including the
issue of Bank Notes.
To this end, Bangladesh Bank would ensure that it has the requisite human and infrastructural
resources and build its capability to promote and ensure a robust and well-functioning financial
sector. This mission statement pledges that the guiding philosophy of Bangladesh Banks
operations would be sound regulatory framework conducive to the operation of efficient market
mechanism along with transparency and accountability, professionalism, ethical standards,
adoption of modern technology in operational and decision making processes, and trust and
respect in all relations. Periodic strategic planning would serve to identify the emerging
challenges, key changes affecting Bangladesh Banks internal and external environment and set
its strategic guidelines, set priorities, promote improvements in management practices, and
induce necessary changes in organizational culture. To fulfill its mission, Bangladesh Bank
would undertake activities related to developing the national financial system and management
of monetary, foreign exchange, and credit policies. The Bangladesh Banks core mission
strategies cover both monetary policy and financial sector developments.

FUNCTIONS OF BANGLADESH BANK

General Function
Bank of issue:
The issue of paper money is the most important function of a central bank. In fact the
privilege of note-issue was almost everywhere associated with the origin and
development of central banks. Central banks were generally known as bank of issue
until the beginning of the twentieth century. The issue of money was always claimed to
be a prerogative of the government.
Banker, Agent & Adviser to the Government:
A central bank functions as a banker to the government of the country. In this capacity, it
conducts the banking accounts of government department, institutions & enterprises. It
makes short-term advances to the Government in normal condition and extra ordinary
advances during a depression, war or other emergency. It carries out the governments
transaction involving purchase or sales of foreign currencies.
As an adviser to the government the central bank gives advice to the govt. on important
matters of economic policy like deficit financing, trade policy, foreign exchange policy
etc. The ultimate responsibility for laying down the monetary policy and maintaining the
monetary stared lies with the government.
Custodian of the cash reserves of the commercial Bank:
The commercial banks in the country keep a part of their cash balance as deposits with
the central bank, either voluntarily because conversion or because of some legal
obligation. In many countries, the banks are required under some legislation to maintain
statutory minimum cash reserves, mostly as a specified proportion of their deposits.
Custodian of the nations reserves of international currency:
The central banks, function of holding the nations metallic reserves and its foreign
exchange reserves was automatically derived from its functions as the bank of issue and
the custodian of commercial banks cash preserves. In most cases a central bank is
required by law to maintain a minimum reserve against its note issue.
Lender of last resort:
The expression lender of last resort implied the assumption of the responsibility of
meeting directly or indirectly. The Central Bank helps the member banks in times of
crisis. If the banks cant manage the money then Bangladesh bank helps those
commercial banks by supplying them money.
Central clearance, settlement and transfer:
As the central bank is the custodian of cash reserves of the commercial banks, it can
easily assume the function of acting as a clearing hours or settlement bank for other
banks in the country.

As all banks maintain their accounts with the central bank, the claims of banks against
one another are settled by simple transfers from and to their accounts this method of
settling accounts through the central bank apart from being of great convenience to the
banking system, provides economy in the use of money in banking operations. It tends
generally to strengthen the banking system of a country.
Controller of credit:
The control of credit is considered to be the main function of a central bank. De Kock
observes, It is the function which embraces the most important questions of central
banking policy and the one thorough which practically all the other functions are united
and made to serve a common purpose.
The central bank functions of note-issue, the management of government accounts, and
the custody of the commercial banks cash reserves along with those of rediscount and
lender last resort, are closely associated with the control of credit by the central bank. An
effective monetary management requires a centralized control over both currency and
credit. That is why the central banks, which enjoy the monopoly of note-issue, also
exercise control over excessive expansion of credit by the commercial banks.
Promoter of economic development:
The modern central bank is an institution responsible not only for the maintenance of
economic stability; it also performs a variety of development and promotional factions,
which were regarded in the past as being outside the normal purview of central banking.
The main objective of a central banks monetary policy is to achieve growth with stability
within the frame work of the general economic policy of the country. For the sake of
economic development the central bank should provide sufficient quality of money
appropriate to growth process.

Function as Government Bank

Central bank is known as govt. bank all over the world. Central bank everywhere fulfills the
functions of banker, agent and adviser of the government. Central bank performs the following
functions govt. banks.
Maintain government fund and accounts:
Central bank maintains and monitors govt. fund and reserve on behalf Govt. For this
reason central bank is called the custodian of govt. fund.
Collection and transfer of money:
Central bank collects govt. revenues from different sectors and deposit it the account of
govt. Besides it transfers money from one place to another according to directions of
govt.
Handling of government monetary transaction:
Central bank performs all monetary transaction of home and abroad on behalf of govt.
According to M.H. De-Kock it carries out the govt.s involving purchase and sale of
foreign currencies.
Sanctioning and supervision of loan:
Central banks not only perform monetary transaction on behalf of govt. but also sanctions
supervising of loans of different ministry, department and institution of govt.
Maintaining relation with foreign bank:
As an agent of govt. central banks maintain relationship with central banks of different
countries, World Bank (WB), International Monetary Fund (IMF), Regional
Development bank (i.e. ADB), different development agencies etc.
Adviser and agent of government:
Central bank acts as agent of govt. to establish and maintain relationship with different
parties inside and outside the country. It also advises govt. in policy making.
Implementation of government monetary policy:
The implementation of government monetary policy in the timing of impact on the
economic inflation in the country. Central bank influences the economy through
monetary policy, because of the monetary policy is very important to the investors.

Function as a Banker of other

Central bank performs the following functions as a banker of other banks.
Scheduling bank:
Central gives the license/permission of new banks to start business and schedule them.
For this reason central is always careful whither the commercial banks following
maintaining the conditions of scheduling. It also set up new rules and policies for other
commercial bank to open new branches.
Functions as a clearing house:
Inter banks indebtedness is arisen from operations of day to day banking activities.
Sometimes it becomes very difficult for commercial bank to settle inter banks
indebtedness. For this reason central perform the function as clearing house all over the
world.
Sanction of loan:
Central bank gives loan to scheduled commercial bank if necessary. Even, when the
commercial banks are in financial crisis and cannot collect loan from other sources, then
central bank acts as lender of last report.
Supervision of loan:
Central banks not only sanction loan but also manage how & when scheduled
commercial banks are granting loan and in different sectors.
Assistance in collecting credit:
Central bank extends the helping hands to the commercial banks in collecting loans by
enacting new rules and regulation about loan and default loan and its report publication.
Audit of accounts:
Central bank carefully check the book of accounts of commercial bank and its proper
maintenance .As a result commercial banks are bound to maintain properly books of
accounts
.
Collection and preservation of deposits:
All the scheduled commercial banks have to maintain a certain percentage of their
deposits into central bank. Central bank carefully monitor about this.
Acts as adviser and agent:
Central bank advises and directs commercial bank for the betterment of their operations
of banking activities/function. Besides it acts as the agent of scheduled bank in home and
abroad.

Development Function
The objective of central bank is to ensure economic development. According to the direction of
Govt. central bank undertake different development activities and tries to implement. These
development activities are as follows:
Development of different production oriented sectors:
Central bank helps to argent extent in the production oriented sectors like the
development of agriculture and industry etc. For this reason it extend helping hands to
establish specialized banks like agricultural bank, industrial bank, investment bank etc.
Development of banking system:
Central bank is always engaged in the development of banking system as the leader of
banking empire. For this reason, central bank set up different rules and regulations when
banking institutions are in danger, central extends it help.
Development of foreign trade:
Central bank under take different activities for the development of foreign trade (i.e.
import and export). Central bank tries to stabilize exchange rate of a country. It creates
confidence among the foreign exporters about countrys banking system.
Improving the quality of economic plan:
Central bank is the top most financial institution in the country and the banker of Govt.
So it helps for the development of the quality of economic plan taken by Govt.
Improving the quality of manpower:
Central bank tries to improve the quality of manpower in the banking sector. For the
development of its own manpower inside the bank, the central bank arranges training
facilities. It motivates scheduled commercial banks to manage adequate training facility
for the development of quality of their manpower.
Development of natural resources:
Central bank provides assistance and help to extract natural resources for use of these
resources to the enhancement of the economic welfare of the people. For this reason it
extends financial help assistance those institution engaged in extracting these natural
resources.

Others Functions
In addition to above function, central bank also provides some others functions. These are as
follows:
Economic research:
Central bank has to undertake different Economic research activities for the development
of banking system effective operation of money market, formulation of different policy of
government etc.
Collection and supply of data:
Central bank has to collect different data to act as the banker of the other banks and the
banker of government. Central bank supply information to various departments of
government and different scheduled bank.
Preparation of report and publication:
Central bank is to prepare many reports to meet the need of government and the bank
itself. Besides, central banks publish annual report and sell it. To do this bank has
separate publication and cell department.

MONETARY POLICY STRATEGY OF THE BANGLADESH

BANK
Monetary policy strategy of the Bangladesh bank was first issued in January 2006. The most
important thinks of monetary policy is followed:
Achieving price stability:
The central bank of a country control the money supply, availability of money, cost of
money or rate of interest rate in order to set of objectives oriented towards the growth and
stability of the economy.
Maintaining high levels of production:
Bangladesh is food crops country. In Bangladesh many people depends on cultivation of
land. As a result, Bangladesh bank maintains the high level of production. For the high
level of production many times Bangladesh bank provides different types of facilities to
the farmer.
Employment and economic growth:
Bangladesh is over populated country. As a result, many people are in under
unemployment. For that reason our economic growth is low. As a result, our government
announced they will try to provide job at least one people in a family. When in every
family get the job, the economic growth will also increase day by day.

MONEY SUPPLY CONTROL POLICY OF BANGLADESH BANK

Changes in the money supply can have a major impact on economic conditions. Financial market
participants closely monitor Bangladesh Banks actions so that they can anticipate how the
money supply will be affected. They then use this information to forecast economic conditions
and securities prices.
Open Market Operation
Bank committee meets eight times a year. At each meeting, the target money supply growth level
and interest level are determined and actions are taken to implement the monetary policy.
Pre meeting economic report
About two weeks before meeting, committee members are sent the Beige Book which is
consolidated report of regional economic condition.
Economic Presentation
The meeting is conducted and its attended by the seven members of the board of Governors. The
meeting begins with presentation by the staff members about current economic condition and
recent economic trends.
Committee Decision
After presentation, members have a chance to offer recommendation.

Role of the Trading Desk

If Bangladesh Bank determines that a chance in its monetary policy is appropriate, its decision is
forwarded to the Trading Desk (or the Open Market Desk). After receiving the policy from the
Bangladesh Bank, the manager of the Trading Desk instructs traders who work at the desk on the
amount of Treasury securities to buy or sell in the secondary market based on the directive.
The buying and selling of Government securities (Through Trading Desk) is referred to as open
market operations.

Bangladesh Bank Purchase of Securities

When traders at the Trading Desk at the Bangladesh Bank are instructed to purchase a specified
dollar amount of securities, the call govt. securities dealers. The dealer provides a list of
securities for sale that give the denomination and maturity of each security as well as the dealers
ask quote (the price at which the dealer is willing to sell the security) and purchase and money
supply will increase in the market.

Bangladesh Bank Sale of Securities

When traders at the Trading Desk at the Bangladesh Bank are instructed to sell a specified dollar
amount of securities, they again call govt. security dealers and sell the securities and money
supply will be decreased in the market.

Repurchase agreement
In some case, bank desire to increase the aggregate level of bank funds only for a few days to
ensure adequate liquidity in the banking system on those days. Under this condition, Trading
Desk may trade Repurchase agreement.

REGULATIONS
As a central bank of the countries there are some laws to regulate the financial market as well as
money market. They are some law to regulate this like money laundering act, banking act, and
insurance act etc. This is the central bank weapon to monitor the financial institutions. As a
central bank they regulate the daily activates of the commercial bank. As well as when
commercial bank in trouble Bangladesh bank give them suggestion also. If they do anything
illegal than they take necessary action against it. The best example of taking action against
commercial bank is oriental bank which is now known as ICB Islamic bank.
Bangladesh bank has followed some internal act also for their employee also. The rules are this:

Bangladesh Bank Order.

Bank Company Act, 1991.
Money Laundering Prevention Act.
Foreign Exchange Regulation Act.
Micro Credit Regulation Act.
Financial Institution Act.
The Negotiable Instruments Act.
The Bankers Bok Evidence Act.
Money Loan Court Act.
Bank Deposit Insurance Act.
Anti-termism Act.

CONCLUSION
In order uphold the mission, Bangladesh banks aims would be provide the required leadership by
discharging its duties in a manner that shows a clear vision, its watchful, far-sighted, intelligent
and responsive based on an effective and efficient communication strategy. At all times
Bangladesh bank aims would be to remain committed, efficient, capable, logistically supported,
speedy, focused, and aggressive where necessary in order to ensure that the Bangladesh bank
always remains a credible and prestigious institution with an efficient organizational structure
committed to achieving its goals. And also Bangladesh Bank tries to impose something new for
the people of our country. The Bangladesh Bank always remains a reliable and important
institution with an efficient organizational structure committed to achieving its goals. In
Bangladesh Bank reserve is now cross to 10 billion US dollar for the strong monetary policy.
In this report we tried to focus on the function of Bangladesh Bank. Bangladesh Bank cans an
important role in ones organization. Bangladesh bank always tries to impose something new for
the people of the country.