Bank, Banking and Banker

Bank is a Govt. approved Financial Institution which collect/receive fund from surplus unit, repayable on
demand or otherwise and deploy the same to the deficit unit duly observed some rules & regulations. The
Banking Company means any company which transacts the business of banking.
Banking means accepting of deposits/money from the public, payable on demand or otherwise with
draw able by cheque, draft or otherwise, for the purpose of lending or investing of the same.
Banker means a person transacting the business of accepting, for the purpose of lending or investment,
of deposit of money from the public, repayable on demand or otherwise and with draw able by Cheque,
Draft
Banking System:
- Branch Banking - Unit Banking - Group Banking
- Chain Banking - Corresponding Banking - Deposit Banking - Industrial and Investment Banking
Sources of Banks Funds:
A) Deposit Account
- Transaction deposit - Savings deposits
- Time deposits - Money market deposit accounts
B) Borrowed Funds
- Government funds purchased/borrowed - Borrowing from central bank - Repurchase agreement
- Foreign currency borrowing
C) Long-Term Sources of Funds
- Bonds issued by bank - Bank capital
Uses of Funds by Banks:
- Cash - Investment in securities (Govt./private)
- Central banks loaned out - Bank loans
- Repurchase agreement - Foreign currency loans
- Fixed assets - Call money market

Banking System in Bangladesh:

After the independence, banking industry in Bangladesh started its journey with 6 Nationalized
Commercial Banks, 2 State owned specialized Banks and 3 Foreign banks. In the 1980s banking industry
achieved significant expansion with the entrance of private banks. Now, banks in Bangladesh are
primarily of two types:
1) Schedule Banks: The banks which get license to operate under Banking Company Act, 1991
(amended up to 2013) are termed as Scheduled Banks.
2) Non-Scheduled Banks: The banks which are established for special and definite objectives are termed
as Non-Scheduled Banks. These banks cannot perform all functions of scheduled banks.
Central Bank
A central Bank is the bank established in a country with the view to managing the monetary and credit
system to established domestic monetary value and maintaining a competitive external par value of the
country and fostering growth and development of the country in the best national practice. In every
country there must be a Central Bank. The name of the central bank of BD is
Functions of Central Bank:
1) Traditional Function:
- Note issue (except Government notes & coins one taka, two taka, five taka and coins)
- Bankers Bank - Governments Bank
- Maintenance of Foreign Exchange reserve
- Framing of monetary Policy
2) Modern Functions:
- Declaration of bank rate - Clearing House maintenance
- Lender of last resort to Govt. & Banks
- Advisor to the Govt. on financial matter
- Supervisor of Banks & Financial Institutions
- Development of money market and capital market.

Functions of Commercial Banks:

The traditional function of a Commercial bank is to receive deposit from the surplus unit with a condition
to repay on demand or otherwise and allowing investment/ advances/loans to the deficit unit. But now-adays the functions of a commercial bank diversified and acting as a superstore.
- General functions - Agency functions - Functions related to foreign trade and foreign exchange
- Welfare functions and - Other functions
What are the mechanism of central bank to control over scheduled banks in Bangladesh
The main functions of Bangladesh Bank to control over scheduled Banks are:
- Enlistment of Banks - Central Bank is the Banker to the Commercial Banks - Submission of returns
- Management of Clearing House - Audit & Inspection
- Appointment of MD/CEO - Investment/Credit Control - Discount rate policy - Open market
operations - Risk Management - Foreign Exchange Regulation Act
- Anti Money Laundering Act and Anti-Terrorism Act
Scheduled Banks:
There are 56 scheduled banks in Bangladesh who operate under full control and supervision of
Bangladesh Bank which is empowered to do so through Bangladesh Bank Order 1972 and Bank
Company Act 1991. Scheduled Banks are classified into following types:
1. State owned Commercial Banks (SOCBs) : 06
2. Specialized Banks (SDBs)

: 02

3. Private Commercial Banks (PCBs) : 39

PCBs are two types according to mode of operation:
Conventional : 31
Islamic

: 08

4. Foreign Commercial Banks (FCBs)

: 09

Non-Scheduled Banks:
There are now 4 non-scheduled banks in Bangladesh which are:
1. Ansar VDP Unnayan Bank,

2. Karmashangosthan Bank,
3. Probashi kollyan Bank,
4. Jubilee Bank

Banking System in USA:

As the central bank of the United States of America, the Federal Reserve System (the FED) has the
responsibility for conducting national monetary policy. The Fed, as it exists today has five major
components:
1. Federal Reserve District Banks there are 12 Federal Reserve District banks out of which the New
York district bank is most important.
2. Member Banks Commercial banks that become members of the Fed are required to purchase stock
of their Federal Reserve District bank. This stock are not traded in a secondary market, pays a maximum
dividend of 6%.
3. Board of Governors is made up of seven members nominated by the president of USA and serve as
non-renewable 14-year term. One member is selected as chairman by the president for a term of 4-year
which is renewable.
4. Federal Open Market Committee (FOMC) is made up of the seven members of the Board of
Governors plus the president of New York district bank and 4president of 4 other district banks.
5. Advisory Committee is consisting of one member from each district bank.