Governor Secretariat

(Information & Public Relations Division)

About
BANGLADESH BANK
(The Central Bank of Bangladesh)

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

Bank and Strengthening the financial sector is a vital concern for an economy.

Central Banking: Efficient banking or sound financial system serves as an effective channel
for mobilizing funds from savers to productive sectors and thus helps to
History
achieve economic growth. However, the idea of ‘Bank’ is so ancient and
this concept is evolving over time. Around the time of Adam Smith (1776)
there was a massive growth in the banking industry. Within the new system
of ownership and investment, the state's role as an economic actor changed
substantially. The Jews in Jerusalem introduced a kind of banking in the
form of money lending before the birth of Christ. The word 'Bank' was
probably derived from the word 'bench' as during ancient time Jews used to
do money lending business sitting on long benches. First modern banking
was introduced in 1668 in Stockholm as 'Svingss Pis Bank' which opened
up a new era of banking activities throughout the European Mainland.
 In the South Asian region a major landmark was the establishment of the
Hindustan Bank in 1700 at Kolcutta. Dhaka Bank started to operate in1806.
Banks established in this region during the British period include Kurigram
Bank (1887), Kumarkhali Bank(1896), Mahalaxmi Bank, Chittagong
bank(1910), Dinajpur Bank(1914), Comilla Banking Corporation (1914)
and Comilla Union Bank(1922). Major Indian Banks also had branches in
this territory. In Europe prior to the 17th century most money was
commodity money, typically gold or silver. However, promises to pay were
widely circulated and accepted as value at least five hundred years earlier in
both Europe and Asia. The medieval European Knights Templar ran
probably the best known early prototype of a central banking system. At
about the same time, Kublai Khan of the Mongols introduced fiat currency
to China, which was imposed by force by the confiscation of specie.
Although central banks are generally associated with fiat money, under the
international gold standard of the nineteenth and early twentieth century’s
central banks developed in most of Europe and in Japan, though elsewhere
free banking or currency boards were more usual at this time. Problems
with collapses of banks during downturns, however, was leading to wider
support for central banks in the respective nations which did not as yet
possess them, most notably in Australia.
As the first public bank to "offer accounts not directly convertible to coin",
the Bank of Amsterdam established in 1609 is considered to be the "first
true central bank". This was followed in 1694 by the Bank of England,
created by Scottish businessman William Paterson in the City of London at
the request of the English government to help pay for a war.
With the collapse of the gold standard after World War II, central banks
became much more widespread.
The banking system at our independence consisted of two branch offices of
the former State Bank of Pakistan established in July 1948: one was in
Bangladesh (former East Pakistan) and the other was in West Pakistan
(present Pakistan).
 

 
 

Bangladesh Bank Bangladesh Bank, the central bank as well as chief authority to regulate
(BB): Establishment country’s monetary and financial system, was established in Dhaka as a
body corporate vide the Bangladesh Bank Order, 1972 (P.O. No. 127 of
1972) with effect from 16th December, 1971. Bangladesh Bank started
functioning with all capital and liabilities of the then Dhaka branch of State
Bank of Pakistan. At present it has got 9 branches and those are located at
Motijheel, Khulna, Sadarghat, Bogra, Chittagonj, Sylhet, Barisal, Rangpur
and Rajshahi in Bangladesh and total number of staffs stood at 7240 as on
end December 2009. 

BB’s Vision and Vision:

Mission: To develop continually as a forwardlooking central bank with competent
and committed professionals of high ethical standards, conducting monetary
management and financial sector supervision to maintain price stability and
financial system robustness, supporting rapid broad based inclusive
economic growth, employment generation and poverty eradication in
Bangladesh.
Mission:
We at Bangladesh Bank are carrying out its following main functions as the
country’s central bank:
• formulating monetary and credit policies
• managing currency issue and regulating payment system
• managing foreign exchange reserves and regulating the foreign
exchange market
• regulating and supervising banks and financial institutions, and
advising the government on interactions and impacts of fiscal,
monetary and other economic policies.

We are discharging these functions in a forward looking, proactive,

responsive and consultative manner. In our aspiration for ever higher
standards of performance we are aware of our limitations in independence,
logistics, professional know-how and appropriateness of skill sets in
staffing; we are persistent in effort to overcome these limitations.

Bangladesh Bank: BB as the central bank of Bangladesh executes all the functions that a
Core Functions central bank traditionally performs as elsewhere in the world. The core
functions of BB are briefly discussed as follows:

(1) BB formulates and implements monetary policy aiming at stabilizing

 domestic monetary value and maintaining competitive external per
value of taka for fostering growth and development of country’s
productive resources in the best national interest.

 
(2) BB formulates and implements intervention policies in the domestic
money market and foreign exchange market. BB intervenes the
money market with some policy instruments such as (1) open
market operation (treasury bills/bonds, repo, reverse repo auctions)
(ii) variations in reserve ratios such as cash reserve requirements
(CRR) and statutory liquidity ratio (SLR); (iii) secondary trading ;
(iv) discounting rate/ bank rate; and (v) moral suasion;

(3) BB monitors and supervises scheduled banks and non-bank financial

instructions (NBFIs) that include off-site supervision and on-site
supervision in order to enhance the safety, soundness, and stability
of the banking system to ensure banking discipline, protect
depositors’ interest and retain confidence in the banking system.

(4) BB holds sole responsibility of the management of international

reserve representing aggregate of BB’s holding of gold, foreign
exchange SDR and reserve position in the IMF;

(5) BB, as the central bank of Bangladesh reserves sole responsibility

to issue bank note1;

(6) BB performs as a clearing house for the scheduled banks to clear

and settle inter-bank payment arising through drawing cheque,
drafts, bills, etc to one another.

(7) BB acts as a banker to the government;

(8) BB functions as a lender of the last resort for the government as

well as for the country’s scheduled banks;

(9) BB acts as an advisor to the government;

(10) BB directs the growth expediting programs for the national

interest.

                                                            
1
Bank note include notes of taka 5 and above denominations and coins of taka 5
 Additionally, BB’s functions include some other promotional activities such
as development of new instruments, guidelines for money and financial
market participants, providing training to the banks and NBFIs, monitoring
and encouraging corporate social responsibilities (CSR) executed by banks
and NBFIs and so on.

BB’s Hierarchy:
Governor
↓
Deputy Governor
↓
Executive Director/Economic Adviser
↓
General Manager/Systems manager
↓
Deputy General Manager/Senior Systems Analyst/Deputy Chief Medical Officer
↓
Joint Director/Joint Manager/Systems Analyst/Sr. Programmer/Operation Manager/Asstt. Chief Medical Officer
↓
Deputy Director/Deputy Manager/Programmer/Computer Operation Supervisor/Sr. Medical Officer
↓
Assistant Director/Assistant Manager/Assistant Programmer/Sr. Computer Operator/Medical Officer
↓
Officer/Data Entry/Control Supervisor
↓
st
Clerk-1 Grade/Sr. Data Entry/Control Operator/Stenographer/Typist/Telephone Operator
↓
Data Entry/Control Operator
↓
Caretaker-1st Grade
↓
Caretaker-2ndGrade
↓
Jomader/MLSS
↓
Door Keeper/Mali/Khedmotgar

 
 

BB’s Governors: Sl. No. Name Tenor

01 Mr. A.N.M. Hamidullah 18/01/1972 - 18/11/1974
02 Mr. A.K.N. Ahmed 18/11/1974 - 13/07/1976
03 Mr. M. Nurul Islam 13/07/1976 - 12/04/1987
04 Mr. Shegufta Bakht Chaudhuri 12/04/1987 - 19/12/1992
05 Mr. Khorshed Alam 20/12/1992 - 21/11/1996
06 Mr. Lutfar Rahman Sarkar 21/11/1996 - 21/11/1998
07 Dr. Mohammed Farashuddin 24/11/1998 - 22/11/2001
08 Dr. Fakhruddin Ahmed 29/11/2001 - 30/04/2005
09 Dr. Salehuddin Ahmed 02/05/2005 - 30/04/2009
10 Dr. Atiur Rahman* 01/05/2009
BB’s Acts, Laws, A set of acts, laws, regulations, and guidelines have been enacted and
Regulations, and promulgated time to time since BB’s establishment which helped BB to
perform its role as a central bank particularly, to control and regulate
Guidelines:
country’s monetary and financial system. Among others, important laws
and acts include:

o Bangladesh Bank Order, 1972 (P.O. No. 127 of 1972)

o Bank Company Act, 1991
o The Negotiable Instruments Act, 1881
o The Bankers’ Book Evidence Act, 1891
o Foreign Exchange Regulations Act, 1947
o Financial Institutions Act, 1993
o Bank Deposit Insurance Act, 2000
o Money Loan Court Act, 2003
o Micro Credit Regulatory Authority Act, 2006
o Money Laundering Prevention Act, 2009 and
o Anti-terrorism Act, 2009
On the other hand, regulations and guidelines broadly include Bangladesh
Bank Regulations and Foreign Exchange Regulations.
 

* Acting Governor
Monetary Policy: Monetary policy is a set of rules that aims at regulating the supply of money
Objectives in accordance with predetermined goals or objectives. Monetary policy
plays a very dominant role in altering the economic activity and the price
level in a country. So, it should be very carefully formulated and
implemented in achieving the goals and objectives as outlined in the
Bangladesh Bank Order, 1972 below:

• Price stability both internal & external;

• Sustainable growth & development;
• High employment;
• Economic and efficient use of resources;
• Stability of financial & payment system. 
Exchange Rate Towards liberalization of foreign exchange transactions, a number of
Policy: measures were adopted since 1990s. Bangladeshi currency, the taka, was
declared convertible on current account transactions (as on 24 March 1994),
in terms of Article VIII of IMF Article of Agreement (1994). As Taka is not
convertible in capital account, resident owned capital is not freely
transferable abroad. Bangladesh adopted Floating Exchange Rate regime
since 31 May 2003. Under the regime, BB does not interfere in the
determination of exchange rate, but operates the monetary policy prudently
for minimizing extreme swings in exchange rate to avoid adverse
repercussion on the domestic economy. In the forex market banks are free
to buy and sale foreign currency in the spot and also in the forward markets.

BB’s Reserve Bangladesh Bank (BB) is empowered by section 7A of Bangladesh Bank

Management Order, 1972 (President’s Order No. 127 of 1972) to hold and manage the
official foreign exchange reserve of Bangladesh. It maintains its foreign
Strategy:
exchange reserve in different currencies to minimize the risk emerging from
widespread fluctuation in exchange rate of major currencies and very
irregular movement in interest rates in the global money market. BB has
established Nostro account arrangements with different Central Banks.
Funds accumulated in these accounts are invested in Treasury bills, repos
and other government papers in the respective currencies. It also makes
investment in the form of short term deposits with different high rated and
reputed commercial banks and purchase of high rated
 sovereign/supranational/corporate bonds. Forex Reserve & Treasury
Management Department of BB performs the operational functions
regarding investment which is guided by investment policy set by the BB’s
Investment Committee headed by a Deputy Governor. The underlying
principle of the investment policy is to ensure the optimum return on
investment with minimum market risk.

Deposit and The deposit insurance scheme (DIS) was introduced in Bangladesh in
Insurance: August 1984 to act as a safety net for the depositors aiming at minimizing
the risks of loss of depositors' fund with banks in which all the commercial
banks including foreign banks and the specialized banks operating in
Bangladesh are the member of this scheme by compulsion as provided
under Article of Bank Deposit Insurance Act 2000.
The DIS is designed to minimize the risks that the depositors suffer a loss
out of placing funds with a bank. The purpose of DIS is to help to increase
market discipline, reduce moral hazard in the financial sector and provide
safety nets at the minimum cost to the public in the event of bank failure.
The direct rationale for the deposit insurance is customer protection. The
indirect rationale for deposit insurance is that it reduces the risks of
systemic crisis, involving, for example, panic withdrawals of deposits from
sound banks and breakdown of payments system.

Bangladesh bank has adopted a system of risk based deposit insurance

premium rates applicable for all scheduled banks effective from the half
year January - June 2007. According to new instruction regarding premium
rates, problem banks are required to pay 0.09 percent and private banks
other than the problem banks and state owned commercial banks are
required to pay 0.07 percent where the percent coverage of the deposits is
taka one hundred thousand per depositor per bank.

With this end in view, BB has already advised the banks for bringing DIS
into the notice of the public through displaying the same in their display
board.
Research and Bangladesh Bank brings out a number of research and statistical
Publications: publications. Among others, major publications include the Annual Report,
the Monetary Policy Review, the Financial Sector Review, the Bangladesh
Bank Quarterly Report, and Monthly Report - Major Economic Indicators,
Monthly Economic Trends intended to inform policy makers, market
participants and general public. Research, Policy Analysis Unit, IT,
Monetary Policy and Statistics Departments jointly prepare these reports,
with support from the department of Printing and Publications. And the
Information and Public Relations Division (IPRD) of Governor Secretariat,
helps handling media briefings and liaison, and issuance of press releases,
etc.

BB's websites (www.bangladesh-bank.org and

www.bangladeshbank.org.bd) now serve as important communication
platforms, allowing continuous instant access to information on roles,
responsibilities and policy approaches of the central bank. The websites
contain circulars issued by the BB, economic indicators, BB’s publications
and reports including important speeches/presentations by the Governor.

Financial Basic financial services such as deposit, credit etc. is considered as

Inclusion and entitlement of all people in a society, this is particularly true in developed
countries. Inclusiveness of a greater segment of people in financial system
Growth
is pre requisite for economic development of a country like Bangladesh to
Expediting
facilitate employment to ease credit facilities. Despite a large number of
Programs: bank branches and micro finance institutions in our country, a large
segment of our population particularly rural poor have scant access to
banking services. Bangladesh Bank has started to find a way out of this
situation and services like deposit, small credit etc. need to be made
available to the common people for the sake of poverty reduction also.
Bangladesh Bank and the Government of Bangladesh (GOB) have adopted
several remedial measures to bridge these gaps in financial inclusion.

Bangladesh Bank has introduced refinance schemes for banks against their
loans to Small and Medium Enterprises (SMEs) multilateral development
partners such as the IDA and ADB are supplementing BB’s refinance
programs with their co-financing lines. BB’s refinance schemes for banks
against their loans to Small and Medium Enterprises (SMEs) have been
expanded from Taka 100 crore to Taka 600 crore for ensuring credit
availability to this sector. To widen and strengthen SMEs, recently
Bangladesh Bank has formed SME and Special Programs Department; to
enhance investment in this sector especially to help women in increasing
their contribution to industrialization, BB is detecting the hindrances on the
way. In this regard it has been made mandatory that at least 15% of the
credit will have to be disbursed among women entrepreneurs. Against the
sector in total of Tk. 24000 will be disbursed in the current fiscal (FY 2009-
10) through the banking channel.

The agriculture credit program announced by BB for FY 10 enjoins all

banks to engage in lending for a comprehensive range of no-and off-farm
rural economic activities, with refinance lines available to them from
Bangladesh Bank. BB has announced its Annual Agricultural/Rural Credit
Policy and Program for FY 2009-10 of TK. 11,500 crore and to ensure
institutional credit facility for the share croppers, Bangladesh Bank for the
first time has introduced a refinance scheme of TK.500 crore which will be
disbursed using NGO linkages. To implement agricultural credit program
BB has formulated a three stage monitoring system. Besides, the farmers
are now allowed to open their bank account by ten taka only.

Bangladesh Bank is increasing its concentration on infrastructural

development because it’s a vital prerequisite for economic development. A
Taka 200 crore refinance line has been introduced in FY-10 against bank
loans for environment friendly investments in solar energy, Biogas plants
and Effluent Treatment Plants (ETP). Already Participatory Agreement with
some banks for receiving refinance facility for loan against ETP is under
process. In addition commercial banks have been persuaded to invest in
power generation plant under Public Private Partnership (PPP). In the
meantime BB itself has established a 20 kilo watt solar panel.

In addition, BB is always urging the financial institutions to be more

committed to the society by fulfilling their Corporate Social
Responsibilities (CSR) because the ultimate target of any business activity
should be the maximization of social welfare.

According to vision 2021 of present Govt. poverty has been targeted to

reduce below 15%. As a short term measure to achieve this target BB
authority hopes the credit facilities for agriculture and SMEs will be very
effective and will ease the implementation of long term strategies.

Nevertheless recently, BB has adopted the Strategic Planning in

accomplishing 16 core objectives by 2010-14:

1. Revisit the current monetary policy framework to ensure continuing

effectiveness of monetary polices
2. Strengthen regulatory and supervisory framework to enhance financial
sector resilience and stability
3. Further deepen financial markets in Bangladesh
4. Financial inclusion and broadening of access
5. Develop more efficient currency management and payment system
6. Enhance regulatory and supervisory framework against money
laundering
7. Introduce separate and comprehensive guideline and supervision for
Islamic banking
8. Develop more efficient management of government domestic debt
9. Streamline and transform data reporting, processing and dissemination
through full fledged ICT framework
10. Full automation of credit information bureau (CIB)
11. Close the existing gaps in legal empowerment of BB in different
functional areas
12. Attract, retain and develop people ensuring sound organizational
development
13. Strengthen Risk-based internal control to add value to the Risk
Management Process in Bangladesh Bank
14. Promote CSR activities and preparedness for climate change in
Bangladesh with conducive policy direction
15. Develop effective channels for communicating central bank’s
policies and initiatives to stakeholders to enhance effectiveness of
implementation
16. Create a ‘Strategic Planning and coordination Unit as a process
owner of BB strategic plan
 In order to improve the quality of customer service of Bangladesh Bank
modernization program for the cash department has been initiated, such
as, setting up CCTV as part of improved security system, help desk,
separate counter for women, aged and physically handicapped people, using
sophisticated machine for note processing sorting, banding etc. central
display board for displaying up-to date directives and citizen charter and
many others.

Therefore, with the view to reduce poverty; accelerate economic activities

with satisfying the credit needs, BB’s recent initiative in bringing the people
outside the bank under banking services in line with financial inclusion is
likely to contribute in economic development of Bangladesh.

Economic BB’s one of the key objectives is to promote and maintain a high level of

Growth: production, employment and real income of Bangladesh; and to foster

growth and development of the country's productive resources for national
interests. Therefore, BB as the regulator of country’s financial system
performs its responsibilities with the view to achieve its objectives that
impacts directly and indirectly on country’s financial growth, in particular,
monetary, fiscal, and economic growth. The yearly economic/financial
growth chart is given below:

Source: Bangladesh Bureau of Statistics (BBS)