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.
Introduction of Bangladesh Bank
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 persuant to Bangladesh Bank Order, 1972, and the Bangladesh Bank came into existence with retrospective effect from 16th December, 1971.
Objectives of Bangladesh Bank
As the central Bank of Bangladesh, the broad objectives of the Bank are :
a) To regulate currency issuance and to keep foreign exchange reserves;
b) To manage the monetary and credit system of Bangladesh with a view to stabilizing domestic monetary value;
c) To preserve the par value of the Bangladesh Taka;
d) 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.
Functions of Bangladesh Bank
Bangladesh Bank performs all the functions that a central bank of any country is expected to perform, and such functions include maintaining the price stability through economic and monetary policy measures, managing the country’s foreign exchange and the gold reserve and regulating the banking sector of the country. Like all other central banks across the globe, Bangladesh Bank is both the Government’s banker and the banker’s bank, a ”Lender of the Last Resort”. Bangladesh Bank. like most of the central banks of different countries, exercises monopoly over the issue of currency and the banknotes. Except for the 1 and 2 taka notes, it issues all other denominations of Bangladeshi Taka.
Organisation of Bangladesh Bank
The highest official in the bank is the Governor (currently Salchuddin Ahmed). The Governor chairs the Board of Director. The Executive Staff, also headed by the Governor, are responsible for the day to day affairs.
Activities of Bangladesh Bank
Bangladesh Bank has been entrusted with all the traditional central banking functions including the sole responsibilities of issuing currency, keeping the reserves, formulating and managing the monrtary policy and regulating the credit system of Bangladesh with a view to stabilising domestic and external monetary value and promoting and maintaining a high level of production, employment and real income in the country. The bank acts as the banker to the government and accepts government deposits, cheques and drafts, and undertakes collection of cheques and drafts drawn on other banks. The government deposits all its cash balances with the Bangladesh Bank free of interest. The bank transfers government funds from one place to another as requested by the government and its agencies. It makes ways and means for
advances to the government, which are repayable not later than three months. It acts as the public debt manager and runs a public debt office (PDO) within itself. The bank also sells government TREASURE BILLS on tender, PRIZE BONDS and different types of saving certificates (sanchayapalrd). The bank acts as the clearing house of the scheduled banks.
The purchase, sale and rediscount of bill OF kxchange and promissory notes drawn on and payable in Bangladesh are also included in the activity of the bank. The bank acts as the lender of last resort for the government as well as for the country’s scheduled banks. All scheduled banks are required to maintain a minimum reserve with the Bangladesh Bank. The present statutory liquidity reserve (SLR) requirement is 20% of total demand and time liabilities, 4% of which is to be maintained as cash reserve ratio (CRR), and the rest 16% as approved securities. The SLR requirement for Islamic banks is 10% and they are to keep 4% of this reserve as CRR and the rest 6% in approved securities.
Bangladesh Bank exercises its wide range of power in credit control through different types of traditional and non-traditional methods. In addition to bank rate and open market operations, it uses a number of other weapons. It can vary the minimum reserve requirements of scheduled banks whenever circumstance so warrant. Being responsible for maintaining external value of Bangladesh currency, the bank also handles the exchange control. It ensures that all foreign exchange inflows are accounted for, and surrendered to the authorised dealers. It allocates and rations foreign exchange in line with the set priorities. Bangladesh Bank is empowered to manage the country’s international reserves, which represent aggregate of its holding of gold, foreign exchange, SDR and reserve position in the IMF. The bank also acts as the representative of the government in different international agencies and other forums such as World Bank, IMF, Asian Clearing Union, ADB, etc.
Bangladesh Bank is empowered to act as the watchdog of the country’s banking systhm, and all scheduled banks are accountable to Bangladesh Bank, which has extensive powers to ensure soundness of the banking system. No bank can commence banking business in Bangladesh and no existing bank can open a new branch in or outside the country or shift any branch from one place to another without obtaining a licence/permission from the Bangladesh Bank.
Bangladesh Bank runs a Deposit Insurance Scheme established under the
Deposit Insurance Ordinance 1984. The objective of the scheme is to
safeguard the deposits of the customers with both local and foreign deposit money banks doing business in Bangladesh. The deposits amounting up to Tk 100,000 of all customers in a scheduled bank are insured under the scheme. All scheduled banks in Bangladesh are required to be members of the scheme and pay premium on their deposits at a rate determined by the Bangladesh Bank from time to time. Bangladesh Bank accumulates the premiums in the Deposit Insurance Fund
The paid up capital of Bangladesh Bank is Tk 30 million divided into 300,000 shares of Tk 100 each that are fully paid up by the government. A nine-member board of directors comprising the governor as chairman, one deputy governor and seven members oversees the affairs of the bank. The governor and the deputy governors of the Bank are appointed by the government for a period not exceeding five years and are eligible for reappointment.
To reduce the huge costs of printing currency notes from foreign countries Bangladesh Bank had initiated a Security Printing Project, which was converted into a limited company of the name The Security Printing Corporation (Bangladesh) Ltd. on 18th October 1992. The corporation is now working as a commercial concern and prints all currency and bank notes in Bangladesh. Other security papers, such as judicial and non-judicial stamps, prize bonds, revenue stamps, postal envelope and stamps, band rolls for customs and excise department, and cheque books of different private banks in Bangladesh are also printed by this company. The company however, does not have a minting plant and the country still remains dependent on foreign mint companies for minting the coinage.
Branches of Bangladesh Bank
Bangladesh Bank has 9 branch offices, two in Dhaka city (SADARGHAT and Motijheel), and one each in Chittagong, Khulna, Rajshahi, Sylhet, Bogra, Rangpur and Barisal.
VISION 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 country’s 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.
MISSION of Bangladesh Bank
To uphold the vision and in pursuant with the Bangladesh Bank Order of 1972, Bangladesh Bank’s mission is to promote and maintain macroeconomic and price, stability through:
· Formulating and implementing appropriate monetary policy consistent with the country’s 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 bank’s 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;
· Giving advice to the Government on the interaction of monetary policy with fiscal and exchange rate policies, on the impact of various policy measures on the economy;
· Analyzing priority macroeconomic issues for policy advice and dissemination of information to attain the central bank’s social responsibility.
Current Board of Directors of Bangladesh Bank
• Dr. Salehuddin Ahmed
• Md. Nazrul Huda
• Dr. Wahid Uddin Mahmud
• Dr.Momtaz Uddin Ahmed
• Dr.Sufia Ahmed
• Dr. Hossain Zillur Rahman
• Dr.Mohammad Tareque
• Mr.Jafar Ahmad Chowdhury
• Mr. Muhammad Abdul Mazid
• Mir Abdur Rahim
Current Executive Staff of Bangladesh Bank
• Dr. Salehuddin Ahmed
• Md. Nazrul Huda
• Ziaul Hasan Siddiqui
• Md. Murshid Kuli Khan :
• Habib Ullah Bahar
• Khandakar Muzharul Haque
• Md. Abul Quasem
• A.T.M. Nasiruddin
• Chowdhury Mohidul Haque
• Mir Abdur Rahim
• Md. Harunur Rashid Chowdhury
• Md. Mofiz Uddin Chowdhury
• Nazneen Sultana
Former Governors of Bangladesh Bank
• A.N.M. Hamidullah 1972-1974
• A.K.N. Ahmed 1974-1976
• M.Nurul Islam 1976-1987
• Shegufta Bakht Chaudhuri 1987-1992
• Khorshed Alam 1992-1996
• Lutfar Rahman Sarkar 1996-1998
• Dr. Mohammed Farashuddin 1998-2001
• Dr. Fakhruddin Ahmed 2001-2005
Head Office / Department of Bangladesh Bank
Ø Accounts & Budgeting Department
Ø Anti-Money Laundering Department Banking Regulation and Policy Department
Ø Common Services
Ø Department of Banking Inspection 1 Department of Currency Management and Payment System
Ø Department of Off-Site Supervision
Ø Equity and
Ø Entrepreneurship Fund Unit Foreign Exchange Inspection & Vigilance Department
Ø Foreign Exchange Policy Department
Ø Governor’s Secretariat Information Systems Development Department
Ø IT Operation &
Ø Communication Department
Ø Monetary Policy
Ø Security Management Department
Ø Statistics Department
Ø Agricultural Credit and Special Programmes Department
Ø Bangladesh Bank Training Academy Central Bank Strengthening Project Cell
Ø Credit Information Bureau
Ø Department of Banking Inspection 2
Ø Department of Financial Institutions and Markets
Ø Department of Printing and Publications
Ø Expenditure Management Department
Ø Foreign Exchange Investment Department
Ø Forex Reserve & Treasury
Ø Management Department
Ø Human Resources Department
Ø Internal Audit Department
Ø Law Department
Ø Research Department
Ø Special Studies Cell
Bangladesh Bank Related Law and Regulation
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 1 994, Companies Act 1 994 and Bankruptcy Act 1 997. [S M Mahfuzur Rahman]
Through above discussion, we tried to explain some important issues in monetary policy and its implication in overall economic situation of Bangladesh.
Bangladesh Bank still work heard to get the overall economic trend of the country stable by checking the monetary policy and implementing some other relevant policy which will prove to be effective in the long run as well as it will help to create congenial economic environment in the economy.