8/2/2019 Group 10 Task3

1/14

Influences of reforms inbanking sector ofbangladesh.

Group 10

Welcome to our Presentation

8/2/2019 Group 10 Task3

2/14

Group members

Name ID

Sanjana Haque 16070

Tauhidul Islam 16071

Priyanka Choudhury 16073

Saiful Islam 16072

Sohel Mia 16074

Inur Nahar Lipi 16019

Mir Ehsanul Haque 16068

Nazmul Islam 16069

Mohammad Kawser Hasan 16020

8/2/2019 Group 10 Task3

3/14

Reforms

Reforms infiscal policy

Raise revenue

GDP by 1.5% by97-98.

Increase in therate of investment

to around 18%-

20%.

Increaseddomestic

resource

mobilization.

Influence

Scope

Unified secondary

exchange market

rate- 1991

Increase in foreignreserve

Tk.7485crore in 96-97 from Tk.452 in

80-81.

Foreign can investin capital market.

Rapid expansionof external sectorof our economy.

8/2/2019 Group 10 Task3

4/14

Development of

bond market

Expansion in the

monetary

aggregate.

Contraction of

credit to privatesector.

Broaden the

scope ofborrowing by

Govt.

Provides shortterm investment

by banks.

Reform

Capital market

development

After 1996declining price

index.

Ratio of loanfrom ICB raisedfrom 1:2 to 1:3.

Entry ofmerchantbank.

Attract foreigncapital.

Influence

Scope

8/2/2019 Group 10 Task3

5/14

Monetary Policy reforms

8/2/2019 Group 10 Task3

6/14

Situation

In the first yearsafter liberation,

the primary targetof monetarypolicy was toregulate the

direction of theflow of money

and credit

Until 1990, the

lending rate of thecentral bank for

borrowings of thecommercial banks

to meet their

temporary needswas non-existent

Reforms

In 1975,

Bangladesh

entered into a

standby-

arrangementwith IMF and the

country's

monetary policygot a changed

shape

In 1989, thegovernment

adopted a

comprehensive

Financial Sector

Reform Program

Influence

Bangladesh Bank

started setting

short-term

objectives of

monetary policy

in close

collaboration of

the government

The monetarypolicy therefore,

could not

function in its

true sense

Scope

The banking

system could not

play its role asan effective

financialintermediary forthe 1975 reforms

Bangladesh Bankstarted moving

away from directquantitative

monetary control toindirect methods of

monetarymanagement since

the beginning of

1990.

8/2/2019 Group 10 Task3

7/14

Situation

At present, themoney supply is

regulated through

indirect manipulation

of reserve money

instead of creditceiling

The capital market is

having a huge crash

ReformsFrom 2000- 2010banks have beeninstructed to preparetheir financialstatements on accrual

basis, banks are

advised to operatemerchant bankingactivities ,Guideline onRisk Based Capital

Adequacy for Banks(Basel II) was

introduced

In 2012 contractionarymonetary policy has

been taken

Influence

Bangladesh bank willfocus more on interest

rate spread to keep it

below 5%

Govt. is trying to raise

funds

Govt. is urged tolower borrowing from

banking sector by

increasing interest

rates

8/2/2019 Group 10 Task3

8/14

Situation

Financiallydepressed

in1980s

Reforms

Privatizatio

n

Liberalizati

on of

interest

rate

Influence

More efficiency in deposit mobilization More competitiveness in providing better services

Concentration of operations in the urban

Charge different interest rate based on period & risk(1980s-1990s)

Reduction of Bank Rate and Lending Rate (2001 )

Scope

Expansion

Better services

to compete Merger

Choose to selectdeposits onbasis of interestrate

8/2/2019 Group 10 Task3

9/14

Situation

Disburse of loanable fund ofbanks in

publiclydirected sectors

Reforms

CIB & Measuresfor LoanRecovery(1997-1999)

New loanclassification

Capital adequacyrequirement

Influence

Collect all creditinformation of theborrowers

Provide credit

information to allbanks

Prepare creditreports

Provide relevantdata on bank credit

Prepare & provide

credit risk rating

Classify of bad &non performingloans

Keep provisions forbanks

Linking Classified

Loan Level to LargeLoan Sanctioning

The risk of default

Sustain operatinglosses

Scope

Chance tooverview banks allcredit information

Effective loanidentifying andimplementation

Proper capitalpositioning

8/2/2019 Group 10 Task3

10/14

Situation

The weakness

of internalcontrol system

Reforms

On site & off sitesupervision

Decision on CRR &SLR

Merger of LossIncurringBranches(2002).

Delegation of PowerandResponsibility(2002)

Influence Continuously incurring

losses for the last fiveyears

keep at least one branch

within five kilometerradius

Loan sanctioningpower to the MDs(7.5% of capital )

The banks' budget,employment andtransfer policy, trainingpolicy, business risk &management policy etcon the Board

Monitoring the internalcontrol system onBoard

Scope

Dropping thechance tominimize loss

New and effectiveauthority toimplement budgetand corporategoals.

8/2/2019 Group 10 Task3

11/14

Capital market reforms:

Fiscal incentives.

Establishment of SEC as regulatory body. Capital gains from bank share made tax free.

An allocation of 5%share of new IPO for non residents.

Influence of these reforms:

Existing company can not take the opportunity of fiscalincentives.

Only listed company can invest in the capital market.

Bank can finance loans against share and debenture.

The ratio of loan from ICB has been raised from 1:2 to

1:3.

8/2/2019 Group 10 Task3

12/14

Scope:1)The outflow on account of portfolio investment was

much higher than the inflow.

2) Make quick profit by exploiting the manipulatedstock market.

3)More liberal policies have been put forward to issue

licenses to new merchant banks.4)Make more opportunity for banks and foreign

investor.

8/2/2019 Group 10 Task3

13/14

References:

www.bangladesh-bank.org

http://www.tradingeconomics.com/bangladesh/

indicators http://en.wikipedia.org/wiki/Economy_of_Bangl

adesh

http://www.bangladesh-bank.org/http://www.tradingeconomics.com/bangladesh/indicatorshttp://www.tradingeconomics.com/bangladesh/indicatorshttp://en.wikipedia.org/wiki/Economy_of_Bangladeshhttp://en.wikipedia.org/wiki/Economy_of_Bangladeshhttp://en.wikipedia.org/wiki/Economy_of_Bangladeshhttp://en.wikipedia.org/wiki/Economy_of_Bangladeshhttp://www.tradingeconomics.com/bangladesh/indicatorshttp://www.tradingeconomics.com/bangladesh/indicatorshttp://www.bangladesh-bank.org/http://www.bangladesh-bank.org/http://www.bangladesh-bank.org/

8/2/2019 Group 10 Task3

14/14

Thank you