Question : 01 :: What is the definition of Bank?

Ans: What is the definition of Bank?

Bank is a financial institution or corporation which deals with money and its substitutes; it also provides other financial services. Banks accept deposits and make loans and obtain a profit from the difference in the interest paid to lenders (depositors) and charged to borrower s , respectively.

It is formed for the purposes of maintaining current accounts, savings accounts and checking accounts, issuing loans or advances or investment (Islamic mode) and credit, and dealing in negotiable securities issued by governmental entities and corporations.It makes a link with depositors and customers directly or indirectly.

“A bank is a dealer in debts- his own and other peoples”- G. Crowther.

“Bank is an economic institution whose main aim is to earn profit through exchange of money and credit instrument” – Jhon Harry.

“A bank is an institution,the principal function of which is collect the unutilized money of the people and to lend it to others.” –R.P. Kent.

“Banks are institutions whose debts are commonly accepted in settlement of other people’s debts.” –R.S. Sayers.

“A bank is a financial intermediary- a dealer in loans and debts” -Cairncross.

“A bank is an establishment which trades in money, an establishment for deposit, custody and issue of money and also for granting loans and discounting bills and facilitating transmission of remittances from one place to another.”-Imperial Dictionary

English Version of Dictionary Definitions

1) “ A bank is an organization chartered by the state or federal govt. principal functions of which are :

i) To receive demand deposits and pay customers cheques drawn against them.

ii) To pay time deposits and pay interest thereon.

iii) To discount notes, make loans and invest in govt. or other securities.

iv) To collect cheques, drafts, notes etc.

v) To issue drafts and cashier’s cheques.

vi) To certify depositors cheques.

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vii) When authorized by the chartering govt. it may act in a fiduciary capacity.

-Dictionary of Banking and Finance.

2) “ Bank is an institution where money is received for custody and returned on demand.” – A.T. Deb.

3) “A bank is an institution for the custody and investment of money.

– Samsad Dictionary.

4) “A bank is an establishment which trades in money, an establishment for deposit, custody and issue of money and also for granting loans and discounting bills and facilitating transmission of remittances from one place to another.”-Imperial Dictionary

 

Some Definitions of Banks as provided by Famous Encyclopedias

1) “ A commercial banker is a dealer in money in substitutes for money, such as cheques or bill of exchange.”- New Encyclopedia Britanica.

2) “ Establishment for custody of money, which it pays out on customers order” – The New Oxford Encyclopedic Dictionary.

3) “ Commercial banks usually just called banks, can be defined as institutions that provide checking accounts to the public and have substantial proportion of their assets invested in loans and general business firms.”

– The Macmillan Family Encyclopedia

– Lexicon Universal Encyclopedia.

4) “Primarily business of dealing in money and instrument of credit.”

– New Illustrated Columbia Encyclopedia.

5) “ An establishment receiving money for the purpose of being lent out on interest or returned by exchange or disposed of the profit of to be drawn out again as the owner require it” – The new Caxton Encyclopedia.

 

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Some Definitions of Banks as provided by Acts and Ordinances

1) “ Banker includes a body of person, whether incorporated or not, who carry on the business of banking”-English Bills of Exchange Act-1982

2) “ A bank , it implied, is an instrument of society having functions what make it, in effect, a financial reserviour receiving streams of currency from any direction and from which their issue out following streams where and as required to sustain and fructify or assist commercial, industrial or other enterprises or ventures.”- High court of Australia.

3) “ A bank is a person or corporation carrying on bonafide banking business.” – English Finance Act, 1915

4) “ Banker includes a person, or corporation, or a company acting as banker” – Negotiable Instrument Act, 1881

 Some Definitions of Banks as provided by Banking Institutes

1) “ A bank performs an essentially distributive task, service or acts as an intermediary between borrowers and lender sense, however, a bank can be considered the heart of a complex financial structure.” – American Institute of Banking.

2) “ Stated very simple, banks deals in money and in that connection offer certain related financial services.” – Harold Wallgren for American Bankers Association.

Question : 02 :: Discuss the Characteristics of a Bank?

Ans: Characteristics of a Bank is given below:

1. Dealing in MoneyBank is a financial institution which deals with other people’s money i.e.money given by depositors.

2. Individual/ Company/ Firm

A bank is a person or firm or a company. A banking company means acompany where the business of banking.

3. Acceptance of Deposit

A bank accepts money (deposit) from the depositors in the form of depositswhich are usually repayable on demand or after the expiry of a certain

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period. It gives safety to the deposits of its customers. It also acts as acustodian of deposited funds of its customers.

4. Giving Advances/Investments/loans

A bank lends/invests/advances out money in the form of loans to those who require it for different purposes.

5. Payments and Withdrawals

A bank provides easy payments and withdrawals facility to its customers in the form of cheques and drafts; It also brings bank money in circulation. This money is in the form of cheques,drafts, etc.

6. Agency or Utility ServicesA bank provides various banking facilities to its customers. They includegeneral utility services and agency services.

7. Profit and Service OrientationA bank is a profit generating institution having service-oriented approach.

8. Ever increasing or maximizing FunctionsBanking is an evolutionary concept. There is continuous expansion anddiversification as regards the functions, services and activities of a bank.

9. Connecting LinkA bank acts as a connecting link between borrowers and lenders of money.Banks collect money from those who have surplus money and give the same to those who are in need of money.

10. Banking Business or jobsA bank’s main activity to do business of banking which should not be subsidiary to any other business

Question : 03 :: Discuss the objectives of a Bank?Ans: Objectives of Bank

Bank has various objectives as per other financial organizations. But banking organization view point is exceptional than others. The objectives of bank can be viewed from three different perspectives:

1) Objective from the view point of Bank owners,

2) Objective from the view point of the government and

3) Objective from the view point of Bank customers.

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1. Objective from the view point of Bank owners

i) Earning profit: Profit motive of the owners of the Bank acts as a driving force in engaging themselves in the business of banking like all other business.

ii) Rendering Services: Bank renders various services to the society as a part of their social commitment and this is a prime objective for engaging in banking business. Bankers are not only to make profit but also to do some good to the society.

iii) Investment of fund: Theowners of the banktreat the bank as a suitable sector to invest their accumulated saved money.

iv) Earning good will: The owners of bank take bank as a way of earning good will by enhancing the periphery of their banking business.

v) Raising efficiency: The owners sharpen their managerial skill and efficiency by ensuring smooth operation of their banking business.

2. Objective from the view point of the government

i) Issuance of Note and currency notes: Government issues notes and currency as a medium of exchange through banks.

ii) Formation of capital: Government always encourages formation of capital in society through households and bank act as a catalyzing force in formation of capital in different sectors of the society.

iii) Investment of capital and industrialization: Bank helps investment of ideal money through its various asset products and expedites industrialization. Eventually this helps the growth of GDP, alleviating poverty and ensures equal distribution of wealth.

iv) Control of money market: Bank by its various products help in controlling money market (supply of money in the market) and guards against the economy to be inflated.

v) Creation of employment : Bank to fulfill its human resource requirements and create a large employment opportunities.

vi) Counseling in financial matters: Banks sometimes put up effective suggestions to Govt in financial matters from their part

 

3. Objective from the view point of bank customers

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i) Safe custodian of public money: Bank acts as a safe custodian of public money. By depositing own money into a Bank account people get rid of worries like theft, burglary and snatching.

ii) custodian of public money: Sometimes bank acts as a financial advisers and counselor to its customers in various aspects.

iii) Representative or trustee: Bank sometimes performs the role of a representative or trustee on behalf of its customers.

iv) Providing credit facility: Bank provides credit facility to its customers and make opportunities to invest in profitable sector and by the process create income opportunities for customers.

Question : 04 :: What types of Bank?Ans: Types of Bank

Bank may be classified are as follows:

A) Based on organizational Characteristic

B) Based on Technique

A) Types of Bank based on organizational Characteristic:

1. Branch Banking: A banking system where operation of branches that situated in different parts of the country or even in abroad executed under control of the corporate office. Branch office has no different identity. Branch office works as a representative and follow all instructions/circulars of corporate office for performing banking activities. It has many branches in local and abroad.

2. Chain Banking: When two or more banks are operated and controlled jointly by keeping separate identity in order to avoid risk and competition among themselves termed as chain banking. It’s objectives are to improve jointly. This types of banking systems were available before 1920 in USA.

3. Holding Company Banking or Group Banking: Holding company banking/ group banking system actually refers two or more banks, which are held as subsidiaries by holding company. It is also called holding company bank. The largest company purchases other weak bank’s maximum shares. As a result, Strong bank represent weak bank as a subsidiary bank.In 1930 in USA, this types of banking started.

4. Unit Banking:

Operations of banking system are conducted by a single office/unit. It has no branches. It generally collects deposit from the small communities in that particular arena and places those

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deposits with bigger bank. Since the unit banks are small in size, they cannot provide remittance facilities to their customer. They have own capital, Board of directors and share holders.In Bangladesh there is no unit Bank.

 

B) Types of Bank based on Technique:

1. Deposit Banking: Deposit banking is collecting of different types deposits from the public and invest the same to their existing investment clients.

2. Investment Banking: Investment banks are the specialized institutions engaged in providing assistance to the commercial companies in raising their long-term capital through sale of shares, stocks, and bonds in the open market. The activities of investment banking may be classified as (a) Originating, (b) underwriting and (c) retailing on behalf of individual and institutional investors.

3. Merchant Banking: Merchant bank is a financial institution where mainly engaged in offering financial services and counsel to corporations and to rich individuals. The term can also be used to describe the private equity activities of banking. The main difference between an investment bank and a merchant bank is that a merchant bank invests its own capital in a client company whereas an investment bank entirely distributes (and trades) the securities of that company in its capital raising role.

4. Mixed Banking: Mixed banking usually refers to combination of commercial banking and investment banking.

Question : 05 :: What is the function of commercial Banks or Modern banks?

Ans: The function of commercial Banks or Modern banks:

In the modern world, banks perform such a variety of functions that it is not possible to make an all-inclusive list of their functions and services. However, some basic functions performed by the banks are given below:A] Accepting Deposits:

The first important function of a bank is to accept deposits from those who can save but cannot profitably utilize this saving themselves. People consider it more rational to deposit their savings in a bank because by doing so they, on the one hand, earn interest, and on the other, avoid the danger of theft. To attract savings from all sorts of individuals, the banks maintain different types of accounts:1. Fixed Deposit Account: 

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Money in these accounts is deposited for fixed period of time (say one, two, or five years) and cannot be withdrawn before the expiry of that period. The rate of interest on this account is higher than that on other types of deposits. The longer the period, the higher will be the rate of interest. Fixed deposits arc also called time deposits or time liabilities.2. Current Deposit Account:

These accounts are generally maintained by the traders and businessmen who have to make a number of payments every day. Money from these accounts can be withdrawn in as many times and in as much amount as desired by the depositors. Normally, no interest is paid on these accounts; rather, the depositors have to pay certain incidental charges to the bank for the services rendered by it. Current deposits are also called demand deposits or demand liabilities.3. Saving Deposit Account:

The aim of these accounts is to encourage and mobilise small savings of the public. Certain restrictions are imposed on the depositors regarding the number of withdrawals and the amount to be withdrawn in a given period. Cheque facility is provided to the depositors. Rate of interest paid on these deposits is low as compared to that on fixed deposits.4. Recurring Deposit Account:

The purpose of these accounts is to encourage regular savings by the public, particularly by the fixed income group. Generally money in these accounts is deposited in monthly installments for a fixed period and is repaid to the depositors along with interest on maturity. The rate of interest on these deposits is nearly the same as on fixed deposits.5. Home Safe Account:

Home safe account is another scheme aiming at promoting saving habits among the people. Under this scheme, a safe is supplied to the depositor to keep it at home and to put his small savings in it. Periodically, the safe is taken to the bank where the amount of safe is credited to his account.

 B] Advancing of loans:

The second important function of a bank is advancing of loans to the public. After keeping certain cash reserves, the banks lend their deposits to the needy borrowers. Before advancing loans, the banks satisfy themselves about the credits worthness of the borrowers. Various types of loans granted by the banks are discussed below:

1. Money at call:

Such loans are very short period loans and can be called back by the bank at a very short notice of say one day to fourteen days. These loans are generally made to other banks or financial institutions.

2. Cash Credit:

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It is a type of loan, which is given to the borrower against his current assets, such as shares, stocks, bonds, etc. Such loans are not based on personal security. The bank opens the account in the name of the borrowers and allows him to withdraw borrowed money from time to time up to a certain limit as determined by the value of his current assets. Interest is charged only on the amount actually withdrawn from the account.

3.  Overdraft:

Sometimes, the bank provides overdraft facilities to its customers though which they are allowed to withdraw more than their deposits. Interest is charged from the customers on the overdrawn amount.

4. Discounting of Bills of Exchange:

This is another popular type of lending by the modern banks. Through this method, a holder of a bill of exchange can get it discounted by the bank. In a bill of exchange, the debtor accepts the bill drawn upon him by the creditor (i.e, holder of the bill) and agrees to pay the amount mentioned on maturity. After making some marginal deductions (in the form of commission), the bank pays the value of the bill to the holder. When the bill of exchange matures, the bank gets its payment from the party, which had accepted the bill. Thus, such a loan is self-liquidating.

5. Term Loans:

The banks have also started advancing medium-term and long-term loans. The maturity period for such loans is more than one year. The amount sanctioned is either paid or credited to the account of the borrower. The interest is charged on the entire amount of the loan and the loan is repaid either on maturity or in installments.

C] Credit Creation

A unique function of the bank is to create credit. In fact, credit creation is the natural outcome of the process of advancing loan as adopted by the banks. When a bank advances a loan to its customer, it does not lend cash but opens an account in the borrower’s name and credits the amount of loan to this account. Thus, whenever a bank grants a loan, it creates an equal amount of bank deposit. Creation of such deposits is called credit creation which results in a net increase in the money stock of the economy. Banks have the ability to create credit many times more than their deposits and this ability of multiple credit creation depends upon the cash-reserve ratio of the banks.

D] Promoting Cheque System:

Banks also render a very useful medium of exchange in the form of cheques. Through a cheque, the depositor directs the bankers to make payment to the payee. Cheque is the most developed credit instrument in the money market. In the modern business transactions, cheques have become much more convenient method of settling debts than the use of cash.E] Agency Functions

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Banks also perform certain agency functions for and on behalf of their customers:

1. Remittance of Funds:

Banks help their customers in transferring funds from one place to another through cheques, drafts, etc.

2. Execution of standing Orders:

Banks execute the standing instructions of their customers for making various periodic payments. They pay subscriptions, rents, insurance premium, etc. on behalf of their customers.

3. Purchasing and sales of Securities:

Banks undertake purchase and sale of various securities like shares, stocks, bonds, debentures etc. on behalf of their customers. Banks neither give any advice to their customers regarding these investments nor levy any charge on them for their service, but simply perform the function of a broker.

4. Collection of Dividends on Shares:

Banks collect dividends, interest on shares and debentures of their customers.5. Collection and Payment of Credit Instruments:

Banks collect and pay various credit instruments like cheques, bill of exchange,6. Income Tax Consultancy:

Banks may also employ income-tax experts lo prepare income-tax returns for their customers and to help them to get refund of income-tax.7. Acting as Trustee and Executor:

Banks preserve the wills of their customers and execute them after their death.8. Acting as Representative and Correspondent:

Sometimes the banks act as representatives and correspondents of their customers. They get passports, travelers tickets, book vehicles, plots for their customers and receive letters on their behalf.

F] General Utility Functions:

In addition to agency services, the modern banks provide many general utility services as given below:

1. Locker Facility:

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Banks provide locker facility to their customers. The customers can keep their valuables and important documents in these lockers for safe custody.2. Traveller’s Cheques:

Banks issue traveller’s cheques to help their customers lo travel without the fear of theft or loss of money. With this facility, the customers need not take the risk of carrying cash with them during their travels.

3. Letter of Credit:

Letters of credit are issued by the banks to their customers certifying their creditworthiness. Letters of credit are very useful in foreign trade.

4. Collections of Statistics:

Banks collect statistics giving important information relating to industry, trade and commerce, money and banking. They also publish journals and bulletins containing research articles on economic and financial matters.

5. Underwriting Securities:

Banks underwrite the securities issued by the government, public or private bodies. Because of its full faith in banks, the public will not hesitate in buying securities carrying the signatures of a bank.

6. Gift Cheques:

Some banks issue cheques of various denominations (say of Taka. 1000, 2000, 3000, 5000,10000, etc.) to be used on auspicious occasions.7. Acting as Referee:

Banks may be referred for seeking information regarding the financial position, business reputation and respectability of their customers.8. Foreign Exchange Business:

Banks also deal in the business of foreign currencies. Again, they may finance foreign trade by discounting foreign bills of exchange.

9. Safeguarding money and valuables: People feel safe and secured by depositing their money and valuables in the safe custody of commercial banks. Many banks look after valuable documents like house deeds and property, and jewellery items.10. Transferring money: Money can be transferred from one place to another. In the same way, banks collect funds of their customers from other banks and credit the same in the customer’s account.11. Merchant banking: Many commercial banks provide merchant banking services to the investors and the firms. The merchant banking activity covers project advisory services and loan

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syndication, corporate advisory services such as advice on mergers and acquisitions, equity valuation, disinvestment, identification of joint venture partners and so on.

12. Automatic Teller Machines (ATM): The ATMs are machines for quick withdrawal of cash. In the last 10 years, most banks have introduced ATM facilities in metropolitan and semi-urban areas. The account holders as well as credit card holders can withdraw cash from ATMs.

13. Credit Cards: Credit cards are another important means of making payments. The Visa and Master Cards are operated by the commercial banks. A person can use a credit card to withdraw cash from ATMs as well as make payments to trade establishments.

Modern Banks functions mainly two Type:

1.Micro Functions

2. Macro Functions

1.Micro Functions

1. Receiving Deposit2. Allowing interest or profit3. Extension of Credit or Investment and Receiving Interest or profit4. Creation of Credit Deposit5. Creating Medium of Exchange6.  Giving Cheques7. Formation of Capital8. Issuing Notes9. Circulation of Money10. Act as a Trustee11. Exchanging Negotiable Instruments

2.Macro Functions

1. Investment of capital2. Role in the economic Development3. Transmission of Money4. Safe Custody of Money5. Consultancy6. Employment7. Controlling Money Market8. Credit Control9. Agricultural Development10. Industrial Development11. To setup Relation

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12. Regional Development13. Formation of Money Market14. Help in Import and Export15. Act as a treasurer of the Government16. Discounting of Bill of Exchange, Bank Drafts etc

Question : 06 :: Discuss the Concept & History of  Bank and the Banking System in Bangladesh

Concept of Bank

 The historians of banking tell us that the word ‘bank’ comes from Italian word ‘banko’ which means bench. It is thought that the banking in an unorganized structure started in Babylon some four thousand years ago. People of that period made transactions sitting on a long bench in the open street. The banking in an organized form started at a later day in Greece and Rome. Then the banks were used to receive deposits and lend money only. Generally, a Bank is any financial institution that receives, collects, transfers, pays, exchanges, lends, invests or safeguards money for its customers. Now, a Bank renders many other services like issue of letter of credit, bid bond & bank guarantee, remittance, collection of utility bills, locker’s services and many other financial services of a client.

The Evolution of Banking

 Italy is said to be breeding grounds of modern banking. The ‘Bank of Venice,’ established in 1157, is supposed to be the most ancient bank. Thereafter, the Bank of Genoa was established in 1407, when the banking business radiated from Italy to Spain and Holland. The Bank of Amsterdam was established in 1609 to meet the needs of the merchants of the city. It accepted all kinds of deposits which could be withdrawn on demand or transferred from the account of one person to another.

In England, it was the goldsmiths who were responsible to initiate banking business in the country. They used to receive their customers’ valuables and funds for safe custody and issue receipts/notes. These notes, in course of time, became payable to bearer on demand and hence enjoyed considerable circulation. In fact, the goldsmith’s note may be considered as the precursor of the bank note. In England, the growth of private banking started with the establishment of the ‘Bank of England’ in 1694. Then, the function of bank was confined to “financial intermediation only”. Banking is “the accepting, for the purpose of lending or investment of money from the public, repayable on demand or otherwise, and withdrawable by draft, order or otherwise”.

  Origin of Banking in Bangladesh

 Bangladesh shares a common past with India and Pakistan in respect of development of the banking business. With the advent of Muslim rule in India, the fortune hunting Afghan traders

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started money lending business in exchange of interest sometime in 1312 A.D. They, were known as ‘Kabuliawallas.’ During the period of Moguls, the banking was run by wealthy families. At the time of British occupation of Bengal, there was English type agency houses in Kolkata. They initiated what can be called forerunners of present day commercial banks. A European style bank named Hindustan Bank was set up in 1860. Afterwards a good number of modern banks were established in the then Indo-Pak sub-continent.

 Banking System in Bangladesh

 At the top of the Banking System, there is Bangladesh Bank which is working as the Central Bank of the country. It came into being on the 16th December, 1971 under the Bangladesh Bank (Temporary) order, 1971 (subsequently substituted by the Presidential Order No. 127 of 1972).

 A.    Bangladesh Bank

 It is the Central Bank of Bangladesh. The Governor of the Bank is the Chief Executive Officer appointed by the Government for a period of four years and is eligible for re-appointment till he attains the age of sixty five years.

 Core Functions of Bangladesh Bank

i) Formulation and implementation of Monetary Policyii) Issue of notes iii) Regulation and supervision of the financial systemiv) Banker’s Bankv) Lender of the last resortvi) Banker to Government

 1.Commercial Banks

 1) Nationalized/State Owned Commercial Banks

 After liberation of Bangladesh, the 12(twelve) banks which had been functioning prior to liberation were compressed into Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Pubali Bank & Uttara Bank through a process of amalgamation or mergers. Subsequently, the Pubali Bank and Uttara Bank were denationalized in 1984 & 1983 respectively and turned into Private Commercial Bank. Sonali Bank, Janata Bank & Agrani Bank became Public Limited Company as per Vendors’ Agreement signed between the Government and the respective bank. In December, 1986, Rupali Bank turned into a Public Limited Company , keeping 51% share in the government sector. Subsequently, the above bank’s ownership in the government sector was raised to 94.5% in 1996.

 

2) Private Commercial Banks

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 In order to bring competition among the banks, the Government allowed a few Private Banks to operate in Bangladesh for the first time in 1982 & 1983. These banks are AB Bank Limited, International Finance and Commerce (IFIC) Bank Limited, National Bank Limited (NBL), The City Bank Limited, Islami Bank Bangladesh Limited (IBBL), ICB Islami Bank Limited and United Commercial Bank Limited. In addition, the Pubali Bank and Uttara Bank became Private Commercial Banks in 1984 & 1983 respectively. These 9 Banks are commonly known as First Generation Bank. In the second phase, 8 Banks were given permission for operating in the private sector which are known as Second Generation Banks and lastly 13 banks are allowed to operate as Third Generation Banks in Bangladesh. Now, there are 30 (thirty) Private Commercial Banks in the country. Out of 30 Private Banks, there are 7 (seven) full fleged Islamic Banks. 23 Banks are Conventional Banks. But 20 branches of 9 Conventional Banks are also doing Islamic Banking activities obtaining necessary permission from the Bangladesh Bank.

3) Specialized Banks

 At present, there are 5 (five) Specialized Banks in Bangladesh. These are Bangladesh Krishi Bank (BKB), Bangladesh Smal Industries and Commerce (BASIC) Bank Limited, Rajshahi Krishi Unnayan Bank (RAKUB) and Probashi Kallayan Bank (started operation from April 20, 2011)

Question : 07 :: Discuss the Difference between scheduled and unscheduled banks of Bangladesh

Ans: Difference between scheduled and unscheduled banks

Sl. No Scheduled Bank Unscheduled bank01 Member of Central bank Not a member

02 Minimum capital required Not compulsory

03 Bound to fulfill conditions of central bank Not necessary

04 Required to keep cash liquidity for safety of customer

Not necessary

05 Must keep 4% cash receive of deposit (CRR) Not necessary

06 Member of clearing house No

07 Must submit weekly statement No

08 Banks to obey instruction of central bank’s No

09 Central bank gives credit in case of financial crisis Do not get any credit

10 There is much facilities of banking business Limited scope

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11 Can open foreign branches with permission from central bank

No

12 These banks are permanent in nature Generally temporary in nature

13 The people keeps confidence in these banks It is very difficult to earn public confidence

Question : 08 :: What are the Objectives of Central Bank (Bangladesh Bank)

Ans: Objectives of Central Bank (Bangladesh Bank):

1) ensure money supply of the country2) management of loans and finance3) maintain essential reserve money4) assist in making principles relating to finance and resources.5) Building a bill market in the country

Question : 09 :: What are the activities of Central Bank (Bangladesh Bank)

Ans: Activities of Bangladesh Bank:

1) Issue of notes and coins2) Banker to the government3) Bankers to other Banks4) Credit control5) Lender of last resort6) Control of foreign exchange7) Clearing House8) Valuation of currency of Bangladesh e.g., devaluation of Taka Revaluation of Taka9) Maintain stability of price of commodity by taking steps in consultation with

government.10) Consultancy / Advisory to the government relating to financial matters and advising

farming of Import and Export policy.

Question : 10 :: What is Commercial Bank?

Ans: Commercial Banks established for financing trade and commerce. By accepting deposits it accumulates funds and it deploys fund mainly in short term loans and advances foe expansion of trade and commerce.

- Two types of Commercial Banks are there in our country.

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(i) State owned Commercial Banks (SCBs)

Example :

Agrani Bank LtdJanata Bank LtdRupali Bank Ltd andSonali Bank Ltd (owned by Govt. and under control of the Government through Central Bank).

(ii) Private Commercial Banks (PCBs)

For developing banking sector and to develop the standard of services and to bring about financial discipline through competition with SCBs, the government has allowed establishment of many Private Banks for commercial Banking.

Question : 11 :: What is Specialized Bank?

Ans: Specialized Bank established for financing special purposes. These banks do not accept ordinary deposits from the people like commercial Banks but get funds from the government or other sources / organization and they mainly allow long term loans and thereby contribute for the economic development of the country in various fields.

Example : Bangladesh krishi bankBagladesh Krishi Unnayan bankBangladesh Development Bank etc.

Question : 12 :: What is History of Banking in Bangladesh?

Ans : History of Banking in Bangladesh

In Bangladesh we inherited the said Banking Companies Act (of Pakistan), which was adopted after liberation of the country. Recently, Banking Companies Ordinance, 1991 has been passed which has been amended from time to time to meet the requirements.

After liberation of the country in 1971, Bangladesh Bank, the Central Bank of the Bangladesh Bank was established (previously State Bank of Pakistan which was functioning in East Pakistan was taken up).

As regards other 22 Banks and Branches thereof, after liberation, the banks operating in Bangladesh (Except those incorporated abroad) were nationalized by President’s order in 1972. These banks were merged and group into six commercial banks. Of the total six commercial

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banks, Pubali Bank Ltd. and Uttara Bank Ltd. have subsequently been transferred to the private sector with effect from January, 1985.

The two Govt. owned specialized banks were renamed as Bangladesh Krishi Bank and Bangladesh Shilpa Bank. In March, 1987 Bangladesh Krishi Bank was bifurcated and another specialized bank emerged as Rajshahi Krishi Unnayan Bank (RAKUB) for Rajshahi Division.

Bank of small Industries & Commerce Bank Ltd. (BASIC) started its operation as a private bank from September 1988. Later on BASIC was brought under direct control of the Government and reckoned as a specialized bank with effect from June, 1993. From July, 1995 again the BASIC has been categorized as a Private Bank. Recently, the Government has decided to treat the Bank as a specialized bank. So, the BASIC is been treated as a specialized bank instead of a private bank.

The branches of foreign banks operating in Bangladesh were treated as foreign private banks. Of the foreign banks, Bank of Credit and Commerce International (Overseas) Ltd. was liquidated and a separate bank in the name of Eastern Bank Ltd. Started its operation as a private bank in its place with effect from August, 1992. Besides these, a few foreign banks and some other private sector banks with foreign participants are in operation in Bangladesh.

Each banks operating in Bangladesh with different paid-up capital and reserves having a minimum of an aggregate value of Taka 50 lacs and conducting their affairs to the satisfaction of the Bangladesh Bank had been declared as scheduled banks in terms of section 37(2) of Bangladesh Bank Order 1972. Now in terms of section 13 of Banking Companies Act, 1991, the minimum aggregate value is Taka 20 crores.

Question : 13 :: What is History of Banking in India & Pakistan?

Ans : History of Banking in India & Pakistan

In the Indian Sub-continent the oldest banks were Hindustan Bank, Bank of Baroda, Bank of Madras and Imperial Bank of India, which was however incorporated in 1700. Pakistan inherited the theories and practices prevailed in India where Banking business was conducted as per Negotiable Instrument Act, 1881. Of course, for controlling the Banks, Banking Companies Act, 1962, was passed in Pakistan. The State Bank of Pakistan was the Central Bank and 22 Commercial Banks were functioning prior to our liberation in 1971.

Question : 14 :: What is History of Banking?

Ans : History of Banking

Banking is as old as Civilization. There was banking in 300-400 B.C. but that was not like present modern banking. Now almost all economic activities are routed through Banks.

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Other available information, the first Central Bank was established in 1644 in England i.e. Bank of England. Thereafter central banks were established in other countries gradually.

The first incorporated Commercial Bank was set up in Geneva in 1644. Of course, some claims “Bank of Vanice” as the first commercial Bank established in 1664.

Question : 15 :: What are Characteristics of Modern Bank?

Ans : Characteristics of Modern Bank:

The main characteristics are as follows:

a) Financial institutionb) Financial solvencyc) Safety and securityd) Honesty and confidencee) Business of money and creditf) Accepting depositg) Return of deposit on demand by the depositorsh) Giving credit and advancei) Giving and taking of interest by the interest based banks or sharing of profit with the

depositors and clients by the Islamic Banks.j) Other Services: like locker facilities and consultancy etc.

Question : 16 :: What is Banking?

Ans : “Banking” means the activities which are performed by banks as per Rules/Ordinance of the banking of the country. In Bangladesh there is Banking Companies Ordinance 1991 for running banking business which include accepting deposits with drawable by cheque, draft or order etc. and those deposits as credit or advances to others.

Banking is essential for the following reasons:

a) Creation of capital : Bank creates capital by accumulating the savings of the people.b) Supplying capital: For expansion of trade and commerce bank gives credit to the

traders and Industrialist and thereby contributes to the overall development of the economy.

c) Industrial Development: Bank assist industrial development by giving capital, assisting import and export.

d) Agricultural developmente) Economic stabilityf) Trade expansiong) Stability of price of commodities.h) Development of foreign trade: For maintaining balance in import and export. Trade.

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Question : 17 :: What is the meaning of the word Bank?

Ans : Bank: Word ‘Bank’ has been derived from Italian word “Banco (Banque or Bancus)” which means “Bench or long sitting table”. Then the businessmen of Lambambi town of Italy used to run their business Sitting on bench. If any businessmen failed to pay dues of others, the aggrieved people used to break the bench i.e. people treated him as Bankrupt.

In the modern days the word ‘Bank” is related to a wide field; generally, bank means such a person, firm, company or a corporation which deals in money and credit. Many economists defined Bank in many ways.

Bank can be defined in short as a financial mediator institution which accepts deposits from the people, gives credit, issues notes and cheques, keeps safe custody of peoples money, exchanges documents related to money and credit, discounts bills, transfers money and performs money related other activities for earning profit for itself.

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