Overview of Bangladesh Bank Updated1

8/10/2019 Overview of Bangladesh Bank Updated1

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Governor:Dr. Atiur Rahman took the helm of the central Bank of Bangladeshfor four year tenure on May 1, 2009 as the 10th Governor of BangladeshBank, the country's monetary policy authority, financial sector regulator andsupervisor.

Deputy Governors: Four Deputy Governors looking after the followingsectors: Banking Regulation and Policy Department, Department of Financial

Institutions and Market, Law Department, Credit Information BureauStatistics Department, Monetary Policy Department , Foreign Exchange PolicyDepartment, Expenditure Management Department, Common ServicesDepartment, Department of Banking Inspection -1

Board of Directors

Executive Staffs

General Managers


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Bangladesh Bank was established as a body corporate vide theBangladesh Bank Order, 1972with effect from 16thDecember 1971 .All the members of he body must have experience and provencapacity in the fields of banking, trade, commerce, industry oragriculture - all nominated by the government. The broad objectivesof the Bank are :

a) To regulate the issue of the currency and the keeping of reserves;b) To manage the monetary and credit system of Bangladesh with aview to stabilizing domestic monetary value;c) To promote and maintain a high level of production, and to fostergrowth and development of the country's productive resources forthe national interest
http://www.bangladesh-bank.org/aboutus/bankregulations/bbankorder.pdfhttp://www.bangladesh-bank.org/aboutus/bankregulations/bbankorder.pdf


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The core functions of BB are briefly discussed as follows:a) BB formulates and implements monetary policy aiming at

stabilizing domestic monetary value and maintaining competitiveexternal per value of taka for fostering growth.

b) BB formulates and implements intervention policies in the

domestic money market and foreign exchange market.c) BB, as the central bank of Bangladesh reserves sole responsibility

to issue bank note

d) BB performs as a clearing house for the scheduled banks to clearand settle inter-bank payment arising through drawing cheque,drafts, bills, etc to one another.

e) BB acts as a banker to the government;

f) BB functions as a lender of the last resort for the government aswell as for the countrys scheduled banks;

g) BB acts as an advisor to the government;


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Overview of Financial system of Bangladesh

The financial system of Bangladesh is comprised of two broadfragmented sectors:

Formal Sector, includes all regulated institutions like Banks, Non-Bank Financial Institutions (FIs), Insurance Companies, CapitalMarket Intermediarieslike Brokerage Houses, Merchant Banks etc.;Micro Finance Institutions (MFIs).

Semi-Formal Sector, inludes SEC, House Building FinanceCorporation, NGO, Grameen Bank


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Monetary Policy: The main objectives of monetary policy ofBangladesh Bank are:

Price stability both internal & external

Sustainable growth & development

High employment

Economic and efficient use of resources

Stability of financial & payment system


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Bangladesh Bank maintains the foreign exchange reserve ofthe country in different currencies to minimize the riskemerging from widespread fluctuation in exchange rate ofmajor currencies and very irregular movement in interestrates in the global money market. BB has established Nostroaccount arrangements with different Central Banks. Fundsaccumulated in these accounts are invested in Treasury bills,repos and other government papers in the respectivecurrencies. It also makes investment in the form of short termdeposits with different high rated and reputed commercial

banks.


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Under the Financial sector reform program, a flexible interestpolicy was formulated. According to that, banks are free tocharge/fix their deposit (Bank/Financial Institutes) andLending (Bank/Financial Institutes) rates other than ExportCredit. Yet, banks can differentiate interest rate up to 3%

considering comparative risk elements involved amongborrowers in same lending category.
http://www.bb.org.bd/fnansys/interestdeposit.phphttp://www.bb.org.bd/fnansys/interestlending.phphttp://www.bb.org.bd/fnansys/interestlending.phphttp://www.bb.org.bd/fnansys/interestdeposit.php


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The exchange rate policy of Bangladesh Bank aims at maintainingthe competitiveness of Bangladeshi products in the internationalmarkets, encouraging inflow of wage earners' remittances,maintaining internal price stability, and maintaining a viable externalaccount position. Under the existing floating exchange rate regime(that started from 31/05/2003), the interbank foreign exchange

market sets the exchange rates for customer transactions andinterbank transactions based on demand-supply interplay; However,along with intervention in the taka money market, the US dollarpurchase or sale transactions take place by the Bangladesh Bank asneeded, to maintain orderly market conditions.


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Foreign Exchange reserve Call Money Rate Share Price Index Export

Import Tax Revenue L/C Opening Foreign/Local Debt Rate of Inflation

GDP Bank Deposit Industrial & Consumer Loans


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The financial system of Bangladesh consistsof Bangladesh Bank (BB) as the central bank,government owned specialized banks,domestic private banks, foreign banks and

non-bank financial institutions. The financialsystem also embraces insurance companies,stock exchanges and co-operative banks.


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Bangladesh offers generous opportunities for investment under itsliberalized Industrial Policy and export-oriented, private sector-ledgrowth strategy. All but four sectors (i.e. (1) arms and ammunitionand other defense equipment and machinery, (2) forest plantationand mechanized extraction within the bounds of reserved forests,(3) production of nuclear energy, and (4) mining are open for

private investment in Bangladesh.

Tax holiday

Tax holiday facilities will be available for 5 or 7 years depending on

the location of the industrial enterprise. For industrial enterpriseslocated in Dhaka and Chittagong Divisions ( excluding Hill Tractdistricts of Chittagong Division) the tax holiday facility is for 5 yearswhile it is 7 years for locations in Khulna, Sylhet, Barisal, andRajshahi, Divisions and the 3 Chittagong hill districts.

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Tax exemptions are allowed in the following cases:

* Tax exemption on royalties, technical know-how feesreceived by any foreign collaborator, firm, company andexpert.

* Tax exemption on income of the private sector powergeneration company for 15 years from the date of commercialproduction.

Industrial undertakings not enjoying tax holiday will enjoyaccelerated depreciation allowance


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Foreign Investment

Private investment from overseas sources is welcome in allareas of the economy with the exception of the fourreserved sectors (mentioned earlier). Such investments canbe made either independently or through venture on

mutually beneficial terms and conditions. Foreigninvestment is, however, especially desired in the followingmajor categories of industries:

Export oriented industries

Industries in the Export Processing Zones ( EPZs)

High technology products that will be either importsubstitute or export oriented.


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Facilities/Incentives

A)For foreign direct investment, there is no limitation pertaining toforeign equity participation, i.e. 100 percent foreign equity isallowed. Non-resident institutional or individual investors can make

portfolio investments in stock exchanges in Bangladesh.

B) A foreign technician employed in foreign companies will not besubjected to personal tax up to 3 (three) years , and beyond thatperiod his/ her personal income tax payment will be governed by

the existence or non-existence of agreement on avoidance ofdouble taxation with country of citizenship.


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Other Incentives

Citizenship by investing a minimum of US $ 500,000 or bytransferring US$ 1,000,000 to any recognized financialinstitution ( Non-repatriable ).

Permanent resident ship by investing a minimum of US$ 75,000 (non-repatriable).

Special facilities will be provided to export-orientedindustries under "Thrust sectors" .Thrust Sectors include Agro-based industries, Artificial flower-making, Computer softwareand information technology, Electronics, Frozen food,Floriculture, Gift items, Infrastructure, Jute goods, Jewellery anddiamond cutting and polishing, leather, Oil and gas, Stuffed toys,Textiles, Tourism. Investment Protections / InternationalAgreements

Overview of Bangladesh Bank Updated1

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