Marketing Research - Banking System of Bangladesh

Chapter-One

Introduction of the Study

1.1 An Overview of Banking:

The English word 'Bank' is derived from the Italian word 'Banco'. The Latin word 'Bancus' and the French word 'Banque' which means a bench. They are of the opinion that the medieval.

European banker (i.e. moneychanger and moneylenders) transacted their banking activities on the benches in the market place. This money changing and money lending business is known as banking business. The overall purpose of banking is to collect money from surplus unit and transfer it to the deficit unit.

The history of banking is as old as the history of many. Generally, to the necessity for keeping the money safe, the business of banking comes in to existence. The evolution if money solved the problem of 'Barter System'. Earlier there are two groups of people. One group felt the need of honest and faithful person to keep their surplus money safe and the other group owing to transaction felt the need of some person who could provide money. As a result based on two groups a kind of businessman came in to picture. They used to keep the money as deposit for security and give loans to the needy people. This is how the banking sector has developed.

1.2 Banking System Of Bangladesh:

Banking system occupies an important place in a nation's economy because of its intermediary role; it ensures allocation and reallocation of resources and keeps up the momentum of economic activities. A banking institution is indispensable in a modern society. It plays a pivotal role in the economic development of a country and forms the core at the money market of any country. In a developing country like Bangladesh the banking system as a whole has a vital role to play in the progress of economic development.

Before liberation in 1971, the banking system of this part of the country that now constitutes Bangladesh consisted of the State bank of Pakistan, the central Bank of the country and 17 scheduled banks. These banks had a total of 1169 branches. Among these 17 banks, 12 were Commercial Banks, one Industrial Development Bank, one agricultural development Bank and three Foreign Commercial Banks. Beside these, a lot of co-operative banks were in operation. At the time of liberation only two banks had their head offices in Bangladesh and were managed by Bangladeshis. These two banks were the Eastern Mercantile Bank Ltd. and the Eastern Banking Cooperation Ltd. West Pakistani capitalists owned and managed all the other 10 commercial banks that had their head offices in West Pakistan. The 2 development banks had very limited number of branches operating in the then Bangladesh.

The banking system of Bangladesh was virtually in a state of disarray immediately after the liberation in 1971. On the eve of our independence, only one bank in this country was fully owned by Bangladeshis. All the others were owned and operated by Pakistanis who had just left and abandoned these enterprises. Partly because of the manifesto of the then ruling party and partly because of the need of the hour, the government nationalized the entire banking system. The Dhaka branch of the State Bank of Pakistan was declared the central bank of Bangladesh in December 16, 1971. All the domestic banks were reorganized into six separate entities. Leaving aside the three foreign banks, the two other specialized banks were also restructured as Bangladesh Krishi Bank and Bangladesh Shilpa Bank.

After 1987, private banks came more strongly into the Banking sector scenario. The expansion of private banks has helped to increase the service quality of the total banking sector of our country. Although they primarily invest in short term ventures, their introduction has created a valuable source of capital for businessmen of Bangladesh.

There are five category banks in Bangladesh and 52 Banks works in Bangladesh are given bellow:

Central Bank

Bangladesh Bank : Pursuant to Bangladesh Bank Order, 1972 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 with retrospective effect from 16 December, 1971.

Nationalized Commercial Banks

The banking system of Bangladesh is dominated by the 4 Nationalized Commercial Banks, which together controlled more than 54% of deposits and operated 3388 branches (54% of the total) as of December 31, 2004[1]. The nationalized commercial banks are:

 Sonali Bank

 Janata Bank

 Agrani Bank

 Rupali Bank

Private Commercial Banks:

Private Banks are the highest growth sector due to the dismal performances of government banks (above). They tend to offer better service and products.

AB Bank Ltd.

BRAC Bank Limited

Eastern Bank Limited

Dutch Bangla Bank Limited

Dhaka Bank Limited

Islami Bank Bangladesh Ltd

Pubali Bank Limited

Uttara Bank Limited

IFIC Bank Limited

National Bank Limited

The City Bank Limited

United Commercial Bank Limited

NCC Bank Limited

Prime Bank Limited

SouthEast Bank Limited

Al-Arafah Islami Bank Limited

Social Islami Bank Limited

Standard Bank Limited

One Bank Limited

Exim Bank Limited

Mercantile Bank Limited

Bangladesh Commerce Bank Limited

Mutual Trust Bank Limited

First Security Bank Limited

The Premier Bank Limited

Bank Asia Limited

Trust Bank Limited