What is a bank
• A bank is a financial intermediary.
• A broader definition of a bank is any financial institution that receives,
collects, transfers, pays ,exchanges, lends, invests or safeguards money for its
“ Bank is such an institution which creates money by money only.”-----W.
The main task of banks are to recycle money from savers to investors and it is
called financial intermediation.
The main focus is on commercial banks.
• Commercial banks are so named because they specialize in
Loans to commercial and industrial businesses.
•Commercial banks may be owned by private investors ,called stock
•They are sometimes owned by Government also.
•The banks are established under the banking company’s act 1994.
Services rendered by banks.
1) The commercial banks receive deposits from one section of the public
and lend it to another section with a priced tag called interest.
The deposits can be three types
i) A demand deposit is a deposit that can be withdrawn on demand at any
time and in any amount up to the full amount of the deposit.The most
common example of demand deposit is current account.
ii) Savings Account: Savings account pay interest to the depositor, but have
no specific maturity date on which the funds need to be withdrawn.any
amount can be withdrawn from a savings account up to the amount
deposited subject to the limits imposed by individual on the number of
times and the amount that can be with drawn from the bank during a
• iii) Time Deposits: TD are deposits on which the depositor and the
bank have agreed that the money will not be withdrawn without
substantial penalty to the depositor before a specific date.They are
called Fixed depost Receipts(FDR). It is not as liquid as savings or
current deposits because of the restrictions imposed on it.
ii) Cash management and other services: these include cheque cashing,
foreign currency buying and selling, safety deposit boxes In which
customers can store their valuables, electronic wire trnafer.
iii) Letter of credit : It is required in foreign trade.
• Agency Services: A commercial bank provides a range of ancillary
services.Like dividend collection, interest collection of bonds,
collection of IPO subscription money, collection of cheques, bills etc.
• General utility Services: As a social commitment, Commercial Bank
collects utility service bills e.g. water, electricity, gas, telephone
etc. from the public.
• Information and other services: Banks may act as a major source of
information on overseas trade in all aspects. Some banks produce
regular bulletins on trade and economic conditions at home and
,special reports on commodities and markets.
• Financial Advising: Banks provide financial advices to their customers,
particularly when it comes to the use of credit and the savings or
investing of funds. Many bank has a wide range of financial advisory
services, from helping to prepare tax returns, financial plans, project
report to consulting about marketing opportunity at home and
abroad for their customers.
After the independence, banking industry in Bangladesh started its journey
with 6 Nationalized commercialized banks, 3 State owned Specialized banks
and 9 Foreign Banks. In the 1980's banking industry achieved significant
expansion with the entrance of private banks. Now, banks in Bangladesh
are primarily of two types:
• Scheduled banks: The banks that remain in the list of banks maintained
under the Bangladesh Bank Order, 1972.
• The banks which are established for special and definite objective and
operate under any act act but are not Scheduled Banks. These banks
cannot perform all functions of scheduled banks.
Types of Banks operating in Bangladesh.
• State Owned Commercial Banks (SOCBs): There are 6 SOCBs which are fully or majorly owned by
the Government of Bangladesh. Like Agrani , Janata, Rupali , Sonali , BDB, BASIC bank.
• Specialized Banks (SDBs): 3 specialized banks are now operating which were established for
specific objectives like agricultural or industrial development. These banks are also fully or
majorly owned by the Government of Bangladesh.Bangladesh Krishi Bank, Rajshahi Krishi
Unnayan Bank, Probashi Kallyan bank.
• Private Commercial Banks (PCBs): There are 43 private commercial banks which are majorly
owned by individuals/the private entities. PCBs can be categorized into two groups:
• Conventional PCBs: 33 conventional PCBs are now operating in the industry. They perform the
banking functions in conventional fashion i.e interest based operations. AB bank, City bank, Dhaka
bank , Dutch Bangla bank, Bank Asia etc
• Islami Shariah based PCBs: There are 10 Islami Shariah based PCBs in Bangladesh and they
execute banking activities according to Islami Shariah based principles i.e. Profit-Loss Sharing
(PLS) mode. Islami Bank, Exim bank, Al Arafah bank.
• Foreign Commercial Banks (FCBs): 9 FCBs are operating in Bangladesh as the branches of the
banks which are incorporated in abroad. HSBC bank, Standard Chartered bank, Commercial bank
of Ceylon, Bank Al Falah ltd
• There are now 5 non-scheduled banks in Bangladesh which are:
• Ansar VDP Unnayan Bank,
• Karmashangosthan Bank,
• Grameen Bank,
• Jubilee Bank,
• Palli Sanchay Bank