INTRODUCTION

Bangladesh Bank is the central Bank of the country was established as a body corporate vides the
Bangladesh bank order 1972 with effect from 16th December, 1971.After the liberation war, and
the eventual independence of Bangladesh, 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. Bangladesh Bank is an adviser of government for taking decision in the future. And also
Bangladesh Bank is the head of the country’s commercial Bank and others financial institution of
our country.

OBJECTIVES

As the central Bank of Bangladesh, the broad objectives of the Bank are:

a) To regulate currency issuance and to keep foreign exchange reserves.

b) To manage the monetary and credit system of Bangladesh with a view to stabilizing domestic
monetary value.

c) To preserve the par value of the Bangladeshi Taka.

d) To promote and maintain a high level of production, employment and real income in
Bangladesh and to foster growth and development of the country's productive resources.

e) To Reserve all the rights of the bank.

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 BRANCHES OF BANGLADESH BANK

Bangladesh Bank has 9 branch offices, two in Dhaka city (SADARGHAT and Motijheel), and one
each in CHITTAGONG, KHULNA, RAJSHAHI, SYLHET, BOGRA, RANGPUR and BARISAL. The head office
discharges its duties with 28 departments-

Bangladesh
Bangladesh
Bank
Bank
Chittagong
Barisal
Bangladesh
Bank

Sadarghat

Bangladesh
Bank

Bangladesh (Motijheel Bangladesh

Bank Office) Bank

Rajshahi Rangpur

Bangladesh
Bank
Bangladesh
Khulna Bank

Sylhet

FUNCTIONS OF BANGLADESH BANK

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GENERAL FUNCTIONS

1. Bank of issue:

The issue of paper money is the most important function of a central bank. In fact the
privilege of note-issue was almost everywhere associated with the origin and
development of central banks. Central banks were generally known as ‘bank of issue’
until the beginning of the twentieth century. The issue of money was always claimed to
be a prerogative of the government.

2. Banker, Agent & Adviser to the Government:

A central bank functions as a banker to the government of the country. In this capacity, it
conducts the banking accounts of government department, institutions & enterprises. It
makes short-term advances to the Government in normal condition and extra ordinary
advances during a depression, war or other emergency. It carries out the government’s
transaction involving purchase or sales of foreign currencies.

As an adviser to the government the central bank gives advice to the govt. on important
matters of economic policy like deficit financing, trade policy, foreign exchange policy
etc. The ultimate responsibility for laying down the monetary policy and maintaining the
monetary stared lies with the government.

3. Custodian of the cash reserves of the commercial Bank:

The commercial banks in the country keep a part of their cash balance as deposits with
the central bank, either voluntarily because conversion or because of some legal

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 obligation. In many countries, the banks are required under some legislation to maintain
statutory minimum cash reserves, mostly as a specified proportion of their deposits.

4. Custodian of the nation’s reserves of international currency:

The central banks, function of holding the nation’s metallic reserves and its foreign
exchange reserves was automatically derived from its functions as the bank of issue and
the custodian of commercial banks cash preserves. In most cases a central bank is
required by law to maintain a minimum reserve against its note issue.

5. Lender of last resort: The expression lender of last resort implied the assumption
of the responsibility of meeting directly or indirectly. The Central Bank helps the member
banks in times of crisis. If the banks can’t manage the money then Bangladesh bank helps
those commercial banks by supplying them money.

6. Central clearance, settlement and transfer:

As the central bank is the custodian of cash reserves of the commercial banks, it can
easily assume the function of acting as a clearing hours or settlement bank for other
banks in the country.

As all banks maintain their accounts with the central bank, the claims of banks against
one another are settled by simple transfers from and to their accounts this method of
settling accounts through the central bank apart from being of great convenience to the
banking system, provides economy in the use of money in banking operations. It tends
generally to strengthen the banking system of a country.

7. Controller of credit:

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 The control of credit is considered to be the main function of a central bank. De Kock
observes, “It is the function which embraces the most important questions of central
banking policy and the one thorough which practically all the other functions are united
and made to serve a common purpose.”

The central bank functions of note-issue, the management of government accounts, and
the custody of the commercial banks cash reserves along with those of rediscount and
lender last resort, are closely associated with the control of credit by the central bank. An
effective monetary management requires a centralized control over both currency and
credit. That is why the central banks, which enjoy the monopoly of note-issue, also
exercise control over excessive expansion of credit by the commercial banks.

8. Promoter of economic development:

The modern central bank is an institution responsible not only for the maintenance of
economic stability; it also performs a variety of development and promotional factions,
which were regarded in the past as being outside the normal purview of central banking.
The main objective of a central bank’s monetary policy is to achieve growth with stability
within the frame work of the general economic policy of the country. For the sake of
economic development the central bank should provide sufficient quality of money
appropriate to growth process.

FUNCTIONS AS GOVERNMENT BANK

Central bank is known as govt. bank all over the world. Central bank everywhere fulfills the
functions of banker, agent and adviser of the government. Central bank performs the following
functions govt. banks.

1. Maintain government fund and accounts:

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Central bank maintains and monitors govt. fund and reserve on behalf Govt. For this
reason central bank is called the custodian of govt. fund.

2. Collection and transfer of money:

Central bank collects govt. revenues from different sectors and deposit it the account of
govt. Besides it transfers money from one place to another according to directions of govt.

3. Handling of government monetary transaction:

Central bank performs all monetary transaction of home and abroad on behalf of govt.
According to M.H. De-Kock “it carries out the govt.’s involving purchase and sale of
foreign currencies.

4. Sanctioning and supervision of loan:

Central banks not only perform monetary transaction on behalf of govt. but also sanctions
supervising of loans of different ministry, department and institution of govt.

5 Maintaining relation with foreign bank:

As an agent of govt. central banks maintain relationship with central banks of different
countries, World Bank (WB), International Monetary Fund (IMF), Regional Development
bank (i.e. ADB), different development agencies etc.

6. Adviser and agent of government:

Central bank acts as agent of govt. to establish and maintain relationship with different
parties inside and outside the country. It also advises govt. in policy making.

7. Implementation of government monetary policy:

The implementation of government monetary policy in the timing of impact on the

economic inflation in the country. Central bank influences the economy through monetary
policy, because of the monetary policy is very important to the investors.

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FUNCTION AS A BANKER OF OTHER:

Central bank performs the following functions as a banker of other banks.

1. Scheduling bank:

Central gives the license/permission of new banks to start business and schedule them. For
this reason central is always careful whither the commercial banks following /maintaining the
conditions of scheduling. It also set up new rules and policies for other commercial bank to
open new branches.

2. Functions as a clearing house:

Inter banks indebtedness is arisen from operations of day to day banking activities.
Sometimes it becomes very difficult for commercial bank to settle inter banks indebtedness.
For this reason central perform the function as clearing house all over the world.

3. Sanction of loan:

Central bank gives loan to scheduled commercial bank if necessary. Even, when the
commercial banks are in financial crisis and cannot collect loan from other sources, then
central bank acts as lender of last report.

4. Supervision of loan:

Central banks not only sanction loan but also manage how & when scheduled commercial
banks are granting loan and in different sectors.

5. Assistance in collecting credit:

Central bank extends the helping hands to the commercial banks in collecting loans by
enacting new rules and regulation about loan and default loan and its report publication.

6. Audit of accounts:

Central bank carefully check the book of accounts of commercial bank and its proper
maintenance .As a result commercial banks are bound to maintain properly books of
accounts.
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 7. Collection and preservation of deposits:

All the scheduled commercial banks have to maintain a certain percentage of their deposits
into central bank. Central bank carefully monitor about this.

9. Acts as adviser and agent:

Central bank advises and directs commercial bank for the betterment of their operations of
banking activities/function. Besides it acts as the agent of scheduled bank in home and
abroad.

DEVELOPMENT FUNCTION

The objective of central bank is to ensure economic development. According to the direction of
Govt. central bank undertake different development activities and tries to implement. These
development activities are as follows:

1. Development of different production oriented sectors:

Central bank helps to argent extent in the production oriented sectors like the development
of agriculture and industry etc. For this reason it extend helping hands to establish
specialized banks like agricultural bank, industrial bank, investment bank etc.

2. Development of banking system:

Central bank is always engaged in the development of banking system as the leader of
banking empire. For this reason, central bank set up different rules and regulations when
banking institutions are in danger, central extends it help.

3. Development of foreign trade:

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 Central bank under take different activities for the development of foreign trade (i.e. import
and export). Central bank tries to stabilize exchange rate of a country. It creates confidence
among the foreign exporters about country’s banking system.

4. Improving the quality of economic plan:

Central bank is the top most financial institution in the country and the banker of Govt. So it
helps for the development of the quality of economic plan taken by Govt.

5. Improving the quality of manpower:

Central bank tries to improve the quality of manpower in the banking sector. For the
development of its own manpower inside the bank, the central bank arranges training
facilities. It motivates scheduled commercial banks to manage adequate training facility for
the development of quality of their manpower.

6. Development of natural resources:

Central bank provides assistance and help to extract natural resources for use of these
resources to the enhancement of the economic welfare of the people. For this reason it
extends financial help assistance those institution engaged in extracting these natural
resources.

OTHER FUNCTIONS

In addition to above function, central bank also provides some others functions. These are as
follows

1. Economic research:

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 Central bank has to undertake different Economic research activities for the development of
banking system effective operation of money market, formulation of different policy of
government etc.

2. Collection and supply of data:

Central bank has to collect different data to act act as the banker of the other banks and the
banker of government. Central bank supply information to various departments of
government and different scheduled bank.

3. Preparation of report and publication:

Central bank is to prepare many reports to meet the need of government and the bank itself.
Besides, central banks publish annual report and sell it. To do this bank has separate
publication and cell department.

MONETARY POLICY STRATEGY OF THE BANGLADESH BANK

Monetary policy strategy of the Bangladesh bank was first issued in January 2006. The most
important thinks of monetary policy is followed-

(1) Achieving price stability:

The central bank of a country control the money supply, availability of money, cost of money
or rate of interest rate in order to set of objectives oriented towards the growth and stability of
the economy.

(2) Maintaining high levels of production:

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Bangladesh is food crops country. In Bangladesh many people depends on cultivation of land.
As a result, Bangladesh bank maintains the high level of production. For the high level of
production many times Bangladesh bank provides different types of facilities to the farmer.

(3) Employment and economic growth:

Bangladesh is over populated country. As a result, many people are in under unemployment.
For that reason our economic growth is low. As a result, our government announced they will
try to provide job at least one people in a family. When in every family get the job, the
economic growth will also increase day by day.

OVERVIEW OF T-BILLS MARKET IN BANGLADESH

Another important think is treasury bonds and PRIZE BONDs, the bond market is a financial
market where participants buy and sell debt securities, usually in the form of bonds. Like
emerging-market countries around the world, Bangladesh could benefit from having a local-
currency, fixed-income securities market. At present, its main fixed-income financial products
are bank deposits, bank loans, government savings certificates, term loans, treasury bills, and
government bonds and corporate debt (syndicated loans, private placement, and debentures).
But in general the corporate debt market is still very small compared with the equity market.
Numerous factors in Bangladesh today suggest that Bangladesh will not be able to develop an
active, local-currency fixed-income market. The Bangladesh Bank sells government TREASURY
BILLs on tender, PRIZE BONDs and different types of saving certificates (sanchayapatra). The
market for Bangladesh Treasury bills has a complex structure and involves numerous
participants--Ministry of Finance, Bangladesh Bank, government securities dealers and
brokers, and other holders of Treasury securities. The Bangladesh government finances its
expenditures in excess of tax receipts through the sale of debt obligations. Currently, the total
par value of outstanding Treasury bills stood at about Taka 22000 crore approximately.

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 Treasury bills are short-term Government debt securities with maturity of a period less than
one year. However, in Bangladesh, two and five year securities are also regarded as T-bills
since they are zero coupon securities. They are the most well known of all Government
securities. Treasury bills are designated by the number of days to their maturity.

IMPORTANCE OF THE BANGLADESH BANK

In our economy, Bangladesh bank is the most important part of our country. Like in our survey,
we got the information that Bangladesh Bank try to develop in our banking sector. And also
Bangladesh bank is strengthening in our money market and to assist to our capital market. And
also Bangladesh bank try to develop in our agriculture sector and rural development and poverty
alleviation and to develop in our industry sector in many ways like Bangladesh bank provide
many types of facilities to them.

REGULATIONS

As a central bank of the countries there are some laws to regulate the financial market as well as
money market. They are some law to regulate this like money laundering act, banking act, and
insurance act etc. This is the central bank weapon to monitor the financial institutions. As a
central bank they regulate the daily activates of the commercial bank. As well as when
commercial bank in trouble Bangladesh bank give them suggestion also. If they do anything
illegal than they take necessary action against it. The best example of taking action against
commercial bank is oriental bank which is now known as ICB Islamic bank.

Bangladesh bank has followed some internal act also for their employee also.
The rules are this:

Bangladesh Bank Order

Bank Company Act, 1991

Money Laundering Prevention Act

Foreign Exchange Regulation Act

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Micro credit Regulatory Authority Act

Financial Institutions Act

The Negotiable Instruments Act

The Bankers' Book Evidence Act

Money Loan Court Act

Bank Deposit Insurance Act

Anti-terrorism Act

CONCLUSION

 In order uphold the mission, Bangladesh banks aims would be provide the required
leadership by discharging its duties in a manner that shows a clear vision, it’s watchful,
far-sighted, intelligent and responsive based on an effective and efficient communication
strategy. At all times Bangladesh bank aims would be to remain committed, efficient,
capable, logistically supported, speedy, focused, and aggressive where necessary in order
to ensure that the Bangladesh bank always remains a credible and prestigious institution
with an efficient organizational structure committed to achieving its goals. And also
Bangladesh Bank tries to impose something new for the people of our country. The
Bangladesh Bank always remains a reliable and important institution with an efficient
organizational structure committed to achieving its goals. In Bangladesh Bank reserve is
now cross to 10 billion US dollar for the strong monetary policy.

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 In this report we tried to focus on the function of Bangladesh Bank. Bangladesh Bank
cans an important role in one’s organization. Bangladesh bank always tries to impose
something new for the people of the country.

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