5/5 Rᴀᴏғɪɴ Jᴀʜᴀɴ S. 11 months ago on Google • 71 reviews
On
7
April
1972,
after
the Independence
War and
the
eventual
independence
of
Bangladesh,
the
Government
of
Bangladesh
passed
the Bangladesh
Bank
Order ,
1972
(P.O.
No.
127
of
1972),
reorganising
the Dhaka branch
of
the State
Bank
of
Pakistan as
Bangladesh
Bank,
the
country's central
bank and
apex
regulatory
body
for
the
country's
monetary
and
financial
system.[7]
The
1972
Mujib
government
pursued
a
pro-socialist
agenda.
In
1972,
the
government
decided
to
nationalise
all
banks
to
channel
funds
to
the
public
sector
and
to
prioritise
credit
to
those
sectors
that
sought
to
reconstruct
the
war-torn
country
–
mainly
industry
and
agriculture.[8] However,
government
control
of
the
wrong
sectors
prevented
these
banks
from
functioning
well.
This
was
compounded
by
the
fact
that
loans
were
handed
out
to
the
public
sector
without
commercial
considerations;
banks
had
poor
capital
lease,
provided
poor
customer
service
and
lacked
all
market-based
monetary
instruments.
Because
loans
were
given
out
without
commercial
considerations,
and
because
they
took
a
long
time
to
call
a non-performing
loan,
and
once
they
did,
recovery
under
the
erstwhile
judicial
system
was
so
expensive,
loan
recovery
was
abysmally
poor.[8][9] While
the
government
made
a
point
of
intervening
everywhere,
it
did
not
set
up
a
proper
regulatory
system
to
diagnose
such
problems
and
correct
them.
Hence,
banking
concepts
like
profitability
and
liquidity
were
alien
to
bank
managers,
and
capital
adequacy
took
a
backseat.[9]
In
1982,
the
first
reform
program
was
initiated,
wherein
the
government
denationalised
two
of
the
six
nationalised
commercial
banks
and
permitted
private
local
banks
to
compete
in
the
banking
sector.
In
1986,
a National
Commission
on
Money,
Banking
and
Credit was
appointed[9] to
deal
with
the
problems
of
the
banking
sector,
and
a
number
of
steps
were
taken
for
the
recovery
targets
for
the
nationalised
commercial
banks
and
development
financial
institutions
and
prohibiting
defaulters
from
getting
new
loans.
Yet
the
efficiency
of
the
banking
sector
could
not
be
improved.[8]
The
Financial
Sector
Adjustment
Credit
(FSAC)
and
Financial
Sector
Reform
Programme
(FSRP)
were
formed
in
1990,
upon
contracts
with
the World
Bank.
These
programs
sought
to
remove
government
distortions
and
lessen
the financial
repression.[9] Policies
made
use
of
the
McKinnon-Shaw
hypothesis,
which
stated
that
removing
distortions
augments
efficiency
in
the
credit
market
and
increases
competition.[8] The
policies
therefore
involved
banks
providing
loans
on
a
commercial
basis,
enhancing
bank
efficiency
and
limiting
government
control
to
monetary
policy
only.
FSRP
forced
banks
to
have
a
minimum
capital
adequacy,
to
systematically
classify
loans
and
to
implement
modern
computerised
systems,
including
those
that
handle
accounting.
It
forced
the
central
bank
to
free
up
interest
rates,
revise
financial
laws
and
increase
supervision
in
the
credit
market.
The
government
also
developed
the
capital
market,
which
was
also
performing
poorly.[citation
needed]
FSRP
expired
in
1996.
Afterwards,
the
Government
of
Bangladesh
formed
a
Bank
Reform
Committee
(BRC),
whose
recommendations
were
largely
unaddressed
by
the
then-government.[citation
needed]
At
present
it
has
ten
offices
located
at
Motijheel,
Sadarghat,
Chittagong,
Khulna,
Bogra,
Rajshahi,
Sylhet,
Barisal,
Rangpur
and
Mymensingh
in
Bangladesh;
total
manpower
stood
at
5807
(officials
3981,
subordinate
staff
1826)
as
of
31
March
2015.
1 person found this review helpful 👍
