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The presentation on Historical Background of Banking

Submitted To Kazi Nafiul Mazid

Advocate, Supreme Court of Bangladesh

Submitted ByMeherabul Islam Shovon

Northern University Bangladesh

Learning Objects Definition of Banking.Evolution of Banking. Beginning of banks.Modern Banking.History of Banking in Bangladesh.Bangladesh Bank.Types of Bank in Bangladesh.Commercial Bank.CAMELS Rating System.

Definition of Banking The word Bank come from the Latin Word “Banco”.The term banking is defined as “accepting, for the

purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, and order or otherwise”.

It is thus clear that the underline principle of business of banking is that the resources mobilized through the acceptance of deposits must constitute the main stream of funds which are to be utilized for lending and investment purposes. The banker is thus an intermediary and deals with money belonging to the public.

The Evolution Of Banking

Beginning of Banks

The idea of banks began as long ago as 1,800 BC in Babylon. In those days moneylenders made loans to people. In Greece and Rome banks made loans and accepted deposits. They also changed money. (In the Bible Jesus famously drove the money changers out of the temple in Jerusalem).

However with the collapse of the Roman Empire trade slumped and banks temporarily vanished. However banking began to revive again in the 12th and 13th centuries in the Italian towns of Florence and Genoa.

History of Banking in Bangladesh

Cont. The first modern bank in Bengal was Bank

of Hindostan, established in 1770 in Calcutta.

The first modern bank headquartered in Dhaka was Dacca Bank, established in 1846. It did a very limited business and did not issue banknotes. It was purchased by Bank of Bengal in 1862.

Cont.• 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, naming it Bangladesh Bank. This reorganization was done pursuant to Bangladesh Bank Order, 1972, and the Bangladesh Bank came into existence retroactively from 16 December 1971.

Cont.

Nationalized Commercial Banks (NCBs) were established in Bangladesh in 1972 through amalgamation of twelve commercial banks that were operating in pre-independent Bangladesh allowing the poor access to fund, reducing capital flight to foreign countries, and increasing domestic investment were some of the basic objective of this nationalization.

Bangladesh Bank Bangladesh Bank is the central bank of Bangladesh.

Bangladesh Bank was established in Dhaka as a body corporate vide the Bangladesh Bank Order, 1972 (P.O. No. 127 of 1972) with effect from 16 December 1971. 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. Bangladesh Bank is the first central bank in the world to introduce a dedicated hotline (16236) for the general populace to complain any banking related problem. Moreover, the organization is the first central bank in the world to issue a "Green Banking Policy".

Functions of Bangladesh Bank

The major functional areas include :

Formulation and implementation of monetary and credit policies.Regulation and supervision of banks and non-bank financial

institutions, promotion and development of domestic financial markets.

Management of the country's international reserves.Issuance of currency notes.Regulation and supervision of the payment system.Acting as banker to the government .Money laundering prevention.Collection and furnishing of credit information.Implementation of the Foreign Exchange Regulation Act.Managing a deposit insurance scheme .

Types of Bank in Bangladesh

Commercial BankA commercial bank is a

financial institution that provides services, such as accepting deposits, giving business loans and auto loans, mortgage lending, and basic investment products like savings accounts and certificates of deposit.

The traditional commercial bank is a brick and mortar institution with tellers, safe deposit boxes, vaults and ATMs.

Types of Commercial Bank

Functions of Commercial Bank

Role of Commercial Banks in 21st century The commercial banks are now not confined to

local banking.

They are fast changing into global banking i.e., understanding the global customer, using latest information technology, competing in the open market with high technology system, changing from domestic banking to investment banking etc.

The commercial bank are now considered the nerve system of all economic development in the country.

CAMELS Rating System

Meaning of CAMELS Rating System

C = Capital adequacy. A = Assets. M = Management Capability. E = Earning. L = Liquidity. S = Sensitivity.

CAMELS Rating as of December 2014

Strong or ‘A-class’ Banks

Prime Bank.Exim Bank.South Bangla Agriculture Bank.Southeast Bank.Standard Bank.

Satisfactory or ‘B-class’ Banks Al-Arafah Islami Bank. Islami Bank Bangladesh. Dutch-Bangla Bank. Bank Asia. AB Bank. Mutual Trust Bank. Pubali Bank. Dhaka Bank. Uttara Bank. Shahjalal Islami Bank. One Bank. NCC Bank. Jamuna Bank. The Trust Bank.

Social Islami Bank. BRAC Bank. Union Bank. Midland Bank. NRB Global Bank. Modhumoti Bank. NRBC Bank. Farmers Bank. NRB Bank. Meghna Bank. Premier Bank. First Security Islami Bank. Eastern Bank.

Fair or ‘C-class’ Banks Mercantile Bank National Bank IFIC Bank The City Bank United Commercial Bank Bangladesh Commerce Bank Bangladesh Development Bank Bank Al-Falah Woori Bank

Cont. Marginal or ‘D-class’

Banks

Rupali BankAgrani BankJanata BankSonali BankBASIC Bank

Unsatisfactory or ‘E-class’ Banks

Bangladesh Krishi Bank

Rajshahi Krishi Unnayan Bank

ICB Islamic Bank