Lesson-3 on Bank and Banking Sector

Question: What are the Core Functions of Bangladesh Bank?

Answer:

The core functions of BB are briefly discussed as follows:

1.     BB formulates and implements monetary policy aiming at stabilizing domestic monetary value and maintaining competitive external per value of taka for fostering growth and development of country’s productive resources in the best national interest.

2.     BB formulates and implements intervention policies in the domestic money market and foreign exchange market. BB intervenes the money market with some policy instruments such as

                          i.          Open market operation (Treasury Bills/Bonds, Repo, reverse Repo Auctions)

                        ii.          Variations in Reserve Ratios such as cash reserve requirements (CRR) and statutory liquidity ratio (SLR)

                      iii.          Secondary trading

                       iv.          Discounting rate/ bank rate and

                         v.          Moral suasion

3.     BB monitors and supervises scheduled banks and non-bank financial instructions (NBFIs) that include off-site supervision and on-site supervision in order to enhance the safety, soundness, and stability of the banking system to ensure banking discipline, protect depositors’ interest and retain confidence in the banking system.

4.     BB holds sole responsibility of the management of international reserve representing aggregate of BB’s holding of gold, foreign exchange SDR and reserve position in the IMF;

5.     BB, as the central bank of Bangladesh reserves sole responsibility to issue bank note.

6.     BB performs as a clearing house for the scheduled banks to clear and settle inter-bank payment arising through drawing cheque, drafts, bills, etc to one another.

7.     BB acts as a banker to the government;

8.     BB functions as a lender of the last resort for the government as well as for the country’s scheduled banks;

9.     BB acts as an advisor to the government;

10. BB directs the growth expediting programs for the national interest.

Question. Who is the Governor of Bangladesh Bank?
Answer:

 Dr. Atiur Rahman took the helm of the central Bank of Bangladesh for four year tenure on May 1, 2009 as the 10th Governor of Bangladesh Bank.

Question: What is Repo with Bangladesh Bank?

Answer:

Ø    Commercial bank gives it’s securities to the Bangladesh bank & takes funds.

Ø    Funds are injected into the market

 

Question. What is Reverse Repo with Bangladesh Bank ?

Answer:

Ø    Bangladesh bank gives it’s security paper to the banks & takes fund from commercial banks

Ø    Funds are withdrawn by Bangladesh Bank from the market.

Question. What are the Ingredients of Core Capital (Tier I) in Bank?

Answer:

Ø    Paid up Capital

Ø    Statutory reserve

Ø    Dividend equalization A/C

Ø    Retained Earnings

Question: What are the Ingredients of Supplementary Capital (Tier II) ?

Answer:

Ø    General provision on Unclassified loans

Ø    General Provision on Off balance sheet exposure

Ø    Exchange Equalization Account

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