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Commercial Bank
Mohammad Maksudul Huq Chowdhury
Bank, Banking and Banker
Bank is a Govt. approved Financial Institution which
collect/receive fund from surplus unit, repayable on
demand or otherwise and deploy the same to the
deficit unit duly observed some rules & regulations.
The Banking Company means any company which
transacts the business of banking.
Bank, Banking and Banker
“Banking” means accepting of deposits/money from
the public, payable on demand or otherwise
withdrawable by cheque, draft or otherwise, for the
purpose of lending or investing of the same.
“Banker means a person transacting the business of
accepting, for the purpose of lending or investment,
of deposit of money from the public, repayable on
demand or otherwise and withdrawable by Cheque,
Draft, Order or otherwise” (Section 3b, NI Act –
1881)
Banking System
Different countries have been following different
system of banking which are as under:
Branch Banking
Unit Banking
Group Banking
Chain Banking
Corresponding Banking
Deposit Banking
Mixed Banking
Industrial and Investment Banking
Amongst the above branch banking and unit banking
are widely used in many countries.

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Universal banking
Universal bankingUniversal banking
Universal banking

This document discusses universal banking in India. Universal banking combines commercial banking, investment banking, insurance, and other financial activities under one roof. In India, the Narsimham Committee Report and S.H. Khan Committee Report in 1998 advised consolidating the banking industry through mergers and integrating financial activities, suggesting universal banking. Some large domestic financial institutions in India have been permitted to become universal banks, such as ICICI in 2000. Universal banking allows for economies of scale, profitable diversification, better resource utilization, easy marketing using existing brand names, and one-stop shopping convenience for customers. However, it also presents challenges such as different regulatory requirements for banks versus other financial institutions, lack of expertise in long-term lending, and

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Commercial banks
Commercial banksCommercial banks
Commercial banks

Commercial banks have several key objectives including mobilizing savings through various accounts, granting loans and advances, and providing treasury and payment services. They have advantages like numerous locations for accessibility, offering competitive prices on products and services, and providing a wide range of financial offerings. Canara Bank is a major public sector bank in India with over 5000 branches that offers various banking and financial services and has received several awards for its performance and initiatives.

Branch Banking versus
Unit Banking comparison chart
Area Branch Banking Unit Banking
About A bank that is connected to
one or more other banks in
an area or outside of it.
Provides all the usual
financial services but is
backed and ultimately
controlled by a larger
financial institution.
Single, usually small bank that
provides financial services to
its local community. Does not
have other bank branches
elsewhere.
Stability Typically very resilient, able
to withstand local recessions
(e.g., a bad harvest season in
a farming community) thanks
to the backing of other
branches.
Extremely prone to failure
when local economy struggles
Operational
Freedom
Less More
Loans and
advances
Loans and advances are
based on merit, irrespective
of the status.
Loans and advances can be
influenced by authority and
power.
Branch Banking versus
Unit Banking comparison chart
Area Branch Banking Unit Banking
Decision-
making
Delay in Decision-making
as they have to depend on
the head office.
Time is saved as Decision-
making is in the same branch.
Funds Funds are transferred
from one branch to
another. Under utilization
of funds by a branch
would lead to regional
imbalances
Funds are allocated in one
branch and no support of other
branches. During financial crisis,
unit bank has to close down.
hence lead to regional
imbalances or no balance growth
Cost of
supervision
High Less
Distribution
of Capital
Proper distribution of
capital and power.
No proper distribution of capital
and power.
Rate of
interest
Rate of interest is
uniformed and specified
by the head office or
based on instructions from
Central bank.
Rate of interest is not uniformed
as the bank has own policies and
rates.
Deposits
and assets
Deposits and assets are
diversified, scattered and
hence risk is spread at
various places.
Deposits and assets are nt
diversified and are at one place,
hence risk is not spread.
Statistics on largest banks in the
world by total assets
(based on December 2015)
Rank Country Bank Name Total assets (US$
billion)
1 China Industrial and Commercial Bank of China 3,616.39
2 China China Construction Bank Corporation 2,939.15
3 China Agricultural Bank of China 2,816.60
4 China Bank of China 2,629.31
5 UK HSBC Holdings 2,571.71
6 USA JP Morgan Chase & Co. 2,449.60
7 France BNP Paribas 2,400.04
8 Japan Mitsubishi UFJ Financial Group (MUFG) 2,323.24
9 USA Bank of America 2,149.03
10 France Crédit Agricole Group 1,911.27
11 German Deutsche Bank 1,901.37
12 UK Barclays PLC 1,882.67
13 USA Citigroup Inc 1,829.37
14 USA Wells Fargo 1,720.62
15 Japan Japan Post Bank 1,701.60
16 China China Development Bank 1,613.20
17 Japan Mizuho Financial Group 1,563.88
18 Japan Sumitomo Mitsui Financial Group 1,526.98
19 Switzerland UBS AG 1,525.76
20 UK Royal Bank Of Scotland 1,517.66
Sources of Bank’s Funds
A. Deposit Account
1. Transaction deposit
2. Savings deposits
3. Time deposits
4. Money market deposit accounts
B. Borrowed Funds
1. Government funds purchased/borrowed
2. Borrowing from central bank
3. Repurchase agreement
4. Foreign currency borrowing
C. Long-Term Sources of Funds
1. Bonds issued by bank
2. Bank capital

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Financial intermediaries connect borrowers and lenders by accepting funds from lenders and loaning them to borrowers. They perform maturity transformation, risk transformation, and convenience denomination. Major types of financial intermediaries in India include commercial banks, the Reserve Bank of India, savings banks, life and general insurance companies, investment companies, trusts, and government lending institutions like NHB. Commercial banks promote capital formation, investment, and development. The RBI acts as the central bank that regulates other banks and implements monetary policy.

Uses of Funds by Banks
The more common uses of funds by banks
include the followings:
1. Cash
2. Bank loans
3. Investment in securities (Govt./private)
4. Central bank’s loaned out
5. Repurchase agreement
6. Foreign currency loans
7. Fixed assets
8. Call money market
Off-balance sheet activities
Banks commonly engage in off-balance sheet
activities, which generate fee based income without
requiring an investment/engagement of funds.
However, these activities do create a contingent
obligation for banks. The following are some of the
more common off-balance sheet activities:
1. Loan commitments – related with commercial
papers
2. Letter of Credit
3. Forward contracts on currencies
4. Documentary Bills for collection
5. Outward Bill Collection (OBC)
6. Bang Guarantee
Banking System in UK
The British banking system has developed over the
past few hundred years to become one of the most
highly specialized centers of finance in the world. It
is highly centralized system. Al most all the important
home and overseas commercial banks have offices
or correspondents situated in closely proximity to
one another in the city of London.
Banking System in UK
Distinguishing features of British Banking System:
 it is an open system
 British banking has never been ordered or
codified by statute
 Banking is almost entirely in the hands of
institutions in the private sector of the
economy
 The credit techniques are still generally
simple and flexible
 Banking activities have often been subject to
certain convention.

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Banking System in USA
As the central bank of the United States of America,
the Federal Reserve System (the FED) has the
responsibility for conducting national monetary
policy. The Fed, as it exists today has five major
components:
1. Federal Reserve District Banks – there are 12
Federal Reserve District banks out of which the
New York district bank is most important. Each
Fed district bank has nine directors- 3 from the
employee of the bank, 3 who are not associated
with any bank and nominated by member banks
and remaining 3 appointed by Board of
Governors.
Banking System in USA
2. Member Banks – Commercial banks that become
members of the Fed are required to purchase
stock of their Federal Reserve District bank. This
stock are not traded in a secondary market, pays
a maximum dividend of 6%.Commercial banks
can elect as member bank if the meet specific
requirements of the Board of Directors. All
nationalized banks (chartered by Comptroller of
the Currency) are required to be members of the
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respective states) are not.
Banking System in USA
3. Board of Governors – is made up of seven
members nominated by the president of USA and
serve as non-renewable 14-year term. One
member is selected as chairman by the president
for a term of 4-year which is renewable.
4. Federal Open Market Committee (FOMC) – is
made up of the seven members of the Board of
Governors plus the president of New York district
bank and 4president of 4 other district banks.
5. Advisory Committee – is consisting of one
member from each district bank.
Banking System in Bangladesh
After the independence, banking industry in
Bangladesh started its journey with 6 Nationalized
Commercial Banks, 2 State owned specialized
Banks and 3 Foreign banks. In the 1980’s banking
industry achieved significant expansion with the
entrance of private banks.

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Now, banks in Bangladesh are primarily of two
types:
1. Schedule Banks: The banks which get license to
operate under Banking Company Act, 1991
(amended up to 2013) are termed as Scheduled
Banks.
2. Non-Scheduled Banks: The banks which are
established for special and definite objectives are
termed as Non-Scheduled Banks. These banks
can not perform all functions of scheduled banks.
Banking System in Bangladesh
Scheduled Banks:
There are 56 scheduled banks in Bangladesh who
operate under full control and supervision of
Bangladesh Bank which is empowered to do so through
Bangladesh Bank Order 1972 and Bank Company Act
1991. Scheduled Banks are classified into following
types:
1. State owned Commercial Banks (SOCBs) : 06
2. Specialized Banks (SDBs) : 02
3. Private Commercial Banks (PCBs) : 39
4. PCBs are two types according to
mode of operation: Conventional : 39
Islamic : 08
5. Foreign Commercial Banks (FCBs) : 09
Banking System in Bangladesh
Non-Scheduled Banks:
There are now 4 non-scheduled banks in
Bangladesh which are:
1. Ansar VDP Unnayan Bank,
2. Karmashangosthan Bank,
3. Probashi kollyan Bank,
4. Jubilee Bank
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with the view to managing the monetary and credit
system to established domestic monetary value and
maintaining a competitive external par value of the
country and fostering growth and development of the
country in the best national practice. In every country
there must be a Central Bank. The name of the
central bank of Bangladesh is ‘Bangladesh Bank”.

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Central Bank
Name of the central bank of few countries:
1. Bangladesh - Bangladesh Bank
2. India - Reserve Bank of India
3. Japan - Bank of Japan
4. USA - Federal Reserve System
5. France - Bank of France
6. England - Bank of England
7. Pakistan - State Bank of Pakistan
8. China - Central Bank of the Republic of
China (Taiwan)
9. Philippines - Bangko Sentral ng Pilipinas
10.Sri Lanka - Central Bank of Sri Lanka
11.Canada - Bank of Canada
Functions of Central Bank
Traditional Function:
1. Note issue (except Government notes & coins –
one taka, two taka, five taka and coins)
2. Bankers’ Bank
3. Governments’ Bank
4. Maintenance of Foreign Exchange reserve
5. Framing of monetary Policy
Functions of Central Bank
Modern Functions:
1. Declaration of bank rate
2. Clearing House maintenance
3. Maintain inflation situation at tolerable limit
4. Lender of last resort to Govt. & Banks
5. Advisor to the Govt. on financial matter
6. Supervisor of Banks & Financial Institutions
7. Research
8. Statistics (SBS – 1, 2, 3, 7 others)
9. Implementation of monetary policy
10.CAMELS (Capital, Asset, Management, Earnings,
Liquidity and Sensitivity) rating of Commercial banks.
11.Development of money market and capital market.
Functions of Commercial Banks
The traditional functions of a Commercial bank is to
receive deposit from the surplus unit with a condition
to repay on demand or otherwise and allowing
investment/advances/loans to the deficit unit. But
now-a-days the functions of a commercial bank
diversified and acting as a superstore.

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Functions of Commercial Banks
So, the functions may be divided into five categories,
such as
1. General functions
2. Functions related to foreign trade and foreign
exchange
3. Agency functions
4. Welfare functions and
5. Other functions
Functions of Commercial Banks
1. General functions are:
 Maintain account of the clients,
 To receive deposits of various types,
 To make advance/investment against with or
without securities,
 To create deposits,
 To create medium of exchange through
cheque, Draft, Pay – order etc.
 To issue guarantees (local)
 To discount Bills.
Functions of Commercial Banks
2. Functions related to Foreign trade & Foreign
exchange:
 To make correspondent banking with overseas
banks
 To place foreign currency funds with
correspondents abroad
 To issue Letter of Credit (LC)
 To issue Back to Back Letter of Credit (BTB
L/C)
 To amend L/Cs
 To extend investment/credit facilities to the
importers through creating PAD/MIB,
MTR/LTR, LIM/LAM/MPI etc
Functions of Commercial Banks
2. Functions related to Foreign trade & Foreign
exchange:
• To extend investment/credit facilities to the
exporters through the modes of Musharaka
Pre-shipment/PC/ECC, LDBP, FDBP etc
• Acceptance of Bill of Exchange and make
payment
• Make forward booking of foreign exchange on
behalf of importer for preventing them from
exchange loss
• Sale and purchase of Foreign currency, TC,
Credit Cards

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Commercial banks play a key role in the economy by accepting deposits from the public, lending money, clearing checks, and providing other services. They earn income through interest on loans and investments as well as fees. Commercial banks must balance objectives of liquidity, profitability, safety, and diversity in their investment policies. They operate using either a unit banking system with independent banks or a branch banking system where a head office controls local branches. By providing finance, credit, and implementing monetary policy, commercial banks help accelerate capital formation and economic development.

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Functions of Commercial Banks
2. Functions related to Foreign trade & Foreign
exchange:
• Maintaining Foreign Currency accounts
• Outward foreign remittance for import, foreign
tour, travel, education, treatment, pilgrims,
training etc.
• Inward foreign remittance – export proceeds,
wage earners remittance etc.
• Issuing guarantees (foreign).
Functions of Commercial Banks
3. Agency functions:
• To transfer money
• To collect funds and makes payment for the
clients
• To maintain confidentiality of customers
• To sale and purchase of shares and securities
• To make payments for utility charges and
insurance premium on behalf of the client
• To receive rent, dividend, premium etc.
• To work as trustee
• To work as representative of Central Bank.
Functions of Commercial Banks
4. Welfare functions:
• Social welfare functions/Corporate Social
Responsibility (CSR),
• Scholarship to poor and meritorious students
• Blanket distribution
• Medical treatment support
• Donation of transport to school, college,
universities
• Ambulance donation
Functions of Commercial Banks
4. Welfare functions:
Social welfare functions/Corporate Social
Responsibility (CSR)
• Scholarship to poor and meritorious students
• Blanket distribution
• Medical treatment support
• Donation of transport to school, college,
universities
• Ambulance donation

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Central banks serve important functions in regulating currency, credit, and monetary policy. Some key functions of central banks include acting as a banker, agent and advisor to governments; controlling money supply through tools like interest rates, reserve requirements, and open market operations; acting as a lender of last resort to banks; and regulating credit allocation. Central banks aim to achieve economic stability through proper monetary management. The Reserve Bank of India operates as India's central bank and performs traditional central banking functions like currency regulation as well as development functions to support financial systems.

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Central bank & monetarypolicy
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The document discusses banks and central banks. It defines a bank as a financial institution that accepts deposits and makes loans. A central bank is the national bank that oversees a country's monetary system and implements monetary policy. The central bank has several functions, including issuing currency, acting as a bank for the government, overseeing commercial bank reserves, managing foreign exchange, acting as a lender of last resort, and controlling the money supply through interest rates and reserve requirements. The central bank uses both direct tools like interest rates and lending as well as indirect tools like open market operations and reserve requirements to implement monetary policy and achieve its targets of stabilizing prices and promoting employment.

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The three main functions of money are as a medium of exchange, a unit of account, and as a store of value. Money must have six key characteristics - it must be durable, portable, divisible, stable in value, scarce, and universally accepted. The Federal Reserve, or the Fed, acts as the central bank of the United States and oversees the banking system and regulates the money supply. It performs governmental banking functions and uses tools like open market operations and interest rates to implement monetary policy and control inflation.

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Functions of Commercial Banks
4. Welfare functions:
Functions related to the welfare of the employees/
retired employees such as
• Establishment of institution
• Establishment of Trust
• Pensions and allowance.
Functions of Commercial Banks
5. Other functions:
• Underwriting
• Work as safe custody through Locker service
• Advices the clients on business matters
• Repo
• Customer financing
• Leasing
• Income sharing
• Syndication, arrangement of funds
• Issuance of Sanchay Patra, ICB Unit Certificate,
Bond
• Sale of Prize Bond
• Merchant banking
• Any other functions approved by the
Gov’t/Bangladesh Bank.
Justification of supervision and
control of scheduled banks by
Bangladesh Bank
The justification of supervision and control:
• To limit the risk of depositors
• To maintain public confidence
• To protect the financial infrastructure
• To maintain stability of banking system
• To maintain investment/credit discipline
• To maintain healthy foreign exchange reserve
of the country
• To ensure lawful transaction of foreign
exchange & foreign trade businesses
• To protect money laundering
Main functions/mechanism of
Bangladesh Bank to control over
scheduled banks
The main functions of Bangladesh Bank to control
over scheduled Banks are:
• Enlistment of Banks
• Central Bank is the Banker to the
Commercial Banks
• Submission of returns
• Management of Clearing House
• Audit & Inspection
• Appointment of MD/CEO
• Investment/Credit Control
• Discount rate policy

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indian banking unit 1
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The document discusses the organizational structure of banks in India. It describes how banks are organized into two sectors - organized and unorganized. The organized sector includes Reserve Bank of India, commercial banks, cooperative banks, and specialized banks. Reserve Bank of India acts as the central bank, while commercial banks like public sector banks, private sector banks, and foreign banks accept deposits and provide loans. Cooperative banks meet credit needs in rural areas. The document also discusses the roles and functions of commercial banks in India.

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The document provides an overview of the banking system in Bangladesh. It defines what a bank and central bank are. It then lists and describes the major types of banks in Bangladesh, including the central bank (Bangladesh Bank), scheduled banks (state-owned commercial banks, specialized banks, private commercial banks, and foreign commercial banks), non-scheduled banks, non-bank financial institutions, and specialized financial institutions. It concludes by listing the major banks in each category.

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Main functions/mechanism of
Bangladesh Bank to control over
scheduled banks
The main functions of Bangladesh Bank to control
over scheduled Banks are:
• Open market operations
• Intervention in the Foreign Exchange Market
• Monitoring of non-performing
investment/loans
• Risk Management
• Foreign Exchange Regulation Act
• CAMELS rating
• Anti Money Laundering Act and Anti
Terrorism Act
Few special issues
A. Financial Inclusion
B. Women Entrepreneurs Refinance Scheme
C. CMSME (Cottage, Micro, Small and Medium
Enterprise) loans
D. Green Banking: Maximum utilization of natural
resources without distorting the nature
Commercial banks

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Commercial banks

  • 2. Bank, Banking and Banker Bank is a Govt. approved Financial Institution which collect/receive fund from surplus unit, repayable on demand or otherwise and deploy the same to the deficit unit duly observed some rules & regulations. The Banking Company means any company which transacts the business of banking.
  • 3. Bank, Banking and Banker “Banking” means accepting of deposits/money from the public, payable on demand or otherwise withdrawable by cheque, draft or otherwise, for the purpose of lending or investing of the same. “Banker means a person transacting the business of accepting, for the purpose of lending or investment, of deposit of money from the public, repayable on demand or otherwise and withdrawable by Cheque, Draft, Order or otherwise” (Section 3b, NI Act – 1881)
  • 4. Banking System Different countries have been following different system of banking which are as under: Branch Banking Unit Banking Group Banking Chain Banking Corresponding Banking Deposit Banking Mixed Banking Industrial and Investment Banking Amongst the above branch banking and unit banking are widely used in many countries.
  • 5. Branch Banking versus Unit Banking comparison chart Area Branch Banking Unit Banking About A bank that is connected to one or more other banks in an area or outside of it. Provides all the usual financial services but is backed and ultimately controlled by a larger financial institution. Single, usually small bank that provides financial services to its local community. Does not have other bank branches elsewhere. Stability Typically very resilient, able to withstand local recessions (e.g., a bad harvest season in a farming community) thanks to the backing of other branches. Extremely prone to failure when local economy struggles Operational Freedom Less More Loans and advances Loans and advances are based on merit, irrespective of the status. Loans and advances can be influenced by authority and power.
  • 6. Branch Banking versus Unit Banking comparison chart Area Branch Banking Unit Banking Decision- making Delay in Decision-making as they have to depend on the head office. Time is saved as Decision- making is in the same branch. Funds Funds are transferred from one branch to another. Under utilization of funds by a branch would lead to regional imbalances Funds are allocated in one branch and no support of other branches. During financial crisis, unit bank has to close down. hence lead to regional imbalances or no balance growth Cost of supervision High Less Distribution of Capital Proper distribution of capital and power. No proper distribution of capital and power. Rate of interest Rate of interest is uniformed and specified by the head office or based on instructions from Central bank. Rate of interest is not uniformed as the bank has own policies and rates. Deposits and assets Deposits and assets are diversified, scattered and hence risk is spread at various places. Deposits and assets are nt diversified and are at one place, hence risk is not spread.
  • 7. Statistics on largest banks in the world by total assets (based on December 2015) Rank Country Bank Name Total assets (US$ billion) 1 China Industrial and Commercial Bank of China 3,616.39 2 China China Construction Bank Corporation 2,939.15 3 China Agricultural Bank of China 2,816.60 4 China Bank of China 2,629.31 5 UK HSBC Holdings 2,571.71 6 USA JP Morgan Chase & Co. 2,449.60 7 France BNP Paribas 2,400.04 8 Japan Mitsubishi UFJ Financial Group (MUFG) 2,323.24 9 USA Bank of America 2,149.03 10 France Crédit Agricole Group 1,911.27 11 German Deutsche Bank 1,901.37 12 UK Barclays PLC 1,882.67 13 USA Citigroup Inc 1,829.37 14 USA Wells Fargo 1,720.62 15 Japan Japan Post Bank 1,701.60 16 China China Development Bank 1,613.20 17 Japan Mizuho Financial Group 1,563.88 18 Japan Sumitomo Mitsui Financial Group 1,526.98 19 Switzerland UBS AG 1,525.76 20 UK Royal Bank Of Scotland 1,517.66
  • 8. Sources of Bank’s Funds A. Deposit Account 1. Transaction deposit 2. Savings deposits 3. Time deposits 4. Money market deposit accounts B. Borrowed Funds 1. Government funds purchased/borrowed 2. Borrowing from central bank 3. Repurchase agreement 4. Foreign currency borrowing C. Long-Term Sources of Funds 1. Bonds issued by bank 2. Bank capital
  • 9. Uses of Funds by Banks The more common uses of funds by banks include the followings: 1. Cash 2. Bank loans 3. Investment in securities (Govt./private) 4. Central bank’s loaned out 5. Repurchase agreement 6. Foreign currency loans 7. Fixed assets 8. Call money market
  • 10. Off-balance sheet activities Banks commonly engage in off-balance sheet activities, which generate fee based income without requiring an investment/engagement of funds. However, these activities do create a contingent obligation for banks. The following are some of the more common off-balance sheet activities: 1. Loan commitments – related with commercial papers 2. Letter of Credit 3. Forward contracts on currencies 4. Documentary Bills for collection 5. Outward Bill Collection (OBC) 6. Bang Guarantee
  • 11. Banking System in UK The British banking system has developed over the past few hundred years to become one of the most highly specialized centers of finance in the world. It is highly centralized system. Al most all the important home and overseas commercial banks have offices or correspondents situated in closely proximity to one another in the city of London.
  • 12. Banking System in UK Distinguishing features of British Banking System:  it is an open system  British banking has never been ordered or codified by statute  Banking is almost entirely in the hands of institutions in the private sector of the economy  The credit techniques are still generally simple and flexible  Banking activities have often been subject to certain convention.
  • 13. Banking System in USA As the central bank of the United States of America, the Federal Reserve System (the FED) has the responsibility for conducting national monetary policy. The Fed, as it exists today has five major components: 1. Federal Reserve District Banks – there are 12 Federal Reserve District banks out of which the New York district bank is most important. Each Fed district bank has nine directors- 3 from the employee of the bank, 3 who are not associated with any bank and nominated by member banks and remaining 3 appointed by Board of Governors.
  • 14. Banking System in USA 2. Member Banks – Commercial banks that become members of the Fed are required to purchase stock of their Federal Reserve District bank. This stock are not traded in a secondary market, pays a maximum dividend of 6%.Commercial banks can elect as member bank if the meet specific requirements of the Board of Directors. All nationalized banks (chartered by Comptroller of the Currency) are required to be members of the Fed, but other banks (chartered by their respective states) are not.
  • 15. Banking System in USA 3. Board of Governors – is made up of seven members nominated by the president of USA and serve as non-renewable 14-year term. One member is selected as chairman by the president for a term of 4-year which is renewable. 4. Federal Open Market Committee (FOMC) – is made up of the seven members of the Board of Governors plus the president of New York district bank and 4president of 4 other district banks. 5. Advisory Committee – is consisting of one member from each district bank.
  • 16. Banking System in Bangladesh After the independence, banking industry in Bangladesh started its journey with 6 Nationalized Commercial Banks, 2 State owned specialized Banks and 3 Foreign banks. In the 1980’s banking industry achieved significant expansion with the entrance of private banks.
  • 17. Banking System in Bangladesh Now, banks in Bangladesh are primarily of two types: 1. Schedule Banks: The banks which get license to operate under Banking Company Act, 1991 (amended up to 2013) are termed as Scheduled Banks. 2. Non-Scheduled Banks: The banks which are established for special and definite objectives are termed as Non-Scheduled Banks. These banks can not perform all functions of scheduled banks.
  • 18. Banking System in Bangladesh Scheduled Banks: There are 56 scheduled banks in Bangladesh who operate under full control and supervision of Bangladesh Bank which is empowered to do so through Bangladesh Bank Order 1972 and Bank Company Act 1991. Scheduled Banks are classified into following types: 1. State owned Commercial Banks (SOCBs) : 06 2. Specialized Banks (SDBs) : 02 3. Private Commercial Banks (PCBs) : 39 4. PCBs are two types according to mode of operation: Conventional : 39 Islamic : 08 5. Foreign Commercial Banks (FCBs) : 09
  • 19. Banking System in Bangladesh Non-Scheduled Banks: There are now 4 non-scheduled banks in Bangladesh which are: 1. Ansar VDP Unnayan Bank, 2. Karmashangosthan Bank, 3. Probashi kollyan Bank, 4. Jubilee Bank
  • 20. Central Bank A central Bank is the bank established in a country with the view to managing the monetary and credit system to established domestic monetary value and maintaining a competitive external par value of the country and fostering growth and development of the country in the best national practice. In every country there must be a Central Bank. The name of the central bank of Bangladesh is ‘Bangladesh Bank”.
  • 21. Central Bank Name of the central bank of few countries: 1. Bangladesh - Bangladesh Bank 2. India - Reserve Bank of India 3. Japan - Bank of Japan 4. USA - Federal Reserve System 5. France - Bank of France 6. England - Bank of England 7. Pakistan - State Bank of Pakistan 8. China - Central Bank of the Republic of China (Taiwan) 9. Philippines - Bangko Sentral ng Pilipinas 10.Sri Lanka - Central Bank of Sri Lanka 11.Canada - Bank of Canada
  • 22. Functions of Central Bank Traditional Function: 1. Note issue (except Government notes & coins – one taka, two taka, five taka and coins) 2. Bankers’ Bank 3. Governments’ Bank 4. Maintenance of Foreign Exchange reserve 5. Framing of monetary Policy
  • 23. Functions of Central Bank Modern Functions: 1. Declaration of bank rate 2. Clearing House maintenance 3. Maintain inflation situation at tolerable limit 4. Lender of last resort to Govt. & Banks 5. Advisor to the Govt. on financial matter 6. Supervisor of Banks & Financial Institutions 7. Research 8. Statistics (SBS – 1, 2, 3, 7 others) 9. Implementation of monetary policy 10.CAMELS (Capital, Asset, Management, Earnings, Liquidity and Sensitivity) rating of Commercial banks. 11.Development of money market and capital market.
  • 24. Functions of Commercial Banks The traditional functions of a Commercial bank is to receive deposit from the surplus unit with a condition to repay on demand or otherwise and allowing investment/advances/loans to the deficit unit. But now-a-days the functions of a commercial bank diversified and acting as a superstore.
  • 25. Functions of Commercial Banks So, the functions may be divided into five categories, such as 1. General functions 2. Functions related to foreign trade and foreign exchange 3. Agency functions 4. Welfare functions and 5. Other functions
  • 26. Functions of Commercial Banks 1. General functions are:  Maintain account of the clients,  To receive deposits of various types,  To make advance/investment against with or without securities,  To create deposits,  To create medium of exchange through cheque, Draft, Pay – order etc.  To issue guarantees (local)  To discount Bills.
  • 27. Functions of Commercial Banks 2. Functions related to Foreign trade & Foreign exchange:  To make correspondent banking with overseas banks  To place foreign currency funds with correspondents abroad  To issue Letter of Credit (LC)  To issue Back to Back Letter of Credit (BTB L/C)  To amend L/Cs  To extend investment/credit facilities to the importers through creating PAD/MIB, MTR/LTR, LIM/LAM/MPI etc
  • 28. Functions of Commercial Banks 2. Functions related to Foreign trade & Foreign exchange: • To extend investment/credit facilities to the exporters through the modes of Musharaka Pre-shipment/PC/ECC, LDBP, FDBP etc • Acceptance of Bill of Exchange and make payment • Make forward booking of foreign exchange on behalf of importer for preventing them from exchange loss • Sale and purchase of Foreign currency, TC, Credit Cards
  • 29. Functions of Commercial Banks 2. Functions related to Foreign trade & Foreign exchange: • Maintaining Foreign Currency accounts • Outward foreign remittance for import, foreign tour, travel, education, treatment, pilgrims, training etc. • Inward foreign remittance – export proceeds, wage earners remittance etc. • Issuing guarantees (foreign).
  • 30. Functions of Commercial Banks 3. Agency functions: • To transfer money • To collect funds and makes payment for the clients • To maintain confidentiality of customers • To sale and purchase of shares and securities • To make payments for utility charges and insurance premium on behalf of the client • To receive rent, dividend, premium etc. • To work as trustee • To work as representative of Central Bank.
  • 31. Functions of Commercial Banks 4. Welfare functions: • Social welfare functions/Corporate Social Responsibility (CSR), • Scholarship to poor and meritorious students • Blanket distribution • Medical treatment support • Donation of transport to school, college, universities • Ambulance donation
  • 32. Functions of Commercial Banks 4. Welfare functions: Social welfare functions/Corporate Social Responsibility (CSR) • Scholarship to poor and meritorious students • Blanket distribution • Medical treatment support • Donation of transport to school, college, universities • Ambulance donation
  • 33. Functions of Commercial Banks 4. Welfare functions: Functions related to the welfare of the employees/ retired employees such as • Establishment of institution • Establishment of Trust • Pensions and allowance.
  • 34. Functions of Commercial Banks 5. Other functions: • Underwriting • Work as safe custody through Locker service • Advices the clients on business matters • Repo • Customer financing • Leasing • Income sharing • Syndication, arrangement of funds • Issuance of Sanchay Patra, ICB Unit Certificate, Bond • Sale of Prize Bond • Merchant banking • Any other functions approved by the Gov’t/Bangladesh Bank.
  • 35. Justification of supervision and control of scheduled banks by Bangladesh Bank The justification of supervision and control: • To limit the risk of depositors • To maintain public confidence • To protect the financial infrastructure • To maintain stability of banking system • To maintain investment/credit discipline • To maintain healthy foreign exchange reserve of the country • To ensure lawful transaction of foreign exchange & foreign trade businesses • To protect money laundering
  • 36. Main functions/mechanism of Bangladesh Bank to control over scheduled banks The main functions of Bangladesh Bank to control over scheduled Banks are: • Enlistment of Banks • Central Bank is the Banker to the Commercial Banks • Submission of returns • Management of Clearing House • Audit & Inspection • Appointment of MD/CEO • Investment/Credit Control • Discount rate policy
  • 37. Main functions/mechanism of Bangladesh Bank to control over scheduled banks The main functions of Bangladesh Bank to control over scheduled Banks are: • Open market operations • Intervention in the Foreign Exchange Market • Monitoring of non-performing investment/loans • Risk Management • Foreign Exchange Regulation Act • CAMELS rating • Anti Money Laundering Act and Anti Terrorism Act
  • 38. Few special issues A. Financial Inclusion B. Women Entrepreneurs Refinance Scheme C. CMSME (Cottage, Micro, Small and Medium Enterprise) loans D. Green Banking: Maximum utilization of natural resources without distorting the nature