Financial institutions play a vital role in the global economy by providing various financial services and facilitating the efficient functioning of capital markets. These institutions include banks, insurance companies, investment firms, and other intermediaries. Banks, for instance, offer a range of services such as savings and checking accounts, loans, mortgages, and investment products. Insurance companies provide risk management solutions by offering policies to protect against various risks, including life, health, property, and liability. Capital markets, on the other hand, are platforms where individuals, businesses, and governments can raise funds by issuing securities such as stocks and bonds. These markets enable the transfer of capital from investors who have excess funds to entities in need of financing. The stock market allows companies to raise equity capital by issuing shares to investors, while the bond market facilitates the issuance of debt securities, providing investors with fixed-income assets. Financial institutions play a crucial role in the capital markets by underwriting, trading, and distributing securities. Investment banks, for example, assist companies in issuing stocks and bonds, while asset management firms help investors build and manage investment portfolios. Additionally, financial institutions provide liquidity and price discovery in capital markets, contributing to market efficiency. Regulation and oversight are essential components of both financial institutions and capital markets to ensure stability, transparency, and investor protection. Regulatory bodies, such as central banks, securities commissions, and financial regulatory agencies, establish rules and guidelines to govern the operations of financial institutions and regulate the conduct of market participants. Overall, financial institutions and capital markets are interconnected components of the financial system, playing complementary roles in allocating resources, managing risks, and fostering economic growth and development. Their efficient functioning is critical for supporting investment, entrepreneurship, and innovation in the global economy.

1. 1
Portfolio Management FIN-614
Financial Institution and Capital Market FIN-616
Corporate Finance and Banking FIN-614
Bank Fund Management FIN-615
Major Finance and Banking
Department of Business Administration
Prime University
MD MAHABUB HASAN
ID NO-133020102060
Batch-34th
Program: MBA
Major: Finance and Banking
Department of Business Administration
Prime University, Mirpur-1, Dhaka-1216
Mahabub1625@gmail.com
www.mahabubbd.com
Dhaka, Bangladesh

2. 2
Finance: The word finance has been derived from a Latin word “FINIS” expressing the
meaning dealing with money. It can be defined as an art and science of managing money
is called finance
Business: Legal activities taken by an entity or entities for earning profit/return/gains is
called business
Business Organization: A forum or an association of some people exchanging the
goods/services and money is called Business Organization
Objectives of Business Organization:
1. Profit maximization
2. Wealth maximization
3. Value creation
4. Social responsibility
Business objectives:
1. Economic objective
2. Social objective
3. Human objective
4. National objective
Types of Business organization
1. Proprietorship / Sole Proprietorship
2. Partnership
3. Company / Corporation
Company: An association of some people having separated entity incorporate under a
law (company act 1994) representing an artificial person is called company
Types of company (Flow Chart)
Company 1. Unlimited
2. Limited
Limited 1. Limited by Guaranties
2. Limited by shares
Limited by shares 1. Private limited
2. Public limited

3. 3
Features of company
1. Formation is difficult
2. To have need Board meeting minimum 4 (four) time (Audit 2 time by external audit
firm)
3. Life is long
4. Liability is limited
5. Double taxation is applicable (Tax ordinance 1984)
6. Should have separated entity
7. Managed by hired person (Agency costs)
8. A company can sue and can be sued
Draw distinction between private and public limited
Private limited company Public limited company
No of stockholder 2 – 50 No of stockholder 7 limited by stocks/share
Share transfer is difficult Share transfer is easier
private company cannot raise fund /
capital by issuing shares for common
people
They can raise capital / fund by issuing shares
for common people
They cannot issue prospectus They can issue prospectus ( Books and
accounts
They can start business after having
license / Registration
For starting business public limited company
has to collect the document called certificate
of commencement of Business
Major consideration of finance
1. Collection of funds: (Financing maximize the profit)
2. Investment: (Utilization of the collected funds)
3. Distribution of profit: (Among the stakeholder)
Major consideration of financial institution
1. Financial asset/instrument/securities
2. Financial institution
3. Financial market/securities market

4. 4
Financial system to the context of Bangladesh
Financial system: An institutional set up agreement facilitations the transferees of fund
from the economic surplus group to economic deficit group is called financial system to
the contest of Bangladesh
Significant/Importance of financial system
Financial system help to flow the money from the economic surplus group to deficit group
as a result the velocity of money is increased and productivity of money also increased.
As a result the economic development is enhanced
1. It facilitates the flow movement of money
2. It increased the velocity of money thereby it enhance the productivity of money
3. It accelerates the economic development
1. Debt instrument
2. Equity instrument
3. Derivative instrument
Basic equation of accounting
A=L+OE+R-E-D
For meaning
A= Asset L= Liabilities OE= Owners equities R= Revenues E= Expense D= Distribution
= L2C
L= Land L= Labor C= Capital Organization
Asset: claims of business to others is called asset
Liabilities: Obligation of business to others is called liability
Owners equities: claims of owners to the business is called Owners equities
Asset: Resources of a business firm having some value and benefits generating
capabilities are called assets
Two system of Banking
1. Conventional Banking system
2. Islamic Sharia based Banking
system
2 Two/3 Three kind of banking world
Banking system
3. Branch Banking
4. Unit Banking
5. Holding Banking

5. 5
F = Financial Resource
4 (Four) kinds of resources H = Human Resources
P = Physical Resources
I = Information and Technical Resources
2 (Two) kinds of Asset 1. Fixed asset
2. Current asset
2 (Two) kinds Fixed asset 1. Tangible asset (Machine, Furniture, Building, Land)
2. Intangible asset (Goodwill, Trademark, Patent, Talent)
Types of securities / financial instrument
1. Debt instrument (Fixed income securities e.g. Bond)
2. Equity instrument (variable income securities e.g. share)
3. Derivative instrument (it represent financial contracts e.g. options future
swaps)
Function of financial asset / financial / instrument / securities
1. Vacillating the transferring of funds from the surplus group to deficit group
2. Re-Distribution the risk
Market: A set of potential buyer/seller is called market
Profit = TRs – TCs (Total revenue/Total cost)
Function of market
1. Facilitating the transferring funds from the surplus group to deficit group
2. Determine the price of financial assets
3. Providing liquidity to financial assets
4. Reducing the transaction cost
List the feature / attributes of financial asset/securities
1. Money ness
2. Divisibility and denomination
3. Reversibility
4. Cash flow
5. Term maturity
6. Convertibility

6. 6
7. Currency
8. Liquidity
9. Return predictability
10. Complexity
11.Tax status
Dividend: Distribution profit among the stock holder is called dividend
Derivative: The word “Derivative’’ has been originated from “derive” that is derivatives
are the instrument which are derived from underlying assets for diversified uses. These
derivatives are of different types such as:
1. Commodity derivatives
2. E.g. a chair is a derivatives
3. Mathematical derivatives
4. Financial derivatives
5. Currency derivatives
Financial derivatives: A contract between 2 parties for buying / selling specified sum of
securities within specified time at specified price is called financial derivatives
Accounting statement
1. Income statement
2. Balance sheet
3. Cash flow statement
4. Retained earnings statement
Financial asset/instrument/securities
An intangible asset represent a contact between 2 parties (investor and issuer) where one
party investor should have the right to give the benefits and the others party issuer has
the obligation to repay the principle amount with benefit at maturity is called financial
asset/ instrument/securities
Function of financial securities
1. Facilitating the transferring funds from the surplus group to deficit group
2. Redistribution the risk
Significant of derivatives
1. For minimizing risk
2. For minimizing return

7. 7
3. For setting “hedge” for investment
4. For conducting huge volume business with small amount of capital
Money: it is an instrument that can be used as means of transaction, medium of exchange
and that has store of value
Types of financial derivatives
Forward
1. Core derivatives
Future
Option
2. Hybrid derivatives
Swaps
Option: A contract between two parties where one party allows or grand the others party
to buy or grand the others party to buy or sell specified sum of securities at specified price
with specified premium within specified time is called option
Types of option
1. Call option: where the option buyer is allowed buy the securities
2. Put option: where the option buyer is allowed to sell the securities
1. Option buyer
- Decision whether the option is to be execute or not will be taken by option
buyer
2. Option writer
- The option writer has the right to have premium whether the option is
executed or not
Dividend: distribution profit is called is dividend
Retained earnings: Un distribution profit is called is Retained earnings
Global definition of financial asset (FI)
The business organization dealing with financial asset/instrument/securities are called
financial institution (FI)

8. 8
Definition of FI to the context of Bangladesh
To the context of Bangladesh by term financial FI it is meant those business organization
running their activities as per financial institution act 1993 and regulation 1994. Such as
IDCL finance, GSP finance, prime finance, LankaBangla finance etc. (Total - 31)
Conventional these organization are known as leasing companies because these
institution started leasing business at first in Bangladesh
Types of Financial Institution
1. Banking financial institution (BFI) Exclusively Bank
2. Non-Banking financial institution (NBFI) others than Bank that includes
- Investment companies
- Leasing companies
- Insurance companies
- HBFC
- Post office
3. Micro finance institution (MFI)
Micro finance institution (MFI)
The business organization dealing with micro credits (amount less than TK. 50000/=)
targeting the have not’s group are called Micro finance institution (MFI)
Historical Background of MFI
Conventionally these organizations are knows as micro credit organization introduced
by professor Dr. Md Eunus in 1976 in the village Zobra in Chittagong
Micro credit reference unit in Bangladesh Bank
Micro credit reference unit in Bangladesh Bank 2006 a separate body under ministry
of finance (MOF) named MRA (micro credit regulatory authority) formed under MRA
act, 2006 (act no 32) for licensing and monitoring of MFI
Common feature of MFI
1. Dealing with micro credit and have not’s group
2. Running their business forming groups
3. Providing training facilitating to the loner
4. High rate of interest (35% - 65%)
5. Flat rate of interest
6. Net crediting organization
7. Women targeted
8. Close monitoring

9. 9
Some important issues for FI working in Bangladesh liquidity of an FI
By term liquidity of a financial institution it is mean the capability or capacity of
meeting up the current liabilities with the current asset that is liquidity represent the
solvency position of an FI
Case study
The value of current ratio of three FI named X,Y,Z are 1:1, 2.5:1 and 5.5:1 respectively
comment which one is superior in respect of liquidity and why?
“Y” is the best (2.5:1)
“X” is the risky position (1:1)
“Z” is the accesses liquidity (5.5:1)
FI are fund receiver as well as fund provider – Explain
FI collect funds from the economic surplus group as deposits and borrowing. As well
as they provides funds to the deficit group as loans/advances/leases thereby they
facilitate the economic development
Asset liability management (ALM) for an FI
FI run their business with the money of others this money is the liability to FI with this
money they create asset lying with the hands of others so for survival/for profitability
these assets and liabilities are to be managed properly
Problem faced by FI for ALM
1. Default risk
2. Regulatory risk
3. Interest rate risk
4. Market risk
5. High inflation risk
6. Liquidity risk
7. Pre-enhance risk
8. Pre-payment risk
9. Re-investment risk
Relation between liquidity and profitability of an FI
1
Liquidity α ……………………………
Profitability

10. 10
Measurement of liquidity and ratio analysis
Total current asset
1) Current asset = …………………………………….. (Industry average 2:1)
Total current liabilities
Cash + securities + receivables
2) Quick or acid test ratio = ………………………………………………… (Industry average 1:1)
Total current liabilities
Net sales
3) Networking capital turnover ratio = …………………………………….
Net working capital
Net sales = Gross sales – sales discount – sales returns
Networking capital = total current asset – total current liabilities
Financial intermediary
The financial institution making a bridge between depositor (surplus group) and
borrowers (deficit group) facilitating the transferring of fund from surplus group to deficit
group and techniques the economic activities are called financial intermediaries
Roles/Function of Financial intermediary
1. Providing maturity intermediation
2. Reducing risks via diversification
3. Reducing the cost of contracting and information processing
4. Providing payment mechanism
Cost of capital calculation for FI/Capital for an FI
A = L+OE = C/A
C = D+E
Where, C = Capital Capital
D = Debt/Borrowing
E = Equity
At first liability from an Business
Capital for an FI
The summation money given by stockholder and money collected from others sources as
debts/borrowing is called Capital for an FI
L + OE

11. 11
Where, “D” includes
1. Borrowing
2. Preference share
“E” includes
1. Money collected through ordinary share
2. Reserves
3. Retained earning
Formula for calculating cost of capital for preference share
D ps
K ps = ……………….
Po (1-F)
Where, K ps = cost of preference share
D ps = Dividend declared against preference share
P o = face value/per value/market price of preference share
F = flotation cost
D1
Ke = ………………. + g where, G= Dividend growth rate
Po (1 - F)
Problem: An Fi named XYZ likes to collect capital from the security market by issuing
preference share and ordinary share having the face value Tk. 1000 declaring 10%
dividend on the face value if the dividend growth rate and flotation cost are 3% and 5%
respectively then calculate the cost of capital for each types of share
Solution, Here, Po= Tk. 1000
Dps = 1000 X 10% = 1000 X 0.1 = Tk. 100
D1 = 1000 X 10% = 1000 X 0.1 = Tk. 100
G = 3% = 0.03 Kps =?
F = 5% = 0.05 Ke = ?
We have,
Dps 100
Kps = ………………. =……………………………… = 0.1052%
Po (1-F) 1000 (1-0.05)

12. 12
D1 1000
Ke = ………………. + g =---------------------- + 0.03 =0.1352%
Po (1 - F) 1000 (1-0.05)
What is mean by Bank? With suitable diagram show its core function
The word Bank has been derived from an Italian word “BANCO” expressing the meaning
a tall bench or from a Latin word “BANQUEE” expressing the meaning a tall tool. It can be
defined as:
A financial institution dealing with money and credit is called Bank.
Bank Corruptly / Bank Insolvency
Key function of Bank by symbol /Fundamental Overview of Bank
Fund (F) Fund (F)
Return (R1) Return (R2)
Where, R2˃R1
Spread = R2 – R1
Spread = 15 – 10
Spread = Tk. 5
That is the differences between the lending rate and deposit rate is called spread
Problem: An FI named xyz likes to maintain 5.5% spread throughout its business. The
average deposit rate of the said FI has been calculate as 12.5% calculation the expected
lending rate of the said FI
Solution, Here, Spread = 5.5%
Deposit rate = 12.5%
Lending rate =?
We know, Spread = lending rate – Deposit rate
5.5% = lending rate – 12.5%
Lending rate – 12.5% = 5.5%
Lending rate = 12.5% + 5.5% Lending rate = 18%
Depositor
(Surplus Group)
Bank
(Financial Intermediary)
Borrower
(Deficit Group)

13. 13
Sometimes FI are called spread businesses – Explain
Banks or others FI are nothing but business organization their ultimate objectives is to
minimize profit for profit maximization they have to maintain positive spread throughout
its businesses so sometimes they are called spread business
An overview of Bank working in Bangladesh
Scheduled Bank……………………………………….…..56
Unscheduled Bank………………………………………..1 (Jublee Bnak, Khulna Khalishpur)
Specialized Financial Institution…………….……..4 (Grameen Bank, Ansar VDB Bank,
Kormosangthan Bank, Unnuon
Bank)
Total Bank 61 (Until = June 29, 2015 Total Bank
Branch 12204 in Bangladesh of all
Bank)
Who is the customer of a Bank? Show the Banker and Customer Relationship
An entity maintaining any sort of account with a Bank is called a customer of that Bank
Banker and Customer Relationship
1. Debtor vs creditor
2. Financer vs fund manager
3. Mortgage vs mortgagee
4. Lessor vs leggie
5. Pledger vs pledgee
6. Baylor vs Bailee
Capital adequacy of a Bank as per Basel – iii
Basel – iii is formula prescribed by central Bank (Bangladesh Bank) expressing the
minimum capital requirement (MCR) for a Bank working in Bangladesh. As per Basel – iii
the MCR for a Bank 10% of total risk weighted asset (TRWA) or Tk. 400 crores which is
higher provided the word Basel represent the name of a city of Switzerland
Risk weighted asset
Risk bearing asset having different weightage of risk
Asset X Assigned Risk
100 X 20%
100 X .02 = 20 %

14. 14
Feature of Basel – iii
1. Expressing the minimum capital requirement (MCR)
2. Expressing the risk based capital (RBC)
3. Expressing the five years road map (2015 – 2019)
4. Risk considering Basel – iii are
- Credit risk
- Operational risk
- Market risk
5. Capital considered here are:
a) Core / Tier – 1 capital 6% of the total risk weighted asset
b) Common equity Tier – 1, 4.5%
c) Additional Tier – 1, 1.5%
a) Supplementary / Tier – ii capital 4%
b) Buffer capital – 2.5% it is to be kept from Tier – 1, capital
(A bird in hand is better than 2 birds in bush)
Problem: From the given information calculate the minimum capital requirement
(MCR) for a bank and comment on the obtain result
Information
a) For credit risk Figure in Tk. Crores
Sl. No Asset Book value Assigned risk
01 Loan to individual 3000 100%
02 Loan to NGO 2000 50%
03 Loan to NBFI 2000 20%
04 Loan to Government 2000 0%
b) Capital charge for operational risk = Tk. 100 crores
c) Capital charge for market risk = Tk. 120 crores
Solution:
a) Risk weighted asset for credit risk
= Book value X assigned risk
= 3000 X 1 + 2000 X 0.5 + 2000 X 0.2 + 2000 X 0
= 3000 + 1000 + 400 + 0
= Tk. 4400 crores

15. 15
b) Risk weighted asset for operational risk
= 10 X capital charge
= 10 X 100
= Tk. 1000 crores
c) Risk weighted asset for market risk
= 10 X capital charge
= 10 X 120
= Tk. 1200 crores
Total risk weighted asset (TRWA) = a + b + c
= TK. 4400+1000+1200 = Tk.6600 crores
Minimum capital requirement (MCR) = TRWA X 10%
= 6600 X 0.1
= Tk. 660 crores
Comment: Since the obtained credit Tk. 660 crores > Tk. 400 crores, so the bank will
have to keep capital Tk. 660 crores
Capital to risk weighted asset ratio (CRAR)
It is nothing but, ratio of total capital kept/maintained by a bank to its total risk
weighted asset (TRWA) expressed % its can be expressed by the following equation
Total capital keep
CRAR = ………………………………. X 100
TRWA
If the result the above formula is > 10% then adequate / sufficient capital
If the result the above formula is < 10% then inadequate / insufficient capital
Problem: As on 30-06-2015 a bank named “ABC” kept capital Tk. 650 crores on the same
day the total risk weighted asset (TRWA) was Tk. 2000 crores using this information
calculate the value of “CRAR” and comment on the capital adequacy considering the
last 2 digits of your ID no as standard value
Solution:
Capital kept = Tk. 650 crores

16. 16
TRWR = Tk. 2000 crores
650
CRAR = ……………. X 100
2000
= 32.5%
Comment: last 2 digit of ID no of Mr. Mahabub is 60 the obtained result 32.5% is less than
60% so, the bank had inadequacy capital
All the bank liabilities of an FI are on demand in nature – Explain
Conventionally the liabilities of an FI may be of
- Short - term
- Mid – term
- Long – term
But, respectively of term the depositors have the right to withdraw his/her deposited
money at any time during the maturity period so in practices the liabilities of an FI are on
demand in nature
All the financial institution and market working in Bangladesh
Answer: Liquidity of FI by the term liquidity of a financial institution it is mean the
capability on capacity of meeting up the current liabilities with the current asset that is
liquidity represent the solvency position of an financial institution (FI)
What is Order, Ordinance, Act and Regulation?
Answer are:

17. 17
Central Banking – Bangladesh Bank perspectives
Definition of central Bank: Regulatory Body / Monitoring Bank / Supervisory authority /
Banker Bank / Banker to Government
Sometimes a central bank is called regulatory body – Explain
- Since the regulates / monitors the others BFI and NBFI
- Since its regulates the flow of money as per the needs of economy
Mention the moral obligation of a central bank
To save the protect the interest of small / average depositor / investor
Name the central bank of Bangladesh with the number of branch offices and location
Bangladesh Bank (BB) the number of branch offices of BB is 10 (Ten)
Location
7 in 7 division
One extra in Dhaka division Sadargate
1 in Bogra
1 in Mymensing
An over view of Bangladesh Bank (BB)
The named of central Bank of Bangladesh is Bangladesh Bank (BB) it was established on
the December 16, 1971 as per Bangladesh Bank order 1972 before the named of central
bank of our country was state Bank of Pakistan
Function of Bangladesh Bank
Core Function
1. Issuing currency / notes
2. Formulating monetary policy
3. Supervising others BFI and NBFI
4. Performing treasury function
5. Preserving and maintaining the reserves of Government
Secondary / Supplementary function
1. Working as the banker of Government
2. Working as the banker of others BFI and NBFI
3. Working as the fiscal agent of Government
4. Working as the lender of the last resort for BFI
5. Maintaining the strength of home currency

18. 18
Issuing currency / notes
The central Bank (BB) has the sole right to issue currency / notes which are the liabilities
to central Bank these liabilities should be backed by asset
The component of asset are
1. Gold
2. Reserves (USD)
3. Others asset
Types of currency
1. Bank notes Tk. 5 to Tk.1000 (Fiat Money)
2. Treasury notes Tk. 1 to Tk. 20 Latest Development
Tk. 5 will be Treasury note
Monetary policy formulation
The process of adjusting the flow of money as per the needs of the economy is called
monetary policy formulation or formulating monetary policy
List of tools used by central Bank (BB) for monetary policy formulation
1. Bank role
2. SLR
3. CRR Repo
4. Open market operation
5. moral suasion Reserve Repo
Bank rate
The rate of interest at which central Bank lend money to commercial Banks and re –
discount the commercial bills is called Bank rate. At present the Bank rate 5%
1. Bill of exchange 1. Inland bill (Local) sight bill
2. Check 2. Foreign bill / Time bill / Uses bill
3. Promissory note (NI - Negotiation Instrument)
N = 1= 30 Days N = 3 = 90 Days
N = 2 = 60 Days N = 4= 120 Days
At present the Bank rate interest is 5% mention the situation when it will be 4% and 6%
4% surplus liquidity
6% short-fall liquidity

19. 19
Why money keep the Bank?
For safety
For profitability
Statutory liquidity reserves / requirements / ratio (SLR)
% of easily cashable liquid assets to be kept by BFI and NBFI for meeting up the currency
liquidities
At present
SLR for conventional Bank = 13%
SLR for Islamic Bank = 5.5%
SLR for specialized Bank = 0%
SLR for NBFI Bank = 2.5%
Cash reserves ratio / requirement (CRR)
% of cash to be kept by BFI and NBFI with their current account with BB
At present: CRR for conventional Bank / Islamic Bank / Specialized Bank = 6.5%
CRR for NBFI = 2.5%
Calculation for CRR and SLR and report submission
1. Statement is to be made on the Thursday basis
2. Statement is to be sent on the Bangladesh Bank (BB) bi-weekly basis
Problem: from the given information calculation the amount SLR and CRR for
convention Bank
Information Figure in crores
Liabilities 1st
Thursday
2nd
Thursday
3rd
Thursday
4th
Thursday
5th
Thursday
Demand
Liability
20 70 110 50 70
Time
Liability
30 50 70 80 110
Solution
Total demand liability = 20+70+110+50+70 = Tk. 320 crores (A)
Total time liability = 30+50+70+80+110 = Tk. 340 crores (B)

20. 20
Total liability = A+B
= Tk. 320+340 crores
= Tk. 660 crores
Tk. 660 crores
Average liability = ………………………. = Tk. 132 crores
5
Amount of SLR = 132X13% =132X0.13 =Tk. 17.16 crores
Amount of CRR = 132X6.5% =132X0.065 =Tk. 8.58 crores
Impact of SLR and CRR on BFI and NBFI
At present SLR for conventional Bank is 13%
What will be the impact when it will be increased by 1%?
Answer are 1% increased must be Negative
100 – 13 = 87 investment Positive
100 – 14 = 86 investment Negative
For SLR: Here the penalty in imposed on the daily product basis special Repo rate at
present 10.25%
Problem For the month of June 2015
The study of SLR statement of a Bank has been shown that the SLR short – fall are Tk. 5
crores and Tk. 3 crores on 03-06-2015 respectively
Calculation the amount of penalties to be imposed on the said Bank
Solution: Here, Rate of penalty = 10.25% = 0.1025
Short-fall amount = Tk. 50000000
= Tk. 30000000
50000000 X 0.1025 30000000 X 0.1025
Penalties to be imposed =………………………..………… + …………………………………
365 365
= 14041.09 + 8424.65 = Tk. 22465

21. 21
For CRR: Rate of penalty = Bank rate + 5%
At present 5% + 5% = 10%
Problem
Let as assume short-fall of CRR as on 06-06-2015 = Tk. 5 crores
Let as assume short-fall of CRR as on 07-07-2015 = Tk. 8 crores
Solution
Rate of penalty = 10% = 0.10
50000000 X 0.10 80000000 X 0.10
Amount penalty to be imposed = …………………………..… + ……………………………
365 365
= 13698.63 + 21917.80
= Tk. 35616.43
Open market operation
Here the central Bank (BB) exchange the securities in the financial market through its own
account through the Repo and Reserved Repo
Draw distinction between Repo and Reserved Repo
Repo Reserved Repo
Money market instrument Money market instrument
Here the central Bank (BB) buying the
securities
Here the central Bank (BB) selling the
securities
Here the central Bank (BB) makes gain Here the central Bank (BB) makes loss
Here the central Bank (BB) provides
liquidities to the participant
Here the central Bank (BB) suck up excess
liquidities from the participant
Participant are BFI and NBFI Participant are BFI and NBFI

22. 22
Supervision / Inspection of BFI and NBFI
Two kind of inspection / supervision
On-site Off-site
Comprehensive Special
Rating of BFI and NBFI through inspection CAMELS Rating
CAMELS – Rating
C – Capital adequacy
A – Asset quality
M – Management efficiency
E – Earning level
L – Liquidity strength
S – Sensitivity to the market risk
List the provision under which Central Bank (BB) supervision others BFI and NBFI
1. article No 44 (1) of Banking Companies act 1991
2. article No 20 of financial institution act 1993
3. article No 7 (A) and (F) of Central Bank (BB) order 1972
4. article No 19 (A) of foreign exchange regulation act 1947
Islamic Banking
The financial institution whose statutes rules operating principle / procedures expressly
state the commitment to Islamic Sariah and banning receipts and payment of interest in
any of its operation is called Islamic Bank
Basic principle / mode of operand of Islamic Bank
1. Sariah expressing the meaning partnership
2. Mudarabah expressing the meaning profit sharing

23. 23
Objective of Islamic Bank
The main or core objective of an Islamic Bank are to promote develop and foster Islamic
principle in business sector specially in banking arena
Fund mobilization of Islamic Bank
Islamic Bank mobilize / collect / pool there fund through the 2 account
1. Al-Wadea account
2. Mudarabah account
Feature of Al-Wadea account
1. It is like the demand deposit account of conventional Bank
2. People keep their money in this account for safety
3. Here the Bank works as a trustee body
4. Bank can use the fund of this account at its own risk
5. Money collected through this account is unreliable for the Bank
Feature of Mudarabah account
1. This account is like as the saving account
2. This account represent a contract between Sahib-Al-Maal / Rabbul Maal (Finance
/ Deposit) Mudarib (Fund Manager / Bank)
3. Profit is to be shared between the 2 parties as per the agreed apon ratio and loss
is to be brone by the financer (Depositor)
4. This account may be following types
1. General Mudarabah account
2. Term Mudarabah account 3 month to 3 years
3. Special Mudarabah account
5 The fund collected through this account is reliable to Bank

24. 24
With a suitable flow chart show the modes of investment of Islamic Bank
Mode of investment of Islamic Bank
Fixed return Based modes variable return benevolent modes
Based modes
`Trading mode Rental mode Sharing mode Quard-Al-Hasana
Bai Murabah Issara (Leasing) Mudarabah
Bai Muzzal Hire purchase Musharaka
Bai Salam Hire purchase shirkatul meilk Diminishing
Bai Istishna
Islamic Bank to the context Bangladesh
The stepping of Islamic Bank started in Bangladesh in 1983 with the introduction of Islamic
Bank Bangladesh limited (IBBL) at present there are 8 local Bank and 1 foreign Bank
working as full-fledged Islamic Bank in our country
1. IBBL
2. Al-Arafa Islamic Bank Limited
3. Exim Bank Bangladesh Limited
4. Social Islamic Bank Limited
5. Shahajalal Islamic Bank Limited
6. ICB Islamic Bank Limited
7. First Security Islamic Bank Limited
8. Union Bank Limited
9. Bank Alfala

25. 25
Draw distinction between Islamic Bank and Conventional Bank
Conventional Bank Islamic Bank
The financial institution whose operating
principle / procedures Interest rate based
is called Conventional Bank
The financial institution whose statutes
rules operating principle / procedures
expressly state the commitment to Islamic
Sariah and banning receipts and payment
of interest in any of its operation is called
Islamic Bank
Dealing with intangible asset Dealing with both tangible and intangible
asset
SLR is 13% SLR is 5.5%
Has to abide by states law Has to abide by both Sariah law and states
law
Interest rate based Profit based
Insurance: A contract between two parties (issuer and insured) for minimizing risk in
exchange monetary benefits is called insurance
Insurance Companies: A financial intermediary running their activity as per insurance act
2010 for the minimization of risk of its clients / customer / insured is called insurance
company
Principal of insurance
1. Principal of probability
2. Principal of co-operation
Use of significant / important insurance
1. It reduce the risk
2. It provides certainty
3. It increased the productivity
4. It increased the capital
5. No Global business without insurance
Types of insurance
1. Life insurance
2. General insurance
3. Marine insurance
4. Social insurance

26. 26
Policies to be purchased from an insurance company for the safe guard of the asset of
a business firm
R-S-D
1. Riot
2. Strike
3. Damage
4. Fire
5. Cyclone
6. Flood
7. Earthquake
Regulating / monitoring the insurance company to the context of Bangladesh
At present the regulation or monitor insurance companies is ministry of finance (MOF) in
our country it regulates the insurance companies as per insurance act 2010 for the better
management of insurance companies MOF has developed a separated body called
insurance development and regulatory authority (IRDA)
Draw distinction between Bank and insurance company
Bank insurance company
A financial institution dealing with money
and credit is called Bank
A financial intermediary running their
activity as per insurance act 2010 for the
minimization of risk of its clients /
customer / insured is called insurance
company
Regulate is central Bank (BB) Regulate is MOF (IDRA)
Product are asset Product are liabilities
Capital requirement is TK. 400 crores Capital requirement is TK. 30 - 40 crores
Provision is Banking companies act 1991 Provision is insurance act 2010
Investment: Sacrificing the current income for generating more future income is called
investment
Commitment of funds for providing return is called investment
Income
Consumption Saving
Investment
Return

27. 27
Feature of investment
1. Return
2. Risk
3. Timing
4. Safety
5. Liquidity
Basic principle of investment
1. Setting investment policy/strategies
2. Making securities analysis
3. Constructing a portfolio
4. Evaluating the portfolio
5. Revising the portfolio
6. Introducing the continuous monitoring
Investment Company
The financial institution facilitating the investment process through the insurance of new
security and trading of security are called Investment Company
Function of Investment Company
1. Facilitating the investment process
2. Transferring the saving into investment
3. Hedging against inflation
4. Developing the capital market
5. Providing required advice to the investor
6. Working as the underwriter for IPO
Advantage of Investment Company
1. Economies of scale (Bulk Operation / Huge Turnover)
2. Professional Management
Types of investment companies
1. Open end fund / Mutual fund
2. Closed end fund
3. Unit trust

28. 28
Net asset value (NAV) of an investment company
The term net asset value means the difference between the total asset total liabilities by
using basic equation of accounting it can be shown as
A=L+OE
Or OE=A-L
For the investment companies by the term “NAV” its means the net value / price of
securities at the end of a particular business day. It can be calculate by using the following
formula
MVP - L
NAV = ……………………
NSO
Where, MVP = Market Value of Portfolio (Market Price of Portfolio)
L= Liability
NSO = Number of Securities Outstanding
Problem: At the end of particular business day the book of accounts of a mutual fund
have shown that the total value of outstanding security Tk. 200000 total liability of a
mutual fund Tk. 50000 and the no of outstanding securities Tk. 5000 calculate the NAV
of the said mutual fund
MVP = Tk. 200000
L = Tk. 50000
NSO = Tk. 5000
NAV =?
We know,
MVP – L Tk. 200000 – Tk. 50000 Tk. 150000
NAV = ………………… = …………………………………………….. = ………………………
NSO Tk. 50000 Tk. 5000
NAV = 30 security

29. 29
Investment Company to the context of Bangladesh
In the Government sector there is only one Investment Company named ICB in
Bangladesh. This ICB was formed on the 1st October 1976 as per Investment Corporation
of Bangladesh ordinance 1976 at present ICB is performing its jobs as per ICB act 2014
Subsidiary organization or Sister concern of ICB
1. ICB capital management Co. Ltd.
2. ICB asset management Co. Ltd.
3. ICB security and trading Ltd.
Branches of ICB
Only 7 branch
6 in six division (Except Rangpur)
1 in Bogura
To work as an investment company BFI and NBFI have to form a separate organization
under the mother organization taking permission from Bangladesh Security and Exchange
Commission (BSEC) such as: Sonali Investment Co. Ltd.
Janata Investment Co. Ltd.
Union Capital Investment Co. Ltd.
Pension Plan / Pension Fund / Provident Fund
A fund developed by the employer (Organization) for provident retirement benefit to the
competent employees is called PP/PF/PF
The introducer of this fund is called plan sponsor
Significant / Importance of pension fund / PF
1. Average life time is being increased
2. Long term saving is being increased
3. Safe investment
4. This fund is tax free
Types of pension fund
1. Defined benefit PF
2. Defined contribution PF
3. Hybrid PF

30. 30
Pension fund to the context of Bangladesh
Two schemes are available
1. CPF (Contributory Provident Fund) Employees who joined job on or before
February 1983
2. GPF (General Provident Fund)
Draw distinction between CPF and GPF
CPF GPF
Members are employees of February 1983
or before that
Members are the employees after
February 1983
Obligation deduction is 12.5% Obligation deduction is 10%
Employees contribution 10% No Employees contribution
No pension facilities Pension facilities are available
List the claimer of pension facilities
1. Self
2. Spouse
3. Male child up to the age of 25 years
4. Female child up to married
5. Disable child
Formula for pension facilities
Maximum retirement benefit = 80% (100%)
(VRS - Voluntary Retirement Scheme) Its means Golden Hand seek
Retirement service length 25 years
Minimum service retired for having retirement benefit 10 years
Last Basic X 80%
Pension benefit = …………………………… X 230
2
40000 X 0.8
Pension benefit = …………………………… X 230 = Tk. 36, 80,000
2

31. 31
Calculate of retirement benefit
For CPF members
Retirement Benefit = PF Account Balance + Last Basic X 2 X Length of Service
Own Balance Gratuity
For GPF members
Retirement Benefit for Selling the Pension
Last Basic X 80% Last Basic X 80%
RBSP = PF A/C Balance + …………………………. X 230 + …………………………………….. X 115
2 2
Last Basic X 80%
Retirement Benefit for Enjoying Pension = PF A/C Balance +……………………………… X 230
2
Problem: An employer ABC Corporation has successfully completed his 30 years’ service
time. At the eve of his retirement his last basic became Tk. 40,000 and PF account
balance was Tk. 37,00,000 considering the said employee a member of CPF and GPF
calculate his retirement benefit
Solution Length of service = 30 years
Last Basic = Tk. 40,000
PF Balance = Tk. 37, 00,000
A) Retirement Benefit as CPF Member = PF Account Balance + Last Basic X 2 X Length
of Service
= Tk. 37, 00,000 + 40,000 X 2 X 30
= Tk. 61, 00,000
PF A/C Balance Last Basic X Length of Service X 2

32. 32
B) Retirement Benefit as GPF Member
Last Basic X 80% Last Basic X 80%
1) For Selling Pension = PF A/C Balance + ………………………….. X 230 + …………………….… X 115
2 2
40,000 X 0.8 40,000 X 0.8
For Selling Pension = Tk. 37, 00,000 + …………………….. X 230 + ……………………… X 115
2 2
= Tk. 37, 00,000 + 16,000 X 230 + 16,000 X 115
= Tk. 92, 20000
Last Basic X 80%
2) For Enjoying Pension = PF A/C Balance + ……………………………….. X 230
2
40,000 X 0.8
For Enjoying Pension = Tk. 37, 00,000 + …………………..………... X 230
2
For Enjoying Pension = Tk. 37, 00,000 + 16,000 X 230
= Tk. 73, 80,000
Financial market / Security market
Means/Ways/Tools/Mechanism through which financial asset/financial
instrument/securities are traded/exchanged is called financial market
Types of financial market
Money market: Financial dealing with short-term security having maturity period one
years to less is called money market
Capital market: Financial dealing with long-term security having maturity period more
than one years is called capital market
Primary market: Financial market dealing with newly issued securities is called primary
market

33. 33
Secondary market: Financial market dealing with existing already issued securities is
called secondary market
Function of securities market
1. Facilitating the transferring of fund from the surplus to deficit group
2. Transferring the saving into investment
3. Providing liquidity to financial asset
4. Minimizing the transaction cost
5. Providing necessary information to the market participant
6. Accommodation the buyer and seller
Globalization of securities market
Factors influencing the globalization of security market
1. De – Regulation
2. Institutionalization securities market
3. Technological Development
4. Sophisticated Communication
Efficiency of security market
By the term efficiency of security market it is market the capacity or capability of that
market for providing lower cost services with publicly available information
Types of marketing efficiency
1. Operational efficiency the capability of providing lower cost services
2. Pricing efficiency the capability of providing publicly available information in the
automatic form
Types of securities market (Secondary Market)
A) From the view point of trading location
1. Organized security market: Feature are
i) Should have a fixed location and physical structure
ii) Should be accepted by statics law
iii) DSE and CSE both are organized security market
2. OTC Market Feature Are:
i) It has been named from the bank counters
ii) Worldwide this market means a telecommunication and sophisticated security
market
iii) To the context of our country this market means a call of organized security
market. For monitoring badly performed enlisted securities

34. 34
B) From the view point of trading frequency
1. Call market Feature are:
i) Enlisted securities are batched / group as per trading times allocation
ii) This types of market is not available in our country
2. Continuous market Feature are:
i) There is no time allocation for trading of securities
ii) Any types of securities may be traded if others condition are satisfied
iii) Both DSE and CSE continuous security market
C) From the view point of trading nature
i) Public market: For general trading
ii) Block market: Market for large volume trading
iii) Odd lot market: Market for odd lot trading
iv) Spot market: Market for corporate trading
Types of lot
1. Even Lot: 50 Securities
2. Odd Lot: 1-49 Securities
3. Mixed Lot: 149 Securities
Grouping of securities in DSE and CSE
“A” Group
“B” Group
“Z” Group
“N” Group
“G” Group
Order of specification
1. Name of Company
2. Order of Sized
3. Price Limit
4. Order Types
Types of order
1. Open order valid until executed
2. Day order valid for a business day
3. Discretionary order here the investor keeps the right of price volume etc.

35. 35
Who the regulator / monitor of securities market to the context of Bangladesh? List the
provision
Bangladesh securities exchange commission (BSEC) is the regulator, monitoring the
securities market to the context of Bangladesh
Provision / Core Provision
1. Securities act, 1920
2. Securities and exchange commission ordinance, 1969
3. Securities and exchange commission act, 1993
Secondary level acts
1. Companies act,1994
2. Bank companies act, 1991
3. Financial institution act, 1993
4. Insurance act, 2010
5. Anti-money laundering ordinance, 2012