This document provides information about monetary policy tools and frameworks in Bangladesh. It discusses key challenges for monetary policy in Bangladesh, including a large non-monetized sector, excess non-banking financial institutions, unorganized financial markets, high liquidity hindering policy, and lack of coordination between monetary and fiscal policy. The document recommends expanding and organizing capital markets, improving credit control mechanisms, developing a narrow bill market, and developing banking habits to improve the effectiveness of monetary policy in Bangladesh.

2. MADE BY:
Amit Kumar Sarker
Studying MBA(Major in HRM) & Author of Publication
Bangabandhu Sheikh Mujibur Rahman Science & Technology University, Gopalganj-8100, Bangladesh
Email: amit.bsmrstu@gmail.com; Facebook: fb.com/amitsarker.alok
For more info to contact:
Mob: +8801723-839393 (Bd)
Twitter: twitter.com/amitsarker_alok
Google+: plus.google.com/+amitbsmrstu
Alternative Mail: amit_bsmrstu@yahoo.com
Others info:
Date of Birth: 2nd August
Present address: Bijoy Dibos Hall, Bangabandhu Sheikh
Mujibur Rahman Science & Technology University,
Gopalganj-8100, Bangladesh

3. MONETARY POLICY
Monetary policy is the term used by economists to describe ways of managing the supply
of money in an economy.
And Monetary policy includes all monetary decisions and measures irrespective of
whether their aims are monetary and non-monetary, all non-monetary decision and
measures that aim it affecting the monetary system.

4. TOOLS OF MONETARY POLICY GENERALLY
USED
Monetary base: Monetary policy can be implemented by changing the size of the monetary base.
Reserve requirements: The monetary authority exerts regulatory control over banks. Monetary policy can be
implemented by changing the proportion of total assets that banks must hold in reserve with the central bank.
Discount window lending: Discount window lending is where the commercial banks, and other depository
institutions, are able to borrow reserves from the Central Bank at a discount rate.
Interest rates: The contraction of the monetary supply can be achieved indirectly
by increasing then nominal interest rates.
Currency board: A currency board is a monetary arrangement that pegs the
monetary base of one country to another, the anchor nation.

5. TOOLS OF MONETARY POLICY

6. THIS COUNCIL CONSISTS OF THE FOLLOWING GOVERNING BODY
Source: General Banking by L.R. Chowdhury

7. MONETARY POLICY DECISION- MAKING PROCESS

8. RECENT AMENDMENT/ADDITION
BB Governor's Address at Monetary Policy Statement announcement ceremony for H1 FY16 Date: 30 July, 2015, Time:
11.00 a.m. Venue: Jahangir Alam Conference Hall, BB

9. FRAMEWORKS OF BANGLADESH’S MONETARY POLICY

10. KEY CHALLENGE FOR MONETARY POLICY OF
BANGLADESH
 There Exist a Non-Monetized Sector:
In Bangladesh there is a existence of non monetized economy
in large extent people areas where many of the transaction are
of the barter type and not monetary type .
 Excess Non Banking Financial Institutions (NBFI):
As the economy launch itself into a orbit of economic growth and
development, the financial sector comes up with great speed as a
result many non banking financial institutions (NBFI)

11.  Existence of Unorganized Financial Markets:
The financial markets help in implementing the monetary policy ,in many developing countries the financial markets
especially the money markets are of an unorganized nature and in backward conditions
 Higher Liquidity Hinders Monetary Policy:
In rapidly growing economy the deposit base of money commercial bank is expanded, this creates excess liquidity in the
system
 Money Not Appearing In an Economy:
Large percentage of money never comes in the mainstream economy, rich people, traders ,business and other people
prefer to spend rather than to deposit money in the bank
 Time Lag Affects Success of Monetary Policy :
The success of the monetary policy depends on timely implementation of it ,however ,in many cases unnecessary delay is
found in implementation of the monetary policy
 Monetary and Fiscal Policy Lacks Coordination

12. RECOMMENDATION
 In Bangladesh, capital markets should be expanded and organized enough to succeed the monetary policy.
 The credit control mechanisms like open market operation, bank rate, etc. should be effective.
 A narrow bill market should make the discount rate effective.
 Banking habits are also underdeveloped which hampers the effectiveness of monetary policy seriously. So banking
habits should be developed.
 Steps should be taken to abolish the existence of liquidity trap.
 To run the monetary policy smoothly and effectively, it is essential to pay sufficient attentions to increase the GDP.