The document discusses the role of central banks in economic development. It outlines that central banks aim to promote rising production, employment, and incomes. They do this by expanding financial institutions and credit, maintaining equilibrium between money supply and demand, implementing suitable interest rates, managing public debt, and controlling credit. Central banks also aim to solve balance of payments issues. The document then provides examples of how Bangladesh Bank promotes economic growth and development in Bangladesh through its monetary policy tools and objectives.

2. Dr. Md. Azam Khan
Professor
Faculty of Business
Bangladesh University of Professionals

3. Name: Hosneara Swarnaly
Id no:1407017
Name: Munni Chakma
Id no:1407035
Name: Afroza Parvin Chowdhury
Id no:1407031
Name: Tasnim Ali Shamma
Id no:1407069
Name: Namrata Khisa
Id no:1404050
Name: Ishrat JahanTanjila
Id no:1404017

4. • The term ‘Bank’ seems to
originated and/or derived from
different sources like the
Germanic word ‘banck’, the
French word ‘banque’ and the
Italian word ‘banco’.
• The Germanic word ‘banck’
which means a joint stock fund
or heap. The Italian word
‘banco’ refers to a bench at
which the money changers
used to change one kind of
money into another and
transact their banking business.
• Thus, in olden days, banking
was associated with the
business of money
changing/lending.

6. • 1. Maximizing profits
• 2. Saving and Lending money .
• 3. Creating propensity of savings amongst the people.
• 4. Create money against money as an alternative for enhancing supply of
money.
• 6. Build up capital through savings.
• 7. Expedite investments.
• 8. Controlling money market.
• 10. Extend co-operation and advices to the Govt. on economic issues.
• 11. Assist the Govt. for trade& business and socio-economic development.
• 12. Issue and control notes and currency as a central bank.
• 13. Maintain and control exchange rates as a central bank.

8. • “A central bank is a bank whose essential duty is to
maintain stability of the monetary standard.”
• Bangladesh Bank is the Central bank of Bangladesh and
is a member of the Asian Clearing Union.
• 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.
• Bangladesh Bank is the first central bank in the world to
issue a "Green Banking Policy".
• Dr. Atiur Rahman was given the title ‘Green Governor’ at
the 2012 United Nations Climate Change Conference,
held at the Qatar National Convention Centre in Doha

9. • Bangladesh Bank came into existence on 16 December
1971.
order 1972 (Presidential Order No. 127 of 1972) .
• In 1982, the first reform program was initiated, wherein
the government denationalized two of the six nationalized
commercial banks and permitted private local banks to
compete in the banking sector.
• In 1986, a National Commission on Money, Banking and
Credit was appointed to deal with the problems of the
banking sector.
• The Financial Sector Adjustment Credit (FSAC) and
Financial Sector Reform Programme (FSRP) were
formed in 1990, upon contracts with the World Bank.

11. • A set of rules that aims at regulating the supply of money
in accordance with predetermined goals or objectives.
Monetary policy plays a very dominant role in altering the
economic activity and the price level in a country. So, it
should be very carefully formulated and implemented in
achieving the goals and objectives as outlined in the
Bangladesh Bank Order, 1972 below:
(1) Price stability both internal and external;
(2) Sustainable growth and development;
(3) High employment;
(4) Economic and efficient use of resources;
(5) Stability of financial and payment system.

12. (i) Open market operation (treasury bills/bonds, repo, reverse
repo auctions),
(ii) Reserve ratios- cash reserve requirements (CRR) and
statutory liquidity ratio (SLR),
(iii) Secondary trading,
(iv) Discounting rate/ bank rate, and
(v) Acts as a banker to the government.
(vi) Acts as an advisor to the government.
(vii) As the central bank of Bangladesh reserves sole
responsibility to issue bank note.
(viii) Directs the growth expediting programs for the national
interest.

13. • Bangladesh banks one of the key objective is to promote
and maintain a high level of production, employment and
real income of Bangladesh; and to foster growth and
development of the country's productive resources for
national interests.
• Therefore, Bangladesh bank as the regulator of country's
financial system performs its responsibilities with the view
to achieve its objectives that impacts directly and
indirectly on country's financial growth, in particular,
monetary, fiscal, and economic growth.

14. 1. Role of Central Bank in Economic Development
The central bank in a developing country aims at the promotion and
maintenance of a rising level of production, employment and real income
in the country.
2. Creation and Expansion of Financial Institutions
One of the aims of a central bank in an underdeveloped and developing
country is to improve its currency and credit system.
3.Proper Adjustment between Demand for and Supply of Money
The central bank plays an important role in bringing about a proper
adjustment between demand for and supply of money. An imbalance
between the two is reflected in the price level. A shortage of money
supply will inhibit growth while an excess of it will lead to inflation. As the
economy develops, the demand for money is likely to go up due to
gradual monetization of the non-monetized sector and the increase in
agricultural and industrial production and prices.

15. 4. A Suitable Interest Rate Policy
In an underdeveloped country the interest rate structure stands at a very
high level. There are also vast disparities between long-term and short-term
interest rates and between interest rates in different sectors of the economy.
5. Debt Management
Debt management is one of the important functions of the central bank in an
underdeveloped and developing country. It aims at proper timing and issuing
of government bonds, stabilizing their prices and minimizing the cost of
servicing public debt.
6. Credit Control
Central Bank should also aim at controlling credit in order to influence the
patterns of investment and production in a developing economy. Its main
objective is to control inflationary pressures arising in the process of
development. This requires the use of both quantitative and qualitative
methods of credit control.
7. Solving the Balance of Payments Problem
The central bank should also aim at preventing and solving the balance of
payments problem in a developing economy. Such economies face serious
balance of payments difficulties to fulfil the targets of development plans. An
imbalance is created between imports and exports which continue to widen
with development.

16. The arguments in its favor are as follows:
(a) To maintain equilibrium in quality between notes and currency issue
(b) To maintain equilibrium in size, types and values of notes and currency
(c) To maintain stability in rates of exchange both inland and foreign
(d) To create confidence on the people
(e) To control money market.

17. • In common parlance, Bank means Commercial Bank and
its functions. Central Bank is a separate entity and plays
distinctive roles. The function of a Bank is to collect
deposits from the public and lend those deposits for the
development of Agriculture, Industry, Trade and
Commerce.
• Bank pays interest at lower rates to the depositors and
receives interests on loans and advances from them at
higher rates. In modern banking, Bank carries out many
other activities, e.g. creation of debts and money,
transmission of money from one country to another
country, increase of foreign trade, preservation of
valuables in safe custody etc.
• Thus, Bank earns profits through executing various types
of activities.

18. Sl. Points of
distinction
Central Bank Commercial Bank
01. Formation Central Bank is the sole banking
Institution which is established
through ordinance or special law of
the Government.
Commercial Bank is formed on the basis of
Banking Company Laws.
02. Ownership Central Bank is established under
Government ownership.
Commercial Bank is established under both
govt. and private Ownership.
03. Purpose To earn profit is not the main
purpose of central bank. Its main
purpose is to control credit system
and money market.
The main purpose of commercial bank is to
earn profit. Recovery of loan is the main stay
for generation of profit.
04. Number In a country there is only one
Central Bank.
In a country there may be more number of
commercial banks.
05. Control Central bank is conducted
exclusively under Government
control.
Commercial Bank is conducted under central
bank’s control.
06. Government
Influence
Government has direct influence on
Central Bank.
Government has indirect influence On
Commercial Bank through Central Bank.

19. • Thus the central bank plays an important role in achieving
economic growth of a developing country like Bangladesh
through the various measures discussed above. It should
promote economic growth with stability, help in attaining full
employment of resources, in overcoming balance of payments
disequilibrium, and in stabilizing exchange rates.
• Over the past decade, many central banks in developing and
emerging economies have begun to place renewed emphasis
on the promotion of economic development. A central bank
with a wider, developmental mandate can make important
contributions to a country’s economic and social development
and may play an important role in improving the framework
conditions for financing the post-2015 development.
• Bangladesh bank is following a vigilantly accommodative
monetary policy to sustain strong public , especially private
sector credit demand and its mechanism of control.