The document provides background information on Eastern Bank Limited (EBL), one of the largest private commercial banks in Bangladesh. It discusses EBL's vision, mission, values, products, organizational structure, and role in the Bangladeshi money market. Specifically, it outlines EBL's objectives to understand money market procedures, identify issues, recommend regulations, and identify various money market investment modes used by EBL. It also summarizes EBL's history, locations, management team, and corporate details.
Money market instruments are very liquid and safe but offer lower returns than other securities. Common money market instruments in Bangladesh include treasury bills, commercial paper, certificates of deposit, and bankers' acceptances. Treasury bills are government securities issued at a discount that mature at par. Commercial paper is short-term debt issued by large companies. Certificates of deposit are bank-issued time deposits. Bankers' acceptances involve bills of exchange endorsed by banks to facilitate international trade.
This document discusses methods for valuing different types of financial instruments including bonds, preference shares, and equity shares.
For bonds, it describes the different types including bonds with maturity, pure discount bonds, and perpetual bonds. It also defines relevant terms like coupon rate, maturity period, current yield, and yield to maturity. Formulas are provided for calculating yield to maturity and yield to call.
Preference shares are valued using the dividend discount model. Equity shares are more difficult to value since dividends may fluctuate or grow. Several dividend discount models are described for valuing equity including the no growth model, constant growth model, and multi-period models using dividends or earnings. The P/E ratio and its
The secondary market allows investors who purchased shares during a company's IPO or FPO to sell those shares to other investors on a stock exchange. Trading occurs between general public investors according to supply and demand. This provides liquidity for shareholders and encourages new investment. Major functions of the secondary market are to provide regular security price information, observe bond prices and interest rates, offer liquidity to investors, and keep transaction costs low.
The document provides an overview of investment banking. It discusses the various divisions within an investment bank like corporate finance, fixed income, currencies and commodities (FICC), equities, and support functions. It explains that a typical investment banking deal can involve multiple divisions from structuring and pricing to selling the asset. The document also covers topics like the difference between commercial/investment banks and traditional investment banks, the impact of regulations like the Volcker Rule and Basel 3, and the current challenges in the investment banking industry due to the economic environment.
This document provides an overview of the implementation of Basel III capital standards in Bangladesh. It discusses key changes introduced by Basel III after the 2008 financial crisis, including strengthening capital requirements, introducing capital buffers, adopting a leverage ratio, and establishing liquidity standards. It outlines Bangladesh Bank's roadmap for phasing in the new requirements between 2015-2019. It also reviews the banking industry's progress in meeting existing Basel II capital requirements, finding industry capital levels are already close to meeting future Basel III standards.
This document provides an overview of financial services in India. It defines financial services as services required for mobilizing and channeling savings to productive activities. It discusses the key components, functions, categories and examples of financial services in India. The categories discussed include asset management companies, liability management companies, fund based financial services companies and fees based financial services companies. Examples of specific financial services discussed include leasing, factoring, bill discounting, securitization, mutual funds, merchant banking and venture capital financing. The document also lists some of the top 10 financial services companies operating in India.
This document discusses financial markets and institutions. It begins by outlining the capital allocation process and defining direct and indirect financing. It then discusses various segments of financial markets, including money markets and capital markets. The document outlines what financial markets are, why they are important to study, and their key functions. It also defines different types of financial markets and instruments traded within them, such as money market securities, capital market securities, bonds, mortgages, and derivatives. Finally, it discusses financial institutions, defining them and their role in facilitating indirect finance between savers and borrowers.
Money market instruments are very liquid and safe but offer lower returns than other securities. Common money market instruments in Bangladesh include treasury bills, commercial paper, certificates of deposit, and bankers' acceptances. Treasury bills are government securities issued at a discount that mature at par. Commercial paper is short-term debt issued by large companies. Certificates of deposit are bank-issued time deposits. Bankers' acceptances involve bills of exchange endorsed by banks to facilitate international trade.
This document discusses methods for valuing different types of financial instruments including bonds, preference shares, and equity shares.
For bonds, it describes the different types including bonds with maturity, pure discount bonds, and perpetual bonds. It also defines relevant terms like coupon rate, maturity period, current yield, and yield to maturity. Formulas are provided for calculating yield to maturity and yield to call.
Preference shares are valued using the dividend discount model. Equity shares are more difficult to value since dividends may fluctuate or grow. Several dividend discount models are described for valuing equity including the no growth model, constant growth model, and multi-period models using dividends or earnings. The P/E ratio and its
The secondary market allows investors who purchased shares during a company's IPO or FPO to sell those shares to other investors on a stock exchange. Trading occurs between general public investors according to supply and demand. This provides liquidity for shareholders and encourages new investment. Major functions of the secondary market are to provide regular security price information, observe bond prices and interest rates, offer liquidity to investors, and keep transaction costs low.
The document provides an overview of investment banking. It discusses the various divisions within an investment bank like corporate finance, fixed income, currencies and commodities (FICC), equities, and support functions. It explains that a typical investment banking deal can involve multiple divisions from structuring and pricing to selling the asset. The document also covers topics like the difference between commercial/investment banks and traditional investment banks, the impact of regulations like the Volcker Rule and Basel 3, and the current challenges in the investment banking industry due to the economic environment.
This document provides an overview of the implementation of Basel III capital standards in Bangladesh. It discusses key changes introduced by Basel III after the 2008 financial crisis, including strengthening capital requirements, introducing capital buffers, adopting a leverage ratio, and establishing liquidity standards. It outlines Bangladesh Bank's roadmap for phasing in the new requirements between 2015-2019. It also reviews the banking industry's progress in meeting existing Basel II capital requirements, finding industry capital levels are already close to meeting future Basel III standards.
This document provides an overview of financial services in India. It defines financial services as services required for mobilizing and channeling savings to productive activities. It discusses the key components, functions, categories and examples of financial services in India. The categories discussed include asset management companies, liability management companies, fund based financial services companies and fees based financial services companies. Examples of specific financial services discussed include leasing, factoring, bill discounting, securitization, mutual funds, merchant banking and venture capital financing. The document also lists some of the top 10 financial services companies operating in India.
This document discusses financial markets and institutions. It begins by outlining the capital allocation process and defining direct and indirect financing. It then discusses various segments of financial markets, including money markets and capital markets. The document outlines what financial markets are, why they are important to study, and their key functions. It also defines different types of financial markets and instruments traded within them, such as money market securities, capital market securities, bonds, mortgages, and derivatives. Finally, it discusses financial institutions, defining them and their role in facilitating indirect finance between savers and borrowers.
MONEY MARKET AND CAPITAL MARKET(short project)vijayverma767
The document provides information about money markets and capital markets. It defines the money market as dealing in short term loans of up to 365 days. Money market instruments discussed include call money, treasury bills, certificates of deposit, commercial paper, repurchase agreements, and banker's acceptances. The roles of the money market are also summarized, such as maintaining monetary equilibrium, promoting economic growth, and helping implement monetary policy. Characteristics of the money market include short term borrowing and lending between parties who agree on interest rates. The importance of the money market to the Indian economy is also highlighted.
This document provides an overview of mutual funds, including their key concepts, roles, how they operate, types of funds, legal structure in India, and distribution channels. The main points are:
- A mutual fund pools money from investors and invests it in stocks, bonds and other securities, with the fund managed by a professional on behalf of investors.
- Mutual funds assist investors in earning income, provide diversification, and help raise money for governments and companies through investments.
- The legal structure of mutual funds in India involves a trust with sponsors, trustees, an asset management company, custodian and registrar & transfer agent. Key documents include SID, SAI and KIM.
This chapter provides an overview of the topics that will be covered in the course, including money, banking, financial institutions, financial instruments, financial markets, and central banks. It describes the five core components of the financial system as money, financial institutions, financial instruments, financial markets, and central banks. It provides brief definitions and discussions of these components, as well as concepts like monetary policy, fiscal policy, and the roles of central banks.
The document provides an introduction to financial systems, including definitions, key components, and functions. It discusses that a financial system consists of institutions, markets, instruments, and services that facilitate the transfer of funds. The main components are financial institutions like banks, markets where assets are traded, various financial services, and instruments/assets like stocks, bonds, and mutual funds. Financial systems play an important role in allocating resources and facilitating economic growth.
Presentation on "Capital Market"
1.definition and characteristics
2.function and players
3.importance/role and types
4.factor and structure
5.reforms and development
The document discusses secondary markets and stock exchanges. It defines the secondary market as the market where existing securities of companies are traded. Investors buy and sell stocks and bonds among themselves in secondary markets, without providing new funds to the issuer. Stock exchanges like the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) provide organized markets for trading these secondary market securities and play an important role in capital formation and liquidity. The BSE and NSE are the largest stock exchanges in India in terms of market capitalization and trade volume.
This document provides an overview of money and the payments system. It defines money as an asset generally accepted for payment or debt repayment. Money serves three main functions: as a medium of exchange, unit of account, and store of value. The document discusses different forms of money like commodity money, fiat money, checks and different payment methods including credit cards, debit cards, and electronic funds transfers. It also examines measures of money like M1 and M2 and how money growth relates to interest rates, economic growth and inflation. Key inflation measures are explained like the consumer price index and deflators.
1) Futures contracts are agreements to buy or sell an asset at a predetermined price on a specified future date. Commodity futures involve agricultural and industrial goods, while financial futures are based on stock indexes, interest rates, and currencies.
2) Futures contracts are used by hedgers seeking to offset price risk and speculators hoping to profit from price changes. Clearinghouses associated with exchanges guarantee trades and regulate deliveries.
3) The theoretical futures price is determined by arbitrage and equals the current cash price plus the cost of carry until the futures contract expires. Basis risk and cross-hedging risk can reduce the effectiveness of hedging strategies using futures.
- The document provides an overview of mutual funds including their concept, workings, history, structure, types, and regulations in India.
- Mutual funds pool money from investors and invest it professionally in securities like stocks and bonds. They provide investors diversification, professional management, and low costs.
- The mutual fund industry in India has grown significantly since the 1990s and is now regulated by SEBI. Key entities involved include sponsors, trustees, asset management companies, and custodians.
- Mutual funds can be categorized by structure (open-ended or closed-ended), investment objective (growth, income, balanced), or type (equity, debt, liquid/money market funds). Regulations govern
The document discusses money markets and money market instruments. It defines a money market as a market for short-term financial instruments with maturities of less than one year. Money market instruments allow borrowers to access short-term funds and provide liquidity to lenders. Some key money market instruments discussed include treasury bills, commercial paper, certificates of deposit, commercial bills, and repurchase agreements. The money market plays an important role in economic development by facilitating the flow of funds.
The document provides an overview of capital markets, including its definition, objectives, key components and functions. It discusses the primary and secondary markets, and the major players in capital markets such as brokers, investment bankers, stock exchanges, underwriters, credit rating agencies, corporations, banks/financial institutions, and foreign investors.
This document provides an overview of the money market, including its key components, instruments, and structure in India. The money market deals in short-term financial assets that can be easily converted into cash. It includes treasury bills, certificates of deposit, commercial paper, banker's acceptances, and repurchase agreements. The money market helps facilitate short-term borrowing and lending, provides liquidity management for the central bank, and supports business financing needs. The structure of the Indian money market involves both organized and unorganized sectors, with the Reserve Bank of India playing a key regulatory role.
The document discusses key aspects of secondary markets. It defines secondary markets as markets where securities are traded after being initially offered to the public in primary markets. The majority of trading occurs in secondary markets, which comprise equity and debt markets. Secondary markets offer both sellers and buyers advantages, such as sellers recouping a portion of the original purchase price, though they can also reduce sales for original sellers. Key products traded in secondary markets include equity shares, government securities, debentures, and bonds.
This document provides an overview of financial markets and institutions. It defines financial markets as markets for trading financial assets like stocks and bonds. It describes the main roles of financial markets as facilitating financial intermediation, providing a payments system, and allowing risk management. The document also outlines different types of financial markets and securities traded on markets. It discusses the role of financial institutions in processing information, lowering transaction costs, and addressing market imperfections to serve borrowers and lenders. Finally, it notes trends in financial institutions like consolidation, increased competition, and global expansion.
The document discusses money markets and the various securities traded within them. Money markets provide short-term funding for participants and a place for investors to store excess cash. Major securities discussed include Treasury bills, certificates of deposit, commercial paper, and repurchase agreements. These instruments vary in issuers, maturity length, and liquidity. Money markets help corporations and governments manage mismatches between cash inflows and outflows.
Financial markets allow buyers and sellers to trade financial securities like stocks and bonds, as well as commodities, at low costs. There are two main components - the capital market for long-term financial assets over 1 year, and the money market for short-term loans and borrowing under 1 year. The capital market raises funds through instruments like shares, debentures, and bonds, while the money market uses short-term instruments like treasury bills, commercial paper, and bankers acceptances. Both markets serve important functions like mobilizing savings, facilitating investment and economic development.
Mutual Funds_ Structure and Constituents.pdfRustineRose1
The document discusses the constituents and structure of mutual funds. It describes the key parties involved - investors who contribute funds, sponsors who set up the fund, asset management companies that manage the fund's assets, trustees who ensure investors' interests are protected, distributors who bring in investors, registrars who maintain records of investors, and custodians who hold the fund's securities. It also outlines different types of mutual fund schemes and provides a brief history of mutual funds in the Philippines, comparing them to other major financial institutions like commercial banks, securities firms, and insurance companies.
This document discusses primary and secondary markets. The primary market involves the initial sale of securities to raise capital, such as through initial public offerings. It occurs before the secondary market and has no single location. The secondary market allows existing securities to be traded, creating liquidity. It occurs through stock exchanges and enables prices to be established and investors to buy and sell securities they already hold. Both markets play important roles in capital formation and resource allocation.
financial instruments available in Pakistan for investment Zafar aziz
There are different investment options available in Pakistan's financial markets for both short-term and long-term investing. The money market includes short-term instruments like treasury bills, certificates of deposit, and commercial paper. The capital market includes both equity instruments like common stock and preferred stock, as well as fixed income instruments like corporate bonds. Additionally, Pakistan's debt market offers savings certificates of various maturities like Defense Savings Certificates (10-year), Special Savings Certificates (3-year), and Regular Income Certificates (5-year). These provide attractive returns to savers while supporting the government and economy.
The money market is where short-term borrowing and lending occurs between entities with surplus short-term funds and those with short-term deficits. It includes various financial instruments with original maturities of one year or less like treasury bills, commercial paper, certificates of deposit, and repurchase agreements. The money market serves important functions like facilitating liquidity management, providing outlets for surplus funds, and enabling central banks to influence the economy. It consists of both organized segments with formal institutions and markets, as well as unorganized segments involving informal lenders.
Critically examine the features of various common money market instruments av...Bilal Ahmed Bhatti
Critically examine the features of various common money market instruments available in corporate sector of Pakistan. Also give theoretical background of the topic
MONEY MARKET AND CAPITAL MARKET(short project)vijayverma767
The document provides information about money markets and capital markets. It defines the money market as dealing in short term loans of up to 365 days. Money market instruments discussed include call money, treasury bills, certificates of deposit, commercial paper, repurchase agreements, and banker's acceptances. The roles of the money market are also summarized, such as maintaining monetary equilibrium, promoting economic growth, and helping implement monetary policy. Characteristics of the money market include short term borrowing and lending between parties who agree on interest rates. The importance of the money market to the Indian economy is also highlighted.
This document provides an overview of mutual funds, including their key concepts, roles, how they operate, types of funds, legal structure in India, and distribution channels. The main points are:
- A mutual fund pools money from investors and invests it in stocks, bonds and other securities, with the fund managed by a professional on behalf of investors.
- Mutual funds assist investors in earning income, provide diversification, and help raise money for governments and companies through investments.
- The legal structure of mutual funds in India involves a trust with sponsors, trustees, an asset management company, custodian and registrar & transfer agent. Key documents include SID, SAI and KIM.
This chapter provides an overview of the topics that will be covered in the course, including money, banking, financial institutions, financial instruments, financial markets, and central banks. It describes the five core components of the financial system as money, financial institutions, financial instruments, financial markets, and central banks. It provides brief definitions and discussions of these components, as well as concepts like monetary policy, fiscal policy, and the roles of central banks.
The document provides an introduction to financial systems, including definitions, key components, and functions. It discusses that a financial system consists of institutions, markets, instruments, and services that facilitate the transfer of funds. The main components are financial institutions like banks, markets where assets are traded, various financial services, and instruments/assets like stocks, bonds, and mutual funds. Financial systems play an important role in allocating resources and facilitating economic growth.
Presentation on "Capital Market"
1.definition and characteristics
2.function and players
3.importance/role and types
4.factor and structure
5.reforms and development
The document discusses secondary markets and stock exchanges. It defines the secondary market as the market where existing securities of companies are traded. Investors buy and sell stocks and bonds among themselves in secondary markets, without providing new funds to the issuer. Stock exchanges like the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) provide organized markets for trading these secondary market securities and play an important role in capital formation and liquidity. The BSE and NSE are the largest stock exchanges in India in terms of market capitalization and trade volume.
This document provides an overview of money and the payments system. It defines money as an asset generally accepted for payment or debt repayment. Money serves three main functions: as a medium of exchange, unit of account, and store of value. The document discusses different forms of money like commodity money, fiat money, checks and different payment methods including credit cards, debit cards, and electronic funds transfers. It also examines measures of money like M1 and M2 and how money growth relates to interest rates, economic growth and inflation. Key inflation measures are explained like the consumer price index and deflators.
1) Futures contracts are agreements to buy or sell an asset at a predetermined price on a specified future date. Commodity futures involve agricultural and industrial goods, while financial futures are based on stock indexes, interest rates, and currencies.
2) Futures contracts are used by hedgers seeking to offset price risk and speculators hoping to profit from price changes. Clearinghouses associated with exchanges guarantee trades and regulate deliveries.
3) The theoretical futures price is determined by arbitrage and equals the current cash price plus the cost of carry until the futures contract expires. Basis risk and cross-hedging risk can reduce the effectiveness of hedging strategies using futures.
- The document provides an overview of mutual funds including their concept, workings, history, structure, types, and regulations in India.
- Mutual funds pool money from investors and invest it professionally in securities like stocks and bonds. They provide investors diversification, professional management, and low costs.
- The mutual fund industry in India has grown significantly since the 1990s and is now regulated by SEBI. Key entities involved include sponsors, trustees, asset management companies, and custodians.
- Mutual funds can be categorized by structure (open-ended or closed-ended), investment objective (growth, income, balanced), or type (equity, debt, liquid/money market funds). Regulations govern
The document discusses money markets and money market instruments. It defines a money market as a market for short-term financial instruments with maturities of less than one year. Money market instruments allow borrowers to access short-term funds and provide liquidity to lenders. Some key money market instruments discussed include treasury bills, commercial paper, certificates of deposit, commercial bills, and repurchase agreements. The money market plays an important role in economic development by facilitating the flow of funds.
The document provides an overview of capital markets, including its definition, objectives, key components and functions. It discusses the primary and secondary markets, and the major players in capital markets such as brokers, investment bankers, stock exchanges, underwriters, credit rating agencies, corporations, banks/financial institutions, and foreign investors.
This document provides an overview of the money market, including its key components, instruments, and structure in India. The money market deals in short-term financial assets that can be easily converted into cash. It includes treasury bills, certificates of deposit, commercial paper, banker's acceptances, and repurchase agreements. The money market helps facilitate short-term borrowing and lending, provides liquidity management for the central bank, and supports business financing needs. The structure of the Indian money market involves both organized and unorganized sectors, with the Reserve Bank of India playing a key regulatory role.
The document discusses key aspects of secondary markets. It defines secondary markets as markets where securities are traded after being initially offered to the public in primary markets. The majority of trading occurs in secondary markets, which comprise equity and debt markets. Secondary markets offer both sellers and buyers advantages, such as sellers recouping a portion of the original purchase price, though they can also reduce sales for original sellers. Key products traded in secondary markets include equity shares, government securities, debentures, and bonds.
This document provides an overview of financial markets and institutions. It defines financial markets as markets for trading financial assets like stocks and bonds. It describes the main roles of financial markets as facilitating financial intermediation, providing a payments system, and allowing risk management. The document also outlines different types of financial markets and securities traded on markets. It discusses the role of financial institutions in processing information, lowering transaction costs, and addressing market imperfections to serve borrowers and lenders. Finally, it notes trends in financial institutions like consolidation, increased competition, and global expansion.
The document discusses money markets and the various securities traded within them. Money markets provide short-term funding for participants and a place for investors to store excess cash. Major securities discussed include Treasury bills, certificates of deposit, commercial paper, and repurchase agreements. These instruments vary in issuers, maturity length, and liquidity. Money markets help corporations and governments manage mismatches between cash inflows and outflows.
Financial markets allow buyers and sellers to trade financial securities like stocks and bonds, as well as commodities, at low costs. There are two main components - the capital market for long-term financial assets over 1 year, and the money market for short-term loans and borrowing under 1 year. The capital market raises funds through instruments like shares, debentures, and bonds, while the money market uses short-term instruments like treasury bills, commercial paper, and bankers acceptances. Both markets serve important functions like mobilizing savings, facilitating investment and economic development.
Mutual Funds_ Structure and Constituents.pdfRustineRose1
The document discusses the constituents and structure of mutual funds. It describes the key parties involved - investors who contribute funds, sponsors who set up the fund, asset management companies that manage the fund's assets, trustees who ensure investors' interests are protected, distributors who bring in investors, registrars who maintain records of investors, and custodians who hold the fund's securities. It also outlines different types of mutual fund schemes and provides a brief history of mutual funds in the Philippines, comparing them to other major financial institutions like commercial banks, securities firms, and insurance companies.
This document discusses primary and secondary markets. The primary market involves the initial sale of securities to raise capital, such as through initial public offerings. It occurs before the secondary market and has no single location. The secondary market allows existing securities to be traded, creating liquidity. It occurs through stock exchanges and enables prices to be established and investors to buy and sell securities they already hold. Both markets play important roles in capital formation and resource allocation.
financial instruments available in Pakistan for investment Zafar aziz
There are different investment options available in Pakistan's financial markets for both short-term and long-term investing. The money market includes short-term instruments like treasury bills, certificates of deposit, and commercial paper. The capital market includes both equity instruments like common stock and preferred stock, as well as fixed income instruments like corporate bonds. Additionally, Pakistan's debt market offers savings certificates of various maturities like Defense Savings Certificates (10-year), Special Savings Certificates (3-year), and Regular Income Certificates (5-year). These provide attractive returns to savers while supporting the government and economy.
The money market is where short-term borrowing and lending occurs between entities with surplus short-term funds and those with short-term deficits. It includes various financial instruments with original maturities of one year or less like treasury bills, commercial paper, certificates of deposit, and repurchase agreements. The money market serves important functions like facilitating liquidity management, providing outlets for surplus funds, and enabling central banks to influence the economy. It consists of both organized segments with formal institutions and markets, as well as unorganized segments involving informal lenders.
Critically examine the features of various common money market instruments av...Bilal Ahmed Bhatti
Critically examine the features of various common money market instruments available in corporate sector of Pakistan. Also give theoretical background of the topic
The role of financial market and institution in the economic development of b...badhon11-2104
The document discusses the role of financial markets and institutions in Bangladesh's economic development. It describes the money market and capital market in Bangladesh. The money market facilitates short-term lending between financial institutions and is still developing, while the capital market allows medium-to-long term lending but grew slowly under regulation. Depository institutions like banks accept deposits and provide loans, playing an important intermediary role. While financial markets and institutions have developed, the government still plays an active role in regulating the financial system and providing infrastructure to support financial services.
This document provides information about money markets and capital markets in Bangladesh. It discusses treasury bills (T-bills) which are the main instrument in Bangladesh's money market. T-bills are issued in maturities from 28 days to 5 years through auctions held by the Bangladesh Bank. The document outlines the key participants and processes involved in the primary and secondary markets for T-bills. It also discusses other money market instruments like repos, reverse repos, and call money rates. The capital markets section provides a brief history and overview of the two stock exchanges in Bangladesh and the regulatory bodies that oversee the capital markets.
The money market in Bangladesh provides short-term lending between financial institutions and involves various instruments like treasury bills and certificates of deposit. It has developed gradually over time and now includes interbank lending as well as call money and bill markets. However, it remains transitional with continued efforts to develop adequate instruments and a more market-oriented structure. Interest rates are determined competitively by individual banks but the money market experiences occasional volatility and high rates due to factors like monetary policy and government borrowing levels.
The document discusses the need for development of the Indian debt market. It notes that debt markets have historically been neglected compared to equity markets in India. It provides historical context around perceptions of debt stemming from slavery and independence struggles. Well-developed debt markets are needed to meet real sector financing needs, diversify investor risks, reduce currency mismatches, and aid monetary policy transmission. Past issues that hindered development included lack of price discovery, hedging options, and market fragmentation. Recent reforms have addressed many of these problems to help build a more efficient and liquid debt market.
The document provides an overview of money markets, including key definitions and concepts. Money markets are a segment of the financial market where short-term, highly liquid financial instruments are traded. They allow participants to borrow and lend for short periods ranging from a few days to under a year. Common money market instruments include treasury bills, commercial paper, certificates of deposit, and banker's acceptances, which are all very short-term, safe investments. Money markets serve important functions like financing trade and industry while also providing investment opportunities.
The financial system in India has three main parts - financial assets, financial institutions, and financial markets. It is regulated by bodies like RBI, SEBI, and IRDA. The money market provides short-term funds through instruments like treasury bills, certificates of deposit, commercial paper, and call/notice money. The capital market supplies long-term funds via stock and bond markets. Indigenous bankers also provide credit but remain outside RBI purview. Post nationalization in 1969, banking expanded through branch proliferation and priority sector lending, increasing access across India.
The document provides an overview of the Indian capital market, including its key participants and regulation. It describes the money market as consisting of organized and unorganized components, with the organized market dominated by commercial banks and the Reserve Bank of India. The capital market includes the primary market for new securities issuances and the secondary market for trading existing securities on stock exchanges. Major players in the markets include merchant bankers, mutual funds, financial institutions, FIIs, and individual investors. Several laws were passed over time to regulate the financial market and promote its development, with key legislation including the Capital Issues Control Act, Companies Act, and Securities Contracts Regulation Act. SEBI was established in 1992 to reform and regulate the capital markets.
The document provides an overview of the money market, including what it is, its key features and objectives, common instruments like treasury bills, certificates of deposit, commercial paper, and repurchase agreements, and the structure and recent developments of the Indian money market. It defines the money market as the market for short-term, highly liquid debt instruments with maturities of one year or less, including government securities, bank instruments, and commercial paper.
The document provides an overview of financial markets, with a focus on comparing money markets and capital markets. It defines money markets as short-term lending markets for securities like treasury bills and commercial paper, while capital markets deal in longer-term securities like stocks, bonds, and retained earnings. Key differences highlighted include maturity periods (under 1 year for money markets, over 1 year for capital markets), liquidity (higher for money markets), and risk level (lower for money markets). Major institutions involved include central banks, commercial banks, stock exchanges, and non-banking financial institutions.
This document discusses the key components of a country's financial environment including financial managers, investors, financial markets, and financial instruments. It provides details on the roles of financial managers and investors. It also describes different types of financial markets (money market, capital market, foreign exchange market, derivatives market) and some common financial instruments like treasury bills, commercial paper, and certificates of deposit. The document emphasizes that understanding a country's financial environment, including its monetary and fiscal policies, is important for comprehending its overall financial system.
The document discusses the key components of the Indian financial system including financial institutions, financial markets, financial instruments, and financial services. It provides definitions and examples of various types of institutions like commercial banks, cooperative banks, non-banking financial companies. It also describes different financial markets and instruments like money market, capital market, treasury bills, commercial papers, debentures etc. Finally, it outlines the evolution of the Indian financial system in three stages from pre-independence to post-liberalization.
Financial institutions and markets notes as per BPUT syllabus for MBA 2nd sem...Venkat Kothakota
The document provides information on the Indian financial market and its various components. It discusses the money market and capital market as the two main organized financial markets in India. The money market is further divided into unorganized and organized segments. The unorganized segment includes money lenders, indigenous bankers, and chit funds. The organized money market comprises treasury bills, commercial paper, certificates of deposit, the call money market, and the commercial bill market. The capital market provides long-term finance and consists of the industrial securities market, government securities market, and long-term loans market.
The document discusses the Indian money market, including its definition, objectives, importance, composition, instruments, structure, disadvantages, and recent developments. Some key points covered include:
- The money market deals with short-term lending/borrowing of less than one year to meet short-term deficits or park surplus funds.
- It consists of sub-markets like the call money market, commercial bills market, acceptance market, and treasury bill market.
- Important instruments are treasury bills, certificates of deposit, commercial paper, repos, and banker's acceptances.
- The structure includes organized players like the RBI, commercial banks, and development banks, as well as unorganized sectors.
- Recent developments
The Indian financial system manages the flow of funds between savers and investors. It has four main components: 1) Financial institutions like banks that act as intermediaries between savers and borrowers. 2) Financial assets or instruments that are traded in markets like stocks, bonds, and treasury bills. 3) Financial services provided by asset and liability management companies to help obtain and invest funds. 4) Financial markets like the capital market, money market, foreign exchange market, and credit market where buyers and sellers interact and trade financial securities.
The document provides an overview of the Indian capital market, including key participants and regulatory bodies. It discusses the money market and its organized and unorganized components. It then describes the primary and secondary markets that make up the capital market. Several acts have historically regulated the capital market, but the Securities and Exchange Board of India (SEBI) now has primary regulatory authority. SEBI was established to improve market efficiency, enhance transparency, and bring the Indian market up to international standards.
The document provides an overview of loan syndication. It begins by defining loan syndication as the process where a group of lenders come together to provide a loan that is larger than any single lender is willing to provide alone. This allows risk to be distributed across multiple lenders.
It then discusses some key aspects of loan syndication including the roles of various parties like the lead arranger who organizes the syndicate and ensures documentation is completed. Borrowers benefit from loan syndication through access to larger amounts of funding, more flexible terms, and lower interest rates due to risk being distributed.
Finally, it briefly touches on how loan syndication has grown to become a dominant financing mechanism particularly for large projects
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Uses of money market instrument in Bangladesh -Eastern Bank Limited(EBPL)
1. Uses of Money Market Instruments in Bangladesh 6
Chapter I
Introductory Aspects
2. Uses of Money Market Instruments in Bangladesh 7
1.1 Background of the Study
Each BBA student of the Premier University Chittagong will have to submit
an Term paper Report in partial fulfillment of his/her BBA program. The
actual goal of my assignment is to disclose a true picture about the credit
risk grading of the banking sector. Bangladesh economy has been
experiencing a rapid growth since the '90s. Industrial and agricultural
development, international trade, inflow of expatriate Bangladeshi workers'
remittance, local and foreign investments in construction, communication,
power, food processing and service enterprises ushered in an era of
economic activities. The aim of the term paper program is to become aware
the student about the official correspondents, managerial behavior,
decision-making process, motivating system, supervision, interpersonal
relations and many more. Now the world is a competitive world. So
everybody has to be expert in both practical and theoretical knowledge. The
proposed topic of this term paper report is “Uses of money market in
Bangladesh” and I focused on Eastern Bank limited how the financial
institution works with money market. This report is the partial fulfillment of
BBA program as assigned by my honorable supervisor.
1.2 Objectives of the study
Eastern Bank Limited is one of the fast growing 2nd generation bank in
Bangladesh. I have been assigned to do my report here. I have also been
assigned with some objectives to be filled up during this term paper
program. This study is aimed at providing me invaluable knowledge on
current business trend of money market in Bangladesh. The objectives of
study are as following:
1) To understand the procedure that DBL is practicing to provide the
money market services
2) To identify the faced problems with money market
3) To recommends for regulating money market properly
4) To know the functioning of money market in the Bangladesh economy
3. Uses of Money Market Instruments in Bangladesh 8
5) To identify and briefly explain different modes of investment in the
money market used by the eastern bank
1.3 Scope of the Report
This study covers the some important aspects of trade financing of a
commercial bank such as the different modes of investment in the money
market by the bank, Product of money market, Bank investment in the
money market & the overall conditions of money market. The performance of
money market can greatly influence the financial market of the economy
and so studying like important topics will help me to get exposure me in
getting the practical knowledge about the financial market of the economy.
1.4 Methodology of the Study:
The study impute were collected from secondary sources:
Secondary sources
Annual Report
Different books, Journals, Periodicals, News papers, Websites on
Bangladesh money market
Different circulars sent by Head Office and Bangladesh Bank.
4. Uses of Money Market Instruments in Bangladesh 9
1.5 Limitation of the Report
Every matter has got some limitation. So this is also not an exception. The
limitations of this term paper are been sated below:
Available data also could not be verified.
EBL as a commercial bank they are very busy and they could not able
to give me enough time for discussion about various topics.
Due to time and cost restriction, the study is concentrated in selected
areas.
To continue study in such a vast are requires a big deal of time. The
time I got to do report which is not enough.
5. Uses of Money Market Instruments in Bangladesh 10
Chapter II
Theoretical Aspects
6. Uses of Money Market Instruments in Bangladesh 11
2.1 Money Market
Network of banks, discount houses, institutional investors, and money
dealers who borrow and lend among themselves for the short-term (typically
90 days). Money markets also trade in highly liquid financial instruments
with maturities less than 90 days to one year (such as bankers' acceptance,
certificates of deposit, and commercial paper), and government securities
with maturities less than three years (such as treasury bills), foreign
exchange, and bullion. Unlike organized markets (such as stock exchanges)
money markets are largely unregulated and informal where most
transactions are conducted over phone, fax, or online. Long-term borrowing
and lending markets are called capital markets.
Market for short-term debt securities, such as banker's acceptances,
commercial paper, repos, negotiable certificates of deposit, and Treasury
Bills with a maturity of one year or less and often 30 days or less. Money
market securities are generally very safe investments which return a
relatively low interest rate that is most appropriate for temporary cash
storage or short-term time horizons. Bid and ask spreads are relatively small
due to the large size and high liquidity of the market.”
7. Uses of Money Market Instruments in Bangladesh 12
2.2 Players in Money Market
The money market consists of financial institutions and dealers in money or
credit who wish to either borrow or lend. Participants borrow and lend for
short periods of time, typically up to thirteen months. Money market trades
in short-term financial instruments commonly called "paper." This contrasts
with the capital market for longer-term funding, which is supplied by bonds
and equity.
The core of the money market consists of interbank lending--banks
borrowing and lending to each other using commercial paper, repurchase
agreements and similar instruments. These instruments are often
benchmarked to (i.e. priced by reference to) the London Interbank Offered
Rate (LIBOR) for the appropriate term and currency.
Finance companies typically fund themselves by issuing large amounts of
asset-backed commercial paper (ABCP) which is secured by the pledge of
eligible assets into an ABCP conduit. Examples of eligible assets include
auto loans, credit card receivables, residential/commercial mortgage loans,
mortgage-backed securities and similar financial assets. Certain large
corporations with strong credit ratings, such as General Electric, issue
commercial paper on their own credit. Other large corporations arrange for
banks to issue commercial paper on their behalf via commercial paper lines.
In the United States, federal, state and local governments all issue paper to
meet funding needs. States and local governments issue municipal paper,
while the US Treasury issues Treasury bills to fund the US public debt:
Trading companies often purchase bankers' acceptances to be
tendered for payment to overseas suppliers.
Retail and institutional money market funds
Banks
Central banks
Cash management programs
8. Uses of Money Market Instruments in Bangladesh 13
Merchant banks
2.3 Functions of the money market
Functions of
the money
market
Transfer of
large sums of
money
Transfer from
parties with
surplus funds
to parties with
a deficit
Allow
governments
to raise funds
Determine
short-term
interest rates
Help to
implement
monetary
policy
Figure 1: Functions of Money Market
9. Uses of Money Market Instruments in Bangladesh 14
2.4 Common Money Market Instruments
Treasury
bills
Money
funds
Short-lived
mortgage-
Municipal
notes
Federal
funds
Federal
agency
short-term
securities
Eurodollar
deposit
Commercial
paper
Repurchase
agreements
Certificate
of deposit
Common
Money
Market
Instruments
Figure 2: common money market instruments
10. Uses of Money Market Instruments in Bangladesh 15
Certificate of deposit - Time deposit, commonly offered to consumers
by banks, thrift institutions, and credit unions.
Repurchase agreements - Short-term loans—normally for less than
two weeks and frequently for one day—arranged by selling securities
to an investor with an agreement to repurchase them at a fixed price
on a fixed date.
Commercial paper - short term promissory notes issued by company
at discount to face value and redeemed at face value
Eurodollar deposit - Deposits made in U.S. dollars at a bank or bank
branch located outside the United States.
Federal agency short-term securities - (in the U.S.). Short-term
securities issued by government sponsored enterprises such as the
Farm Credit System, the Federal Home Loan Banks and the Federal
National Mortgage Association.
Federal funds - (in the U.S.). Interest-bearing deposits held by banks
and other depository institutions at the Federal Reserve; these are
immediately available funds that institutions borrow or lend, usually
on an overnight basis. They are lent for the federal funds rate.
Municipal notes - (in the U.S.). Short-term notes issued by
municipalities in anticipation of tax receipts or other revenues.
Treasury bills - Short-term debt obligations of a national government
that are issued to mature in three to twelve months.
Money funds - Pooled short maturity, high quality investments which
buy money market securities on behalf of retail or institutional
investors.
Foreign Exchange Swaps - Exchanging a set of currencies in spot
date and the reversal of the exchange of currencies at a predetermined
time in the future.
Short-lived mortgage- and asset-backed securities
11. Uses of Money Market Instruments in Bangladesh 16
Chapter III
Practical Aspects
12. Uses of Money Market Instruments in Bangladesh 17
3.1 Eastern Bank Limited:
Over the years EBL has established itself as a leading private commercial
bank in the country with undisputed leadership in Corporate Banking and a
strong Consumer and SME growth engines. With a vision to become the
bank of choice and to be the most valuable financial brand in Bangladesh,
Eastern Bank Ltd. (EBL) began its journey in 1992. EBL’s ambition is to be
the number one financial services provider, creating lasting value for its
clientele, shareholder, and employees and above all for the community it
operates in.
3.1.1 Product Basket
Bangladesh Banking Sector has grown from strength to strength over the
past one decade and is fiercely competitive, especially in the Consumer
Banking segment. EBL offers a wide range of depository, loan and card
products to cater virtually for every customer segment. From Student
Banking to Priority Banking to Platinum card EBL has almost all banking
products in its repertoire. The product basket is rich in content featuring
different types of Savings & Current Accounts, Personal Loans, Debit Cards,
Credit Cards, Pre-paid Cards, Internet Banking, Corporate Banking, SME
Banking, Investment Banking, Treasury & Syndication services. The
customers are served through a network of 49 Branches, 74 ATMs and 6
Kiosks countrywide. EBL has its presence in 11 major cities/towns in the
country including Dhaka, Chittagong, Sylhet, Khulna, Rajshahi & Cox’s
Bazar.
3.1.2 Product Innovation
EBL is known for its product innovation in the market. During the past five
years, EBL introduced 12 new-to-Bangladesh financial products and
services. EBL Matribhumi – the bundle product for expatriate Bangladeshis,
insurance covered monthly savings scheme, VISA corporate cards,
remittance card and mobile–based remittance solution are just a few of
them. On the SME banking window EBL offered customer–friendly and
13. Uses of Money Market Instruments in Bangladesh 18
groundbreaking products like EBL Uddom and EBL Mukti. At present, EBL
Consumer, SME and Corporate Banking units are capable of handling every
kind of customer financial needs.
Things that unknown to people :
• EBL is the first bank in Bangladesh to go online.
• EBL provided the first “Green Loan” in Bangladesh in Solar Panel
manufacturing plant which will contribute to transform the lives of 1
million people of the most remote and off-grid areas by lighting up
their homes.
• EBL is the first ever local bank to finance Aircraft purchase deal of
Biman Bangladesh Airlines. Prior to this, only multinational banks
used to finance such projects.
• EBL generates highest profitability per employee in Bangladesh
Banking sector.
• EBL launched first ever Bank- sponsored Mutual Fund in Bangladesh.
3.2 Bank’s Vision:
To become the bank of choice by transforming the way, they can do
business and developing a truly unique financial institution that delivers
superior growth and financial performance and be the most recognizable
brand in the financial services in Bangladesh.
3.3 Bank’s Mission Statement :
To deliver service excellence to all its customers, both internal and
external.
To ensure maximum shareholders' value.
To constantly challenge its systems, procedures and training to
maintain a cohesive and professional team in order to achieve service
excellence.
14. Uses of Money Market Instruments in Bangladesh 19
To create an enabling environment and embrace a team based culture
where people will excel.
3.4 Bank’s Values
• SERVICE EXCELLENCE
We passionately drive customer delight.
We use customer satisfaction to accelerate growth.
We believe in change to bring in timely solution.
• OPENNESS
We share the business plan.
We encourage two way communications.
We recognize achievements, celebrate results.
• TRUST
We care for each other.
We share learning/ knowledge.
We empower our people.
• COMMITMENT
We know our roadmap.
We believe in 'continuous improvement'.
We do not wait to be told.
• INTEGRITY
We say what we believe in.
We respect every relationship.
We do not abuse information power.
• RESPONSIBLE CORPORATE CITIZEN
We are tax-abiding citizen.
We promote protection of the environment for our children.
15. Uses of Money Market Instruments in Bangladesh 20
We conform to all laws, rules, norms, sentiments and values of the
land.
3.5 Corporate Slogan
SIMPLE MATH
TEAM
3.6 Corporate Address
Head Office : 10, Dilkhusa C/A
Jibon Bima Bhaban,
Dhaka – 1000, Bangladesh.
Tel : 880-2-9556360 , Fax : 880-2-9562364, 9554610.
Swift :EBLDBDDH, Cable :EASTBANK.
Email : info@ebl-bd.com.
Web :www.ebl.com.bd.
3.7 Company Milestones
August 16, 1992: Date of commencement of banking operations.
July 17, 2003: First online banking operations across all the
branches.
June 6, 2006: EBL launched SME Banking Division.
November 09, 2006: Signed agreement with ADB to become ADB’s
partner bank under their Trade Finance Facilitation Program (TFFP)
supporting guarantee and revolving credit facility.
April 26, 2009: EBL launched Priority Banking for premium customer
segment.
February 2013: EBL launched EBL VISA Platinum Card.
September 21, 2013: EBL launched VISA Corporate Platinum Card for
the first time in Bangladesh.
16. Uses of Money Market Instruments in Bangladesh 21
3.8 EBL Organ gram:
Managing Director
&CEO
Company
Secretary
Md’s
Secretariat
DMD
Consumer
banking
Cards
NRB
SME
Service
Delivery
Trade
Service
NRB back
office
Treasury
Back Office
Operations DMD HRD Finance
Corporate
Investment/
Merchant
Banking
Treasury
ID
ICC CRM
Consumer
Credit
CAD
IT
IT
consultant
yant
Admin
SAMD
(Corporate)
SAMD(SME)
Brand
&Marketing
Consumer
Collection
17. Uses of Money Market Instruments in Bangladesh 22
3.9 Corporate directory:
NAME OF THE COMPANY :
Eastern Bank Limited.
COMPANY REGISTRATION NUMBER :
C-22554(961)/92
BANGLADESH BANK LICENSE NUMBER :
BL/ DA/ 5926/ 92
CAPITAL (December 31,2013)
Authorised Capital : Tk. 12,000,000,000(1,2000,000,000 ordinary shares of
Tk. 10 each )
Paid up Capital : Tk.2,920,811,400(292,081,140 ordinary shares of Tk.10
each )
ACCOUNTING YEAR END
December 31.
3.10 EBL Management
The EBL Management Team or Management Committee (ManCom)
comprises of a group of eleven people and each of them comes with an
international working background and are committed in leveraging their
experiences to take EBL to greater heights by ensuring top line revenues
with dynamic capabilities.
The objective of EBL ManCom is to drive the business to maximize the
operational excellence and efficiency through acquisition of talent,
18. Uses of Money Market Instruments in Bangladesh 23
developing systems, processes and people and through blending in of these
to let customers revel in with fulfillment and permanency.
3.11 Organ gram of EBL ManCom
Ali Reza Iftekhar
Managing Director and CEO
Muklesur Rahman
Deputy Managing Director (Consumer Banking)
Md. Fakhrul Alam
Deputy Managing Director (Corporate Banking & Treasury)
Mahbubul Alam Tayiab
Senior Executive Vice President & Head of ICCD
Syed Rafiqul Haq
Area Head-Dhaka, Corporate Banking
Malick Musfique Reza
EVP & Head of Finance
Md. Sirajul Islam
Head of Human Resources
Safiar Rahman, FCS
SEVP & Company Secretary
Abul Moqsud
Head of Credit Risk Management
A.M.M Moyen Uddin
Head of Information Technology
Akhtar Kamal Talukder
Head of SAMD (Corp)
Sami Karim
Head of SAMD (SME)
Omar F. Khandaker
IT Consultant
19. Uses of Money Market Instruments in Bangladesh 24
3.12 Eastern Bank Limited: Achievements
EBL believes in relationship building and focuses on sustainable and long
term growth – both for the bank, its clients and the community it operates
in.
Despite the constant threat of the global economic recession and its
subsequent effect on the Bangladesh market in 2009, EBL's Profit After Tax
grew by 84% last year.
The Non Performing Loan Ratio dropped to 2.46% from 3.30%. The same
year, Earning per Share (EPS) had increased by around 70% and Cost to
Income ratio remained 35.64% which is one of the lowest in the industry.
And in 2013 the bank's Credit Rating increased to AA from AA-, which was
A+ in the year before.
EBL’s sincere efforts are well-appreciated by all and have gotten recognitions
from local and international institutions like Institute of Chartered
Accountants in Bangladesh, Superbrands Inc., South Asian Federation of
Accountants.
3.13 EBL’S Business Principles:
Outstanding customer services
Effective and efficient operations
Strong capital liquidity
20. Uses of Money Market Instruments in Bangladesh 25
Conservative lending policy
Strict expense discipline
Eastern Bank Limited
Eastern Bank Limited
Balance Sheet as on 31.12.2013
Particulars Details Amount in BDT Total amount in BDT
Current Assets calculation
Stock 2,965,526,662
Book Debt 879,296,451
Advance, deposit and Pre-
payments
142,239,277
Cash and Bank Balances
451,451,930
Total Current Assets
3,717,062,390
Fixed Assets Calculation
Tangible Fixed Assets 1,437,114,119
Preliminary Fixed Assets 298,040
Share Issue Expense 6,341,498
Total Fixed Assets 1,443,753,657
Current Liability Calculation
Creditors and Accruals 684,666,844
Advance against sales 37,778,901
21. Uses of Money Market Instruments in Bangladesh 26
Short term Bank loan 2,390,974,361
Provision for workers profit
participation fund
6,144,665
Unclaimed Divident 3,973,500
Current portion of term loan 97,248,800
Lease finance due within 01
year
11,829,052
Propsoed Divident 80,017,200
Deffered Income Tax 70,004,579
Total Current Liability
1,392,457,504
Long term liability
calculation
Term Loan (secured) 788,289,421
Lease Finance (secured)
-
Loan from Associated
Companies (unsecured)
216,640,519
Long term Loan
1,004,929,940
Total Loan Liability Current & fixed liability
4,397,567,842
Share Holders Equity
calculation
share Capital 533,448,000
Ratained Earnings 21,252,135
Total shareholders equity
22. Uses of Money Market Instruments in Bangladesh 27
456,700,935
TOTAL ASSETS
5,652,967,508
TOTAL LIABILITIES AND OWNERS EQUITY
5,652,967,508
Profit & Loss Account
Net Sales 1,956,096,334
Less: Cost of goods sold 984,819,715
Gross Profit 354,276,289
Less: Operating expenses 34,226,135
Less: Financial Expenses 194,106,893
Less: WPPWF 6,144,665
Less : Amortization of
preliminary Expanses
149,020
Less: Amortization of Share
Issue Expanses
2,113,833
Net profit before tax 114,485,789
Less: Provision for income tax 42,916,841
Profit after Tax 71,568,948
Calculation of EBITDA
Profit after tax 71,568,948
Add: provision for tax 42,916,841
Add: Financial Expenses 194,106,893
Add: Amortization 2,262,853
23. Uses of Money Market Instruments in Bangladesh 28
Add: Depreciation 59,547,892
EBITDA 470,954,081
Summery for Financial Risk Measurement as a part
of CRG:
1. Total Liabilities 5,652,967,508
2. Shareholders Equity 456,700,935
3. Current Assets 3,717,062,390
4. Current Liabilities 1,392,457,504
5. EBITDA 470,954,081
6. Interest on debt 194,106,893
7. Sales 1,956,096,334
Debt-Equity Ratio 1.99
Current Ratio 1.60
Operating Profit Margin 30%
Interest Service Coverage
Ratio
3.5
3.14 Uses of Money market instruments in Bangladesh
Until problems surfaced during the global financial crisis, money markets
were often taken for granted as plain-vanilla, low-volatility segments of the
financial system.
For the most part, money markets provide those with funds—banks, money
managers, and retail investors—a means for safe, liquid, short-term
investments, and they offer borrowers—banks, broker-dealers, hedge funds,
24. Uses of Money Market Instruments in Bangladesh 29
and nonfinancial corporations—access to low-cost funds. The term money
market is an umbrella that covers several market types, which vary
according to the needs of the lenders and borrowers.
One consequence of the financial crisis has been to focus attention on the
differences among various segments of money markets, because some
proved to be fragile, whereas others exhibited a good deal of resilience.
For the short term
These markets are described as “money markets” because the assets that
are bought and sold are short term—with maturities ranging from a day to a
year—and normally are easily convertible into cash. Money markets include
markets for such instruments as bank accounts, including term
certificates of deposit; interbank loans (loans between banks); money
market mutual funds; commercial paper; Treasury bills; and securities
lending and repurchase agreements (repos). These markets comprise a large
share of the financial system—in the United States, accounting for about
one-third of all credit, according to the Federal Reserve Board’s Flow of
Funds Survey.
These money market instruments, many of them securities, differ in how
they are traded and are treated under financial regulatory laws as well as in
how much a lender relies on the value of underlying collateral, rather than
on an assessment of the borrower.
The most familiar money market instruments are bank deposits, which are
not considered securities, even though certificates of deposit are sometimes
traded like securities. Depositors, who are lending money to the bank, look
to the institution’s creditworthiness, as well as to any government programs
that insure bank deposits.
Interbank loans are not secured by collateral, so a lender looks exclusively
to a borrower’s creditworthiness to assess repayment probabilities. The most
25. Uses of Money Market Instruments in Bangladesh 30
closely watched interbank market is in England, where the London
interbank offered rate (LIBOR) is determined daily and represents the
average price at which major banks are willing to lend to each other. That
market did not prove to be a reliable source of funding during the crisis.
LIBOR rates rose sharply in comparison to other money market rates once
the creditworthiness of banks was called into question. Moreover, lending
volume decreased significantly as banks struggled to fund their existing
assets and were less interested in new lending. Emergency lending by
central banks helped make up for the contraction of this funding source.
Recent investigations by regulatory authorities have also called into question
the integrity of the pricing process by which LIBOR is determined.
Commercial paper is a promissory note (an unsecured debt) issued by highly
rated banks and some large nonfinancial corporations. Because the
instrument is unsecured (no more than a promise to pay, hence the name),
investors look solely to the creditworthiness of the issuer for repayment of
their savings. Commercial paper is issued and traded like a security. But
because it is short term by nature and not purchased by retail investors, it
is exempt from most securities laws. In the United States, for example,
commercial paper is issued in maturities of 1 to 270 days, and in
denominations that are deemed too large for retail investors (typically $1
million, but sometimes as small as $10,000).
The safest investment
Treasury bills, which are issued by the government, are securities with
maturities of less than a year. BD treasury bills, sold at a discount from face
value and actively bought and sold after they are issued, are the safest
instrument in which to place short-term savings. The markets are deep and
liquid, and trading is covered by securities laws. BD treasury bills are not
only savings instruments; they can be used to settle transactions. Treasury
bills, which are issued electronically, can be sent through the payments
system as readily as money.
26. Uses of Money Market Instruments in Bangladesh 31
3.15 Participation of Eastern Bank in the money market instruments
Eastern Bank is a regular participant in the money market of Bangladesh.
In this report, I emphasized on the data of 2013 to analyze the bank’s
participation in the market. Following table shows the quarterly data
regarding the banks participation
Lending Amount (in
Cr.)
Borrowing Amount
(Cr.)
year 2013 93,326 1727
year 2012 65,970 2002
lending & Borrowing status in 2012-2013
1727
93,326
65,970
2002
0
50,000
100,000
150,000
200,000
Lending Amount Borrowing Amount
year 2012
year 2013
Caption: Participation of Eastern Bank in the money market
instruments
Lending
In the year 2013 Eastern Bank, had total amount of Tk.93, 326 crore as its
lending amount to other banks which was only 65,970 in the year of 2012.
Their borrowing status was lower in the observed previous two years
denoted that their liquidity status proposition of the bank is good and have
managed fund to invest in money market.
27. Uses of Money Market Instruments in Bangladesh 32
Borrowing
Eastern Bank made its major portion of borrowing in the second quarter of
the year which was ofTk.783 crore that is the 45% of the total borrowing
and paid the lowest rate of the year. The next major borrowing was made in
the first quarter. The third quarter of the year had the lowest amount of
borrowing with highest rate for its borrowings of that year. The quarter wise
borrowing position is as follows:
Borrowing proposition Borrowing WAR
1ST Quarter 15% 9.54
2nd Quarter 45% 8.10
3rd Quarter 39% 13.30
15%
45%
39%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1st Qtr 2nd Qtr 3rd Qtr
Borrowing
Proposition
Figure 3: Quarter wise Borrowing proposition over the years
28. Uses of Money Market Instruments in Bangladesh 33
Volume of Transactions
The following table represents the total volume of Eastern Bank’s
transactions in the money market for the previous three years
1150
1530
1422
0
200
400
600
800
1000
1200
1400
1600
2011 2012 2013
Volume of transaction over the years
Volume of
Transaction
Figure 4: Volume of transaction over the years
For the year 2013 Eastern Bank made most of its transactions in the Money
market and the trend of volume of transaction over the years because it was
in sharp increase if I consider the past two years of volume of transaction. .
Analyzing the overall situation, it can be said that, Eastern Bank made its
best performance in the last year, when it made highest lending, although
the rate was not the highest. The year 2012 is at the lower point, when the
maximum borrowing was made and lowest amount of lending was made as
the rate was a bit higher than that of 2011.
29. Uses of Money Market Instruments in Bangladesh 34
3.16 Uses of money market instrument in Bangladesh
Money market in Bangladesh is composed of two broad groups of
institutions: formal and informal. The formal institutions (up to 1999)
include the Bangladesh Bank at the apex, 4 nationalized commercial banks,
27 domestic and 12 foreign private commercial banks, 9 specialized
(development) banks, 24 NON-BANK FINANCIAL INSTITUTIONs, a number of non-
scheduled banks. Informal institutions comprised mainly the moneylenders
and small co-operative organizations, which are not under the control of the
central bank. The three distinct components of organized segment of money
market of Bangladesh are the inter-bank market, money market and bill
market.
The year 1990 may be treated as a landmark in the evolution of money
market in Bangladesh. This year a comprehensive Financial Sector Reform
Program (FSRP) was undertaken to establish a market oriented financial
structure in the country. The objectives of FSRP were to deregulate lending
activities, replace the refinance facilities with rediscount facility, and abolish
the administered interest rate regime. Subsequently, introduction of new
money market instruments such as certificate of deposits (CDs), Bangladesh
Bank bills of 91-days and 30-days maturity and some new government
treasury bills were introduced to accelerate the pace of development of
money market in the country.
Inter-bank market operates within a limited scale in the form of inter bank
deposits and borrowings and has virtually no fixed price fixing mechanism.
Traditionally, scheduled commercial banks lend to each other when they are
in need of temporary funds. Sometimes, banks also keep a part of their
resources to other banks as deposits and borrow as and when needed
against the lien of those deposits. Small banks usually keep their funds as
deposits with large banks for safety.
30. Uses of Money Market Instruments in Bangladesh 35
Non-bank financial institutions also take part in inter-bank market
operations in Bangladesh by way of lending their fund to the deficit banks.
The inter-bank transactions are concentrated mainly in Dhaka city but may
also be found in other parts of the country. As part of fund management,
branch offices of banks, which can not send their surplus funds to their
respective head offices, usually keep them in their nearest big branch or in
other banks and draw the funds back as and when needed.
Inter-bank transactions, although constitute an integral part of money
market, comprise a small portion of total banking activities. Inter-bank
deposits as percent of total deposits varied between 2 and 5 percent during
1986-99. This indicator was between 1.6 and 2.5 percent during the FSRP
period of 1990-96. Historically, there appears to be a positive correlation
between growth of inter-bank deposits and excess cash reverses of the
banking system. Total inter-bank deposits increased from Tk 3.4 billion in
June 1986 to Tk 25 billion in December 1998. Excess cash reverses
increased during this period from Tk 1.3 billion to Tk 21.5 billion.
The deposit resources of banks registered an increase of Tk 122.6 billion or
an yearly average growth of 22% during the period between June 1986 to
June 1991 and 18% during June 1991- June 1998. That the money market
is not much developed in Bangladesh is depicted from the growth pattern of
deposits of the country.
Certificate of deposit was introduced as a money market instrument in
Bangladesh in 1983. Its objective was to strengthen the money market and
bring idle funds, including those arising from black money and unearned
incomes, within the fold of the banking system. The Bearer of Certificate of
Deposits (BCD) with a fixed maturity is issued by and payable at the bank to
Bangladeshi nationals, firms and companies. The certificate does not
contain the name of the purchaser or holder. The interest rate is not fixed as
in the case of other deposit resources accepted by the banks at present.
31. Uses of Money Market Instruments in Bangladesh 36
Call money market is the most sensitive part of money market, in which a
good number of players from the banking as well as the non-bank financial
sector actively participate on a regular basis. Initially, this market developed
as an inter-bank market where the banks in temporary deficit of cash
resorted to borrowing from other banks having surplus funds. As banks
were in the public sector until the beginning of the 1980s, the Bangladesh
Bank provided them with liberal refinance facilities at concessional rates.
There was hardly any need for raising funds from the call money market
during this period. Moreover, administered interest rate regime, easy
availability of borrowing from central bank and its directive to provide credit
to priority sectors were the major impediments in development of a call
money market in the country. Notwithstanding the fact, banks participated
in a limited scale in the call money market mainly to wipe out the temporary
mismatch in their assets and liabilities.
A turning point was the denationalization of Uttara and Pubali Bank in 1983
and 1984 respectively and the government decision to allow private banks to
operate in the country. Formation of private banks during the 1980s
provided new opportunities to develop this segment of money market. In
1985, two investment companies and in 1989, one leasing company were
allowed to participate in the call money market. At present, all banks
including specialized ones and non-bank financial institutions are allowed
to participate in this market.
Basic features The transactions of call money market are mainly Dhaka
based. Since, the head offices of all banks and financial institutions are
located in Dhaka, the branches of the banks and financial institutions from
all over the country remit their excess funds to their respective head offices
at Dhaka for investment. The head offices, after meeting their usual liquidity
requirement invest the surplus funds in the call money market.
As there is no brokerage house or intermediary organization, the
transactions in call money market usually take place on the basis of
32. Uses of Money Market Instruments in Bangladesh 37
bilateral negotiations. Since call loans are made on clean basis, i.e., without
any security, lending institutions/banks are always cautious in the selection
of borrowing banks/institutions.
The demand for and supply of funds in the call market remains volatile
throughout the year with some occasional turbulence. The transactions and
the rate of interest are largely linked with government treasury bill market,
seasonality in demand for bank loans, central bank's monetary policy,
variation in discount rate, open market operations, changes in statutory
reserve requirements, excess liquidity position of the banks etc. The
transactions and the variations of the rate of interest in call money market
normally remains high during November to April and as such the rate of
interest during this period also goes up.
The rates of interest amidst fluctuations reached a maximum of 17% during
1998-99. Due to prolonged and devastating floods at the beginning of 1998-
99, the country's monetary policy was relaxed to enable banks to provide
necessary credit for early recovery of economic activities. Easy access of the
scheduled banks to the discount window of the Bangladesh Bank helped
them holding liquidity position at a comfortable level. The banks borrowed
an amount of Tk 9.15 billion from the Bangladesh Bank during 1998-99 as
compared to a much lower amount of Tk 1.13 billion during 1997-98.
Moreover, excess reserve position of the banks increased by Tk 4.96 billion
during 1998-99 as compared to an increase of Tk 9.78 billion in the
preceding year. As a result, the call money market witnessed a lower
pressure during 1998-99.
Bill market is restricted to buying and selling of government treasury bills.
In the past, it was basically concentrated in transaction of government
treasury bills of 3-month maturity at predetermined rates. Commercial
banks were obliged to buy these bills as approved security to meet their
statutory liquidity requirement (SLR) under the Banking Companies Act.
Moreover, these instruments were being used to mop up excess cash from
33. Uses of Money Market Instruments in Bangladesh 38
the banking sector and help government to borrow money from banks to
meet its budgetary shortfall. In fact it was a guilt-edged market where both
the principal and interest was guaranteed by the government. Bangladesh
Bank, on behalf of the government, was entirely responsible for arranging
buying and selling of treasury bills. However, the availability of the
government treasury bills depended only on the fiscal consideration of the
government. Bangladesh Bank had no scope of its own to increase or
decrease their supply. Besides, interest rates were not market based and
were fixed arbitrarily by the government from time to time. In addition to the
commercial banks, Bangladesh Bank also had to hold a portion of
government treasury bills.
The holdings of treasury bills by the deposit money banks (DMB) were only
Tk 0.94 billion on 30 June 1973 and the rate of interest was 6%. Amidst
fluctuations, the volume went up to Tk 9.54 billion at the end of June 1986.
The rates of interest went up to 9% at that time. Although the rate of
interest declined to 8% at the beginning of 1987, the treasury bill holdings
by the DMBs went up substantially to Tk 12.51 billion at the end of June
1987. The treasury bill holdings reached a peak of Tk 45.12 billion at the
end of June 1993 and thereafter, it declined to Tk 0.46 billion at the end of
June 1995. However, the treasury bill holdings shoot up to Tk 49.73 billion
by May 1999. It may be assumed that lower treasury rate as compared to
higher yield on Bangladesh Bank Bill might have induced the banks to shift
their portfolio investments in favour of the latter. However, due to
suspension of auctioning of Bangladesh Bank Bills government treasury
bills, other than the commercial bill segment, have become the only
instruments in the bill market.
34. Uses of Money Market Instruments in Bangladesh 39
3.17 SWOT ANALYSIS OF EASTERN BANK LTD.
Strength
Very good profit margin achieved by the last few years
Strong capital back up brings available liquidity
Efficient and experienced management team
Directors of the bank are not over ruling the decisions made by the
management team
Several deposits schemes and financial products offered by the
organization. So clients have enough options to invest their money.
Bank quickly expanding its business all over the country.
Weakness:
Performance of the marketing sector is really poor
Officers are limited experienced and not enough trained
Opportunities:
Clients reliability on EBL is growing day by day on the bank
Business Banking
Diversification
Modern facilities & computerization
Stirring Branches
Interactive Corporate Culture
Threats:
Very competitive market.
Our political unsuitability effects the banking sector very often.
Our economy now passing recession this also effects the bank.
Central banks policies some times are not in favor of the private.
Competitors have more deposits
Competitors have more products and services
Competitor’s increasing interest rate against FDR for their clients.
35. Uses of Money Market Instruments in Bangladesh 40
3.18 Findings
Though the Bangladeshi money market is considered as the advanced
money market among developing countries, it still suffers from many
drawbacks or defects. These defects limit the efficiency of our market.
Some of the important defects or drawbacks of Bangladeshi money market
are :-
The Bangladeshi economy with its seasonal structure faces frequent
shortage of financial recourse. Lower income, lower savings, and lack
of banking habits among people are some of the reasons for it. So
there are insufficient resources.
In the Bangladeshi money market, various investment instruments
such as Treasury Bills, Commercial Bills, Certificate of Deposits,
Commercial Papers, etc. are used. But taking into account the size of
the population and market these instruments are inadequate. So
Bangladesh money market has scarcity of Investment Instruments.
The Bangladeshi money market is broadly divided into the Organized
and Unorganized Sectors. The former comprises the legal financial
institutions backed by the RBI. The unorganized statement of it
includes various institutions such as indigenous bankers, village
money lenders, traders, etc. There is lack of proper integration
between these two segments. So there is absence of integration that
should be recovered.
In the Bangladeshi money market, especially the banks, there exists
too many rates of interests. These rates vary for lending, borrowing,
government activities, etc. Many rates of interests create confusion
among the investors. So the multiple rate of interests should be
treatment.
In Bangladesh, as many banks keep large funds for liquidity purpose,
the use of the commercial bills is very limited. Similarly since a large
number of transactions are preferred in the cash from the scope for
36. Uses of Money Market Instruments in Bangladesh 41
commercial bills are limited. There is enough shortage of commercial
bill.
There are poor number of dealers in the short-term assets who can act
as mediators between the government and the banking system. The
less number of dealers leads the slow contact between the end lender
and end borrowers. In Bangladesh there is a short of dealers.
In Bangladesh even through we have a big network of commercial
banks, still the banking system suffers from major weaknesses such
as the NPA, huge losses, poor efficiency. The absence of the organized
banking system is major problem for Bangladeshi money market.
There is a great be short of in the organized banking system.
These are my findings I got regarding doing this report as highlighted in the
above quotation are the major drawbacks in the money market of
Bangladesh.
37. Uses of Money Market Instruments in Bangladesh 42
Chapter IV
Conclusion Aspects
38. Uses of Money Market Instruments in Bangladesh 43
4.1 Recommendation
I noted some recommendations with considering the problems of money market
highlighted in my findings section could be structured as follows:
To develop a well organized and sound call market in Bangladesh its scope
should be expanded. Now-a-days there are a good number of investment
as well as leasing companies operating in the country with experience of
utilizing money in variety of uses. Moreover, insurance companies also
mobilize plenty of fund that can be utilized effectively if they are allowed
to operate in the call market. Therefore, to broaden area of call market
such institutions may be allowed to participate in the country’s Money
market.
Money rate, maximum and minimum along with Bank Rate should be
regularly published in the daily news papers.
Monetary authority in Bangladesh can effectively use this market as an
efficient means of mobilization and allocation of domestic resources.
The current practice of maintaining liquidity ratio for the banks at 20 per
cent may be gradually reduced to a minimum, so that more fund can be
made available in this market.
Seasonal credit demand might also be assessed on the basis of transaction
in this market and further credit program for the banking sector may be
formulated accordingly.
Bangladesh Bank, as a guardian of money market, may help in developing
this market by formulating detailed rules and regulations covering the
operations and obligations of participants in such market.
39. Uses of Money Market Instruments in Bangladesh 44
The banks whose transactions fluctuate abnormally as well as those who
borrow at a very high rate of interest, should be looked into separately to
identify their problems.
The rate of interest in this market reflects the market interest rate, and
therefore, it may be taken as a useful indicator while changing Bank Rate
to affect the cost of credit in the banking sector.
4.2 Conclusion:
Bangladesh Banking Sector has grown from strength to strength over the past
one decade and is fiercely competitive, especially in the Consumer Banking
segment. With a vision to become the bank of choice and to be the most valuable
financial brand in Bangladesh, Eastern Bank Ltd. (EBL) began its journey in
1992. Over the years EBL has established itself as a leading private commercial
bank in the country with undisputed leadership in Corporate Banking and a
strong Consumer and SME growth engines. EBL’s ambition is to be the number
one financial services provider, creating lasting value for its clientele,
shareholder, and employees and above all for the community it operates in. The
money market in Bangladesh is in its intermediary stage. The various
constituent parts of it are in the process of formation, while continuous efforts
are being made to develop appropriate and adequate instruments to be traded in
the market. At present, government treasury bills of varying maturity,
Bangladesh Bank Bills and Certificates of Deposits etc in limited supply are
available for trading in the market. If the financial regulate of Bangladesh
nurture it properly, this can be a good milestone for Bangladesh economy. After
considering all the aspects of money market instruments in Bangladesh can be
concluded with a sentence is that the scope of financial practicing is dramatically
increasing and the money market should be more in more concern to use it
properly in the economic development of our country.
40. Uses of Money Market Instruments in Bangladesh 45
Refferences
Money & capital market by Rose