Being a third world country, Bangladesh possessed an under developed banking sector based on client care and services for a long phase. Initially, most of the banks were government owned. Eventually, with the brewing rate of industrial growth and denationalization private investments began to flow in this sector. During the mid and late 1980s there was a surge in commercial bank establishment which were owned by a board of shareholders. Private sector started to grow.
As number of rural banks multiplied in that 1980 decade and more and more commercial banks were joining the market, Bangladesh’s banking sector officially turned into an industry. Since then it has gone through some quite significant challenges. With one central bank and four state owned bank and eight Islamic banks and thirty one private commercial bank there were approximately forty four banks in Bangladesh in the 1990s. There were also nine foreign commercial banks and five specialized bank along with one land development bank in Bangladesh.
Bangladesh banking sector has come a long way. To describe the current status of the sector some intense points can be notified. The most promising growth rates Bangladesh banking sector has been deteriorating are in terms of credit, disbursement and risk management.
However excess of liquidity has been a seriously concerning issue for this sector for the last couple of years. A noticeably low level of demand for credit by the private sector can be a significant reason behind that. Apart from that there is some more focus points in the concerning side. The rate of growth of agricultural credit disbursement and credit recovery has been experiencing lower trend. Also according to calculated projection a certain decrease is inevitable on the way for ROE (Return on equity) if the current trend follows. This can result in the gradual declining of the profit of the majority shareholders. As the borrowing increases every year, its expenditure is also going up due to higher interest payment.
Despite all those negative effects, the banking sector has started to operate more productively as the political scenario has been quite calm lately. If this current state continues there are indeed some good times ahead of the banking industry.
As number of rural banks multiplied in that 1980 decade and more and more commercial banks were joining the market, Bangladesh’s banking sector officially turned into an industry. Since then it has gone through some quite significant challenges. With one central bank and four state owned bank and eight Islamic banks and thirty one private commercial bank there were approximately forty four banks in Bangladesh in the 1990s. There were also nine foreign commercial banks and five specialized bank along with one land development bank in Bangladesh.
Bangladesh banking sector has come a long way. To describe the current status of the sector some intense points can be notified. The most promising growth rates Bangladesh banking sector has been deteriorating are in terms of credit, disbursement and risk management.
However excess of liquidity has been a seriously concerning issue for this sector for the last couple of years. A noticeably low level of demand for credit by the private sector can be a significant reason behind that. Apart from that there is some more focus points in the concerning side. The rate of growth of agricultural credit disbursement and credit recovery has been experiencing lower trend. Also according to calculated projection a certain decrease is inevitable on the way for ROE (Return on equity) if the current trend follows. This can result in the gradual declining of the profit of the majority shareholders. As the borrowing increases every year, its expenditure is also going up due to higher interest payment.
Despite all those negative effects, the banking sector has started to operate more productively as the political scenario has been quite calm lately. If this current state continues there are indeed some good times ahead of the banking industry.
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