The role of central bank in Bangladesh in performing its function is poor and inadequate
To understand the topic we need to introduce ourselves to the terms first.
Here central Bank in Bangladesh refers to Bangladesh Bank and the functions means functions of Bangladesh Bank. On the other hand, poor and inadequate means poor in service and not sufficient.
As I agree to the topic there I tried to figure it out in some headings
1. Failing in controlling inflation rate
Inflation occurs when there is enough money supply in the market but the value of money decrease. Amount of money became value less when the inflation rate is high. It is the duty of central bank to keep the inflation rate under control, but Bangladesh Bank really failed to do so. The inflation rate in Bangladesh was recorded at 7.78 percent in July of 2013. This record is reported by the Bangladesh Bureau of Statistics. This is the second highest record in the history of Bangladesh. It is 1.18 percent more than average inflation rate.
2. Failing to monitor Banks
Bangladesh Bank has power to monitor and supervise all banks present in Bangladesh; generally they supervise the banks in two ways.
- On site Supervision
- Off site Supervision
Inspection of banking companies is assigned on BB under article 7A (f) of the Bangladesh Bank Order 1972 and section 44 of the Banking Companies Act 1991. As part of Bank’s statutory function,
Three departments of the BB namely Department of Banking Inspection-1, Department of Banking Inspection-2 and Foreign Exchange Inspection and Vigilance Department (FEIVD) are conducting the inspection activities.
All Though BB has this type of statute power and supervision body they failed to monitor the banking system; As a result we found two biggest banking scandals in banking history of Bangladesh. Namely: –
Hall Mark Scandal
In May 2012, a report from the Bangladesh Bank showed that the Ruposhi Bangla Hotel Branch of the state-owned Sonali Bank, illegally distributed Tk 36.48 billion in loans between 2010 and 2012. The largest share, of Tk 26.86 billion went to the Hallmark Group.
Other companies also participated in the fraud, including: T and Brothers, Tk 6.10 billlion , Paragon Group, Tk 1.47 billion , Nakshi Knit, Tk 660 million , DN Sports, Tk 330 million , Khanjahan Ali, Tk 50 million
Bismillah Group Scandal
During an investigation anti corruption commission it detected that a number of business entities of Bismillah group pulled about 12 billion taka from state owned Janata Bank and four private commercial banks – Prime Bank, Shahjalal Bank, Jamuna Bank and Premier Bank – showing fake export documents.
This indicates total failure of Bangladesh bank of his power of monitoring and supervision.
3. Failing in monitoring others non-banking financial Institute and illegal monitory companies.
According to Financial Institutions Act, 1993; No person can run any financial institution without a license from Bangladesh bank (u/s 4 (1)). In section 5 of the act said Bangladesh Bank can investigate any information, document or record and can also search or seize any such documents if the Bangladesh Bank thinks fit that there is any violation of the act.
But meanwhile in Bangladesh there are many company openly run there illegal Monitory business, take deposit as a security and pay monthly or yearly benefit. And many of them already took the depositors’ money and ran away but the Bangladesh Bank sill in sleep about their duties.
Remarkable of them are: Destiny 2000 Ltd, JUBOK, MXN Modern Harbal, Dolancer, E-Lancer, ClickBD, Neway Outsourcing ltd, E-links, Royal Dream limited Etc.
4. Failing to control illegal money transfer
Illegal international money transfer is also known money laundering or Hundi, as a result such transaction government loose there tax, currency value goes down, fail to estimate proper foreign reserve etc. this is one of the main concern of Bangladesh bank according to section 7(A) (b) to formulate and implement intervention policies in the foreign exchange market; of Bangladesh Bank Order 1972
Such kind of transaction are regulated by Money Laundering Prevention Act, 2012 and Foreign exchange regulation act 1947
In section 3 of foreign exchange regulation act 1947 only Bangladesh bank can authorize any person to deal foreign exchange and no other person then a authorized dealer can buy or borrow or sell or land or exchange with any person (u/s-4 of the act). And by Money laundering prevention act 2012, the Bangladesh bank or the government can take necessary action to prevent money laundering.
Our central bank fails here too. There is no accurate record of money laundering but in the observation of Bangladesh bank, most people reside outside of Bangladesh like to send their money in an informal way via hundi because they get maximum price in a quickest possible time. On the other had the highly corrupt politicians and business man kept their money in foreign bank in a illegal way to keep them safe
On the other hand some foreign Non-banking financial Institute works in the county without permission of Bangladesh bank, they tread foreign currency and exchange. Just in front of the authority. Namely: Forex, Paypal, Alartpay etc.
5. Failing in monitoring customer complain
Bangladesh Bank receives 6824 complain in the year 2013 among them 4296 from commercial bank, 2525 from non-banking financial Institute, according to the annual report of the customer services division of the Bangladesh bank. These complain are received by 10 Branch of Bangladesh Bank around the country. Most of them are related to general banking, loans and advance, remittance, bills, cards and ATM booths, mobile baking and others. And most of them are still not solved.
This is a clear picture of poor service of Bangladesh bank.
6. Failing to understand present necessity of the county
Bangladesh is a developing country so its functions are not limited by only traditional function. It has a huge liability on every financial sector of the county. So it should respond according to present necessity of the country.
Bangladesh holds the third position in freelancing field in the world. According to BASIS there are one lack freelancers around the country; Last year it was one coror per day income earned by the freelancer’s. But they have many problems one of the vast problems is getting or withdraw the earned money. They spend a lot of money using foreign bank or banking system or in many illegal way as Bangladesh Bank denied to accept activities there most reliable payment method PayPal and money bookers. That should be permitted to boost up this sector and for better Bangladesh. I think this is another poor performance of Bangladesh Bank.