BUS 203: BUSINESS ENVIRONMENT Term Paper

Report on banking sector of Bangladesh

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Report on Banking sector of Bangladesh

Submitted to

Mohammad Atiqul Basher

Lecturer

BRAC Business School

BRAC University

Submitted by

Nazifa Tasnim Promee

Rabia Boshory Atoshy

Tasfia Shafiq

Shajnin Nahar Shammi

MD. Samiul Hasan Aric

Date of submission: 7 December, 2019

BRAC University
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 Index
Letter of transmittal……………………………………………………………………………………..04

Introduction………………………………………………………………………………………………05

Overview of the industry………………………………………………………………………………..07

Defining micro environmental factor…………………………………………………………………..14

Future and current opportunities of Banking industry………………………………………………….

………………………………………………..16

Demographic
Data……………………………………………………………………………………………………….17

Financing a venture in banking sector………………………………………………………………..20

The legal procedures one will have to undertake to establish a business in banking sector…..21
Trade License Issue in banking sector………………………………………………………………..22

Outline towards Globalization………………………………………………………………………….23

Limitation and recommendation……………………………………………………………………….28

Cocclusion………………………………………………………………………………………………29

Bibliography…………………………………………………………………………………………30

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 Letter of transmittal
Mohammad Atiqul Basher

BRAC Business School

BRAC University

66, Mohakhali, Dhaka 1212, Bangladesh

Sub: Letter of Transmittal

Dear Sir,

It is indeed a great pleasure for us to be able to hand over the result of our hardship of the
report on banking industry. This report is the result of the knowledge which has been acquired
from the respective course. We tried our level best for preparing this report. The information of
this report is mainly based on Internet information and news article. Some other details were
gathered from an official from a reputed bank. All of us gave our hundred percent for making
this report come together. We, fervently hope that you will find this plan worth reading. Please
feel free for any query or clarification that you would like us to explain. Hope you will appreciate
our hard work and excuse the minor errors. Thanking you for your cooperation and help.

Sincerely,

Nazifa Tasnim Promee

Rabia Boshory Atoshy

Tasfia Shafiq

Shajnin Nahar Shammi

MD. Samiul Hasan Aric

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 Introduction
 Origin of the report

It is the study about the business environment in banking sector of Bangladesh. Normally, this
study is applied to have a minimum idea about business environment of country’s one of the
major sector, the banking sector. The main reason to study of this course is to explain
opportunities and threats for businesses arising from global, national and local business
environments and interaction between business and political, economic, social, technological,
and legal environment. It provides an understanding of opportunities and threats to a business
arising from business environment. We were taught how to analyze the rise and fall of various
trade and industry sector in Bangladesh. We can understand how business laws, policies, rules
and regulations are formulated as well as learn how business can modify and adjust to business
environment. Lastly, in the end of the course we were asked to make a report upon a report on
analyzing business environment of a particular sector.

 Purpose statement

The task was given to us to analyze and to understand the business environment of a particular
industry, in our case we have selected banking sector of Bangladesh, which we and sir mutually
agreed to. Our sole purpose of making this report is to find out current and future opportunities
and challenges faced in that particular industry. Therefore, we will be discussing different
theories we have learned in the class by taking our class room experience to the field.

 Objective

The objective of the central bank of Bangladesh, Bangladesh Bank is to frame monetary and
credit policies, manage currency issue and set payment system, manage external exchange
investments and regulate the foreign exchange market and to regulate and control banks and
financial institutions and advise the government on interactions and impacts of fiscal, financial
and other economic policies. To achieve these, the organization has established some values
that it tries to instill in its employees. They want their employees to be reliable, innovative,
passionate and straightforward.

 Scope

This report is entirely based on banking sector of Bangladesh.

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  Limitations

Fortunately, we were blessed with some beautiful minds to carry on with our task. All of our members
worked so passionately, that it was almost impossible for us to face obstructions regarding this study.
However, in depth we could not get in any particular organization and their specification and
controls they have to achieve and establish their vision. Nonetheless, this report is not out of
some limitations. Throughout the report we have faced some problems and confusions. Some of
this are-

 Limitations regarding appropriate locations

 Shortage of time

 No definite government rules regarding about company Act etc.

 Primary data are not available enough

 Methodology

We have conducted the literature search to the topic to support and direct the research. This
search was mainly conducted on journal database, websites, textbooks, search engines like
Google scholar.

To conduct this research, we have followed several news articles from newspapers and internet.

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Overview of the industry
The banking sector in Bangladesh is comparatively larger than many countries with comparable
levels of development and per capita income relative to the size of their economy. As
Bangladesh is developing rapidly, to promote economic growth, it is continuously trying to
develop its banking sector. The sector dominates country’s financial system as the total size of
the sector is 26.54 percent of her GDP. The banking sector of Bangladesh has changed the
picture of overall rural economy. Microfinance and microcredit are the policy, used by
Bangladeshi banking industry by which the monetization of rural economy has been expanded
and also made such a market-oriented situation which enables continuous resource transfer
from rural to urban areas of the country.

The central bank of Bangladesh is Bangladesh bank. The Bangladesh bank is the principal
supervisor of the banking sector of Bangladesh. There are 62 scheduled banks in Bangladesh.
These are being operated under full control, monitoring and supervision of Bangladesh Bank. It
conforms through Bangladesh Bank Order, 1972 and Bank Company Act, 1991.

Considering ownership, Bangladeshi bank sector can be classified in to following categories –

 State Owned Commercial Banks (Agrani Bank Limited, Sonali Bank Limited, Janata

Bank Limited, Rupali Bank Limited, Bangladesh Development Bank Limited)

 State Owned Development Financial Institutions (Bangladesh Krishi Bank, Rajshahi

Krishi Unnayan Bank)

 Private Commercial Banks (BRAC Bank Limited, City Bank Limited, Dutch-Bangla

Bank Limited, NRB Global Bank Limited, Premier Bank Limited)

 Foreign Commercial Banks (Bank Al-Falah Limited, Commercial Bank of Ceylon PLC,

Standard Chartered Bank, ICICI Bank, Citibank N.A)

From a report published by Bangladesh Bank, over the last 10 years, 3,228 branches of both
private and state owned banks has been established. Total number of branches is 10,114 by
2018. About 4,890 bank branches are being operated in rural area. The number is increasing
day by day.

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After the independence in 1971, banking industry in Bangladesh started its journey with 6
nationalized commercialized banks, 2 State owned Specialized banks and 3 Foreign Banks.
The eastern branch of the former State Bank of Pakistan at Dhaka was retitled as the
Bangladesh Bank as the central bank of Bangladesh. In the 1980's banking industry achieved
significant expansion with the entrance of private banks.

Banking System Structure (in billion, Taka):

Bank type Number of Number of Total Percent of Deposits Percent of

Banks Branches assets Industry deposits
assets

State owned 6 3700 3219.10 26.10 2447.40 29

commercial
bank

State owned 2 1407 302.20 2.50 247.40 2.90

developmen
t financial
institutions

Private 39 4271 8254.60 67 5382.30 63.80

commercial
banks

Foreign 9 75 550.60 4.50 358.90 4.30

commercial
banks

Total 56 9453 12326.40 100 8436 100

This static table has been taken from Bangladesh Bank, June 2016

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Types of banks:

There are 2 types of banks in banking sector of Bangladesh-

 Scheduled bank
 Non-scheduled bank

Scheduled Bank: Scheduled banks are those banks which get license to operate under Bank
Company Act, 1991 (Amended up to 2013). State-owned commercial banks, private commercial
banks, Islamic commercial banks, foreign commercial banks and some specialized banks are
Scheduled Bank. For examples, Agrani Bank Limited, Sonali Bank Limited, BRAC Bank Limited,
City Bank Limited, Dutch-Bangla Bank Limited etc.

Non-scheduled bank: Non-scheduled bank are those banks which are established for
exceptional and certain objective and operate under the acts that are enacted for meeting up
those objectives. These banks don’t have all functions of scheduled banks.

There are now 6 non-scheduled banks in Bangladesh-

 Ansar VDP Unnayan Bank

 Karmashangosthan Bank
 Grameen Bank
 Jubilee Bank
 Probashi Kollyan Bank
 Palli Sanchay Bank

Functions of Central Bank:

Bangladesh Bank is the central bank as well as the regulator of all the monetary and credit
policy and supreme supervisor of all the banks of Bangladesh. As a central bank of Bangladesh,
Bangladesh Bank executes all the functions as a central bank of a country is expected to
execute. The major functions of Bangladesh Bank are discussed below-

 Formulation and implementation of monetary and credit policy: Aiming at alleviating

domestic monetary value and maintaining competitive external per value of taka for
raising growth and development of country's dynamic resources in the best national
interest, Bangladesh Bank formulates monetary policies and implement it.

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 Regulation and supervision of banks and other financial institutions: Bangladesh
Bank monitors and supervises scheduled banks and non-bank financial institutions. It
uses two methods such as off-site supervision and on-site supervision to enhance
stability, ensure safety and soundness of the banking system of Bangladesh.

 Management of the country’s international reserves: It has the sole responsibility of

the management of international reserves like holding of gold, foreign exchange SDR
etc.

 Issuance of currency notes: As the central bank of Bangladesh, Bangladesh Bank has
the sole responsibility to issue bank currency notes.

 Regulation and supervision of payment system: It performs as the mediator for

scheduled banks to clear and settle inter-bank payment done through checks, bills etc.

 Acting as a banker to the government: Bangladesh Bank acts like a banker to

Bangladesh government. It carries out all banking business of the government. It
accepts receipts and bills and makes payment on behalf of the government.

 Money laundering prevention: Bangladesh Bank prevents money laundering and

fights against the financing of terrorism.

 Collection and flourishing of credit information: Bangladesh Bank collects all the
credit information from other organizations.

 Implementation of the Foreign-exchange regulation act: Bangladesh Bank

generates and implements intervention policies in both domestic and foreign exchange
market.

 Managing a Deposit Insurance Scheme: Bangladesh Bank manage a Deposit

Insurance System by which, it protects small depositors, enhance public confidence,
more propitious bank service as well as stability of financial system and increase savings
and encourage economic growth.

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Furthermore, Bangladesh Bank performs some other additional functions include some other
persuasive activities such as expansion of new instruments, strategies for money and financial
market participants, providing training to the banks, observing and inspiring corporate social
responsibilities (CSR) executed by banks and so on.

Functions of Commercial Banks in Bangladesh:

 Receiving Deposits: This is the main function of commercial banks to collect savings of
individuals and firms. They offer various types of deposits as the customer’s needs.
o Current Account: Any measure can be withdrawn from this account any without
any notice. No interest is allowed on this type of account.
o Saving Account: This type of deposit account which is frequently held by the
middle class group. The saving account carries lower rate of interest.
o Fixed Deposit: Amount cannot be withdrawn before the fixed future date in this
type of deposit. High interest is endorsed in fixed deposit which is different
according to period.
 Advancing Loans: Credit is given to the people in different ways.
o Loan account: There are three types of loans given to borrowers.
 Short term loans
 Medium term loans
 Long term loans
o Bank overdraft: Bank permits their trustful customers to draw more than the
deposit they have in the bank. Bank concerns interest on overdraft.
o Cash credit: Bank also gives credit against permanent property and interest is
accused by the bank.
o Discount of bills: this is income source of bank to discount bills of exchange.
They charge minimal interest and discount only reputed and clear bills of
exchange.

Islamic Banking:

Islamic banking is a non-interest banking system which is based on the principles of Islamic or
Shariah law guided by Islamic economics. Besides, the conventional interest bearing banking
system, Bangladesh entered into an Islamic banking system in 1983. At present, out of all the
commercial banks in Bangladesh, 8 commercial banks are operating as full-fledged Islamic

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banks. Now, a total of 23 public and private commercial banks are operating full-fledged or
partially Islamic banking operations in Bangladesh. Among them, 8 full-fledged Islamic banks
are operating with 843 branches, 8 conventional commercial banks with 19 Islamic banking
branches and 7 commercial banks with 25 Islamic banking windows in the country. A total of
26,135 employees are working in 887 Islamic banking branches and windows.
Total deposit from Islamic banks stood at Tk. 1,13,360 crore in December 2013 which was 29
percent deposits of the private banks as well as 18 percent of total deposits of the country. Total
deposits of the Islamic banks stood at Tk. 1,33,561 crore in June 2014. Total investment of
Islamic banks was Tk. 97,530 crore on December 2013. It was 30 percent investment of the
private commercial banks and 21 percent of total investment. On June 2014, the investment
stood at Tk. 113,796.

Mobile Banking in Bangladesh:

Mobile banking started from 31 st March, 2011 in Bangladesh. The concept of Mobile Banking
Services was launched by Dutch Bangla Bank limited. Former Bangladesh Bank Governor Atiur
Rahman initiated the service by depositing Tk 2,000 and withdrawing Tk 1,500 through
Banglalink and Citycell mobile networks in Motijheel area. Bangladesh Bank has already
allowed 10 banks to initiate mobile banking. Of them DBBL kicked off first.
BRAC Bank was the 2nd bank to enter into this industry and came up with country’s most
popular mobile banking service, Bkash. It is a joint venture between BRAC Bank and US-based
Money in Motion, will provide mobile banking with a fully encrypted VISA technology platform for
transactions through mobile phones. Any mobile user can register and open up a bKash
account and then do transactions through their mobile phones in stress-free, convenient and
reliable way. Then gradually all other banks open up with the same idea.

Most popular mobile banking service providers are-

 bKash by BRAC Bank Limited
 Rocket by Dutch-Bangla Bank Limited
 EasyCash by Prime Bank Limited
 mCash by Islami Bank Bangladesh Limited
 SureCash By Rupali Bank Limited
 UCash by United Commercial Bank Limited Bangladesh
 My Cash by Mercantile Bank Limited Bangladesh

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Service Name Bank/Service Provider First Operation in Mobile Partners of Operation
Market Place
DBBL Mobile Dutch Bangla Bank May 2011 Banglalink, CityCell, Grameen
Banking Ltd. Bangladesh Phone, Airtel
bKash Brac Bank Ltd. July 2011 Grameen Phone, Banglalink
Bangladesh
UCash United Commercial November 2013 Grameen Phone, Banglalink
Bank Ltd.,
Bangladesh
My Cash Mercantile Bank Ltd. February 2012 Grameen Phone, Banglalink
Bangladesh
Easy Cash Prime Bank Ltd. 25 March 2012
Bangladesh
OK Mobile One Bank Ltd. October 2013 Grameen Phone
Banking Bangladesh

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Defining micro environmental factors
External environment includes all factors outside the organization which provide opportunities or
pose threats to the organization. It consists of Micro and Macro environment.
The micro-environment of a business includes the factors in the direct area of operation
affecting its performance and decision taking freedom. They include competitors, customers,
resellers, suppliers, and the public. These factors affect the performance of the business in
numerous ways and understanding them is important for strategy making. It also helps at
planning for operational efficiency and financial success. These factors are essential for any
business. Below is a brief analysis of these micro-economic factors that affect the banking
sector of Bangladesh.

Competitor: There are 62 banks are currently operational in Bangladesh. If we go back earlier,
the number of banks is increasing gradually. Even in February 2019, three new commercial
banks have been approved by Bangladesh Bank. The banks are Bengal Commercial Bank,
Citizen Bank and People’s Bank. With the increasing of banks, branches are also being
increased. From a report published by Bangladesh Bank, over the last 10 years, 3,228 branches
of both private and state owned banks has been established. Total number of branches is
10,114 by 2018. About 4,890 bank branches are being operated in rural area. In this
circumstance, the threat of substitute products has been increased in Bangladesh banking
sector as every banks in market are offering specifically different offers, policies, schemes,
facilities etc, to compete with other banks, every bank has to come up with new dedicated lower
financing, investment service, higher rate and greater conveniences constantly for customers.
Meanwhile, with several new banks entering into the market each year, the threats of new
entrants is very high. However due to mergers and other failures, many banks are compelled to
shut down. A main reason of this is ‘trust.’ It is one of the biggest barrier for entrance in the
banking industry. Because, the industry deals with people’s money and other sensitive financial
information. Newer banks finds difficult to start up. Here major, well-known banks get the
advantage that people are more willing to keep their money in well-known banks who they
consider to be trustworthy and reliable. This role of trust acts as a barrier for new banks to
compete with old banks. The impact of technology on the intense competition is quite noticeable
on banking sector. Banks were one of the first companies in the world to adopt computer
technology. The more a bank is technically advanced, the more it catches customer attentions.
Those banks which has quicker access to more information, they are in the much better position
to identify risks and provide improved services in market.

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Customer: Now-a-days almost every individual has a bank account. Most of the people prefer a
particular bank to meet his/her banking needs like mortgages, checking, savings etc. If the
person wants to switch his bank to another, he might face trouble. He might bear extra switching
cost. This can be a major reason, high switching cost. For this reason, sometimes bank
authorities lower the switching price to try and influence customers to switch their banks.
Internet has a great impact empowering the customer. All the details regarding bank has been
given in internet. Through this, customer can easily compare the price side by side with other
banks. Mobile banking has been increased a lot in Bangladesh. Internet makes transferring
money from bank to bank more easier.

Suppliers: The two main suppliers for a bank are the depositors and employees. Depositors
supply the primary resource of capital. Employees supply the resource the labor. As we know,
capital is the primary resource for any bank. There are four major suppliers such as customer
deposits, mortgages and loan, mortgage-baked securities and loan from other financial
institutions. By utilizing properly these suppliers, a bank can be sure that they have necessary
resources required to give proper service to their customer. Meanwhile, recruiting quality
employees makes the opportunity to flourish and increase the bargaining power of companies.
Quality and skilled employees can give better services to customers. They can attract more
sophisticated clients. This strengthens its customer service rating.

General public: Every organization has a duty to satisfy the public. Any actions of company
must be considered from the angle of the general public and how they are affected. The public
have the power to help an organization reach its goals, just as they can also prevent that
organization from achieving them. In order to make people satisfied, bank authorities should
take some measures. They have to hire skillful and well-mannered employees who can treat
customer better. Good employees can attract new clients as well as can give better
performance. They have to provide best and fastest service to customers and of course, the
safest service they have to provide. They can also engage in Corporate Social Responsibilities
(CRS) for the welfare of society. They can keep an eye on social media on what customers or
people say about the organization.

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Future opportunities of Banking industry

 Bangladesh Bank is currently working on the insufficient investments on private sectors

and the cancelation in Foreign Direct Investments (FDI) which will create an opportunity
to flourish in future in Bangladesh’s economy growth from Banging sector.
 Direct lending and weak corporate governance lead to the rise in non-performing loans
(NPLs). The practice of loan rescheduling and write-offs also increased creating further
stress on banks. Bangladesh Bank approved loan scheduling in 2017 and 2018. NPLs
are increasing despite these wholesale approvals of loan rescheduling but Bangladesh
bank is working on this problem to make new opportunities for banking sector.
 Bangladesh Bank is also working on reducing the difference between state-owned bank
and privately-owned banks. It will help to take the banking sector one step closure to the
development in near future.

Current opportunities in Banking industry

 Banking Sector of the country now has risk management guidelines and compliances
requirements for all key areas of banking. Noteable initiatives have been taken for
effective oversight risk management, internal controls and customer interest protections
by the Central Bank.
 Bangladesh Bank has updated and enforced circulars for improving corporate
governance practices of the banking industry in response to the global development and
BIS guidelines.
 A large number of commercial banks are leading with innovative initiatives and products
in the area of mobile and agent banking (like bKash or Rocket), small & micro enterprise
financing and green banking, school banking and financial inclusion through small
deposit mobilization in response to policy initiatives and support services of the
Bangladesh Bank.
 In Bangladesh, few banks have been playing a leading role in modernizing banking
processes, developing new products and launching technologies- driven payment and
financing services. Some banks have already come up with their own internet banking
apps to provide services. At present, agent banking is a remarkable venture.

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Demographic Data

Banking Services

The number of bank branches per 100,000 populations increased from 4.67 in 2005 to 5.64 in
2014. The number of ATMs per 100,000 populations increased from 0.13 in 2005 to 3.99 in
2014. Demographic penetration by NGO-MFIs points that 9.61 branches existed per 100,000
population in 2007 which decreases marginally to 9.46 branches in 2013. In case of MFS agent
per 100,000 adult people the growth is quite high. Starting from 2011, demographic penetration
of banks, MFIs and ATMs crossed within four years.

Access to banking

Four in five households in Bangladesh have access to financial services due to the
improvements in the networks of banks as well as a booming mobile banking segment.
Bangladesh is one of the leading countries in South Asia where households have higher access
to financial services. The percentage went up to 5 points between 2010 and 2014 in terms of
household’s access to banking services such as savings, credit and insurance. More than 40%
in rural regions have access to bank services which was 32.8% four years ago. In urban areas it
is now 49.76%. The poor households that are constrained by service charges, collateral and a

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lack of financial literacy stood at 24.19% in 2014 up from 19.53% four years ago. However, 59%
of households are still credit constrained.

Expansion of online banking

The expansion of branches of commercial bank was limited until new technologies like mobile
phones came up with huge opportunities for banks. The banks that are using ICT related
products such as online banking, electronic payments, security investments can deliver high
quality customer services with comparatively less effort. It is important for banks to reduce the
cost per transaction as they have been under tremendous pressure due to continuous shrinking
of spread. The cost drastically reduces when banks use online delivery channels like ATM, POS
Terminal, Mobile phone, Internet etc. The basic difference between traditional and online
banking is that people have to visit the branches of bank but in online banking they save a lot of
time. So, more people are into online banking due to their convenience.

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Bank accounts

Banking penetration in Bangladesh was low because of low account ownership. The lack of
penetration with over 70% population having no bank account. World bank reveals that there
are only 82 branches per 10a license from Bangladesh0,000 adults in 2015. On the other hand,
mobile phone banking saw rapid adoption. Bangladesh now accounts for more than 8% of total
mobile money accounts worldwide. At present, there are 31% banked adults. Bangladesh is a
land of 160 million people and half of its population are deprived of bank accounts. This
contradicts with the financial inclusion strategy. The low financial literacy, poverty, low income,
large gender gap and lack of understanding of banking services work as a barrier to have bank
accounts. The number of bank accounts need to be increased to bring people into the financial
system.

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Financing a venture in banking sector

Financing a venture for banking industry has to go through a lot of requirements.

Paid up capital

Paid up capital is required for a bank to be established. It should not be less than 400crore taka
as required under Bank Company Act 1991. The Paid up capital can also depend on the size of
economy and interests of depositors. The share capital needs to be formed with ordinary shares
only.

Adequacy of documents for license

As per the Banking Company Act 1991, section 31, without obtaining a license from Bangladesh
Bank no company can carry out the banking business. Bangladesh Bank will decide whether to
approve license or not considering the need and overall strategy that are easy to get along with
the effective monetary and financial sector policy for the country and also the application for
approval with all the accompanying documents and information required.

Banking barriers

There are 62 scheduled banks in Bangladesh. The banks of Bangladesh are under stress due
to non-performing loans and other deteriorating factors. The study says that we don’t need more
banks. This makes it difficult for the banks to do banking business in Bangladesh. However, if
someone has deep connections with the government and ministry of finance then Bangladesh
Bank might approve new banks. There are some other barriers like non-performing loans,
banking volatility, lack of corporate governance and skilled human resource and increasing
capital shortfall in the existing banks that make it difficult for the new banks to enter the market.

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The legal procedures one will have to undertake to establish
a business in banking sector
To start a private bank in Bangladesh, at the initial stage, the entrepreneur should apply for a
new offshore banking license. An application has to be sent to the ministry of finance. This
procedure will take three to 18 months depending on the authority. The waiting time also
depends on the current situation of the following company or the regulated business plan.
Applying for a bank requires having sufficient capital as given in the applicable regulations. In
Bangladesh, there should be a total capital of 4 billion taka (53 million). Without capitalization,
applying for a bank license has no useful objective. The process starts with a diagnostic of
entrepreneur’s specific situation. Several additional services that are part of the bank will be
included in that process. In Bangladesh, a minimum of 2 partners and a solid management team
with an faultless track record and without a history of bankruptcy, money laundering, fraud or
this kind of related issues. Then they have to recruit senior directive staff with a very good
banking experience and also general experience in financial sector. They have to assign of a
compliance officer and a risk management officer, among other key individuals. Then a local
office has to be set up. The bank should hire directive staff with relevant experience. The
employees typically should have MBA or similar qualification from a renowned institute. All
director and shareholder have to submit to a full background check and an audit should be
conducted by an external auditing firm. An preliminary business plan should be submitted with
the application to the ministry.

Legal factor a bank should consider:

Legal factors are external factors that contribute to how the law impacts the way business works
and the actions of consumers. Product transportations, capability of certain market and profit
margin etc spares can be influenced by legal factor. Legal factors can choose whether or there
is a business behind selling a certain product or service and can also affect the mechanisms
through which a company frame their portfolio or interact with customers. General examples of
legal factors affecting banking sector are consumer law, employment law, copyright law etc. for
example, consumer law is designed to protect consumers from fraudulent companies or
practices as well as preserve their rights in the marketplace. Then comes the employment law.
It’s also known as labor law. It dictates how company’s employees should be treated. Minimum
pay laws can limit the various different employment possibilities a company can offer.

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Trade License Issue in banking sector
Banks basically use trade license to distinguish their service from the competitors. Trade license
is mandatory for every kind of business in Bangladesh, specially industries which provide
service. Bank business is a service providing industry so bank also need trade license to
operate business.

Trade license must be obtained from local government in the area it operates. It must be
renewed every year.

To form a trade license a bank must use a “K” form and the form must be bought from the
respective zonal office. The from may cost tk10. The form must be submitted to the local ward
commissioner for validation.

All the information of the bank with the basic information about the owners or shareholders
should be provided. These all have to be submitted to the DCCS zonal office.

After the inspection of LS the bank is asked to pay the predetermined TK 10000 to the DCC
office.

At the time of collecting the trade-license the 30% of the license fee as signboard fee. After
following these procedure one can get a trade license for starting a bank

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Outline towards Globalization

The countries we have opportunities to invest in financial sector as banking

 China
 USA
 UK

China’s financial industry and capital markets are full of vitality and opportunities. It's financial
system and explore directions of future development is easy than any other country. Though
USA and UK also provide exclusive opportunities but as researching on their demographic and
social data china gets first priority for us. As China is within Asian country it gives us extra
opportunity which USA cannot give us. Such as-

 Establishing legal and institutional infrastructure such as creditor rights.

 Building information and governance infrastructure such as credit information
systems, accounting and disclosure rules, and internal and external auditing
systems.
 Tax exemption on royalties, technical know-how fees received by any foreign
collaborator, firm, company and expert.
 Strengthening the role of central banks to provide systemic liquidity support through
effective monetary operations and efficient payments and settlement systems.
 No limitation pertaining to foreign equity participation, 100 percent foreign equity is
allowed.

Though we get the opportunity on services to foreign residents and institutions free of some
Federal Reserve requirements and some state and local income taxes. For all of these we took
china to invest in banking sector.

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Reasoning for selecting China as a particular country

Demographic and Public data

Demography mainly depends on countries Age, Gender, Race, Marital status, Number of
children (if any),Occupation, Annual income, Education level. In china the total population is
1.368 billion people where most of the male and female are between (18- 35) years and (45-60)
years old. Working age people are 998.3 million people. The family planning policy, which is
based on the two-child policy and the one-child policy, is a population planning policy of China.
As we know, China is innovating faster than our imagination. These people are too much hard
working. They are the fastest-growing markets in the world. They are accumulating innovative
ideas and practices tailored to the local market and is committed to improving the wellbeing of
Chinese people. Research and Development (R&D) is the backbone of innovation. It supports
the development of new products and services, which have the potential to touch all aspects of
modern life, in the ways that personal computers and smart phones have and that artificial
intelligence and robotics are expected to in the near future. As 4 th industrial revolution is
coming ,china might get the top position to adopt and adapt with the new technologies. China
has leaned on its manufacturing process for decades to support economic development, but it
must now contend with countries whose economies are deeply rooted in innovation-based
growth. Yet, China has made considerable progress in establishing itself as a pioneer in
emerging industries and its leaders are increasingly looking toward innovation as a driver of its
economic growth.

By 2015, China’s R&D expenditure had surged to 2.07 percent of its GDP. This shift was
propelled in part by government measures. For instance, the 12th 5-year plan (2010 – 2015) set
an R&D spending target of 2.2 percent of GDP by 2015, a mark it only narrowly missed by 0.13
percent. Beijing has since renewed its support for R&D through the 13th 5-Year Plan (2015 –
2020), which outlined Beijing’s goal of hitting a R&D expenditure-to-GDP ratio of 2.5 percent by
2020. China is already making headway in pursuit of this goal. In 2017, its R&D expenditure
reached 2.1 percent of GDP. Here they actually invest more money. The statistic shows the
degree of adult literacy in China from 1982 to 2015. In 2015, the literacy rate, which is defined
as people aged 15 and above who can read and write, had reached about 96.4 percent in
China. Most of the people are literate, the unemployment rate is decreasing day by day. Their
unemployment rate is 3.9% only.

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How this will help in invest in banking sector

China is a populated country, but their working age people are higher who are active in
economic activity. As 79% people literate , they search for a job or start up a new business.in
that time they need financial support from the bank. On the other hand , as we know Chinese
people are innovative than our imagination, their investment in (R&D) research and
development sectors are high. Chinese people basically do business in their local market. As

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their product is exporting all over the country, banking sectors can easily flourish by doing LC
and other export duties.

What are the facilities get in financial sector

As 4th industrial revolution is knocking at the door, China is working to build up its digital wealth
management services. Contributing one-third of total global economic growth and boasting the
world’s highest GDP (as measured in purchasing power parity terms1), China is a market that
foreign investors cannot avoid.

 China is removing the entry restriction of 30 years of operating experience for

foreign insurance companies.
 China will scrap foreign ownership limits of bank in 2020 instead of 2021.
 On Friday, Oct. 11, the China Securities Regulatory Commission announced a
time frame for removing foreign ownership limits in the financial industry
 In terms of supporting the growth of the overall economy that gives the
opportunity to consist of alternative financing channels, governance mechanisms,
and institutions co-exist with banks and markets in the future in order to continue
to support the growth of the Hybrid Sector (non-state, non-listed firms).
 As the stock market in allocating resources in the economy has been limited and
ineffective, banks are the only way which can make sustainable economic
growth.

How we take entry in the china’s banking sector

As we are investing in new country’s market, we may have face lots of problems which may
cover up by doing joint venture. As we are not directly see their lifestyle, how they may attract or
what are the facilities may help in banking sector or in which place people are available to have
financial support. As we do joint venture we may get some advantages such as-

 As there is cultural differences, if we do joint to extend marketing reach.

 Help to access needed information
 Build credibility with a particular target market
 Both parties share the risks and costs for that if the joint-group project fails, we
are not alone when bearing the costs of its failure. Because two companies had
volunteered to share the expenses, they both will also support the losses.

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  Access technical expertise and know how that your company may be lacking
 A joint venture is only a temporary arrangement between my company and
another. By definition, I won’t be committing to it long term.

So, as China’s huge financial markets have been largely closed to foreign financial institutions
(FIs), but this looks set to change as evolving global relationships and the demands of a
growing middle class reinvigorate its globalization agenda. As authorities make genuine moves
to open the country’s financial sector to both attract foreign capital and broaden the financial
system, inbounds should move fast, its future will be flourished.

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Limitation of the study
Fortunately, we were blessed with some beautiful minds to carry on with our task. All of our members
worked so passionately, that it was almost impossible for us to face obstructions regarding this study.
However, in depth we could not get in any particular organization and their specification and
controls they have to achieve and establish their vision. We couldn’t take any interview from
bank officials due to some unavoidable reason. We have contacted with City Bank Limited, NRB
Global Bank Limited and Bank Asia. But we didn’t get any appointment because audit program
are being conducted in those banks and its officials are so busy that they couldn’t approve our
appointment letter. Meanwhile, there is very less information available on internet. There was
also shortage of time. Nevertheless, this report is not out of some limitations.

Recommendation

Banking Sector of Bangladesh should work on their poor asset quality and low capital buffers.
Besides, they should focus on fast credit growth, state-directed lending and loan re-structuring.
If this problem is solved then it can help to flourish Bangladesh's economy growth. Moreover,
the major development in implicit guarantee on deposits will curb credit growth slightly in private
owned banks or encourage better interest rates on deposits.

As we know, Bangladesh is improving their banking sectors and we can also see the
improvements from better customer services and employees satisfaction but if they make some
more developments it will be one of the major sector which will play a vital role in country's
development.

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Conclusion

The heart of all economic development in Bangladesh are now the commercial banks.
Commercial banks are now using ICT to compete with the market consisting of cutting edge
technology system. It has now changed from domestic banking to investment banking.
Bangladesh is one of the fastest growing economic country. In Bangladesh, we have total 62
banks to render their services to the nation. However, all banks do not render internet banking
services. The services of some banks are very limited (such as only general banking). Due to
comparatively lower quality service the State owned commercial bank and specialized
development bank is still not efficient for internationalization. Foreign expansion is possible in
case of Private commercial banks. Some private commercial banks are providing one stop
services for non- resident Bangladeshi (NRB) that is very productive for foreigners for example-
BRAC Bank, Dutch Bangla Bank, Islamic Bank Bangladesh Limited, National Bank etc. The
outcome even after pursuing liberalization policy is still far from the expected ones. Interest rate
is still not affirmative to business entities.

In the upcoming years the banks will witness endeavor to create sound internal control or risk
management processes. The banks with proper risk management systems will gain
comparative advantage regulating capital charge in a lower way and also add value to the
shareholders and other stakeholders by efficiently pricing their services, adequate provisioning
and maintaining a sturdy financial structure.

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