Bangladesh Bank is the Central bank of Bangladesh and is a member of the Asian Clearing Union.  After the liberation war, and the eventual independence of Bangladesh, the Government of Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of the country, and named it Bangladesh Bank. This reorganization was done pursuant to Bangladesh Bank Order, 1972, and the Bangladesh Bank came into existence with retrospective effect from 16 December 1971.

Functions: Like all other central banks across the globe, Bangladesh Bank is both the Government’s banker and the banker’s bank, a “Lender of the Last Resort”. Bangladesh Bank, like most of the central banks of different countries, exercises monopoly over the issue of currency and the banknotes. Except for the 1 and 2 taka notes, it issues all other denominations of Bangladeshi Taka .Credit control, Clearing House, Control Money Market, Job creation, Agricultural development, Industrial development, and Natural resources development are also the functions of Bangladesh Bank. The bank is active in developing financial inclusion policy and is a member of the Alliance for Financial Inclusion. The Bank also has a number of departments under it, namely Debt Management Dept, Law Dept, and so on, each headed by one or more General Managers.^[4] The Bank has nine physical branches in Bangladesh, in Motijheel, Sadarghat, Barisal, Khulna, Sylhet, Bogra, Rajshahi, Rangpur and Chittagong, each headed by a General Manager (the Motijheel branch, the HQ, has two GMs).

In 1982, the first reform program was initiated, where the government denationalized two of the six nationalized commercial banks and permitted local private banks to create competition in the banking sector. In 1986, a National Commission on Money, Banking and Credit was appointed to recover the problems of the banking sector and a number of steps were taken for the recovery targets for the nationalized commercial banks and development financial institutions and prohibiting defaulters from getting new loans, yet, the efficiency of the banking sectors could not be improved.

The Financial Sector Adjustment Credit (FSAC) and Financial Sector Reform Program (FSRP) were formed in 1990, upon contracts with the World Bank with the objective to remove government distortions and lessen the financial repression. The policies made use of the McKinnon-Shaw hypothesis which stated that removing distortions will augment efficiency in the credit market and increase competition. The policies therefore involved banks to provide loans on commercial basis, enhance banks’ efficiency and to limit government control to the monetary policy only. FSRP forced banks to have a minimum capital adequacy, to systematically classify loans and to implement modern accounting systems and computerized systems. It forced the central bank to free up interest rates, revise financial laws, and to increase supervision in the credit market. The government also developed the capital market, which too was performing poorly.

However, FSRP was expired in 1996 and afterward the Government of Bangladesh formed a Bank Reform Committee (BRC) whose recommendations were largely remained unaddressed by the then government.

The commercial banking system dominates Bangladesh’s financial sector. Bangladesh Bank is the Central Bank of Bangladesh and the chief regulatory authority in the sector. The banking system is composed of four state-owned commercial banks, five specialized development banks, thirty private commercial Banks and nine foreign commercial banks. The Nobel-prize winning Grameen Bank is a specialized micro-finance institution, which revolutionized the concept of micro-credit and contributed greatly towards poverty reduction and the empowerment of women in Bangladesh.

State-owned Commercial Banks: The banking system of Bangladesh is dominated by the 4 Nationalized Commercial Banks In which 3 is totally controlled by government and 1 (Rupali Bank) bank is controlled by both government and private sector which together controlled more than 54% of deposits and operated 3388 branches (54% of the total) as of December 31, 2004. The nationalized commercial banks are:

• Sonali Bank
• Agrani Bank
• Rupali Bank
• Janata Bank

Private Commercial Banks: Private Banks is the highest growth sector due to the dismal performances of government banks (above). They tend to offer better service and products. Now 31 private commercial banks are operating in Bangladesh. Here is the list -

• United Commercial Bank Limited
• Mutual Trust Bank Limited
• BRAC Bank Limited
• Eastern Bank Limited
• Dutch Bangla Bank Limited
• Dhaka Bank Limited
• Islami Bank Bangladesh Ltd
• Uttara Bank Limited
• Pubali Bank Limited
• IFIC Bank Limited
• National Bank Limited
• The City Bank Limited
• NCC Bank Limited
• Mercantile Bank Limited
• Prime Bank Limited
• Southeast Bank Limited
• Al-Arafah Islami Bank Limited
• Social Islami Bank Limited
• Standard Bank Limited
• One Bank Limited
• Exim Bank Limited
• Bangladesh Commerce Bank Limited
• First Security Islami Bank Limited
• The Premier Bank Limited
• Bank Asia Limited
• Trust Bank Limited
• Shahjalal Islami Bank Limited
• Jamuna Bank Limited
• ICB Islamic Bank
• AB Bank

Foreign Commercial Banks: 10 Foreign Commercial Banks are operating in Bangladesh. These are -

• Citibank
• HSBC
• Standard Chartered Bank
• Commercial Bank of Ceylon
• State Bank of India
• Habib Bank Limited
• National Bank of Pakistan
• Bank Alfalah
• ICICI Bank
• Woori Bank

Specialized Development Banks: Out of the specialized banks, two (Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank- only for the development of the agriculture of the north Bengal of Bangladesh) were created to meet the credit needs of the agricultural sector while the other two (Bangladesh Shilpa Bank (BSB) & Bangladesh Shilpa Rin Sangtha (BSRS) are for extending term loans to the industrial sector. The Specialized banks are:

• Karmasangsthan Bank
• Bangladesh Krishi Bank
• Rajshahi Krishi Unnayan Bank
• Progoti Co-operative Landmortgage Bank Limited (Progoti BanK)
• Grameen Bank
• Bangladesh Development Bank Ltd
• Bangladesh Somobay Bank Limited(Cooperative Bank)
• Ansar VDP Unnyan Bank
• BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited)
• The Dhaka Mercantile Co-operative Bank Limited (DMCBL).