Commercial banks play an important role in the economy. It works as financial intermediary. The major function of commercial banks is to collect funds as deposit from small savers. It uses the collection of funds to invest in large projects or to loan other investors. In this way banks protects the savers from risk and in exchange enjoys spread. Now-a-days banks are not confined to these functions solely. Other functions of commercial banks are-
* Securities underwriting
* Asset management
* Foreign exchange trading
* Commission based services etc.
COMMERCIAL BANKS IN BANGLADESH
After the independence there were six commercial banks that were merged and ...view middle of the document...
54% in the third quarter in 2009. PCBs share in total bank credit is 63.95% in 2009 (Q3) and is increasing at the rate of 5.19%. Trade occupies the largest share of the total loans and advances (35.58%) but in terms of growth industrial sector is the leader (5.22%).
Banks earn 73% of its total revenue from interest income and the main source of interest income for banks is loans and advances. Among the non interest income commission, Exchange and Brokerage contribute 49.97%.
Aggregate net interest income (NII) of the industry has been positive and consistently increased from Taka 8.4 billion in 2000 to Taka 54.8 billion in 2007. However, the NII of the SCBs sharply declined to a
negative amount of Taka 1.2 billion in 2000. Since 2005, SCBs have been able to increase their NII by reducing their cost of funds. The NII of PCBs & FCBs has been very high over the period from 2000 through 2007. The trend of NII indicates that the PCBs & FCBs are charging interest at very high rates on their lending as compared to their interest they are paying to the depositors.
There were significant increases in risk weighted capital asset ratio (RWCAR) for all banks to 11.7% in June 2009 from 10% in December 2008 indicating positive change in the asset position. For SCBs the ratio increased to 9.1% in June 2009 from 6.9% in December 2008; to 12% from 11.4% for PCBs: to 28.3% from 23.8% FCBs and to 0.2% from -5.3% for SBs.
ROA increased from 1.2% to 1.4% during June 2009 compared to December 2008. The FCBs and SCBs were the main contributors as ROA increased from 2.9% to 3.6% for FCBs and from 0.7% to 1% for SCBs. On the other hand, overall ROE during this period increased from 15.6% to 18.2% due mainly to a sharp rise in ROE for SCBs from 22.5% to 27.6%; moderate rise for FCBs and PCBs from 17.8% to 21% and 16.4% top 18.3% respectively. For SBs, ROA and ROE increased substantially to -0.04% and -0.33% at June 2009 from -0.6% and -6.97% percent respectively during December 2008. These negative but increasing figures may indicate positive sign in banking performance.
The three year average net interest margin of the industry is 25%, which is higher than those of NBFI & Insurance sector (18%).
The bank can enjoy lower cost of capital than the NBFI.
Banks are introducing brokerage house in other countries to boost their income.
The foreign remittance inflow has been increased by 5.5 times from 2001-02 (BDT 10,170 cr) to 2008-09 (BDT 66676.51 cr). But it has been decreased by 15% in February 2010 over the previous month. The export and import are increased by 12.94% and 4.35% respectively in 2008-09 over the previous FY.
Banks have improved services by introducing on line banking facility, one stop service, door step foreign remittance service etc.
Banks have introduced innovative banking products as Credit & Debit card, ATM & POS facility, Internet Banking, Mobile banking, individual bank on-line networks, tele-banking,...