Fund Management Practices Of The Selected Nationalized Commercial Banks In Bangladesh

6170 words - 25 pages

ASA University Review, Vol. 6 No. 1, January–June, 2012

Fund Management Practices of the Selected Nationalized Commercial Banks in Bangladesh
Vhokto Kumar Biswas* Kartik Chandra Mondal** Abstract
Fund management of commercial bank is a significant issue for its growth and stability. The unusual difference between cost of fund and return on fund is alarming for the financial health of any commercial bank. The major objective of the study is to know the position of fund management, profitability, growth, stability, and productivity trends of Janata Bank Ltd and Agrani Bank Ltd during the period of 2000-2009 and 2004-2008 respectively. Here the secondary data are used. In fund management ...view middle of the document...

Accordingly local as well as Pakistani banks were nationalized and reorganized into distinct new banks incorporated in Bangladesh in terms of the Bangladesh Banks Nationalization order 1972, which was promulgated on the 26th March 1972. During this time 6 nationalized commercial banks were created viz. Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Pubali Bank, and Uttara Bank. No private commercial bank was allowed by the Government to operate except the foreign banks, which were allowed to function as before. Although some of the objectives of nationalization such as opening of bank branch in rural areas, mobilizing deposits from small borrowers and extension of bank credit to the weaker sections of the society have been achieved to a certain
* **

Senior Lecturer, Faculty of Business, ASA University Bangladesh Assistant Professor, Faculty of Business, ASA University Bangladesh

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ASA University Review, Vol. 6 No. 1, January–June, 2012

extent. The welfare of those sections has not been improved to the extent as expected. Bank credit to the priority sectors increase at a rate but the actual results expected to be achieved as a result of expansion of bank credit had been far from satisfactory because of misuse of credit. Allocation of credit was much below the actual requirements. The effective cost of borrowing in many cases was very high due to high transaction costs and other costs which had to be high by the small borrowers. The projects became unprofitable due to high effective cost of borrowing, which results in failure.

Statement of the Problem
Commercial Banks in Bangladesh have severe problem of stuck up advances in both public and private sectors. The amount of such advances (excluding inter-bank) is about Tk. 2, 64,182.20 cores in 2009-2010 financial year. Most of the public sector industries have become sick. Many of our private sector industries have also become sick due to production and marketing difficulties. In our northern districts in Bangladesh, the industrial projects financed by Sonali Bank Ltd, Agrani Bank Ltd, Janata Bank Ltd, Bangladesh Development Bank Ltd (BDBL, formerly known as BSB and BSRS), Rajshahi Krishi Unnayan Bank (RAKUB) and others have also become sick with some exception. This has raised the cost of fund of the banks. There is low profit and productivity of the banks. In this context, any research work on fund management may be beneficial to the authorities, policy makers, and others.

Need for the Study
Management of fund in Commercial bank is very essential for its sucessful survival. An extereme difference between cost of fund and return on fund is very harmful for the financial base of any Commercial bank. Agrani Bank Ltd and Janata Bank Ltd have severe financial difficulties and due to alarming situation our government has appointed foreign consultant to review their financial performance, World Bank suggests that over staffing should be reduced and even nationalized commercial banks (NCBs)...

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