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INTRODUCTION..........................................................................................................................................1 BANGLADESH BANK AS A CENTRAL BANK OF BANGLADESH GOVERNMENT ....................1 GENERAL ROLES OR FUNCTIONS OF CENTRAL BANK.................................................................2 ROLES AS A GOVERNMENT BANK........................................................................................................3 ROLES AS A BANKER OF OTHERS:.......................................................................................................4 DEVELOPMENT FUNCTIONS..................................................................................................................5 OTHER FUNCTIONS...................................................................................................................................6 MONETARY POLICY STRATEGY OF THE BANGLADESH BANK.................................................7 CONCLUSION...............................................................................................................................................8 REFERENCES...............................................................................................................................................9

Introduction
A central bank, reserve bank, or monetary authority is a banking institution granted the exclusive privilege to lend a government its currency. Like a normal commercial bank, a central bank charges interest on the loans made to borrowers, primarily the government of whichever country the bank exists for, and to other commercial banks, typically as a 'lender of last resort'. However, a central bank is distinguished from a normal commercial bank because it has a monopoly on creating the currency of that nation, which is loaned to the government in the form of legal tender. It is a bank that can lend money to other banks in times of need. Its primary function is to provide the nation's money supply, but more active duties include controlling subsidized-loan interest rates, and acting as a lender of last resort to the banking sector during times of financial crisis (private banks often being integral to the national financial system). It may also have supervisory powers, to ensure that banks and other financial institutions do not behave recklessly or fraudulently.

In economy, Central bank is the most important part of a country. Central Bank tries to develop the banking sector of the country. And also Central bank is strengthening in money market and to assist to the capital market. And also Central bank tries to develop the agriculture sector, rural development, poverty alleviation and to develop the industry sector in many ways. So, the Central Bank plays a vital role for the economic development.

Bangladesh bank as a Central Bank of Bangladesh government


Bangladesh Bank is the Central bank of Bangladesh. It is the monetary authority of the country. It came into existence under the Bangladesh Bank Order 1972 (Presidential Order No. 127 of 1972) which took effect on 16 December 1971. Through this order, the entire operation of the former State Bank of Pakistan in the eastern wing was transferred to Bangladesh Bank. Bangladesh Bank headquarters in Motijheel. Bangladesh Bank has 9 branch offices, two in Dhaka city (Sadarghat and Motijheel), and one each in Chittagong, Khulna, Rajshahi, Sylhet, Bogra, Rangpur and Barisal. The head office discharges its duties with 28 departments. Bangladesh Bank performs all the functions that a central bank of any country is expected to perform. There are some major objectives of Bangladesh Bank; To regulate the issue of the currency and the keeping of reserves; Manage the monetary and credit system of Bangladesh with a view to stabilizing domestic monetary Value To preserve the par value of the Bangladesh Taka; To promote and maintain a high level of production, employment and real income in Bangladesh; and to foster growth and development of the country's productive resources for the national interest.

General Roles or Functions of Central Bank


Bank of issue: The issue of paper money is the most important function of a central bank. In fact the privilege of note-issue was almost everywhere associated with the origin and development of central banks. Central banks were generally known as bank of issue until the beginning of the twentieth century. The issue of money was always claimed to be a prerogative of the government.
Supervision of the Banking System

Central Bank is the leader of all banks. It supervises the banking system of the country. Central Bank may be responsible for banking system. They collect information from commercial bank and take necessary decision by two ways- a) bank examine and b) bank regulation. When a bank takes decision for customer or others, Central Bank examines it and gives permission for implement or eliminates the project. Central Bank also make project for customer and advice to implement in Other Banks.

Banker, Agent & Adviser to the Government: A central bank functions as a banker to the government of the country. In this capacity, it conducts the banking accounts of government departments, institutions & enterprises. It makes short-term advances to the Government in normal condition and extra ordinary advances during a depression, war or other emergency. It carries out the governments transaction involving purchase or sales of foreign currencies. As an adviser to the government the central bank gives advice to the govt. on important matters of economic policy like deficit financing, trade policy, foreign exchange policy etc. The ultimate responsibility for laying down the monetary policy and maintaining the monetary stared lies with the government. Custodian of the cash reserves of the commercial Bank: The commercial banks in the country keep a part of their cash balance as deposits with the central bank, either voluntarily because conversion or because of some legal obligation. In many countries, the banks are required under some legislation to maintain statutory minimum cash reserves, mostly as a specified proportion of their deposits. Custodian of the nations reserves of international currency: The central banks, function of holding the nations metallic reserves and its foreign exchange reserves was automatically derived from its functions as the bank of issue and the custodian of commercial banks cash preserves. In most cases a central bank is required by law to maintain a minimum reserve against its note issue.
Lender of last resort: The expression lender of last resort implied the assumption of the

responsibility of meeting directly or indirectly. The Central Bank helps the member banks in times of crisis. If the banks cant manage the money then Central bank helps those commercial banks by supplying them money.

Central clearance, settlement and transfer: As the central bank is the custodian of cash reserves of the commercial banks, it can easily assume the function of acting as a clearing house or settlement bank for other banks in the country. As all banks maintain their accounts with the central bank, the claims of banks against one another are settled by simple transfers from and to their accounts this method of settling accounts through the central bank apart from being of great convenience to the banking system, provides economy in the use of money in banking operations. It tends generally to strengthen the banking system of a country. Controller of credit: The control of credit is considered to be the main function of a central bank. De Kock observes, It is the function which embraces the most important questions of central banking policy and the one thorough which practically all the other functions are united and made to serve a common purpose. The central bank functions of note-issue, the management of government accounts, and the custody of the commercial banks cash reserves along with those of rediscount and lender last resort, are closely associated with the control of credit by the central bank. An effective monetary management requires a centralized control over both currency and credit. That is why the central banks, which enjoy the monopoly of note-issue, also exercise control over excessive expansion of credit by the commercial banks. Promoter of economic development: The modern central bank is an institution responsible not only for the maintenance of economic stability; it also performs a variety of development and promotional factions, which were regarded in the past as being outside the normal preview of central banking. The main objective of a central banks monetary policy is to achieve growth with stability within the frame work of the general economic policy of the country. For the sake of economic development the central bank should provide sufficient quality of money appropriate to growth process.

Roles as a Government Bank


Central bank is known as govt. bank all over the world. Central bank everywhere fulfills the functions of banker, agent and adviser of the government. Central bank performs the following functions govt. banks. Maintain government fund and accounts: Central bank maintains and monitors govt. fund and reserve on behalf Govt. For this reason central bank is called the custodian of govt. fund. Collection and transfer of money:

Central bank collects govt. revenues from different sectors and deposit it the account of govt. Besides it transfers money from one place to another according to directions of govt.

Handling of government monetary transaction: Central bank performs all monetary transaction of home and abroad on behalf of govt. According to M.H. De-Kock it carries out the govt.s involving purchase and sale of foreign currencies.
Advising the Government on Monetary Policy

Monetary policy is a most important issue for economic. The decision on monetary policy may be taken by the central bank. Monetary policy refers to interest rates and money supply. The central bank will corporate with the government on economic policy generally and will produce advice on monetary policy and economic matters, including all the statistics.

Sanctioning and supervision of loan: Central banks not only perform monetary transaction on behalf of govt. but also sanctions supervising of loans of different ministry, department and institution of govt. Maintaining relation with foreign bank: As an agent of govt. central banks maintain relationship with central banks of different countries, World Bank (WB), International Monetary Fund (IMF), Regional Development bank (i.e. ADB), different development agencies etc. Adviser and agent of government: Central bank acts as agent of govt. to establish and maintain relationship with different parties inside and outside the country. It also advises govt. in policy making. Implementation of government monetary policy: The implementation of government monetary policy in the timing of impact on the economic inflation in the country. Central bank influences the economy through monetary policy, because of the monetary policy is very important to the investors.

Roles as a Banker of Others:


Central bank performs the following functions as a banker of others bank. Scheduling bank: Central gives the license/permission of new banks to start business and schedule them. For this reason central is always careful whither the commercial banks following /maintaining the conditions of scheduling. It also set up new rules and policies for other commercial bank to open new branches.

Functions as a clearing house: Inter banks indebtedness is arisen from operations of day to day banking activities. Sometimes it becomes very difficult for commercial bank to settle inter banks indebtedness. For this reason central perform the function as clearing house all over the world. Sanction of loan: Central bank gives loan to scheduled commercial bank if necessary. Even, when the commercial banks are in financial crisis and cannot collect loan from other sources, then central bank acts as lender of last report. Supervision of loan: Central banks not only sanction loan but also manage how & when scheduled commercial banks are granting loan and in different sectors. Assistance in collecting credit: Central bank extends the helping hands to the commercial banks in collecting loans by enacting new rules and regulation about loan and default loan and its report publication. Audit of accounts: Central bank carefully check the book of accounts of commercial bank and its proper maintenance .As a result commercial banks are bound to maintain properly books of accounts. Collection and preservation of deposits: All the scheduled commercial banks have to maintain a certain percentage of their deposits into central bank. Central bank carefully monitor about this. Acts as adviser and agent: Central bank advises and directs commercial bank for the betterment of their operations of banking activities/function. Besides it acts as the agent of scheduled bank in home and abroad.

Development functions
The objective of central bank is to ensure economic development. According to the direction of Govt. central bank undertake different development activities and tries to implement. These development activities are as follows: Development of different production oriented sectors: 5

Central bank helps to argent extent in the production oriented sectors like the development of agriculture and industry etc. For this reason it extend helping hands to establish specialized banks like agricultural bank, industrial bank, investment bank etc.

Development of banking system: Central bank is always engaged in the development of banking system as the leader of banking empire. For this reason, central bank set up different rules and regulations when banking institutions are in danger, central extends it help. Development of foreign trade: Central bank under take different activities for the development of foreign trade (i.e. import and export). Central bank tries to stabilize exchange rate of a country. It creates confidence among the foreign exporters about countrys banking system. Improving the quality of economic plan: Central bank is the top most financial institution in the country and the banker of Govt. So it helps for the development of the quality of economic plan taken by Govt. Improving the quality of manpower: Central bank tries to improve the quality of manpower in the banking sector. For the development of its own manpower inside the bank, the central bank arranges training facilities. It motivates scheduled commercial banks to manage adequate training facility for the development of quality of their manpower. Development of natural resources: Central bank provides assistance and help to extract natural resources for use of these resources to the enhancement of the economic welfare of the people. For this reason it extends financial help assistance those institution engaged in extracting these natural resources.

OTHER FUNCTIONS
In addition to above function, central bank also provides some others functions. These are as follows Economic research: Central bank has to undertake different Economic research activities for the development of banking system effective operation of money market, formulation of different policy of government etc. Collection and supply of data: Central bank has to collect different data to act act as the banker of the other banks and the banker of government. Central bank supply information to various departments of government and different scheduled bank.

Preparation of report and publication: Central bank is to prepare many reports to meet the need of government and the bank itself. Besides, central banks publish annual report and sell it. To do this bank has separate publication and cell department.

MONETARY POLICY STRATEGY OF THE BANGLADESH BANK


Monetary policy strategy of the Bangladesh bank was first issued in January 2006. The most important thinks of monetary policy is followedMonetary Policy Framework: It starts by articulating the monetary policy framework (in

terms of the goals, the instruments, and the analytic channels of transmission) for greater clarity and transparency benefiting both the policy makers as well as the stakeholders. The appropriate monetary policy goal in the Bangladesh context is to achieve price stability with the highest sustainable output growth.
Growth Outlook: In view of strong consumer demand, agricultural growth, stable

industrial growth, robust service sector growth, and the steady growth of remittances offsetting the deficit in the trade balance, the FY06 real GDP growth is expected to come in at the 6.3 to 6.8 percent range. However, it ought to be stressed that this forward looking analysis assumes a stable and predictable import regime (including the petroleum price behaviour), a stable exchange rate regime, adequate private sector credit flows, and the continuation of an appropriate cautionary (i.e., tight) monetary policy stance in light of inflationary pressures currently at play.
Sectoral Growth Outlook: An analysis of sub-sectoral growth rates suggests the overall

growth for the agricultural sector is likely to be in the 3.8-4.3 percent range in FY06, the principal contribution coming from the crop sub-sector. It is also believed that industrial growth for FY06 would lie in a range of 8.0 to 8.5 percent, which is a shade lower than the 8.6 percent figure realised in FY05, but well in excess of the average recorded over the past five years. Further, the service sector in FY06 is expected to build on the past years performance, and yield a growth rate of 6.5 to 7.0 percent. These sectoral growth projections are consistent with the overall growth predicted for FY06.
Inflation Outlook: Over and above the risks posed by the high price of crude oil and the

consequent balance of payments pressure, there is the spectre of rising real interest rate in the global economy (led by the US) and the associated increase in the inflationary expectations in the industrial countries, the source of most of national imports. In the domestic scene, the possibility of another round of upward revision in the set of administered energy tariffs cannot be ruled out. On the positive side, however, in view of the bumper aman harvest, the food component of CPI is unlikely to register much further growth over the balance of FY06. Taking the above factors into account, and on the assumption that the tightened monetary policy stance will be maintained, the 12-month average inflation in FY06 is unlikely to exceed 7.0 percent. Achieving price stability:

The central bank of a country control the money supply, availability of money, cost of money or rate of interest rate in order to set of objectives oriented towards the growth and stability of the economy.

Maintaining high levels of production: Bangladesh is food crops country. In Bangladesh many people depends on cultivation of land. As a result, Bangladesh bank maintains the high level of production. For the high level of production many times Bangladesh bank provides different types of facilities to the farmer. Employment and economic growth: Bangladesh is over populated country. As a result, many people are in under unemployment. For that reason our economic growth is low. As a result, our government announced they will try to provide job at least one people in a family. When in every family get the job, the economic growth will also increase day by day.

Conclusion
After a little bit of discussion on the Roles of Central Bank, we can easily understand about the whole activities of Central Bank relating to improving the banking sector, economic development, making policies, doing job for the government, making rules and regulation for several financial organizations, controlling the money market and social development works etc. The bank acts as the banker to the government and accepts government deposits, cheques and drafts, and undertakes collection of cheques and drafts drawn on other banks. The government deposits all its cash balances with the Bangladesh Bank free of interest. The bank transfers government funds from one place to another as requested by the government and its agencies. Central Bank is empowered to act as the watchdog of the country's banking system, and all scheduled banks are accountable to Central Bank, which has extensive powers to ensure soundness of the banking system. No bank can commence banking business in the country and no existing bank can open a new branch in or outside the country or shift any branch from one place to another without obtaining a license/permission from the Central Bank. Central Bank is an Important part of a countries it try to develop the economy of the country, and also try to develop the agricultural sector, industry sector, rural development and overall economic development of the country. So, central bank plays a significant role for economic development of the country.

References
http://www.bangladesh-bank.org/research/policynote/pn0602.pdf http://www.scribd.com/doc/34331402/The-Functions-of-Bangladesh-Bank http://www.scribd.com/doc/32115544/Bangladesh-Bank-Report-Final