History of Bangladesh's banking sector

The formally known ‘State Bank of Pakistan’ was renamed as ‘Bangladesh Bank’ right after Bangladesh’s independence. The Bangladesh Bank automatically became official foreign exchange reserve institute. It was too accountable for currency control, monitoring exchange and credit control. In the early 1970s, the government decided to permit foreign banks to continue their business and nationalize the local banks.

In that very decade of 1970s, the primary concern of the government was to develop the country’s agricultural industry. This resulted in the Krishi Bank extending loans to more farmers. In the later decades, however, the county’s focus shifted to industrialization; resulting in various difficulties in the economic growth process.

Lack of proper private activity guidelines and proper methods on loan giving were more significant of these problems. It was not until the late 1980s that these difficulties were being overcome and compensated for the agro sector. However the financial institutions failed to recover the loans the industrial sector. Interestingly, Grameen Bank has set an ideal example of how things should be managed during this devastating time. The bank gave out small amount of loans to the poor population in order for themselves to be self-employed. The selection process for giving out these loans was extraordinary. They gave loans mostly to women who were subordinated; these women became self-employed and hence paid back when were helped with guidance to run their business.

In the mid ‘1980s, the government adopted new policies for recovery. It did not work. Government-owned banks continued to fail on recovering the loans.

In the 1990s, many private banks started to emerge. Local group of companies became aggressive in investment so the money flow was rather big.  Bangladesh Bank played key role in managing these private banks with modern outlook. As consciences the banking sector grew many folds.

Throughout the 2000s, governments maintained positive economic policies. The economy grew, so did the Bangladesh's banking sector and business sector. Since 2011 however, many banking scams took place, mainly at government owned banks. This created a bad vibe which is still to recover from.