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Financial institution

string(119) ‘ _____________________________________________ 3 5 Calculated from your data collected from Statistical Yearbook, 1996\. ‘

Journal of Business Study, vol. three or more, 2001 Here is info brought to you simply by www. bdresearch.

org Bank Sector in Bangladesh: The Contribution and Performance Sharif Rayhan Siddique* A F M Mafizul Islam** Abstract: The paper attemptedto highlight the prospects and opportunities of banking sector in Bangladesh. Like other economic sector in the country, Banking is certainly one of major industries which contribute to the national overall economy. The study attempted to furnish the overview of the performances of banking sector and also understand the evaluation among the various categories of banking institutions with respect to the Success.

Finally, the paper tried to establish the linear romantic relationship among the different variables and net income of the bank sector. 1 . Introduction Bank sector of Bangladesh is among the major areas, which leads to significantly to the national economy. The sector comprises many banks in several categories. Looking at ownership the sector could be classified in to four major categories , such as Nationalized Commercial Banks (NCBs), Specialized Banks (SPBs), Private Commercial Banks (PCBs), and Trans-National Banks (TNBs). The list of banks underneath different categories is equipped in the appendix , A.

The study has been initiated to investigate the contribution of this sector and its success. This paper attempts to supply an overview of the contribution of the sector in national economic system. The newspaper also analyzes the profitability of various categories of banking institutions. Finally a regression examination has been done to examine the partnership between the success and other factors. 2 . Contribution of the Banking sector in National Economic climate Economic development , from the country can be executed by contribution of numerous economic areas. Like agriculture, industries, electricity, transport, rade service, etc ., banking sector also has a contribution to the economic development. In middle 80s Bank and Insurance contributed 1 . 69% of GDP and gradually the figure was increasing. The utmost contribution was 2 . 09% of GROSS DOMESTIC PRODUCT in the year 1993 and it was 2 . 00% in 1996-971 Average expansion rate of this contribution was 1 . 51% of GDP, which shows a positive tendency. Again, the sector makes a positive impact within the economic creation by creating employment. Back in 1980 amount of staff in this sector was fifty nine, 235 good results . in 15 years of period the figure shoot around double to 101, 444. The average growth rate of employment era was 3. 76% (1980-1995). Countries like Bangladesh have got a burden of its joblessness, where as banking sector continue to keep certain impact on career generation. __________________________ * Helper Professor, Commence of Business Administration, University or college of Dhaka. ** Associate Professor, Start of Business Administration, University of Dhaka. 1 Calculated from the info collected by Economic Craze, December 97. 2 Ibid. 2 Banking Sector in Bangladesh: The Contribution and Performance Branches in the banks were also growing drastically.

Increasing twigs indicate an extensive service provider towards the population of Bangladesh. General growth price of the traditional bank branches was 2 . 11% (1980-1995). But before 1990 the pace was several. 00% and after 1990 it absolutely was 0. 92%. In early 1980s for the first time Federal government of Bangladesh (GOB) allowed private sector to operate commercial banks. At that time number of traditional bank branches was growing speedily. In the early 90s this growth level was lowered, which may be because of the saturation stage. Individuals and business organizations accustomed to deposit all their savings in the bank and borrow money kind it.

More the bank twigs more persons can be protected to avail them in banking providers. Average inhabitants per branch was 19, 875 during the period coming from 1984 to 1995. Because of the higher population growth charge (2. 22%), 3 despite increasing branches, the population per branch was also raising. Commercial banking institutions are one of the profit making organizations, also, they are making money by investing their deposits towards the profitable venture through lending to the internet marketers. Commercial financial institutions earn money from fascination for financial loan and commissions and assistance charges pertaining to the services and it incurred expenditure as well.

Average earnings per taka of expenses was 0. 10. Ahead of 1991 this kind of figure was quite very good, but following 1991 the ratio was negative approximately 1993. Optimum figure was in the year 1982 that was 0. 3 and bare minimum was -0. 04 in the year 1991. Recently the percentage became 0. 07 back in 1995. During 1991 to 1993 net profit was negative. we. e. commercial banks spent more than getting but again they will improved the specific situation by reducing their costs compared to profits. Banks’ profits generated by positive efforts of their staff.

Efficient personnel can make more which will observed a good impact to profit technology. Income per employee may be one of the signals of commercial banks’ performance. Typical income per employee from 1980 to 1995 was Tk. 227, 046, my spouse and i. e. per employees’ contribution to cash flow was a lot more than Tk. 2 lacs. The ratio was increasing significantly with the average growth charge of 12%, to Tk. 371, 297 in the year 1995. A country leads itself towards the economic advancement by trading and generating more from your area. Purchase can be ensured through increased savings rate.

Monetization ratio indicates a good impact towards the economic expansion. This percentage is Broad Money to GDP. Normal monetization proportion was 28% of GDP, and it had been growing substantially from 17% in the year 1981 to 35% in the year 95. 4 Industrial banks, overall, performing very well and contributing to the financial development of the. The average profitability of all banking institutions collectively was 0. 09% during 1980 to 1995, which means earnings Tk. 0. 09 gained by utilizing possessions of Tk. 100. In each and every aspect of profit, banking sector contributes to national economy as well as to the individual business.

Despite overall growth of the banking sector was positive, but the shows of different categories of banks weren’t equally attractive. Following section would assess analytically the performances of various categories of banks. _____________________________________________ 3 4 Determined from the info collected from Statistical Yearbook, 1996.

You read ‘Banking Industry in Bangladesh: The Contribution and Performance’ in category ‘Essay examples’ Ibid. Journal of Business Study, Vol. 3, 2001 a few 3. Profitability of the Diverse Categories of Banking institutions: A Comparative Analysis Key focus of this kind of comparison on net profit earned by the banks.

Income ratio, profit per taka of costs, profit per employee, profit per branch, profit every advance bank account, profit every taka of investment, revenue per taka of put in (savings), and per capita profit received by the financial institutions will be the factors for this examination. Various categories of banks will vary performances regarding profit. Average measures were calculated for different categories of banks over the period from 1980 to 1995. 3. one particular Profit Rate In case of profitability, i. elizabeth. amount of profit per Tk. 90 of property. The proportion indicates the effective usage of assets.

Overall performance of the organization can be indicated by this percentage. Average success ratios for the various categories of banks during 1980 to 1995 had been exhibited in the table listed below: Table one particular: Profit Ratio for Numerous Banks Financial institutions Profit Rate (%) NCBs 0. ’08 SPBs -0. 32 PCBs 0. 13 TNBs zero. 71 Overall 0. 09 Source: Adopted from data in Appendix , B. The desk indicated the performances in terms of utilization of assets in creating profit TNBs were the best. Specialized Banks had a incredibly worst scenario in using of their resources, by demonstrating negative typical net income.

Though since 1990 net profits had been increasing efficiently, but coming from 1991 to 1995 these types of net revenue were gradually decreased to negative due to their declining salary. On the other hand TNBs performance was excellent when compared with overall banks performance. Average growth charge of net profit intended for TNBs was 39%, that has been extremely good. a few. 2 Revenue per Taka of Costs Banks gained profit by taking on expenditure for their operations. Successful usage of financial resources led to a commendable profit situation. “How much income earned by spending one taka” may be the measure of performance of an business.

Following stand shows net profit every taka of expenditure for the different banking companies Table 2: Profit per Taka of Expenditure intended for Various Banking companies Banks Profit per taka of expenses (Tk. ) NCBs zero. 029 SPBs -0. 092 PCBs 0. 033 TNBs 0. 307 Overall 0. 10 Source: Adopted by data in Appendix , B. 4 Banking Sector in Bangladesh: Its Contribution and Performance Over all average earnings was Tk. 0. you by occuring expenditure of Tk. 1 ) i. elizabeth. average go back on expenses was 10%. But in case of person performance SPBs had adverse average go back on costs (-9. %), on the other hand TNBs performance (30. 7%) was above the industry average. Apart from these two NCBs and PCBs both experienced vulnerable condition. 3. 3 Profit every Employee Successful utilization of recruiting produces higher return. Gained more profit by few amounts of employee shows commendable efficiency of the banks and individual efficiency. Considering that the nature of the industry is service oriented, so human being efficiency is determined by intellectual talents of the staff. Following table shows the comparison amongst various banking companies Table 3: Profit per Employee for Various Financial institutions

Banks Revenue per worker (Tk. ) NCBs 5, 538 SPBs -34, 216 PCBs being unfaithful, 659 TNBs 285, 659 Over all doze, 88 Supply: Adopted from data in Appendix , B. Over-all profit every employee was Tk. 12, 880, we. e. each employee’s average contribution to the net profit was Tk. 12, 880 in a given time. TNBs as compared with total, the figure was extremely good (Tk. 285, 659). You will discover two signals for this photo, one is TNBs had highly efficient workers, and other is less number of workers. On the other hand apart from SPBs (which had unfavorable figure), NCBs average earnings per staff was Tk., 538, which was far beneath from TNBs, even beneath from performance, which displays un-utilized human resources. 3. some Profit per Branch All categories of banks have amounts of branches masking wide range of the citizenry of the region. To provide service to the wide range of people, banks have to create multiple divisions. Contribution for the total profit of different divisions was varied, depending on the volume of deposits and improvements. Table under expresses average profit contribution by the twigs. Table 5: Profit per Branch intended for Various Financial institutions Banks Income per part (Tk. ) NCBs 6, 205 SPBs -491, 827 PCBs 181, 548 TNBs 13, 171, 737 Overall 210, 481 Source: Used from info in Appendix , B. 5 Bank Sector in Bangladesh: It is Contribution and gratification Considering most commercial banking companies in Bangladesh, these were attained on an average Tk. 0. 064 from investing one particular taka. The regular Return on Investment (ROI) was not limited (6. 4%) as compared to virtually any business. In the event of TNBs this kind of rate was very attractive (12. 7%), but except SPBs, both NCBs and PCBs had 1 . 2% and 2 . five per cent respectively. a few. 7 Per Capita Profit Commercial financial institutions are working countrywide by providing services.

Accumulating funds and distributing those to entrepreneur was the main function of commercial banks. Wider area coverage the actual commercial bank more comfortable regarding operation. Every capita earnings earned by the commercial bank would suggest overall economical strength of banking system. Average profit gained per head can be expressed in the table listed below: Table six: Per Capita Profit for Various Banking companies Banks Per Capita Earnings (Tk. ) NCBs 2 . 53 SPBs -5. 25 PCBs 1 ) 46 TNBs 2 . fifty-one Over all twelve. 66 Resource: Adopted from data in Appendix , B. Typical profit every individual in the area for all banks was Tk. 0. sixty six, i. at the. banking sector earns above Tk. 12 per brain. But employing same insurance coverage for different categories of banks, the style would be diverse. In case of NCBs operation they will gained on an average Tk. 2 . 53 per specific, where as TNBs earned Tk. 2 . 51 per head. Apparently these two figures had been same yet considering the protection in terms of quantity of branches, NCBs have 168 time more branches than TNBs. a few. 8 Overall Situation Taking into consideration all variables regarding earnings, TNBs were doing very good operation in this sector. Because of the policies and managements TNBs functionality was better.

Keeping TNBs aside, PCBs performance fairly better. In terms of the control was worried both NCBs and SPBs were same. PCBs began their procedures in 1982, prior to Government of Bangladesh managed that total financial sector. But following allowing personal sectors to control commercial banking companies, PCBs were gradually recording the market reveal. Surprisingly SPBs had adverse performances in every single aspect for their negative net profit. 5. Relationship of Profit To Variables Inside the above section comparison of profitability among various groups of banking institutions has been talked about.

But it was desired to know about the sensitivity of earnings on several variables. Journal of Business Research, Volume. 3, 2001 6 Multiple regression evaluation has been completed analyze the partnership between net profit since dependent variable and property, expenditure, number of employees, volume of branches, volume of advance accounts, investment, time deposit happen to be as self-employed variables. From this paper it absolutely was assumed the fact that relationship among the list of variables was linear, which can be? = A + M? + C? + D? + E? + Farrenheit? + G? + They would? , , , , , , , , , , , , , , , , ,. i) where,? can be net profit? is range of employees? is usually amount of expenditure? is usually number of branches? is amount of investment? is volume of property? is period of time deposit? is definitely number of enhance accounts A is continuous The following section expressed the determination of coefficient in the independent factors, which show the degree of impact on on net profit by corresponding variables. four. 1 Regression Result Based upon data supplied in appendix , C, the ideals of coefficients and frequent were calculated and also identified the relationship included in this.

Multiple thready regression equation is stated in equation (ii).? sama dengan , 68459+0. 002? -0. 186? +0. 159? -0. 084? +0. 003? +0. 133? -1. 03, 10-6? , ,. (ii) Previously mentioned linear equation shows that a few of the independent parameters have great relationship yet others have bad. Amount of expenditure, amount of investment and volume of advance accounts all have got negative romantic relationship with net profit. On the other hand amount of asset, number of employees, range of branches and amount of time first deposit have confident relationship with net earnings.

Further, the effectiveness of the relationship among the variables tested by the coefficient of dedication (r2). The worthiness was computed as zero. 89, indicating very strong romantic relationship. Therefore , the independent factors collectively may well play important role on getting net earnings in the financial sector all together. 4. 2 Scope to Improve of Income In the equation (ii), it absolutely was evident that some of the independent variables have got positive impact on net earnings, though the degree of influences was very low. Net profit may well increases simply by increasing values, which have great relations.

Via equation (ii), it was several Banking Sector in Bangladesh: Its Contribution and Performance very clear that number of employee, volume of branches, volume of advantage and timeframe deposit have got positive relationships with net profit. From above relationship, it is usually explained that if quantity of employee elevated by one particular, the net profit will increase by simply Tk. zero. 002 crores, i. elizabeth. every you, 000 employees can add Tk. 2 crores to net profit. This suggested that there may be still in order to generate work in this sector and can help the national economy.

Again range of branches in addition has positive impact upon net profit. Equation (ii) reflects that increase in a single branch may possibly increase net profit by the quantity of Tk. 0. 159 crores, which also testifies that there was continue to scope to improve branches. In Bangladesh there have been opportunities to set up branches in the rural areas where lots of organization potentials were hoping to find the bank service. Another variable the amount of asset has positive romance with net profit. Possibly it has hardly any influences on profit, every single Tk. you, 000 crores of possessions would boost net profit by the amount of Tk. 3 crores.

Therefore , it absolutely was apparent that there was still room to enhance the amount of asset to earn more profit. Finally, how much time first deposit was additional variable, containing positive impact on on net profit. Pourcentage of this changing in equation (ii) was 0. 133, this indicated that every Tk. 1, 000 crores embrace time pay in would increase profit by how much Tk. 133 crores. Studying above romantic relationship, time deposit has more robust influences on net income. Therefore , financial sector as a whole may increase their contribution to national economy if the amount of time deposit was increased.

Examining the regression equation it had been clear that some of the impartial variables have got positive control of the generation of net profit, and in addition might raise the contribution with the banking sector to national economy by increasing the values of those variables. a few. Conclusion The performance of the banking sector in terms of net profit may differ in various sets of bank. The study revealed that in every single aspect, TNBs had a good performance. But comparing between other sets of banks (NCBs, SPBs, and PCBs), PCBs had favored achievement aiming profit. Alternatively Specialized Banks in Bangladesh had a not of very good performance.

This meager activity affected the complete banking sector’s performance. The comparison amongst various types of banks have been done based on the profit regarding some other variables. The study likewise revealed the partnership among the centered variable and independent parameters. The equation (ii) reveals the weights in the independent parameters that impacts net earnings of the financial sector. Finally, the daily news intended to discover the scopes and chances of the factors by which over all net profit might boost, and contribute to the national economic climate.

Journal of Business Analysis, Vol. three or more, 2001 almost 8 References 1 . Mohammad Moqbul Hossain Bhuiyan. (1995). Managerial Effectiveness of personal Commercial Banking institutions: A Comparison Study. Record of Organization Studies, Vol. XVI, No-1, June. installment payments on your Sujit Ranjan Saha. (1996). Ancillary Organization and Success of Banks: Trends and Prospects. Traditional bank Parikrama. Vol. XXI, Em , 1 & 2, March & June. several. Taufic Ahmad Choudhury and others. (1994). Comparison Characteristics of Profit Generating and Loss Incurring Rural Bank Divisions in Bangladesh. Bank Parikrama. Vol. XIX, Nos , 3 & 4, Sept & 12 ,. 4.

Abdul Ghafar Ismail. (1993). Deregulation and Financial institution Behaviour in Mixed market segments. The Oriental Economic Review. Vol. XXXV, No , 2, August. 5. Dipendra Sinha. (1996). Savings and Economic Growth in India. The Oriental Economic Assessment. Vol. XXXVIII, No , 3, January. 6. Bienquerer Chand Kaushik. (1996). Effects Study of Regional Countryside Bank’s Credit rating on Profits Generation a great d Low income Alleviation in Rural Haryana. The Asian Economic Assessment. Vol. XXXVIII, No , 1, 04. 7. David Lynch. (1996). Measuring Economical Sector Advancement: A Study of Selected Asia-Pacific Countries. The Developing Economics. Vol.

XXXIV, No , 1, Mar. 8. Schiller, Bradley L. (1994). The Macro Economy Today. Sixth Edition. McGrawHill Inc., New York, USA. 9. McConnell, Campbell R. and Brue, Stanley L. (1993). Macro Economics. Twelfth Release. McGraw-Hill Inc., New York, USA. 10. Fischer, Stanley., Dornbusch, Rudiger. And also other. (1988). Summary of Macroeconomics. next Edition. McGraw Hill, Ny, USA. eleven. Department of Statistics. (1997). Monthly Monetary Trends. Bangladesh Bank. December. 12. Bangladesh Bureau of Statistics. (1997). Statistical Yearbook of Bangladesh 1996. Seventeenth Edition. The fall of. 9

Financial Sector in Bangladesh: The Contribution and satisfaction Appendix , A List of Banks: [a] Nationalized Commercial Banking institutions (NCBs) Agrani Bank Janata Bank Sonali Bank Rupali Bank Limited. [b] Specific Banks (SPBs) Bangladesh Krishi Bank Bangladesh Shilpa Lender Rajshahi Krishi Unnayan Bank [c] Exclusive Commercial Banking companies (PCBs) Arab Bangladesh Bank Ltd. Islami Bank Bangladesh Ltd. National Bank Ltd. The City Bank Ltd. IFIC Bank Limited. United Commercial Bank Limited. Pubali Bank Ltd. Uttara Bank Ltd. Al-Baraka Lender Bangladesh Limited. BSIC Bangladesh Ltd. Asian Bank Limited. National Credit rating and Trade Bank Limited.

Prime Lender Ltd. Southeast Bank Limited. Dhaka Financial institution Ltd. Al-Arafah Islami Bank Ltd. Social Investment Bank Ltd. Dutch-Bangla Bank Ltd. [d] TNBs Hanil Bank Hongkong Financial institution Society General Bank American Express Bank Ltd. ANZ Grindlays Financial institution Plc. S tandard Chartered Bank Point out Bank of India Habib Bank Ltd. Citi Bank N A Banque Indosuez National Lender of Pakistan Muslim Industrial Bank Limited. J ournal of Organization Research, Volume. 3, 2001 10 Appendix , N Various Info for PCBs Year 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 year 1994 1995 Enhance Assets Net Profit Costs Employees Limbs

Accounts (cror (cror Tk. ) (cror Tk. ) (no. ) (no. ) (no. ) Tk. ) 82 2132 1877 almost 8 173 11562 628 8429 5202 14 245 11813 653 283320 6381 18 281 12756 693 267393 7768 22 366 13552 715 178460 7208 twenty-five 438 14810 771 160220 9072 13 594 16107 824 160834 9514 a couple of 682 16916 865 165290 11059 (11) 765 17486 902 169549 12445 (8) 886 18034 942 84913 15502 12 819 17826 943 90599 15783 16 865 18806 1000 102055 24190 seventy two 907 19777 1047 117985 26794 Several Data intended for TNBs Net Advance Expenditure Employees Divisions Year Income Accounts (cror Tk. ) (no. ) (no. ) (cror Tk. ) (no. ) 1980 3 20 912 21 years old 1882 1981 8 25 984 21 542 1982 11 32 999 twenty one 2910 1983 12 forty-five 1061 20 2888 1984 15 sixty two 1042 twenty 3098 1985 18 77 1051 20 3610 1986 14 98 1064 22 3929 1987 22 119 1114 twenty two 4144 1988 21 146 1124 twenty two 4887 1989 7 147 1123 22 3971 1990 18 154 1135 twenty-two 3890 1991 25 99 789 18 2355 1992 38 sixty-five 826 18 2463 93 54 92 826 18 3969 1994 68 106 888 19 6329 95 90 146 926 23 9215 Investment (cror Tk. ) seventy six 293 346 327 396 506 554 787 750 653 879 1266 1439 Assets Purchase (cror Tk. ) (cror Tk. ) 757 1280 1526 1476 1848 2281 2887 3245 4330 4697 4694 5575 4297 4377 5832 7111 51 seventy 109 118 156 163 177 196 300 279 358 340 228 203 260 266

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