Role of Banks in the Development of Economy

7/31/2019 Role of Banks in the Development of Economy

1/25

ASSIGNMENT

ON

ROLE OF BANKS IN THE DEVELOPMENT OF ECONOMY

SUBMITTED TO:

ABED ALI

REXONA YESMIN

COURSE CO-ORDINATORS

BANGLADESH INSTITUTE OF BANK MANAGEMENT

DHAKA

SUBMITTED BY:

MD. MAHMUDUL ISLAM TALUDKER

MD. ZABED HOSSEN

MD. ABDULLAH KHAN

MD. MOHIUDDIN

SUMON KANTHI BAROI

ACHYUTANANDA DEY

A.Q.M. SAFIUL ALAM


2/25

Preface

In the new era of globalization, the banking sector has witnessed drastic changes at structural and

organizational levels. In the financial sector, banks act as an intermediary to transfer the

resources from those who spend more than their earnings to those who spend less. Banking play

a key role in deciding the best business practices in developing new markets and clients, and

creates new products for e-commerce & Net-based technologies. Faster technological

developments have transformed human life into a virtual mode, a reality that allows people to

make purchase payments online, without risking themselves to errors and frauds.

In the economy whether it is developed, developing or under developed, we see a variety of

banks operating to meet some specific objectives. All kinds of banks play significant

contribution for the development of the economy as a member of financial markets.

Before describing the contribution made by the banks to the economy, we must see their

classification, key functions and traditional role thereafter.

Classification of Banks

1) Central Bank.2) Commercial Bank3) Specialized Bank4) Investment Bank5) Merchant Bank

Overview of Banks

Banks can be described as financial institutions whose current operations consist of accepting deposits

from the public and issuing loans.

The receiving of deposits and provision of loans distinguishes banks from other financialinstitutions.


3/25

The term banks includes commercial banks, merchant banks, finance houses, building

societies, savings banks and credit unions

Key Function: Financial Intermediation

Banks act as intermediaries when they mobilize savings from surplus units (savers) toshortage units (borrowers) in order to finance productive activities.

Other financial institutions can also be intermediaries e.g. between buyers and sellers ofshares

The taking of deposits and granting of loans singles out banks.

Traditional Theory of the Role of BanksThere have eight significant elements

information advantages,

imperfect information,

delegated monitoring,

control,

insurance role of banks,

commitment theories,

regulatory subsidies and the special role of banks in the payment systems.

Banks solve problems associated with asymmetric information between lenders: ex

ante (adverse selection) and ex post (moral hazard) behavior of borrowers.

With large investments in information technology and expertise, banks are able to

evaluate a borrowers credit worthiness and verify the borrowers dealings at a

lower cost than would individual savers.


4/25

The role of central banks in fostering economic development

We will here describe both the traditional & Neo-liberal role of a central bank operated as an

agent of the govt. as well as the financial market controller of every economy.

Indeed, historians of central banking will agree that financing governments and managing

exchange rates were key of central banks for decades, if not centuries. But there will be more

resistance to the idea that a common feature of central banking has also included the support of

economic sectors.

1). Price stability

Let us first consider price stability. Low and stable inflation rates allow the private sector to plan

for the future, lead to a lower need for costly price adjustments, prevent tax distortions and thus

create a stable business environment. On the other side, high and unstable inflation creates

random wealth transfers between creditors and debtors. One of the main objective of a central

bank is to maintain the price stability in the country, attempting to minimize the inflation rate

and upgrading the currency rate.

2). Payment systems

Next lets look at the payment system. The development of the payment system determines how

easy it is for firms and consumers to access and transfer money. Can businesses pay their

suppliers by writing a cheque or making an electronic transfer? Or do they have to undergo the

cumbersome and insecure process of sending cash physically? Can workers in urban areas

transfer money to their rural families by simply sending an SMS, or do they have to carry it with

them on a dangerous bus ride?

Particularly in Bangladesh, Central bank is playing a great role in the payment systems with the

help of commercial banks. Introduced online clearing house, mobile banking & online bankingas well many non-cash mode payment instruments which enables the easy transaction and

increases high standard of living.


5/25

3. Financial sector development

An efficient and deep financial sector provides enterprises with debt and equity to finance their

growth, thus spurring economic activity. At the same time a deep financial sector can provide

households with savings and credit products to smooth their consumption patterns, again

increasing their return from economic activity, and reducing poverty.

Traditional Functions:

The central banks in the developing countries perform both traditional and non-traditional

functions. The traditional functions of the central bank are : having the monopoly of note-issue;

acting as banker to the government; serving as bankers' bank; functioning as the lender of the last

resort; controlling and regulating the credit; and maintaining the external stability.

1. Economic Growth:

The central banks in the developing countries should aim at promoting the process of economic

growth. Economic growth requires sufficient financial resources. The central bank can ensure

adequate monetary expansion in the country. Moreover, as a banker to the government, the

centralbankcanprovide funds for initiating investment in the public sector.

2. Internal Price Stability:

Along with the objective of economic growth, the central bank should also attempt to maintain

internal price stability. The developing countries are susceptible to inflationary pressures mainly

due to supply -in elasticitys in the short period. The central bank should adopt such a monetary

policy thatcancontrol inflationary tendencies and ensure price stability.

3. Development of Banking System:

The developing and underdeveloped countries do not have well-developed banking system. In

such an economy, the central bank should not only take measures to develop an integrated

commercial banking system, but also should not hesitate undertaking directly the commercial

banking functions.


6/25

4. Branch Expansion:

In developing countries, the commercial banks generally concentrate their branches in the urban

areas. In order to extend credit facilities to the agricultural sector, the central bank shouldprepare

programme for branch expansion in the rural areas.

5. Development of Financial Institutions:

Development of the leading sectors of the economy such as agriculture, industry, foreign trade,

etc. requires long-term finances. For this, the specialised financial institutions should be

established which provide term-loans to these sectors.

6. Development of Banking Habits:

Through its various credit control instruments (i.e., bank rate, variable cash-reserve ratio, etc.)

and by providing discounting facilities to the commercial banks, the central bank exercises full

control over the activities of commercial banks. This creates public confidence in the banking

system and helps in the development of banking habits of the people.

7. Training Facilities:

A major difficulty in developing the banking system in developing countries is the lack of

trained staff. The central bank can provide training facilities to meet the personnel requirements

of the banks.

8. Proper Interest Rate Structure:

The central bank can help in establishing a suitable interest rate structure to influence the

direction of investment in the country. In underdeveloped countries, a policy of low interest rate

is necessary for encouraging investment and promoting development activities. Again, by

adopting different interest rates, the central bank can increase productive investment and

discourage unproductive investment.


7/25

9. Other Promotional Roles:

The central bank can provide a number of other promotional facilities. For example, (a) it can

adopt policies to provide help to the various priority sectors, such as agriculture;, cooperative

sector, small scale sector, export sector, etc. (b) it can provide guidelines to be followed by the

planners about some definite patterns of economic and investment policies; (c) it can publish

information regarding the state of the economy and promote research in money and banking.

Role of Bangladesh Bank in the Development of the Countrys

Economy

Bangladesh Bank is an adviser of government for taking decision in the future. And also

Bangladesh Bank is the head of the countrys commercial Bank and others financial institution of

our country.

FUNCTIONS OF BANGLADESH BANK

GENERAL FUNCTIONS

1. Bank of issue

2. Banker, Agent & Adviser to the Government3. Custodian of the cash reserves of the commercial Bank

4. Custodian of the nations reserves of international currency

5. Lender of last resort

6. Central clearance, settlement and transfer

7. Controller of credit

8. Promoter of economic development

FUNCTIONS AS GOVERNMENT BANK

1. Maintain government fund and accounts

2. Collection and transfer of money

3. Handling of government monetary transaction

4. Sanctioning and supervision of loan


8/25

5 Maintaining relation with foreign bank

6. Adviser and agent of government

7. Implementation of government monetary policy

FUNCTION AS A BANKER OF OTHER:

Central bank performs the following functions as a banker of other banks.

1. Scheduling bank

2. Functions as a clearing house

3. Sanction of loan

4. Supervision of loan

5. Assistance in collecting credit

6. Audit of accounts

7. Collection and preservation of deposits

8. Acts as adviser and agent

OTHER FUNCTIONS

In addition to above function, central bank also provides some others functions. These are as

follows

1. Economic research

2. Collection and supply of data:

3. Preparation of report and publication:

DEVELOPMENT FUNCTION OF BANGLADESH BANKS

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:


9/25

1. Development of different production oriented sectors:

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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.


10/25

ROLE OF COMMERCIAL BANKS IN THE ECONOMIC

DEVELOPMENT OF A COUNTRY

Commercial banks play an important and active role in the economic development of a country.

If the banking system in a country is effective, efficient and disciplined, it brings about a rapid

growth in the various sectors of the economy. The economic significance of commercial banks is

given in brief.

1. Banks promote capital formation

2. Investment in new enterprises

3. Promotion of trade and industry

4. Development of agriculture

5. Balanced development of different regions

6. Influencing economy activity

7. Implementation of Monetary policy

8. Monetization of the economy

9. Export promotion cells

(1) Banks promote capital formation.The commercial banks play an important role in

rising of the financial resources. They encourage savings by giving various types of incentives to

the savers. They expand branches of the banks in rural and urban areas and mobilize savings

even at far of places. These savings are then made available to the businesses which make use of

them for productive purposes in the country.

(2) Investment in new enterprises.Businessmen normally hesitate to invest their money

in risky enterprises. The commercial banks generally provide short and medium term loans to

entrepreneurs to invest in new enterprises and adopt new methods of production. The provision

of timely credit increases the productive capacity of the economy.


11/25

3) Promotion of trade and industry.With the growth of commercial banking in the 19th

and 20th centuries, there is vast expansion in trade and industry. The use of bank draft, cheque,

bill of exchange credit cards etc has revolutionized both national and international trade.

(4) Development of agriculture. The commercial banks, particularly in developing

countries, are now providing credit for the development of agriculture and small scale industries

in rural areas. The provision of credit to agriculture sector has greatly helped in raising

agricultural productivity and income of the farmers. This has led to increased demand for

industrial goods and expansion of industry.

(5) Balanced development of different regions. The commercial banks play an

important role in achieving balanced in different regions of the country. They help in transferring

surplus capital from developed regions to the less developing regions. The traders, industrialists

etc of less developed regions are able to get adequate capital for meeting their business needs.

This, in turn, increases investment, trade and production in the economy.

(6) Influencing economy activity.The banks can also influence the economic activity of

the country through its influence on (a) availability of credit and (b) the rate of interest. If the

commercial banks are able to increase the amount of money in circulation through credit creation

or by lowering the rate of interest, it directly affects economic development. A low rate of

interest can encourage investment. The credit creation activity can raise aggregate demand which

leads to more production in the economy.

(7) Implementation of monetary policy. The central bank of the country controls and

regulates volume of credit through the active cooperation of the banking system in the country. If

helps in bringing price stability and promotes economic growth within shortest possible period to

time.

(8) Monetization of the economy.The commercial banks by opening branches in the rural

and backward areas are reducing the exchange of goods through barter. The use of money has

now greatly increased the volume of production of goods. The non-monetized sector (barter

economy) is now being converted into monetized sector with the help of commercial banks.


12/25

(9) Export promotion cells.In order to increase the exports of the country, the commercial

banks have established export promotion cells. They provide information about general trade and

economic conditions both inside and outside the country to its customers. The banks are,

therefore, making positive contribution in the process of economic development.

Commercial Banks Contribution in the Development progression of

Bangladesh

An attempt will be made here to examine the nature and extent of involvement by commercial

banks in conventional development financing in Bangladesh. In this case, we have considered

the following performance indicators of commercial banks on the basis of availability of data

during the period of the nineties :

1. Borderless of Branches;

2. Sharing Deposits and Advances;

3. Regional Distribution of Deposits and Advances;

4. Aid in Agriculture and Allied Activities;

5. Financing Industries Term Loan and Working Capital;

6. Promotion of Export and Import;

7. Financing for Infrastructure; and

8. Financing for Poverty Alleviation.

Borderless of Branches

The NCBs have the largest branch network among the commercial banks of Bangladesh. The

network rapidly increased during the years of concentration on deposit mobilization and

provision of banking services in rural areas.

The respective share of PCBs in the network has increased during last decades significantly. The

number of branches of FCBs as percentage of branch network of the banking sector is almost

stable.

In regard to distribution of branches in urban and rural areas, NCBs occupy about two thirds of

their branch network in rural areas, while PCBs have very little presence in the rural outlets. The

FCBs, however, have no rural branch network.


13/25

By increasing of branches to the remote rural areas, our commercial banks are contributing to the

development of agriculture, livestock, horticulture industry etc.

Share of Deposits and Advances

The nationalized and private commercial banks are the backbone of the financial system of

Bangladesh. However, the private banks (local and foreign) are growing and increasing their

market shares. Compared with the distressed nationalized banking sector, the growth of private

banking is a healthy development for a sound financial system.

Regional Distribution of Deposits and Advances

The mobilization of deposits from and dispersal of advances to the various regions other than the

geographical areas of traditional concentration reflect the policy of following the balanced

development financing approach.

The share of Dhaka and Chittagong divisions in total deposits of NCBs, PCBs and FCBs is still a

large part. The share of other four administrative divisions in total outstanding advances of

NCBs, PCBs, and FCBs were only a few.

This indicates a very high concentration of deposit mobilization and lending operations in Dhaka

and Chittagong divisions by all types of banks (especially in case of PCBs and FCBs) at the cost

of development of other divisions and results in pumping out of money from underdeveloped to

developed areas which is contrary to a decentralized development financing strategy. But now

commercial banks are trying to decentralize the savings to the non-developed areas.

Agricultural Financing

Given the role of the agriculture in the economic development of Bangladesh, it is imperative to

invest considerable resources for agricultural development of the country. The agriculture sector,

the lifeline of the rural economy, which contributes about 30% to the GDP of the country andconstitutes the chief source of supply of food, is continuously being deprived of the needed

capital. The role of PCBs in agricultural financing is meager due to lack of rural branch network

and risk averse behavior. FCBs are almost absent in agricultural financing. On the other hand,

the share of NCBs in the total outstanding advances in this sector has increased.


14/25

Industrial Term Loans and Working Capital Financing

This is a new phenomenon in commercial bank lending in Bangladesh. Term loans are designed

to fund long and medium term business investments, such as the purchase of equipment or the

construction of physical facilities, covering a period of more than one year. The bulk of the

financing for longterm investment is currently supplied by commercial banks as term loans.

Foreign Trade Financing

Trade financing may be both domestic and international. Financing of international trade has

direct relevance to the development of our economy, particularly in the context of developing

countries. In Bangladesh, export being the thrust sector is financed at the administered interest

rate within a band of 12-14 per cent. Again, import of capital goods, industrial raw materials,

semi-processed inputs, etc are directly linked to economic development.

Financing for Infrastructure

Availability of infrastructure is one of the objective conditions of undertaking development

efforts in an economy. A well-knit transport and communication network facilitates the quick

movement of people and goods. Besides, increasing construction activities comprising housing,

office premises and other ancillary buildings are the manifestations of development.

Financing for Poverty Alleviation

The major objective of economic development has been to alleviate poverty by uplifting bottom

line population to the development stream through institutional credit. The attainment of this

objective deserves urgent attention when about half of the population of Bangladesh is

considered as poor and one fourth of the population as hard core poor. In this endeavor, the role

of commercial banks does not appear to be commendable.


15/25

Role of Specialized Banks in the Economy

Specialized banks are foreign exchange banks, industrial banks, development banks, export-

import banks catering to specific needs of these unique activities. These banks provide financial

aid to industries, heavy turnkey projects and foreign trade.

The importance of Specialized Banks(SB) may be attributed to the following:

They constitute an important source of long-term finance to industry. Over a period of

time, there has been a steady growth in the number of industrial units assisted, and in the

amount of loan sanctioned and distributed by SB.

SBs have played an important role in the development of (a) Small scale industry, and (b)

Projects in backward areas.

They have helped new and small entrepreneurs in setting up industry.

Through their operations involving underwriting of and direct subscription to the issue of

shares and debentures, they have been important players in the capital market. These

operations have a favourable impact on the ability of industrial concerns to raise funds

from capital market.

These institutions have improved the allocation of funds to industry and thus, have aided

in better use of the available resources for the economic development of the country.

SBs have been a source of technical and managerial advice to the industry. They have

also helped in identification, evaluation and execution of new investment projects.

These institutions have been helpful in the establishment of concerns which required

extra-ordinarily large amounts of finance for their projects with a long gestation period.


16/25

Role of Specialized Banks in Bangladesh

The specialized banks consist of other development banks of the Bangladesh and also some

NGOs that extend micro credit to the people. Some banks are completely government-owned

institutions established mainly to provide medium and long-term credits to the industrial,

agricultural, and real estate sectors of the economy and to promote the establishment of private

development banks in the country. The main focus of these specialized institutions is to promote

and accelerate the socio-economic development of the country by performing banking, financing

and investment operations and to establish and participate in agricultural, commercial and

industrial ventures based on the Islamic concept of banking.

Specialized banks in Bangladesh

Grameen Bank(GB)

Bangladesh Krishi Bank(BKB)

The Dhaka Mercantile Co-operative Bank Limited (DMCBL)

Bangladesh Development Bank Ltd(BDB)

Rajshahi Krishi Unnayan Bank(RKUB)

BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited)

Bangladesh Somobay Bank Limited(Cooperative Bank) (BSBL)Ansar VDP Unnyan Bank(AVUB)

Role of Specialized Banks in the economy of Bangladesh

Bangladesh Development which is merge of Bangladesh Shilpa Bank & Bangladesh

Shilpa Rin Shangtha aids industrial development by providing credit facilities & equity

supportfor accelerating the process of industrialization of the country.

Play unique role in the capital market growth by providing bridge financing, debenture

financing assistance to the public limited companies.


17/25

Bangladesh Krishi Bank(BKB) provides credit facilities to individual & corporate bodiesengaged in crop production, horticulture, forestry & fisheries. It also offers financial &

technical assistance to agro-based & cottage industries.

BKB is supposed to give preference to the credit needs of small farmers & other

disadvantaged group therefore has to fulfill both social & economic objectives.

As the largest development partner in the countrys northwest region, Rajshahi Krishi

Unnayan Bank(RKUB) aims at overall development of farmers & all sectors & sub-

sectors of agriculture in this region. Besides, catering to agricultural credit the bank

performs ancillary functions as financing agri-business & agro-based industries &

poverty alleviation programs.

Grameen Bank popularly known as the bank of the poors is famous for its non -

depository micro-credit functions over the country which helps to alleviate the extreme

poverty of the very lower class people , that ultimate increase the per capita income level

of the country.


18/25

Role of Investment Banks in the Development of Economy

In the universal banking system, banks perform tasks of both commercial banks and investment

banks. Investment Banking an American synonym of merchant banking. Investment banks

provide advice on mergers and acquisitions and are involved in financing industrial corporations

through buying shares and selling them in relatively small lots to investors.

Investment Banking Activities

The activities of Investment Banks are of two types:

1). Financial Intermediation &

2). Proprietary Trading

Financial Intermediation activities are consist of .

Financial Advisory

Primary Market &

Secondary Market.

Of the above categories of functions, many other activities are related with each category which

are shown in the graph below.


19/25

Figure 1: Investment banking activities


20/25

Role of Investment Corporation of Bangladesh as An Investment

Bank in the Country

About Investment Corporation of Bangladesh:Investment Corporation of Bangladesh (ICB) established on 1 October 1976 under the

Investment Corporation of Bangladesh Ordinance 1976. It is an investment bank established to

accelerate the pace of industrialization and develop a sound securities market in Bangladesh.

Initially, the activities of ICB were limited to underwriting public issue of shares, bridge

financing, debenture financing and opening/maintaining investors' accounts (Investors' Scheme).

ICB had largely expanded its areas and scope of activities and now provides various types of

investment and banking services. Added activities include providing debenture loans to

companies and loans to investors on margin trading basis, providing advances against ICB unit

certificates, leasing of industrial equipment, managing unit fund and mutual funds, and

participating in stock exchange for trading securities.

Objectives

To encourage and broaden the base of investment.

To develop the capital market.

To provide for matters ancillary thereto.

To mobilize savings.

To promote and establish subsidiaries for business development.

Basic Functions

Underwriting of initial public offering of shares and debentures

Underwriting of right issue of shares

Direct purchase of shares and debentures including Pre-IPO placement and equity

participation

Managing investors account

Managing Open End and Closed End Mutual Funds

Operating on the Stock Exchanges


21/25

Providing investment counsel to issuers and investorsParticipating in Government divestment Program

Participating in and financing of, joint-venture projects

Dealing in other matters related to capital market operations

Trusty, Custodian, Bank Guarantee

Consumer Credit

Business Policy

To act on commercial consideration with due regard to the interest of industry,

commerce, depositors, investors and to the public in general.

To provide financial assistance to projects subject to their economic and commercial

viability.

To arrange consortium of financial institutions including merchant banks to provide

equity support to projects and thereby spread the risk of underwriting.

To develop and encourage entrepreneurs.

To diversify investments.

To induce small and medium savers for investment in securities.

To create employment.

To encourage Investment in IT sector.To encourage Investment in joint venture capital/project.

Continued Operations of ICB

Private Placement

Custodian and Banker to the Issues (IPO)

Mergers and Acquisitions

Corporate Financial Advice

Lease Finance

Portfolio Investment

Advance Against Unit Certificate Schemes

Advance Against Mutual Fund Certificate Schemes

Consumer Credit Scheme


22/25

Bank GuaranteeTraining Program

Trustee to the Debentures and Securities Assets


23/25

Role of Merchant Banks in Economic Development

Need for Merchant Banking is felt in the wake of huge public savings lying untapped. M er ch an t

bankers can play highly significant role in mobilising funds of savers to investible

channels assuring promising returns oninvestments and thus can assist in meeting thewidening

demand for investible funds for economic activity.

Wi th gr ow th of me rc ha nt ba nk in g pr of es si on corporate enterprises,

Undertaking expansion, modernisation, diversification of the existing enterprises. This reinforces

the need for a vigorous role to be played by merchant banking.

Reasons why Specialist merchant banks have crucial role to play in the

economy

Growing industrialization and increase of technologically advanced industries.

Need for encouragement of small and medium industrialists, who require specialist

services.

Growing complexity in rules and procedures of the government.

Need to develop backward areas and states which require different criteria

Exploring the possibility of joint ventures abroad and foreign markets.

Promoting the role of New Market in mobilizing savings from the public

Services Provided by Merchant Bankers :

1).Corporate Counseling

It denotes advise provided by a merchant banker to a corporate unit to ensure better corporate performance in

terms of image building among investors, steady growth through good working, appreciation in market value of

its equity shares. The counseling is limited to only opinions and suggestions and any detailed analysis would

form part of a specific service. The scope of corporate counseling is restricted to the explanation of

concepts, procedures and laws to be observed by the client company.

2.Project Counselling

Project counselling is a very important and lucrative merchant banking service. It covers

development of an idea into a project, preparation of the project report, estimation of the cost of the project and

deciding upon the means of financial and techno-economic appraisal of projects for capital

issue/financing etc.


24/25

3 Management of Capital Issues:

(a)Pre-issue Management:Steps required to be taken to manage Pre-issue activity as as follows:

1) Obtaining stock exchange approvals to memorandum and articles of association.

2) Taking action as per SEC guidelines.

3) Finalizing the appointments of the following agencies.

a) Co-managers/Advisors to the issue.

b) Underwriters to the issue.

c) Brokers to the issue.

d) Bankers to the issue and refund Banker.

e) Advertising agency.

f) Printers and Registrar to the issue.

4) Advise the company to appoint auditors, legal advisers and broad base Board of Directors.

5) Drafting of prospectus.

6) Obtaining approvals of draft prospectus from the company's legal advisors, underwriting financial

institutions/ Banks.

7) Obtaining consent from parties and agencies acting for the issue to be enclosed with the prospectus.

8) Approval of prospectus from Securities and Exchange Commission of Bangladesh(SEC).

9) Filing of the prospectus with Registrar of Companies(ROC)

10 ) Making an application for enlistment with Stock Exchange along with copy of the prospectus.

11) Publicity of the issue with advertisement and conferences.

12) Open subscription list.


25/25

(b) Post-issue Management: Steps involved:

1) To verify and confirm that the issue is subscribed to the extent of 90% including development from

underwriters in case of under subscription.

2) To supervise and co-ordinate the allotment procedures of registrar to the issue as per prescribed StockExchange guidelines.

3) To ensure issue of refund order, allotment letters/certificates within the prescribed time limit of 10

weeks after the closure of subscription list

4) To report periodically to SEC about the progress in the matters related to allotment and refunds.

5) To ensure the listing of securities at stock Exchanges.

6) To attend the investors for managers regarding the public issue.

4. Portfolio Management

It involves selection of Securities and constant shifting of the portfolio in the light of varying attractiveness of

the constituents of the portfolio. It involves selecting and revising the spectrum of securities to the

portfolio based on the characteristics of an investor.

The objectives of portfolio management is to maximize the yield and minimize the risk along

with other objectives like stability of income, capital growth, liquidity, safety, tax incentives, etc.

References:

1. Muraleedharan. D, Modern Banking- Theory and practices.2. Machiraju. H.R, Merchant Banking (4th edition).3. Laxmi Narasaiah. M and Venkata Naidu. G, Role of Banking in Rural development.4. Bank related different websites.

Date post:	05-Apr-2018
Category:	Documents
Upload:	zabedsbctg
View:	218 times
Download:	0 times

Role of Banks in the Development of Economy

Documents