Banks are highly leveraged financial institutions, which mean that most of their fund comes form borrowing. However, just like any others business enterprise, the bank mobilizes fund from the following two categories of sources:
1. Funds form own
sources: This source consists of
funds owned by
the banking institution, namely share capital, reserve fund and other reserves,
retained earnings, etc.
2. Borrowed funds: this source consists of deposits in various types of accounts and borrowings from other banks, Bangladesh bank and other sources.
In case of banks, the borrowed funds, mainly the deposits in various types of accounts, constitute the major part of bank’s funds in comparison with the owned funds in the form of capital and reserve. Therefore, borrowed funds are
main basis of banking operations.
Regulations imposed on commercial bank by BB:
As a central bank, Bangladesh bank imposed some rules and regulations for banking industry are mentioned below:
1. Minimum capital requirement: Tk. 400 cr.
2. SLR for banks-19%, for Islamic banks-11.5%
3. CRR for banks and Islamic banks-6%
4. Bank rate-5%
5. Repo-7.25%, reverse repo-5.25%
6. Interest rate on credit: Export-7%, Agri.-7%, Industrial term-13%
7. Single borrower exposure limit-35% for funded & non-funded credit
8. KYC, observation on abnormal transactions
9. Classification on performing and non-performing loans
10. Financial inclusion-Opening A/c with Tk.10/00
11. Green Banking
12. Stress testing
13. BASEL-II and Up coming BASEL-III
14. Environmental risk management