The Role of the Banking Sector in the Economic Development of Bangladesh

 

Banks are the mainstream of the financial system of a country. The banking system must be robust, resilient, and sound for efficient intermediation of financial resources. Lack of any one or all of these prerequisites would not bring only disaster for the country but also cost the real sector. Our government has taken various types of reform programs from time to time making the banking system more effective so that the positive impact of the banking system on our everyday life in economic activities can be more realized.

Banks have played a vital role in the economy by providing credit for performing economic activities and at the sometime conglomerate the surplus capital from the general public through different types of depository incentives. Hence we discuss the major sectors of the economy like agriculture, industry, and business mentioned by Bangladesh Bank and how much wells banks perform these sectors.

Agriculture is the main sector of our economy. According to the new GDP measurement system, it provides about 22 percent of our GDP. Though the total amount of credit increases day by day, the portion of credit has decreased in the agriculture, fishery, and forestry sectors it has reduced to half a percent. The rescue of agriculture revenue is heartier than other sectors and this credit directly affects the agricultural production. At present 44 private and foreign commercial banks have to continue their activities. They contain collectively TK 20,365 crore as a deposit which is 35 percent of total credit. But unfortunately, they don't give any single coin to the agriculture sector, as a credit.

The industrial sector acts as the main sector of GDP in developed countries but unfortunately, this sector's performance is very weak in our country, and participation of GDP in this sector is 17.79 percent. This sector gets the highest credit from commercial banks.

The business sector has become a major role-playing sector in our economy. Nowadays almost 14.47 percent of GDP comes from the merchandise sector, which is lucid from different statistical data. In 1981, One reason for getting more credit in the business sector was that the probability of default loans is comparatively low vis-a-vis other sectors. But nowadays, default culture has also increased in the trading sector. Only garments artistry takes on prominent credit is TK 786 crore and TK 878 crore respectively provided by private and national commercial banks provide 24 percent of total credit in the business sector and it is only 14.31 percent in the case of foreign banks.

A bank is one of the main means of government by which the government can implement different types of steps for eradicating poverty. As the branches of banks are available everywhere from the downtown area to the remotest rural area government uses this channel to provide any financial benefit quickly. Some projects are run by banks with the help of the government to wipe out poverty are as follows:

Rural poor co-operative project in the greater Rajshahi, Kustia, and Jessore area with the help of Sonali Bank.

Self-reliance loan project through the self-reliance Bangladesh and financed by Sonali Bank.

Small and landless farmer’s development project by Janata Bank.

Small and marginal farming.

Foreign Commercial Banks have provided 39.9 percent of total credit in other sectors. In this time National Commercial Banks and PCBs provided 7.15 percent of their total credit and Private Commercial Banks provided 10.21 percent of total credit in other sectors. Though the banking sector is the lifeblood of our financial system, the functional arena of the bank is rather narrow than wide range and the performance of handsome banks is not quite good. Bangladesh's government has taken different types of reform according to the demand of the era, but this type of reform doesn't make our banking system an international standard. But we are not hopeless rather by taking steps, we will reach our ambitious target.