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Challenges
If anyone needed an example of an economy that needed a stable and sustainable banking
system, Bangladesh is it. Banking is the oxygen of the global economy, enabling companies to
grow, trade & invests; enabling individuals to spend and save. Bangladesh’s geographic position
presents a clear advantage for foreign banks because it is virtually located as a bridge between
the emerging markets of South Asia and fastest growing markets of South East Asia and Asian
countries. It is also very close to India and China two large growing countries having positive
effect.
Foreign Bank: A foreign bank is a bank that is obligated to follow the regulations of both the
home and host countries. Because the foreign branch banks' loan limits are based on the parent
bank's capital, foreign banks can provide more loans than subsidiary banks.
8.Benefits to Exporters: Bangladeshi exporters are getting benefits in terms of finer margins on
loans and better foreign exchange rate.
Disadvantages
1.Unbalanced Competition: Foreign banks entry have created higher unbalanced competition
especially due to the inability of innovate and compete with foreign banks entry advance
innovations, technology and system.
3.Increasing cost for domestic bank: Domestic banks have to take on greater cost by paying
higher interest on deposits and lower interest rate on loans to attract domestic high net worth
clients and low risk firms of domestic sectors to compete with foreign banks entry.
2.Non-Performing Loan (NPL) and excess liquidity: A Non-Performing Loan is a loan that is
in default or close to being in default. Many loans become non-performing after being default for
90 days but this can depend on the contract terms. The causes of nonperforming loans are usually
attributed to the lack of effective monitoring and supervision on the part of banks (as required by
the BASEL principles of bank monitoring and supervisions), lack of strategies. Effective lenders’
recourse, weaknesses of legal infrastructure, and lack of effective debt recovery
Non-
Performing
Loans(NPLs)
3.Advancement of technology: It has become a non-traditional challenge for the banks. FinTech
companies are becoming major competitors for the bank as they are creating a threat to banks
traditional retail banking and payment system. In Bangladesh 18 banks are allowed to operate
mobile banking service. The latest statistics of Bangladesh Bank show that there are 23.9 million
active mobile banking customers out of total 50 million registered mobile banking customers.
Bkash the subsidiary of BRAC Bank Ltd occupies the 80 per cent share of total transactions.
4.Changing behavior of customer: Every financial institution has to meet certain regulatory
standards these things are "necessary, but not sufficient". In other words, banks aren't going to
win business simply by meeting capital requirements; they're going to need to engage their
customers to win business.
5.Utilize data: Recently there was an instance of a billion dollar reserve heist of Bangladesh
Bank, which has raised a serious question for the whole world on whether the banking system is
safe from any cyber intruder. Data are going to be huge assets for the banks. The bank can
become an outsized data bank and it'll be the challenges of bank how they're going to utilize data
for doing business.