Abstract
Fund management of commercial bank is a significant issue for its growth and stability. The
unusual difference between cost of fund and return on fund is alarming for the financial health
of any commercial bank. The major objective of the study is to know the position of fund
management, profitability, growth, stability, and productivity trends of Janata Bank Ltd and
Agrani Bank Ltd during the period of 2000-2009 and 2004-2008 respectively. Here the
secondary data are used. In fund management practices, the banks are not in a good position
due to heavy stuck up advances, low recovery rates, excessive over dues, and outstanding
advances. The management of the banks is alert enough to overcome this odd situation. The
recent financial reforms introduced by the Ministry of Finance and Bangladesh Bank have
improved the situation. The overall profitability, productivity, and stability of the banks are
increasingly improving trough the application of modern fund management techniques.
Introduction
Banking system as a whole plays an important role in the economy of a country irrespective of its
level of development. Bangladesh as one of the poorest countries in the world, no exception to
this regard, inherited a poor banking system in terms of liquidity, personnel deposits, loan and
advances, discipline and banking work at the time of liberation (1971). After the independence of
Bangladesh, the development strategy which was followed in pre independence period,
underwent a qualitative change. The Government of the People's Republic of Bangladesh adopted
economic policies and programs ensuring social control and ownership of banks, major industries
and insurance companies, which were privately owned during Pakistan period. Accordingly local
as well as Pakistani banks were nationalized and reorganized into distinct new banks incorporated
in Bangladesh in terms of the Bangladesh Banks Nationalization order 1972, which was
promulgated on the 26th March 1972. During this time 6 nationalized commercial banks were
created viz. Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Pubali Bank, and Uttara Bank.
No private commercial bank was allowed by the Government to operate except the foreign banks,
which were allowed to function as before. Although some of the objectives of nationalization
such as opening of bank branch in rural areas, mobilizing deposits from small borrowers and
extension of bank credit to the weaker sections of the society have been achieved to a certain
extent. The welfare of those sections has not been improved to the extent as expected. Bank credit
to the priority sectors increase at a rate but the actual results expected to be achieved as a result of
expansion of bank credit had been far from satisfactory because of misuse of credit. Allocation of
credit was much below the actual requirements. The effective cost of borrowing in many cases
was very high due to high transaction costs and other costs which had to be high by the small
borrowers. The projects became unprofitable due to high effective cost of borrowing, which
results in failure.
Fund management of commercial bank is a significant issue for its growth and stability. The
unusual difference between cost of fund and return on fund is alarming for the financial health
of any commercial bank. The major objective of the study is to know the position of fund
management, profitability, growth, stability, and productivity trends of Janata Bank Ltd and
Agrani Bank Ltd during the period of 2000-2009 and 2004-2008 respectively. Here the
secondary data are used. In fund management practices, the banks are not in a good position
due to heavy stuck up advances, low recovery rates, excessive over dues, and outstanding
advances. The management of the banks is alert enough to overcome this odd situation. The
recent financial reforms introduced by the Ministry of Finance and Bangladesh Bank have
improved the situation. The overall profitability, productivity, and stability of the banks are
increasingly improving trough the application of modern fund management techniques.
Introduction
Banking system as a whole plays an important role in the economy of a country irrespective of its
level of development. Bangladesh as one of the poorest countries in the world, no exception to
this regard, inherited a poor banking system in terms of liquidity, personnel deposits, loan and
advances, discipline and banking work at the time of liberation (1971). After the independence of
Bangladesh, the development strategy which was followed in pre independence period,
underwent a qualitative change. The Government of the People's Republic of Bangladesh adopted
economic policies and programs ensuring social control and ownership of banks, major industries
and insurance companies, which were privately owned during Pakistan period. Accordingly local
as well as Pakistani banks were nationalized and reorganized into distinct new banks incorporated
in Bangladesh in terms of the Bangladesh Banks Nationalization order 1972, which was
promulgated on the 26th March 1972. During this time 6 nationalized commercial banks were
created viz. Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Pubali Bank, and Uttara Bank.
No private commercial bank was allowed by the Government to operate except the foreign banks,
which were allowed to function as before. Although some of the objectives of nationalization
such as opening of bank branch in rural areas, mobilizing deposits from small borrowers and
extension of bank credit to the weaker sections of the society have been achieved to a certain
extent. The welfare of those sections has not been improved to the extent as expected. Bank credit
to the priority sectors increase at a rate but the actual results expected to be achieved as a result of
expansion of bank credit had been far from satisfactory because of misuse of credit. Allocation of
credit was much below the actual requirements. The effective cost of borrowing in many cases
was very high due to high transaction costs and other costs which had to be high by the small
borrowers. The projects became unprofitable due to high effective cost of borrowing, which
results in failure.
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