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Growth of Private Commercial Banks in Bangladesh

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International Journal of Economics, Finance and Management Sciences
2014; 2(1): 53-67
Published online January 30, 2014 (http://www.sciencepublishinggroup.com/j/ijefm)
doi: 10.11648/j.ijefm.20140201.17

Growth of private commercial banks in Bangladesh

Md. Ariful Islam1, Mahmudul Hasan Siddiqui2, Md. Rayhan Islam3
1
BASIC Bank Limited, Khulna, Bangladesh
2
Unilever Bangladesh Limited, Gulshan-1, Dhaka-1212, Bangladesh
3
Business Administration Discipline, Khulna University, Khulna-9208, Bangladesh

Email address:
arifrussell@yahoo.com (Md. A. Islam), mhs.sadi@gmail.com (M. H. Siddiqui),rayhan_07@yahoo.com (Md. Rayhan Islam)

To cite this article:

Md. Ariful Islam, Mahmudul Hasan Siddiqui, Md. Rayhan Islam. Growth of Private Commercial Banks in Bangladesh. International
Journal of Economics, Finance and Management Sciences. Vol. 2, No. 1, 2014, pp.53-67. doi: 10.11648/j.ijefm.20140201.17

Abstract: Now-a-days PCBs have succeeded to occupy a handsome portion of the total banking sector through their 23
years journey. For that matter, the study is done to verify how successfully PCBs have come across to today’s position.
After liberation in 1971 all banks except few foreign banks’ branches were nationalized and reorganized. But the step of
nationalization is viewed as a discouraging picture of NCBs because of some careless management activities. For that
reason, PCBs had appeared in 1982 in the banking sector to improve the NCBs’ performance as well as the overall
condition of the banking sector. The whole period has been segmented in to two parts and the growth of PCBs has been
tried to find out according to the segments. Firstly, the denationalization and privatization period (1982-1989) and secondly,
the financial liberalization period (1990-2004). We have tried to measure the growth of PCBs in the above mentioned time
periods. To ascertain the PCBs’ growth we have used their branch expansion, deposit mobilization capability and credit
deployment quality. With the help of these three components we can observe whether PCBs share in the total banking
sector has been increased. We have also inquired that whether the performance of PCBs is better than that of NCBs. The
study also covers NPL problems faced by the banks, and to what extent PCBs have recovered their NPL condition and what
should be the further action to restrain the problem. Though PCBs have been playing the leading position, with the largest
number of banks (30) in the banking sector, their overall performance is not as much appreciable as it should be. For that
reason, PCBs should behold their full concentration to overcome their shortcomings.

Keywords: Banking, Industry, Growth, Private Commercial, Financial Institution, Growth, Performance

growth of the financial structure itself act as a facilitating

1. Introduction factor in the economic transformation of a country.
1.1. Background of the Study Financial sector of Bangladesh, like most developing
countries, is dominated by banking enterprises. Currently,
Banks are known as the financial intermediaries because the banking sector of Bangladesh comprises of 4
their basic role is to mobilize saving from the public on the nationalized commercial banks(NCBs), 5 government-
one hand and to deploy one to productive investment on the owned specialized banks (SBs) dealing mostly with
other hand. Thus banks open up safe channels of savings development finance in specialized sectors, 30 private
and investment which are most vital for promoting commercial banks (PCBs) and 10 foreign commercial
economic growth. Without banks an economy cannot run banks (FCBs).
smoothly because banks provide payment service to the Banking system, before liberation of Bangladesh were
economy. So not only the intermediary function, banks also private owned, urban-based and profit oriented. After
enhance its activity by issuing note, holding demand liberation in 1971 the development strategy which was
deposit, honoring checks, facilitating international trade. followed in pre-independence period underwent a
Banks role in the development process is more prominent qualitative change. The then government in power
in developing countries than in developed countries nationalized and reorganized all the financial institutions
because of dominance of the banks in the letter financial excepting a few foreign bank branches. The government
systems. So it is undoubtedly true that banks are the most which assumed power in Bangladesh adopted economic
influencing component of the financial structure and the policies and programs ensuring social control and
54 Md. Ariful Islam et al.: Growth of Private Commercial Banks in Bangladesh

ownership of banks, major industries and insurance of data, and technique of analysis are delineated below –
companies, which were privately owned during Pakistan Reference period: Since the introduction of PCBs
period. But Bangladesh Bank ‘s Nationalization order did have been introduced in our country in1983 so the
not specifically spell out the objectives of Nationalization reference period of the study is from the year 1983 to
due to the rapid increase in bad debt, overdue loans, the year 2004. We can divide the whole period into
irregularities in management and corruption among some two distinct sub groups to fulfill the objectives of the
of the members of the bank staff. study : (1) Denationalization and Privatization Period
In the early 1980 because of the failure of NCB’s and from the year 1983 to1989, (2): Financial
increasing activities of the growing private sector, the need Liberalization Period initiated by the “Financial
for allowing local private banks was keenly felt. This Sector Reform Project” (FSRP) in the year 1990.This
feeling became particularly strong after the disinvestment period is considered up to the year 2004 for this
of some public sector enterprises. Accordingly govt. particular study. The various data related to the study
decided to allow the operation of local private banks and to are used in this study are taken as on the month of
denationalize 2 out of 6 NCBs(namely Uttara Bank & June of each year. This is done in order to maintain
Pubali Bank) in 1982. The emergence for allowing PCBs the chronological order of data and consistency in the
was the desire on part of GOB(Government of Bangladesh) study.
to the objectives of: Number of Banks: There are 30 PCBs (including 2
1. To increase the competition in the banking sector. denationalization commercial banks and 5 Islamic
2. To reduce the deficit of government to meet the banks) in our country. In this study all the PCBs have
continuous loss of the public enterprises. been covered.
3. To improve the operating efficiency of the banking Sources of data: As the nature of the study dictates,
sector. the secondary sources of data (I.e., the published data)
4. To introduce competition in all spheres of economic have been used here. Hence, there is no need to collect
activities. any type of primary data or raw data. A good number
5. To ensure the flow of credit to different economic of sources of secondary data are used to meet the
sectors including the priority sectors. purposes of the present research work. The sources
6. To improve the customer service of the bank. included: Bangladesh Bank Bulletin, Scheduled Bank
7. To run forward to the way of globalization of the Statistics, Economic Trend published by Bangladesh
financial sector. Bank, various publications of the Ministry of Finance
Initially 5 banks were set up in private sector in 1982. (MOF), and different books, articles and seminar
With the setting up of a number of subsequent banks in this papers of home and abroad. Exact sources of data are
sector, the number of PCBs has stood up at 30 including 2 cited in the footnotes of each table.
denationalized commercial banks as on March, 2005. On Data analysis: for accurate analyses of data several
the basis of the above background, we can draw the type of ratios have been used. To analyze the trend of
following objectives of the study. commercial banks in terms of branch expansion,
deposit mobilization, credit deployment, the trend
1.2. Objectives of the Study lines (showing the relationship of the above variable
The vital objective of the study is to recognize and with time) have been fitted.
scrutinize the growth of PCBs in Bangladesh. This specific The trend equation is:
objective is the examination of the following pertinent Y’=a + bX
objectives:
• To examine the growth of PCBs in regard to branch Where,
expansion. Y’ (read as Y prime) = Dependent variable (e.g., branch
• To identify the growth of PCBs in regard to deposit expansion, deposit mobilization, credit deployment)
mobilization. X =The independent variable (time).
• To evaluate the growth of PCBs in regard to credit a = The Y-intercept. It is estimated as the value of Y
deployment. when T=0
• To assess the growth of PCBs in regard to credit b = The slope of the line
deposit ratio. The computer software named “MS-EXCEL 2000 “is
• To ascertain the trend of productivity and profitability used to draw the trend equation and relevant charts. Ratios
of PCBs. such as “Deposit credit Ratio”, “Productivity Ratio” etc.
• To compare the growth of PCBs in regard to NCBs. have been used as shown below:
Deposit credit Ratio
1.3. Methodology of the Study DCR = Total Deposit /Total Credit
The methodologies which have been chosen for this Productivity Ratio (Expenditure-Income Ratio)
study cover the reference period, number of banks, sources EI Ratio =Total Expenditure/Total Income
To find out the growth rate we have used the “Compound
 International Journal of Economics, Finance and Management Sciences 2014; 2(1): 53-67 55

Annual Growth Rate” process started in the commercial banking sector of

1
Bangladesh since 1983. In that year two nationalized
Compound Annual Growth Rate =
commercial banks (NCBs), namely Uttara Bank and Pubali
Where, Tn= Current year value Bank were denationalized and transferred to private
To = Base year value ownership and five private commercial banks (PCBs),
n = Number of years namely
By using these statistical tools the collected data have 1.National Bank Bangladesh Ltd,
been analyzed and in some cases the approximate result is 2.The City Bank Ltd,
obtained because of some limitation. 3.United Commercial Bank Ltd,
4.Islami Bank Bangladesh Ltd,
1.4. Limitations of the Study 5.International Finance, Investment and Commerce Bank
Any research work needs high degree of involvement Ltd, were licensed to operate in the banking sector of
regarding collection of information, creation of database Bangladesh and that is why this study is focusing on the
and analysis of data. In this study, it has been tried to period of denationalization and privatization. The
collect the related information and analyze the data being development of PCBs in our country has been broadly
with the following limitations: discussed under two heads: Geographical coverage and
1. Inadequate logistics such as limited access to the functional coverage. In the Geographical coverage,
information regarding various aspects of the banking expansion of branches and in the functional coverage,
system acts as a great hindrancefor the completion of the deposit mobilization and deployment of credit by the
study. commercial banks are included.
2. The depth of the analysis the study has been limited to 2.1. Expansion of Branches
the extent of information collected from different sources.
3. In spite of taking proper care to collect necessary 2.1.1. Trend Equation of Branch Expansion
information and prepare this paper, some pitfalls might be To reach closer to the people as rapidly as possible, the
there. extension of the geographical coverage of commercial
banks through opening more and more branches is
1.5.Organization of the Study compulsory. For this purpose a number of branches have
The research paper is divided into 5 chapters. The 1st been opened in both urban and rural areas. In the year 1984,
chapter is the introduction of the study. This chapter is 628 branches of PCBs were in operation which has become
composed of the background of the study, objectives of the 1494 in 2004. The denationalization and privatization
study, methodology of the study, and limitations of the period is demonstrating that the branches expanded with a
study. Background of the study has focused on the role of sluggish scale by 199 branches. In the financial
banks in the financial sector, banking system before and linearization period, the number stood at 1160 at the end of
after liberation and the adoption of denationalization and 1990s and lastly at 1494 in 2004. To examine how far the
privatization in the banking sector. On the basis of the PCB’s has expanded its branches, the trend equation has
background the objective of ascertain the growth of PCBs been used.
in Bangladesh, has been drawn. To explain the objectives B=a + bT
the methodologies which have been selected is stated in the
methodology part, And at the end of the introduction This equation showing the relationship between branch
chapter the limitations that have been faced is described in expansion (B) as the dependent variable and time(T) as the
the limitation part of the study. independent variable.
The analytical part of the study starts with the 2nd chapter Another two variables (a) , the estimated value of B
which has dealt with the growth of PCBs in Bangladesh in when T=0 or the estimated value of B where the regression
regard to their branch expansion, deposit mobilization, line crosses the B-axis when T is zero and (b), the slop of
credit deployment, credit deposit ratio, and productivity the line, or the average change in B for each change of one
and profitability. unit in the independent variable T. The calculated value of
In our financial sector NCBs share is still very “a” is 389.74 and “b” is 49.82. So the regression equation
substantial, so a comparative analysis has been done of branch expansion is,
between NCBs and PCBs in the 3rd chapter.
B=389.74+49.82(T)
Finally the findings of the study have been summarized
in the 4th chapter and from which the conclusions and Table2.1.1. Trend Equation of Branch Expansion of PCBs in Bangladesh
recommendations have also been drawn.
Year B Year B
1983 437.5178 1994 987.0706
2. Growth of PCBS in Bangaladesh 1984 487.4771 1995 1037.03
1985 537.4365 1996 1086.989
We know that the denationalization and privatization 1986 587.3958 1997 1136.949
56 Md. Ariful Islam et al.: Growth of Private Commercial Banks inn Bangladesh

Year B Year B PCBs

TOTAL
1987 637.3552 1998 1186.908 YEA % of
URBA %of total RURA BRANCHE
1988 687.3145 1999 1236.867 R total
N Branches L S
1989 737.2739 2000 1286.827 Branches
1990 787.2332 2001 1336.786 1996 758 12.90 321 5.46 5874
1991 837.1925 2002 1386.745 1997 776 13.13 319 5.40 5911
1992 887.1519 2003 1436.705 1998 821 13.79 312 5.24 5952
1993 937.1112 2004 1486.664 1999 849 14.19 311 5.20 5982
2000 913 15.08 318 5.25 6056
Source: Appendix Table 1
2001 959 15.58 337 5.47 6156
2002 1011 16.10 335 5.34 6278
2003 1054 16.86 369 5.90 6253
2004 1108 17.77 386 6.19 6236

Sources: Appendix Table 2

The table indicates that in the beginning begi of

denationalization and privatization period the PCBs branch
expansion growth rate was very low and there was no
branches in the rural areas after permitting private banking
in the first two years. With the passage of time the
percentage share of PCBs Bs in both rural and urban areas
Chart2.1.1. Trend Equation of Branch Expansion of PCBs in started to increase and within the beginning of financial
Bangladesh(Sources: Table: 2.1.1) liberalization period it stood 65: 35 percent. And finally the
proportion has become wider and has stood 74: 26 percent
So from the table and chart of Trend Equation of Branch in 2004. The urban to rural proportion is showingsho the
Expansion we can see a positive correlation between time negligible concentration in the rural areas as the rural areas’
and PCBs branches,
hes, i.e., with the passage of time the PCBs share of PCBs branches has decreased gradually.
gradually
operating in our country have extended their branches
increasingly. 2.1.3. Growth Rate of Branch Expansion
To find out the growth rate we have used the formula of
2.1.2. Area wise Branch Expansion Compound Annual Growth Rate, which measures measu the
Not only branch expansion in the urban areas but also in average annual percent increase of economic data from one
the rural areas should be evaluated for measuring the
t PCBs period to another.
success in branch expansion, since the overwhelming
proportion of the country’s population lives in the rural Growth Rate of
Table 2.1.3.Growth o PCBs Branches
areas. The growth rate of rural and urban branches from
Time Branches At the Branches at the No. Of Growth
1983 to 2003 is 24.26 percent. But if we want to observe Period Beginning Period End Period Year(n) Rate(%)
the proportion between urban
ban and rural branches of PCBs,
then we will find 60: 40 percent in the years 1985. 1984-1988 628 733 5 3.140
The following table shows the PCBs contribution in 1989-1993 785 943 5 3.736
terms of branch expansion in urban and rural areas. 1994-1998 971 1133 5 3.134
1999-2004 1160 1494 6 4.316
Table 2.1.2. Area wise Branch Expansion of PCBs
Sources: Appendix Table 1
PCBs
TOTAL (Here the base year is considered 1984 instead of 1983 because of the
YEA % of actual figure of number of branches was not found for the year 1983)
URBA %of total RURA BRANCHE
R total
N Branches L S
Branches
1983 12 0.2607 0 0 4603
1984 46 0.95 0 0 4817
1985 380 7.66 252 5.08 4963
1986 409 8.00 256 5.01 5114
1987 448 8.58 240 4.59 5224
1988 482 9.02 251 4.70 5345
1989 516 9.47 269 4.93 5451
1990 545 9.84 282 5.09 5539
1991 580 10.32 296 5.27 5621
1992 N.A. N.A N.A. N.A. 5656
1993 N.A. N.A N.A. N.A. 5740
1994 N.A. N.A N.A. N.A. 5792
1995 N.A. N.A N.A. N.A. 5813 Chart 2.1.3. Growth Rate off PCBs Branches.
Branches Source: Appendix Table 1
 International Journal of Economics, Finance and Management Sciences 2014; 2(1): 53-67 57

So the chart 2.1.4 is showing a smooth upward trend YEAR D YEAR D

over the period of 1984-2004. It is in the range of 3 to 4.5 1986 16.190 1997 30.709
percent. The stability shows a better correlation between
1987 17.510 1998 32.029
time and branch expansion and sustainable position in the
banking sector. 1988 18.830 1999 33.349
1989 20.150 2000 34.669
2.2. Deposit Mobilization of PCBs
1990 21.470 2001 35.989
The geographical coverage indicates the extent of bank 1991 22.790 2002 37.309
branches through which banks can provide their services, 1992 24.110 2003 38.629
but what services they are providing, are stated through the 1993 25.430 2004 39.949
functional coverage of banking sector. Commercial banks,
should regulate their activities, i.e., geographical and Source: Appendix Table 2
functional coverage, in such a way so as to serve the
objectives of economic development of the country T ren d O f Dep o sit O f P CBs
concerned. The expansion of branches also led to the
5 0 .0 0 0
mobilization of greater volume of deposit. Deposits are the 4 0 .0 0 0
main sources of funds for the commercial banks. As all

Deposit
3 0 .0 0 0
other activities of the banks are mainly dependent on the 2 0 .0 0 0
quantum of deposits, it can be referred to as the lubricant 1 0 .0 0 0
0 .0 0 0
that turns the wheels of the banking industry. Growth of
1980 1985 1990 1995 2000 2005 2010
deposit with the banking system in any country is a
Ye a r
welcome phenomenon. It is particularly more important in
a capital scarce country because of the existence of Graph 2.2.1. Trend Equation of Deposit Mobilization by PCBs. Sources:
imbalance between the availability of funds and the Table 2.2.1.
demand for such funds. Our first attempt to find out the
growth of PCBs’ deposit mobilization by using the trend So it is very natural that with the expansion of time trend
equation, but before that at a glance the situation of PCBs line will also be upward linear trend, but in order to
deposit mobilization should demonstrate. ascertain how much growth it has attained, we need to find
PCBs were able to mobilize their deposit only by 1.39 out the growth rate of deposit mobilized by the PCBs
percent of total deposit mobilization in the initial stage of within the said period of time
denationalization and privatization period. They recovered
2.2.2. Growth Rate of Deposit Mobilization
the poor condition very swiftly and reached 26.99 percent
Here also we will take the formula of “Compound
of total deposit mobilization at the beginning of financial
Annual Growth Rate” to measure the growth rate of deposit
liberalization period. At present it is giving a much better
collected by PCBs over the period of 1984-2004.
position with a 42.86 percent of total deposit mobilization
In the year 1983-1986 the growth was extremely high
in the year 2004.
with 93.78 percent just because of the high expansion of
2.2.1. Trend Equation of Deposit Mobilization deposit mobilization to the year of privatization. But after
The table 2.2.1 shows the trend equation of deposits that deposit collection rate slowed down and started to
mobilized by the PCBs during the period of 1983-2004. increase 1 percent to 2 percent up to the year 1991.
Like all trend equation of branch expansion, this trend
Table 2.2.2.Growth Rate of Deposit Mobilization
equation is also having positive slope, which has been
found statistically significant. The figures in the table have Deposit
been found by calculating the amount of deposit mobilized Time Value of Deposit Value No. of Growth
by PCBs over the said period. Here “a” has been found Period Beginning Of End Period Year Rate(%)
10.9098 and “b” is 1.3199. And deposit mobilization has Period
been treated as the dependent variable denoted by “D” and 1984-1986 6.24 19.6 4 93.78
the equation stands:
1987-1989 20.93 24.51 3 5.349
D=10.9098+1.3199(T) 1990-1992 25.66 25.63 3 -0.039

Table 2.2.1. Trend Equation of Deposit Mobilization by PCBs 1993-1995 28.23 27.93 3 -0.352

YEAR D YEAR D 1996-1998 27.83 27.98 3 0.178

1983 12.230 1994 26.750 1999-2001 29.01 33.6 3 4.967

1984 13.550 1995 28.070 2002-2004 36.8 42.86 3 5.159
1985 14.870 1996 29.389
Sources:Appendix Table 2
58 Md. Ariful Islam et al.: Growth of Private Commercial Banks in Bangladesh

Growth Rate Of Deposit Deployment should be a subject matter of the performance of a

commercial banking system. The table 2.2.3 presents the
50.000
area wise percentage distribution of deposit mobilization by
40.000
PCBs in Bangladesh. It reveals that both the share of rural
30.000
Deposit

deposits and its rate of growth over time were very poor.
20.000
The percentage share of urban deposit in total deposit was
10.000
0.000
1.39% in1983, went up to 20.89% in 1988 and then reached
-10.000 1984- 1987- 1990- 1993- 1996- 1999- 2002- 24.60% in 1993 and stayed almost stable till 2000. From
1986 1989 1992 1995 1998 2001 2004 the year 2001 the increasing trend was noticed and finally
Year in 2004 the percentage of urban deposit mobilization by
PCBs reached at 39.14 of total deposit of the banking sector.
Chart 2.2.2. Growth Rate of Deposit Mobilization. Sources: Table 2.2.2
In the context of share of rural branches in total number
A negative trend has been observed from the year 1992 of branches, the percentage share of the rural deposit in the
to 1996 and growth rate were -.039 and -.352 percent total deposit seems to be very low. The critical
respectively in those two years. PCBs deposit mobilization factor(among many others such as lower level of rural
capability improved with a low rate, 0.178 in the year 1999, income, lack of availability of appropriate assets to rural
just after the recession and tended to increase again and savers etc.) for the very low level of rural deposits in is the
achieved a stable positive trend. lack of motivation on the part of the rural bankers. If they
can be motivated properly then the growth rate of deposit in
2.2.3. Area Wise Mobilization of Deposit the rural sector of PCBs can also be improved within the
How far and how effectively the functional coverage of given constraints.
the commercial banks are spread geographically over time,
Table2.2.3. Rural-Urban distribution of Deposit of PCBs

URBAN (Amount in lacs of % of Total Deposit RURAL(Amount in lacs of % of Total Deposit

YEAR TOTAL
TK) Mobilization TK) Mobilization
1983 70.72 1.39 0 0 5098
1984 446.09 6.23 0 0 7158.4
1985 1596.16 17.06 49.37 0.53 9356.32
1986 2072.54 18.81 86.36 0.78 11016.64
1987 2556.05 19.26 222.26 1.67 13274.16
1988 3261.5 20.89 322.57 2.07 15614.65
1989 3891.62 21.51 375.28 2.07 18091.08
1990 4641.68 22.79 405.56 1.99 20367.1
1991 5528.12 24.23 524.22 2.30 22818.02
1992 5992.19 22.89 603.14 2.30 26181.57
1993 7366.88 24.60 709.19 2.37 29945.35
1994 9390.04 25.51 937.58 2.55 36815.63
1995 9707.23 24.94 980.98 2.52 38924.12
1996 10342.59 24.66 1050.32 2.50 41941.17
1997 11549.63 24.48 1171.18 2.48 47189.36
1998 12564.86 24.16 1330.74 2.56 52004.51
1999 14663.81 24.86 1580.6 2.68 58994.12
2000 17606.98 24.81 1749.25 2.46 70981.25
2001 24819.63 30.40 1792.6 2.20 81650.02
2002 30554.58 32.82 2224.37 2.39 93084.14
2003 38684.73 36.02 2844.9 2.65 107406.8
2004 47579.41 39.14 3463.76 2.85 121576.1

Sources: Appendix Table 4

As the table and chart shows that the share of PCBs in

Rural-Urban Deposit Distrbution
rural deposit is less than 3 percent from the period of
Percentage of Total Deposit

50.00
40.00 privatization and denationalization till 2004. This almost
30.00 fixed growth rate is an indication that very little
20.00 concentration has been given to the rural areas for deposit
10.00
0.00
mobilization by the PCBs. And from the table 2.2.4 we can
also come to the conclusion that the urban-rural proportion
83

85

87

89

91

93

95

97

99

01

03

of deposit mobilized by PCBs demonstrated a high

19

19

19

19

19

19

19

19

19

20

20

Year
deviation between them.
PCBs Urban PCBs Rural

Chart2.2.3. Rural-Urban distribution of Deposit. Sources: Table 2.2.3.

 International Journal of Economics, Finance and Management Sciences 2014; 2(1): 53-67 59

Table2.2.4. Proportionate Urban-Rural Deposit Mobilization by PCBs to Financial Liberalization (1982-1989):

In the beginning of the above mentioned period(1982)
YEAR URBAN-RURAL YEAR URBAN-RURAL
the NCBs role was very much dominant as the private
1983 0 1994 1001.52 banking had just started its journey. In the year 1983 NCBs,
1984 0 1995 989.54
SBs, PCBs and FCBs credit deployment position were
69.50, 24.8, 0.60 and 5.0 percent respectively of the total
1985 3233.06 1996 984.71 credit deployment. But NCBs proportionate share
1986 2399.88 1997 986.15 decreased as PCBs started to penetrate in the market. As a
result at the end of this period (1989), the credit situation
1987 1150.03 1998 944.20
stood at 51.55, 21.65, 20.16 and 6.64 percent respectively.
1988 1011.10 1999 927.74 In this period both the NCBs and SBs growth rate declined
(-23.93%) and (-2.59%) while PCBs and FCBs growth rate
1989 1036.99 2000 1006.54
increased by 64.94% and 2.96% respectively. Though
1990 1144.51 2001 1384.56 PCBs were able to create its own place in the market but
1991 1054.54 2002 1373.63 the decreasing trend of NCBs appear to provide that the
intentions of denationalization and privatization to improve
1992 993.50 2003 1359.79 NCBs conditions in term of improving credit quality, were
1993 1038.77 2004 1373.63 not successful.
From the Inception of Financial Liberalization till Today
Sources: Appendix Table 4 (1990-2004):
During (90-2004), PCBs market share was increased as a
The above table shows that the urban sector’s deposit result of liberalization. PCBs and FCBs attracted the
mobilization is on an average 1000 times than rural sectors. customers through their efficient services; however, FCBs
That is, for one Taka deposit mobilization from rural area, market share is almost constant over the years. NCBs share
the PCBs are mobilizing on an average TK.1000 from the was around 50% up to 1999. SBs market share declined as
urban area. Since a mentionable proportion of the country’s the directed lending was stopped. In June 2004 market
people is living in the rural sector, so PCBs should give share of NCB, SB, and FCB were 37.05%, 9.81%, and 6.81%
more attention in the rural deposit collection. respectively and with the leading position of PCBs of
2.3. Growth of Credit Deployment by PCBs 46.33% . The credit deployment by all banks on the basis of
their ownership over the period of 1983-2004 has been
Another important primary function of a commercial drawn in the chart 2.3.1.
bank is to extend credit to the deficit economic units that
comprises borrowers of all types. Bank credit is a catalyst Credit Deployment By Banks
of economic development. Without adequate finance, there
80.00
can be no growth in the economy. Bank lending is
important for the economy in the sense that it can 60.00
Credit

simultaneously finance all the sector and sub-sectors of

40.00
economic arena, which comprises agricultural, commercial
and industrial activities of a nation. Therefore, a bank is 20.00
supposed to distribute its loanable fund among economic
0.00
agent-in-deficit in a manner that it will generate sufficient
1 3 5 7 9 11 13 15 17 19 21
income for it and at the same time benefits the borrower to
overcome his/her deficit. Banks used to lend in two ways- Time Period
NCBs SBs PCBs FCBs
discounting and purchasing of bills and advances.
Hence, Bank credit can be classified in two broad Chart2.3.1. Credit deployment by all banks. Sources: Appendix Table-3
categories-
1. Advances 2.3.2. Trend Equation of Credit Deployment of PCBs
2. Bills discounted and purchased. Like the branches and deposit, the trend equation also
So the growth of credit deployment by PCBs will give us has been used here to demonstrate the positive correlation
an indication for ascertaining the growth of PCBs. between time and credit deployment by PCBs.
Trend Equation: C= a + b(T)
2.3.1. Generation Wise Growth of Credit Deployment
Where, C = Credit, the independent variable
Since our study is to find out the growth of PCBs so we
a = Intercept, the calculated value is 5.866
will focus on the period from the inspection of private
b = The slope of the line, is 1.607
banking to till now. The whole time period can be discussed
So the equation stands:
under two segments:
From The Period of Denationalization and Privatization C = 5.866 + 1.607(T)
60 Md. Ariful Islam et al.: Growth of Private Commercial Banks in Bangladesh

Table2.3.2.Trend Equation of Credit Deployment Of PCBs

Area Wise Credit Deployment By PCBs
Year C Year C
50.00
1983 7.47 1994 25.16
40.00
1984 9.08 1995 26.77

Credit
30.00
1985 10.69 1996 28.37
20.00
1986 12.30 1997 29.98
10.00
1987 13.90 1998 31.59
1988 15.51 1999 33.20 0.00
1 3 5 7 9 11 13 15 17 19 21
1989 17.12 2000 34.80
Time
Urban Period
Rural
1990 18.73 2001 36.41
1991 20.33 2002 38.02
Chart 2.3.3. Area Wise Credit Deployment. Source: Table 2.3.3
1992 21.94 2003 39.63
1993 23.55 2004 41.23 As a whole, chart 2.3.3 shows the overall trend of urban-
Source: Appendix Table 3 rural deployment of credit by the PCBs. It reveals that
proportion of urban credit was always higher than that of
rural credit. But in the year 85-86 both the proportion of
Trend Of Credit Of PCBs
urban and rural credit was in an increasing trend. But after
50 1990, the proportion of rural credit stared declining as a
40 result of deregulation and liberalization. So, it can be
Credit

30 concluded that withdrawal of credit control encourages

20 banks not to go for rural financing.
10 As in deposit, in case of credit deployment also it has
0 been observed that a very high deviation exists between
1980 1985 1990 1995 2000 2005 2010
urban and rural credit deployment PCBs, which indicates
Year that the most of the credit of PCBs are being deployed in
the urban areas.
Chart 2.3.2.Trend Equation of Credit Deployment Of PCBs. Source: Table
2.3.2 2.4. NPL Problem in PCBs and Recent Action toward the
NPL Problem
2.3.3. Area Wise Credit Deployment
Again how far the PCBs have expanded their credit area The most important indicator of loan quality is the non-
wise will be another indetermination to examine the growth performing loan, higher the proportion of NPL, lower the
of PCBs. quality of loan management in the bank. In this study, the
percentage of gross and net non-performing loans (NPLs)
Table 2.3.3. Area Wise Credit Deployment
to the total assets and total advances have been considered.
PCB’s CREDIT Though the volume of NPL of the PCBs has reduced in the
YEAR %of total %of total recent years, still this is the biggest problem at this moment
URBAN RURAL
Credit Credit not only for the PCBs but also for the whole banking
1983 31.95 0.64 0 0
system. As per Bangladesh Bank Annual Report 2003-2004,
1984 273.81 5.46 0 0
1985 1010.50 11.31 87.87 0.98 FCBs have the lowest proportion, while DFIs have the
1986 2050.96 18.82 109.95 1.01 highest one (38.4%),followed by NCBs(28.3%). PCBs
1987 1886.75 15.96 78.61 0.66 condition is much better than the other state owned banks
1988 2507.57 17.99 98.17 0.70 with a 8.3% NPL to the total loans. The following table 2.4
1989 3163.66 18.96 166.51 1.00
has demonstrated the NPL picture of different types of
1990 3817.24 19.17 246.1 1.24
1991 4559.12 21.32 148.66 0.70 banks in Bangladesh.
1992 5351.24 22.24 124.26 0.52
1993 6578.70 24.04 134.86 0.49 Table 2.4. Ratio of NPL to Total Loans By Type Of Banks
1994 7524.97 24.16 193.94 0.62
1995 8055.00 23.75 188.69 0.56 Bank
1997 1998 1999 2000 2001 2002 2003
1996 1880.44 5.06 205.36 0.55 Type
1997 10052.33 24.07 230.16 0.55 NCBs 31.4 35.6 41.3 34.1 32.8 30.1 28.3
1998 1773.34 3.70 247.36 0.52
1999 13682.47 25.35 308.26 0.57 DFIs 57.0 59.1 58.5 54.6 54.5 48.0 38.4
2000 15848.51 26.70 354.67 0.60
PCBs 25.1 26.3 21.2 15.5 10.5 10.5 8.3
2001 22484.11 32.69 358.32 0.52
2002 27328.37 35.60 526.16 0.69 FCBs -0.5 0.1 0.9 -0.1 -0.3 -0.4 0.0
2003 32618.64 38.50 727.99 0.86
2004 39377.24 41.39 920.43 0.97 TOTAL 30.7 34.4 35.6 28.8 28.8 22.6 18.8

Sources: Appendix Table 6 Sources: Bangladesh Bank Annual Report 2003-2004

 International Journal of Economics, Finance and Management Sciences 2014; 2(1): 53-67 61

The ratio of non-performing loans to total loans of all and total expenditure. Income and expenditure sources of
banks show an improving trend. In case of PCBs, the ratio the commercial banks may be grouped under two heads: (a)
of NPL has been continuously decreasing over the year and interest and (b) non-interest sources. In the terminology of
if they are able to maintain this trend then it will be a new commercial banking, the difference between interest
dimension for the PCBs. income and interest expenditure is known as ‘spread’ and
the difference between non-interest expenditure and non-
interest income is known as ‘burden’.
Comparative Position Of NPLs By Types Of Banks
Therefore, alternatively, profit is also defined as the
70 difference between ‘spread’ and ‘burden’. In common
60 parlance, productivity refers to the output per unit of input
50
employed. The measurement of productivity in a service
Billion Taka

40
30
industry like commercial banks is very difficult, because
20 identification and separation of input and output is not easy
10 in the commercial banks. Therefore two things must be
0 carefully observed: first, input and output must represent
-101996 1998 2000 2002 2004 total banking activity and second, both of them must be
Year
financial in nature.
NCBs DFIs PCBs FCBs Although there are various measure of profitability, the
best and widely used measure is return
Chart 2.4. Ratio of NPL to Total Loans by Type of Banks. Source:
onassets(ROA) ,which is supplemented by return on equity
Table:2.4
(ROE).
Recent Actiontowardsthe NPL Problems 2.5.1. Return on Assets(ROA) and Return on Equity(ROE)
The CPD Task Force (2003) has suggested the following Table 2.5.1 and 2.5.2 show ROA and ROE and chart
actions to be taken in order to address the NPL problems. 2.5.1 shows the aggregate position of these two indicators
Careful and strict vigilance must be maintained so that for all banks which reveal that the PCBs had an
no loan is turned bad or default. Toward this end, the inconsistent trend.
total loan process (sanction, monitor and recovery) is
to be made more balanced, effective and free from all Table 2.5.1. Return on assets(ROA)
sorts of influence.
For effective implementation of the new Money Loan Year NCBs DFIs PCBs FCBs Total
Court Act, all concerned parties specially bank 1997 0 -2.1 1.1 4.8 0.3
officers and authorities must be initiating best possible
1998 0 -2.8 1.2 4.7 0.3
efforts.
At the initiative of bank authorities, compromise 1999 0 -1.6 0.8 3.5 0.2
settlements may be tried outside the jurisdiction of
2000 0.1 -3.7 0.8 2.7 0
Money Loan Court Act – 2002.
No loan should be rescheduled for more than two 2001 0.1 0.7 1.1 2.8 0.7
times. 2002 0.1 0.3 0.8 2.4 0.5
Credit risk management should not be confined only
to loan disbursement through lending risk analysis. It 2003 0.1 0 0.7 2.6 0.5
should be extended to loan monitoring and finally to Sources: Bangladesh Bank Annual Report 2003-2004
recovery.
Debt Collection unit should be reorganized as loan Table 2.5.2.Return on Equity(ROE)
work out unit or each bank may establish loan work
out department for managing the problem loans. Year NCBs DFIs PCBs FCBs Total
Each bank is required to formulate a specific loan 1997 1.3 -29.1 24.4 38.2 7
recovery policy as a part of its credit policy.
1998 0.3 -36.3 26.8 40.7 6.6
The formation of Asset Management Company may
be considered for overcoming loan default problem. 1999 -1.1 -29.4 15.3 41.8 5.2

2.5. Trend of Profitability and Productivity of PCBs 2000 1.7 -68 17 27.3 0.3

2001 2.4 12.3 20.9 32.4 15.9

Profit and profitability are two separate concepts. The
former indicates absolute measurement while the latter 2002 4.2 5.8 13.6 21.5 11.6
indicates relative measurement that is profit in relation to 2003 3 -0.6 11.4 20.4 9.8
some other variable. In commercial banks, as in other cases,
the profit is defined as the difference between total income Sources: Bangladesh Bank Annual Report 2003-2004
62 Md. Ariful Islam et al.: Growth of Private Commercial Banks in Bangladesh

Aggregate Profitability of All Banks From the above information we can observe the PCBs
60 expenditure to income ratio is showing an increasing trend
40 from last few years, i.e., the manage quality has been
20 deteriorated from the year 1996 to 2003.
0
-201996 1998 2000 2002 2004
-40 3. Comparative Performance Analysis
-60 between PCBS and NCBS
-80
Year Our banking financial institutions can be divided into 2
NCBs ROA NCBs ROE DFIs ROA DFIs ROE PCB ROA
PCB ROE FCBs ROA FCBs ROE subgroups, namely (1) commercial banks and (2)
specialized banks. Among the commercial banks there are
Chart 2.5.1. Aggregate Profitability of All Banks. Source: Table:2.5.1 and
another 3 groups (a) nationalized commercial banks, (b)
2.5.2
private commercial banks, (c) foreign commercial banks.
Earnings as measured by return on assets (ROA) and Currently, the banking sector of Bangladesh comprises of 4
return on equity (ROE) vary largely within the industry. nationalized commercial banks (NCBs), 5 government-
Table 2.5.1and 2.5.2 and chart 2.5.1 show the aggregate owned specialized banks (SBs) dealing with development
position of these two indicators for all banks in which we finance in specialized sectors, 30 private commercial banks
can notice the PCBs portion is much better than NCBs and (PCBs) and 10 foreign commercial banks (FCBs). The
DFIs in both cases. structure of the banking sector according to Bangladesh
Bank Annual Report 2003-2004 is:
2.5.2. Productivity
To measure the productivity, we have used the Table 3. Banking Structure in Bangladesh.
Expenditure-Income (EI)ratio which indicates the
soundness of bank’s management. Generally a high and Type of
NCBs PCBs FCBs SBs Total
Schedule Banks
increasing expenditure to income ratio indicates the
operating inefficiency that could be due to weaknesses in 2003-2004 4 30 10 5 49
management. The table 2.5.3 demonstrates the EI ratio of
all banks; Source: Bangladesh Bank Annual Report 2003-2004

Table 2.5.3. Expenditure- Income Ratio by All Banks

BANKING SECTOR OF BANGLADESH
YEAR NCBs DFIs PCBs FCBs 2003-2004
1998 99.8 180.4 85.3 60.1
1999 100.5 145.2 90.4 67.4
2000 99.4 175.3 90.8 77.7
2001 99.0 89.1 88.1 75.7
2002 98.5 95.9 91.9 78.3
2003 98.8 101.1 93.1 80.3

Source: Bangladesh Bank Annual Report 2003-2004

NCBs SBs PCBs FCBs
Chart 3. Banking Structure in Bangladesh. Source: Table 3
Expenditure-Income Ratio By All Banks
PCBs cannot alone ensure the efficiency of the overall
200 banking system. The intention behind the denationalization
150 and privatization was to create competition in the banking
sector, especially to encourage NCBs. According to
Percen t

100 Bangladesh Bank Annual Report 2003-04, the share of

50 NCBs in total deposits and loans are 41.7 and 40 percent
respectively. As on December-2003, the capital of NCBs
0 was only 4.3 percent of risk weighted assets and classified
1996 1998 2000 2002 2004 loan was around 29 percent. While the PCBs position was
9.7 and 16.4 percent respectively. A comparative analysis
Year
between NCBs and PCBs have been done to examine and
NCBs DFIs PCBs FCBs
verify whether the allowing of denationalization and
privatization was really worthwhile in order to improve the
Chart 2.5.3.Expenditure- Income Ratio by All Banks. Source: Table 2.5.3
performance of NCBs.
 International Journal of Economics, Finance and Management Sciences 2014; 2(1): 53-67 63

3.1. Comparison on the Basis of Bank Branches term deposit, long term deposit etc. Both NCBs and PCBs
work as intermediary to collect deposits and lend it to the
First of all we have made an attempt to compare the clients.
performance of NCBs and PCBs covering their branch
expansion. According to Schedule Banks Statistics (April – Table 3.2.1. Deposits distributed by different category of banks: (in Billion
June, 2004) total 6236 branches were in operation in which Taka)
the area wise distribution of NCBs and PCBs are shown in
%of total %of total
the table 3.1. Time NCBs
deposit
PCBs
deposit

Table 3.1.1. Branches in Operation December,

516.65 48.10 415.30 38.67
2003
NCBs PCBs December,
545.56 44.87 510.43 41.98
Year Sub %of Total Sub %of Total 2004
Urban Rural Urban Rural
Total Branches Total Branches Source: Scheduled Bank Statistics April-June, 2004
2003 1223 2146 3397 54.28 1141 369 1510 24.13
2004 1243 2145 3388 54.33 1108 386 1494 23.96
Of the total deposits of TK. 121576.11 crores, the shares
of NCBs was TK. 54556.19 crores and that of PCBs was
Sources: Appendix Table 2 TK. 51043.17 crores in 2004. The PCB’s percentage of
total deposits increased by 3.31% but in case of NCBs the
From the above data we can see that the NCBs share of rate of deposit mobilization decreased by 3.23 percent in
total branches increased very slightly only by .05% where 2004 over the previous year.
PCBs share decreased by .17 % during 2003-2004.
DEPOSIT MOBILIZATION BY NCBs PCBs
BRANCHES IN OPERATION
50000
4000 40000
DEPOSIT
B R A N C H ES

30000
3000
N O. OF

20000
2000 10000
1000 0
2003 2004
0
2003 2004 YEAR

YEAR NCBs URBAN NCBs RURAL PCBs URBAN PCBs RURAL

NCNs URBAN NCBs RURAL NCBs TOTAL
PCBs URBAN PCBs RURAL PCBs TOTAL
Graph 3.2.1. Deposits Distributed by PCBs and NCBs.Source: Appendix
Table 4
Chart 3.1.1.Branches in Operation. Source: Table 3.1.1
So we see that, PCBs mobilization of deposit is greater
The table and graph show the number of branches for the than that of NCBs. The reason is that PCBs in Bangladesh
different types of banks. The table indicates that there are a offer attractive interest rate to their clients for more
large number of branches operating under NCBs and PCBs deposits and we also see that, many PCBs in Bangladesh
branch network is limited in comparison to NCBs. have started Bank Marketing Program by their employee to
Specially in the rural sector PCBs branch contribution collect deposits but the NCBs in Bangladesh have not
(6.19%) is very few whereas NCBs branches occupy the started this type of program.
highest percentage of the total branch operation(34.40%) in
the rural sector in the year 2004.
4. Findings, Conclusions and
3.2. Comparison on the Basis of Deposit Recommendations
Banks’ one of the main work is to collect deposits. With
The banking system of our country is comprised of four
the expansion of bank branches the deposits of the
types of schedule banks, namely, nationalized Commercial
nationalized commercial banks also grew at an increasing
banks(NCBs), government-owned development financing
rate. The basic objective of banks nationalization in 1972 or
institutions(DFIs), private commercial banks(PCBs) and
for that matter of NCBs was to mobilize rural savings
foreign commercial banks(FCBs). Private commercial
through the expansion of bank branches.
banks are playing most significant role in the banking
But we see that PCBs in Bangladesh have established
sector through its geographical and functional coverage.
their branches basically in urban areas and collect deposits
There is no disagreement that the performance of the
from the people of the town.
commercial banks of a country should be judged in the
The various kinds of deposits are mobilized by both the
context of the objectives of development and the socio-
NCBs and PCBs can be categorized as fixed deposit, short-
economic conditions prevailing in that country.
64 Md. Ariful Islam et al.: Growth of Private Commercial Banks in Bangladesh

In this study an attempt has been made for the The credit situation of PCBs is better than other types of
justification of the denationalization and privatization and banks and PCBs also managed to reduce the volume of
how successfully PCBs have contribute to improve the NPL in the recent year.
performance of commercial banks. Keeping in mind the The profitability of NCBs as well as the commercial
specific objective of the study, to examine the growth of banking sector went down from the level existing before
private commercial banks, the whole study has been the process of denationalization and privatization started,
arranged. To fulfill the objective, three major components though the absolute profit level of the commercial banks
have been focused, such as how far PCBs have expanded increased, which has proved that the intention of raising
their branches, to what extent they have mobilized deposits competition has been aborted.
and how effectively they have managed their credit The comparative performance between PCBs and NCBs
function. has given the indication that the performance of NCBs is
Some significant observations have been noted while still not satisfactory, may be because of numerous problems
analyzing the overall scenario of PCBs in Bangladesh. The such as political influence in loan decisions, excess
observations are enumerated as follows – manpower, poor salary and so on.
Within 21 years PCBs have established 30 banks with
1494 branches, which is comparatively almost 1/2 of NCBs 5. Conclusion and Recommendations
and around 24% of total branches in operation.
In the denationalization and privatization period, PCBs After having studied the growth of PCBs in Bangladesh,
contribution to the total banking sector was not at all it can be said that, after than capturing the highest
satisfactory from 1980s to mid-1990s, because of proportionate share of the banking sector, the PCBs
regulatory forbearance. So the denationalization and performance is not as much satisfactory as it should be.
privatization cannot be treated as victorious for PCBs as During 1980s PCBs performance was not satisfactory as it
well as overall banking sector. not only failed to achieve the desired efficiency of its own,
PCBs performance have started to be better after mid- but also was unsuccessful to improve the position of NCBs,
1990s, which have been manifested through significant which was thought to be improved. The Performance of
increase of PCBs share in overall banking operation. PCBs have started to be better after mid-1990s, which have
Consequently the financial performance of PCBs have also been manifested through significant increase of PCBs share
improved in the latter part of 1990s as well as 2004. So it in overall banking operations. Licensing a number of PCBs
can be said that in the financial liberalization period PCBs leading towards an expansion of branches all over the
have conquered their position that of denationalization and country, providing better salary and another advantages to
privatization period. their employees, improving competition among PCBs,
It was expected that the decision of denationalization and strict banking supervision have contributed largely for the
privatization had been able to raise the profitability of the matter of increasing the banking share of PCBs and their
NCBs and the commercial banking sector as a whole, but financial performance. But still there are some drawbacks
the profitability of NCBs deteriorated over the years since which are acting as the barrier to achieve the expected
the denationalization and privatization process started. performance of PCBs and for these reason some subject
The PCBs of the country are mainly focusing their matter can be recommendations can be made.
operation mainly in the urban areas. Hence, urban branches Recent reform measures should be maintain accordingly
(branches situated in the municipal areas) are getting more so that the existing problems of PCBs can be solved.
attention from the top management of the banks. Rural For a balanced banking business, rural areas or branches
branches always remain the objects of negligence on the must be given due emphasis as they can provide a
part of the PCBs. handsome portion of earnings.
It has been observed that the NCBs are holding the major Systematic and proper planning system should be
segment of the total bank deposits distribution. But the introduced to achieve expected goal.
monopoly of NCBs has changed with the inception of Political and other sorts of intervention should be
PCBs in the banking arena of Bangladesh from the year avoided to select project, for bank investment so that the
1983. proportion of NPL can be reduced further.
The growth rate of PCBs deposit was high enough up to Only improving the performance of PCBs cannot ensure
mid of the 1980s, but it declined and turned in to negative the efficiency of overall banking system. Therefore all out
growth just after the Financial Sector Reform Program efforts (especially political commitment of the government)
(FSRP) had launched in 1990. However, PCBs again had must be put in place for bringing financial discipline and
been able to attain a positive growth at the end of 1990s efficiency in the NCBs, so that the development of the
which continued till 2004 overall banking system can be ensured.
 International Journal of Economics, Finance and Management Sciences 2014; 2(1): 53-67 65

Appendix Appendix Table 3.TOTAL DEPOSIT MOBILIZATION BY BANKS

(Percentage of total deposit)
Appendix Table 1.TOTAL BRANCHES IN OPERATION
DEPOSIT
YEAR
NCBs SBs PCBs FCBs
BRANCHES
YEAR 1983 85.32 4.53 N.A. 8.76
NCBs SBs PCBs FCBs TOTAL
1984 82.54 4.60 6.24 6.62
2004 3388 1318 1494 36 6236 1985 69.86 5.83 17.59 6.72
2003 3397 1314 1510 32 6253 1986 68.39 5.73 19.60 6.28
2002 3496 1311 1398 31 6236 1987 64.32 7.51 20.93 7.24
2001 3612 1215 1296 33 6156 1988 58.92 10.37 22.95 7.76
2000 3607 1185 1231 31 6054 1989 62.43 4.78 24.51 8.28
1999 3616 1175 1160 29 5980 1990 62.28 4.82 25.66 7.24
1998 3617 1173 1133 26 5949 1991 61.18 4.88 26.99 6.95
1997 3619 1171 1095 24 5909 1992 62.78 5.11 25.63 6.48
1996 3620 1151 1079 22 5872 1993 62.16 5.44 28.23 4.17
1995 3611 1164 1016 18 5809 1994 62.52 6.31 27.22 3.95
1994 3605 1186 971 18 5780 1995 61.19 6.34 27.93 4.54
1993 3595 1184 943 22 5744 1996 61.33 5.54 27.83 5.30
1992 3587 1168 915 22 5692 1997 60.26 5.15 28.19 6.40
1991 3582 1166 883 22 5653 1998 59.19 5.80 27.98 7.03
1990 3545 1145 827 22 5539 1999 57.54 5.93 29.01 7.52
1989 3522 1122 883 22 5549 2000 54.50 6.31 31.43 7.76
1988 3486 1104 733 22 5345 2001 52.66 6.59 33.60 7.15
1987 3446 1068 709 22 5245 2002 50.30 5.80 36.80 7.10
1986 3399 1015 678 21 5113 2003 46.00 5.20 41.40 7.40
1985 3393 1028 653 20 5094 2004 44.40 5.63 42.86 7.11
1984 3843 981 628 20 5472
1983 3843 914 N.A 20 4777 Source: Bangladesh Bank Annual Report, various issue.

Source: Bangladesh Bank Annual Report, various issue. Appendix Table 4. AREA WISEDISTRIBUTION OFDEPOSITS

Appendix Table 2. AREA WISE DISTRIBUTION OF BANCHES NCBs PCBs

YEAR TOTAL
(Lacs Taka) URBAN RURAL URBAN RURAL
1983 3053.07 1187.31 70.72 0 5098
NCBs PCBs 1984 4217.63 1559.95 446.09 0 7158.4
YEAR TOTAL
URBAN RURAL URBAN RURAL 1985 4887.87 1717.36 1596.16 49.37 9356.32
1983 1419 2321 12 0 4603 1986 5706.49 1902.16 2072.54 86.36 11016.64
1984 1424 2413 46 0 4817 1987 6502.66 2405.09 2556.05 222.26 13274.16
1985 1124 2222 380 252 4963
1988 7087.61 3037.55 3261.5 322.57 15614.65
1986 1135 2264 409 256 5114
1987 1144 2302 448 240 5224 1989 8465.55 3131.09 3891.62 375.28 18091.08
1988 1154 2332 482 251 5345 1990 9624.82 3295.3 4641.68 405.56 20367.1
1989 1181 2341 516 269 5451 1991 10638.63 3833.94 5528.12 524.22 22818.02
1990 1191 2354 545 282 5539
1992 12534.16 4390.93 5992.19 603.14 26181.57
1991 1197 2368 580 296 5621
1992 N.A. N.A. N.A. N.A. 5656 1993 13795.81 5003.82 7366.88 709.19 29945.35
1993 N.A. N.A. N.A. N.A. 5740 1994 16676.62 6090.39 9390.04 937.58 36815.63
1994 N.A. N.A. N.A. N.A. 5792 1995 17562.45 6452.76 9707.23 980.98 38924.12
1995 N.A. N.A. N.A. N.A. 5813
1996 18946.76 7207.49 10342.59 1050.32 41941.17
1996 1326 1326 758 321 5874
1997 1326 1346 776 319 5911 1997 20806.49 8162.8 11549.63 1171.18 47189.36
1998 1336 1336 821 312 5952 1998 22716.28 9058.51 12564.86 1330.74 52004.51
1999 1336 1336 849 311 5982 1999 25169.53 10176.62 14663.81 1580.6 58994.12
2000 1337 1337 913 318 6056 2000 26037.36 1152.44 17606.98 1749.25 70981.25
2001 1338 1338 959 337 6156 2001 32173.04 12053.71 24819.63 1792.6 81650.02
2002 1321 1321 1011 335 6278 2002 34998.26 13157.04 30554.58 2224.37 93084.14
2003 1250 1250 1054 369 6253 2003 38106.18 13559.2 38684.73 2844.9 107406.8
2004 1243 1243 1108 386 6236 2004 41727.28 12828.91 47579.41 3463.76 121576.1

SOURCE: SCHEDULED BANKS STATISTICS (From June’83 SOURCE: SCHEDULED BANKS STATISTICS (From June’83
toJune’04) toJune’04)
 66 Md. Ariful Islam et al.: Growth of Private Commercial Banks in Bangladesh

Appendix Table 5. TOTAL CREDIT DEPLOYMENT BY BANKS

(Percentage of total deposit)
References
CREDIT
YEAR
NCBs SBs PCBs FCBs [1] Bangladesh Bank . 2004. Annual Report 2003-2004. Dhaka.
1983 69.60 24.80 0.60 5.00 Bangladesh Bank.
1984 63.40 26.80 4.20 5.60
1985 57.00 25.60 12.30 5.10 [2] Choudhury, Toufic A. 2004. “Private Banking In
1986 55.80 24.50 14.00 5.70 Bangladesh”. Bangladesh Institute Of Bank
1987 53.10 23.60 16.70 6.60 Management .(Mime)
1988 51.90 22.90 18.70 6.50
1989 51.55 21.65 20.16 6.64 [3] Choudhury, Toufic A. 1990. “An Evaluation Of The
1990 52.01 20.50 21.40 6.09 Performance Of Commercial Banks Of Bangladesh”.
1991 52.66 19.33 22.00 6.01 Himachal Pradesh University , Shimla.(Mime)
1992 49.56 19.59 24.72 6.13
[4] Choudhury, Toufic A. 1998. “Impact OfDenationalisation
1993 52.16 16.88 26.25 4.71
and Privatisation in the Profitability and Productivity of the
1994 50.60 17.04 27.35 5.01
Commercial Banks of Bangladesh”. Bank Parikroma.
1995 53.13 14.14 27.59 5.14
Vol.XIII, Nos 3 &4. pp.37-49
1996 52.88 14.99 26.73 5.40
1997 53.03 14.26 26.94 5.77 [5] Uddin, Mohammad Sohrab, Dr. Bandana Shaha, Toufic
1998 51.45 16.17 26.16 6.22 Ahmed Choudhury. 1998. “Growth and Structure of the
1999 50.29 16.48 27.27 5.96 Banking Sector in Bangladesh”. Bank Parikrama. Vol. X. pp.
2000 47.55 16.00 30.34 6.11 1-9.
2001 45.47 13.83 34.90 5.80
2002 42.35 12.85 38.63 6.17 [6] Huda, Md. Nazrul.1998. “Bangladesh’s Financial Sector: An
2003 39.65 10.86 42.51 6.98 Oveview”. Bank Parikrama. Vol.XXII,Nos 3 & 4. pp. 33-54.
2004 37.05 9.81 46.33 6.81
[7] Ahmed, Faruquddin.1999.”Banking in Bangladesh-
Source: Bangladesh Bank Annual Report, various issue. Evolution and Present Status”.. Vol. XXIV, No.2,June,1999.
pp. 5-12.
Appendix Table 6. AREA WISE DISTRIBUTION OF CREDIT
(Lacs Taka) [8] Alam, Khorshed. 1994. “Reforms in Finance and Banking
in Bangladesh”. Bank Parikrama. Vol.XIX, Nos.3 & 4,
NCBs PCBs September-December,1994. pp.1-6.
YEAR TOTAL
URBAN RURAL URBAN RURAL
1983 2862.42 628.34 31.95 0 5020.99 [9] Choudhuri, A.H.M. Nurul Islam, et al.1995. “ An Evaluation
1984 3327.14 831.78 273.81 0 5017.02 of the Impact of Reforms in the Financial Sector”. Bank
Parikrama. Vol. XX, Nos.3 & 4.1995.pp.1-44
1985 4326.60 763.52 1010.50 87.87 8933.19
1986 6391.27 1217.38 2050.96 109.95 10898.73 [10] Mason, D. Robert, Douglas A. Lind.1990. Statistical
1987 5151.63 1130.85 1886.75 78.61 11822.45 Techniques in BUSINESS & ECONOMICS. Ninth Edition.
1988 6005.66 1230.07 2507.57 98.17 13936.15 Irwin.
1989 7330.81 1193.39 3163.66 166.51 16686.72
[11] Choudhury, Toufic Ahmed. “PRINCIPLES AND
1990 8326.39 2033.46 3817.24 246.1 19909.43
PRACTICES OF BANKING”. Bangladesh Institute of
1991 9308.54 2414.68 4559.12 148.66 21387.19 Bank Management.(Mime)
1992 10325.90 2089.02 5351.24 124.26 24058.55
1993 11681.90 2445.54 6578.70 134.86 27361.08 [12] Bangladesh Bank, Scheduled Bank Statistics. Dhaka.
1994 12744.65 3074.95 7524.97 193.94 31140.8 Bangladesh Bank, 1983-2004.
1995 14003.13 3280.56 8055.00 188.69 33910.87 [13] Bangladesh Bank, Economic Trend. Dhaka. Bangladesh
1996 15859.28 3728.67 1880.44 N.A. 37166.04 Bank, 1983-2003.
1997 18253.23 4011.75 10052.33 230.16 41764.56
1998 20048.05 4395.26 1773.34 247.36 47989.72 [14] Bangladesh Bank, Bangladesh Bank Bulletin. Dhaka:
1999 22292.06 5130.96 13682.47 308.26 53983.58 Bangladesh Bank, 1983-2003.
2000 22847.70 5315.48 15848.51 354.67 59361.74 [15] Zikmund, William G.2003. BUSINESS REASEARCH
2001 26508.61 5075.35 22484.11 358.32 68778.01 METHODS. Seventh edition. Thomson.
2002 28803.58 5104.67 27328.37 526.16 76772.36
2003 30934.78 4914.30 32618.64 727.99 84734.11
2004 33150.36 4511.51 39377.24 920.43 95130.25

Source: scheduled banks statistics (From June’83 toJune’04)

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