Merkentile Bank

CHAPTER ONE

1.1 Introduction

The Jews in Jerusalem introduced a kind of banking in the form of money lending before the birth of Christ. The word ‘bank’ was probably derived from the word ‘bench’ as during ancient time Jews used to do money -lending business sitting on long benches.

First modern banking was introduced in 1668 in Stockholm as ‘Savings Piss Bank’, which opened up a new era of banking activities throughout the European Mainland.

In the South Asian region, early banking system was introduced by the Afghan traders popularly known as Kabuliwalas. Muslim businessmen from Kabul, Afghanistan came to India and started money-lending business in exchange of interest sometime in 1312 A.D. They were known as ‘Kabuliawalas’.

The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, 4 nationalized commercial banks (NCB), and 5 government owned specialized banks, 30 domestic private banks, 10 foreign banks and 28 non-bank financial institutions. The financial system also embraces insurance companies, stock exchanges and co-operative banks .The structure of the banking system has changed substantially over the last few years. NCBs’ role has gone down. Their share in total assets went down from 54 percent in 1998 to 40 percent in 2006. On the other hand, PCBs’ share went up from 27 percent in 1998 to 43 percent in 2006. The change reflects adoption and implementation of new policies for the banking sector

Banks are become more important to the economy as a whole and to local communities. Certainly, banks can be identified by the functions they perform in the economy. Bank is a financial intermediary accepting deposits and granting loans offers the widest menu of services of any financial institution. Banks are the most important financial institution in the economy. They are the principal sources of credit (loan able funds) for millions of individuals and families for many units of the government.

Banks are also closely watched...