The central bank has targeted fuller and deeper financial inclusion of all productive economic sectors and all population segments to help the government attain faster and more comprehensive growth, its governor has said.
Atiur Rahman said Bangladesh Bank's financial inclusion initiatives are structured within the overall private sector credit growth targeted in the monetary programme, so as not to raise concern about additional monetary expansion.
“Deepening of financial inclusion would require bringing in new dimensions and services in the financial markets to bridge market failures and market gaps, responding on an ongoing basis to new needs as they emerge,” he said.
Bangladesh Bank (BB) chief was speaking at a meeting of World Bank on Central Bank Structuring Project in Washington on Friday, according to a copy of his speech received by The Daily Star.
Rahman said BB has been striving to perform excellently in policy formulation and implementation with continual institutional strengthening and reforms, working within the framework of a periodically revisited comprehensive medium term strategic plan.
He said the country in the 1990s moved to market-based monetary and financial regime with abolition of directed lending and dictated interest rates and strengthened regulation and supervision protecting financial sector solvency and liquidity, with tighter lending and loan repayment disciplines.
"In the first decade of the new millennium, we've introduced market-based monetary regime fully with adoption of floating exchange rate of Taka. We've had statutory and regulatory changes introducing revised risk management, financial reporting and corporate governance standards in closer convergence with international best practices, with fuller operational autonomy of the central bank."
Besides, internal institutional reforms and strengthening in BB, including performance-based human resource management, automation of banking and data warehousing functions, inter-bank clearing and settlements and full automation and capacity augmentation of the Credit Information Bureau have also been brought in.
Rahman said recent monetary and credit programmes of the bank have targeted to actively engage the financial institutions and markets in providing adequate credit flows and financial services to the under-served sectors and populations.
"Creative and innovative cost-saving and risk mitigating partnerships between banks, micro-finance institutions and mobile phone/smart card-based IT platforms are being encouraged," he said.
He said the central bank is also working on bridging the market gaps and failures over the medium term.
"Following full transition to market-based interest and exchange rates, Monetary Policy Statements -- after rounds of prior consultation sessions with stakeholder groups including leaders of trade bodies, think-tanks, eminent professionals and academics, former finance ministers and BB governors -- are being issued half yearly from 2006 onwards, to anchor inflation expectations," he said.
An in-house BB committee reviews every month the unfolding policy outcomes and new policy steps required, said Rahman.
The governor said a major project of automated inter-bank clearing and settlement of paper-based and electronic payments, supported by DFID, is fast nearing completion, effecting a quantum leap forward in quick and secure payment system.
Besides, a number of BB approved mobile phone-based arrangements for prompt delivery of inward remittances and payment of utility bills are in place, he said.
He said the next near-term reform phase would involve putting in place a national payment switch bringing about interoperability of the existing multiple e-payment networks and facilitating online banking, e-commerce, shared automated teller machines and mobile phone payments.
He told the World Bank meeting that Bangladesh Bank has put in place 'Early Warning' arrangements for absorbing shocks, including introduction of periodical stress testing routines in banks to bring out their vulnerabilities to certain possible large shifts in macroeconomic situation or in market condition.