Financial Market of Bangladesh

A financial market is a platform where buyers and sellers trade financial products — shares, bonds, mutual funds, treasury instruments, and foreign currencies. It channelises funds from surplus units (savers) to deficit units (investors/borrowers), driving economic growth. Bangladesh's financial market has grown significantly since the 1990s and continues to evolve with regulatory reforms in 2024–2025.

1. Structure of the Financial System of Bangladesh

The financial system of Bangladesh is comprised of three broad sectors, categorised according to their degree of regulation:

Sector	Description	Key Participants
Formal Sector	Fully regulated institutions under enacted financial laws	Banks, NBFIs, Insurance Companies, Capital Market Intermediaries (Brokerage Houses, Merchant Banks), MFIs
Semi-Formal Sector	Regulated but not under central financial regulators (BB, BSEC, IDRA)	HBFC, PKSF, Samabay Bank, Grameen Bank, NGOs, discrete government programmes
Informal Sector	Completely unregulated private intermediaries	Moneylenders, rotating savings groups (samity), private lending

The three main constituents of any financial system are: Financial Institutions / Intermediaries, Financial Instruments, and Financial Markets.

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2. Financial Institutions in Bangladesh UPDATED 2025

Financial institutions are broadly classified into Banking Financial Institutions (BFIs) and Non-Bank Financial Institutions (NBFIs). The key difference: the liabilities of BFIs are money, whereas the liabilities of NBFIs are not money.

62Scheduled Banks

35NBFIs

5Non-Scheduled Banks

78+Insurance Companies

Category	Number	Examples
State-owned Commercial Banks (SOCBs)	6	Sonali, Janata, Agrani, Rupali, BASIC, Bangladesh Development Bank
Specialised Development Banks (SDBs)	3	Bangladesh Krishi Bank, RAKUB, Probashi Kallyan Bank
Conventional PCBs	33	MBPLC, BRAC Bank, Dutch-Bangla, City Bank, Eastern Bank
Islamic (Shariah-based) PCBs	10	Islami Bank Bangladesh, Al-Arafah, Shahjalal, EXIM, SIBL
Foreign Commercial Banks (FCBs)	9	Standard Chartered, HSBC, Citibank N.A., State Bank of India
Non-Scheduled Banks	5	Grameen Bank, BSBL, Ansar VDP Unnayan Bank

⚠️ 2025 UPDATE — Bank Merger: Under the Bank Resolution Ordinance 2025, five troubled Islamic banks — EXIM Bank, First Security Islami Bank, Global Islami Bank, Social Islami Bank, and Union Bank — are being merged into a new state-owned entity called Sammilito Islami Bank PLC. This merger is expected to reduce the total number of scheduled banks from 62 in the near future.

New Bank Setup Requirements:

• To set up a conventional/Islamic bank: minimum paid-up capital of BDT 500 crore
• To set up a Digital Bank: minimum paid-up capital of BDT 125 crore

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3. Financial Markets of Bangladesh

The financial market in Bangladesh is mainly of the following four types:

3.1 Money Market UPDATED

The money market deals in short-term financial instruments (maturity up to 1 year). It is regulated by Bangladesh Bank (BB).

Key participants: Banks, NBFIs, and Primary Dealers (PDs).

▶ Updated: 24 Primary Dealers now operate in the money market (updated from the old figure of 15). These are banks authorised to deal in government securities both in primary and secondary markets.

Instrument / Operation	Details
Call Money Market	Overnight inter-bank lending; most sensitive segment of money market; participated by scheduled banks and FIs
Repo / Reverse Repo	BB's key monetary policy tools; banks borrow/lend against government securities
Treasury Bills (T-Bills)	Short-term government securities (91-day, 182-day, 364-day)
BB Bills	7-day, 14-day, 30-day, 91-day BB Bills available
Taka Treasury Bonds	Long-term (2, 5, 10, 15, 20 year maturities); secondary trade through PDs
EDSMoney	Electronic Dealing System for Interbank Money Market

📌 Key Rates (Verify current rates with Bangladesh Bank):
Policy (Repo) Rate | Standing Lending Facility (SLF) | Standing Deposit Facility (SDF)
SMART rate (Six-Month Moving Average Rate of Treasury Bill) has been abolished.
For Islamic Banks: Mudarabah Liquidity Support (MLS) — 7, 14, 28-day tenors; and Islamic Banks Liquidity Facility (IBLF) — 14-day.

3.2 Capital Market

The capital market deals in long-term financial instruments (maturity more than 1 year). It is regulated by the Bangladesh Securities and Exchange Commission (BSEC).

Segment	Description
Primary Market (NIM)	New Issue Market — companies issue new stocks/bonds via IPO (Initial Public Offering), rights shares, or private placement. Regulated and approved by BSEC.
Secondary Market	Previously issued securities are bought and sold. Includes Organised Stock Exchanges and OTC market.

Stock Exchanges:

Exchange	Est.	Location	Indices
Dhaka Stock Exchange (DSE)	1954	Dhaka (Nikunja)	DSEX, DS30, DSES (Shariah)
Chittagong Stock Exchange (CSE)	1995	Chittagong	CASPI, CSI (Shariah)

Key Capital Market Intermediaries:

• Stock Exchanges (DSE, CSE)
• Central Depository Bangladesh Ltd (CDBL) — formed 2000; settlement of financial securities
• Investment Corporation of Bangladesh (ICB) — established 1976
• Merchant/Investment Banks, Asset Management Companies (AMCs)
• Stock Brokers and Dealers
• Credit Rating Agencies

Instruments traded: Equity securities (shares), debentures, corporate bonds, treasury bonds, mutual fund units, ETFs (Exchange Traded Funds), Sukuk (Islamic bonds).

📌 2024–2025 Capital Market Update: BSEC withdrew floor prices on equities in January 2024, removing a major market distortion. Bangladesh's maiden sovereign Sukuk (2021) was oversubscribed fourfold. The capital market regulator is now named Bangladesh Securities and Exchange Commission (BSEC) — not SEC as in older references.

3.3 Foreign Exchange Market UPDATED 2025

The foreign exchange market facilitates buying and selling of foreign currencies. It is regulated by Bangladesh Bank under the Foreign Exchange Regulation Act (FERA), 1947 and Guidelines for Foreign Exchange Transactions (GFET).

Key milestones:

• 24 March 1994: Bangladeshi Taka declared convertible on current account transactions (Article VIII of IMF Agreement)
• 31 May 2003: Bangladesh adopted managed floating exchange rate regime
• 2022–2024: Multiple exchange rate mechanisms introduced; crawling peg adopted
• May 2025: Bangladesh Bank announced a more flexible / managed floating exchange rate to fulfil IMF loan conditions ($4.7 billion programme). The SMART rate mechanism was abolished and a market-based rate with BB intervention (as needed) is now in effect.

Feature	Current Status (2025)
Exchange Rate Regime	Managed Floating — market-determined with BB intervention to prevent extreme volatility
Taka Convertibility	Convertible on current account; NOT freely convertible on capital account
FDI Repatriation	Profits, capital gains, and disinvestment proceeds freely repatriable for non-residents
Resident Capital Abroad	Subject to prior Bangladesh Bank approval
Regulator	Bangladesh Bank (FEPD — Foreign Exchange Policy Department)
Authorised Dealers (ADs)	Licensed banks authorised to deal in foreign exchange; 22 AD branches of MBPLC

Foreign Exchange Instruments in Bangladesh:

• Spot contracts — most widely used; immediate settlement
• Forward contracts — popular among corporates; 3–6 months (up to 2–3 years for small tickets)
• FX Swaps — active short-dated market (mostly within 1 week); used as funding technique
• Commodity derivatives — permitted since 2008 for genuine underlying commodity risk (subject to BB approval)

3.4 Insurance Market

The insurance market deals in trading of insurance products (life and non-life). Regulated by the Insurance Development and Regulatory Authority (IDRA) established under the Insurance Development and Regulatory Authority Act, 2010. There are over 78 insurance companies operating in Bangladesh.

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4. Types of Financial Market — Summary

Basis	Type A	Type B
By Issuance	Primary Market (new securities issued)	Secondary Market (existing securities traded)
By Duration	Money Market (short-term, up to 1 yr)	Capital Market (long-term, over 1 yr)
By Trading	Organised Stock Exchange (listed securities — DSE, CSE)	OTC Market (non-listed or unlisted securities)
By Security	Security Market (shares, bonds — regulated by BSEC)	Non-Security Market (banking, insurance — regulated by BB/IDRA)

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5. Regulators of the Financial System

Regulator	Established	Regulates	Legal Basis
Bangladesh Bank (BB)	1972	Banks, NBFIs, forex market, payment systems	BB Order, 1972; Bank Company Act, 1991
BSEC	1993	Capital market, stock exchanges, merchant banks, AMCs	Securities and Exchange Commission Act, 1993
IDRA	2010	Insurance companies (life & non-life)	Insurance Act, 2010
MRA	2006	Microfinance Institutions (MFIs)	Microcredit Regulatory Authority Act, 2006

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6. Payment System Infrastructure NEW

Bangladesh Bank has developed a robust electronic payment infrastructure replacing traditional paper-based systems:

System	Full Name	Function
BACH	Bangladesh Automated Clearing House	Umbrella system for all automated clearing
BACPS	Bangladesh Automated Cheque Processing System	Electronic cheque clearing
BEFTN	Bangladesh Electronic Funds Transfer Network	Electronic credit/debit transfers
RTGS	Real Time Gross Settlement	High-value real-time interbank settlements
NPSB	National Payment Switch Bangladesh	Interoperability of ATM/POS transactions
MFS	Mobile Financial Services	bKash, Nagad, Rocket — mobile payments

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7. Quick Reference: Key Facts

Item	Detail
Central Bank	Bangladesh Bank — established 16 December 1971 (BB Order, 1972)
1st Governor, BB	A. N. Hamidullah
14th Governor, BB	Md. Mostaqur Rahman, FCMA (joined 26 February 2026)
Scheduled Banks	62 (6 SOCB + 3 SDB + 33 Conv. PCB + 10 Islamic PCB + 9 FCB)
NBFIs	35
Primary Dealers (PDs)	24 (in money market / treasury securities)
Stock Exchanges	DSE (Dhaka, est. 1954) and CSE (Chittagong, est. 1995)
Capital Market Regulator	BSEC (Bangladesh Securities and Exchange Commission)
Exchange Rate Regime	Managed Floating (since May 2025, per IMF conditions)
Taka Convertibility	Current account: YES | Capital account: NO
Gross Forex Reserves	Approx. USD 30 billion (July 2025); Net (BPM6): ~USD 24.99 billion
Bank Setup Capital	BDT 500 crore (conventional/Islamic) | BDT 125 crore (Digital Bank)
Islamic Bank Total Assets	Exceeded BDT 5 trillion (mid-2025); ~20% share of total banking assets

📅 Last Updated: March 2026 — This post has been updated with figures from Bangladesh Bank, BSEC, and official sources. Always verify policy rates and bank counts from the latest Bangladesh Bank publications as these are subject to change.