Money market of Bangladesh.

→ Characteristics

→ Structure

→ Problem related to money market

→ Characteristics: The central bank controls the entire operation of the organized
sector of the money market. Over the year both commercial banks, and other bank
have come to depend more and more on the rediscounting and borrowing facilities
provided by central bank, especially during the busy season. Moreover, the CB
supervises their lending policies from time to time. The main characteristics of
money market of Bangladesh are as follows,

(i) Existence of Unorganized Money market: The Major defect the Bangladesh
money market has always been the existence of the indigenous banker who do not
distinguish between short-term and long term finance. During the last decades, there
is whole lot of non-banking financial companies who raise funds from the general,
public but who are generally outside the control and supervision of central bank of
Bangladesh.

(ii) Absence of Integration: An important defect of the incident money market at

one time was the division of the money market into several segments one sections,
loosely connected to each other.

(iii) Diversity in Money Rates of Interest: Another defect of the Bangladesh

money market related to the existence of too many rate of interest the borrowing rate
of the Government, the deposit and lending rates of commercial banks, deposit and
lending rates of co-operative bank ete.

The basic rate for the existence of so many rate of interst simultaneously is the
immobility of funds from one section of the money market to another.
(iv) Seasonal Strengency of Money: A very striking characteristics of Bangladesh
money market is the seasonal monetary strengency and high rate of interest during a
part of the money.

(v) Absence of the market: The existence of an organized bill market is absolutely
essential for linking various credit agreement with the central bank in an effective
manner.

(vi) limited Instruments: It is in fact a defect of the Bangladesh money market. In our
money market the supply of various instrument I such as the Treasury bill,
Commercial Bills, Certificate of Deposit, Commercial Paper etc. is very limited. In
order to meet the varied requirement of borrower and Lenders

→ Structure: - The structure of Money market comprises credit instrument,

components of submarket and institution.

Structure of Money Market

 Credit Instrument
 Components or sub-markets,
 Institution on constituents.

On other hand, money market of Bangladesh is dividend into organized and

unorganized.

(i) Organized market - Organized Bank is that part which comes under the regulatory
purview of Bangladesh bank, The nature of money market transaction is such that
they are large in amount and high in volume. The key players in the organized
money market include
(1) Central Bank,

(2) commercial Bank, cooperative. Bank, Finance Industrial and service companies,
(3) Financial institution, Mutual Funds and certain specific entities,

4) Discount Houses and Bill Brokers,

5) Acceptance Houses,
(6) Lange Transaction and Telecommunication Network,

(7) Firms, Companies, corporate Bodies, Trusts,

(ii) Unorganized Market:

Unorganized market is organized market is old Indigenous Market mainly made of

(1) Bankers.

(2) Money tenders.

(3) Individuals.

(4) NBFlS.

(5) Friends,

→ Problem related to money market: Though the Bangladeshi money market is

considered as the advanced money market among developing countries, it still
suffers from many problem or defects. These defects limit, the efficiency of our
market.

(i) Absence of Integration: The money market of Bangladesh is broadly divided into
the organized and unorganized sectors. The former comprises the legal financial
institution backed by the central bank. The unorganized statement of it includes
various institution such as indigenous bankers, village money of lenders, traders etc.
There is lack of proper integration between these two segments.

(ii) Mutiple rate of interest: In Bangladeshi and money market, especially the banks,
there exists to many rates of interests. These rates vary for lending, borrowing,
government activities etc. Many rates of interests create confusion among the
investors.