The problems prevailing as well as to be encountered in Bangladeshi perspective can be analyzed under the following headings: 1.

. Mass Illiteracy Level: The majority portion of people in Bangladesh is illiterate in general education. Having been unable to read and write in English it is the most important problem for ban!ers to implement online ban!ing services. "s e#ban!ing services gets subject to fraudulent activities due to lac! of ability of people from different wal!s of life to maintain account activities re$uiring handling sophisticated software tools to be provided by different ban!s for online purpose it is almost impossible for different ban!s especially covering mass customer base even from rural areas. 1. 1.?? Lack of ICT Knowledge and Skills: Technology literacy is still very limited in most developing countries. There is a shortage of s!illed wor!ers among ban!s a !ey issue in moving forward with using information technology in business. But in order to offer and maintain e#ban!ing services without any fault ban!s need s!illed manpower. But in Bangladesh the ban!s are suffering due to inade$uate s!illed manpower. They have to hire manpower from foreign countries to overcome this problem. %therwise they have to provide proper training to the e&isting manpower. Both will result in increased operating e&penses. '. 2.?? (Infrastructure: The other challenge for e#ban!ing is well developed infrastructure.( )nformation and *ommunication Technology +)*T, infrastructure is prior most to offer and to implement e# ban!ing services. *ommunication infrastructure such as )nternet -". Telephone lines must be ade$uate for e#ban!ing. )n Bangladesh due to unavailability of computer systems and )nternet infrastructure by the majority of people ban!ing sector is facing lot of problems or challenges. Especially )nternet is the major problem because of /ow bandwidth and low speed for ban!s intending to go online. 1. .????? !ower "isru#tion: "nother major problem is fre$uent Electric 0ower disruption. This will create lot of problems in e#ban!ing activities which are basically depending on power supply. )t will force the ban!s to depend on generators 12 hours 3 day resulting in high operational cost. Besides customers transacting from home will face problem due to disruption while conducting e#ban!ing activities. 1. $.????? %sta&lis'(ent %)#enses: )nitially ban!s have to invest huge amount of money in order to provide e#ban!ing services. They have to buy and install the re$uired systems and facilities which lead increased establishment e&pense. They have to incur heavy maintenance costs also. 4or well#established ban!s commercial ban!s of Bangladesh the establishment cost may not be a problem. But for small and new ban!s it is very difficult to invest such huge amount even may create financial crisis. 4aced with budgetary constraints ban!s consider the additional costs of )*T spending as too big investment without immediate returns. 1. *.????? Lack of +wareness and ,nderstanding of t'e -alue of %./anking: 5ost indigenous ban!s in Bangladesh have not ta!en up the use of the )nternet as their ban!ing way because they fail to see the value of e#ban!ing to their businesses. 5any thin! e#ban!ing needs an additional cost that will not bring any major returns on investment. 1. 0.????? ,navaila&ility of %./usiness !ractices: Having a -eb site which is a pre#re$uisatoryis for online operation is not e$uivalent to having a well#visited -eb site. %ne reason is that there may be no critical mass of users in Bangladesh for

unavailability of )nternet facilities by people. %ther reason may be that mass people are not accustomed with using )nternet platform for day#to#day shopping ban!ing and so on. 1. 1.????? Legal 2ra(ework: /egal framewor! is plying a crucial role in facilitating e#ban!ing system and in its growth. )nstead of strict regulation a country should ma!e some amendments in order to coincide with the e#ban!ing practices. Bangladesh has not yet set a comprehensive legal framewor! for e# commerce in general and e#ban!ing in particular. But mostly in developed countries they have developed a comprehensive legal framewor! for e#commerce which includes e#ban!ing. The *entral Ban! of Bangladesh has not clearly mentioned yet its role in regulating the e# ban!ing system in its governing legislation. )t has some short comes such as e#signature lac! of significant penalties for frauds and other abuses and lac! of ade$uate provision for e#ban!ing especially e#payment. 1. 3.????? Socio.Cultural +s#ects: .ormally customer(s confidence and trust in traditional ban!ing system will ma!e customers less li!ely to adopt new technologies. .ew technologies will not be successful until customers are satisfied with privacy and security aspects. )t also re$uires some time to earn confidence among the customers even it is easier and cheaper than the traditional methods. )n Bangladesh the customers are in a position with far away from technological orientation. This is also not forcing customers to demand modern ban!ing services and thereby hindering the prospects of e# ban!ing. 1. 4.????? Security: 6ecurity is another foremost re$uirement of e#ban!ing as the internet is inherently unsecured. 6ecuring the process in e#ban!ing involves authenticating both customer and ban!er and protecting the information to be transmitted from interception. This authentication can be done using user )7 and passwords. Ban!s should ta!e effective steps for the interests of customers from data tampering and hac!ing. 6oftware failures can also destroy entire portions of a networ! and bring huge losses. )n e#ban!ing system there are many ways in which private information may be accesses by attac!ers. "nd this information could be used to ma!e fraudulent transactions that could lead to a loss of money. Being first in corruption four times successively it is also the serous concerning problem in case of Bangladesh as attac!s might be whether from outsiders or from insiders such employees staff etc. can not be ignored. 1. 15.? Standardi6ation of Software: %ne of the major issues in E#ban!ing is the standardization of software which is necessary to offer e#ban!ing services. 0roven high $uality software is a must for high#tech ban!ing services. 4or the sophisticated services the standardization of operating systems systems software and application software throughout the ban!ing industry is a necessary condition which may have to be pursued. The unavailability and s!ill needed to operate such software are also impeding the growth of e#ban!ing in Bangladesh. 1. 11.? Lack of Initiative fro( Central /ank: "ll ban!s are in need of smooth clearing. -hile we see )n )ndia 8eserve Ban! of )ndia initially too! step to interconnect all ban!s operating in )ndia for smooth transaction and chec! truncation purposes. But in Bangladesh in this age of 1' st century all ban!s are re$uired to conduct

clearing house mechanism and che$ue settlement till today manually. But it can be said that without online che$ue settlement and other clearing mechanism it would be totally impossible for ban!s to transact online. 1. 12.? Lack of Co(#liance: 5any of ban!s providing plastic cards in Bangladesh are not subject to any consumer act. 6ome ban!s hide necessary information while issuing cards to customers and then later charge more than proposed charges based on the hidden information. Even educated people are also bombarded by the techni$ues of ban!s. *ustomers get faced serious cost burden because of such anti#consumerism attitude which ultimately leads to un#trust regarding those cards. Therefore different cards especially credit card are not becoming so popular in Bangladesh. This serious problem is ma!ing bottlenec!s towards the growth of popularity of e#ban!ing to some e&tent. 1. 1 .? Lack of +TM: Though a few ban!s in Bangladesh are providing initially "T5 facility but this facility is rare in distance areas even not available in district town. %nly customers living in four city corporation areas avail to reach such "T5 facility. -ithout this type of basic re$uirement ban!s and its( customers are hardly able to capitalize on e#ban!ing facilities. 1. 1$.? %(#loy(ent Issue: %ne of the most important problems in Bangladesh is un#employment problem. E#ban!ing practices might reduce the number of employees in the front office in Bangladesh leading to more people un#employed. 8ight now ban!ing sector occupies the majority of employment. Hence there might be a tremendous affect on employment level due to full e#ban!ing practices.

Problems and prospects of banking industry in Bangladesh

The central bank has finally approved nine more banks in addition to existing 47 commercial banks in Bangladesh. Three new NRB commercial banks, sponsored by non resident Bangladeshis !NRBs", and six private commercial banks !#$Bs", have been approved aiming to help boost the inflow of foreign exchange and strengthen the ongoing financial incl%sion programmes thro%gh bringing %nbanked people %nder the banking network respectively. The letters of intent !&o's" (have already been iss%ed to the sponsors of s%ch approved banks. There have been many significant developments in the economy of Bangladesh since )*** )**+, the central bank stated, explaining the economic context and rationale behind iss%ing licences in favo%r of new banks. The economy has grown and the banking system has become more competitive b%t there are still a large n%mber of %nder banked people in Bangladesh. Recent estimates from a s%rvey cond%cted by the 'nstit%te of ,icrofinance !'o-" fo%nd that only 4. per cent of the nearly /*** ho%seholds s%rveyed do have access to banks and micro finance instit%tions !,-'s" for loans. The pop%lation per branch !)+*0." and the ratio of loan acco%nts per +*** ad%lts !4)yrs" s%ggest that the o%treach of the formal financial sector in Bangladesh is lower than that in 'ndia !+441. and +)4 respectively" and #akistan !)*24* pop%lation per branch and 47 loan acco%nts per +***", according to the statement of 'o-. Bangladesh Bank ass%mes that the new banks will help increase the 3%ality of banking services by increasing competition in the banking sector. They will also be able to meet the %nf%lfilled demand for credit by the private sector whose needs have grown in line with a fast expanding

economy. The central bank noted that, for new banks the ratio of opening r%ral and %rban branch will be +4+ which will help increase bank branches in r%ral areas and improve financial incl%sion. B%t the home tr%th is5 no bank can expand in the r%ral areas before concentrating and making b%siness in %rban areas. 6arlier, the iss%e of granting licenses to new banks ca%sed many to raise their eyebrows. 7%estions were being asked by a%thentic experts, bankers and people even on the board of directors of the central bank abo%t the wisdom of allowing more banks, a sector that had been str%ggling hard to cope with the problem of li3%idity shortage for years together. The banking sector is already sat%rated with 47 commercial banks. There was no logic to allow new banks at this moment of the co%ntry. The new comers will create an %nhealthy competition in banking services, affect stability of the sector and ca%se profitability of the existing banks to s%ffer. The entry of more banks will trigger a flight of h%ge f%nd incl%ding Tk 20.** billion from existing banks to place as paid %p capital against new banks5 this will lead to f%rther deteriorations of the stringent sit%ation already prevailing in the banking sector. The similar incident will take place for 3%ality employees of the existing banks. 8ll these will lead to a greater mismatch between their credit and deposit ratio and ac%te shortage of good bankers. The banks will be forced to go for risky investment after collecting deposit at high rate from an already sat%rated market. 't will serio%sly affect the overall bank b%siness and the ind%stry as well. Banks are to facilitate all kinds of economic activities and finance many other needs of the people, in both %rban and r%ral areas. B%t overcrowding of the banking sector is not at all desirable as this, instead of meeting those ob9ectives, wo%ld create problems for the sector itself, partic%larly the existing operators in the sector. This might even adversely impact the vital sectors of the economy in the process. 't was %nlikely that the board of directors of Bangladesh Bank were not aware of that fact. :et they were trying to select the right ones since the government is %nrelenting in its decision to allow new banks. ;pening %p of new banks on political consideration, as reported time and again, may red%ce the confidence of the clients in banks as well as impair the management 3%ality of the overall banking sector. ,eanwhile, some spec%lators state that as soon as new banks kick off their operations a heavy press%re on deposits of existing banks wo%ld be exerted. The latter are likely to see a flight of deposits while their existing loan liabilities incl%ding non performing loans !N#&s" will remain at an %nchanged level. This is likely to ca%se a mismatch between their deposits and o%tstanding amo%nt of credits or loan portfolio. Now that the central bank already approved new banks and iss%ed the &o's, it will be 9%st beating abo%t the b%sh to say anything to the contrary. Rather, now it is better to design how all these banks can be managed smoothly. 'n this regard the following meas%res may be implemented4 < The new banks sho%ld introd%ce new and innovative services and sho%ld scale %p their prod%cts for the sake of making the government decision meaningf%l.

< There is no denying that the 3%ality of the sponsors largely infl%ences the 3%ality of operation of banks as s%ch sponsors play an important role in the decision making. =o, the central bank will have to closely examine the track records of the sponsors and it m%st not give in to political press%re of any sort on this iss%e. The 3%ality of the bank directors sho%ld be maintained scr%p%lo%sly. < The central bank may concentrate its attention on the colo%r of money of the proposed directors who will be investing as the paid %p capital. < The central bank m%st have to play the role of a watchdog in case of shopping the investment clients of new banks from existing banks by approving the higher limit then the present o%tstanding. < The central bank m%st have to be vigilant in examining the proposed investment clients of new banks, partic%larly those whose cases have to be resched%led. >etting resched%led, the sick clients in the existing banks become very m%ch performing in new banks for the time being in the backdrop of opening new banks in the market. < The central bank needs to re3%ire to consider several other iss%es, prior to giving effective permission to new banks, incl%ding ownership 3%ality. < The vital iss%e that deserves priority attention of both central bank and the government is better banking coverage of the hitherto neglected r%ral areas. The new banks may be asked to serve the r%ral people extensively. < ;n the top of everything, both the central bank and the government will have to ens%re the entry of stronger players in the banking arena and keep close watch on the effects of s%ch an entry on the overall banking ind%stry. < The Bangladesh Bank and Bangladesh 'nstit%te of Bank ,anagement !B'B," have to take preparation on str%ct%ring the banks by training %p the bankers. Beca%se market will be oversat%rated as soon as the new banks start operations. The precipitations of banks may appear at the bottom of the banker of banks in Bangladesh. Time has arrived5 the possibility of merger of weak banks cannot be la%ghed away. =till we hope for the best. The newly approved three NRB commercial banks namely, NRB $ommercial Bank &td, NRB Bank &td and NRB Bank &td will bring ?=@+.*.** million as paid %p capital of the non resident Bangladeshis !NRBs". 6xpectations of the people abo%t the six approved #$Bs, s%ch as ?nion Bank &imited, ,odh%moti Bank &imited, the -armers Bank &imited, ,eghna Bank &imited, ,idland Bank &imited and =o%th Bangla 8gric%lt%re and $ommerce Bank &imited, are 3%ite high. Now the nation is passionately staring at the f%nctions of the new born banks with a ray of hope of even development of the people of all the strata in the days to come.