Bangladesh Bank Training Academy Journal

Abstract

Government owned banks have always raised questions by their business performance in Bangladesh since its inception in 1971. Therefore, the country has implemented a massive reform in the mid-1990sto increase the financial performanceof all banks by switching toa greater deregulated and market based banking sector. This paper attempts to conduct a comparative assessment of this deregulation effort on different groups of banks in Bangladesh. We have conducted both statistical analyses and econometric investigations on the comparative performance of the government and other types of commercial banks only for their post-deregulated operation period. The study has found an overwhelming support of lower performance by the government banks compare to the private and foreign commercial banks even though government banks were doing business not only in a level playing field but also with additional supports from the government and regulatory authorities (i.e. central bank etc.) of the country. Thus, the findings of this study indicate that reform for shiftingin a deregulated market based banking regime has not improved the financial performance of the government banks in Bangladesh. So, the government banks in this countryshould contemplate in cost reduction, explore more profitable and technology based banking services, and cost efficient business operations to ameliorate their financial performance in future.