Central banking is conducted by the Bangladesh Bank, which has its head office in Dhaka. It is responsible for the circulation of money, supervision of commercial banks, and control of credit and foreign exchange. There are four commericial governmentowned banks, 6 development financial institutions, 27 domestic private banks, and 12 foreign bank branches operating in Bangladesh. The four major banks are all state-owned: Sonali Bank, Janata Bank, Agrani Bank, and Rupali Bank. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $4.3 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $16.9 billion. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 6%.
Trade on the Dhaka Stock Exchange (DSE) was dormant until 1993. The fourth quarter of 1996 was marked by feverish activity on the DSE, and on the smaller Chittagong Stock Exchange (CSE). In September, October, and the first two weeks of November, records were broken daily as share prices soared. Prices soon bore little relation to the current profitability or future prospects of the companies concerned. Up to 300,000 first-time buyers joined in the bonanza, driving the limited number of stocks traded-210-to a peak on 16 November, 1996, when the all-share index reached 3,627, up from around 1,000 in June. By 4 November, market capitalization had reached an unsustainable $6 billion, equivalent to some 20% of the country's GDP. The government began to cool down the market by selling off state-owned enterprises. In late December, the central bank announced that T2 billion ($47 million) would be available to the state-run Investment Corporation of Bangladesh to buy shares and give some support to the market, but the market crashed despite these preventative measures. In 1997, 37 stock brokers were charged with market manipulation in the DSE boom and crash of 1996. In 2001, market capitalization reached $1.15 billion, although very little foreign portfolio investment was recorded.