Sonali Bank the largest nationalised commercial bank of Bangladesh established under the Bangladesh Banks (Nationalisation) Order 1972 by taking over the branches of National Bank of Pakistan, Bank of Bhowalpur and Premier Bank that were functioning in East Pakistan until 1971. In 1972, the bank's paid up capital was Tk 30 million, which remained unchanged until 1990. In 2001, its authorised and paid up capital were Tk 10 billion and Tk 3.272 billion respectively. The bank's reserve funds were Tk 60 million in 1979 and Tk 2.050 billion on 30 June 2000.

Sonali Bank performs all traditional banking functions including deposit mobilisation and lending. The bank discharges the treasury functions as the agent of the bangladesh bank. It collects tax, stamp duty and registration fees, operates special savings accounts, pays salaries to the teachers of schools, madrasahs, and colleges and pension to retired government employees. The bank provides funding to some income generating and economic development projects namely, Poverty Alleviation Credit Programme, Female Special Credit Programme, and Agro-based Industrial Credit Programme in the rural areas. It has a large participation in foreign exchange business and off-balance sheet activities. The total volume of foreign exchange business handled by the bank in 1979 was Tk 14.91 billion and in 2000, it was Tk 67.847 billion, 25.87% of which was related to exports, 32.2% to imports, and 41.93% to remittances. At present, the bank has correspondent relationships with 380 foreign banks/bank offices throughout the world.

On 30 June 2000, Sonali Bank had 1,297 branches within the country and of them, 421 were in the urban areas and 876 were in rural areas. In the early 1990s, the bank had 8 overseas branches, 7 in UK and 1 in Calcutta. The branches in UK were recently closed. In 1994, the bank established in New York a full-fledged subsidiary company of the name the Sonali Exchange Company Inc. to expand its participation in international banking. Bangladeshis working in USA send remittances through this company, which operates with its main office at Manhattan, New York and branches/booths at Brooklyn, Estoria, Jackson Height and Los Angeles.

The management of Sonali Bank is vested in a 7-member board of directors appointed by the government. The managing director is the chief executive. He is assisted by a deputy managing director, six general managers, and other senior executives. The general managers are in charge of the bank's branches in the headquarters of the six administrative divisions of the country namely, Dhaka, Chittagong, Rajshahi, Khulna, Sylhet and Barisal. The bank has 32 departments at its head office including a training institute in Dhaka. On 30 June 2000, the total number of employees of the bank was 26,085.

Deposits and advances of the bank totaled Tk 8.387 billion and Tk 6.76 billion in 1979 and these amounted at Tk 17.0261 billion and Tk 126.684 billion respectively in 2000. On 30 June 2000, the bank's total investment stood at Tk 41.028 billion and the whole amount was in approved securities. On the same date, the value of the bank's assets was Tk 205.122 billion and its reserve funds Tk 2.050 billion. The different types of deposits with the bank during 2000 were demand deposits Tk 46.126 billion, fixed deposits Tk 124.135 billion and time deposits Tk 88.510 billion. Of the total loans and advances of Tk 126.684 billion, Tk 57.910 billion (45.7%) were classified.

On 30 June 2000, the credit-deposit ratio of the bank was 68.53%. The bank borrowed Tk 720 million from the inter-bank call market. The liquid assets of the bank were valued at Tk 65.430 billion. In September 1999, the interest rate offered by the bank on savings deposits in both rural and urban areas was 7%, while the average interest rate charged by it on different sectors was 13.96%. Up to that date, the bank's loans to the public sector was Tk 25.731 billion, 48.7% of which was classified. Public sectors' borrowing from the bank accounted for 19.33% of its total loans and advances. Up to June 2000, the bank disbursed a total of Tk 483 million as microcredit.

During 1999, the bank disbursed Tk 88.881 billion in loans and advances, while the total recovery in the year was Tk 85.041 billion. The recovery rate in terms of total loans outstanding was 68% in 1999 and 18% in 2000. The cumulative balance of outstanding loans and advances of the bank on 30 June 1999 and 2000 was Tk 123.620 billion and Tk 125.610 billion respectively. The amount of over due loans on the same dates were Tk 55.35 billion and Tk 57.91 billion. The ratio of total overdue to total outstanding loans were 44.77% and 46.10% on 30 June 1999 and 2000 respectively. The decline in the recovery and increase in the rate of overdue loans deteriorated the quality of its assets. On 30 June 2000, the total and net incomes of Sonali Bank were Tk 6.71 billion and Tk 20 million respectively. As compared to the previous year, the net profits decreased in 2000 mainly due to increase in interest paid and operating expenses incurred. However, there had been some increase in commission and exchange incomes of the bank in 2000.

The broad economic areas in which the bank currently lends and the amount of advances to those areas upto 30 June 2000 were agriculture and fisheries -Tk 25.526 billion, industry (small and cottage, and large and medium)-Tk 43.563 billion, retail/wholesale trade, hotels and restaurants-Tk 10.75 billion, transport/communication and storage -Tk 175 million, special credit programmes including poverty alleviation - Tk 2.207 billion, insurance, real estate and trade services - Tk 3.3 billion and others - Tk 70.194 billion.

Sonali Bank monitors its work through a performance budget. It has a marketing intelligence unit and conducts a programme of human resources development through training and motivation. It introduced the Lending Risk Analysis suggested by the Financial Sector Reform Programme. Business policies of the bank in the 1990s included fulfilling capital adequacy requirement, mobilising deposits in large amounts, and making investments in more profitable ways. The bank diversified its activities in off-balance sheet items to expand its area of operations and increase non-interest based incomes. [S M Mahfuzur Rahman]