Bangladesh Bank plays an effective role for School Banking

As the present school going children are the future citizen of Bangladesh, so they would be the potential customers of their respective bank. So, for the profit motive banks should encourage students and their parents to go under banking system. Banks can also develop communication with the educational institutions to boost the number of school banking accounts. 

At present School Banking is one of the most important parts of the banking sector as well as economic development. School banking is one type of banking wing towards school going students and their parents to facilitate lower depository obligation, free from operating charges, a higher rate of interest on deposit with an advanced form of banking transactions.

It is not new in Bangladesh. Some banks, including Muslim Bank, had introduced that type of banking program in the 1960s, before the liberation of Bangladesh, but it was not last long. It was some years earlier AB Bank (formerly Arab Bangladesh Bank) launched in Sunshine Grammar School in Chittagong in 2003, but that too did not work.

 Finally, school banking got renewed impetus when Bangladesh Bank, the central bank of Bangladesh, issued the formal circular to all scheduled banks on November 02, 2010. 

The core objective of school banking is a development of banking sector as a model of financial inclusion by introducing banking operation and advanced technology among school going students as well as participating students into economic development by the mode of savings. Now, moreover all scheduled banks are conducting their school banking operation and already they have introduced 850,303 accounts and collected Tk. 717.49 crore under school banking scheme.

So, school banking would be a smart form of banking activities and it would gather all school going students in Bangladesh under uniform banking facilities. So, it is a special type of banking towards the school going children and their parents to know about the banking systems that helps to make a habit of savings from the early age of children. 

This is a new form of banking that is getting more popular day by day because of some smart advantages, such as free of charges and fees, free internet banking, a waiver of minimum balance requirement, facility of debit card at lower cost, etc. School banking scheme helps students and parents with a sizeable amount of savings after certain period and it also aims to insist the habit of savings into the students. Bank will also comply with related acts, rules, regulations and policy guidelines circulated    by Bangladesh Bank in case of school banking activities. 

Whenever account holder (student) will turn into 18 (eighteen) years; the account will be transformed into regular savings account with his/her consent and then will be continued. In this regards related rules, regulations, policy guidelines circulated by Bangladesh Bank will be applicable as usual; Mentionable,   in case of  converting   into  savings accounts, full KYC form must be accomplice and other declaration letter with TP must be obtained. After completing eighteen years of account holder and before converting into regular savings account, now it withdrawal will be allowed(except account closure)in this period;

The concept of school banking is not well known in Bangladesh, but it is becoming more popular among the all scheduled banks. To expand its boundary and for having vast importance fit, Bangladesh Bank advised all scheduled banks to introduce school banking in their operations by BPRD Circular Letter No. 12 on November 02,2010. Through the GBCASRD Circular No. 07  on  October 28,  2013, Bangladesh Bank issued an order to all banks operated in Bangladesh  to submit their respective school banking activities report to the central bank in a quarterly basis.

 To reach banking services to the students in an appropriate manner through ensuring more transparency, awareness and acceleration into this activity, Bangladesh Bank has issued some guidelines on operation of School Banking to all scheduled banks for their compliance: Opening of Account, operation of account, account Opening Form, nature of account, minimum Initial deposit, ATM card, establishment of School Banking Counter, deposit of    scholarship benefit, education Insurance Practice of school banking in Bangladesh is passing through an increasing trend which has been shown earlier in the study. 

Banks are conducting school banking activities not only in urban area but also in rural area. Up to December 31, 2014, 49 scheduled banks operated their school banking in rural and urban areas in the ratio of 3:5. From the data analysis it is shown that private commercial   banks introduced 5.50 lacs accounts under school banking that is 65% of total 8.50 lacs accounts in school banking scheme operated by all bank. On the other hand, private commercial banks collected deposit approximately Tk. 527.13 crore that is 73.47% of total deposit of Tk. 717.49 crore. So, private commercial banks are doing better job in case of school banking compare to other banks that is a positive sign for our banking business. In last quartering 2014, banks have collected deposit of Tk 307.43 crore under school banking and they have given withdrawal facilities of Tk. 179.52 crore to the accounts holders from where Tk 22.39 crore was withdrawn by ATM booth. In case of account opening Islami Bank Bangladesh Limited opened highest number of accounts under school banking that was 1,78,751  accounts which was 21.02%  of total school banking accounts operated by all scheduled banks in Bangladesh. It is also noted that Dutch Bangla Bank Limited collected more amount of deposit under school banking that is Tk 183.66 crore which is 25.60% of total deposit under that scheme.

2014 and it is satisfactory to say, that was passing a growing trend from the preceding periods. State-owned commercial banks and specialized development banks also doing better for opening new school bank accounts experiencing their past records. Out of 09 foreign commercial banks, 08 banks (excluding City Bank N.A) have opened their school banking wing and their total school bank accounts were 1,269 at December, 2014. It is necessary to say, 03 newly scheduled banks in 2013 (out of 09) i.e. Meghan Bank Ltd., NRB Commercial Bank Ltd. and NRB Bank Ltd. already operating their school banking activities and they hold many numbers of accounts in total.

Out of 56 scheduled banks in Bangladesh, 57 banks hold total Tk. 717.49 crore in their school banking accounts up to December 31, 2014. At the end of the year, 2013 and 2012 deposit amount under school banking was Tk. 305.79 crore and Tk. 96.51 crore respectably. So the increasing trend from the successive period is 217% in 2013 and 135% in 2014. Private commercial banks collect more amount of deposit under school banking that is Tk.527.13 crore at the end of 31 December 2014.But the increasing rate is more in the case of state-owned commercial banks; they hold approximately 60 times more amount of money in 2014 than 2013. On the other hand, specialized development banks hold about 4 times more and private commercial banks hold more or less 1.78 timesmoremoney under school bank accounts at the closing period of 2014 than 2013.

School banking may be a social role for the banks to gather scatter, unproductive money from our society to make social deposit for future. This also helps to develop a savings habit among the young children from their early age. That will be a positive sign for our economic development. So, to increase school banking activities in our country, our central bank, all scheduled banks and financial institutions, school going children, parents, educational institutions as well as our government should come forward to set up an environment that facilitates school banking activities in our country to make a financial inclusion across banking system in Bangladesh.

Taslim Ahammad is an Assistant Professor of Management Studies in Bangabandhu Sheikh Mujibur Rahman Science and Technology University, Gopalgonj and Md. Julker Naim is an official of Bangladesh Bank