The total number this organizations and banking sectors branches increased 14% annually during 1973-83. At the same time, population perbranch reduced remarkably 2639 to 2272. The urban rural proportion of branches, deposits and credit improved significantly in favor of rural areas during the period and thus satisfied the economic objectives of the government in regard to extending banking generous credit to public manufacturing enterprises. It is imperative that as the financial network of a country increases, the case of implementing prudential and information regulations is such more important than economic regulation for the matter of improving on the operations of financial market. But this did not happen; rather economic regulations monopolized whole regulatory structure of Bangladesh Financial System. Consequently , financial institutions pursued a policy of rapid expansion (during 1972-82) to the priority areas in response to government and nongovernmental directives with little regard to loan quality. Sound credit analysis was replaced with socio-economic considerations. Many rural branches
were opened without
considering viability aspects. Lending rate specially for priority sectors were kept as such allowed level, which did not cover the risk, and actual cost factors. As a result, huge proportion of the financial institution became overdue. Debt recovery performance was also poor due to inadequate laws for debt recovery and ineffective debt recovery efforts on the part of the financial institutions themselves. All these have been reflected through decline in the probability of the NGOs. The probability(defined by net profit deflated by balance sheet total) of NGOs fell down from 0.25% to 0.23% during 1973-74 to 1982-83. This deterioration of the operational efficiency of NGOs was surfaced in spite of their inappropriate according system(that is accrual system of income recognition). Not only operational efficiency, level of customer services of the banks also deteriorated during the period mainly due to complete government monopolization of banking sector during 1972 -80 was thus mixedsuccess in achieving economic objectives of expanding financial network and providing easy credit to priority areas, but failure as far as ensuring prudential and information regulations, viability and customer services of the banks are concerned. Since 1983, the government of Bangladesh started taking decentralization and privatization measures are the financial sector. Two out of six NCBs were decentralized and a numbers of Private Commercial Banks (PCBs) were allowed to operate by the government. In this time also supported many insurance company, and Non Government Organizations. They perform their own ability and