The Dynamics of Concentration and Competition in the Banking Sector of Bangladesh:An Empirical Investigation

Although the adoption of financial deregulation has led to substantial changes in the banking sector of Bangladesh, the analysis of concentration and competition still remains insignificant. At this backdrop, this research aims at assessing the market structure of the banking sector and its changes over the years. Different concentration ratios with the data of all banks from 1983 to 2011 and the Panzar-Rosse algorithm for measuring competition with the data of 39 banks from 2001 to 2011 are used in this study. The findings report a reduction in concentration, that is, an increase in competition in the banking sector of Bangladesh. Most importantly, banks are facing more competition in the credit market than in the deposit market. In addition, the level of competition is higher in interest based regular banking market than in fee based non-banking market.