The cabinet on Thursday approved the draft of the Grameen Bank Act 2013, under which the microcredit institution will come under full control of Bangladesh Bank.
The draft law will dissolve the existing Grameen Bank ordinance of 1983 but will include previous rules and regulations with some amendments.
The draft was approved at a cabinet meeting on Thursday chaired by Prime Minister Sheikh Hasina. Cabinet Secretary Muhammad Muhsarraf Hossain Bhuiyan briefed the media after the meeting.
Asked if the amendment would bring Grameen Bank under the central bank, the cabinet secretary said nowhere was it stated in the draft that the new law would harness Grameen Bank under the authority of the central bank.
“However, all banks in the world are under a central bank to maintain regularity. Thus, Grameen Bank should appreciate this move as it is a good sign for the bank,” he said.
Despite having the word “bank” in its name, Grameen Bank was beyond the central bank’s control in the 1983 ordinance.
According to article 7 (1) of the Bank Company Act 1991, any organisation that gives out loans or takes deposits from people will come under the law.
According to the act, Bangladesh Bank will have the authority to take action against Grameen Bank and direct it to submit documents for investigation of any irregularities – like other scheduled banks – but the power of amending or formulating rules of the microcredit institution will be under the government.
The government will continue with 25% ownership of the institution with the remaining 75% under the possession of shareholders as per paid capital of the bank, which was increased to Tk3bn from Tk500m.
On Grameen Bank’s tax exemption, Finance Minister AMA Muhith on Tuesday said the privilege was given only for a certain period, and the bank would enjoy it from now on.
The law will form a body for monitoring the microcredit institution.
However, the cabinet secretary did not specify who will be handed the responsibility. “The body will be finalised when the bill is placed in parliament after the law ministry’s vetting. The law will be passed during the current parliament session.”
The changes
The authorised capital of the microcredit institution has been increased from Tk3.5bn to Tk10bn while the paid up capital increased to Tk3bn from the previous Tk500m with 25% government ownership.
The bank will have to submit all its reports, returns and financial statements to Bangladesh Bank in addition to the government.
The tenure of elected or government-selected directors of the bank has been chaged to three years from the previous indefinite period of time.
Production of untrue information to access loan or other facilities from the bank will incite a penalty of one year jail term or Tk10,000 fine or both.
Use of the name of the Grameen Bank in any prospectus or advertisement without prior permission of the bank will result in one year jail along with Tk100,000 fine, which previously was six months imprisonment along with Tk1,000 fine.
When contacted, Bangladesh Bank Governor Atiur Rahman said he did not want to make any comment on Grameen Bank.
Bangladesh Bank’s Executive Director Mahfuzur Rahman said the central bank would follow the law in acting about Grameen Bank.
“Now that another new bank has come under the Bangladesh Bank, it will not be hard for the central bank to control it,” he said.
Tahsina Khatun, a member of the Grameen Bank Board, said political influence would affect the bank.
“The government is trying to destroy the Nobel prize winning Grameen Bank through the amendment to its existing regulation,” she told the Dhaka Tribune on Thursday. After the amendment, poor village women would be deprived of the facilities of Grameen Bank, she added.
Grameen Bank was formed in 1983 under a military ordinance during the rule of HM Ershad. Muhammad Yunus was its founding managing director from the beginning.
The Bangladesh Bank removed Yunus in 2011 on the ground that he had crossed the permissible age for the post of the bank’s chief. The position has since remained vacant.
In December 2010, a documentary aired on a Norwegian television alleged that Yunus had transferred foreign money, given to Grameen Bank, from one account to another. It heaved a wave of controversy both at home and abroad.
The government formed a commission to oversee the activities of Grameen Bank.