Only three persons from a single family will be able to become directors of a commercial bank from the existing four, according to the Bank Company (Amendment) Bill 2023.
Finance Minister AHM Mustafa Kamal placed the bill in parliament on Thursday, and later sent it to the parliamentary standing committee on the finance ministry for further scrutiny.
The committee was asked to submit its report before the House within seven working days.
There are allegations that a few families are controlling a number of banks in the country.
The draft act, which has been in the works since 2019, has been a longstanding demand of the multilateral lenders such as the World Bank and the International Monetary Fund.
As per the bill, directors of a bank will not be allowed to become members of the board of another bank, non-bank financial institution, insurance company, and their subsidiaries and associated companies.
According to the draft law, an individual will be considered a willful defaulter if he or she does not repay a loan, secured by them or their companies, to banks despite being able to pay it back.
If borrowers divert funds to areas not mentioned in the credit proposal, they will also be treated as habitual defaulters as well.
Banks in Bangladesh witnessed an accumulation of default loans by Tk10,964 crore in the first three months of 2023.
Non-performing loans stood at Tk131,621 crore as of March 31, up 9% from three months ago and 16% from a year earlier, data from the BB showed.
As per the provisions of the draft law, banks must send the list of willful loan defaulters to the BB.
The central bank can ban them from travelling abroad.
Willful defaulters will also be barred from obtaining trade licences, listing their companies on the stock exchanges and securing registration from the Registrar of Joint Stock Company and Firms to open a new company.
A willful defaulter will not be eligible to be a director of a bank or NBFI within five years after their exclusion from the list of willful loan defaulters.
If a director of a bank becomes a willful loan defaulter, the BB can remove him and declare the post vacant.
Banks will have to file lawsuits against habitual defaulters within two months after they are categorized as willful defaulters.
If a bank fails to send the list of habitual defaulters to the central bank on time or does not file a lawsuit, it could be fined Tk50 lakh to Tk1 crore.
The central bank can remove the chairman and managing directors of banks if they become involved in harmful activities that go against the interest of depositors.