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Dhaka Tribune

Cabinet gives nod to amended 'Bank Company Act'

No more than three bank directors from the same family anymore

Update : 29 Mar 2023, 05:30 PM

The Cabinet on Tuesday gave its final approval to the draft Bank Company (Amendment) Act 2023 with the provision that not more than three directors of a bank can be from the same family.

The decision was made during the cabinet committee meeting chaired by Prime Minister Sheikh Hasina. 

Besides, the draft act also proposed strict measures in terms of borrowing by board members from banks as submission of collateral was made mandatory for them, Cabinet Division Secretary (coordination and reforms) Mahmudul Hossain Khan told reporters after the day's meeting chaired by Prime Minister Sheikh Hasina.

He also said that currently there can be four directors from one family, but this has now been reduced to a maximum of three.

Sharing some of the proposed provisions, the secretary said the banks must send the list of willful loan defaulters to Bangladesh Bank (BB) and it can impose a ban on overseas travel against them.

Stricter measures are also related to the issuance of their trade licence, and company registration under the Bangladesh Securities and Exchange Commission and the Registrar of Joint Stock Company and Firm.

A willful defaulter cannot be eligible to be a director of a bank or financial institution until after five years have passed after being excluded from the list of willful loan defaulters, he said.

If any director of a bank becomes a willful loan defaulter, Bangladesh Bank can declare his post vacant, Khan also said.

The cabinet secretary said if a bank fails to send the list of loan defaulters to the central bank in time, the bank can be fined Tk50 lakh to Tk1 crore. 

The bank will have to count fines of an additional Tk1 lakh for each day's delay.

According to the draft law, despite having the financial ability, if a person or institution fails to repay a loan, it will be considered willful default.

About the definition of a willful defaulter, he said: "If anyone takes financial benefits from a bank or financial institution providing false information in their name or of their family members, the individual will be considered a willful defaulter."

At the same time, if someone states a specific purpose for taking a loan from a bank or financial institution, but uses the loan for other reasons, the recipient will be considered a willful defaulter.

"A provision is also included here so that Bangladesh Bank can regularly inspect different institutions and foundations run under the law," the official added.

The International Monetary Fund (IMF) in its $4.7 billion loan conditions, had asked the Bank Company (Amendment) Act 2023 to be implemented soon.

The IMF also asked for non-performing loans for state-owned banks to be reduced by 10%.

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