Bangladesh Bank remains firm on its decision to reduce family control on the board of directors of private banks.
Despite pressure from bank owners, the central bank has retained its proposal to shorten the tenure of directors and limit the number of members from the same family.
In the draft amendment to the Bank Company Act sent to the Finance Division last week, a proposal was made to reduce the number of members from the same family on a bank's board of directors from three to two.
Additionally, it has been proposed to reduce the continuous tenure of directors from 12 years to 6 years, with a mandatory three-year break required before any re-appointment.
These changes were also part of the reform proposals initiated during the interim government.
The central bank, led by governor Md Mostaqur Rahman, has maintained that exact stance.
However, changes have been made to the previous proposals regarding the size of the board of directors and the number of independent directors.
In the new draft, alongside proposing a maximum of 20 board members, it has been proposed to increase the number of independent directors from two to five.
The previous proposal was to limit the number of board members to 15, with at least half the seats reserved for independent directors.
To curb political influence in loan disbursements, the new proposal suggests barring Members of Parliament (MPs), ministers, and local public representatives from becoming bank directors.
At the same time, there is a proposal to grant the central bank the authority to relax the 10 percent shareholding limit for strategic institutional investors.
Meanwhile, the Bangladesh Association of Banks (BAB), an organization of bank owners, has been opposing these reforms.
They demand that the maximum number of family members on the board be kept at three and the tenure of directors be set at nine years.
These initiatives have been taken as part of restructuring the banking sector, which has been hit hard by non-performing loans.
According to a Moody's report on September 15, 32.8% of the country's total loans are defaulted.
A senior official from the Ministry of Finance said that the draft will be reviewed in an inter-ministerial meeting before being presented to the Cabinet. The government aims to table and pass the bill in the upcoming parliamentary session.
