AMENDMENTS TO BANK COMPANIES ACT 1991

Govt under pressure to promulgate ordinance

Shakhawat Hossain | Published: 00:58, Jul 31,2017

 
 

The Financial Institutions Division is under pressure from the private banks directors to make effective the proposed amendments to the Bank Companies Act 1991 through an ordinance.
Officials said that many directors were at risk of losing their directorship they hold in the private banks unless the proposed amendments come into effect in next one month.
As the next session of the parliament is scheduled to begin on September 13 family-member-directors wanted the government to publicise the amendments through an ordinance with the approval of the president, they said.
FID secretary Eunusur Rahman, however, refused to make any comment about the pressure the division officials were allegedly facing from the policymakers and the bank owners.
He said the proposed amendments to the Bank Companies Act 1991 was now awaiting the law ministry’s vetting after it was approved by the cabinet on May 8.
The secretary also said he would take next course of action after the law ministry completed vetting on the amendment.
Despite criticisms, the cabinet approved the amendments to the bank companies act to allow four from a family to be bank directors instead of two and extending the tenure of directors to nine consecutive years from six years.
The FID had proposed the amendments against the backdrop of widespread allegations of loan scams and irregularities against bank directors.
Experts have already viewed that such amendments would widen control of a family over the bank leaving depositors’ interests at stake and would create scopes for further worsening the discipline of the banking sector, suffering from bad loans and loan scams.
In 2013, the government amended the act restricting to maximum two the number of directors from a family on the board to check irregularities and indiscipline.
In October 2016, Bangladesh Association of Banks, an organisation of the private bank owners, demanded the amendments to the
act at a meeting with finance minister AMA Muhith.
Association leaders led by its chairman Nazrul Islam Mazumder at the meeting had claimed that directors coming from family would be deprived of their right to wealth if the existing six-year tenure continued.
Former deputy governor of BB Ibrahim Khaled said the proposed amendment would undermine the Bangladesh Bank’s authority to regulate the banking sector.
It would also put a negative impact on the corporate governance in the banking sector, he said.
According to a central bank report, directors borrowed Tk 88,790.03 crore from each other’s banks until September 30, 2016 through mutual understanding.
The central bank records showed that 13.96 per cent of Tk 6,35,986.89 crore lent by 56 scheduled banks was disbursed to bank directors. The loans were pocketed by 50-70 directors of 46 scheduled banks. 

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