The Cabinet has given final approval to the draft Bank Company (Amendment) Act 2023 with the provision that no more than three directors can be from one family.
The information was disclosed by the Secretary of the Cabinet Division (Coordination and Reforms) Mahmudul Hassan on Tuesday while briefing the media about the provisions of the draft law after a meeting of the Cabinet Committee held at the Prime Minister's Office in the capital.
He said, “Currently there can be four directors from one family. This has now been changed to a maximum of three.”
He said that banking activities are currently being conducted in Bangladesh based on the Bank Company Act 1991.
Amendments were proposed to modernize it, he said, adding that there are a total of 34 concepts in the proposed law.
However, the Central Bank can now impose travel restrictions on wilful loan defaulters, the draft Bank Company (Amendment) Act 2023 said.
Besides, the central bank can impose a ban on issuing trade licenses and company registration with Bangladesh Securities and Exchange Commission (BSEC) and Directorate of Joint Capital Companies and Firms (RJSC) against the loan defaulters.
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 non-performing loans for state owned banks to be reduced by 10 percent.
Mahmudul Hassan said, “Banking activities are being conducted in Bangladesh based on the Bank Company Act 1991. Amendments were proposed to modernise it,” he added.
He also said the proposed law defines who constitutes a wilful defaulter and what action can be taken against them.
According to the law, despite having the financial ability, if a person or institution fails to repay a loan, it will be considered as wilful default.
Besides, if anyone takes financial benefits from a bank or financial institution providing false information in their name or their family members’, the individual will be considered a wilful 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 wilful defaulter.
The draft proposed sending a list of wilful loan defaulters to the Bangladesh Bank, and action would be taken accordingly.
He further said a person or institution listed as a wilful defaulter cannot become a director of any bank or financial institution for five years after being exempted from the list of defaulters.
He also said if the director of a bank or financial institution is deemed to be a defaulter, the central bank can declare their position vacant.
He said if the defaulter fails to pay the loan within two months of receiving the notice, a case can be filed in the Money Loan Court.
If any bank or financial institution does not send the list of defaulters, the central bank can impose a fine of Tk 50 lakh to a maximum of Tk one crore. Even then, if the violation continues, a fine of Tk one lakh per day can be imposed, said the cabinet secretary.
Mahmudul Hassan said the board members of a bank or their relatives must provide collateral or bond or security to avail the loan.
He further said a provision has been added in the draft law allowing the Bangladesh Bank to conduct regular inspections of institutions or foundations financed by bank companies.