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Bank & Finance - March 28, 2023

7-yrs jail if use word bank without license

New IMF conditions

Special Correspondent: In order to fulfill the conditions of the International Monetary Fund (IMF), the amended Bank Company Act-2021 is going to be raised in the upcoming National Parliament session. There, a maximum penalty of 7 years or Tk 50 lakh or both has been provided for the offense of using the word ‘bank’ with any institution without the right. Provisions are also included that willful defaulters cannot participate in any state honors and functions.
The draft of the amended Bank Companies Act is likely to be approved in the next cabinet meeting. This information was found in the relevant sources.
The organization has given many conditions regarding the $4.7 billion loan approved by the IMF to Bangladesh to deal with the economic crisis. Among them is the issue of raising the revised Bank Company Act-2021 in the National Parliament in 2023. In this regard, the government has also given consent to the organization. In that context, the Financial Institutions Department of the Ministry of Finance has made all preparations for raising it in the National Parliament.
If asked, the former governor of Bangladesh Bank Saleh Uddin Ahmed said, there will be weaknesses and loopholes in the law but the law must be scrutinized first. There are many deficiencies in the existing Bank Companies Act. In the current context, this law is not enough. However, if there is a law, some punishment or effective action can be taken. This requires the implementation of the law. It also needs to be seen how defaulters and willful defaulters will be dealt with in the amended law.
Provisioning rules, risk management of depositors, financial policies should be made more transparent. He further said that the Act was further weakened by (See Page-2)
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adding a provision to have five members from the same family instead of two members on the board of directors of the bank. Now is the time to tighten up the role of managers. The amended law does not need anything big, it should be enough to ensure transparency and accountability in the legal processes.
And bank officials should be brought under punishment if they are involved in irregularities, whether it is small or big.
Executive Director of Policy Research Institute Ahsan H. Mansoor said, if it is not implemented properly, nothing will happen with this law. According to my knowledge, the amendment stage of the Bank Companies Act has been done by experienced people of international standards to bring it to international standards. Now it needs proper implementation.
He also said that if someone is not caught after sitting on the board of directors of the bank, then nothing will be done by law. Bank boards should be of quality. Board directors should not look at each other’s interests. Don’t lend your company to others, stop giving loans anonymously. Multiple directors from the same family should be stopped.
According to sources, the draft of the amended law states that the director of another bank cannot be appointed as a director on the board of a bank. However, this does not apply to state-owned banks. Apart from this, another person related to the interest of the person who is the director of the bank cannot be a director in the same bank. No person or organization can appoint more than one person as director on the board of directors.
Regarding the identification of willful defaulters, the draft law states that every bank and financial institution will form a committee under the direction of Bangladesh Bank. The committee will identify and finalize willful defaulters. Every bank and financial institution will send the list of willful defaulters to the Central Bank at regular intervals. The Central Bank can publish this list.
And after being finally included in the list, the accused person can appeal to the central bank within 30 days. However, the decision of the central bank in this regard will be considered final. It also said that if a willful defaulter is identified as a borrower, he will be banned from owning a car, land registration and foreign travel. Besides, joint capital companies and firms can’t obtain company registration and trade license from the Directorate. Besides, he cannot hold any position in social, professional, cultural and political organizations. However, he cannot become a director of any bank or financial institution within a maximum period of 5 years after the central bank exempts him from being a willful defaulter.
The draft law also states that if the director of a bank is included in the list of willful defaulters, he will lose his position as a director of that bank. Failure to pay installments and interest on loans or advances from any bank or financial institution will not hold the position of director.
Besides, every bank and financial institution shall constitute an audit committee comprising members outside its board of directors and a risk management committee comprising the board of directors of the bank. And for the sake of proper management and operation of the bank, Bangladesh Bank may issue instructions from time to time regarding the scope of work of the Board of Directors and Board Committees. The draft law provides for merger of weak banks.

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