Maximum three family members will be allowed on bank board as govt approves amendments

The number of family members on a bank’s board of directors will be reduced from four once parliament passes the amendments

The government has approved amendments to the Bank Company Act, reducing the maximum number of family members allowed to sit on a bank’s board of directors to three from four.

The cabinet cleared the amendments in a meeting chaired by Prime Minister Sheikh Hasina on Tuesday, said Mahmudul Hossain Khan, cabinet secretary for coordination and reforms.

Mahmudul said bank directors and their family members must keep deposits or bonds as security to get loans.

Bank directors abused powers to obtain loans without security. Now the amendments have specified the matters necessary to prevent this practice, Mahmudul said. “There must be collateral against loans.” 

The government had amended the law in 2018 amid widespread criticisms, raising the maximum number of family members allowed on a bank’s board to four from two.

It started working on amending the law again as criticisms of irregularities in the banking sector continued. The cabinet approved the latest amendments in principle in 2021.

Mahmudul said a series of changes were brought to the law to stymie default loans by taking steps against people who willingly miss repayment of debts.

The amended law will define people or companies who willingly default on loans despite having the ability to repay.

Mahmudul said loans taken through fraud or forgery and spent on other purposes than stated in the papers will fall under this category of defaults.

Once the amended law is passed, security against a loan cannot be transferred or moved without the bank’s permission.

Banks will provide the Bangladesh Bank with lists of such defaulters and the central bank can impose an overseas travel ban on them.

The central bank will also be able to ban them from getting trade licence or company registration.

They will be barred from boards of banks and financial institutions for a period less than five years. The central bank will fix the period.

If an incumbent director of a bank or financial institution defaults on a loan willingly, the central bank can declare them ineligible to hold the post.

Regardless of other laws, banks will be able to bring charges in the Money Loan Court within two months of sending a notice on defaulted loans.  

If a bank or financial institution does not send a list of loan defaulters to the central bank, it will be fined Tk 5 million to 10 million and Tk 100,000 per day if it fails to send the list even after the initial penalty is imposed.