The Banking Companies Act is being amended again. This time a new section of taking action against intentional defaulters is being added to the amendment. If a bank becomes weak or fails to comply with the rules, the way is also being paved for liquidation. For this a new section will be added in the law.
In the last 30 years, the Banking Companies Act, 1991 has been cut seven times. The latest amendment was made with four members from one family and the opportunity to be the bank’s director for nine consecutive years. This time it is the Banking Companies (Amendment) Act, 2021.
If you want to know the Secretary of the Department of Financial Institutions. Asadul Islam told Prothom Alo , “Legislation is being enacted with the financial sector reform in mind. There is no alternative but to keep pace with the modern world.
A new section is being added to the Banking Companies Act to curb management weaknesses. The draft states that if a weak bank feels that its existing financial condition, i.e. liquidity, asset quality and capital situation has deteriorated, or it is not possible to maintain good governance, or the bank is heading for a more critical situation, the bank authorities It will inform Bangladesh Bank. Then Bangladesh Bank will see if the situation is improving in two years time. The bank will also be given a recovery plan. Failure to do so will result in liquidation of the weak bank.
The draft Banking Companies Act defines ‘intentional defaulters’. It has been said that a person who does not repay a loan in the name of his own or an interest-bearing organization in the name of an anonymous or non-existent organization, even though he can afford it, will be called an intentional defaulter.
The draft further states that each bank and financial institution will have two committees on intentional defaulters. One committee will identify them, another committee will finalize it. Later, each bank or financial institution will send a list of intentional defaulters to Bangladesh Bank. Once the list is finalized, the aggrieved person can appeal to Bangladesh Bank within 30 days. However, the decision of Bangladesh Bank in this regard will be considered final.
If the new law is passed, Bangladesh Bank will send the list of intentional defaulters to various government agencies. Apart from this, letters will also be sent to the Central Bank to impose a ban on foreign travel, car-house registration and trade licenses and registration of joint venture companies and firms at the Registrar’s Office (RJSC).
According to the draft, intentional defaulters will not be considered eligible to receive any state honors or participate in state functions. They cannot hold any position in any professional, business, social, cultural or political organization.
A person or entity listed as an intentional defaulter cannot be a director of a banking company or financial institution until five years have elapsed since the exemption from that list. If a director of a bank is identified as an intentional defaulter, Bangladesh Bank will be able to vacate his post.
Asked for feedback on the amendment, Shams-ul-Islam, managing director of Agrani Bank, said: “I agree with the proposal to add a new section on liquidation. But defaulter means defaulter, whether intentionally or unintentionally. Intentional defaulters will be difficult to identify. So we need to think about it before making a law.
The government has been working on 15 laws related to the banking and financial sector, including amending the Banking Companies Act, since two years ago. The work is being led by the Financial Institutions Department of the Ministry of Finance, but the work does not seem to be coming to an end.
Banking companies, finance courts, bankruptcy, deposit protection, prevention of counterfeit notes, prevention of money laundering etc. are related to the laws. Some of the existing laws are being amended, and some laws are being made completely new.
According to the Bangladesh Bank, the amount of defaulted loans stood at Tk 8,634 crore till last December. However, some bankers said that the amount of defaulted loans is less due to special benefits and concessions given by Corona.
So far no research has been done on the amount of intentional defaulted loans in the country and no bank liquidation has taken place.
