The bill states violators of the act, titled 'Micro Credit Regulatory Authority Act, 2006, will be sentenced to a maximum one-year imprisonment and fined Tk 5 lakh.

Bangladesh Bank governor will head the MCRA board, six members of which will be selected by the government. An executive vice-chairman will act as chief executive officer of the MCRA.

Finance Minister M Saifur Rahman piloted the bill in parliament when the House began its budget session. Placing the bill, the minister said it would ensure transparency and accountability in micro-credit activities and protect interests of customers and depositors.

Praising micro credit programmes of NGOs, he pointed out that the micro-credit institutions in Bangladesh operated without a regulatory body as yet. The new law will ensure their accountability and the country would also be benefited, he argued.

The micro-credit institutions will have to take approval from the MCRA afresh.

They will not be allowed to run activities, make transaction or provide services that contradict the 'purpose and spirit of the act'.

Each institution must have a minimum reserve fund as specified by the law, and its money cannot be spent without approval. No institution will also be able to distribute the profit without the authorities' permission.

The government-run micro-credit activities will also come under this act.

The regulatory body will not directly interfere in determining the interest rate, but it will reserve the authority to keep it within a reasonable limit.

Meanwhile, the House yesterday extended tenure by eight weeks to scrutinise the Contempt of Courts (Amendment) Bill 2006, implying that it will not be passed during the current session.