Amendment to banking companies act placed in parliament

The Banking Companies (Amendment) Act-2017, which allows the doubling of the number of directors in a bank's board from a single family and extends the tenure of directors, was placed in the parliament yesterday.

The proposed law has now been forwarded to the parliamentary standing committee on finance for further scrutiny. A report has to be submitted to the parliament within two months.

The bill, which was placed by Finance Minister AMA Muhith, was met with strong opposition from Jatiya Party Lawmaker Fakhrul Imam, who termed the government move unethical.

Raising the number of directors from two to four from a single family and the extension of the tenure from six years, or two consecutive terms, to nine years would strengthen a family's grip in private banks, he said.

They could become directors again after a three-year hiatus. “It will turn the banking sector into a family venture,” Imam said.

In May, the cabinet gave the go-ahead to the amendment that triggered an outcry from economists and former central bankers, who said the move would hurt the interest of depositors and that the government was bowing to pressure from businessmen.

For instance, AB Mirza Azizul Islam, a former adviser to a caretaker government, earlier told The Daily Star that the amendment is not desirable from the point of good governance in the banking sector. Muhith said although the Banking Companies Act 1991 was amended in 2013 there are ambiguities in some provisions, due to which the revisions are being done now.

The progress of the banking sector might be hindered if the new amendment was not brought in, he said.

At present, there are over one lakh loan defaulters, according to Imam. The latest amendment will encourage corruption and the loan default culture, he said. 

“He (Muhith) is vocal against corruption. But why does the minister bring out such a bill?” he asked, while requesting the finance minister to withdraw the amendment.

In reply, Muhith said the country has witnessed a massive development in the financial sector since 1991. Individuals are showing more interest in the banking sector although the system has not developed significantly in the country.

“I have increased the number of directors from two to four so that the near and dear ones of investors can become involved in the system.” There is scope to discuss the bill further during its scrutiny in the parliamentary standing committee. 

“Besides, if the MPs make any good suggestion during the passage of the bill, I am assuring that those proposals will be accepted,” the minister said.