Ins and outs of Bank Companies Act, 1991

Bank Companies Act, 1991 is a guideline for Banks is a guideline for Commercial Banks and the Central Bank of the country as well. All banks of Bangladesh have to abide by the provisions of this Act. This Act has given necessary power to the Central Bank i.e. Bangladesh Bank to control the Commercial Banks and Specialized Banks in line with its monetary policy. This Act has 124 Sections. I will not discuss all the sections rather discussing ins and outs of this act.

 

Power of the Bangladesh Bank to control the law making of advances:
1. Whenever the Bangladesh bank is satisfied that it is necessary in interest of the public to do so, it may make the policy subject to advances to be taken by the bank companies in general or their bank company related or by any bank company in particular and when the policy has been so determined or the bank company concern shall be bound to follow the policy that it determined.
2. without prejudice to the generality of the poser conferred by sub-section, the Bangladesh Bank may make directions to bank companies in general or to any bank company in particular or any particular group of bank companies which is compulsory followed in respect of the under written matters-
(a) The credit ceiling to be furnished;
(b) The ratio to be cited between the total advances and small loans or other loans;
(c) The motive of which advances may or may not be drawn;
(d) The maximum limit of the advances may be given to Bank Company, special classes of banks or companies or person or group of persons;
(e) The secured advances and the margin of requirement; and
(f) The rate of interest to be determined on advances.

3. If any bank company  default to comply with any direction referred to a subject mentioned in clause (a) and (b) of sub-section (2), the Bangladesh Bank may order that banking company to deposit at the Bangladesh Bank such amount of money as the letter may be determined; and the said banking company shall be liable to comply with such order on that conditions as the Bangladesh Bank may determine.
    Provided that the Bangladesh Bank may not pass any order to the said bank company to deposit such amount as exceeding the amount in regard of that the said default has been created.
4. The amount which is deposited with Bangladesh Bank under subsection (3) or any portion thereof may be remitted by it to the Bank Company either conditionally or unconditionally by an order in black and white i.e. in writing.

Power of the Bangladesh Bank to give of directions:
1. Where the Bangladesh Bank is satisfied that:
(a) In the public interest, or
(b) Improvement of the monetary and banking policy, or
(c) Prevention the affairs of any Bank Company having conducted detrimental of the interest of the depositors or in a manner prejudicial to the interest of the depositors or in a manner prejudicial to the interest of the Bank Company, or
(d) To make sure the proper management of any bank company in general, or
(e) It is inevitable to issue directions to banking company in general or in particular, it may issue such directions as it thinks fit and the Bank Company shall be bound to carry out such directions.
2. The Bangladesh Bank may cancel or modify any direction issued under sub-section (1) on representation to it or its own motion. Such cancellation or modification may be subject to any condition.

The future power and sanction of the Bangladesh Bank:
1. The Bangladesh Bank may:
(a) Caution or prohibit Bank Companies generally or any bank company in particular against making uinto any particular transaction or class of trasacntions;
(b) Require bank companies in general or any bank company particularly to refrain from such action as it may specify in relation to any matter in relation to the business of that bank companies or bank company or to take such action in relation there to as the Bangladesh Bank thinks proper.
(c) On request of the concerned bank company and subject to the provisions under section 76.
(d) During the inspection under section 44 or after ending such inspection, by order in writing and such condition as may be specified therein-
    (i) Require the bank company to invite a meeting with its directions with a view to considering any matter or may direct any officer of it in order to discuss such matter with an officer of the Bangladesh Bank;
    (ii) Deputy any of its officers to observe the proceedings at any meeting of the board of director of the bank company or of any committee or of any other body constituted by it and require the bank company in order to give an opportunity to that officer to be heard as such meetings, and require the officers to send a report at such meeting to the Bangladesh Bank.
    (iii) Require the bank company to send to any officer specified by the Bangladesh Bank the order communications in relation to any meeting of the board of directors of the bank company or of any committee or of any other constituted by it;
    (iv) Any of its officer for the purpose of observing the manner where the affairs of the bank company or of its branches are being conducted.
    (v) Within the specified period, require the bank company within such time as the Bangladesh Bank may specify in the order, such changes in its management as the Bangladesh Bank may bring under consideration as it thinks necessary in consequence of the state of affairs disposed un during or after the inspection.

2. The Bangladesh Bank shall make an annual report to the government trending to progress of banking in the country. In this report, it is suggested with a view to strengthening of banking business throughout the country and the required steps to be taken in that behalf shall be stated.

The restrictions on purchase of shares of bank:
1. The share of Bank shall not be come under centralization of any person, company or the members of the same family, on person, no company or member of the family either individually or jointly or in both ways, shall buy more than ten percent (10%) of the share of a bank.
2. A buyer shall make an oath declaration at the time of buying shares of a bank that he is not purchasing the share as nominee or in Benami of other person and he has never bought any share in Benami share before.
3. If the subject matter of the submitted oath or declaration paper is proved, as false, the all the share of concerning Bank shall be fortified to the Bangladesh Bank.
4. If any one maintained in sub-section (1) holds more share than fixed in that sub-section immediately before the coming into being of the Bank Companies Amdt. Act. 1995 (Act XXV of 1995), more shares than determined in this section, within one year of the coming in being of that amendment, he shall sell such shall share to a person who is not the member of the said company or family or to a company or institute who has not taken share in that company.
5. If additional share, which is mentioned in sub-section (4), is not sold within the limited and time conditions that are mentioned therein. In this field, that additional share shall be vested with the Government or any institution fixed by the Government, the Government of the said institution shall pay the value or market value, which is less between the two.
6. Notwithstanding contained in this sub-section, it shall not be applicable to the Government.
Explanation- In this sub-section the said “family” consists of wife, husband, father, mother, sons and daughters, brothers and sisters of any person and all those who are defendant on such person.

The restrictions of paying of Loan and Advances:
1. No Bank Company shall-
(a) Draw any loans or advances against the security of its own share; or
(b) Without security the person mentioned below draw any loan; or advances to any of the following persons of institutions or draw any loan or advances in cases where those persons are grantors: (i) Any of its directors; (ii) Any of the members of the family of any its directors; (iii) Any commercial institution or private company in which the Bank Company or any of its directors or any member of the family of any directors are interested as director proprietor of partner;
(iv) Any public limited company which is at any means regulated by the company itself or any of its directors or any member of the family of any of its directors or the shares of those are held by any of the said persons to such an extent about giving it regulate of no less than 20% of the voting rights.
2. No Bank Company under the following ground, draw loans or advances to any of the following persons of institutions without the approving of the majority of the directors, having the director concern- (a) To any of its directors; or (b) Persons, commercial institution or company in which any of the directors of the said Bank company is willing to as partner, director or guarantor.
Explanation- In this sub-section “director” means the directors wife, husband, father, mother, son, daughter, brother, sister and other persons dependent on the Director.
3. Repealed.
4. The managing director of every bank company shall, before the close of the month succeeding that to which the return relates, submit to the Bangladesh Bank a return in the form and manner prescribed by rules, and in the same return the following particulars shall be mentioned- (a) All loans and advances sanctioned by it to companies, private or public, in which the banking company or any or its directors is concerned as director; and (b) All loans and advances sanctioned by it to public companies in which the banking company or any of its directors is concerned as managing agent or guarantor.
5. If on verifying of any return which is submitted under sub-section (4), it appears to the Bangladesh Bank that any loans or advances referred in that sub-section have been granted to the detriment of the interests of the depositors of the Bank company the Bangladesh Bank may by order in writing for forbidding the Bank Company granting loans or advances or impose restrictions on the granting of that loans and advances on the grant thereof as it thinks proper and may be like pass an order directing the bank to secure the payment in advances of any such loans or advances within such time as may be specified in the order.