The Bangladesh Bank has taken an initiative to deal with troubled and weak banks as the number of such banks has been increasing over the last one decade, officials said.
They said that the central bank in a draft bill seeking amendments to the Bank Company Act 1991 spelt out its plans for ‘structuring’, ‘merger’ or ‘liquidation’ of the bank companies in trouble.
As per the bill, a permanent body would be established at the Bangladesh Bank to deal with such banks.
Once problems in banks are exposed the permanent body, according to the draft, will be able to impose a ‘moratorium’ for six months with an extension of another six months.
The body can approve a restructuring plan for a ‘problem bank’ for a maximum of one year or the bank may face merger, acquisition or even liquidation.
The central bank in the draft recommended penalties for the officials and persons responsible for putting a bank into financial maladies or other problems.
The penalties include fine, removal from posts, suspension, confiscation of shares and closure of bank accounts, according to the draft, now kept open by the Financial Institutions Division for public opinions.
Finance minister AHM Mustafa Kamal told reporters on Thursday that the BB proposals would bring benefit to the sector.
The proposals for amending the 1991 act would be placed before the cabinet soon and it would be up to the cabinet whether or not to accept the proposals, he added.
The government was forced to inject bail-out funds into the scam-hit Farmers Bank established by former home minister Muhiuddin Khan Alamgir and renamed it as Padma Bank Limited to regain public confidence in the bank severely affected for loan scams.
Farmers Bank was one of the nine banks established in 2013 by ruling party-backed businesses even though then finance minister AMA Muhith had on several occasions admitted that the number of banks in the country was high.
The government has meanwhile dished out an opportunity to banks to reschedule their bad loans at two per cent down payment since May although the move drew sharp criticisms from economists as an ‘artificial arrangement’ to contain the bad loans that soared to Tk 1,12,425 crore or 11.69 per cent of the Tk 6,92,077.26-crore total loan extended by the banks until September 2019.
A former FID secretary, Eunusur Rahman, said that the BB bill was a welcome initiative for amending the Bank Company Act 1991.
He, however, expressed doubts that the government would accept the key amendment proposals as the bank owners were politically powerful.
Pursued by Bangladesh Association of Banks, an organisation of the private bank owners, the government amended the bank company act in January 2018 enabling four members of a family to be directors of a bank, up from the previous two.
The amendment also allowed the directors to hold their posts of director for three consecutive terms or nine years, an increase from the earlier two terms or six years.