Bangladesh Bank has imposed restrictions on the major shareholders of banking companies to ensure proper utilisation of fund of the banking companies and gain confidence of the depositors.

They will have to take board approval before taking financial facilities over Tk1 crore and let the central bank know about the privilege.

The facilities might come in terms of loans and advances, guarantees and other financial facilities, according to a circular Bangladesh Bank issued yesterday to comply with the amendments (up to 2013) to the Bank Company Act 1991. The circular takes immediate effect.

The major shareholders would be the individuals or companies having more than 5% stake in the bank.

The limit of financial facilities would be calculated with having the facilities to be enjoyed by the spouse or organisation having his or her own interest.

According to the circular, the loan or its part and net income interest should not be exempted, and in case of exemption, it should get prior approval from the central bank.

It also asked the bank-related persons to get prior approval by majority members of the respective bank boards for taking financial facilities from the banks.  

The representative directors will have to take prior approval or guarantee from the respective board or similar authorities to get loans and advances or any other financial facilities from the bank.

The loan amount will have to be considered based on the amount of paid up capital of the shareholder institutions, and it should not be more than 50% of the paid up capital.

Loan or other financial facilities cannot be provided to independent directors or persons and institutions having relation with the independent directors.

A bank will not perform any transaction with the bank-related persons that would be easier than with the person not related to the bank.

All financial transactions with a bank-related person or in favour of his interest should be done through prior approval by the majority members of the bank board of directors.

Bangladesh Bank also imposed a restriction on the directors of banking companies not to borrow more than 50% of their respective paid up capital in the bank.  In case, a director’s loan amount is more than 50%, it should be immediately raised to the bank board and informed the central bank.

The additional facilities being enjoyed by any director should be repaid within the stipulated time to be fixed by Bangladesh Bank. The additional amount cannot be renewed or its tenure be extended under no circumstance.

News:Dhaka Tribune/24-Feb-2014