The central bank and the Banking Division of the finance ministry yesterday opposed the idea of setting up the proposed Palli Sanchay Bank; they instead suggested establishing a microcredit financial institution.

An inter-ministerial meeting made the recommendation to the Rural Development and Cooperatives Division, who had sent the proposal to establish the specialised bank for the rural poor along the lines of Grameen Bank.
The Cooperatives Division had also prepared a draft Palli Sanchay Bank Act 2013.

At yesterday’s meeting, officials of both the central bank and the Banking Division said it is not possible to formulate a law in the present tenure of the current government due to a time constraint.

However, the Cooperatives Division was told that they can set up a financial institution under the Microcredit Regulatory Authority, said officials who were present at the meeting.

The meeting was also told that already there exist some banks of the same kind such as Ansar VDP Bank, Probashi Kalyan Bank, and Karmasangsthan Bank, but they have failed to serve the purposes.

“The proposed bank will remain out of the control of Bangladesh Bank but will perform several banking activities that may create indiscipline in the financial sector,” the BB had earlier written to the Banking Division.
The proposed bank will emerge from the government’s “One House, One Farm” project, just like Grameen Bank was born in 1983.
As per the draft law, the specialised bank will enjoy exemption from value-added and income taxes, like Grameen Bank.
The bank will not be governed under the Banking Companies Act, meaning it would remain mostly out of bounds of the central bank. However, Palli Sanchay Bank’s managing director would be appointed by its board of directors, with permission from the BB.

The bank’s paid-up capital will be Tk 600 crore, 80 percent of which will be provided by the government through its “One House, One Farm” project.

The government will hold 50 percent of the bank’s ownership and the rest would go to the member cooperative societies of the project. However, the government will not take any dividends against its shares.
The activities of the specialised bank, in many aspects, would also resemble those of Grameen Bank. Like Grameen, it will collect deposits and lend to its members.

But Palli Sanchay Bank will conduct some general banking activities, including various types of foreign exchange related transactions, opening letters of credit, online banking, and introducing debit and credit cards.
The bank’s board of directors will consist of 17 members and the secretary of the Cooperatives Division will be its ex-officio chairman.
Seven directors will be selected from the shareholders, with the government appointing one from the civil society. The other positions of the board will be filled up by government officials.

The “One House, One Farm” is a project under the Annual Development Programme, the first phase of which started in 1997. The second phase of the project started after the present government assumed power.