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Legal steps to heal ailing banking sector proposed

Star Economic Report
The 11-member Task Force on financial sector reforms recommended that the Government should undertake several legal steps to strengthen the Intermediately' role of the banks tn the overall
The report of the Task Force was submitted to the Government in March.
Additional Secretary of Economic Relations Division (ERD) Dr Mohiuddin Ahmed, who was Managing Director (MD) of Bangladesh Shilpa Bank (BSB) in the mid-eighties. was the Convenor of the Task Force.
It examined the critical issues in the country's ailing financial sector. It stressed the need for streamlining the legal framework for more effective and dynamic operations by the banking sector.
The recommendations of the Task Force covered four major operational aspects. They included : (I) Legal and statutory problems. (2) Implementation process for recently-Introduced financial sector reforms. (3) Financial discipline and management, and (4) Capital market and de velopment of securities market.
The Task Force on financial sector reforms was one of 29 working groups set up by the Government to make a review of existing problems In various socio-economic sectors and suggest remedial measures to help overcome the same.
In it's recommendations for instituting an appropriate institutional legal framework for the banking and. overall, financial sector, the Task Force suggested that steps should be taken for waiving stamp duty in cases of mortgaging any documents or deeds with the bunks as collateral for lending operations. There should be provisions for registration fees only for such cases.
The report highlighted the need* for appropriate move* in following area* :
(1) The existing arrangement* for clearance certificate* from income tax authorities at the time of registration of any mortgage documents for obtaining bank loans. Mortgage is not sale. So, clearance certificate* are redundant for such cases. Without the certificate loan or credit disbursements will be easier
(2) There should be penal provisions for punishment up to a maximum of three years' prison term in cases where cheques are bounced because of non-availability of funds in the account* of *uch cheque-Issuing persons, firms or institutions. Bounchlng of cheques is a fraudulent practice.
(3) Equity mortgages should be allowed at the upazila levels for disbursements of credits in rural areas.
(4) Credit recovery courts should be set up at district levels. Number of such courts in Dhaka. Chittagong and other commercial cities should be increased, depending upon the number of cases relating to defaults in loan repayment.
(5) Legal measures should be instituted to regulate the functioning of those banks which operate on Islamic principles. There Is no law at present for the same in the country. Malaysia has enacted One for Its Islamic banks
(6) Highest income tax rate for banking companies should be limited to 45 per cent
(7) The supervisory role of ministry of finance should be extended to insurance companics because insurance ts essentially a savings project So. the control and supervision of banks and Insurance com panics should be tn the hands of one and the same authority -Ministry of Finance.
(8) The existing provisions debarring defaulter*. In repayment of bank loans, from participating In local council elections should be extended to national level elections
(9) There should be legal coverage for use of electronic methods in banking practices. Such electronic process or methods should be considered as evidence and given full legal coverage.
The Task Force commended the recent amendments to the banking compa nies act. This is a welcome forward move, it said while recommending for appropriate measures to strengthen and improve the legal framework tn other field* ol operations tn the financial sector to eater to the changing needs of the
The member* of the T**k Foree included Lutfur Rahman Sarkar of lsl*rni Bank. Hu may an Khaled MG Agrani Bank: A Qureshi of Bangladesh Small and Cottage Industrie* Bank (BSCTB): Kazi Baharul Islam, formei MD Rupali Bank (now MD. Investment Corporation of Bangladesh) S. H. Chowdhuty, Chairman. Square Pharmaceutical* Ltd. M. M Nurul Huq. MD. Bangladesh Shilpa Rin Sangstha IBS RS). S R Karmaker Executive Director. Bangladesh Bank; Khondoker Ruhul Quddus. MD. Bangladesh Krlshi Bank; A B M. Mahbubul Amin Khan of Bangladesh Institute of Bank Management and Khondoker Ibrahim Khalil of PKSP.