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Cabinet nods to bank law changes

REJAUL KARIM BYRON
The cabinet yesterday approved amendments to the Bank Company Act 1991 to tighten the central bank's noose on loan defaulters, make every one from bank directors to bank union activists more accountable and check unruly activities.
The act has been amended in nine areas, some of which are very significant and some are just revision of word arrangements.
Loan defaulters have been redefined. Previously, a borrower failing to repay loan six months into the expiry of deadline became a defaulter. Under the new definition, a borrower becomes a defaulter as soon as the loan is marked as classified under the Bangladesh Bank rules.
The central bank marks a loan classified in case of failure to repay within three months of the deadline. Sources said the central bank is gboing to make this schedule tighter y introducing the international standard that brands a borrower a defaulter just a day after the deadline.
Three new clauses relating to bank directors have been added to the act. The first one limits the number of bank directors to a maximum of 13. It also restricts appointment of more than two directors from the same family. There can be two directors from the same family only if they hold more than 10 percent shares of the bank.
The second one restricts tenure of directorship and says a director cannot continue after two terms in a row. On expiry of two terms and another six months, the post will be automatically vacant.
The third one fixed the tenure of a director at three years.
Besides, another amendment restricts directors from obtaining lower court injunctions on central bank directives. If directors want to question the central bank's orders, they are to go to 'appropriate courts'.
The amended act prohibits any planned activities that can destroy or jolt depositors' confidence in a bank.
Trade union activists will not be allowed to use cars or telephone facilities of the banks. If they misbehave or physically assault any officials, they will face two years' imprisonment and a fine of Tk 20,000.
Penalties for violation of bank laws have been increased.
The maximum penalty will now be seven years imprisonment and a fine of Tk 20 lakh for violation of Article 109 of the act that covers unlicensed banking, fabricated balanced sheet, submission of wrong information to Bangladesh Bank and directors taking illegal loans and facilities from their own banks etc. The minimum fine will be Tk 1 lakh.
From now on, cases under Article 109 of the act can be tried only by a sessions court.