The Bank Companies Act 1991
This is the act which is meant for Commercial Banks and the Central Bank of the country as well. It is mandatory for all banks to abide by the provisions of this Act. This Act has given necessary power to the Central Bank to control the Commercial Banks and Specialized Banks in line with its monetary policy. This Act has 124 Sections.
Important Sections of the Act
Section – 5 : Definition of different terminologies/concept
a) “Company” means any company which may be wounded up in accordance with regulation of the Companies Act, 1994.
b) “Scheduled Bank” bears the same meaning as in Article 2(d) of the Bangladesh Bank Order, 1972 (P.O. No. 127 of 1972)
c) “New Bank” means a new bank as the Bangladesh Bank has defined thereof (Nationalization) Order, 1972 (P.O. No. 26 of 1972)
d) “Bank Company” means any company which serves financial transactions (Banking Business in Bangladesh) including all new banks and specialized banks.
e) “Banking business” means accepting, in order to lend or invest, of deposits of money from the public which will be paid on demand or otherwise and will be withdrawal by cheque, draft, order or otherwise.
Section – 6 : The Bank Companies Act, 1991 is the overriding rule. The provisions of this Act will prevail even if there is contradictory instructions/provisions in the Memorandum and Articles of Association of the Banking Companies.
Section – 7 : Form of business in which banking company may engage –
1) In addition to banking business, a bank may engage in all or any of the following business, namely;
a) The borrowing, collecting or taking up of money;
b) The lending or advancing of money either against security or without security;
c) drawing, accepting, making, buying, selling, collecting and dealing with in bills of exchange, Promissory notes, debentures etc.
d) to grant and issue of letter of credit, traveller’s cheques, credit card and circular notes;
e), f), g) ………..z).
2) No bank company shall engage in any other business form except those referred to in sub-section (1).
Section – 8 : Use of the word “Bank” or any of its derivatives
Every banking company carrying banking business in Bangladesh shall use the word ‘Bank’ or any of its derivatives as part of its name.
Section -10: Disposal of non-banking assets
Notwithstanding anything contained in section-7, no banking company shall
Hold any immovable property however acquired, except such as is required for its own use, for any period exceeding seven years from the acquisition thereof.
Section -11: Prohibition on employment of managing agents and restrictions on certain forms of employment.
a) No banking company shall employ Managing Agent for managing its management;
b) No bank shall appoint any person who was once insolvent, convicted etc.
Section -12: No banking company shall remove from Bangladesh to a place outside Bangladesh any of its records and documents relating to its business in the Head Office or any of its branches, whether they are functioning or not, without the prior permission in writing of the Bangladesh Bank.
Section -13: Requirement as to minimum Paid-up Capital and it is mandatory for Private Banks to maintain the minimum requirement of paid-up capital and reserve fund. The minimum requirement is declared by the Bangladesh Bank from time to time based on minimum capital requirement of the Private Banks.
Section -14: Regulation of paid-up capital, subscribed capital, authorized capital and voting rights of shareholders.
1) No banking company except a new bank or a specialized bank incorporated in Bangladesh shall run business in Bangladesh without satisfying the following conditions, viz-
a) that the company’s subscribed capital shall not be less than one-half of the authorized capital;
b) that the company’s paid-up capital shall not be less than one-half of the subscribed capital;
c) That the voting rights of any share-holder, except those of the Government, do not exceed 5(five) percent of the total voting rights of all the shareholders.
Section -15: Election of new directors
All banking companies except a new bank or a specialized bank may elect new directors in the Annual General Meeting.
Section –15A: Filling up the post of Chief Executive Officer
a) The post of Chief Executive Officer has to be filled up by all banking companies as per approval of Bangladesh Bank.
b) The post of Chief Executive Officer shall not be kept vacant for a consecutive period of more than three months.
c) If it is not filled in within three months, the Bangladesh Bank may appoint an Administrator for the discharge of the responsibilities of Chief Executive Officer.
Section -17: Vacation of the office of Director.
a) If any director of a banking company fails to repay/adjust bank’s loans in time then the concerned banking company may serve notice to the defaulting director through the Bangladesh Bank for full adjustment of the defaulted bank’s loans within a specific period. If such failure of repayment continues for a period of two months even after Bangladesh Bank’s Notice, the post of director shall be fallen vacant with the expiry of the period cited in the Notice.
b) Any person receiving a Notice from concerned bank through Bangladesh Bank may explain his position to the Bangladesh Bank within thirty one days from the date of receipt of such notice with a copy of the explanation to the concerned banking company. The Bangladesh Bank shall give reply of the explanation within 15 days from the date of receipt of the explanation and the decision of the Bangladesh Bank in this regard shall be final.
Section -18: Certain benefit of the directors
Any director of any banking company shall not accept pecuniary benefit other than honorarium for attending the meeting of the Bank’s Board of Directors. The amount of honorarium may be determined by the Board of Directors unanimously.
Section -19: Restriction on commission, brokerage, discount etc.
No banking company shall pay out directly or indirectly as commission, brokerage, discount or remuneration by any means in respect of any share issued by it, any amount not exceeding two and one-half percent of the paid-up capital of the said shares.
Section -20: Prohibition of charge on unpaid capital
No banking company shall create any charge upon unpaid capital of the company.
Section -21: Prohibition of floating charge on assets
No banking company shall make a following charge on its undertaking or any property or any part thereof unless the creation of such a floating charge is certified in writing by the Bangladesh Bank as not being determined to the interest of the depositors of such company.
Section -22: Restrictions regarding payment od dividend
a) No banking company shall pay any dividend on its shares if all its capitalized expenses and other expenses have not been completely written off; or
b) If it fails maintain paid-up capital and reserve fund as per requirements of section – 13.
c) If there is provision shortfall.
Section -24: Reserve Fund
To transfer 20% of the profit to the Reserve Fund as long as the accumulated Reserve Fund is below its paid-up capital.
Section -25: Cash Reserve Fund
It is mandatory for all banking companies to maintain certain percentage of cash reserve with Bangladesh Bank. The percentage of cash reserve changes from time to time through Bangladesh Bank’s notification.
Section -27: Restrictions on loans and advances
No Banking company shall
a) make any loans or advances against the security of its own shares
b) grant unsecured loans & advances
Section –27 Ka Ka: List of Defaulting Borrowers
The Banking companies are allowed to send the list of defaulting borrowers to the Bangladesh Bank from time to time.
Section -31: License of Banking Companies
No banking company shall carry out banking business in Bangladesh without obtaining a license from Bangladesh Bank.
Section -32: Open a branch in a new place of business
No banking company shall open a new branch in a new place or change the location of an existing branch without obtaining prior permission of Bangladesh Bank.
Section -33: Maintenance of Liquid Assets
Every banking company has to maintain liquid assets at a certain percentage at the end of each week with Bangladesh Bank in consideration of its total demand & time liabilities.
Section -35: Unclaimed deposits and valuable articles
All unclaimed deposits & valuable articles for 10(ten) years must be sent to Bangladesh Bank.
Section -37: Power to publish information
The Bangladesh Bank has the power to publish information of banking companies regarding overdue loans & advances of banking companies.
Section -38: Accounts and balance sheet
At the end of each year, every banking company shall prepare a balance sheet and profit and loss account as on the last working day of the year.
Section -39: Audit
The balance sheet and profit and loss account prepared in accordance with section 38 shall be audited by a Chartered Accountants Firm with a special report to the Bangladesh Bank highlighting the status of the financial parameters.
Section -40: Report submission
The accounts and balance sheet along with the Auditor’s Report, duly approved by the Board of Directors, shall be published in the Daily Newspaper , and three copies thereof shall be sent to Bangladesh Bank by three months at the close of the period to which they relate.
Section -44: The Bangladesh Bank shall conduct inspection of any banking company by one or more of its officers and it shall supply to the banking company a copt of its report on such inspection.
Section -46: Power of Bangladesh Bank to remove Directors
In order to protect the interest of the depositors of the Banking Companies, the Bangladesh Bank is empowered to remove the Chairman or Director or CEO of the concerned banking companies recording the reasons of removal.
Section -57: Punishment for certain activities relating to Bank Companies
If anybody makes obstruction from entering or leaving any banking company within office hours or works in any manner planned to lower the confidence of the depositors regarding the banking company, he shall be punishable with imprisonment of maximum two years or with penalty of taka twenty thousand or with both.