Bank Companies Act (Amendment), 2013:

WHAT IS ITS NEW FEATURE?

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Bangladesh Bank is, undeniably, the regulatory authority of banking as well as other financial
sectors. Bank Companies Act, 1991 had fortified the power of Bangladesh Bank, yet, various
scandals in the banking sector in recent time, a statutory showdown was required and Bank
Companies Act (amendment), 2013 was no more charming to that. The power which was vested
through Bank Companies Act, 1991 to Bangladesh Bank , was enough to check the irregularities
in banking societies, all gone in vein since political manipulation in the credit system viz.
Hallmark, Bismillah Group, BASIC Bank, NBLs Myesha Group loan scam, Al-Arafas 500
crore loan scam and stagnancy in public banks pushed under so many pressure that a change
should have been inevitable. Thus it requires seeing the law what significant change has ever
been made:
1. SECTION-3: empowering of Bangladesh Bank to commence inspection:
Section 3 has been amended in implicating the fact by titling that Bank Companies Act, 2013
will be applied to co-operatives societies and other financial institutions rather than cooperatives
banks. Application of Bank Companies Act (Amendment), 2013 will be limited since
Cooperative Societies Act, 2001 (Act no. 47 of 2001) and Micro-Credit Regulatory Authority
Act, 2006 (Act no. 32 of 2006) will be applied to all the affairs of cooperatives societies and
other financial institutions. Only the serious addition is that any financial participation of nonmembers of cooperatives societies will be barred and in that event Bangladesh Bank will be
entitled to intervene which might develop the sense of responsibility to the managing committee
of the cooperatives society that members of the cooperatives will get priority in financial
mechanism of the societies. Moreover 3(3) has clearly implicated that Bangladesh Bank may
have the equal authority to inspect to the subsidiaries companies of bank companies. The
substituted part of section 3 is provided in the following having made translation by the reviewer
himself.

 3. Limited application of the Act for Co-operative Societies and other financial
institutions. (1) Nothing in this Act shall be applicable for the co-operative societies
established under Cooperative Societies Act, 2001 (Act no. 47 of 2001) or any other acts relating
to cooperative societies for the time being in force and micro-credit organizations, authorized to
conduct micro-credit activities under Micro-Credit Regulatory Authority Act, 2006 (Act no. 32
of 2006).
Provided that, likewise the inspection so commenced to the bank companies under section 44
and 45 for the receipt of unlawful deposit from a person or an organization except to the
members of any cooperative societies, Bangladesh Bank may cause an inspect to the cooperative
societies, and may direct to do so.
(2) Nothing except to the rules of section 27A and section 27 AA and subsection (6) of section 17
shall be applicable for any licensee financial institutions under Financial Institutions Act, 1993
( At no. 27 of 1993).
(3) Notwithstanding anything contained in any other acts for the time being in force or registered
under any other acts, under the etiquette the bank companies under section 44 and 45 are
inspected or likewise those are directed, Bangladesh Bank may inspect to subsidiaries of any
bank companies so composed of in accordance with subsection (1) of section 26, and may direct
to those subsidiaries companies.
2. OMISSIONS OF SECTION 4: NO ESCAPE FROM THE BURDEN OF BANK
COMPANIES ACT, 2013:
By this section, GOB might exercise of suspending the application of the law for a certain
period of time which might give a safe passage of letting perversion in the financial sector if they
might deem fit to do so, most extensively, taming the scandalous course of action, hopefully the
omission of this section might help to fill up the loop holes.
3. SECTION 5: The definition of loan defaulter and micro credit organization added.
In section 5 of 1991, there was neither any definition of loan defaulter nor there any definition of
micro-credit organization. In the present context, the number of loan defaulter is increasing for
various reasons the giant borrowers are manipulating their right of taking loan and remain
indifferent to the payment. To regularize the loan, a hidden banking practicing has been emerged
by scrupulous officers of the banks. In addition, to current estimation, the limit of spread is more
than the limit; it is 5 percent to some extent 11.73 percent; studying over 47 banks 28 banks
always crossing the limit. Economists predict that if such a phenomenon is emerged in the bank,
the borrowers are to pay highest rate of interest, as a result of burden of interest, the number of
loan defaulter is increased. Moreover, abusing the political power, wearing mask of businessmen,
a vested politicians are borrowing huge sum of money from the bank. Hallmark is the latest and
highest in the history of Bangladesh . Besides it, SASCO group has borrowed huge sum from AlArafah Bank which may likely to be default since security is insufficient. In the same way, loan
disbursed to Myesha Group by NBL is definitely a result of political influence. In such banking
culture the definition of loan defaulter was required to be added since it has been indispensable

to the bank. In 1991, there was insignificant number of micro credit organizations in the country.
Currently, micro credit organizations have been bloomed. Alongside Bank, these segments have
been participating to crediting. A slight change has been made in the case of secured loan and
advance. Special bank though changed in specialized bank in (m), the English version of Act of
1991 available in the market still bears the word specialized. The act should provide the
prescribed word in bracket. In (h) depositor and profit and loss should be projected in a complete
form. The definition and other substitutions are provided herewith:
(CC) Loan Defaulter means any debtor person or organization or company under whose
behalf any advance, loan or any other financial benefit or any part or interest or profit thereof has
been expired 6 (six) months as per the definition proclaimed by Bangladesh Bank.
Explanation. For the purpose of this clause, otherwise any person, organization or company
are not the director of any other organizations or, unless his share or any part thereof is beyond
maximum 20% or as the case may be, organizations or companies are not the guarantor of loan
of the organization aforesaid, the organization shall be seized to be his or his concerned
organization.
(c) (CCC) Micro credit organization means any micro credit organization as per definition
stipulated in clause (21) of section 2 of Micro Credit Regulatory Authority Act, 2006 (Act no. 32
of 2006).
(e) Secured loan or advance means such a loan or an advance which is made on the security
of the asset and the market value of the asset aforesaid estimated in a prescribed procedure by
Bangladesh Bank must not be lesser about than the amount of loan and an unsecured loan and
advance mean such a loan or an advance or any part thereof against which no security is
deposited.
**** (h) Depositor or profit and loss *** (m) specialized. *** specialized.
TO BE CONTINUED
Muhammad Shamim Akhter, 10 September, 2013