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Restriction on payment of loan and advances- Section-27

As per Section 27 of the Bank Companies Act 1991, No Bank Company shall:
-Make any loans or advances against the security of its own shares
- Grant unsecured loan or advances to, or make loans and advances on the grantee of
a) Any Director;
b) Any family members of the Director;
a) Any firm, Private limited company in which any director of banking company is
interested as director, proprietor or partner;
b) Any public limited company which is managed by the director/family members of
the directors of banking company
(i) No banking company shall make loans or advances to any of its directors or to
individuals, firm, companies in which any of its directors is interested as
Partner, Director, Guarantor, as the case may be without the approval of
majority of the directors of the banking company excluding the director
concerned.
(ii) No banking company shall without the prior written approval of Bangladesh
Bank allow either directly or indirectly any such facility to any person or
institution which is
a) more than 15% of the total capital of that banking company
b) more than 25% of total capital of that banking company where such
facility is secured by easily sale able financial securities
The Managing director of every banking company shall submit return of loan/advances
within the following months.
If the Bangladesh Bank is satisfied that any loan and advances granted by any banking
company which is detrimental to the interest of the depositors, the Bangladesh bank may
-prohibits for such further loan
- impose any restrictions
- order to secure the repayment of such loan within a specific time.
Power of Bangladesh Bank to control Advances by Banking Companies: Sec-29:
The Bangladesh Bank may determine the policy relating to advances in the public
interest. All banking companies are bound to follow it.
Bangladesh Bank may give direction to any banking company in the following matters:
i)
ii)
iii)
iv.
v.
vi.

Credit ceilings to be maintained.


Minimum ratio of small loans or other loans to the total advances to be
maintained.
The purposes for which advances may or may not be made.
The limit of advances.
Secured advances and ceiling of interest on advances.
Rate of interest to be charged.

If any banking company makes any default for loan or advances, Bangladesh Bank may
order to deposit such amount to Bangladesh Bank and the Banking Company shall be
liable to follow the order.
The amount deposited to Bangladesh Bank may be released conditionally or
unconditionally as the Bangladesh may determine.
Circumstances under which Bangladesh Bank may supersede the Board of
Directors:
As per section-47 of Banking Companies Act-1991, Bangladesh Bank may
dissolve/supersedes the Board of Directors under the following circumstances:
(1)

Where the Bangladesh Bank is satisfied that(a) he activities of the Board of Directors, by whatever named called, of a
banking Company is likely to be detrimental to the interest of the
banking Company or its depositors or otherwise undesirable; or
(b) for all or any of the reason mentioned in sub-section (1) of section 46;
it is necessary to do so, the Bangladesh Bank may, for reason to be
recorded in writing, by order, supersede the Board of Directors of a
banking Company with effect from such date and for such period as
may be specified in the order.

(2)

The period of supersession specified in an order under sub-section (1) may


from time to time be extended by the Bangladesh Bank so, however, that
the total period supersession does not exceed two years.

(3)

All powers and duties of the Board of directors shall, during the period of
supersession, be exercised and performed by such person as the
Bangladesh Bank may from time to time appoint in this behalf.

(4) The provisions of such sub-section 2, 3, 4 and 5 of section 46 shall, with


necessary modification, apply to an order made under this section.
Power of Bangladesh bank to give directions (section 45):
Where the Bangladesh Bank is satisfied that
a) in the public interest, or
b) in furtherance of monetary and banking policy, or
c) to prevent the affairs of any banking company being conducted in a manner
detrimental to the interest of the depositors or in a manure prejudice to the
interest of the banking company, or
d) to secure the proper Management of the banking company generally:

It is necessary to issue directions to banking company generally or to any banking


company in particular, it my from time to time, issue such directions as it deems fit. The
banking company/companies are bound to comply the directions. The Bangladesh Bank
may modify or cancel any directions if it deems necessary.
Provisions empowering Bangladesh bank to control the banking companiesSection-49
The Bangladesh bank as the guardian of all commercial banks is empowered by the
statute under the Banking companies Act 1991 to control the overall activities of all those
Banks.
The following provisions of the said Act are involved in the control of the Commercial
Banks. These are 24, 25, 27, 28, 39, 39A, 45, 46, 47, 49, 55 and 77. However, further
powers and function of the Bangladesh Bank under section 49 are that:
1) The Bangladesh bank may
a) Caution or prohibit banking companies generally or any banking company in
particular against entering into any particular transaction or class of
transactions;
b) Require banking companies generally, or any banking company in particular
to refrain from taking such action as it may specify in relation to any matter
relating to the (business) of such banking company(s) or to take such action in
thereto as the Bangladesh bank thinks fit;
c) On a request from the banking companies concerned and subject to the
provisions of section 76 assist as intermediary or otherwise in proposals for
the
d) Amalgamation of such banking companies;
e) During the course after the completion, of any inspection of banking
company under section 44, by order in writing and on such terms and
condition as may be specified thereini.
Require the banking company to call a meeting of its Directors for the
purpose of considering any matter with an officer of BB;
ii.
Depute its officers to observe the proceeding at any meeting of the Board
of directors ;
iii.
Appoint its officer to observe the manner in which the affairs of the
banking company are being conduct
iv.
Require the Banking company to make within such time as may be
specified in the order, such change in the management as the BB may
consider necessary;
2.
The BB shall make an annual report to the Govt. on the trend and progress
of banking in the country and in that report suggestion for strengthen of
banking business throughout the country and steps required to be taken in
that behalf shall be stated.