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The Banking Companies Act 1991

Capital Reserve:
Section -13(1) defines the Capital Reserve
Every banking companies, functioning in Bangladesh, shall reserve capital as per the
quantity, rate and procedure, prescribed, from time to time, by Bangladesh Bank;
Provided that the Govt. in consultation with the Bangladesh Bank may exempt specialized
banks from the operation of this section.
Capital means all such materials which are specified as capital in the rules relating to capital
reserve as prescribed, from time to time by the Bangladesh Bank.
Section 39(1) defines Audit any person qualified under the Bangladesh Chartered
Accounts Order, 1973 (P. O. 2 of 1973) or by any other law for the time being in force to be
an auditor of companies if approved by the Bangladesh Bank to be qualified to audit a
banking company, shall audit the profit and loss account and financial report of a banking
company in accordance with the balance sheet prepared under section 38.
Section 39A(1) Special Audit If the Bangladesh Bank, on consideration of an audit report
under section 39 or an inspection report under section 44 or on the basis of a report received
in any other way, has sufficient reason to be satisfied that it is necessary to audit the activities
of, or any special part of the activities of, any banking company, it may cause a special audit
of the activities of, such banking company by any person referred to in subsection(1) of
section 39.
Under Section 39B (1) Auditors to be declared disqualified on the basis of reasonable
ground to believe by the Bangladesh Bank.
Section 43(1) Accounting Provisions being prospective: Nothing in this Act, shall apply to
the preparation and audit of the account of a banking company and sub mission of the report
of accounts or audit in respect of any accounting year which has expired prior to the
commencement of this Act and notwithstanding anything holding in this Act such accounts
shall be made audited and submitted according to the law enforce at once before the
commencement of this Act.
Section 65 winding up by the High Court Division
Sec 65: Winding up by the High Court Division.1) Notwithstanding anything contained in sections 228, 241 and 372 of the Companies Act,
and without prejudice to its powers conferred by section 64(1), the High Court Division shall,
under this section, order the winding up of a banking company, ifa) the said banking company is unable to pay its debts;
b) the Bangladesh bank makes an application under this section or section 64 for
winding up of the said company.
2) The Bangladesh bank shall make an application under this section for the winding up of a
banking company if it is directed so to do by an order under section 44(5) (b).

3) The Bangladesh Bank may make an application under this section for the winding up of a
banking company,a) if the banking companyi) has failed to comply with the requirements specified in section 13; or
ii) has, by reason of the provision of section 31, become disentitled to carry on
banking business in Bangladesh;
iii) has been prohibited from receiving fresh deposits by an order under section
44(5)(a) or under article 36 (5)(b) of the Bangladesh Bank order, 1972 (P.O. No 127 of
1972); or
iv) having failed to comply with any requirements of laid down in the section 13, and
has continued such failure, after notice in writing of such that failure has been conveyed to it;
v) having contravened any provision of this Act has continued such contravention
beyond such period as may be specified in that behalf by the Bangladesh Bank, from time to
time, after notice in writing of such contravention has been conveyed to it; or
b) if Bangladesh Bank is of such opinion thati) a compromise or arrangement sanctioned by a Court in respect of the banking
company cannot be worked satisfactory with or without modification: or
ii) in returns, statements or information furnished to it under or in pursuance of the
provisions of this Act disclose that the banking company is unable to pay its debts; or
iii) the continuance of the banking company is prejudicial to the interests of its
depositors.
4) Without prejudice to the provisions contained in section 242 of the companies Act,
a banking company shall be deemed to be unable to pay debts ita) it has refused to meet any lawful demand if it is made at a place where there is an
offices or branch of the banking company within two working days; or
b) such demand is made elsewhere and the Bangladesh Bank certifies to the effect that
the banking company is unable to pay its debts; or
e) the Bangladesh Bank certifies in writing that the banking company is unable to pay
its debts.
5) The Bangladesh Bank shall submit an application under sub-section (1) to the
Registrar of the Supreme Court.
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, pvt. 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)
Credit ceilings to be maintained.
ii)
Minimum ratio of small loans or other loans to the total advances to be
maintained.
iii)
The purposes for which advances may or may not be made.
iv.
The limit of advances.
v.
Secured advances and ceiling of interest on advances.
vi.
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)
(a)

(b)

Where the Bangladesh Bank is satisfied thathe 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
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

(2)

(3)

with effect from such date and for such period as may be specified in the
order.
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.
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 may 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 companies-Section-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 therein4

i.
ii.
iii.
iv.

2.

Require the banking company to call a meeting of its Directors for the purpose
of considering any matter with an officer of BB;
Depute its officers to observe the proceeding at any meeting of the Board of
directors ;
Appoint its officer to observe the manner in which the affairs of the banking
company are being conduct
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;
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.