The Cabinet on Tuesday approved the draft of Bank-Company (Amendment) Act, 2023 in a bid to check willful loan defaulters.

Under the draft law, maximum three members (instead of existing four members) of a family will be allowed to be directors of a bank.

The approval came from the cabinet meeting chaired by Prime Minister Sheikh Hasina at her office here.

Now the banking activities are run under the Bank-Company Act, 1991.

Its amendment proposal was brought in order to make the law modern and time-befitting one, said Secretary (Coordination & Reforms) at the Cabinet Division Mahmudul Hossain Khan while briefing reporters at the secretariat after the meeting.

“Those who are willful loan defaulters are defined and what actions will be taken against them are mentioned here,” he said.

Talking about the actions, the secretary said the banks must send the list of willful loan defaulters to Bangladesh Bank and it can impose ban on going abroad,  issuance of trade license (against them), and registration under the Bangladesh Securities and Exchange Commission and the Registrar of Joint Stock Company and Firm.

Besides, a willful loan defaulter can’t be eligible to be a director of a bank or financial institution until five years passes after being excluded from the list of willful loan defaulters, he said.

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If any director of a bank becomes a willful loan defaulter, Bangladesh Bank can declare his post vacant, he added.

The secretary said if a bank fails to send the list of loan defaulters to Bangladesh Bank in time, the bank can be fined Tk 50 lakh to Tk one crore. The bank will have to count additional Tk one lakh as fine for every each day delay, he said.

“As per the existing law, the maximum four members of a family can be directors of any bank, but it has been reduced to three now,” he said.

The bank directors and their family members must provide collaterals, bond or security for taking loans from the bank as per a new provision incorporated in the draft law.

A provision was also included here so that Bangladesh Bank can regularly inspect different institutions and foundations run under the law, he added.