Govt. must rewrite Bank Companies Act

THE cabinet’s approval of a draft bill in May 2017 seeking to amend the Bank Companies Act 1991 to allow four of a family to be on the boards of private commercial banks for nine yeas in a row suggested that the government was willing to strengthen family control on the banks. The passage of the bill into a law now suggests that the government was hell bent, going against warnings of experts, on consolidating family control on banks, to the jeopardy of depositor’s interest.

This is likely to deal a blow to good governance in the banking sector, which has so far faced loan scams and irregularities over the past few years. All such shady loans and mismanagement in the banking sector took place when the law allowed only two of a family to be on the bank boards and that too for six years in a row. What more harm the passage of the law may now do is that, as experts fear, the directors on the bank boards who are about to serve out their tenure of six years would now be on the board for nine more years, taking the total to about 14 years in a row.

While the law would be serving the interest of individuals and families and not the interest of people and depositors, and create the scope for turning banking activities into a family-oriented monopolistic business, it would definitely shrink the space for professionals to be bank directors. The finance minister is reported to have replied in the negative when he was asked if the law would strengthen family domination in the banks. But the minister in November 2017 termed the move of the Chittagong-based S Alam Group, to tighten its grip over banking in the private sector, ‘nasty steps’.

The minister that time sought a report from financial institutions division on the group’s engagement in private-sector banking when the group has already had, directly or indirectly through people having link to the group, its control over at least five banks. This happened when the law had restrictions and now without any such restrictions being in place, this could very well happen further and on a wide scale. The minister that time could not lift a finger to stop the ‘nasty’ moves, he may not be able to do it in future.

All this lends credence to the speculation that the law, in effect, would consolidate the authority of the families over the banks that they set up during the tenure of the Awami League-led government out of partisan interest. If the government cannot stop this, which will be highly harmful to depositors, it will lead to further debility of the banking-sector health. The government, under the circumstances, must scrap the law as it is, rewrite it by heeding expert opinions and drop the controversial provisions that entail the risk of a monopolistic business run by families in banking in the private sector. 

• Courtesy: New Age/Jan 18, 2018