The existing law permits only two members of a family to be directors of a bank. Briefing reporters after the Cabinet meeting, Cabinet Secretary Mohammad Shafiul Alam said it was the desire of the founding directors of private banks that four members of their families should be allowed to be directors of a bank instead of two under existing law.
As per the amended law, a director will be able to remain in his post for nine consecutive years -and that will essentially be indefinite as he will be able to retain his directorship for another nine years with a three-year break. Currently, one is allowed to remain director of a bank for six years and after a three-year break he or she can be director for another six years.
The Draft Law also restricts commercial banks from selecting, nominating, appointing and posting anyone to the posts of Director, Managing Director and Chief Executive Officer without any prior approval of the Central Bank. If Bangladesh Bank rejects the selection, nomination, appointment and posting that will stand cancelled.
It is interesting as to why the government would bow down to the wishes of the Bank Directors and allowing them to have four family members to the posts of Directors. We must say that the government should not bow down to the wishes of any pressure group when making a law – unless the law greatly improves equity and fairness in the land.
This does not seem to have occurred in this case. While private banks have, on the whole, been highly successful in snatching away funds from public banks, and in fact hold a clear majority of bank deposits now, it has occurred solely due to the sheer inefficiency and corruption of the state run banks in the first place. However allowing them to retain four directors from a single family can give rise to nepotism and inefficiency and mismanagement of loan portfolios. Corruption and misuse of power may protect family interest risking safety of depositors’ money in the bank.
Only moral judgment may not be sufficient to prevent bank interest. It is entirely possible such banks may end up with massive bad loans and other irregularities to become sick or insolvent. The government may have to bail out them at the end. It appears that most owners of private banks are ruling party men who want their families absolute control on banks. But in fairly good situation it should not be the case. In our view the government should review the bill before making it a law.
