The New Nation - Internet Edition

Staff Reporter

Bangladesh Bank yesterday asked commercial banks to raise their capital to Tk 200 crore by June 2009, in compliance with the Bank Company (Amendment) Act, 2007.

The banks will have to increase half of the capital of Tk 100 crore by June 2008 and the rest by June 2009, said a circular issued yesterday.

The Council of Advisers in July last, approved the draft of the Bank Companies (Amendment) Ordinance 2007 updating the Bank Companies Act 1991 in order to streamline the banking sector.

The bankers at that time said that immediate implementation of this rule will be impossible for small banks as the paid-up capital of bank has been doubled to Tk 200 crore from earlier Tk 100 crore.

"If this provision is implemented immediately, small banks will not be able to exist. Small banks will be forced to be merged with bigger ones," one of the bankers told this correspondent.

However, the statement on the objective of the amended law left a space for the weak banks to heave a sigh of relief. It said, "Bangladesh Bank, in consultation with the government, if necessary, can change the amount through government gazette notification."

Yesterday, the central bank issued a circular giving the guideline for banks to comply with the capital requirement.

The central bank further asked commercial banks that they would have to increase the capital to that extent, even beyond Tk 200 crore, equal to their respective risk weighted capital requirements.

Meanwhile, in a separate circular yesterday the Bangladesh Bank instructed commercial banks to comply with the amended clauses regarding directorship and the chief executive officer.

According to the amendments, the board of directors of a commercial bank will consist of no more than 13 directors and their tenures will be restricted to two consecutive terms (three-year term each).

A family having above 5.0 per cent shares in a banking company would be entitled to have not more than two directors on its board, and a family having less than 5.0 per cent shares would be able to hold one post of director.

Parents, husband and wife, children, brothers and sisters and their dependants would be considered members of a family.