Not just mentions in law, loan defaulters must be punished

The draft of the Bank Companies (Amendment) Act prohibits loan defaulters from travelling abroad and registering houses and cars, but it is not sufficient. The provision of the law must be strictly enforced. Without proper enforcement, the intended benefits of the law may not be realised.

Merely outlining what a director can or cannot do according to the law may not be sufficient. It is important to have provisions to confiscate their bank shares if they break the law. Additionally, clear descriptions of the appropriate punishment for such offences should be included in various sections of the law.

While the formation of the draft is a positive step, it may not be sufficient to address the issue at hand. In 2018, an amendment increased the number of bank directors from the same family from two to four, but the current draft resets this number to three. Many banks still have several directors from the same family, or they may have directors who are somehow related to family members.

It seems that family-based banks are becoming more common in the country, but it is important to note that no bank can truly be family-based since it operates using the money of depositors. When family members become directors of a bank and default on loans, it can create a crisis of confidence in the bank.

I think it will not be good to make a law at the desire of anyone. A more extensive interpretative reform of the Bank Companies Act is needed.

Directors who default on loans at one bank often take loans from another bank or turn to financial institutions. In the event of a default, all benefits, including government and export incentives on easy terms, should be suspended.

Salehuddin Ahmed is former governor, Bangladesh Bank

TBS Staff Reporter Sakhawat Prince spoke to Salehuddin Ahmed over the phone