The Bank Companies Act, 1991 is the primary legislation regulating the establishment, management, and operations of banking companies in Bangladesh. It applies to all banking companies operating within Bangladesh, including both local and foreign banks. The Act sets out the requirements for incorporation and licensing of banks (Sections 15-31), minimum capital requirements, and the conditions under which a bank may commence business. It prescribes prudential norms including cash reserve ratio, statutory liquidity ratio, and limits on credit exposure to individual borrowers and groups. Key mechanisms include the power of Bangladesh Bank to inspect and supervise banks, to issue directions in the public interest or in the interest of depositors (Section 44), to impose restrictions on banks regarding payment of dividends, and to take corrective action or even amalgamate or wind up banks in financial distress (Sections 45-47). The Act also regulates the composition of boards of directors, requiring independent directors, and restricts loans to directors and related parties (Section 27). Notable provisions include the regulation of bank mergers and acquisitions, the requirement for maintaining capital adequacy as prescribed by Bangladesh Bank, and penalties for non-compliance including fines and imprisonment of directors for certain offences. The Act was most recently consolidated in 2013 and amended in 2023 (Act No. 13 of 2023), and is currently in force.
Full text · showing key sections
§ 1Short title
(1)This Act may be called the Bank Companies Act, 1991.
(2)It shall come into force on the twenty-fourth day of February, 1991.
§ 2Application of other laws
Subject to the provisions of this Act, the Companies Act, 1994 (Act No. XVIII of 1994) shall apply to bank companies.
§ 3Limited application of the Act to cooperative societies and other financial institutions
(1)Nothing in this Act shall apply to cooperative societies registered under the Cooperative Societies Act, 2001 or any other financial institution as may be specified by the Government.
§ 4[Omitted]
[Omitted.]
§ 5Definitions
In this Act, unless there is anything repugnant in the subject or context— (a) "approved share" means such share as may be approved by Bangladesh Bank; (b) "bank business" means the business of accepting deposits and lending or investing money; (c) "bank company" means any company that transacts bank business in Bangladesh; (d) "Bangladesh Bank" means the Bangladesh Bank established under the Bangladesh Bank Order, 1972.
§ 6Act to override memorandum, etc.
Unless otherwise provided in this Act— (a) no bank company, other than a specialised bank, shall carry on any business other than bank business; (b) the provisions of this Act shall prevail over the memorandum and articles of association of a bank company.
§ 7Functions of bank company
(1)In addition to bank business, a bank company may engage in all or any of the following businesses as may be prescribed.
§ 8Use of word "Bank" or its derivatives
Every company engaged in bank business in Bangladesh shall use the word "Bank" or its derivatives as part of its name.
§ 9Prohibition of certain businesses
No bank company shall, except as permitted under section 7, engage in any trade or business of any kind.
§ 10Transfer of property not used for banking business
(1)A bank company shall transfer any property not required for its own use within the prescribed period.
§ 11Prohibition of appointing managing agent and restrictions on certain appointments
(1)No bank company shall— (a) appoint a managing agent for itself; (b) engage in any business other than bank business.
§ 12Restrictions on removal of documents, etc.
No bank company shall remove any document, record or operational procedure from its head office or any branch.
§ 13Capital conservation
(1)Every bank company operating in Bangladesh shall maintain such capital as may be prescribed by Bangladesh Bank from time to time.
§ 13A[Omitted]
[Omitted by the Bank Companies (Amendment) Act, 2003 (Act No. 14 of 2003).]
§ 14Paid-up capital, subscribed capital, authorised capital and shareholders
(1)No bank company other than a specialised bank shall commence or carry on bank business unless its paid-up capital is not less than the prescribed amount.
§ 14ARestrictions on purchase of bank shares, etc.
(1)No person, institution, company or members of the same family shall own or control shares in a bank company exceeding the prescribed limit without the prior approval of Bangladesh Bank.
§ 14BSignificant shareholder
(1)No person, institution or company shall acquire or hold shares of a bank company exceeding the prescribed threshold without the prior approval of Bangladesh Bank.
§ 15Election of directors, appointment of managing director or chief executive officer, etc.
(1)Bangladesh Bank may, by order, remove any director, managing director or chief executive officer of a bank company within two months of the order.
§ 15AFilling of vacancy of Chief Executive Officer, etc.
(1)Any vacancy in the office of the Chief Executive Officer of a bank company shall be filled within the prescribed period with the approval of Bangladesh Bank.
§ 15AATerm of office of directors, etc.
(1)Notwithstanding anything contained in any other law for the time being in force or in the memorandum or articles of association of a bank company, the term of office of directors shall be as prescribed.
§ 15AAAAppointment of alternate director, term, etc.
(1)Subject to the provisions of section 101 of the Companies Act, the board of a bank company may appoint an alternate director.
§ 15BRole of the Board
(1)The board of directors of a bank company shall be responsible for policy formulation and implementation, risk management, internal control and compliance.
§ 15CInternal audit and control
(1)The board of directors shall establish an effective internal audit and control system in the bank company.
§ 16[Omitted]
[Omitted by the Bank Companies (Amendment) Act, 1993 (Act No. 17 of 1993).]
§ 17Vacancy in the office of director
(1)A director of a bank company shall vacate office if— (a) he or she absents himself or herself from three consecutive meetings of the board without leave; (b) he or she becomes disqualified under this Act.
§ 18Restrictions on transactions with directors, officers and employees of bank companies, etc.
(1)Notwithstanding anything contained in any other law or in the memorandum or articles of association, no bank company shall grant any loan or advance to any of its directors or to any firm in which the director is a partner.
§ 19Restrictions on commission, brokerage or discount on sale of shares, etc.
Notwithstanding anything contained in sections 152 and 153 of the Companies Act, no bank company shall pay any commission or brokerage in connection with the sale of its shares exceeding the prescribed limit.
§ 20Floating charge on uncalled capital invalid
No bank company shall create a floating charge on its uncalled capital.
§ 21Floating charge on assets invalid
(1)Notwithstanding anything contained in section 7, in the interest of depositors of a bank company, no bank company shall create a floating charge on its assets.
§ 22Restrictions on payment of dividend
No bank company other than a specialised bank shall declare or pay any dividend on its shares until all its capital expenses have been fully met.
§ 23Restrictions on appointment of general manager, etc.
(1)Notwithstanding anything contained in any other law or in the memorandum or articles of association of a bank company, no person shall be appointed as general manager or chief executive officer without the prior approval of Bangladesh Bank.
§ 24Statutory reserve
(1)Every bank company registered in Bangladesh shall transfer a prescribed percentage of its annual profits to a statutory reserve.
§ 25Cash reserve
(1)Every bank company, other than a scheduled bank, shall maintain a cash reserve with Bangladesh Bank at such rate as may be prescribed.
§ 26Subsidiary company
(1)No bank company shall hold shares in any other company except for the following purposes.
§ 26AHolding of shares of another company by a bank company
(1)Subject to the provisions of section 26, a bank company may hold shares in another company up to the prescribed limit.
§ 26BGeneral limitation on loan limits
Notwithstanding anything contained in this Act— (1) no bank company shall grant any loan or advance to any person, institution or group exceeding the prescribed limit.
§ 26CTransactions with bank-related persons or institutions
(1)No bank company shall enter into any transaction with any bank-related person or with any institution in which such person has an interest without complying with the prescribed conditions.
§ 26DLoan limits for bank employees
No bank company shall grant any loan or advance to its officers or employees or to its subsidiary company exceeding the prescribed limit.
§ 27Restrictions on loans and advances
(1)No bank company shall— (a) grant any loan or advance on the security of its own shares; (b) grant any unsecured loan or advance exceeding the prescribed limit.
§ 27ADirector or member of governing body of debtor company or institution
Notwithstanding anything contained in any other law for the time being in force, a director or member of the governing body of a debtor company or institution may be appointed by the lending bank or financial institution.
§ 27AAList of defaulters, etc.
(1)Every bank company or financial institution shall submit a list of defaulters to Bangladesh Bank in the prescribed form.
§ 27BList of wilful defaulters, etc.
(1)Every bank company or financial institution shall submit a list of wilful defaulters to Bangladesh Bank.
§ 28Restrictions on remission of interest or profit
(1)No bank company shall remit any interest or profit without the prior approval of Bangladesh Bank.
§ 28ASpecial provisions regarding bad or classified loans, etc.
Notwithstanding anything contained in this Act or any other law, a bank company shall make provision against bad or classified loans in accordance with the directives of Bangladesh Bank.
§ 29Power of Bangladesh Bank to control advances
(1)Where Bangladesh Bank is satisfied that it is necessary to regulate the grant of advances, it may issue directions to bank companies.
§ 29AEnlistment of collateral valuation companies or institutions
(1)Bangladesh Bank may prescribe the procedure for enlistment of collateral valuation companies or institutions for the purpose of valuation of collateral offered for loans or investments by bank companies.
§ 30Jurisdiction of court regarding rate of interest
Notwithstanding anything contained in any other law for the time being in force, the court shall not question the rate of interest charged by a bank company in respect of any loan or advance.
§ 31License of bank company
(1)No person, institution or company shall carry on bank business without obtaining a license from Bangladesh Bank under this Act.
§ 32Restrictions on opening of new business centre or transfer of existing business centre, etc.
(1)Without the prior written approval of Bangladesh Bank— (a) no bank company shall open a new place of business; (b) no bank company shall change the location of an existing place of business.
§ 33Maintenance of liquid assets
(1)Every bank company shall maintain in Bangladesh, at current market value, such amount of liquid assets as may be prescribed.
The Bank Companies Act, 1991 is the primary legislation regulating the establishment, management, and operations of banking companies in Bangladesh. It applies to all banking companies operating within Bangladesh, including both local and foreign banks. The Act sets out the requirements for incorporation and licensing of banks (Sections 15-31), minimum capital requirements, and the conditions under which a bank may commence business. It prescribes prudential norms including cash reserve ratio, statutory liquidity ratio, and limits on credit exposure to individual borrowers and groups. Key mechanisms include the power of Bangladesh Bank to inspect and supervise banks, to issue directions in the public interest or in the interest of depositors (Section 44), to impose restrictions on banks regarding payment of dividends, and to take corrective action or even amalgamate or wind up banks in financial distress (Sections 45-47). The Act also regulates the composition of boards of directors, requiring independent directors, and restricts loans to directors and related parties (Section 27). Notable provisions include the regulation of bank mergers and acquisitions, the requirement for maintaining capital adequacy as prescribed by Bangladesh Bank, and penalties for non-compliance including fines and imprisonment of directors for certain offences. The Act was most recently consolidated in 2013 and amended in 2023 (Act No. 13 of 2023), and is currently in force.
