BB publishes draft guidelines to set up new banks

Express (September 06, 2011)

The central bank has published draft guidelines to establish new banks imposing a restriction to keep the number of directors in their board within 13, officials said.

Under the draft guidelines, the paid-up capital of a new commercial bank will have to be Tk 4.0 billion as required under Bank Company Act 1991. The share capital will be formed with ordinary shares only.

Any interested individual can submit his/her opinions to the general manager of Banking Regulation and Policy Department (BRPD) of the central bank through e-mail or by normal post as early as possible, the BB officials said.

"We'll submit the draft guidelines incorporating the public opinions to the next meeting of our Board of Directors for approval," a BB executive director told the FE Monday.

He also said the next Board meeting is scheduled to be held on September 14.

"The Board may take a final decision on setting up new private commercial banks (PCBs) in the next meeting," another BB official said.

The central banker also said the BB will publish an advertisement for inviting fresh applications from interested entrepreneurs to establish new banks, if the Board gives its approval for allowing new PCBs to operate.

On August 24 last, the Board kept in abeyance a proposal to issue lincences for new PCBs.

"The initial minimum capital of Tk 4.0 billion shall be provided by sponsors of the proposed bank," the Bangladesh Bank (BB) said in its draft guidelines, adding that the bank shall issue public shares within three years from the date of commencement of the banking business.

"Public issues shall be at least equal to the sponsors' share amount," it added.

Currently, the commercial banks maintain a total capital - paid-up and reserve - of Tk 4.0 billion, while a minimum of Tk 2.0 billion has been added as paid-up capital out of the total capital.

The minimum shareholding stake of each sponsor will be Tk 10 million instead of the existing Tk 2.5 million and the maximum will be 10 per cent of the proposed bank's total share capital, according to the guidelines.

"This ceiling of 10 per cent applies to an individual, company or family member, either personally or jointly or both," it added.

"Family" is defined herewith to include spouse, father, mother, son, daughter, brother and sister of the individual or anyone dependent on that individual.

"The number of members of the board of directors shall be restricted to 13," the guidelines said, adding that the chief executive officer (CEO) of the proposed bank shall have at least 15 years' experience in the banking profession.

Relating to the branch expansion policy, the guidelines said the ratio of urban and rural bank branches has to be 1:1 or as per instruction issued by the BB from time to time.

"The new bank has to ensure financing at least 5.0 per cent of its total lending into agricultural sector or as per instruction issued by the central bank from time to time," it added.

Currently, all PCBs and foreign commercial banks are fixing agriculture credit disbursement target at least at 2.5 per cent of their total loans.