BB invites new banks’ applications

September 28, 2011

Bangladesh Bank on Tuesday invited applications from interested sponsors for establishing new private commercial banks in the country.
The central bank, which took the decision to allow setting up of more banks apparently under political pressure, invited the sponsors to submit their applications by November 30.
Although the BB did not mention in the notice inviting applications how many banks would be allowed, central bank officials said licences for around 3-5 banks might be issued.
The notice said interested sponsors would have to prepare and submit the applications according to the instructions provided in the Guidelines to Establish Banking Company in Bangladesh, which was unveiled on Tuesday, along with a non-refundable bank draft of Tk 10 lakh.
As per the terms and conditions, the bank’s paid up capital should not be less than Tk 400 crore and the share capital will be formed with ordinary shares only.
As per the guideline to establish banking company the ratio of urban and rural bank branch of the new bank has to be 1:1 and the bank has to ensure finance at least 5 per cent of its total lending into agricultural sector or as per instruction issued by BB from time to time.
The notice said that the initial minimum paid up capital of Tk 400 crore will be provided by sponsors of the proposed bank, the minimum shareholding stake of each sponsor will be Tk 1 crore and the maximum will be 10 per cent of the proposed bank’s share capital.
This ceiling of 10 per cent applies to an individual, company or family member, either personally, jointly or both.
‘If an individual or any member of his or her family is or had been a loan defaulter with a bank or financial institution at any time during the past five years shall not be eligible to apply as a sponsor of the proposed bank,’ said the guideline to establish banking company.
‘Competence, integrity and qualifications of the sponsors of the proposed bank becoming the first directors shall be evaluated. The evaluation process shall include background checks on whether previous activities, including regulatory or judicial judgments, raise doubts concerning their competence, sound judgment, or integrity,’ said the BB notice.
According to the guideline 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 sponsors’ share amount.
The sponsors’ shares shall not be transferred within a period of three years from the commencement of the business, without permission from Bangladesh Bank.
The member of the board of directors shall be restricted to 13 while the maximum number of directors from a family shall be restricted to two in case of the total shareholding of that family exceeds 5 per cent and one director if the total shareholding is up to 5 per cent.
The chief executive officer of the proposed bank shall have at least 15 years of experience in the banking profession.
The BB board recently decided to allow setting up more banks after the finance ministry had asked the central bank to start process to issue licences for new banks amid hectic lobbying by leaders of ruling party Awami League to get licences.
The finance minister, AMA Muhith, told reporters in July that it was a political decision of the government to allow more banks.
Leading economists, senior bankers and International Monetary Fund opposed the government move saying that the existing 47 banks were enough considering the size of the country’s economy and the central bank’s monitoring capacity. But the government bowing down to the political pressure ignored the opposition.

-With New Age input

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