Bank Company Act, 1991 – Overview & Significance
The Bank Company Act, 1991 is a crucial legal framework that governs the banking sector in Bangladesh. It outlines the rules, regulations, and guidelines for bank operations, ensuring financial stability, transparency, and accountability. The Act has undergone multiple amendments to align with global banking standards.
Background of the Bank Company Act, 1991
Before 1991, Bangladesh’s banking sector faced several challenges, including weak regulatory control, financial irregularities, and lack of corporate governance. To strengthen the banking framework, the Government of Bangladesh enacted the Bank Company Act on August 14, 1991.
The Act was modeled to ensure smooth banking operations, protect depositors’ interests, and regulate financial institutions effectively.
Key Features of the Bank Company Act, 1991
1. Definition of a Bank Company
- The Act defines a Bank Company as a financial institution that conducts banking business, such as accepting deposits, granting loans, and facilitating monetary transactions.
2. Licensing & Regulation
- Any company operating as a bank must obtain a license from Bangladesh Bank.
- Bangladesh Bank has the authority to approve, cancel, or monitor banking licenses.
3. Capital & Reserve Requirements
- Banks must maintain a minimum capital to ensure financial stability.
- A certain percentage of profits must be allocated to statutory reserves.
4. Banking Supervision & Control
- Bangladesh Bank has the power to inspect, audit, and regulate all banking institutions.
- The Act allows Bangladesh Bank to take action against banks involved in fraud, mismanagement, or financial misconduct.
5. Loan & Credit Regulations
- The Act sets limits on loan distribution, particularly for directors and stakeholders.
- It ensures that loans are given transparently and without favoritism.
6. Anti-Money Laundering & Financial Crime Prevention
- Banks must follow strict anti-money laundering measures.
- Any suspicious transaction must be reported to Bangladesh Financial Intelligence Unit (BFIU).
7. Mergers, Acquisitions, and Liquidation
- The Act provides guidelines for bank mergers, acquisitions, and liquidation in case of financial distress.
- Bangladesh Bank has the authority to take control of struggling banks.
8. Rights & Protection of Depositors
- Ensures the security of public deposits.
- Provides mechanisms for compensation in case of bank failure.
Amendments & Modernization
The Bank Company Act, 1991 has been amended multiple times to adapt to modern banking trends. Notable amendments include:
✔ 2003 Amendment – Strengthened corporate governance in banking.
✔ 2013 Amendment – Introduced loan classification & risk-based supervision.
✔ 2018 Amendment – Tightened rules on non-performing loans (NPLs) and money laundering.
Significance of the Bank Company Act, 1991
✅ Ensures banking transparency & accountability.
✅ Strengthens customer protection & deposit security.
✅ Promotes financial stability & economic growth.
✅ Empowers Bangladesh Bank as the regulatory authority.
✅ Prevents financial fraud & money laundering.
Conclusion
The Bank Company Act, 1991 is a cornerstone of Bangladesh’s banking regulation. It ensures that banks operate fairly, securely, and efficiently while maintaining the trust of depositors and investors. As banking evolves, continuous amendments ensure that the banking system remains strong, resilient, and globally competitive.
For a comprehensive understanding of the Bank Company Act, 1991, you can refer to the following official documents:
- Bank Company Act, 1991 (PDF): This document provides the complete text of the act, detailing the regulations and guidelines for banking companies in Bangladesh. https://www.bb.org.bd/en/index.php/about/lawsnacts
- Bank Company Act, 1991 – FinDev Gateway: This resource offers insights into the provisions and implications of the act within the financial sector. https://www.findevgateway.org/paper/1991/01/bank-company-act-bangladesh-1991
- Bank and Financial Sectors Related Laws and Rules: This document includes the Bank Company Act, 1991, along with other related laws and regulations pertinent to the banking and financial sectors in Bangladesh. https://fid.portal.gov.bd/sites/default/files/files/fid.portal.gov.bd/page/7836838f_51fd_4d72_a1c4_f1e4a029447f/3.%20Bank%20and%20Financial%20Sectors%20Related%20%20Laws%20and%20Rules-LATESTACP.pdf
These references will provide you with detailed information on the legal framework and operational guidelines established by the Bank Company Act, 1991.
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