Govt to increase capitals of banks gradually

DHAKA, The government is planning to implement a

number of reform initiatives in the financial sector including to increase

gradually the authorized and paid up capitals of banks.

Finance Minister AHM Mustafa Kamal revealed this while placing the

proposed national budget for FY20 in parliament today.

He said the government has initiated and implemented various activities

for the reform and development of banking, capital market, insurance and

other financial sectors.

About the reform initiatives, Kamal said the Bank Company Act would be

amended so that the bank management, all components of revenue management

(VAT, Customs and Income Tax) can function as usual, without facing any

conflict with other laws.

Bank Company Act will be amended so that amalgamation, merger and

absorption of banks can be legally processed, if required, he said adding

that stern measures would be taken against the willful defaulters of bank


The Finance Minister said the government has been working to bring down

the interest rates of bank loans to single digits with a view to making the

industries and businesses more competitive.

Necessary amendments will be brought to the Bank Company Act to

modernize the functions of holding companies and subsidiary companies, he


Kamal said the government did not observe any mentionable reform

initiative in some areas, especially in the banking sector from the beginning

as there was no exit route for the loan recipient if he or she fails to repay

the bank loan.

This time around, we have arranged an exit for the loan recipient

through effective insolvency and bankruptcy laws. We have heard for long

about establishing a Bank Commission for bringing discipline in the banking

and financial sector. We would discuss with all concerned in this matter and

do the needful, he said.

The Finance Minister said the government observed that, no mentionable

instruments were used in the financial sector and this has led banks to give

long term loans by collecting short term deposits.

This creates a mismatch. It may turn out to be critical sometimes. We

will take necessary measures to remove such kind of mismatch. We will

encourage instruments like Wage Earners' Bond, venture capital, treasury bond

including a vibrant bond market. he said.

Source: Bangladesh Sangbad Sangstha (BSS)