Bank Company Act 1991 Bangladesh: Key Provisions, 2023 Amendments and the 2026 Draft

Bank Company Act 1991 Bangladesh: the section-by-section position in 2026

The Bank Company Act 1991 Bangladesh lawmakers enacted on 4 May 1991 still decides who may run a bank, who may own and direct one, how much a bank may lend and to whom, and what the regulator may do when a board fails. It has been rewritten in stages, most heavily in 2013 and 2023, and a further amendment is in draft. For sponsors, directors, borrowers and foreign investors, the question is not what the Act said in 1991 but what each section requires today.

This guide works through the Act section by section: licensing under section 31, capital and reserves, shareholding caps, board composition and the family-director limit, insider and related-party lending under sections 26Ga and 27, single-borrower exposure under section 26Kha, the defaulter and wilful-defaulter regime in sections 27KaKa and 27Kha, and the supervisory and removal powers in sections 45 to 47 and 77A. It closes with the Bank Resolution Act 2026 and the status of the 2026 draft amendment.

Summary: The Bank Company Act 1991 is Bangladesh's core banking code. Section 31 requires a licence; sections 13 to 15KaKa set capital, ownership and board rules, including a 10 per cent shareholding cap, a maximum of three directors from one family and a 12-year tenure limit; sections 26Kha to 28 restrict large, insider and related-party lending; section 27Kha creates the wilful-defaulter regime; and sections 45 to 47 let the central bank direct banks, remove directors and dissolve boards.

Key point: Since the 2023 amendment, directors who knowingly allow a loan to a bank-related person in breach of section 26Ga are personally liable, jointly and severally, for its principal, interest and charges, and the loan must be recovered immediately. Insider-lending rules now reach directors' own assets.

At a glance

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Table of Contents

What the Bank Company Act 1991 Bangladesh regime covers

The Act is Act No. 14 of 1991, and section 123 repealed the Bank Company Ordinance 1991 that preceded it.[1] It has eight parts: definitions; the business, governance and supervision of bank companies, by far the largest; unlawful banking; offences; acquisition of bank companies; suspension and winding up; speedy disposal of winding-up proceedings; and miscellaneous provisions on deposits, nominations, lockers, penalties and rules.[1] The official consolidated text is in Bangla on the Laws of Bangladesh portal, with each amendment footnoted against the section it changed.

Bangladesh's equivalent of a banking regulation act

Bangladesh has no statute called a Banking Regulation Act. The Bank Company Act performs that role, as the Banking Regulation Act 1949 does in India: it is the prudential code for banks, while the Bangladesh Bank Order 1972 constitutes the central bank and the Bank Resolution Act 2026 deals with failure. Section 5 defines banking business as accepting public deposits, repayable on demand or otherwise and withdrawable by cheque, draft or order, for lending or investment.[1]

Statute and circulars

Many headline numbers are not in the statute. The Act fixes outer limits and lets the central bank set the operative figure: section 13 leaves capital to Bangladesh Bank, section 26Kha lets it set the single-borrower ratio below a ceiling, and section 49(1)(Cha) authorises binding directions on classification, provisioning, rescheduling and restructuring.[1] Our guide to banking law in Bangladesh maps the other statutes, and our note on Bangladesh banking regulations covers the circular framework. This article stays with the Act's text.

The amendment history: 2013, 2018 and 2023

Three amending Acts shaped the provisions that matter in 2026. Older commentaries and some bank policies still quote superseded figures, so check which amendment last touched a section before relying on it.

The Bank Company (Amendment) Act 2013 (Act No. 27 of 2013) rewrote the governance chapter. It substituted the capital provision in section 13 and its penalties, added the fit and proper disqualifications and board-size rules to section 15, inserted the significant-shareholder approval in section 14B, recast the conflict rules in section 18, and replaced the appeal to government against licence cancellation with a review by the Bangladesh Bank board.[1]

The 2018 amendment (Act No. 4 of 2018), passed on 16 January 2018, raised the number of one family's members allowed on a bank board from two to four and extended the tenure threshold from two consecutive three-year terms to nine consecutive years, with a three-year gap before re-election.[3]

The Bank Company (Amendment) Act 2023 (Act No. 13 of 2023), passed in June 2023, cut the family limit to three, extended the tenure cap to twelve years, required security from directors and their families for borrowing, and introduced the statutory wilful defaulter.[4] It also rewrote section 14A(1), section 15KaKa, section 27A, most of section 27KaKa and section 28, inserted sections 27Kha and 77A, widened section 26Ga and added definitions of family, controlled entity, banking group and wilful defaulter to section 5.[1]

Licensing under section 31

Section 31(1) provides that no person, institution or company may carry on banking business in Bangladesh without a licence from Bangladesh Bank; the 2013 amendment widened the prohibition beyond companies.[1] Section 109(1) makes unlicensed banking, or banking after cancellation, punishable with up to seven years' imprisonment and a fine of Tk 5 lakh to Tk 50 lakh.[1]

Licensing conditions

Under the Bank Company Act 1991 Bangladesh Bank must be satisfied, by inspection or otherwise, that the applicant can pay present and future depositors in full and that its affairs are not, and are not likely to be, conducted against their interests.[1] A bank incorporated abroad must also pass a reciprocity test in section 31(4)(Ga). Section 31(2) lets Bangladesh Bank attach any condition it thinks fit, and section 32 requires its approval to open or relocate a place of business.[1]

The statute sets no capital figure for new licences. Bangladesh Bank raised the paid-up capital floor for new commercial banks to Tk 500 crore from Tk 400 crore, initially leaving existing banks outside it.[11] There is no statutory timetable, and the process from incorporation through feasibility review and fit and proper testing of sponsors typically takes 18 to 24 months or more.[14]

Cancellation and review

Section 31(5) allows cancellation if the bank stops banking in Bangladesh, breaches a licence condition or ceases to meet the section 31(4) conditions, but Bangladesh Bank must first allow time to comply where the delay would not harm depositors or the public interest. Within thirty days of notice, an aggrieved bank may apply to the Bangladesh Bank board for review.[1] Beyond that, the route is a writ petition to the High Court Division.

Capital, reserves and dividends

Section 13(1) requires every bank to maintain capital in the amount, ratio and manner Bangladesh Bank prescribes.[1] Under the Basel III framework, that is a minimum capital to risk-weighted assets ratio of 10 per cent plus a 2.5 per cent conservation buffer.[14] Section 13(2) bars a bank from doing business after two consecutive years in which paid-up capital, statutory reserve and retained earnings fall below the gazetted minimum, extendable by one year.[1]

Section 13(7) is graduated. Under section 13(7) of the Bank Company Act 1991 Bangladesh Bank may order a shortfall cured within up to one year; if it persists, it may prohibit new deposits and new loans and impose a fine of Tk 20 lakh to Tk 1 crore plus up to Tk 50,000 a day.[1] Section 14 requires capital to consist of ordinary shares only and caps any single shareholder other than the government at 5 per cent of total voting rights.[1]

Statutory reserve and dividends

Section 24 requires at least 20 per cent of profit to go to a statutory reserve, before any dividend, until the reserve with share premium equals paid-up capital. Section 22 bars dividends while capitalised expenses and losses remain unwritten-off or while capital under section 13(1) is not maintained.[1] Circulars add more: from dividends for the year ending 31 December 2026, a bank needs paid-up capital of at least Tk 2,000 crore to pay any cash dividend, and cash may be no more than half the total declared.[12] Section 33 sets the statutory liquidity requirement and section 25 the cash reserve.[1]

Ownership: shareholding caps and significant shareholders

Section 14A(1), substituted in 2023, prohibits concentration of a bank's shares and provides that no person, institution, company or family, directly or indirectly, alone or jointly, may acquire more than 10 per cent.[1] A buyer must, if asked, swear that the shares are not held as a nominee or benami; if that proves false, all the declarant's shares in the bank are forfeited in favour of Bangladesh Bank.[1]

Section 14B adds a lower threshold: nobody may become a significant shareholder, meaning a holder of more than 5 per cent, without prior approval.[1] "Family" in section 5 means a spouse, father, mother, son, daughter, brother, sister and dependants, so family holdings aggregate for both tests.[1] Acquirers and foreign strategic partners should build both thresholds into the timetable, because an unapproved stake above 5 per cent is unlawful when acquired.

Board composition, family directors and tenure

Approval and fit and proper

Under section 15(4) of the Bank Company Act 1991 Bangladesh Bank must approve the appointment or reappointment of every director, managing director and chief executive of a bank other than a specialised bank, and none may be released, dismissed or removed without its prior approval.[1] Section 15(6) disqualifies anyone with less than ten years' management, business or professional experience; convicted of a crime or involved in forgery or financial crime; subject to adverse judicial observations; penalised by a financial regulator; associated with a company whose licence was cancelled or which was wound up; in default personally or through an interested concern; or adjudged insolvent.[1]

Board size and independent directors

Section 15(9) caps a board at 20 directors, at least three independent, or at least two if the board is smaller. An independent director must be independent of management and shareholders with no past, present or future interest in the bank or any bank-related person, and Bangladesh Bank may regulate their number, fees and appointment.[1]

Family directors: the limit is three

Section 15(10) provides that, notwithstanding any other law or the articles, no more than three members of one family may be directors of a bank at the same time.[1] The limit was two after 2013 and four after 2018.[3] [4] If someone must step down, section 15(11) leaves the choice to agreement and, failing that, a lottery at a board meeting.[1]

Tenure: twelve consecutive years

Section 15KaKa caps consecutive service as a director of one bank at 12 years, followed by a three-year gap before reappointment, and counts any break shorter than three years as part of the consecutive period.[1] Section 15Ka adds that a chief executive post may not stay vacant for more than three consecutive months, failing which an administrator may be appointed at the bank's cost.[1]

Section 18: benefits and conflicts

A director may take only meeting fees and sums fixed unanimously by the board for special duties. Directors, the chief executive and officers two tiers below must disclose business and family interests to the board annually and declare links to significant contracts. An interested director must disclose, abstain and is not counted in the quorum; on non-disclosure a court may void the contract and the person may be suspended for up to a year.[1]

Loans to directors and related parties

Insider lending is where many of Bangladesh's bank losses began. The Act attacks it through security, approval, an aggregate cap and personal liability.

Section 27: secured lending and disinterested approval

Section 27(1) bars lending against a bank's own shares and, subject to section 26Ga(2), any credit to a director or a director's family member other than a secured loan. It also bars unsecured credit to an interested firm or private company in which the bank, a director or family member is a significant shareholder, director, owner or partner or which they control, and to a public company they control or in which they hold at least 20 per cent of voting power.[1] Section 27(2) requires approval by a majority of the directors other than the director concerned, and "security" means eligible collateral as Bangladesh Bank defines it.[1]

The managing director must file a monthly return of loans to companies in which the bank, its directors or their families are interested. Under section 27(5) of the Bank Company Act 1991 Bangladesh Bank may stop further lending of that kind and order recovery within a fixed time if depositors have been harmed.[1]

Section 26Ga: the related-party cap

Section 26Ga bars dealing with a bank-related person on terms better than those for unrelated customers, caps total credit to bank-related persons at 10 per cent of Tier-1 capital, and requires prior board approval for each such loan above any exempt threshold.[1] Bank-related persons include directors, the chief executive, significant shareholders, their families, anyone with control or significant influence, and companies they control. A loan made in breach must be recovered immediately, and directors who knew of the breach are individually and jointly liable for the whole debt.[1]

Section 28: waiver of interest

Since 2023, section 28 forbids waiving interest or profit on credit to directors, their families or interested concerns without Bangladesh Bank's prior approval. A waiver in breach is void, and each director or officer responsible faces up to three years' imprisonment, a fine of up to Tk 3 lakh, or both.[1] Section 28A confirms that a write-off does not bar recovery.

Section 27A: directors of borrowing companies

Section 27A is the provision borrowers most often miss. A director of a debtor company cannot resign, and cannot transfer or sell shares, without the approval of the lending bank's board or senior authority.[1] A sponsor leaving a borrower group needs lender consent, not just a resolution and transfer form. Loan documentation and security are covered in our guide to bank loan laws in Bangladesh.

Single-borrower and large-loan exposure

Section 26Kha(1) provides that total credit to any person, institution or group may not exceed the percentage of capital Bangladesh Bank prescribes, and that the limit may in no case exceed 25 per cent. Section 26Kha(2) caps aggregate large loans as a share of total lending, section 26Kha(3) allows exemptions for government-related and short-term interbank exposure, and a "group" includes anyone whose financial health or liabilities pass to the borrower.[1]

The operative figure has moved. Before 2022 a bank could lend 25 per cent of capital to one borrower, split into 15 per cent funded and 10 per cent non-funded; the 2022 rules tightened this to a 15 per cent cap. A circular of 14 May 2026 restored 25 per cent for a single borrower or group, suspended the 15 per cent cap until 30 June 2028, and until 30 June 2027 counts only 25 per cent of letters of credit and guarantees against the limit.[7] In March 2026, Bangladesh Bank had already allowed case-by-case approvals above the ceiling for LPG importers.[8]

The May 2026 circular ties large-loan headroom to asset quality until 31 December 2027: a bank with a non-performing loan ratio below 10 per cent may allocate up to 50 per cent of total loans to large borrowers, one above 30 per cent only 30 per cent.[7] Section 29 underpins this by letting Bangladesh Bank set binding lending policy on loan limits, purposes, security and margins.[1] For corporate groups, the group definition, not the borrowing entity, drives the calculation.

Defaulters and wilful defaulters: sections 27KaKa and 27Kha

The Act runs two lists that are often confused: section 27KaKa covers defaulting borrowers generally, and section 27Kha, inserted in 2023, covers wilful defaulters.[1] CIB reporting, rescheduling and court proceedings are covered in our guide for a loan defaulter in Bangladesh; this section covers the statutory machinery.

Section 27KaKa: the defaulter list

Under section 5(GaGa), a defaulter is a debtor whose own facility, or that of an interested concern, has been overdue for six months under Bangladesh Bank's definition; a concern is interested only if the person is its director, holds over 20 per cent of its shares or guarantees its loan.[1] Section 27KaKa requires banks to report defaulters, bars new credit to them and requires lenders to sue. A group company is not tainted by a related defaulter that is not wilful, or where Bangladesh Bank accepts there is reasonable cause, and may then borrow with its prior approval.[1]

Who is a wilful defaulter

Section 5 defines a wilful defaulter as a defaulter who fails to repay despite the ability to pay, obtains credit by fraud, deception or false information, diverts a loan to another purpose, or transfers the security without the lender's written consent, whether for itself, a family member or an interested person.[1] A March 2024 circular required each bank to set up an identification unit, gave it 30 days from a default to decide, and took effect from 1 July 2024.[9]

Procedure, appeal and consequences

Under section 27Kha of the Bank Company Act 1991 Bangladesh Bank issues the identification rules, the borrower must be heard before the name is finalised, and the bank must notify the borrower within seven working days. An appeal lies to Bangladesh Bank within 30 days, and its decision is final.[1] Listed persons may face travel bans and refusal of trade licences and of company registration with the BSEC and RJSC, cannot be bank or financial institution directors for up to five years after release from the list, and a sitting director's office may be declared vacant.[1]

If no appeal succeeds, the bank must demand full repayment within two months and then, with board approval, file a criminal case, which does not interrupt recovery in the Artha Rin Adalat. A bank that breaches section 27Kha faces a fine of Tk 50 lakh to Tk 1 crore plus up to Tk 1 lakh a day.[1] Evidence of inability rather than unwillingness to pay belongs at the hearing stage.

Supervision and removal powers: sections 45, 46 and 47

The Act gives the central bank a ladder of powers, from inspection to directions, removal of individuals, supersession of the board and compulsory amalgamation. Which rung is used determines the procedural protection available.

Directions: sections 44, 45 and 49

Section 44 authorises inspection, and section 44Kha allows examination of the accounts of those dealing with a bank. Under section 45 of the Bank Company Act 1991 Bangladesh Bank may issue binding directions in the public interest, for monetary and banking policy, to prevent conduct harmful to depositors or the bank, or to secure proper management, and since 2013 this applies equally to state-owned and specialised banks.[1] Section 49 adds powers to prohibit classes of transaction, place observers at board meetings and order management changes after an inspection.[1]

Section 46: removal of individuals

Section 46(1), substituted in 2023, allows the regulator, recording reasons, to remove a chairman, director or chief executive to prevent harmful activity, misuse of funds through interested transactions, money laundering or terrorist financing, or to secure proper management.[1] A show-cause opportunity is required, but where delay would be harmful the person can be suspended at once and a temporary appointee installed for up to a year. A removed person is barred for three years from managing any bank or financial institution, cannot claim compensation, and may be pursued by the bank for losses under section 85.[1]

Section 47: board dissolution

Section 47 allows the board to be dissolved by reasoned order if its activities harm the bank or its depositors, or on any section 46(1) ground, for a total of no more than two years, with Bangladesh Bank appointees exercising its powers.[1] By 20 August 2025, Bangladesh Bank had reconstituted the boards of 15 banks since 15 August 2024.[13]

Sections 77 and 77A: moratorium and compulsory amalgamation

Section 77 lets the government, on Bangladesh Bank's application, impose a moratorium on a bank's business and on proceedings against it, during which a reconstruction or amalgamation scheme may reduce members', depositors' and creditors' claims. Section 77A, added in 2023, allows prompt corrective action and, if a recovery plan fails, compulsory amalgamation or reconstruction.[1]

Bank resolution and the Bank Resolution Act 2026

The Bank Resolution Ordinance 2025 (Ordinance No. 19 of 2025) was replaced by the Bank Resolution Act 2026 (Act No. 88 of 2026), dated 10 April 2026, whose section 74 repeals the ordinance and saves action taken under it.[2] Our banking law guide covers the resolution tools and the five-bank merger; this section deals only with the interface.

Section 8 of the resolution statute keeps the Bank Company Act and its directions applicable to a bank in resolution for regulatory requirements. Section 14 allows resolution where a bank is or is likely to become non-viable, including where it has breached Bank Company Act capital or liquidity requirements so seriously that its licence would be cancelled, or where ultimate beneficial owners holding 2 per cent or more have fraudulently used its funds.[2] At least one resolution power must be used within 30 days of notice.[2] On 9 September 2026 Parliament repealed section 18A, which had let pre-resolution shareholders apply to reacquire a resolved bank.[10]

The 2026 draft amendment and where it stands

In November 2025, Bangladesh Bank's draft ordinance proposed cutting family directors to two and tenure to six years, a 15-member board half of it independent, barring ministers, MPs and local government representatives, raising required experience to fifteen years and widening "family" to include in-laws.[5] The interim government left office without issuing it.[6]

The revised draft reviewed on 20 September 2026 retains three family directors; the Financial Institutions Division initially favoured nine years' tenure and settled on a maximum of three independent directors, and the proposal to remove directors whose affiliates default was dropped. It would also let Bangladesh Bank appoint an administrator without dissolving a board. As of mid-October 2026 the draft must return to Bangladesh Bank and then go to Cabinet.[6] Until an amending Act is gazetted, the 2023 figures apply; boards planning succession should also model a nine-year scenario.

Compliance steps for banks, sponsors and borrowers

Most enforcement follows an acquisition, appointment or loan that could have been structured correctly at the outset. The sequence below suits a sponsor group entering or restructuring a bank, and much of it applies to groups borrowing from banks in which they have an interest.

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Finance companies follow a parallel statute, explained in our guide to the NBFI licence in Bangladesh.

Mistakes to avoid under the Bank Company Act 1991 Bangladesh regime

Splitting family holdings. Sections 14A and 14B aggregate direct and indirect family holdings, and a false non-benami declaration forfeits the entire stake.[1]

Treating tenure breaks as resets. A break shorter than three years counts towards the 12-year cap.[1]

Approving insider loans by ordinary vote. A loan to a director-linked concern needs disinterested-majority approval, eligible collateral and headroom within the 10 per cent Tier-1 cap; missing any one exposes knowing directors to the whole debt.[1]

Ignoring section 27A on exit. Resignation from a borrower's board, or a share sale, is ineffective without lender approval.[1]

Missing the wilful-defaulter hearing. The case against classification must be made before the name is finalised, and the appeal filed within 30 days.[1]

How TRW advises on the Bank Company Act

TRW advises sponsors and investors on bank licensing, shareholding approvals, director appointments and fit and proper submissions, related-party lending and board conflict procedures. We act for banks, directors and borrowers in show-cause proceedings under sections 46 and 47, wilful-defaulter appeals under section 27Kha and writ petitions against regulatory orders. See our banking and finance practice, our banking and finance litigation team and our corporate governance practice.

Frequently asked questions

What is the Bank Company Act 1991 Bangladesh banks operate under?

It is Act No. 14 of 1991, the principal statute regulating banking companies. It governs licensing, capital, ownership, boards, lending limits, defaulters, supervisory powers and winding up.[1]

Does Bangladesh have a Banking Regulation Act?

Not by that name. The Bank Company Act 1991 performs that role, with the Bangladesh Bank Order 1972, central bank circulars and, for failing banks, the Bank Resolution Act 2026.[1] [2]

Which section requires a banking licence?

Section 31. Unlicensed banking is punishable under section 109 with up to seven years' imprisonment and a fine of Tk 5 lakh to Tk 50 lakh.[1]

How many family members can be directors of a bank?

No more than three at the same time under section 15(10), as amended in 2023. The 2026 draft amendment keeps three but has not been enacted.[1] [6]

How long can a bank director serve?

Up to 12 consecutive years under section 15KaKa, then a three-year gap. Breaks shorter than three years count towards the 12 years.[1]

Can a bank lend to its own directors?

Only on a secured basis, with approval of a majority of the other directors, on ordinary terms and within a related-party cap of 10 per cent of Tier-1 capital under sections 26Ga and 27.[1]

What is the single-borrower exposure limit?

Section 26Kha sets a ceiling of 25 per cent of capital. A May 2026 circular set the operative limit at 25 per cent and suspended the 15 per cent cap until 30 June 2028.[1] [7]

Which section deals with wilful defaulters?

Section 27Kha, inserted in 2023, with the definition in section 5. Section 27KaKa covers ordinary defaulter lists and the bar on new credit.[1]

Can Bangladesh Bank remove a bank director?

Yes. Section 46 allows removal after a show-cause opportunity, with a three-year bar from bank management; section 47 allows dissolution of the whole board for up to two years.[1]

Has the Bank Company Act been amended in 2026?

Not as of 20 October 2026. A draft was reviewed on 20 September 2026 and must go to Bangladesh Bank and then Cabinet. The separate Bank Resolution Act 2026 was enacted in April 2026.[2] [6]