Bangladesh Bank yesterday opposed the finance ministry's move to amend the banking law, which has restricted the tenure of a director to six years.

Bangladesh Association of Banks in October last year demanded the director's tenure be extended to 10-15 years.

The opposition from the central bank came at a meeting chaired by Banking Division Secretary Yunusur Rahman on planned amendments to the law.

The BB said the governance of the private banks would be affected if the law is amended, as the banks do business with a huge amount of money from depositors, an official of the finance ministry said.

In the backdrop of various irregularities by the bank directors, the existing Banking Companies Act was revised in line with the advice of the International Monetary Fund and international best practices, the central bank said. 

The government had been considering tightening some provisions in the law for over a decade to rein in irregularities and indiscipline in the sector.

The amendments did not get through until 2013, when the IMF tagged the changes as one of the conditions for receiving $1 billion under the Extended Credit Facility or ECF.

Later, the banks proposed relaxation of the amendments made to the law in 2013 after Bangladesh successfully completed the Manila-based donor's ECF programme.

On the new move for amendments, a high official of the Banking Division said: “We are just stocktaking. No decision has yet been taken about the amendment.”

The central bank has given written opinion point-by-point about the amendments sought by the BAB, officials said.

In October last year, a BAB team led by its Chairman Nazrul Islam Mazumder placed their demands for fresh revision of different provisions of the law to Finance Minister AMA Muhith and presented the logic behind the demands, an official of the Banking Division said.

As per the original Banking Companies Act, the shareholders should elect the directors from among themselves at annual general meetings.

But according to the new law approved in 2013, the banks must take approval from the central bank for the appointment of the directors.

The BAB said the law regarding the six-year tenure of a director may be applicable to the directors coming from outside, like independent directors, appointed directors or ex-officio directors. The sponsor-directors will be deprived of their right to wealth or property if the law is applied for them as well, the association said.

Since the sponsors have invested their money to make up the paid-up capital of the bank, it would not be judicious to deprive them of their position and wealth simultaneously, BAB said.

The BAB also proposed amendments to the definition of family in the law.

Under the act, family means spouse, parents, siblings, children and any person dependent on the sponsor director. But the BAB says if the person is elderly and fully independent or has separate business, he/she should not be counted as family.