Restrictions on Loans and Advances

1) No banking company:-
a) Shall make any loans or advances on the security of its own shares;
b) Shall, without security, make any loan or advance to any of the following persons or institutions,
or make any loan or advance in cases where those persons or institutions are guarantors-
i) any of its directors;
ii) any member of the family of any of its directors;
iii) any commercial institution or private company in which the banking company itself, or any of
its directors or any member of the family of any of its directors is involved as director, owner
or shareholder;
iv) any public limited company which is in some way or other controlled by the company itself, or
any of its directors or any member of the family of any of its directors, or the shares of which
are held by any of the said persons to such an extent as to give it control of no less than twenty
per cent of the voting rights.
2) No banking company shall give to any of the following persons or institutions any loan or advance
without the approval of the majority of the directors, excluding the director concerned,-
a) Any of its directors; or
b) Any person, commercial institution or company in which any of the directors of the said
banking company is interested as partner, director or guarantor.
Explanation: - For the purpose of this subsection "director" shall include the director's wife, husband,
father, mother, son and daughter.
3) No banking company shall, without the previous permission in writing of the Bangladesh Bank, give
to any person or institution, directly or indirectly, any benefit the aggregate value of which exceeds-
a) 15% of the total capital of the said banking company; or
b) 25% of the total capital of the said banking company where the security of the said benefits
has been provided by such financial securities as might be easily put on the market for sale.
Explanation: - (1) "Benefit" shall mean any loan, advance or any other loan benefit, or financial
guaranties or any such obligation as any banking company has taken on in behalf of any person or
institution; and - (2) "Total capital" shall mean paid-up capital and reserve fund including those various
kinds of security which are in accordance with the provisions of the Bangladesh Bank under section (13),
certificates of indebtedness, deposits, obligations etc. .
4) Every banking company shall, before the close of the month to which the report relates, submit to the
Bangladesh Bank a report in the prescribed form and manner, and in the said report the following
particulars shall be mentioned:-
a) all loans and advances granted by it to companies, private as well as public, in which the
banking company or any of its directors is interested as director; and
b) all loans and advances granted by it to public companies in which the banking company or
any of its directors is interested as managing agent or guarantor.
5) If on examination of any report submitted under subsection (4) it appears to the Bangladesh Bank that
any loans or advances referred to in that subsection have been granted to the detriment of the interests
of the depositors of the banking company, the Bangladesh Bank may, by order in writing, prohibit the
banking company from granting any such further loans or advances or impose restrictions on the
granting of such loans or advances, and may direct the banking company to secure the repayment of
loans or advances granted in this way within such time as may be specified in the order.