Non-banks’ directors cannot appoint representative in other non-banks

The directors of non-bank financial institutions (NBFIs) will not be allowed to appoint their representatives as directors to boards of other non-banks, according to a Bangladesh Bank notice issued today.

Similarly, the companies, which have already appointed directors at NBFIs, will not be permitted to appoint representative directors to more than one non-bank.

In addition, the individuals and companies that have shares with a non-bank will not be able to appoint representative directors to more than one NBFI.

A Bangladesh Bank official said some individuals and entities, who have directorship at a non-bank, are now appointing representative directors to several NBFIs in order to control the institutions.

This has put an adverse impact on the corporate governance of the NBFI sector.

The country's NBFI sector has been facing a wide range of scams in recent years, which is why the central bank has taken several initiatives to fortify the rules and regulations there.

The central bank in its several probes revealed that a good number of directors of NBFIs had been involved in siphoning off funds from NBFIs. 

Under such a situation, the central bank has already restructured and dissolved the boards of a number of NBFIs.