Regulating the Future: Evaluating the 2023 Amendments to the Bank Company Act and the Emergence of Digital Banking in Bangladesh

Abstract 

This doctrinal research examines the recent amendments to the Bank Company Act 1991 and the  concurrent emergence of digital banking in Bangladesh through a detailed analysis of primary  legal sources—statutes, case law, and Bangladesh Bank circulars—and secondary materials including academic articles, government reports, and reputable newspaper analyses. Using a  qualitative legal methodology, the paper critically evaluates the implications of the 2023  amendments for corporate governance, accountability, and regulatory oversight, alongside the  legal foundation of digital banking under Bangladesh Bank’s 2023 policy framework. It argues  that while the reforms are portrayed as progressive, they risk reinforcing entrenched governance  deficiencies. The study concludes that sustainable transformation in Bangladesh’s financial sector  requires not only technological innovation but also legislative and institutional integrity. 

1. Introduction 

1.1 Context of Financial Sector Transformation in Bangladesh The financial sector of Bangladesh stands at a defining juncture. On one hand, the Bank Company  (Amendment) Act 2023 introduced extensive revision to corporate governance, director tenure,  and banking oversight structures. On the other, the Bangladesh Bank’s 2023 Digital Banking  Policy heralded a new era in financial innovation, expanding access to technology – driven banking  platforms and cashless transactions. Collectively, these developments single the State’s ambition  to modernize its financial system, aligning it with global standards while fostering domestic  inclusion and efficiency. Yet, beneath this rhetoric lies an unresolved tension between reform and  regulatory capture. 

1.2 Overview of the Bank Company Act and Digital Banking 

The Bank Company Act 1991 defines a “banking company” as any company carrying on banking  business in Bangladesh licensed under section 31 of the Act.¹ The Act provides the principal statutory framework for commercial banking operations, including 

licensing, corporate structure, and regulatory oversight. With the digital transition, banks have  extended their services through online platforms, mobile applications, and algorithmic financial  tools. However, the absence of digital-specific provisions in the parent Act raises questions about  its sufficiency in the age of fintech and artificial intelligence. 

2. Recent Amendments to the Bank Company Act 1991 

2.1 Timeline of Amendments (2013–2023) 

Between 2013 and 2023, the Act was amended multiple times. The 2023 Amendment extended  the tenure of bank directors from 9 to 12 years and authorised Bangladesh Bank to initiate forced  mergers among financially distressed banks.² These amendments, enacted by Parliament in June  2023, were justified as part of a governance reform agenda.³ Yet, the same reform simultaneously  diluted accountability by extending familial control and weakening independent oversight. 

2.2 Key Changes and Their Implications 

The extended director tenure fosters power concentration and reduces institutional checks.⁴  Allowing up to three family members on a single board sustains familial dominance,  undermining independent decision-making.⁵ Despite the inclusion of provisions against wilful  defaulters, enforcement remains sporadic. Weak monitoring mechanisms and political patronage  have contributed to Bangladesh’s default loan ratio rising to 16.93 per cent in 2024, with IMF  estimates suggesting an even higher effective rate.⁶ 

Such figures indicate that legal amendments alone cannot cure structural corruption; rather, they  risk legitimising it under the guise of modernisation. 

3. Emergence of Digital Banks in Bangladesh 

3.1 Bangladesh Bank’s 2023 Digital Banking Policy 

In June 2023, Bangladesh Bank introduced the Guidelines for Digital Bank Licensing and  Operation, mandating a minimum paid-up capital of BDT 125 crore sourced exclusively from  sponsors’ own funds.⁷ Digital banks are restricted from operating physical branches and from 

financing trade or large-scale industrial projects. This framework reflects the regulator’s cautious  approach—prioritising stability and risk containment over rapid liberalisation. 

3.2 Legal Foundation and Operational Guidelines 

Although the Bank Company Act 1991 remains the parent legislation, the digital banking model  derives operational legitimacy from Bangladesh Bank’s regulatory circulars and policy  instruments, rather than statutory amendment. The 2023 amendment to the Act did not address  digital banking, highlighting a legislative-regulatory disconnect between conventional and  digital systems. 

3.3 Limitations and Regulatory Constraints 

While digital banks are expected to expand financial inclusion, several limitations persist: lack of  rural digital infrastructure, low financial literacy, and absence of comprehensive cybersecurity  legislation. Consequently, the benefits of digitisation may remain urban-centric, potentially  widening socio-economic divides. 

4. Case Studies and Legal Precedents 

4.1 BRAC Bank: A Model of Institutional Governance 

BRAC Bank stands as a leading example of ethical and institutional governance. Unlike many  privately-owned banks, BRAC Bank’s ownership is institutional, ensuring greater transparency.  In 2023, it recorded a profit of BDT 8.27 billion, a 35 per cent increase from 2022, without  allegations of irregularities.⁸ Its model underscores the value of professionalised oversight and  separation of ownership and control. 

4.2 ASF Rahman v Bangladesh Bank (52 DLR (AD) 2000) 

In ASF Rahman and others v Bangladesh Bank and others,⁹ the petitioners—directors of Beximco  Holding Ltd—were guarantors for corporate loans. When the loans defaulted, Bangladesh Bank,  under section 17 of the Act, directed that the petitioners be removed as directors of other banks. 

The writ petition challenging this directive was dismissed as premature for non-compliance with  section 17(2). The Appellate Division upheld Bangladesh Bank’s regulatory competence,  affirming that guarantors bear co-extensive liability with borrowers. This decision illustrates  judicial deference to regulatory authority and the importance of procedural compliance under  the Act. 

4.3 Lessons from Judicial Interpretation 

The case reinforces that the Bank Company Act grants wide supervisory powers to the central  bank, including actions against directors compromising the integrity of the banking system. It also  affirms that corporate accountability and prudential regulation remain cornerstones of financial  governance. 

5. Policy and Legal Perspectives 

5.1 Evaluation of Legal Adequacy for Digital-Era Banking 

Despite its amendments, the Act remains ill-suited to the realities of digital finance. It lacks  provisions addressing data protection, cybersecurity, AI-driven financial decisions, or cross border fintech operations. Without statutory adaptation, Bangladesh risks regulatory  obsolescence, where innovation outpaces law. 

5.2 Issues of Accessibility, Equity, and Infrastructure 

Digital banking, while transformative, risks excluding rural communities. Broadband  penetration and digital literacy remain limited, and the absence of physical branches may alienate  low-income clients.¹⁰ The vision of a “cashless society” must therefore reconcile with  technological inequality. 

5.3 Recommendations for Policy Reform 

1. Legislative Modernisation: Introduce a dedicated Digital Banking Act defining digital only banks, data-handling duties, and consumer-protection standards.
2. Governance Enhancement: Limit director tenure to six years and restrict related-party  appointments to ensure genuine independence. 
3. Inclusion Mechanisms: Establish government-private partnerships for digital literacy  and rural connectivity. 
4. Regulatory Capacity: Strengthen Bangladesh Bank’s enforcement powers, including  merger oversight and sanction authority. 
5. Conclusion 

The Bank Company (Amendment) Act 2023 and the rise of digital banks represent a dual  narrative—reform and regression. While Bangladesh has taken commendable steps towards  digital modernisation, its legislative framework remains tethered to traditional paradigms. Unless  governance integrity and regulatory autonomy are fortified, the benefits of digitisation may be  captured by existing elites rather than democratised across society. Thus, technological  transformation must be anchored in legal transparency, institutional accountability, and  equitable access. 

Reference(S):  

1. Bank Company Act 1991 (Bangladesh) s 31. 
2. Bank Company (Amendment) Act 2023 (Bangladesh) s 15. 
3. ‘Bank Company (Amendment) Bill 2023 Passed Amid Opposition Walkout’ The Business Standard (Dhaka,  21 June 2023) https://www.tbsnews.net/bangladesh/bank-company-amendment-bill-2023-passed-amid opposition-walkout-654082 accessed 27 October 2025. 
4. ‘Why Amendments to Bank Company Act Fail to Improve Governance’ The Business Standard (Dhaka, 8  July 2023) https://www.tbsnews.net/analysis/why-amendments-bank-company-act-fail-improve governance-661866 accessed 27 October 2025. 
5. ‘Maximum Three Family Members Will Be Allowed on Bank Board as Govt Approves Amendments’  bdnews24.com (Dhaka, 28 March 2023) https://bdnews24.com/business/og71ycvoep accessed 27 October  2025. 
6. International Monetary Fund, Bangladesh: Financial Sector Assessment 2024 (IMF Report No. 24/112,  2024) 10. 
7. Bangladesh Bank, Guidelines for Digital Bank Licensing and Operation (June 2023) para 4.
8. ‘BRAC Bank Reports Record Profit in 2023’ The Financial Express (Dhaka, 15 March 2024)  https://thefinancialexpress.com.bd/trade/brac-bank-profit-2023 accessed 27 October 2025.
9. ASF Rahman and others v Bangladesh Bank and others [2000] 52 DLR (AD) 170 (Bangladesh). 10. World Bank, Bangladesh Digital Economy Diagnostic Report (2023) 25–27.