Govt contemplates ‘Payment and Settlement Systems Act-2021’

To bring evolving business transactions under an umbrella, the government is contemplating a ‘Payment and Settlement Systems Act-2021, officials said.

When promulgated, loan defaulter directors of any financial institutions will not be able to do a business, they added.

The Financial Institutions Division of the ministry of finance has finalised the ‘Payment and Settlement Systems Act-2021’.

An official of the finance division said the draft has been placed before the cabinet division for its approval. Then the bill would be sent to the Legislative and Parliamentary Affairs Division for vetting.

Dr AB Mirza AzizuL Islam, a former adviser to the caretaker government, told the Business Insider Bangladesh on Sunday that defaulters had never been on the board of directors of any financial institution before. There are such laws. But even after this, the debtors entered the board of the financial institutes through gaps, he said.

He also said the director of a financial institution is drafted into the board of directors after rescheduling his or her loan.

“These are the games of any law Payment and Settlement Systems Act-2021,” Mirza Azizul told Business Insider Bangladesh on Sunday.

He said the proposed Payment and Settlement Systems Act is a good initiative to impose restrictions on the loan defaulters. “But it remains to be seen how far it will go. Because debtors are so influential that they work by circumventing the law.”

The Payment and Settlement Systems Act must comply with the country's banks and financial institutions and while conducting 46 types of financial transactions, including insurance and trading at the capital market. Notable among these are Internet Banking Operations, Debit and Credit Cards and Electronic Funds Transfer (EFT).

Businesses run on legally recognised currencies, apps e-wallets for transactions of various banks, electronic currency, central bank digital currency have also been incorporated here.

The law would facilitate electronic presentation of checks and e-checks, cash and clearing house operations, payment service business, and government securities settlement systems, officials said.

If a bank wants to do such a payment and settlement business, it has to get approval from the Bangladesh Bank and requires a license. The central bank may change the conditions if it deems it necessary. Bangladesh Bank will have the power to revoke the license of the company if it conducts harmful activities under any business disguise.

The capital of this business has to be saved in the prescribed amount through the central bank. Shares of any other entrepreneurial director of the board of directors of this business cannot be transferred without approval. Action will be taken against the responsible persons and organisations for conducting business related to money transactions in violation of any of its regulations. The central bank will be able to impose a maximum fine of Tk 25 lakh, including restrictions on the organisation. As well as the organisation's license may be suspended or revoked.
The proposal further states that the Central Bank may apply to the High Court Division to terminate the business establishment if it engages in any activity against the customer or public interests. However, such an institution could not be terminated at the request of any third party. And, if the liquidation process is issued by the court, the company will not be able to do any transaction with the clients. A customer’s liability will be on the administrator of a financial institution. However, at the time of termination, the clients should be given the highest priority. Apart from this, the central bank will formulate policies to modernise the transaction related activities and to reduce the risk.