The word \\\'bank\\\' is reserved only for bank companies

A bank is a highly-sensitive Public Interest Entity (PIE) as it deals with public money in the form of deposit. The banking law and regulations of the central bank are being made stringent day by day to secure the public money. The term 'bank' is used as part of the name of only a bank company incorporated under the Bank Company Act 1991. The reason for restricting use of the word is to protect the people from getting deceived by someone or a group dealing with public money using the word 'bank' as part of its name despite not being a bank. Section 8 of the Bank Company Act 1991 states: 'Every company running banking business in Bangladesh shall use the word bank…..and no company except a bank company shall use in its name any word which claims it to be a bank company.'
It is clear that no organisation except a bank company can use the word 'bank' or any word derived from it, by which it can claim itself to be a bank or which creates a scope for deceiving the people. The proviso of Section 8 stipulates three additional grounds for using the word 'bank' as part of a company's name. Considering the whole contexts  of Section 8 including its proviso, the word 'bank' or any derivative of it may be used by: (i) a bank company as defined in the section 2(0) of the Bank Company Act 1991, (ii) a subsidiary company of a bank operating for the purpose of one or more objects as mentioned in section 26(1), (iii) any society or association formed under section 28 of the Companies Act 1994 to protect mutual interest of bank companies, and (iv) by a company wholly or partly owned or regulated by Bangladesh Bank having no banking companies. These four categories of companies are fully regulated and controlled by the Bangladesh Bank. None can use the word 'bank' as part of its name excepting those four categories of companies. But some cooperative societies and nearly all mutual funds sponsored by banks use the word 'bank' in their names in violation of the section 8 of the Bank Company Act 1991.
Most of the cooperative societies in our country are credit cooperatives. Production-oriented cooperative societies like Milk Vita (a national milk producers' cooperative union) are rare in our country. Some of the credit cooperative societies are using the word 'bank' in their names. Maybe, these types of societies were registered before the enactment of the Bank Company Act 1991, but once the law has been enacted, the use of the word 'bank' has become illegal for them. Such a type of cooperative societies may deceive the general people by using the word 'bank' as part of their names. The general people may be misguided that these are bank companies registered under the Bank Company Act 1991 and regulated by the Bangladesh Bank, which is not at all true. The common people may put their money in such ventures in the hope of getting a higher rate of interest. They are not aware of the fact that the company may not be commercially viable and they may lose their money. In order to ensure proper discipline in the banking sector and protect the public from transactions with any company operating using the word bank in its name despite not being a bank. The use of the word 'bank' should not be allowed for credit cooperatives as per the Bank Company Act.
Banks sponsor funds to constitute mutual funds. Most of such funds bear either the full name or the abbreviation form (short form) of their respective sponsor bank's name. The fund is a separate legal entity but not a subsidiary of the bank whatever size of investment a bank makes in the fund. The bank has neither any control as a subsidiary nor has the influence on the fund as any associate or association of the bank. The fund is managed by an asset management company doing close monitoring and supervision under the guidance of a board of trustees formed under the Mutual Fund Rules 2001. The bank is here only the lead sponsor.
A good performing bank does not mean a good performing mutual fund and vice versa. The performance of the fund does not depend on the performance of the bank. It depends on the performance of the asset management company and trustees, as they directly deal with the fund management. The investors in the capital market should have adequate knowledge about investment in any securities like the units of mutual funds. Their investment decisions are guided by rumours about price hike or the name or brand image of the organisation. Accordingly, an investor may buy any unit of a mutual fund being guided by the well-performing bank's name. Such a fund may not be good when it comes to return from investment and the net asset value (NAV). So, use of the word 'bank' may mislead the buyer to think the performance of the fund is related to performance of the bank.
During the last couple of years, it was found that some organisations deceived the people through collection of deposits like banks, although they did not use the word 'bank' in their names. The government was able to bring them to book lately.
 The Bank Company Act was enacted in 1991. Since then the word 'bank' is reserved only for bank companies.
The writer is an Associate Member of ICAB and Head of Finance of Venture Investment Partners Bangladesh Ltd. (VIPB). roy_dipok@yahoo.com