Provisions relating to Prohibition on purchase by bank or financial institution of its own shares.

Provisions relating to Prohibition on the purchase by the bank or financial institution of its own shares:

(1) No bank or financial institution shall purchase its own shares (buy-back) or lend money against the security of its own shares.

(2) Notwithstanding anything contained in Sub-section (1), in the following circumstances, a bank or financial institution may, with the approval of the Rastra Bank, so buy back its shares out of its free reserves available for being distributed as dividends not exceeding the percentage prescribed by the Rastra Bank:

(a) If the shares issued by the bank or financial institution are fully paid up;
(b) If the shares issued by the bank or financial institution have already been listed on the Securities Board;
(c) If the buy-back of shares is authorized by the articles of association of the concerned bank or financial institution;
(d) If a special resolution has been adopted at the general meeting of the concerned bank or financial institution authorizing the buy-back;
(e) If the ratio of the debt owed by the bank or financial institution is not more than twice the capital and general reserve fund after such buy-back of shares;

Explanation: For the purposes of this Clause,

“debt” means all amounts of secured or unsecured debts borrowed by the bank or financial institution.

(f) If the value of shares to be bought back by a bank or financial institution is not more than twenty percent of the total paid-up capital and general reserve fund of that bank or financial institution

(g) If the buy-back of shares is not in contravention of the directives issued from time to time by the Rastra Bank in this respect.

(3) Any bank or financial institution shall make an application, setting out the following matters, to the Rastra Bank to obtain approval of the Rastra Bank for the purposes of Sub-section (2); and if such application is made and, based on the matters received, it appears appropriate to give approval to the bank or financial institution to purchase its own shares, the Rastra Bank may give approval for the same:

(a) The reason and necessity for the buy-back of shares;
(b) A statement of the evaluation of possible impacts on the financial situation of the bank or financial institution as a result of the buy-back of shares;
(c) The class and number of shares intended to be bought back;
(d) The maximum or minimum amount required to buy back shares as referred to in Clause (c), and source of such amount;
(e) The time limit for the buy-back of shares;
(f) The mode of the buy-back of shares;
(g) Such other necessary matters as specified by the Rastra Bank and as required to be disclosed under the laws in force, in respect of the buy-back of shares.

(4) On receipt of the approval pursuant to Sub-section (3), the concerned bank or financial institution may buy back its shares in any of the following manners, within six months after the date of receipt of such approval or twelve months of the adoption of a special resolution at the general meeting, whichever occurs later:

(a) Purchasing from the stock exchange;
(b) Purchasing from the concerned employees of the bank or financial institution the shares allotted to them pursuant to this Act;
(c) Purchasing from the existing shareholders on a proportionate basis.

(5) If a bank or financial institution buys back its own shares pursuant to Sub-section (4), it shall file with the Rastra Bank a return containing the number of shares bought back, the amount paid for the same and other necessary details within thirty days of the date of such buy-back.

(6) There shall be established a separate capital redemption reserve fund, to which a sum equal to the nominal value of the shares bought back pursuant to Sub-section (4) shall be transferred; and the amount of such fund shall be maintained as if it were the paid-up capital.

(7) If a bank or financial institution buys back its shares pursuant to Sub-section (4), it shall cancel the shares so bought back within one hundred twenty days of the date of such buy-back.

(8) Other conditions where a bank or financial institution cannot buy back its shares and other terms required to be complied with in the buying back of its shares shall be as prescribed by the Rastra Bank.