(1) No bank or financial institution shall buy back its own shares or lend loans against security of its own shares.
(2) Notwithstanding anything contained in Sub-Section (1), a bank or financial institution may, with the approval of the Rastra Bank, buy back its shares out of its free reserves available for being distributed as dividends not exceeding the percentage prescribed by the Rastra Bank, under the following circumstances:
(a) If the shares issued by the bank or financial institution have alredy been fully paid up,
(b) If the shares issued by the bank or financial institution have already been listed in the securities market,
(c) If the buy-back of its own shares is authorized by the Articles of Association of the concerned bank or financial institution,
(d) If a special resolution has been passed at the General Meeting of the concerned bank or financial institution authorizing the buy-back of its own share,
(e) If the ratio of the debt owed by the bank or financial institution is not more than double of the capital and general reserve fund after such buy-back of shares,
Explanation: For the purposes of this Sub-Section, “debt” means all amounts of secured or unsecured debts borrowed by a bank or financial institution.
(f) If the value of the 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 the shares comply with the directives relating to the capital fund issued by the Rastra Bank to that bank or financial institution,
(h) If it is not against the directives issued by the Rastra Bank from time to time with regard to buy back of shares.
(3) A bank or financial institution shall make an application to the Rastra Bank for the approval to buy-back its own share pursuant to Sub-Section (2) with the following details:-
(a) The reason, necessity, duration and modus-operandi for the buy-back of the shares,
(b) A statement of the evaluation of the potential impacts on the financial situation of the bank or financial institution as a result of the buy-back of the shares,
(c) The type of the share, par value of the share and number of the shares purposed to buy-back,
(d) The maximum or minimum amount required to buy-back the shares as referred to in Part (c), and the source of such amount,
(e) Such other matters as specified by the Rastra Bank with regard to the buy-back of its own shares,
(f) Other necessary matters to be mentioned as per the prevailing laws.
(4) The Rastra Bank may, in cases where, upon inquiry into the application received as per Sub-Section (3) and the details enclosed therewith, it deems appropriate to grant approval to such a bank or financial institution to buy back its own shares, grant such approval.
(5) Upon receipt of the approval pursuant to Sub-Section (4), the concerned bank or financial institution may buy back its shares in any of the following manners, within six months from the date of receipt of such approval or within twelve months of the adoption of a special resolution at the General Meeting, whichever is the later: –
(a) By purchasing through the securities market,
(b) By purchasing from the existing shareholders on a proportional basis.
(6) If a bank or financial institution buys back its own shares pursuant to Sub-Section (5), it shall file with the Rastra Bank a return containing the number of shares bought back, amount paid for the same and the other necessary details within thirty days of the date of such a buy-back.
(7) There shall be established a separate capital redemption reserve fund, to which a sum equal to the face value of the shares bought back pursuant to Sub-Section (5) shall be transferred; and the amount of such fund shall be maintained as if it is the paid-up capital.
(8) If a bank or financial institution buys back its own shares pursuant to Sub-Section (5), it shall cancel the shares so bought back within one hundred twenty days of the date of such a buy-back.
(9) Other provisions regarding buy-back of its own shares by a bank or financial institution shall be as prescribed by the Rastra Bank.