It has been noted that as a matter of practice some of the banks have 50% of their sponsor directors from the same family on the board of the bank. With the passage of time it has been observed that sometimes the key investors puts four of his family members as directors while raising the total number of Directors to eight by including the Chief Executive or some technical person on the board and thus takes control of the bank’s management. In this way the bank becomes one man show which is not only against the interest of depositors but also detrimental to the financial institution itself. 

2.            Keeping the above in view it has now been decided to discontinue this practice & reduce the existing number of directors of the same family on the board of all banks as well as NBFIs from 50% to 25%. The term family member has already been defined in Section 5(ff) of the Banking Companies Ordinance, 1962. Those banks/NBFIs, which are already having sponsor directors of the same family on their board in excess of 25% of total directors, should regularize their position within 90 (ninety) days from the issuance of this circular letter. 

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