The secretaries of ministries have been barred from serving as chairpersons and directors of the 16 state banks and financial institutions in the latest guideline from the finance ministry as the government looks to enhance corporate governance in the organisations.

Besides, government officials equivalent to the rank of a secretary are also disqualified from the posts, according to the notice on December 22.

The financial institution division of the finance ministry will form a selection committee led by its secretary for the boards of state lenders.

The roles can be assumed by people with knowledge of economics, banking, financial market, monetary policy and financial management, business studies and administration, agriculture, industry, law and information technology.

The board must have at least one chartered accountant, a retired district judge or attorney general and a banker.

While one-third of the boards should be populated with females, the persons must have sufficient experience.

All nominated directors must have at least 10 years of experience in the field of administrative or management-related work.

People involved in illegal activities, including criminal offences and financial corruption, will be disqualified for the posts. No defaulter will be allowed on the board of state lenders.

Once appointed, a director can serve for three terms or nine years in a row.

The guideline is a good initiative as there were no criteria before on who could be appointed as directors to state banks, said Salehuddin Ahmed, a former governor of the Bangladesh Bank.

He suggested the finance ministry take prior suggestions from the central bank before appointing directors such that people with a clean image can be recruited.

"The policy seems good but is inadequate," said Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue.

The regulations do not mention anything about the screening process for those who come from the private sector to serve on the state lenders' board.

Besides, the secretaries should have an embargo of two-three years after retirement from their government jobs before they can take up positions at state institutions' boards.

The appointment process should be handed over to the central bank to ensure corporate governance at the state lenders, Bhattacharya said.

The long tenure for holding directorship is not logical, said  AB Mirza Azizul Islam, a former finance adviser to a caretaker government.

The government should appoint experts from the private sector for the selection committee.

"If all members of the selection committee are government officials, directors may be appointed on the consideration of political influence," he said.

The government earlier appointed a good number of persons with involvement in ruling parties as directors of the state lenders.

The move also played a pivotal role in deteriorating corporate governance in the lenders.