Section 54 of The National Bank for Agriculture and Rural Development Act, 1981
- (1)Every director shall be indemnified by the National Bank against all losses and expenses incurred by him in, or in relation to, the discharge of his duties, except such as are caused by his own wilful act or default.
- (2)A director shall not be responsible for any other director or for any officer or other employee of the National Bank or for any loss or expenses resulting to the National Bank from the insufficiency or deficiency of the value of, or title to, any property or security acquired or taken on behalf of the National Bank or the insolvency or wrongful act of any debtor or any person under obligation to the National Bank or anything done in good faith in the execution of the duties of his office in relation thereto.
Summary
- The National Bank protects its directors from financial losses and expenses they face while performing their official duties.
- This protection does not apply if the loss was caused by the director's own intentional wrongdoing or failure to act.
- A director is not held responsible for the actions or mistakes of other directors, officers, or employees of the bank.
- A director is not liable if the bank loses money because a property or security taken by the bank turns out to be worth less than expected or has a defective legal title.
- A director is also protected if a borrower goes bankrupt or acts wrongly, as long as the director acted in good faith while doing their job.
Practical examples
FAQ
1. Will the bank pay for a director's legal fees if they are sued for doing their job?
Yes, the bank will cover expenses incurred during the normal discharge of duties, provided the director did not act willfully wrong.
2. Is a director liable if another bank employee makes a huge mistake?
No, a director is not responsible for the acts of other officers or employees.
3. What happens if a property used as security for a loan loses its value?
The director is not held responsible for the loss if the value of a property or security taken on behalf of the bank goes down.
Test yourself
Q1.Under Section 54 of The National Bank for Agriculture and Rural Development Act, 1981, when is a director NOT protected by the bank for losses incurred during their duties?
Q2.Under Section 54 of The National Bank for Agriculture and Rural Development Act, 1981, what happens if a director approves a loan in good faith, but the borrower later commits a wrongful act and defaults?
Q3.Under Section 54 of The National Bank for Agriculture and Rural Development Act, 1981, who is held responsible if an officer or regular employee of the bank makes a mistake that costs the bank money?
Q4.Under Section 54 of The National Bank for Agriculture and Rural Development Act, 1981, how does the law treat a situation where a property taken by the bank as security turns out to have a flawed legal ownership title?