Cenbank invites fresh applications for digital bank licence from 1 September
New guideline restricts shell companies, raises minimum capital to Tk300cr
Highlights
- Licence applications can be submitted between 1 and 30 September
- Move aims to expand digital financial services and foster banking innovation
- Digital banks will support CMSEs, employment, credit access, food security
- Applications require Tk5 lakh fee, complete physical and digital submission
- Previous licence issues raised concerns over transparency, political influence
- Digital banks reflect global shift toward branchless banking models
The Bangladesh Bank has invited fresh applications for digital bank licences from 1 to 30 September, revising its digital bank guidelines to prevent shell companies from sponsoring proposed digital banks.
A shell company is defined as one that lacks its own business or assets in the country where it is registered.
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The revised guidelines, issued on Monday, also tightens the fit-and-proper test for sponsors, raising the paid-up capital requirement from Tk125 crore to Tk300 crore.
Besides, if an individual sponsor or the nominated representative of an institutional sponsor holds citizenship in more than one country, full details of all citizenships and related information must be provided.
Any previously renounced citizenships must also be disclosed, according to the revised guidelines.
Enterprises, companies, or individuals awaiting verdicts in any ongoing lawsuits related to loan default status will be ineligible to apply as sponsors. Banks or finance companies operating in Bangladesh are also barred from sponsoring.
Previously, in October 2023, the Bangladesh Bank granted digital banking licences to two applicants – Nagad and Kori Digital Bank – out of 52 submissions.
Nagad was backed by the same investors as Nagad Mobile Financial Services, while Kori was sponsored by ACI.
However, in August 2024, the Bangladesh Bank suspended Nagad Digital Bank's licence over allegations of corruption and dubious sponsors.
The central bank also launched an investigation into Nagad's foreign investors, including US-based Blue Haven Ventures, Osiris Capital Partners, Zen Fintech, Trupay Technologies, and Singapore-based Finclusion Ventures.
These five companies hold 94% of Nagad Digital Bank's shares, and the central bank sought detailed information about their ownership, registration, addresses, and other business activities.
Meanwhile, Kori Digital Bank has not yet submitted all mandatory documents within six months of receiving its Letter of Intent. It remains in the compliance phase, progressively submitting required information.
A diagnostic report by the World Bank Group has criticised the 2023 awarding of licences to Nagad and Kori, claiming the selection process lacked transparency and showed signs of favouritism towards politically connected interests.
The report, "Bangladesh: Country Private Sector Diagnostic", highlighted corruption, political interference, and regulatory ambiguity as key barriers in the sector.
"Lack of transparency and accountability in awarding contracts and licences discourages innovation and entrepreneurial activity," the report stated.
Why digital banking is needed
According to the revised guidelines, the Bangladesh Bank aims to align with global banking trends by adopting fintech and digital solutions to achieve Sustainable Development Goals (SDGs) and the National Financial Inclusion Strategy (NFIS).
The guidelines note that the central bank is addressing challenges posed by the Fourth Industrial Revolution (4IR) by exploring alternatives to traditional branch-based banking.
A branchless, end-to-end virtual banking system can extend financial services to remote areas, create employment opportunities, ensure economic and financial stability, and strengthen the country's financial ecosystem.
Others under consideration
Three applicants – Japan Bangla Digital Bank, North East Digital Bank, and Smart Digital Bank – remained under consideration for digital licences after monitoring Nagad and Kori's six-month performance in 2023.
Japan Bangla Digital Bank PLC is a joint venture of Japan Remit Finance and several local companies and individuals.
Separately, bKash Digital Bank, Digi Ten, and Digital Bank were allowed to open digital banking windows, for which separate guidelines were to be issued.
bKash Digital Bank PLC is an initiative of MFS provider bKash and Brac Bank. Digi Ten PLC is a consortium of multiple banks, including City Bank, Dutch-Bangla Bank, and Eastern Bank. Digital Bank, led by Bank Asia, is a joint venture involving fintech and other firms, with Bank Asia holding a 10% stake.
Differences from conventional banking
The distinction between digital and conventional banking is not always clear, as many traditional banks now offer robust online platforms. Customers often choose based on accessibility, convenience, and service range.
Digital banks operate exclusively online without physical branches, while traditional banks combine in-person and online services.
Digital banks typically have lower operational costs, enabling lower fees, higher savings interest rates, and competitive loans. They focus on core banking services, such as savings, loans, and payments, often enhanced by fintech innovations.
Traditional banks offer a broader spectrum, including investment, insurance, and wealth management services.
Digital banks excel in technological innovation, offering mobile check deposits, budgeting tools, and real-time alerts. Traditional banks, though slower to adapt, have expanded online and mobile offerings in response to digital competition.
