Nagad becomes country’s first digital bank

The Bangladesh Bank has granted final approval to Nagad Digital Bank with an exemption on the shareholding of its three institutional investors.

Typically, individuals, companies, or their family members are limited to acquiring no more than 10% of a bank's shares, whether held individually, jointly, or through combined ownership.

However, a special arrangement has been made for these three investors of Nagad — Osiris Capital Partners LLC, Blue Haven Ventures LLC, and Finclusion Ventures Pte Ltd.

The Banking Regulation and Policy Department of the central bank issued two separate circulars in this regard today (3 June).

According to one circular signed by the central bank's Deputy Governor Nurun Nahar, "Nagad Digital Bank PLC" was listed as a scheduled bank on 3 June 2024.

This means that Nagad Digital Bank can now operate like any other conventional bank. The primary difference is that digital banks will only have their headquarters and no other physical branches, unlike traditional banks which have a physical presence nationwide.

Nagad first approached the Bangladesh Bank for a digital bank licence in 2020 and following that the regulator moved to formulate guidelines in this regard.

Upon receiving the licence, Tanvir A Mishuk, founder and CEO of Nagad Ltd, told TBS, "We have been advocating for a digital bank to transform Bangladesh into a smart economy through cashless transactions. A significant portion of the country's people remain out of financial inclusion and Nagad Digital Bank will work with them." 

"Getting the licence for the country's first digital bank is historic. I extend my greetings to our 9.5 crore customers and everyone involved," he said.

Regarding the preparations for launching the digital bank, he said, "Customers will no longer need to visit banks; instead, banking services will be at their fingertips." 

"We will offer single-digit interest loans without any collateral, introduce micro savings schemes and provide solutions to people's day-to-day transactions. We have completed all preparations and expect to launch this innovative banking service soon," Tanvir added.

A separate central bank circular clarified that a specific section of the Bank Companies Act, regarding ownership limitations, will not apply to investment in Nagad Digital Bank by Osiris Capital Partners LLC, Blue Haven Ventures LLC, and Finclusion Ventures Pte Ltd.

Section 14A(1) of the Bank Companies Act (1991) in Bangladesh prohibits any individual, company, or members of their families from acquiring more than 10% of a bank's shares, whether held singly, jointly, or through combined ownership.

Earlier on 27 March, The Financial Institutions Division of the finance ministry approved a central bank request for exempting these three aspiring Nagad Digital Bank investors/shareholders, each exceeding 10% ownership, from the Bank Companies Act ownership limit. 

Nagad Digital Bank's total number of issued shares is 12.50 crore. The US-based company Osiris Capital Partners LLC owns the largest stake, at 6.225 crore shares, representing nearly half (49.80%) of the bank's total shares. Tanvir Ahamad Mishuk, the managing director of Nagad, serves as their representative.

Blue Haven Ventures LLC, another US company, holds 3.125 crore shares, equivalent to 24.90% ownership. Their representative is Muhammad Farid Khan, a director at Summit Group of Companies.

The Singapore-based firm Finclusion Ventures Pte Ltd owns 1.375 crore shares, translating to an 11% stake in Nagad Digital Bank. Nakib Chowdhury, a Nagad official, represents Finclusion Ventures.

Central Bank Spokesperson Md Mezbaul Haque said foreign investors typically show less inclination towards acquiring minor stakes in a company. Therefore, a special concession has been offered to attract foreign investment.

The central bank published the digital bank guidelines in June last year. According to guidelines, the digital bank has to keep provision for paid-up capital at Tk125 crore. The minimum shareholding of each sponsor will be Tk50 lakh (maximum 10% or Tk12.5 crore). However, the ceiling of 10%, in consultation with the government, may be relaxed.

According to the guideline, the digital bank must go for an initial public offering (IPO) within five years from the date of the licence issuance by the central bank and the IPO amount should be minimum to the sponsor's initial contribution.