Bank Asia to invest Tk12.5cr to set up digital bank

Publicly listed Bank Asia has decided to invest Tk12.5 crore to set up a digital bank. It is the first private commercial bank to go for a digital bank.

The decision came at the bank's board meeting held on 13 July, reads a disclosure posted on the bank's website.

Bank Asia sources said the digital bank is a joint venture consortium comprising fin-tech and other firms where Bank Asia is a sponsor with 10% stake. The consortium has already applied to the Bangladesh Bank for a digital banking licence.

The consortium is yet to disclose the name of the proposed digital bank.

Bank Asia's Managing Director Adil Chowdhury could not be reached over phone for a comment, and neither did he reply to a text message.

On 21 June this year, the Bangladesh Bank, after approving the guidelines for setting up a digital bank, called for licence applications from companies. The central bank has given companies only 41 days (till 1 August) to apply for a licence to set up a digital bank.

The Bangladesh Association of Software and Information Services (BASIS) has requested the central bank to extend the deadline till 31 August.

Bank Asia sources said the bank had applied to the Bangladesh Bank for a digital bank licence back in 2019. But the central bank could not approve it back then as there was no guideline in this regard.

How to set up a digital bank

According to the central bank's guidelines, investors willing to set up a digital bank will have to have a minimum paid-up capital of Tk125 crore and the capital will have to come from sponsors.

The minimum shareholding of each sponsor will be no less than Tk50 lakh and no more than 10% or Tk12.5 crore.

The guideline encourages fintech companies, tech firms, microfinance institutions, mobile financial service-providers, banks, and financial institutions to come into joint ventures for setting up digital banks.

A digital bank must go for an initial public offering (IPO) within five years from the date of the licence issuance by the central bank. Sponsors' shares cannot be transferred within five years from the commencement of the business, without prior permission from the Bangladesh Bank.

At least half of the board members must have adequate education, knowledge and experience in technology-based banking, emerging technologies, cyber laws and regulations. The other half shall have adequate knowledge and experience in banking, e-commerce and banking laws and regulations.

Digital banks will only have a headquarter, and no other physical presence or branches across the country.

A digital bank may issue virtual cards, QR codes, and other advanced technology-based products for facilitating its customers' transactions. But it is not allowed to issue any physical instrument for transactions.

Digital banks will not be allowed to transact in foreign currencies or involve in trade finance, except for collecting wage earners' remittances.

At present, Nagad, the country's second-largest MFS provider, is planning to set up a digital bank.