BB hikes digital bank capital requirement to Tk300cr
Business Report:
The Bangladesh Bank has increased the minimum capital requirement to Tk300 crore for a digital bank, a new banking concept in the country, according to a circular published on Sunday.
Earlier, the paid-up capital requirement was Tk125 crore for establishing a digital bank, according to the digital bank guideline formulated on 14 June 2023. A conventional bank requires Tk500 crore to get the licence.
The licence of the digital bank will be given under the Banking Company Act 1991. The payment service will be operated under the Bangladesh Payment and Settlement System Regulations, 2014, according to the approved guideline.
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, and the IPO amount should be a minimum of the sponsor’s initial contribution.
Digital banking is part of the broader context for the move to online banking, where banking services are delivered via the internet.
Digital banks, also known as neo-banks, are popular globally as well as in neighbouring countries whereas it is a new concept in Bangladesh.
The major difference is that digital banks will have only a headquarters, and no other physical presence, while conventional banks have physical presence across the country.
The business, governance, and operational requirements applicable to traditional banks in general shall continue to apply to digital banks, according to the guideline.
The central bank is going to introduce digital banks in Bangladesh at a time when new-generation banks across the globe are turning away from traditional brick-and-mortar banks in favour of digital banking.
Among the South Asian countries, India and Pakistan introduced digital banks in 2022.
At present, Bangladesh’s banking sector is oversaturated with 61 conventional banks.
Correspondingly, Bangladesh Bank has put on agenda for its next board meeting to be held on August 27 the topic of issuing new digital bank licenses.
The move comes amidst internal opposition to issuing new digital bank licenses and uncertainties lingering over digital bank licenses granted in 2023.
The central bank might soon invite applications for new digital banks licenses.
It first issued licenses for digital banks in 2023, when 52 applications had been submitted. After an initial review, nine applicants made it to the board.
Five of the applicants -Nagad, Kori, Smart Digital Bank, North East Digital Bank, and Japan-Bangla Digital Bank- received Letters of Intent (LoI). Other applicants like bKash, Digi Ten, and Digital Bank were instead authorised to open digital banking wings, while Pragati Life Insurance’s application was rejected.