Eight digital banks get the initial approval in Bangladesh to serve government goal of catering customer needs in banking in the era of digitisation and covering the unbanked segment of population.
The central bank Sunday gave its nod to the eight out of an array in waiting for stepping in the online banking on a full scale of banking operations.
Digital banking is banking activity conducted entirely online, either through a website or mobile app. It lets customers perform banking transactions and access banking services remotely, without having to visit a physical branch. They will each have a headquarters only, and no branch.
Two of the new digital banks - Nagad Digital Bank PLC and 'Kori' Digital Bank PLC-on the day got letter of intent (LoI). The Bangladesh Bank (BB) will monitor their different indicators over the next six months.
The letter of intent contains a timeframe for the digital banks to prepare their infrastructure under the gaze of the central bank.
Three other banks --- Smart Digital Bank PLC, North East Digital Bank PLC, and Japan-Bangladesh Digital Bank PLC - will be given letter of intent after six months by overseeing the performance of the above-mentioned two that got the LoI on the first day.
Besides, the BB also gave its nod to three existing banks for conducting digital banking in the country. They are BRAC Bank with bKash, DG-10, a group of 10 private commercial banks-City Bank, Eastern Bank, Mercantile Bank, Midland Bank, NCC Bank, MTB, Prime Bank, Pubali Bank, Trust, and Dutch-Bangla Bank. Another is Digital Bank PLC led by Bank Asia.
The BB board led by its governor Abdur Rouf Talukder gave the nod in a board meeting held at the central bank on the day.
Earlier, three separate committees had shortlisted 9 applications out total of 52s. The board members excluded one application that was insurance company-led.
Spokesperson for the BB Md Mezbaul Hauqe briefed the media on the meeting outcome. He said the insurance-led application was excluded because insurance business and banking activity are different.
"The BB will prepare a separate guideline (standard operating procedure) for the existing banks which got the digital bank permissions on the day. They will do their business through digital bank windows. They need not new licence as they have already licences," he said.
The 52 applications came from either individuals or groups of a total of around 500 companies from diverse sectors like commercial banks, mobile financial-service providers, food delivery and ride-sharing platforms, IT service providers, and pharmaceutical companies.
The deadline for applying for the digital bank licensing ended on August 17, after it was extended by 16 days.
Economists and banking academics say digital banking is a good concept for including the unbaked people but they argue that the number is higher than expected.
Dr Ahsan H. Mansur, executive director of the Policy Research Institute of Bangladesh (PRI), told the FE that BB should give at best three digital banks.
He named Nagad, Bkash, and Digi 10.
"They have technology and some people to run banking activity."
Dr Mansur, however, said Nagad has fund shortages.
On the other hand, digital banks are a kind of expansion of digital payments in the country, said Shah Md Ahsan Habib, a professor at Bangladesh Institute of Bank Management.
"These types of banks are necessary to include unbaked people in the formal channel." He, however, said the government has vision on how to include the unbanked people through a policy.
The digital banks need Tk 1.25 billion in paid-up capital each, which is lower than the Tk 5.0 billion for commercial banks.
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