Digital bank emerging for virtual banking

Now digital bank is emerging in Bangladesh for virtual banking with trade-and-project financing as no-go areas under central bank-set modus operandi, creating scrambles among technology entrepreneurs for booking ownerships.
The Bangladesh Bank (BB) Wednesday approved digital bank guidelines for introducing the virtual banking aimed at accelerating “financial inclusion”, officials said.
The BB board of directors at its 428th meeting put the seal of approval on the guidelines. The board meeting was chaired by BB governor Abdur Rouf Talukder, BB spokesperson (in charge) Md Abul Bashar confirmed The Financial Express.
As the move gets going, country’s tech-industry entrepreneurs demanded reservation of at least one-third ownership of digital banks for ICT businesses.
“There should be a requirement for (ensuring) at least one-third of the ownership of each digital bank by the technology-sector organisations or entrepreneurs,” said Russell T Ahmed, president of Bangladesh Association of Software and Information Services (BASIS).
He came up with the demand at a roundtable on ‘Digital Banks: Prospects and Way Forward’ organised by BASIS at its auditorium in Dhaka on the day.
Citing the approved guidelines, the BB spokesman said the digital or virtual bank can finance areas excepting trade financing and term loan to medium and large industries.
Entrepreneurs will have to secure digital-bank licence from the central bank under section 31 of the Bank Company Act 1991 and have to follow instructions of the Bangladesh Payment and Settlement System Regulation 2014 to operate its payment service.
A digital bank shall commence with the paid-up capital of minimum Tk 1.25 billion or as determined by the BB under section 13 of the Bank Company Act 1991. The paid-up capital shall only comprise ordinary shares.
“The minimum shareholding stake of each sponsor shall be Tk 5.0 million and the maximum shareholding stake can be relaxed, if necessary, in consultation with the government,” said Mr Bashar, also executive director of the central bank.
A digital bank will have only a registered head office that will host the offices of management and support staff. “There will be no over-the-counter (OTC) service, branch or sub-branch, ATM/CDM/CRM of its own,” he added.
According to the guidelines, digital bank must go for public offering (IPO) within five years from the date of licensing and the amount of IPO should be minimum to the sponsors’ initial contribution.
Any institution, individual or any member of his/her family is or had been a loan defaulter with a bank or financial institution shall not be eligible as a sponsor of the proposed bank.
The ground rules also say sponsors’ share shall not be transferred within a period of five years from the commencement of the business without prior permission from the BB and the central bank will not allow transfer of sponsors’ share within three years of starting the banking business.
It will offer efficient, low-cost and innovative digital financial products and services through an online end-to-end tech-based digital ecosystem using AI, machine learning, blockchain and other advanced technologies of the 4th Industrial Revolution (4IR) to serve customer needs and reach unserved, underserved and hard-to-reach (hill districts, islands etc) market segments for promoting financial inclusion.
The guidelines mention that a technology-based resolution mechanism shall be active standby with AI system to resolute day-to-day transactions with or without any intimation from the customers while the bank can accept movable property of the clients as collateral.
Digital banks may issue a virtual card, QR Code and any other advanced technology-based product for facilitating their customer transactions.
But it is not allowed to issue any physical instrument for transactions, according to the guidelines binding the operations of the banks in what is known as decentralized finance of DeFi.
The chief executive officer (CEO) of a digital bank shall have at least 15 years of experience in the banking profession having at least five years of experience in technology-based banking, regulations, guidelines, circulars and so.
The appointment of the CEO of a digital bank shall be subject to compliance with regulations and directives issued by the Bangladesh Bank in this regard from time to time.

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