Bangladesh Bank invites applications for digital bank licence

The Bangladesh Bank has invited applications from entrepreneurs interested in establishing digital banks and delivering financial products efficiently through branchless operations.

It has opened a portal for applications in this regard and said it would accept applications until August 1 this year.

Applicants will have to pay Tk 500,000 as a non-refundable application processing fee through the web portal, said the central bank in a notice.

In its notice seeking application, the central bank said digital innovation is continuously modifying the landscape of the financial system all over the world.

It said BB promotes an enabling regulatory environment allowing innovation to make a robust, efficient and secured financial system.

"Accordingly, BB recognises the role of digital platforms and usage of artificial intelligence in driving greater efficiency in the delivery of financial products and services and in widening the outreach of the financial system," said the central bank.

The BB's move comes within a week after it approved guidelines regarding the establishment of digital banks which will provide financial services alongside the existing 61 conventional banks.

On June 1, Finance Minister AHM Mustafa Kamal, in his budget speech, said a central bank committee was working to draw up strategies to broaden financial inclusion.

The BB said investors willing to set up a digital bank will have to have a minimum paid-up capital of Tk 125 crore and the capital will have to come from sponsors.

The entity willing to set up a digital bank must be a public limited company. The minimum shareholding stake of each sponsor shall be Tk 50 lakh, it said

"Sponsors' contribution to the share capital of the proposed digital bank will be required to be out of net worth declared to the tax authorities. Sponsors' contribution out of borrowings from bank or financial institutions or from anywhere else, even from family members, shall not be acceptable," said the BB in the notice issued on June 21.

The central bank said the sponsors or directors must qualify for the Fit and Proper Test (FPT) criteria applicable to the proposed directors of digital banks.

In its guideline, BB said digital banks will not be allowed to provide any service to clients directly through physical counters and can't issue any physical instruments.

Likewise, digital banks would not be permitted to give out loans to carry out foreign trade and term loans to medium and large industries.

The guideline says a digital bank must go public within five years after getting the licence from the central bank. The amount of capital to be raised through initial public offerings can't be less than the paid-up capital amount.

The rule bars loan-defaulting companies, persons and their family members from becoming sponsor shareholders of digital banks.

No sponsor shareholder will be able to transfer shares without the prior approval of the BB within five years of operation.

The guideline has kept the number of members from the same family who will be given permission to sit on the board in line with the Bank Company Law.

As per the latest revision of the law, three members of a family can become directors of a bank, down from four previously.

The BB said the chief executive officer of a digital bank must have a five-year experience of working in technology-based banking and must have a banking career spanning at least 15 years.