- There will be a head office only, no branches
- Call centres will handle customers issues
- All banking services will be completely online
- Operations likely to be extended in three stages
- Deposits, withdrawals, small loans and fund transfers in 1st stage
The minimum capital requirement for a digital bank could be Tk500 crore, while the licensing would be under the Bank Company Act, according to the primary regulatory guidelines of the central bank.
Bank Asia and mobile financial services provider Nagad have recently sought permissions from the Bangladesh Bank for setting up digital banks. Besides, a number of mobile financial services providers have shown interest in launching digital banks, according to Bangladesh Bank sources, persuading the central bank to formulate the guidelines.
Finance Minister AHM Mustafa Kamal also in his FY2022-23 budget speech mentioned launching digital banks to widening and accelerating financial inclusion. He said the banks would also create new jobs for young IT workers.
Digital Bank, also known as Neobank, an internet-only bank or virtual bank, is a type of direct bank that operates exclusively online without traditional physical branch networks.
"The banks will have only head offices and mainly provide banking services through websites and mobile phone apps," a senior central bank official told The Business Standard, adding "The new banks will have call centres for the customers. When fully operational, digital banks will be able to transact large sums just like conventional banks."
The official said it would be a lengthy process if the banks are to be set up after formulating a new law. "Since it is a bank, it rather can be operated in accordance with the existing Bank-Company Act."
The Bangladesh Bank has been working for several months to formulate regulatory guidelines for the digital banks. About 8 months ago, the central bank formed a committee to find out how digital banks are operating in other countries and what digital banking could look like in Bangladesh.
The committee has submitted a primary guideline in the form of proposals around a month ago. Another committee has been formed recently with senior policymakers of the central bank. Sources at the Bangladesh Bank said that the next decision will be taken once the new committee submits the report.
Referring to digital banks in foreign countries, a senior central bank official said once a digital bank is approved, its operations are usually extended in three phases.
"In the first stage, the banks are allowed retail banking. The banks deal with customer deposits and withdrawals, small loans and fund transfers. If they can do these things successfully, they are allowed to go to the second phase."
The second phase incorporates lending to SMEs, while digital banks deal with corporate lending in the third phase. The banks in this stage, according to the official, receive export payments, settle import bills and go for big lending.
In their proposal, the committee suggested that the country should proceed step by step like other countries, but can drop the second phase. Most members of the committee voted for the first phase to be for at least 2-3 years.
The senior central bank official said the new committee will finalise the regulations. As a result, many of the proposals submitted by the previous committee may change.
Rahel Ahmed, chief executive officer of Nagad, told TBS that they are now providing payment services to 5.6 crore customers. Insisting on branch-based services, he said even the agent banking requires outlets.
"We ultimately want to build a cashless society. Nagad already has cash agents and distribution channels all over the country, which can help Nagad's digital banking venture," he added.
"As many as 35% of the people in the country use smartphones, and we want to bring them under digital banking first. Later we plan to launch more mature banking services," said Rahel Ahmed, noting digital banking would not be conflicting with conventional banking systems.