Bangladesh Bank Hikes Minimum Capital for Digital Banks
The minimum paid-up capital for digital banks in Bangladesh has been increased from BDT 1.25 billion to BDT 3 billion. This decision was announced by Bangladesh Bank in a notification issued on 24 August, Sunday.
According to the notification, the directive is part of plans to issue new licenses for digital banks.
Previously, under the digital banking guidelines published by Bangladesh Bank on 14 June 2023, the minimum paid-up capital required to establish a digital bank was BDT 1.25 billion, whereas conventional banks need BDT 5 billion to obtain a license.
As per the guidelines, licenses for digital banks will be granted under the Bank Companies Act of 1991, while payment services will be regulated under the Bangladesh Payment and Settlement System Regulations of 2014. The digital bank will operate with a main office but no physical branches for service delivery. "This means the bank will not provide any over-the-counter (OTC) services. The digital bank will not have its own branches, sub-branches, ATMs, CDMs, or CRMs. All services will be app-based, delivered via mobile or digital devices."
A digital bank will provide 24/7 services. For the convenience of customers, it may issue virtual cards, QR codes, and other advanced technology-based products. However, it cannot provide plastic cards for transactions like a conventional bank.
Customers of a digital bank can still use ATMs, agents, and other services of other banks. Digital banks are not permitted to open Letters of Credit (LCs) or provide loans to large and medium industries. Only small loans will be allowed.
Furthermore, each digital bank must launch an initial public offering (IPO) within five years of Bangladesh Bank approval. "The IPO amount must be at least equal to the entrepreneurs’ initial investment." Digital banking is considered an expanded form of online banking, where services are provided via the internet.
Bangladesh Bank is promoting digital banking at a time when new-generation banks worldwide are shifting from traditional “brick-and-mortar” setups toward digital banking. Among South Asian countries, India and Pakistan launched digital banks in 2022. However, despite obtaining necessary approvals, some of these banks have yet to commence operations.
