The Bangladesh Bank has raised the minimum paid-up capital requirement for digital banks from Tk125 crore to Tk300 crore, according to a circular issued on 24 August. While conventional banks require Tk500 crore to obtain a licence, digital banks will now need Tk300 crore under the Banking Company Act 1991. Unlike traditional banks, digital banks will only operate through headquarters without physical branches. They must also go for an IPO within five years of licensing, with the IPO amount at least equal to the sponsor’s initial contribution. This move comes as Bangladesh prepares to introduce digital banks, following the trend in countries like India and Pakistan.
Capital Requirement Update
The Bangladesh Bank has increased the minimum capital requirement for establishing a digital bank to Tk300 crore, as announced in a circular on 24 August. Earlier, the guideline formulated on 14 June 2023 required only Tk125 crore for setting up a digital bank. In comparison, a conventional bank in Bangladesh still requires Tk500 crore in paid-up capital to obtain a license.
Regulatory Framework
The licence for digital banks will be issued under the Banking Company Act 1991, while payment services will be operated in line with the Bangladesh Payment and Settlement System Regulations, 2014, as stated in the approved guideline.
IPO Obligation
Digital banks must launch an Initial Public Offering (IPO) within five years of receiving their license from the central bank. The IPO amount should be no less than the sponsor’s initial contribution.
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Operational Structure
Digital banking is a new concept in Bangladesh, designed as part of the shift towards online banking services. Unlike conventional banks with widespread physical branches, digital banks will operate with only a headquarters and no other physical presence.
Despite this distinction, business, governance, and operational requirements applicable to traditional banks will also apply to digital banks.
Global and Regional Context
The introduction of digital banks in Bangladesh comes at a time when the global banking industry is increasingly moving away from traditional brick-and-mortar structures in favor of digital platforms. In the South Asian region, both India and Pakistan introduced digital banks in 2022.
Current Banking Landscape in Bangladesh
Bangladesh’s banking sector is already considered oversaturated, with 61 conventional banks currently operating in the country. The entry of digital banks is expected to add a new dimension to the financial landscape.
Source: TBS
