Digital Bank : The Future Banking System in Bangladesh

In Bangladesh, there’s a new banking concept called Digital Bank. The Bangladesh Bank has provided guidelines for banks, Financial Institutions, Fintech companies, microfinance institutions, and mobile financial service providers to collaborate and establish digital banks. These banks will be governed by the Banking Company Act 1991 and can use agents of conventional banks or MFS providers as long as they comply with the regulations set by the Bangladesh Bank.

The Bangladesh Bank has established that a digital bank must have a minimum Paid up capital requirement of BDT 125 crore, while a conventional bank requires BDT 500 crore to get a license. The guideline stipulates that each sponsor must own a minimum of Tk—50 lacks (maximum 10% or BDT 12.5 crore). According to regulations, digital banks are required to lead an initial public offering (IPO) within five years of getting their license from the central bank, and the IPO amount should be at least equal to the sponsor’s primary contribution. In contrast to conventional banks, digital banks have a lower requirement for paid-up capital, which makes it easier for sponsors to obtain a share.

Digital banking services are already available in Bangladesh through Mobile Financial Services (MFS) providers like bKash, Nagad, Upay, Rocket, SureCash, Mcash, and others. Currently, 15 banks offer mobile financial services, which include various vital services except lending and deposits. However, MFS can collaborate with scheduled banks to provide loans and deposit services.
The central bank plans to introduce digital banks to keep up with global trends. Nagad, One of Bangladesh’s most significant mobile financial service providers, is establishing a digital bank and requested a digital bank license from Bangladesh Bank in 2020. As a result, Bangladesh Bank has started developing guidelines for digital banking.

According to the concept, a digital bank will offer efficient, low-cost, and we offer modern financial solutions through a fully digital platform that uses cutting-edge technologies like AI and machine learning. We aim to serve customers currently underserved by conventional financial institutions, including those in remote areas like hill districts and islands. Please be aware that we do not have any physical branches or provide in-person services.

The Digital Bank can offer virtual cards, QR codes, and other tech-based products to assist its customers with transactions. However, it is not permitted to issue any physical instruments for transactions. The Digital Bank is also restricted from conducting business involving foreign currency or trade finance, except for collecting wage earners’ remittances.
Digital banking can extend financial services to previously underserved populations, empowering them with savings, investments, and entrepreneurship opportunities.
Digital banking promotes a more efficient flow of funds, Increases transactions, and stimulates economic activity, contributing to overall economic growth.
The shift towards digital payments can help reduce corruption by minimizing the reliance on cash transactions and promoting transparency.

The expansion of digital banking services creates opportunities for IT professionals, customer service agents, and other related roles.
It’s essential to remember that every advantage comes with challenges and risks. The extensive use of digital banking also poses various risks, such as security breaking, privacy violations, uneven service quality, cybercrime, and systemic risks. Despite the difficulties, the banking industry in Bangladesh is embracing a fresh wave of technological progress to encourage financial inclusion via digital banking. It’s time to empower individuals with a cashless society that permits economic activities through digital means.

The exposure of digital banking is revolutionizing financial services in Bangladesh. It contributes to economic growth by changing how people manage their finances. But to ensure that everyone can take advantage of the benefits of digital banking, we address barriers such as digital literacy, cyber security, and infrastructure. As Bangladesh moves toward a more digitalized banking system, the government, financial institutions, and technology providers must collaborate to drive this conversion.

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