Central Bank increases minimum capital requirement for digital banks to Tk300 crore

Digital banking is set to revolutionise Bangladesh's financial sector, as the Bangladesh Bank announces new regulations for digital banks. Under the Bank Company Act 1991, these digital banks must be public limited companies (PLCs) licensed by the central bank to operate.

The move towards digital banks coincides with new-generation banks worldwide transitioning to digital-first models. In neighbouring India and Pakistan, digital banks were introduced in 2022.

To secure a licence, a digital bank in Bangladesh must meet a higher capital requirement than conventional banks. Previously, the capital requirement for digital banks was set at Tk125 crore, but the Bangladesh Bank has now increased this to Tk300 crore. This new requirement is more than double the earlier threshold.

A conventional bank needs Tk500 crore in paid-up capital to secure a licence, demonstrating the increased financial commitment required for digital banking.

Under the Bank Company Act 1991, a digital bank must be a PLC licensed by the Bangladesh Bank under Section 31 of this Act to receive a license for operating a digital banking business in Bangladesh. Business, governance, and operational standards applicable to conventional banks will also apply to digital banks.

Digital banks in Bangladesh operate without physical branches, delivering services exclusively through online platforms. Unlike traditional lenders, they have no branch network.

The IPO amount for a digital bank in Bangladesh should be a minimum of the sponsor's initial contribution. Payment services for digital banks will operate under the Bangladesh Payment and Settlement System Regulations, 2014.

The digital bank guideline was formulated in June 2023, and under the current rules, a digital bank in Bangladesh must go for an initial public offering (IPO) within five years from the date of the licence issuance by the central bank.

These new regulations mark a significant step forward for digital banking in Bangladesh, a new development in the country's banking sector. As the world continues to move towards digital-first models, Bangladesh is poised to join the digital banking revolution.