The Bangladesh Bank (BB) Wednesday approved digital bank guidelines for virtual banking aimed at accelerating “financial inclusion”.
The Bangladesh Bank board of directors at its 428th meeting put the seal of approval on the guidelines.
Entrepreneurs will have to secure a digital-bank licence from the central bank under section 31 of the Bank Company Act 1991 and have to follow instructions of the Bangladesh Payment and Settlement System Regulation 2014 to operate its payment service.
A digital bank shall commence with the paid-up capital of minimum Tk125 crore or as determined by the Bangladesh Bank under section 13 of the Bank Company Act 1991.
The paid-up capital shall only comprise ordinary shares.
The minimum shareholding stake of each sponsor shall be Tk50 lakh and the maximum shareholding stake can be relaxed, if necessary, in consultation with the government, said a top central bank official, seeking anonymity.
A digital bank will have only a registered head office that will host the offices of management and support staff.
According to the guidelines, digital banks must go for public offering (IPO) within five years from the date of licensing and the amount of IPO should be minimal to the sponsors' initial contribution.
Any institution, individual or any member of his/her family is or had been a loan defaulter with a bank or financial institution shall not be eligible as a sponsor of the proposed bank.
The ground rules also say sponsors' share shall not be transferred within a period of five years from the commencement of the business without prior permission from the Bangladesh Bank and the central bank will not allow transfer of sponsors' share within three years of starting the banking business.
It will offer efficient, low-cost and innovative digital financial products and services through an online end-to-end tech-based digital ecosystem using AI, machine learning, blockchain and other advanced technologies of the 4th Industrial Revolution (4IR) to serve customer needs and reach unserved, underserved and hard-to-reach (hill districts, islands etc) market segments for promoting financial inclusion.
The guidelines mention that a technology-based resolution mechanism shall be active standby with AI system to resolve day-to-day transactions with or without any intimation from the customers while the bank can accept movable property of the clients as collateral.
Digital banks may issue a virtual card, QR Code and any other advanced technology-based product for facilitating their customer transactions.
But it is not allowed to issue any physical instrument for transactions, according to the guidelines binding the operations of the banks in what is known as decentralized finance of DeFi.
The CEO of a digital bank must have at least 15 years of experience in the banking profession having at least five years of experience in technology-based banking, regulations, guidelines, circulars and so on.