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Agent Banking:

Agent Balking means providing limited scale banking and financial services to the underserved population
through engaged agents under a valid agency agreement, rather than a teller/ cashier. It is the owner of an
outlet who conducts banking transactions on behalf of a bank
An agent bank is a bank that performs services in some capacity on behalf of an entity. Agent bank services
can encompass a wide range of duties. Agent banks may also be known as agency banks.

Necessities of Agent Banking

1. Necessities of agent banking to the retail outlets:
1. Increased income through commission: Bank agents are usually awarded commissions whenever they
perform transactions on behalf of the bank. These commissions are mainly awarded when somebody
deposits cash, withdraws cash, and when somebody opens a bank account through the agent. This is a nice
way of generating extra income for a retail outlet.
2. Increased customer traffic hence more business to the retail outlet: Bank agents usually conduct their
normal businesses in addition to being bank agents. For instance a hardware shop that acts as a bank agent
will continue conducting its main business (sale of hardware materials) in addition to being a bank agent.
The increased traffic brought about by customers performing banking activities also translates to more
people getting to know your business hence more sales.

2. Necessities of agent banking to the customer

Agent banking has literally brought banks to the villages and this has come with it many advantages to the
customer. Some of these advantages are:
1. Ease of access: With bank agents almost everywhere, you no longer need to travel long distances to visit
your bank. Your nearest retail shop could be operating a “KCB “Mtaani” or a “Co-op Kwa jirani” as they
are locally known.
2. Flexible hours: Most banks close their doors by 4pm, but with bank agents, for as long as the business
premise remains open, you can do your transactions. This has proven to be very convenient especially for
people who are busy during the day.
3. Cost-Effective: Transacting through bank agents has proven to be cost-effective especially to people who
live in rural areas that are far away from banks.

3. Benefits to the Banks

Local banks have recorded an increase in their profits and agent banking is one of the main attributes to
such huge profits. So, how does a bank benefit from its agents are
1. Cutting Costs: Banks are finding it cheaper to set up agents as opposed to opening a branch where they
will incur extra costs of staffing, rent, electricity etc. With agent banking, the agent incurs almost all the
2. Increased Product penetration: Agent banking has made it possible for bank products and services to
penetrate areas that at first seemed impossible. With agent banking banks have reached even the smallest
of villages.
3. Wide customer base: Bank agents are paid commissions when they sign up new customers and this has
led to an increase in the number of customers for banks. Banks are finding it effective to increase their
customer numbers in this manner as opposed to using sales people.

Necessity requirements of Agent Banking to commence

1. Service Area Requirements: Target groups those really need to be served financial services
under agent banking are the non-privileged, underserved population and the poor segment of the society,
especially from geographically dispersed location. Banks will give much emphasis on the rural area to cover
lion share of the target group but at the same time will not ignore the rest of the target group by concentrating
on the urban area in a limited scope. Thus, the service area for outlet opening of agent banking has to be
designed by following criteria:
1. The ratio of the number of sub-agents/outlets of a bank will be 2:1 for rural and urban area. That means,
a bank must have at least 2 rural agent banking outlet to have 1 urban agent banking outlet.
2. Banks will provide priority to rural area for their operation of agent banking.

2. Approval Requirements: Any scheduled bank in Bangladesh to commence agent banking must
fulfill the following requirements:
1. The bank must have their own Policy for agent banking operation approved by its Board of Directors
(BoD). The policy must cover agent selection criteria, management procedure, operational structure and
service standard of agent banking, monitoring system of agents, customer protection strategies, legal and
regulatory compliance, marketing and branding strategy, selected products, schedule of charges, business
continuity plan and business contingency plan those must be contained in the separate chapter and
articulated in the policy in detailed manner.
2. The bank must have a separate department which will be run by a dedicated team. The department will
be headed by at least Senior Executive Vice President/General Manager or equivalent for operating agent
banking. This department must have a separate dispute resolution cell/wing for complying with the
instructions of the section 16.0 of Guidelines on Agent Banking for the Banks.
3. The bank must have its own internal audit and monitoring manual for its agent banking operation
approved by its BoD.
4. The bank must have its own AML/CFT policies and procedures for agent banking as well as Agent/sub
agent due diligence policy and procedure approved by its BoD.
5. The bank must conduct a feasibility study along with risk assessment prior to apply for agent banking
6. The bank shall be held responsible for any unlawful/fraudulent activities performed by Agent or Sub-
7. The bank will take the necessary measures for the protection and security of the money transacted at
client level and the protection of customers. Apart from that, banks will take insurance coverage for the
money kept in the locker/vault of sub-agent/outlet.
8. Only shariah based banks can pursue shariah based banking in agent banking activities.
9. Bangladesh Bank will accord its approval to banks considering different aspects (capital adequacy,
liquidity situation, asset quality, profitability, internal control system and others) of the overall performance
of banks.

3. System Requirements: With a view to establishing sound systems and vigorous infrastructure to
support agent banking, banks have to ensure the compliance with the following minimum requirements:
1. IT infrastructure must be
a) Able to support real-time processing;
b) Able to provide a secured network including end-to-end encryption; and
c) Robust in managing structural capacity to support agent banking services.
2. Payment Acceptance Devices (PAD) must -
a) Be able to support minimum Two Factor Authentication (TFA)/Two-step verification for agent and
customer registration;
b) Be able to support the requirement of end-to-end encryption based on industry standards algorithm (from
end-point devices i.e. PAD to host system); and
c) Not store any sensitive customer information like PIN/Password at the end-point devices like PAD.
3. Agent Banking Application/Software must
a) Be able to support host validation for PIN/Password authentication;
b) Be able to provide device authentication during session activation and transaction processing at host
c) Be capable to have limit management feature for agents, customer, transaction and other limit
d) Include transaction and system audit trail.

4. Approval Requirements:
Any scheduled bank in Bangladesh aiming to initiate agent banking activities must apply and
obtain prior approval from Bangladesh Bank. The process of the application for approval is
stated below:
1. The bank shall apply as prescribed in Form A to General Manager, Banking
Regulation and Policy Department, Bangladesh Bank, Head Office, Dhaka in its letter
head pad along with duly filled up Form-A-1, Form-A-2, Form-B and the documents as listed
in Form-B.

2. The bank has to submit following documents along with the application:
a. Policy for agent banking operation approved by BoD of the applicant bank,
b. Internal audit and monitoring manual for agent banking operation as approved by
c. Business plan for agent banking operation as approved by BoD,
d. Detailed information (organizational history, financial strength, IT infrastructure,
management structure, division wise number of sub agents and their address) of startup agent(s),
e. Report on feasibility study including risk assessment,
f. Agent/sub agent due diligence policy and procedure,
g. Draft of agreement(s) between bank and agent. The draft must incorporate at least the
issues stated in the section 13.0 of Guidelines on Agent Banking for the Banks and must
be vetted by the legal retainer of the bank.

3. The bank must commence its agent banking operation within 3 (three) months of getting
approval from Bangladesh Bank. The bank will notify Green Banking and CSR Department,
Bangladesh Bank within 7 (seven) days of commencement by submitting the copy of
agreement(s)/MOU(s) to be signed between bank and agent, details of agent and list of sub
agents as well as photograph of commencement day transaction at any outlet/sub-agent point.

4. All the forms and papers those are required to be submitted to Bangladesh Bank for
approval must be duly signed and sealed by the competent/authorized official.

5. Regulatory Issues
1. Without having approval from Bangladesh Bank no bank shall be allowed to undertake agent
banking business.
2. Banks willing to launch Agent Banking Business shall seek prior approval from Bangladesh
Bank, with full details of the services including tentative implementation schedule.
3. Transaction currency will be taka only.
4. Banks shall have to submit copies of agreement(s)/MOU(s) signed between banks and their
agents to Bangladesh Bank before launching the product.
5. The agents shall be selected by the bank and a list of the agents with their names and addresses
shall have to be submitted to the Green Banking and CSR Department, Bangladesh Bank and will
be updated on monthly basis including changes, additions and deletions, if any
6. The inward foreign remittance (credited to Nostro Accounts of Banks) transfer arrangement
through designated agents will be used only for delivery in local currency.
7. The system should not be used for any cross border outward remittance of funds
8. Banks shall submit overall report on agent banking annually to its Board as well as to
Bangladesh Bank
9. Bangladesh Bank may withhold, suspend or cancel approval for providing agent banking
services if it considers any action by any of the parties involved in the system is detrimental to the
public interest.
10. Bangladesh Bank can amend the guidelines as and when required.

List of Agent Bank in Bangladesh

1. Dutch-Bangla Bank Ltd.

2. Bank Asia Ltd.
3. Al-Arafah Islami Bank Ltd.
4. Social Islami Bank Ltd.
5. Modhumoti Bank Ltd.
6. Mutual Trust Bank Ltd.
7. NRB Commercial Bank Ltd.
8. Standard Bank Ltd.
9. Agrani Bank Ltd.
10. Midland Bank Ltd.
11. First Security Islami Bank Ltd.

Trust Bank and South Bangla Agriculture and Commerce Bank have got the licenses but
have not launched the services yet.
Agent Banking

Prepared For
Md. Alamgir Hossen
Assistant Professor
Course Instructor
Bank Management, Fin-303

Prepared By
ID 1907
BBA 25th Batch

Institute of Business Administration

Jahangrinagar University

Date of Submission
28th March, 2018