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Digital Banking in Bangladesh: New era for financial Revolution

"Digital banking is rapidly transforming the financial landscape of Bangladesh,
empowering individuals and businesses with convenient and secure access to
financial services, also driving financial inclusion, fostering economic growth,
and revolutionizing the way we bank in Bangladesh."-Bangladesh Bank

Bangladesh is embracing digital banking to increase financial accessibility. The

Bangladesh Bank has approved guidelines for “Digital bank” on 14 June 2023 that
will offer a variety of services, benefiting underserved individuals. The government
aims to make 75% of all banking transactions cashless by 2027, making digital banks
essential in achieving this objective.
Requirement and Guidelines for Digital Bank:
 The Bangladesh Bank has set the minimum capital requirement for a digital
bank at Tk125 crore, which is less than what conventional banks need to get
licensed.
 Digital banks will be governed by the Banking Company Act 1991 and must
have sponsors who invest in them.
 The guideline encourages different types of financial companies to come
together and form joint ventures for setting up digital banks. A sponsor needs
only Tk50 lakh as their initial contribution with no more than 10%
shareholdings allowed unless there's an exception or it’s formed through a
joint venture.
 To make sure things run smoothly, digital bank in Bangladesh must maintain
the minimum CRR and SLR set by the central bank, as well as an ADR
determined by Bangladesh Bank.
 It also needs to keep a CRAR and liquidity ratios (LCR & NSFR) according
to BASEL III, RBCA guidelines or BB's instructions.
 Additionally, Digital banks must follow the Bank Deposit Insurance Act, 2000
by complying with Bangladesh Bank's Deposit Insurance Scheme. They also
have to adhere to CSR policies and guidelines set forth by Bangladesh Bank
or as instructed periodically.

Latifur’s Focus Writing

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The main office for the digital bank must be registered in Bangladesh so they can
follow all the rules set by regulators there. Digital banks can work with other types
of banks or financial services providers but cannot have agents of its own.
Facilities of a digital bank:
 Digital Bank is a new type of bank in Bangladesh that will only exist online,
without any physical branches.
 It will provide efficient, low-cost innovative products using advanced
technologies such as artificial intelligence (AI), blockchain etc., which could
help reach underserved markets beyond urban areas through smartphones with
virtual cards or QR codes instead of traditional plastic credit/debit card
options.
 Digital banks cannot transact foreign currency nor trade finance except
collecting wage earners' remittances.
Challenges of Digital Bank:
Digital banks may encounter obstacles such as regulatory compliance, customer
acceptance and competition from traditional banks. [More in cashless Banking]
How to overcome challenges:
 Build robust cybersecurity measures to protect customer data and prevent
unauthorized access.
 Establish strong customer trust through transparent communication and
reliable support.
 Stay compliant with evolving financial regulations and implement effective
risk management frameworks.
 Prioritize user experience by optimizing digital platforms for easy navigation
and efficient banking processes.
 Educate customers about the benefits and security measures of digital banking
to alleviate concerns and encourage adoption.
In Conclusion, Digital banking is an innovative way to provide services that can
revolutionize the banking industry in Bangladesh. The country's guidelines for
digital banks are solid, and there is great promise for this sector to usher in a new era
of fintech.

Latifur’s Focus Writing