City Bank has unveiled plans to inject Tk 277.8 million into the establishment of an innovative digital bank in a strategic move towards revolutionizing the banking landscape; this groundbreaking digital banking initiative is a collaborative effort by a consortium comprising diverse fintech and other firms, with Bank Asia emerging as a prominent sponsor, holding an 11.12% stake.
The decision, taken during a pivotal board meeting on August 7th, signifies the bank’s commitment to harnessing the potential of cutting-edge financial technology.
The consortium has already initiated the process of acquiring a digital banking license from the regulatory authority, Bangladesh Bank.
The Central Bank’s recent move, after approving the guidelines for digital bank establishment, urged interested companies to apply for licenses within a 41-day window, ending on August 1st. Meanwhile, the Bangladesh Association of Software and Information Services (BASIS) has appealed for an extension to this deadline, requesting it to be extended to August 31st.
Bank Asia has already taken a pioneering step by applying for the first-ever digital banking license, investing Tk 125 million into the endeavour.
Other prominent entities such as bKash, Nagad, Banglalink, Brac Bank, Padma Bank, ACI, Pragati Life Insurance, and Crystal Insurance also express interest in establishing digital banks.
Guidelines established by the Central Bank mandate a minimum paid-up capital of Tk125 crore for prospective digital banks derived from sponsor investments.
Each sponsor is required to hold a minimum shareholding of Tk50 lakh. Encouraging diverse collaboration, the guidelines welcome joint ventures among fintech companies, tech firms, microfinance institutions, mobile financial service providers, banks, and financial institutions.
To ensure transparency and growth, a digital bank must undertake an initial public offering (IPO) within five years of receiving the license from the Central Bank.
Sponsors’ shares remain non-transferrable within the first five years of business commencement without prior consent from the Bangladesh Bank.
The digital banking model envisions a singular headquarters without any physical branches nationwide.
While digital banks can introduce advanced technology-based products such as virtual cards and QR codes, they are prohibited from issuing physical instruments for transactions. Digital banks cannot engage in foreign currency transactions or trade finance, except for wage earners’ remittances.