Bangladeshs initiative to launch digital banks has remained in uncertainty for nearly 10 months, with 12 institutions submitting applications but none receiving a final licence yet. Although the evaluation of the applications is reportedly nearing completion, differences have emerged within Bangladesh Bank over the necessity of allowing new digital banks amid the ongoing crisis in the countrys conventional banking sector.
However, the central bank says the process has not been halted and visible progress could be made within the next two months once the evaluation is completed. Banking sector insiders said most state-owned and private banks are currently facing severe difficulties due to rising non-performing loans and deposit shortages. Several banks are also struggling with provisioning shortfalls, while some have become so financially weak under the pressure of bad loans that they are unable to meet depositors withdrawal demands.
Against this backdrop, questions have arisen over whether Bangladesh needs new digital banks at this stage. Bangladesh Bank officials have reportedly argued that approving new digital banks when most existing banks are struggling with deposit mobilisation and provisioning would only add further pressure to the already fragile financial sector.
Experts question need for new banks: Professor Dr Md Shahidul Islam Zahid, chairman of the Department of Banking and Insurance at the University of Dhaka, told The Daily Industry that issuing licences for new digital or conventional banks under the current economic circumstances would not bring significant benefits to the economy.
“If a newly licensed bank fails to attract sufficient customers, generate income and eventually incurs losses, the decision to issue its licence will come under question in the future,” he said.
He stressed that stabilising the existing banking sector should be the priority rather than adding new banks. “Currently, the biggest need is not new banks but stabilising the existing banking sector, which is facing a crisis. The government and regulatory authorities must give the highest priority to restoring public confidence,” Shahidul Islam said. He noted that digital banks have succeeded in many developed economies, but Bangladeshs business environment has yet to reach the level required for such institutions to operate successfully. “Before launching such banks, the countrys realities and preparedness must be properly assessed,” he said.
The professor also called for a reassessment of earlier initiatives to establish digital banks, pointing out that many existing banks are experiencing rising default loans, declining profitability and deteriorating ratings by international standards. “Any decision to issue a new bank licence should be based on extensive research, forecasting and realistic analysis,” he said.
Shahidul Islam also criticised the possibility of inviting applications and collecting fees from applicants before subsequently deciding that digital banks are unnecessary. “If applications are invited and fees are collected from institutions and then it is said that such banks are not needed, there must be accountability for that decision,” he said.
According to him, arbitrary decisions could undermine the credibility of the policymaking process. He also argued that future bank licensing should prioritise the interests of the banking system, institutions and depositors rather than political identity or ownership considerations.
Bangladesh Bank expects progress: Bangladesh Bank spokesperson and Executive Director Md Arif Hossain Khan said the digital banking initiative remains active. “The evaluation of the applicant institutions is almost complete. Once the evaluation report is prepared, it will be placed before the board of directors for approval. Further steps will be taken based on the boards decision,” he told The Daily Industry. He expressed hope that visible progress would be made on the issue within the next two months. 12 applications submitted: According to Bangladesh Bank data, 12 institutions submitted applications for digital bank licences during the tenure of the previous interim government. The applicants include British Bangla Digital Bank PLC, Digital Banking of Bhutan-DK, Amar Digital Bank-22 MFI, 36 Digital Bank PLC, Boost-Robi, Amar Bank (proposed), App Bank-Farmers, Nova Digital Bank-Banglalink and Square, Maitree Digital Bank PLC, Upokari Digital Bank, Munafa Islami Digital Bank-Akij and bKash Digital Bank.
Bangladesh Bank began accepting applications for digital bank licences on September 1, 2025. The initial deadline was September 30, but it was later extended to November 2 following requests from interested institutions. Applicants were required to pay a non-refundable fee of Tk 5 lakh along with their proposals. They were also required to submit all relevant documents both physically and by email.
Digital banking framework: Bangladesh Bank first issued guidelines for digital bank operations on June 14, 2023. The minimum paid-up capital was later increased from Tk 125 crore to Tk 300 crore, while the requirement for conventional banks stands at Tk 500 crore.
Under the guidelines, digital banks will not have physical branches, sub-branches, ATMs, cash deposit machines or cash recycling machines. Instead, banking services will be delivered through mobile applications, the internet and other digital platforms, allowing customers to conduct transactions 24 hours a day, seven days a week.
Digital banks will be allowed to offer virtual cards, QR-code-based payments and other technology-driven financial services. However, they will not be permitted to issue conventional plastic debit or credit cards. Customers may use other banks ATM and agent banking networks for cash transactions when necessary.
Digital banks will also be barred from opening letters of credit for imports and exports and from lending to large and medium-sized industries. Their operations will mainly focus on individual customers, small businesses, microcredit and retail lending.
Each digital bank will also have to launch an initial public offering (IPO) within five years of receiving its licence. The funds raised through the IPO must be equal to or greater than the entrepreneurs initial investment.
Existing banks urged to go digital: Dr Toufiq Ahmad Chowdhury, former director general of the Bangladesh Institute of Bank Management (BIBM), said the immediate priority should be improving financial literacy and modernising existing banks rather than issuing licences to new digital banks.
“The first priority under the current circumstances should be ensuring economic and financial education. At the same time, scheduled banks need to strengthen and modernise their banking operations in line with advanced countries,” he told The Daily Industry.
He said the rapid expansion of QR-code payments and other digital transaction systems has already reduced the need to establish separate digital banks. “Instead, existing banks should be encouraged to strengthen their digital operations and bring customers under modern banking services. There is no need to issue separate licences for new banks for this purpose,” he said.
Chowdhury added that greater digitalisation of banking operations would reduce transaction costs. “If financial awareness or financial literacy among people increases, they will naturally move towards digital transactions. People do not need to be separately encouraged to use digital transactions; increasing financial education and awareness would be the most effective initiative,” he said.
Banking sector stakeholders, however, believe digital banks could still play an important role in expanding technology-based financial services if they are introduced with strong corporate governance, technological security and effective risk management.
The ongoing uncertainty over licensing therefore reflects a broader policy dilemma: whether Bangladesh should expand its digital banking ecosystem now or first focus on repairing and modernising the troubled conventional banking sector.
