[🇧🇩] Banking System in Bangladesh

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Stressed loans in banks to remain elevated: Moody’s

The stressed loans in the banking sector of Bangladesh will remain elevated even after the central bank tightened the rules for classification of non-performing loans (NPLs), said Moody’s Investors Service.

www.thedailystar.net

Stressed loans in banks to remain elevated: Moody's

The stressed loans in the banking sector of Bangladesh will remain elevated even after the central bank tightened the rules for classification of non-performing loans (NPLs), said Moody's Investors Service.

Last month, the Bangladesh Bank tightened its definition of overdue installments for fixed-term loans, reversing a relaxation of classification and provisioning rules since April 2019.

Fixed-term loans are currently classified as overdue six months after their expiry date and are subsequently classified as non-performing when overdue for a further three months, implying 270 days past due. Cottage, micro and small credits are classified as NPLs when past due/overdue for six months.

From September 30, a loan will be treated as overdue if an instalment on a term loan is not paid within three months of its due date, while from March 2025 an instalment payment late by even one day will be considered overdue.

The period for classifying past due/overdue loans as NPLs remains unchanged.

"We expect the revised guidelines to increase levels of NPLs and provisions, which will strain banks' profitability in the near term," Moody's said in a report yesterday.

The removal of forbearance measures will push banks to recognise loans to weak borrowers as non-performing in the long term and set aside adequate provisions, a long-term credit positive because it will improve their resilience in times of stress, it said.

The global credit ratings agency, however, expects NPLs to increase by 50 basis points until September 2024.

"We expect stressed loans, including performing loans with modified payment terms, as well as NPLs, to remain elevated."

This is because banks are likely to step up collection efforts on overdue loans to contain higher levels of slippage to non-performing, and may also take advantage of relatively lenient guidelines to restructure overdue loans to contain the impact on profitability.

The revised guidelines are an outcome of the central bank's initiatives related to Bangladesh's programme with the International Monetary Fund to strengthen loan classification and provisioning rules, eliminate forbearance measures and align with global best practices.​

 

[Saif]

A legal perspective

FOR quite a few days, the news of banks and financial institutions merger has created a stir in the banking industry. This merger and acquisition has proved the...

www.newagebd.net

A legal perspective
by Md Badrul Millat Ibne Hannan 05 May, 2024, 00:00

| New Age

FOR quite a few days, the news of banks and financial institutions merger has created a stir in the banking industry. This merger and acquisition has proved the forecasting of economists and experts once again. Economists and experts had strongly opposed the approval of banks on political grounds. Business conglomerates with political clout have taken away these banks because of profit maximisation within a short time and for other reasons.

Experts assume that the banking sector is now on the brink of a disaster. Because the banking sector's total risky loans amounted to Tk 377,922 crore at the end of 2022, this development makes for an abstemious reading of the actual health of this vital sector of the economy. At the end of 2022, the banking sector's non-performing loans stood at Tk 120,649 crore, outstanding rescheduled loans at Tk 212,780 crore, and outstanding written-off loans at Tk 44,493 crore.

In the banking sector of our country, people commemorate the last three mergers and acquisitions, Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangstha amalgamated, renaming Bangladesh Development Bank Ltd. It is now suffering from bad loans, which make up 42.46 per cent of its total loans. Here, mergers and acquisitions have failed.

On the other hand, in 2000, Standard Chartered Bank and ANZ Grindlays merged and named StanChat Grindlays Bank; after that, it was renamed Standard Chartered Bangladesh. In 2001, Bank Asia set a massive milestone by acquiring the business operations of the Bank of Nova Scotia (a renowned Canadian bank) in Dhaka, the first of its kind in the banking history of Bangladesh. It again repeated the performance by acquiring the Bangladesh operations of Muslim Commercial Bank Ltd, a renowned Pakistani bank. Although, Bank Asia launched its operations in 1999, it acquired these two banks within two years and pointed out to our eyes that if there is honesty, integrity, and capability, it is possible.

Recently, the Bangladesh Bank has issued a draft guideline for merger offering to the bidder banks, which will also be called transferee banks, to bid for the transferor bank, which is placed under moratorium and decided to be merged with another bank, with incentives including regulatory relaxation regarding minimum capital requirement provisioning, cash reserve ratio and statutory liquidity ratio requirements, liquidity coverage ratio, liquidity support, foreign exchange assistance, the option of Bangladesh Bank buying long-term bonds or debentures from the transferee bank at low rates, issuance of shares to raise capital, permission for subordinated bonds, tax incentives, and goodwill as an asset.

As per the regulatory duties of the central bank, it has categorised the scheduled banks into three categories: sound banks, stable banks, and distressed banks. Before going forward with the merger and acquisition agreement, the following cautions and considerations are to be re-conceived:

Non-performing loans: Merging banks need to carefully assess the non-performing loans of the weaker bank and develop strategies to address them effectively. Failure to address non-performing loans can impact the financial health of the merged entity.

Financial delinquency: Acquiring banks must evaluate the weaker bank's history of financial misconduct and take appropriate measures to mitigate any potential risks associated with such issues.

Employee homogenising: Merging banks need to contemplate the amalgamation of employees from both entities, ensuring a smooth transition and minimising any negative impact on the workforce.

Capital adequacy ratio: The capital adequacy ratio of the merged entity should be carefully assessed to secure compliance with regulatory requirements and maintain financial stability.

Dilution of earnings: Shareholders of the acquiring bank may experience diluted earnings after the merger, which could lead to possible legal issues.

Liquidity and capital management: Merging banks must carefully manage liquidity and capital to secure the smooth functioning of the merged entity and abstain from any adverse effects on customers and stakeholders.

Banking is the backbone of any economy, and the pursuit of mergers and acquisitions within this sector is a common occurrence worldwide. In Bangladesh, the financial sector has experienced a surge in merger and acquisition activities in recent decades, reflecting the industry's dynamic nature and the pursuit of growth and efficiency.

The terms 'merger', 'amalgamation' and 'acquisition' have not been defined under the Companies Act or Companies Rules. The term 'amalgamation', though not defined, is used in the Companies Act. In general, the following statutes are applicable to merger and acquisition transactions in Bangladesh: the Companies Act 1994, Section 228 and 229; the Securities and Exchange Ordinance 1969; the Securities and Exchange Commission Act 1993, (amendment May 1, 2021); the Bangladesh Bank Order 1972; the Bank Companies Act 1991, Section 49, Sub-section 1 (Ga), 76 (1), 77 (Ka), 77 (1), 77 (2), 77 (4), 77 (5), and 77 (16); the Financial Institutions Act 1993, (amendment 2023), Section 50; the Contract Act 1872; the Competition Act 2012; the Labour Act 2006 (amendment 2022); the Foreign Exchange Regulation Act 1947; and the Income Tax Ordinance.

Chronological steps such as proposal for merger, negotiations/bargaining, due diligence for the merger, disclosure and confidentiality, due diligence report submission, shareholders' and creditors' consent, scheme submission to the Bangladesh Bank, draft scheme examination, assets and liabilities valuation, transaction price, Bangladesh Bank approval, High court petition in regards to mergers and acquisitions and submission of certified copy of the High Court order to the Office of the Registrar of Joint Stock Companies And Firms need to be followed for a merger and acquisition completion.

Here are some international accounting standards and international financial reporting standards that are required since international rating agencies consider these standards based on the balance sheet and financial position, which reflect the overall scenario of the country.

International Financial Reporting Standard 3: Business Combination, which states merger and acquisition. IRFS 02: Share-Based Payment, IFRS 05: Non-Current Asset Held for Sale and Discontinued Operations, IFRS 07: Financial Instruments: Disclosure, IRFS 13: Fair Value Measurement, IAS 07: Statement of Cash Flows for Cash Generating Unit from Goodwill Valuation IAS 08: Accounting Policies, Changes in Accounting Estimates, and Errors, IAS 10: Enevts after the Reporting Period, IAS 12: Income Taxes, IAS 16: Property, Plant and Equipment, IAS 32: Financial Instrument: Presentation, IAS 36: Impairment of Assets, IAS 38: Intangible Assets, IAS 40: Investment Property and other related IFRS and IAS (if required).

Except for international financial reporting standards and international accounting standards, mergers and acquisitions will not convey mutual benefits to shareholders, depositors, or public trusts.

The i8nternational financial reporting standards and international accounting standards are a set of accounting rules for public companies with the goal of making company financial statements consistent, transparent, and easily comparable around the world. This helps for auditing, tax purposes, and investing.

As per the financial statements of some banks and financial institutes, the central bank is not fully following IFRS and IAS. As a result, commercial banks in mergers and acquisitions are not bound to follow these global standards in asset revaluation. The stronger banks undergoing mergers and acquisitions are to suck up weaker banks and NBFIs with high non-performing loans. So it is enormously sensitive in asset revaluation.

In this regard, the central bank can dictate the banks to follow the depicted IFRS and IAS. Asset revaluation at current market prices for mergers and acquisitions would create a catastrophic situation. If the current market price is higher than the original cost, there is a revaluation gain, which means the asset value has appreciated. So, to circumvent cataclysm and ensure shareholder and depositor rights, the Bangladesh Bank should fully embrace international standards in financial reporting.

Nevertheless, mergers and acquisitions devoid of IFRS and IAS can lead to difficulty in understanding financial stability when a strong bank proceeds with a weak bank's colossal NPL hardship. Likewise, by not following IFRS and IAS, investors and regulators may be in the dark about banks' health.

In mergers and acquisitions, there are matters of buying and selling, so every asset should be re-evaluated under international standards, which are dissimilar from general profit and loss accounts maintained by banks.​

 

[Saif]

Bangladesh Bank again dissolves National Bank board

The bank’s sponsor director Khalilur Rahman made the new chairman

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Bangladesh Bank again dissolves National Bank board
The bank's sponsor director Khalilur Rahman made the new chairman

Bangladesh Bank has once again dissolved the board of National Bank.

Today, the central bank informed the managing director of National Bank through a letter about the cancellation of the bank's existing board of directors.

The banking regulator also formed a new board of directors and set the bank's sponsor director Khalilur Rahman as the new chairman, the BB letter read.

Earlier on December 21 in 2023, the central bank issued an order to dissolve the then board of National Bank and formed a new board.

The banking regulator then made Syed Ferhat Anwar, a former professor of the Institute of Business Administration under Dhaka University, the new chairman of the bank.

The central bank then took the move after Parveen Haque Sikder, a director of the commercial bank, wrote to the Bangladesh Securities and Exchange Commission as she fears that the then board may manipulate the next election of the bank's board of directors.

This time, the banking watchdog removed most of the previous directors, including Syed Ferhat Anwar and Parveen Haque Sikder.​

 

[Saif]

Banks bag windfall from record interest spread

Interest calculating in SMART formula comes as a boon for banking as banks bag windfalls from a record spread between the rates they provide to depositors and take from borrowers. Officials and bankers have said Bangladesh Bank's monetary-policy shift from monetary targeting to interest-rate targe

thefinancialexpress.com.bd

Banks bag windfall from record interest spread
Spread between lending, deposit rates 5.11pc in March
JUBAIR HASAN
Published :
May 06, 2024 00:40
Updated :
May 06, 2024 00:40

Interest calculating in SMART formula comes as a boon for banking as banks bag windfalls from a record spread between the rates they provide to depositors and take from borrowers.

Officials and bankers have said Bangladesh Bank's monetary-policy shift from monetary targeting to interest-rate targeting pays off for the country's commercial banks as they saw the widest spread in over nine years to March last.

Such leap between the difference of weighted average deposit and lending rates - called spread in banking parlance - gives some sort of respite to the banks which had witnessed their core incomes squeezing since the imposition of 9.0-percent lending cap in April 2020, according to sector-insiders.

According to data with the central bank, the weighted average spread rose to 5.11 per cent in March, up by 7 basis points from February's 5.04 per cent.

The official data showed the March spread figure as the highest probably since November 2014 when it was 5.12 per cent.

Seeking anonymity, a BB official said the spread started rising in July 2023 when the central bank introduced interest rate-related benchmark rate called SMART.

Now it rose to 5.11 per cent in March last as weighted average rates of deposits and lending were 5.20 per cent and 10.31 per cent respectively, according to the official.

The difference between lending and deposit rates was only 2.93 per cent in June last year before the SMART came into effect on the money market. Afterwards, it started increasing with the figure rising to 3.29 per cent, 3.33 per cent, 3.31 per cent, 3.34 per cent, 3.35 per cent, 4.66 per cent and 4.83 per cent in July, August, September, October, November and December in 2023 and January in 2024 respectively.

Managing director and chief executive officer of Mutual Trust Bank (MTB) Limited Syed Mahbubur Rahman says the banks have raised both deposit and lending rates in line with SMART rating paradigm, which is reflected in the spread situation.

Managing director and chief executive officer of Dhaka Bank Emranul Huq observes that the lending rate in banks keeps rising quickly because of significant increase in SMART rate every month since its introduction.

The deposit rate offered by the banks is also rising but the depositors get the gains once the tenure matures. On the other hand, the banks can charge increased rate from the fresh borrowers each month.

"That's why the spread is widening fast," the experienced banker says about the interest arithmetic.

Seeking anonymity, a top executive of a private bank said getting formal credits becomes extremely expensive, which is lessening the fund demands on the market.

On the other hand, there are banks having liquidity dearth in the existing contractionary monetary regime and they require credits to improve their balance sheet and offer higher rates to allure the depositors, he said.

"It means the difference between the weighted average rates of deposit and lending would come down in the coming few months," the banker hopes.​

 

[Saif]

A former governor’s unpleasant truths about the banking sector

Economists are always noted for telling unpleasant truths because they go by numbers, research, theory, and judgement. Rarely do politicians—who can manufacture arguments to suit their purpose—endorse economists who are objective. Former Bangladesh Bank Governor Dr Mohammad Farashuddin has unvei

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A former governor's unpleasant truths about the banking sector

FILE VISUAL: REHNUMA PROSHOON

Economists are always noted for telling unpleasant truths because they go by numbers, research, theory, and judgement. Rarely do politicians—who can manufacture arguments to suit their purpose—endorse economists who are objective. Former Bangladesh Bank Governor Dr Mohammad Farashuddin has unveiled some truths about the country's banking sector where regulations have remarkably been relaxed in recent years. Seldom have we seen such blistering comments coming from a governor in Bangladesh's history. Farashuddin's statement, though commendable at a critical moment, creates enormous doubt over whether the government will really pay any attention to it.

The doubt is genuine because the looters are quite well-known to all of us, and they are flocking around the people in power. Not only have they indulged in misdeeds, but they are extravagantly empowered with high positions as well. To the bad luck of the nation, these people have been masquerading as the "true saviours" of the financial industry, if not that of the whole nation. These wolves in sheep's clothing, if not checked, will bring an economy of otherwise high potential down.

It would be a mistake for politicians to label Farashuddin as a supporter of the opposition. He was very well liked by Bangabandhu, who appointed him as his personal secretary. The Awami League government appointed him as governor of the central bank after coming to power in 1996. And most importantly, his performance at the helm of the central bank was academically sound and professionally pro-business.

Few retired bureaucrat-turned governors could do what he did. Dr Farashuddin remained committed to economic knowledge and the country's interest, not the interest of the wilful defaulters whose businesses always pretend to be in the red despite the economy's respectable growth. Sadly, growth is showing signs of a premature slowdown, justifying the clamours of economists who advocate bringing a semblance of law and ethics into business.

The great 18th-century economist Adam Smith once wrote, "Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice." Smith was so sure about his articulation that he asserted that all the rest would be brought about by the natural course of things once justice is safeguarded. The history of all developed countries has evidently proven that organised financial corruption and economic prosperity can never be siblings. They are mutually exclusive and many politicians in power seem to have brushed the trade-off aside for a game of personal wealth-making and very short-term interest.

Farashuddin's worry in this regard is quite explicit although he seems to be afraid of being mistreated if he speaks against the financial hooligans pampered by power. He literarily resorted to the poignant lines of Rabindranath Tagore—Morite chahina ami sundoro bhubone (I don't want to die in this beautiful world). So subtle was his sense of melancholy and humour.

The truth hidden under his humour points out that if high-scale bank looters are pardoned so easily, the banking sector's future must be cancerous, suggesting the emergence of further plunderers under the political coddling of the regime. His warning rightly echoes that of Dr Wahiduddin Mahmud, former economic adviser to the caretaker government, who allegorically labels the default culture as the rotten heart of the nation.

Some critics have recently labelled Dr Farashuddin's outburst at the seminar of the Economic Reporters' Forum (ERF) as his personal frustration for not being placed in a policymaking position by the regime. This is a defective interpretation of Farashuddin's standpoint. First, we need to judge whether he is statistically right about what he has said. Second, we need to check whether his recommendations don't serve him personally or his business. We get a "yes" in response to both these questions. His concern is that the family-based directorship proposal was passed at parliament without any resolution or debate. In fact, this law has turned many private banks into a mudir dokan—the single family-run petty shops sprawling in villages, fostering a perverse move of private banks from corporate structures to family dynasties.

The sneaky way of passing this family directorship law is the antithesis to the spirit of parliamentary democracy where we hope to see debates over economic policymaking. But there are many members of parliament who never utter a single word about anything during their tenure, while most of them are familiar with the art of accumulating personal wealth at magical speed. Thus, simply addressing the banking sector won't solve the current economic predicament. Parliament and the legal system must function better to make the economy as robust as it was before the pandemic.

Farashuddin is correct in pronouncing that some groups of people are taking bigger slices of the pizza—which we earned through independence. And hence, he is against the trend that brings more retired bureaucrats to politics. It will dampen the quality of bureaucratic services as we have already degraded the quality of our universities by infusing political enthusiasm. He is right in reiterating the unholy triangle of tax dodgers, bank defaulters, and money launderers. They are the same group of people who are dragging the economy to the cliff's edge, and waiting for the time to fly overseas with their trafficked fortunes.

This must be stopped for the sake of the nation where income inequality has been on an unbroken crescendo of unsustainability, defying any sensible records of peer nations. Putting a farmer in jail for defaulting on loans by Tk 1,000, while letting a bank looter sit beside government officials, signal a cancerous future for the financial industry, and Farashuddin's artistic portrayal of the injustice and asymmetry in this regard warrants serious attention from the government.

Dr Birupaksha Paul is professor of economics at the State University of New York at Cortland in the US.​

 

[Saif]

https://thefinancialexpress.com.bd/economy/bangladesh/poor-banking-sector-malgovernance-impunity-key-factors-says-dr-salehuddin

Poor banking sector: Malgovernance, impunity key factors, says Dr Salehuddin
FE REPORT
Published :
May 09, 2024 10:24
Updated :
May 09, 2024 10:24

Malgovernance and improper management, fuelled by political interventions, are the factors behind the present sorry state of the banking sector of Bangladesh, a former central bank governor has said.

A culture of impunity and undue benefits to loan defaulters and their allies in banks are also liable for this situation, according to Dr Salehuddin Ahmed.

"Governance and management failures are in place, because of which we see problems like corruption, money laundering and (loan) defaults."

Dr Ahmed made the observations at a public lecture on the country's banking sector at United International University (UIU) in Dhaka.

The UIU School of Business and Economics hosted the session as part of a public lecture series styled 'Bangladesh Corpus 2024'.

The noted economist gave a brief outline of the sector, which has become much vibrant after 2006 with the rise of digitalisation, use of information technology and many other tools.

Necessary guidelines, norms and laws are there for the banking sector, but it largely lacks compliance of conventional rules, according to him.

About the recent merger of banks, Dr Ahmed said the merger of the banks has not been directed by the Bangladesh Bank (BB) in a proper way.

"Actually, there is scope to restore weaker banks through setting proficient boards, employing independent directors and hiring right professionals."

Highlighting policy failure with default-loan regulations with improper mechanisms to reschedule and restructure them, thereby fuelling corruption, he said borrowing has become a business model at present.

"Borrowing, increasing your money, making foreign trips and defaulting on loans has become a smart business model now," he went on to say.

With only a 2.0-per cent repayment, one can become a free man now, according to the former BB governor.

"The central bank is giving concessions day by day, whereas nobody is paying back."

Even the board of directors at most private banks are not competent, they sit there and provide loans without following the norms, says Dr Ahmed.

He suggested that the Bank Company Act be amended be amended to minimise the scope for incompetent directorships. Suggesting a way forward for the banking sector, the former governor said the central bank should focus more on ensuring governance to reinstate the sector.​

 

[Saif]

Bank sector battered by people with political clouts: economists

Bangladesh’s banking sector has suffered a serious setback over the years, as people having political clouts received from banks various benefits beyond legal scopes, economists said...

www.newagebd.net

Bank sector battered by people with political clouts: economists
Staff Correspondent 16 May, 2024, 22:49

Former Bangladesh Bank governor Mohammed Farashuddin speaks at a programme at the Bangladesh Institute of Development Studies office in the capital Dhaka on Thursday. Economic Research Group chairman Wahiduddin Mahmud, prime minister's economic affairs adviser Mashiur Rahman, East West University vice-chancellor Shams Rahman and BIDS director general Binayak Sen were present. | — Press release

Bangladesh's banking sector has suffered a serious setback over the years, as people having political clouts received from banks various benefits beyond legal scopes, economists said.

At a programme at the Bangladesh Institute of Development Studies office in the capital Dhaka on Thursday to launch a book titled 'Bangladesh's Future Development: Agenda for Reform', they said that widespread political influences in the financial sector caused lack of governance and deviation from principles.

The BIDS and the East West University organised the launching ceremony of the book written by former Bangladesh Bank governor Mohammed Farashuddin.

At the event, Wahiduddin Mahmud, chairman of the Economic Research Group, observed that governments assuming power without fair elections often resort to patronage politics, granting undue benefits to influential groups in an attempt to establish control over society.

He said that the undue benefits to the influential quarter affected honest entrepreneurs and damaged business environment in the country.

There are key sectors in the country that the government should shield them from political interferences, Wahiduddin said.

'The current regime is an authoritarian government cloaked in a formal democratic framework,' Wahiduddin said, adding that assessing its popularity was complicated due to the absence of fair electoral processes.

He also emphasised that democratic rights, freedom of expression and human rights are crucial for the economic development of a nation.

There is no instance in the world where a country achieved economic development solely through infrastructure development without investing in human capital, Wahiduddin said.

Farashuddin suggested a three-year economic reform programme for the banking sector, saying that defaulted loans affected economy severely.

Criticising the practice of loan rescheduling, he remarked that top bank defaulters were receiving preferential treatment.

Farashuddin observed that loan defaulting, tax evasion and money laundering are all interrelated, often involving the same powerful group in these activities.

He also suggested political and constitutional reforms to ensure economic reforms in the country.

He expressed concern that political leaders often desire economists to serve as their subordinates, which should not be the case.

Instead, political leaders should make decisions based on recommendations from economists, Farashuddin said.

According to the economist, maintaining the taka's exchange rate artificially high for a decade, imposing a cap on interest rates for over two years, and having multiple exchange rates severely affected the economy, and recovery would take a considerable amount of time.

Centre for Policy Dialogue executive director Fahmida Khatun said that political influence made the country's banking sector weak.

The nation is now grappling with the consequences of poor governance in the financial sector, a situation that did not arise overnight, she said.

Fahmida pointed out that prioritising investment solely in infrastructure, while overlooking allocations for education and public health, has created an imbalance in the country.

She emphasised that such lopsided development would not be sustainable.

Prime minister's economic affairs adviser Mashiur Rahman, East West University vice-chancellor Shams Rahman, BIDS director general Binayak Sen, economist MM Akash and BIDS research director Kazi Iqbal, among others, spoke at the event.​

 

[Saif]

Chinese consortium seeks digital banking licence in BD

A group of Chinese nationals, in collaboration with Bangladeshi partners, has applied for a digital bank licence in Bangladesh, according to documents of the Chinese Embassy in Dhaka. The consortium submitted the application to the Bangladesh Bank under the name China Bangla Bank Plc. As a joint

thefinancialexpress.com.bd

Chinese consortium seeks digital banking licence in BD
REZAUL KARIM
Published :
May 18, 2024 00:16
Updated :
May 18, 2024 00:16

A group of Chinese nationals, in collaboration with Bangladeshi partners, has applied for a digital bank licence in Bangladesh, according to documents of the Chinese Embassy in Dhaka.

The consortium submitted the application to the Bangladesh Bank under the name China Bangla Bank Plc.

As a joint venture, China Bangla Bank Plc has pledged an initial investment of approximately $10 million, with a further commitment of $200 million over five years, show the papers.

The embassy expects the venture to generate over 7,000 jobs in Bangladesh.

The infusion of Chinese technical expertise and technology investment will indirectly enhance financial inclusion for marginalised communities. This aligns with the bank's goal of extending banking services to over 75 million under-served individuals, according to the documents.

The China Council for the Promotion of International Trade Guangdong Committee (CCPIT Guangdong Committee) recently contacted the Economic and Commercial Office of the Chinese Embassy in Bangladesh to initiate communication with relevant Bangladeshi agencies regarding the application.

A high-powered team of the Bangladesh Bank previously visited China, where the issue of digital banking operations by Chinese entrepreneurs was discussed, a source said.

When contacted, Bangladesh China Chamber of Commerce and Industry Secretary General Al Mamun Mridha said Bangladesh has made significant strides in digital adoption in recent years. For this, there is no alternative to digital banking.

He added that digital banking offers greater convenience, security and ease of transferring funds compared to existing banking services.

Mr. Mridha claimed that China's experience in digital technologies would be beneficial for Bangladesh's digital banking sector if Chinese investors were involved.

The Bangladesh Bank has already granted initial approval to eight digital banks to meet customer needs in the digital age and serve the unbanked population.

Unlike traditional banks, they will operate solely online with a central headquarters and no physical branches.

Digital banking allows customers to conduct banking transactions and access services remotely, via a website or mobile app, without needing to visit a physical branch.

Two new digital banks, Nagad Digital Bank PLC and Kori Digital Bank PLC, have already received letters of intent (LoI) and are preparing to launch operations soon.

The central bank will monitor their performance over the next six months, a central bank source said.

The letter of intent outlines a timeframe for the digital banks to develop their infrastructure under central bank supervision.

Three other banks -- Smart Digital Bank PLC, North East Digital Bank PLC and Japan-Bangladesh Digital Bank PLC -- will receive their letters of intent after six months, based on the performance of the initial two.

The Bangladesh Bank has also approved three existing banks to offer digital banking services: BRAC Bank with bKash, DG-10, a consortium of 10 private commercial banks, and Digital Bank PLC led by Bank Asia.​