Bangladesh Bank has given initial approval to five proposed digital banks, even as the country’s banking sector struggles with bad loans, weak governance and a large number of existing banks.
The approved banks are Digital Bank of Bhutan, bKash Digital Bank, Nova Digital Bank and Boost Digital Bank. The central bank also retained approval for Kori Digital Bank, granted under the previous government. Bangladesh currently has 63 scheduled banks, while classified loans have reached Tk6.07 lakh crore, or 32.78% of total outstanding loans. This raises concerns that adding more banks could increase competition for the same depositors and borrowers instead of strengthening productive investment. Experts say the need is not necessarily for more banks, but for better digital financial services. Digital banks can operate without physical branches and provide services through mobile apps and websites, potentially reducing costs and expanding access to underserved people and small businesses.
Under current guidelines, digital banks cannot lend to large or medium industries or open letters of credit. However, they can support cottage, micro and small businesses by bringing them into the formal credit system. Some experts question whether entirely new banks are necessary when existing banks and MFS providers are already investing heavily in digital services. Others believe the new banks could make the financial system more inclusive and competitive.
Experts stress that the success of digital banking will depend on strong governance, asset quality, loan recovery, cybersecurity, data privacy, customer protection and effective regulation.
