Bangladesh Bank has increased the minimum capital requirement for establishing a digital bank to Tk 300 crore.

The change was made by a circular issued by the central bank on Sunday (August 24).

The new requirement marks a significant jump from the Tk 125 crore set in the Digital Bank Guideline on June 14, 2023.

In comparison, a conventional bank in Bangladesh needs a paid-up capital of Tk 500 crore to obtain a license.

The circular states that digital bank licenses will be issued under the Bank Company Act of 1991.

However, all payment services operated by the bank will fall under the purview of the Bangladesh Payment and Settlement Systems Regulations-2014.

The central bank has also mandated that a digital bank must go public and be listed on the stock exchange within five years of receiving its license. The size of the Initial Public Offering (IPO) must be equivalent to the initial investment made by the sponsors.

According to the circular, all regulations related to business operations, corporate governance, and activities applicable to conventional banks will also apply to digital banks.

A digital bank is a fully online banking system where all services are provided via the internet. Unlike conventional banks, they will not have physical branches, operating solely from a head office.

Bangladesh Bank's move to approve digital banks comes as many countries worldwide are shifting from branch-based banking to digital-first models.

In South Asia, neighboring countries like India and Pakistan launched their digital banks in 2022.

The new initiative is being introduced at a time when Bangladesh's banking sector is considered oversaturated, with 61 conventional banks currently in operation.