Central bank at odds with BPO over Nagad’s future

A rift between two government institutions — the postal department and Bangladesh Bank (BB) — over the mobile financial service (MFS) provider, Nagad, has come to light.

The discord became apparent after Faiz Ahmed Taiyeb, special assistant to the chief adviser with authority over the Ministry of Posts, Telecommunications and IT, sent a letter to the BB governor on May 12 and posted the letter to his Facebook account recently. He recommended the withdrawal of the administrator and management board from Nagad appointed by the central bank following the political changeover in August last year.

In the letter, Taiyeb raised several allegations against central bank officials and questioned the banking regulator's role in the Nagad issue.

In response, the BB, in a statement Sunday, said it appointed the administrator to protect the interests of the clients of Nagad, the country's second-largest MFS provider, which introduced itself as a digital financial service of the Bangladesh Post Office (BPO) and entered the market in March 2019 with a temporary licence.

How does the rift develop?

The MFS is still operating under a temporary licence from the BB.

However, the BPO holds no share in Nagad. The BPO has a profit-sharing agreement with a company named Third Wave Technologies to operate Nagad.

Tanvir A Mishuk, the founder and managing director of Third Wave Technologies, later renamed the company 'Nagad Limited.'

Following the political changeover, the BB-appointed administrator to Nagad uncovered several alleged irregularities.

One major issue was a Tk 600 crore deficit caused by issuing e-money without corresponding cash backing — an act considered a serious offence in the financial sector.

In another instance, unauthorised withdrawals totalling Tk 1,711 crore were reportedly made over the years through 41 distribution accounts meant for government allowances.

The central bank also formed a management board for the MFS provider.

High Court stays activities of administrator

Meanwhile, former Nagad director Md Shafayet Alam, who worked alongside Tanvir A Mishuk, initiated a legal battle against the administrator's activities.

Eventually, the High Court stayed the activities of the administrator, Motasem Billah, on May 7 following a petition by one of Nagad's former directors. Subsequently, Motasem Billah and his team refrained from attending office since then.

Faiz Ahmed Taiyeb writes to BB

Amid the turmoil, Faiz Ahmed Taiyeb wrote to the BB Governor on May 12, raising several allegations against central bank officials and questioned the banking regulator's role in the Nagad issue.

He recommended the withdrawal of the administrator and management board from Nagad.

He wrote, "Considering the overall situation and in view of ensuring fair competition and discipline in the financial technology market as well as safeguarding national interests, I hereby direct that the administrator and management board appointed by Bangladesh Bank be withdrawn and that the digital financial service 'Nagad' be operated directly under the management of the Bangladesh Post Office."

He stated that placing fintech companies like Nagad under direct and prolonged regulatory control severely disrupts the playing field, often benefiting competing firms.

"I have observed similar market trends in the case of 'Nagad' as well. To prevent this situation from escalating beyond control, 'Nagad' should immediately be operated under the direct supervision of the Bangladesh Post Office as a government entity," he added.

Taiyeb also expressed concern over the selection process for the firm appointed to conduct the digital forensic audit of Nagad, noting that the lowest bidder was not selected.

The letter claimed that after the central bank appointed an administrator to oversee Nagad, MFS providers began increasing service charges, particularly those holding dominant market shares.

Taiyeb shared the letter on Facebook on Saturday, sparking debate in various circles.

BB response today

In response, the BB issued a statement on Sunday presenting its version of the events.

The central bank said it appointed an administrator to protect the interests of the clients of Nagad.

According to the Mobile Financial Services Regulations, 2018, only banks were allowed to establish MFS through subsidiaries, the statement said.

Therefore, no other entities, including the Bangladesh Post Office, were authorised to operate MFS.

Nevertheless, BPO launched 'Nagad' on March 26, 2019, without approval from Bangladesh Bank.

Although the regulations were amended in 2022 to allow government institutions with at least 51 percent ownership to establish MFS, the central bank stated that no initiative was taken to bring Nagad under a legal or institutional framework.

The statement added that without interim approval or any formal agreement with Bangladesh Bank, BPO handed over operations of Nagad to Third Wave Technologies (now Nagad Limited), which is a third party.

The BPO had no role in Nagad's operations, financial matters, service planning, or management, the central bank asserted.

It further noted that the trust-cum-settlement accounts related to Nagad's e-money issuance were neither in the name of nor under the control of the BPO, violating key regulatory conditions.

Under the Bangladesh Bank Order, 1972, the sole authority to issue money in the country lies with Bangladesh Bank.

The creation of excess e-money amounted to unauthorised circulation of money, undermining the central bank's sovereign authority, it said.

The central bank stated that this e-money created a financial liability of Tk 645 crore for the government through the BPO.

Following the Public Procurement Act 2006 and Public Procurement Rules 2008, KPMG Advisory Services Ltd was appointed on February 11, 2025, to conduct a forensic audit as the top-ranked firm under the quality and cost-based selection (QCBS) method.