Bangladesh Bank yesterday issued letters of intent to Nagad Digital Bank and Kori Digital Bank, in a development that can substantially enhance people's access to finance.

Habibullah N Karim, the husband of former finance secretary Fatima Yasmin, is the chairman of Kori Digital Bank. Yasmin, who was appointed the vice-president of the Asian Development Bank in June this year, assumed the role of finance secretary in June 2022 after Abdur Rouf Talukder was made the BB governor. Before that, she was the secretary of the Economic Relations Division.

Sponsors of Kori Digital Bank include conglomerates ACI and Square Group; Rubana Huq, chairman of Mohammadi Group; and Kamran T Rahman, chairman of the Kapna Tea Company and former president of Bangladesh Employers' Federation, The Daily Star has learnt from BB officials informed with the proceedings.

The other recipient of the letter of intent (LoI) is Nagad Digital Bank, whose sponsors are more or less the same as the mobile financial service provider Nagad.

Muhammad Farid Khan, a director of Summit International and the brother of Awami League presidium member Faruk Khan, is an investor in Nagad Digital Bank.

For Nagad, the preliminary approval for the digital bank will put to bed its quest for getting the appropriate licencing for its operations.

Nagad is now running its MFS operation without a full-fledged licence from the central bank as it did not fulfil all licencing criteria. At one point, it wanted to run its MFS operations with an NBFI licence and it obtained the licence in May.

In August, Nagad surrendered the NBFI licence and sought a digital bank licence.

"Nagad's digital bank will literally become a dream-fulfilling powerhouse of Bangladeshi people, digitally orchestrating every facet of one's financial journey," Tanvir Ahmed Mishuk, founder and MD of Nagad, told The Daily Star.

Nagad intends to propel millions of unbanked individuals into the financial fold and play a role in achieving a "Smart Bangladesh", he added.

Other than Nagad and Kori, the BB also decided to allow the three bank-led applicants to open digital banking windows.

Bank Asia-led Digitall, Brac Bank-led bKash Digital Bank, and Digi10, a consortium of 10 private banks, can open digital banking windows as they already have the full-fledged banking licence, said BB spokesperson Md Mezbaul Haque.

The central bank is preparing the necessary guidelines for the window, he said, without elaborating whether the 10 private banks that came together for Digi10 will open individual digital windows.

The banking watchdog will also review the performance of Nagad and Kori over the next six months and issue LoIs to three more shortlisted candidates: Smart Digital Bank, Japan Bangla Digital Bank and North East Digital Bank, Haque said.

Three committees of the central bank assessed 52 applications for digital banks and shortlisted nine names. The list was placed at the 430th meeting of the board of directors of the central bank.

Of the nine applications, the board struck off one proposal as it was submitted by an insurance company, Haque added.

Meanwhile, economists questioned the timing of handing out digital bank licences, which comes about two months before the national election.

"It will not be right to give approval to anything new now, more so amidst the current economic crisis. If something is given, it should be after the national election," said Ahsan H Mansur, executive director of the Policy Research Institute.

Mansur, a former chairman of Brac Bank, advised the BB to provide licences to financially sound companies capable of running them.

While there is a need for digital banks in the country, the central bank should give licences after thorough assessment, said Mustafa K Mujeri, a former BB chief economist.

"It would be wise to give the approval after the upcoming parliamentary election in January next year. The economic situation is not good and there is a crisis in the banking sector."