Bangladesh Bank is likely to give primary approval today for the formation of digital banks in the country.

The central bank has already created a shortlist from applications for the formation of 52 digital banks.

This shortlist will be placed at a meeting of the BB's board of directors at its Motijheel headquarters in the capital today.

The meeting may approve of anywhere from two to five digital banks and subsequently provide them a letter of intent, The Daily Star learned from officials involved in the process.

The letter of intent will contain a timeframe for the digital banks to prepare their infrastructure while being monitored by the central bank.

However, the shortlist contains applications of firms that did not meet the criteria, such as having people with expertise in the field of digital banking, said the officials.

Moreover, firms that do fit the bill have been excluded from the shortlist, they added.

The 52 applications came from either individual or groups of a total of around 500 companies from diverse sectors including commercial banks, mobile financial service providers, food delivery and ride-sharing platforms, IT service providers and pharmaceutical companies.

The deadline for applying for the digital bank licence ended on August 17, after it was extended by 16 days.

Digital banks are online-only banks that offer customers a range of financial services through digital channels, such as mobile apps and websites -- and without any traditional physical branch networks.

The development is coming about at a time when the banking sector is plagued with a number of challenges, including record non-performing loans (NPLs), distressed assets, capital shortfalls and foreign currency shortages.

The NPLs hit a new record of Tk 1,56,039 crore as of June this year, showed central bank data.

The distressed assets amounted to Tk 3,77,922 crore at the end of last year.

And the country's gross foreign exchange reserves stood at $20.95 billion as of October 18.

Two analysts said this was not the right time.

Mustafa K Mujeri, former chief economist of Bangladesh Bank, told The Daily Star that it would be wise to give the approval after the upcoming parliamentary elections in January next year considering the country's overall situation.

Now the economic situation is not good because there is a crisis in the banking sector but ultimately everything rests on the central bank board, said the economist.

Mujeri, also executive director of the Institute for Inclusive Finance and Development, said the country needs digital banks but the central bank should give approvals after conducting assessments in the proper way.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, echoed him.

It will not be right to give approval to anything new amidst the current economic crisis, he said, adding, "If something is given, it should be after the national election."

"If approvals for digital banks are given under political consideration…what can I say?" Mansur said.

He suggested that the central bank provide licences to financially sound companies capable of running them.

"It will not be wise to approve more than two or three digital banks," he said.

Digital banks are a kind of an expansion of digital payments in the country, said Shah Md Ahsan Habib, professor of the Bangladesh Institute of Bank Management.

The infrastructure of digital banks cannot be successfully set up with only Tk 125 crore in paid up capital, which is lower than the Tk 500 crore of commercial banks, he said.

The investors will have to be ready to provide more for the development of the infrastructure of digital banks, said Habib.

"On the other hand, the central bank will have to ensure that everyone benefits from digital banks, not only the upper class," he said.