How to start a Bank in Bangladesh or a Financial Institution in Bangladesh:
Frequently, clients want to know how to establish a financial institution and a bank in Bangladesh. In Bangladesh, financial institutions must be distinguished from general commercial entities and banks by the varied norms that govern their formation. The Financial Institutions Act governs the requirements and procedures for establishing a financial institution. This document depicts the process of establishing a financial institution in Bangladesh.
Important issues on how to start a bank:
Here are the important issues to consider while establishing a financial institution in Bangladesh:
- Obtain Bangladesh Bank name clearance for the proposed institution’s name.
- Provide personal information about the financial institution’s shareholders or directors.
- Form a Memorandum of Association and seek permission from Bangladesh Bank.
- Directly apply to Bangladesh Bank for a license, taking into account aspects such as financial condition, managerial traits, capital, future profits potential, and public interest.
- Obtain a Certificate of Tax Identification Number (TIN) from the National Board of Revenue (NBR).
- Apply to the Ministry of Commerce for a trading license.
- After acquiring the license, provide a security deposit of 100 Crore BDT to Bangladesh Bank and maintain a minimum capital of 100 Crore BDT at all times.
- For day-to-day operations, follow the “Code of Conduct for Banks and Non-Bank Financial Institutions.”
Bangladesh Bank can revoke its license for a variety of reasons, including deviation from intended business activities, liquidation, false information, detrimental conduct to depositors’ interests, insufficient assets, failure to maintain required capital, violation of license conditions, or conviction of Financial Institution Act offenses.
Steps to establishing a financial institution
Before creating a financial institution in Bangladesh, the following conditions must be met:
- Bangladesh Bank has granted name clearance.
- Personal Information of Shareholders or Directors
- Create a Memorandum of Understanding and get permission from Bangladesh Bank.
- Getting a license from the Bangladesh Bank
- NBR TIN Certificate Trade License from the Ministry of Commerce
- Getting a license from the Bangladesh Bank
To operate a financial institution, one must first seek a license from the Bangladesh Bank. The application must be submitted to Bangladesh Bank directly. Bangladesh Bank considers the following factors before issuing the license:
- financial situation
- Characteristics of management
- Prospects for capital and future earnings
- Specified goals in the Memorandum of Association
- Whether the establishment of the financial institution is of general public interest.
- Furthermore, depending on the application, Bangladesh Bank may impose further criteria. As a result, Bangladesh Bank has enormous leeway in selecting whether to give a license.
Determining financial situation
Bangladesh Bank will decide on an individual basis how much capital an applicant needs show to indicate that they have enough financial means to start a financial institution. As a result, there is no set amount of money that each applicant must demonstrate.
The minimum paid-up capital will be determined by Bangladesh Bank based on the applicant’s risks, assets, future goals, financial history, and other considerations. It should be emphasized, however, that the paid-up capital cannot be less than 100 Crore BDT in order to be accepted as an application.
Following the acquisition of a license:
Following receipt of a license from Bangladesh Bank, the financial institution must –
As a security deposit, provide Bangladesh Bank with a reserve amount of 100 Crore BDT.
Maintain a minimum capital of 100 Crore BDT at all times. However, depending on the licensee, Bangladesh Bank may require the financial institution to keep a larger amount of money in reserve as capital.
License cancellation:
Bangladesh Bank has the authority to revoke a financial institution’s license –
- If it ceases to carry on the business for which it was founded;
- If the financial institution falls out of business or is liquidated;
- If it provides incorrect or misleading information or papers to obtain a license;
- If it conducts its business in a way that is damaging to the depositors’ interests;
- If its assets are insufficient to cover its depositors’ demands;
- If it continues to operate with a paid-up capital that is less than the minimum capital;
- If the terms of the license are violated;
- If the financial institution or any of its directors is found guilty of a violation of this Act.
- Financial institutions’ day-to-day operations
Please see the “Code of Conduct for Banks & Non-Bank Financial Institutions” for laws governing the day-to-day operations of the financial institution.
How to Form your Financial Institution with the best law firm in Bangladesh
Tahmidur Rahman Remura Wahid’s Barristers, Advocates, and Lawyers in Mohakhali DOHS, Dhaka, Bangladesh, have extensive experience guiding clients through the whole process of forming financial institutions in Bangladesh. Please contact us at: for questions or legal assistance.
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