How to Setup Banking and Finance Business in Bangladesh

Frequently, clients inquire about the process of establishing a Banking and Finance Business institution in Bangladesh. In order to distinguish financial institutions in Bangladesh from general commercial institutions and banks, distinct regulations govern their establishment. The establishment requirements and procedures for financial institutions are governed by the Financial Institutions Act. This document outlines the steps involved in establishing a financial institution in Bangladesh.

Establishing a Banking and Finance Business institution in Bangladesh

The essential steps for establishing a Banking and Finance Business institution in Bangladesh are as follows:

• Obtain Bangladesh Bank approval for the name of the proposed institution.
• Include the personal information of any directors or shareholders of the financial institution.
• Establish a Memorandum of Association and secure Bangladesh Bank’s approval.
• Submit an application to Bangladesh Bank in person for a license, taking into account elements such as the organization’s financial standing, management qualities, capital, future earnings potential, and public interest.
• Secure a certificate of Tax Identification Number (TIN) from the National Board of Revenue (NBR).
• Submit an application to the Ministry of Commerce for a commerce license.
• Provide Bangladesh Bank with a security deposit of 100 Crore BDT in the form of a reserve fund, and maintain a minimum capital of 100 Crore BDT at all times, following the acquisition of the license.
• It is imperative to adhere to the “Code of Conduct for Banks & Non-Bank Financial Institutions” in all aspects of everyday activities.
• The license of Bangladesh Bank may be revoked for a variety of reasons, including liquidation, deviation from intended business activities, provision of false information, conduct detrimental to depositors’ interests, insufficient assets, failure to maintain required capital, conviction of offences under the Financial Institution Act, or insufficient assets, failure to maintain required capital.

Methods for establishing a Banking and Finance Business institution

Prerequisites for the establishment of a financial institution in Bangladesh are as follows:

• Clearance of the name by Bangladesh Bank.
• Personal Information of Directors or Shareholders
• Establish a memorandum and obtain Bangladesh Bank’s sanction.
• Obtaining a Bangladesh Bank license
• Certificate of TIN from NBR
• License to Trade from the Ministry of Commerce

Obtaining a Bangladesh Bank license

Prior to operating a financial institution, one is required to obtain a license from Bangladesh Bank. Direct submission of the application to Bangladesh Bank is required. Prior to granting the license, Bangladesh Bank takes into account the subsequent factors:

The financial state

• The attributes of management
• Prospects for future earnings and capital
• The goals that are delineated in the Memorandum of Association
• Whether the establishment of the financial institution is of general public interest.

Additional conditions may be imposed by Bangladesh Bank in accordance with the applicant. As a result, Bangladesh Bank possesses an immense degree of discretion when determining whether or not to issue a license.

For the purpose of determining whether an applicant possesses sufficient capital to establish a financial institution, Bangladesh Bank will make a case-by-case determination regarding the amount of capital that must be provided. Consequently, no specific minimum quantity of capital is required from each applicant. A minimum paid-up capital will be determined by Bangladesh Bank in consideration of the applicant’s assets, liabilities, future objectives, financial background, and additional variables. It must be noted, however, that the paid-up capital must not be less than 100 Crore BDT in order to qualify as an applicant. Need More Information about A World Class Law Firm

After acquiring a valid license:

The Banking and Finance Business institution, upon acquiring a license from Bangladesh Bank, is obligated to—

Provide Bangladesh Bank with a 100 Crore BDT reserve fund in the form of a security deposit.

Maintain a minimum capital of 100 Crore BDT at all times. Nevertheless, Bangladesh Bank may mandate that the financial institution maintain a greater amount of money as capital, contingent upon the specific licensee.

Cancellation of authorization:

• The Bangladesh Bank retains the authority to revoke the license of any Banking and Finance Business institution.
• Should it cease operations of the enterprise for which it was originally founded;
• In the event that the financial institution ceases operations or enters liquidation;
• Should it provide inaccurate or deceptive information or documentation with the intention of obtaining a license;
• Should the organization conduct its operations in a way that is adverse to the welfare of the depositors;
• The inability of the institution’s assets to cover the obligations of its depositors;
• Should the organization continue operations with paid-up capital that is lower than the minimum capital requirement;
• In the event that the license conditions are violated:
• A Banking and Finance Business institution or a director may be found guilty of a violation of this Act.

The operations of Banking and Finance Business institutions on a daily basis

Please refer to the “Code of Conduct for Banks & Non-Bank Financial Institutions” for regulations governing the daily operations of the financial institution.