Bangladesh Bank on Monday issued a set of regulations on mobile financial services, barring mobile phone companies from holding any stake in an MFS providing company.
The new Bangladesh Mobile Financial Services (MFS) Regulations, 2018 replaced the previously issued guidelines titled ‘Mobile Financial Services for the Banks’, said a BB circular issued on Monday, adding that the new regulations would come into effect immediately.
The central bank, however, in its draft on MFS regulations had allowed mobile operators to hold maximum 49 per cent stake in an MFS providing entity.
The provision of allowing mobile phone operators in the MFS business was scrapped in an anticipation of conflict of interest between the BB and telecom regulator Bangladesh Telecommunication Regulatory Commission, BB officials said.
They said suspicion of conflict of interest in providing MFS services by mobile operators was among the other reasons for the central bank’s decision.
The central bank in the finalised guidelines allowed bank-led MFS, a model where a scheduled bank may run the MFS as a product of the bank or a bank may form an MFS providing subsidiary with at least 51 per cent of the share held by the bank with control of the board.
The existing MFS providers would be allowed to continue business with the existing licences, while formation of a subsidiary has been made mandatory for getting new licences.
Apart from the parent bank, banks, non-banking financial institutions, non-government organisations, investment and fintech companies, experience of working in financial market, excepting mobile network operators, would be allowed to become shareholder in a MFS entity.
Any bank or a non bank, however, would be allowed to hold equity in only one MFS providing subsidiary.
MFS provider (the subsidiary of parent bank) will act as the primary driver of the products and services, manage customer relationships and distribution channels, and mitigate associated risks, while the parent bank will be responsible for the overall governance of the MFS.
The existing MFS providers will be monitored for 12 months after the issuance of the regulations and the existing non-performing MFS might face licence cancellation if it seems appropriate to the central bank.
To form an MFS entity as a subsidiary of a bank,
a minimum paid-up equity capital would be Tk 45 crore, while equal amount of paid-up capital will have to be built up as capital reserve from retained earnings as cushion.
The amount has to be from annual profit after tax at a rate not less than 10 per cent, to mitigate risks.
On the other hand, it might require, for the loss incurring MFS, injection of additional capital to maintain the minimum paid-up capital.
Under the regulations, MFS operators would be allowed to run cash-in to and cash-out services from MFS accounts through agent locations, bank branches, ATM, linked bank account and other methods determined by the BB.
Besides, person-to-business payments like utility bill payments, merchant payments, mobile top up, deposits into savings accounts or schemes with banks, loan repayments to banks or NBFIs or non-governmental organisations, microfinance institutions and insurance premium payments to insurance companies would be allowed to be carried out by MFS entities.
Business to person, person to person, business to business, e-commerce, government to person, person to government payments, foreign remittance and loan disbursements have also been allowed, among others.
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