Digital Banking Risks Highlighted in Dhaka

Bangladesh must strengthen its institutional and regulatory readiness before issuing licences for digital banks, as the model carries inherent risks such as fraud and cyber theft, experts warned at a conference in Dhaka on Saturday. The observations underscored the need for a cautious and well-structured approach to financial innovation in an increasingly digitised economy.

Digital banks operate with minimal or no physical branches, delivering services such as deposits, withdrawals, payments, and fund transfers through paperless and technology-driven platforms. While the model promises efficiency, cost reduction, and broader financial inclusion, participants stressed that robust cybersecurity measures, stringent regulatory frameworks, and enhanced risk management systems are essential to ensure financial stability and protect consumers.

The remarks were made during the day-long “Risk Conference on Banking and Finance 2026,” organised by dFin and Dnet in collaboration with City Bank and NRBC Bank at a hotel in Gulshan. The conference brought together policymakers, economists, bankers, academics, and industry professionals to deliberate on emerging risks in Bangladesh’s financial sector.

Notably, Bangladesh Bank has attempted twice in the past to issue licences for digital banks, but both initiatives stalled, reflecting the complexities involved in regulating such institutions.

Key Participants at the Conference

Addressing the inaugural session as chief guest, Dr Salehuddin Ahmed highlighted growing fiscal risks arising from contingent liabilities linked to state-owned institutions. He noted that these liabilities have exceeded Tk5.0 trillion, primarily comprising government guarantees extended to public entities for procuring goods and services.

“If these guarantees are invoked, it will be very risky for the government, as repayment capacity remains uncertain,” he cautioned. Economists emphasise that such liabilities, though not reflected in headline fiscal deficit figures, can place significant strain on public finances if realised.

Dr Ahmed also expressed concern over the slow pace of reform at the National Board of Revenue, citing limited progress in automation and computerisation. He pointed out that systems such as ASYCUDA remain only partially implemented due to inadequate digital infrastructure.

Participants called for greater transparency in the banking sector, recommending broader access to credit information to help depositors better understand how their funds are utilised. They also stressed the importance of enhancing financial literacy among bank board members and fostering a risk-aware culture across the industry.

Mashrur Arefin, Chairman of the Association of Bankers, Bangladesh, opposed a draft provision in the Bank Companies Act proposing that 50 per cent of bank directors be independent. He argued that such a structure could create friction within boards and complicate decision-making.

Meanwhile, Dr Mustafizur Rahman warned of spillover risks from geopolitical tensions in the Middle East, noting their adverse impact on Bangladesh’s export-oriented sectors—particularly ready-made garments—with potential knock-on effects for the banking system.

The conference concluded with remarks by Dr Shah Md Ahsan Habib, who emphasised the importance of resilience, transparency, and prudent governance in navigating emerging financial risks in Bangladesh.