The interim licensing period of Nagad, one of the fastest-growing providers of mobile financial services (MFS), has been extended by the Bangladesh Bank until September 30.
A notification was issued by the Bangladesh Bank on June 29 confirming the extension.
Previously, an extension was sought by Nagad for the interim licensing period of the 4th time to complete the process in line with the requirements of the central bank, which was set to expire on June 30.
Based on the licensing condition of Bangladesh Bank, Nagad will have to transfer the trust cum settlement account to the Bangladesh Post Office from Third Wave Technologies Limited.
A trust cum settlement account is defined as a custody account where the legal tender shall be stored against the issuance of e-money by a payment service provider.
Third Wave Technologies operates Nagad and its consumer money is managed in the bank account of Third Wave. It was asked to regularly send statements of the balances of e-money and physical money to the central bank.
Based on the guidelines of MFS, the balance of e-money and physical money will have to be equal.
Even with Nagad sending transaction statements, those are not acceptable to the central bank. The reason is that Third Wave has loans with two private commercial banks against the fund of the trust cum settlement account. The balance of e-money and physical money cannot be equal until the loans are adjusted.
Based on a high official of the Bangladesh Post Office, the Bangladesh Bank requested Third Wave to change the loans but they have not done it yet.
One of the licensing criteria is to transfer 51 per cent of Nagad shares to the Bangladesh Post Office. To comply with this, the Post Office Act needs to be amended, which could not be done even in two years.
With Sigma Group having a majority investment, Nagad is providing services through the MFS agreement with the Bangladesh Post Office, which is not acceptable to the Bangladesh Bank for attaining the licence.
Based on the MFS guidelines of the Bangladesh Bank, the Bangladesh Post Office requires a minimum of 51 per cent of Nagad’s share to get the MFS licence.
The central bank issued a temporary no objection certificate for MFS operation at the request of the Bangladesh Post Office in March last year.
Nagad is now the second-largest MFS provider in Bangladesh, with daily transactions amounting to Tk 400 crore.
It obtained more than 30 per cent market share in its two-year journey.
As of right now, 15 banks have MFS operations and the daily average transactions reached Tk 2,000 crore in April. However, these statistics exclude Nagad.