BB extends interim licensing period for Nagad

Bangladesh Bank has extended the interim licensing period for Nagad, a fast-growing provider of mobile financial services (MFS), until 30 September.

The central bank issued a notification on Tuesday confirming the extension.

Earlier, Nagad sought an extension of the interim licensing period for the fourth time to complete the process in line with the central bank's requirement, which was set to expire on 30 June.

According to the Bangladesh Bank's licensing condition, Nagad will have to transfer the trust cum settlement account to the Bangladesh Post Office from Third Wave Technologies Limited.

Trust cum settlement account is a custody account where the legal tender shall be stored against the issuance of e-money by a payment service provider.

Nagad is operated by Third Wave Technologies and its customer money is managed in the bank account of Third Wave. It was asked to regularly send statements of the balance of e-money and physical money to the central bank.

According to the MFS guideline, the balance of e-money and physical money will have to be equal.

Though Nagad is sending transaction statements, those are not acceptable to the Bangladesh Bank. It is because 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.

According to a high official of the Bangladesh Post Office, the Bangladesh Bank asked Third Wave to adjust the loans but they have not done it yet.

One of the licensing criteria is to transfer 51% 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.

Since its beginning on 26 March 2019, Nagad has been branding itself as a state-run MFS provider, with the Bangladesh Post Office having ownership of it. But in reality, the government has no stake in it.

Nagad, in which Sigma Group has majority investment, is providing services through the MFS agreement with the Bangladesh Post Office, which is not acceptable to the Bangladesh Bank for availing a licence.

The Bangladesh Post Office requires at least 51% of Nagad's share to get the MFS licence, according to the MFS guideline of the Bangladesh Bank.

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 Tk400 crore.

It obtained more than 30% market share in its two-year journey.

Currently, 15 banks have MFS operations and the daily average transactions reached Tk2,000 crore in April. However, these statistics exclude Nagad.