Bangladesh to Give New Bank Licenses for First Time in a Decade

Bangladesh plans to offer new banking licenses for the first time in a decade to boost lending and spur economic growth in the South Asian nation.

Banks will need to meet a minimum capital requirement of 4 billion taka ($53 million), double the requirement for banks set up in 2001, the central bank said on its website. New banks will also have to sell shares within three years and open one branch in a rural area for each one they start in cities, according to the rules.

Bangladesh, which forecasts its economy to expand at a record 8 percent in the next three years, is emulating neighbor India in allowing new banks to help fuel the economy. Credit is expanding at an average 20 percent annually in Bangladesh, while deposits are growing at 25 percent, Governor Atiur Rahman said.

“Our economy has doubled over the last ten years, so we need more banks to cope with the economy,” Rahman said in an interview from Dhaka today. “We are keenly following India’s banking practices.”

India’s central bank last month said it may give licenses to new private lenders, who will have to open at least one in four branches in rural areas that have a population of no more than 9,999 people. Companies including Larsen & Toubro Ltd. (LT) and billionaire Anil Ambani’s Reliance ADA Group have expressed interest in operating in the Indian market where credit is forecast to expand 18 percent in the year to March 31.

BRAC Bank Ltd. (BRAC) was the last lender to start operations in Bangladesh in 2001. Overseas banks will also be allowed to partner with local lenders for the licenses, Rahman said today.

BRAC Bank gained 0.3 percent to 486 taka at 12:17 p.m. in Dhaka.

To contact the reporter on this story: Arun Devnath in Dhaka at adevnath@bloomberg.net

To contact the editor responsible for this story: Arijit Ghosh at aghosh@bloomberg.net