BB acts against Nagad 7 months after renaming

Third Wave Technologies Ltd officially became Nagad Ltd in February, but it appeared that Bangladesh Bank (BB) came to know about it nearly after seven months and this has prompted the central bank to issue an order to banks not to open a ‘trust-cum-settlement account’ in the name of Nagad unless it gets approval from the postal department and the BB.

Payments Systems Department of Bangladesh Bank sent the order to all scheduled banks on September 2.

The central bank said it made the decision after it found that the mobile financial service (MFS) provider changed its owning company’s name to Nagad Ltd from Third Wave Technologies Ltd.

“We have issued the instruction to protect the interest of actual owners of the fund, who have a lawful claim on such a fund at any point in time,” said a senior BB official concerned.

Third Wave Technologies Ltd in partnership with the Bangladesh Post Office launched Nagad as a mobile financial service provider in March 2019 without the required approval from the central bank. Though Nagad says it is a service of the Bangladesh Postal Department, there was no official document in this regard.

Later in March 2020, when the coronavirus pandemic hit the country, the BB allowed Nagad to operate as an MFS provider on a condition that the Bangladesh Postal Department has to form a subsidiary owning Nagad’s 51 percent shares to get a full-fledged MFS licence.

Since then, the Bangladesh Postal Department extended the time from the central bank thrice, but still they cannot form the subsidiary saying that they have to amend the Post Office Act, 1898 and the Post Office (Amendment) Act 2010, which is a very time consuming affair.

In the meantime, Nagad has become the country’s second largest MFS provider with 5.40 crore customers who transact an average Tk 700 crore per day.

Nagad’s response:

Zahidul Islam, head of public relation of Nagad, said changing the name of the company and opening trust-cum-settlement account is an ongoing process.

“Such processes will be completed maintaining the regulatory requirements,” Islam told the Business Insider Bangladesh.

What is a ‘trust-cum-settlement account’?

According to the Bangladesh Payment and Settlement Systems Regulations 2014, Bangladesh Bank issues licences to non-bank entities desirous of providing payment and settlement services.

In the process of facilitating payment and settlement services, these entities hold money that does not belong to them rather belongs to their customers and, or payment participants. A trust-cum-settlement account, within the scope of these guidelines, will comprise of any such money that creates a liability of the service providing entity to its customers and, or participants in the process of mutual business arrangement.