The Bangladesh Post Office (BPO) has officially taken control of Nagad, transforming the digital financial service into a government-run organization, Bangladesh Bank Governor Ahsan H Mansur announced yesterday.

The move, according to Mansur, was necessary because Nagad was previously categorized as a postal department organization, with the BPO holding a significant share.

The central bank’s intervention comes amid growing concerns over Nagad’s operational irregularities. On Tuesday, the Bangladesh Bank (BB) appointed an administrator to oversee Nagad’s operations, effectively dissolving the existing board and the CEO position.

Speaking at a press briefing at the central bank headquarters, Mansur noted that the digital bank’s licensing process would be thoroughly reviewed. He indicated that those who received licenses would retain them only if they met the eligibility criteria upon review.

Nagad, which has been operating without a full mobile financial service (MFS) license, has been under the purview of the postal department, operating with temporary approval from the BB since its launch in March 2019. The central bank has extended Nagad’s temporary MFS license multiple times, with the latest extension set to expire in June 2024.

At a separate press conference held at Nagad’s headquarters in Dhaka, newly-appointed administrator Badiuzzaman Dider emphasized that despite rumors surrounding the company, Nagad’s operations should not be adversely affected, as this could have a broader negative impact on the financial system.

BB officials have also raised concerns about Nagad’s financial practices, particularly regarding a revenue-sharing agreement with Third Wave Technologies, which was later renamed ‘Nagad Ltd’. Mansur clarified that Third Wave Technologies was only contracted as an outsourcing firm by the BPO and did not have ownership stakes in Nagad.

Nagad had previously applied for and received a license as a non-bank financial institution (NBFI) in 2023 under the name ‘Nagad Finance’ but later surrendered the license to apply for a digital bank license. This led to the issuance of the license for Nagad Digital Bank PLC, marking it as the country’s first digital bank.

However, the central bank has expressed concerns over the legality and stability of Nagad’s operations. Mansur noted that Nagad had been functioning without full legal certification and had created more money than it held in deposits, which he described as problematic.