BB concerned over security of Tk 10,000cr tied up in MFS

With the increasing number of mobile financial service accounts and the amount of unused money or deposits, the stature of e-money is constantly growing in Bangladesh.

Bangladesh Bank (BB) sees this rapid growth of e-money as abnormal. The central bank is also concerned about the proper use of funds deposited with MFS service providers.

The experts fear that many people in the country will be affected if a large MFS service provider crashes. There is also a fear of losing discipline in the financial sector.

At the end of June 2021, the number of registered customers of MFS companies stood at 9.97 crore. But half the accounts of this huge customer base are not active. In June the number of active account holders was 4.09 crore. 

At the end of June, the combined balance sheet of all MFS accounts held Tk 9,200 crore. About 85 per cent of the amount is under the control of the largest player, bKash, which enjoys close to 50 per cent market share. At present, the number of registered customers of bKash is more than 5 crore.

Coronavirus has pushed people’s reliance on MFS providers such as bKash, Rocket and Nagad. As a result, the number of customers in mobile banking is increasing in the pandemic period.

At the same time, the amount of transactions is also increasing. Mobile banking is now an easy and popular service in the country due to the convenience of instant transactions.

However, the former governor of Bangladesh Bank Salehuddin Ahmed said that it is not right to have so much money tied up in MFS.

He told UNB that MFS companies are never like banks. These institutions are only being used as a means of transferring and paying customers. Depositing so much money at MFS is against financial norms. Salehuddin said the central bank does not have direct control over MFS institutions.

“Unclaimed deposits in the bank have to be deposited in the central bank. It is unknown at this time what will be unclaimed deposits in the MFS. It will be the responsibility of Bangladesh Bank to look after the portfolio of MFS,” he added.

Customers need to be encouraged to withdraw money by identifying accounts that have not been cashing out for a long time, he said.

“If this does not work, then the money deposited as unused needs to be taken under the control of the central bank. The implementation of monetary policy targets will also be hampered if huge sums of money are concentrated in MFS institutions,” Salehuddin said.

Chief Executive officer bKash, Kamal Quadir said, all bKash customers’ money is safe. “According to government policy, we have to invest 25 per cent of our customers’ money in treasury bill-bonds,” he told UNB.

At present, 35 per cent of the money has been invested to that end. “All the money of our customers is safe. It remains to be seen whether other institutions will invest in the policy,” Kamal said.

According to the latest statistics Bangladesh Bank on MFS, customers have transacted Tk 65,141 crore through mobile banking in September this year. In other words, the average daily turnover stood at Tk 2,121 crore.

The average daily turnover in August was Tk 2,007 crore. The total turnover in that month (August) was Tk 62,230 crore. However, the information of Nagad, a joint venture involving the postal department, was not included in this measure as Nagad is yet to come under the BB control.

According to the latest data, there are currently 13 banks operating mobile banking services. In September, Tk 19,777 crore was deposited (cash in) through mobile banking services. At this time Tk 16,463 crore has been withdrawn (cash out). During the period under review, Tk 19,794 crore was sent from individual accounts (send money) using mobile banking services.

In September, Tk 2,936 crore was paid for purchases through mobile banking services. At that time the amount of social security allowance was reduced to Tk 19.20 crore. A total of Tk 2,458 crore has been transacted through mobile banking for payment of salaries, Tk 652 crore for mobile phone balance recharge, and payment of bills for various services including gas, electricity and water were transacted to the tune of Tk 1,331 crore.

The BB’s payment systems department General Manager Mejbaul Haque said that the number of customers in MFS service is constantly increasing. Every customer has some money deposited. That is why the status of e-money in the MFS companies is increasing.

However, several central bank officials believe the type of transactions that are made using mobile banking services should not lead to the volume of money being directed to the MFS sector. It is not safe for MFS companies to have a balance of Tk 10,000 crore, they feel.

In recent times, there has been a lot of controversy surrounding e-commerce, money laundering and lack of trust. In this situation, if any MFS institution is closed down, it may not be possible for everyone involved to retrieve the money they have put in.