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Sharia Commercial Bank and Sharia Business Unit: A New Era in Digital Banking

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Introduction

The Indonesian Financial Services Authority (OJK) has issued Regulation 12/2021, which defines a digital bank as an Indonesian bank that provides business activities primarily through electronic channels without a physical office apart from its headquarters or with limited physical offices.

Requirements for Establishing a Digital Bank

According to the regulation, a digital bank must:

  • Carry out a business model that utilizes innovative and safe technologies to meet customers’ needs.
  • Manage a prudent and sustainable digital banking business.
  • Provide adequate risk-management processes and procedures.
  • Satisfy various governance aspects.
  • Ensure adequate protection and security of customer data.
  • Make an active contribution to the development of a digital financial ecosystem and/or financial inclusion.

The regulation also outlines the requirements for establishing a digital bank, including:

  • Minimum issued and paid-up capital of IDR10 trillion Rupiahs.
  • Ownership structure.
  • Banking business plan.
  • Licenses. A prospective digital bank must include efforts to fulfill Digital Bank Requirements, plans to open an office network, and other requirements in its banking business plan.

Regulation on Banking Operation Plan Reporting & Banking Product Classification

The OJK has also issued Regulation 13/2021 on Banking Operation Plan Reporting & Banking Product Classification. The regulation requires banks to:

  • Submit a new banking products implementation plan (RPPB) to the OJK at the end of November before the year of planned product launching.
  • Classify their banking products into two categories: basic and advanced.

Basic products include:

  • Fund collection
  • Distribution
  • Other basic operations stipulated by the OJK

Advanced products include:

  • IT-based products
  • Products related to another financial services institution
  • Products that require approval or permission from another institution
  • Complex products

The regulation also outlines the licensing requirements for banking products, including the need for a license for advanced products. Banks must submit a realization report within 5 business days of product launch and failure to do so may subject them to fines.

Conclusion

This new regulation is expected to pave the way for fully digital banks such as Bank Jago to have a significant presence in the Indonesian banking spectrum. The OJK’s efforts to promote digital banking are aimed at increasing financial inclusion, improving efficiency, and enhancing customer experience.

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Note: This article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.