Bangladesh Bank introduces 'e-loan' facility for online borrowing

Bangladesh Bank has issued directives for banks to launch a fully online-based 'e-loan' service to make digital banking easier, faster and more efficient. Through this system, customers will be able to apply for loans from home using mobile apps or bank websites. The entire process of loan verification, approval and disbursement will also be completed online.

The central bank sent a circular from its Banking Regulation and Policy Department-1 to chief executives of all scheduled banks on Monday, May 11. It stated that banks must introduce e-loan operations to make technology-driven financial services easier, faster and more customer-friendly.

According to the circular, a customer can take up to Tk 50,000 in e-loan. The maximum loan tenure will be 12 months. Banks will determine the interest rate based on market conditions, but if refinance facilities are availed, the maximum interest at customer level will be 9 per cent.

Loan disbursement, instalment payments and other activities must be completed through fully digital methods. The central bank's initiative is expected to make loan services more accessible and time-saving. However, banks must review the Credit Information Bureau report before loan approval. Defaulting borrowers will not be eligible.

Bangladesh Bank said banks will use national ID cards, biometric information and necessary digital verification systems to verify customer applications.

The circular also stated that all information regarding interest, fees, charges, late payment fees or prepayment fees must be clearly communicated to customers in advance. No additional charges can be imposed without customer consent.

The central bank has placed special emphasis on cyber security. Banks have been instructed to ensure secure transactions through two-factor authentication, multi-factor authentication and one-time password systems. Banks must also strictly follow existing laws and policies to protect customers' personal information.

Before launching e-loan operations, each bank must formulate its own policy and obtain board approval. The service must be launched after ensuring information technology risk management and cyber security capabilities.

Bankers said the new initiative will make small and retail loan disbursement easier, especially for young entrepreneurs, freelancers and customers dependent on digital platforms. It will also reduce time and costs in banking services and decrease cash dependency.