Commercial banks will now be allowed to disburse certain consumer loans directly to vendors through electronic fund transfers, as part of efforts to align lending operations with the country's increasingly digital payment ecosystem.
In a circular issued on Tuesday, the Bangladesh Bank (BB) permitted scheduled banks to transfer loan proceeds electronically to vendors in the case of auto loans, housing finance, consumer durable loans and loans for professionals.
The central bank said the move would improve operational efficiency, eliminate settlement delays, reduce the risk of instrument-related fraud and lower the costs associated with paper-based transactions for both banks and customers.
Previously, banks were required to make payments under these loan categories through pay orders or cheques issued in favour of vendors to ensure the proper use of funds and prevent the diversion of loan proceeds.
According to the circular, digital disbursement will enable instant fund transfers, speed up asset delivery and provide a more secure settlement mechanism for banks, vendors and borrowers.
Under the new guidelines, banks may transfer funds directly to a vendor's account if it is maintained with the same bank.
If the vendor's account is held with another scheduled bank, the disbursing bank may use the Real-Time Gross Settlement (RTGS) system to complete the payment.
However, loan proceeds must not be credited to the borrower's account or paid in cash unless specifically allowed under applicable regulations, the circular said.
The central bank also instructed banks to take adequate measures to identify, monitor and mitigate operational, fraud, cyber security, third-party and unauthorised fund transfer risks arising from digital disbursement arrangements.
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