BRPD Circular No. 11: Refinance Scheme for Digital Nano Loan

Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka. BRPD Circular No.-11 Date: 19 Jyestha, 1429 02 June, 2022 Managing Director/Chief Executive All Scheduled Banks operating in Bangladesh.

Dear Sir,

Regarding the formation of a refinance scheme for providing 'Digital Nano Loan' facility to improve the standard of living of the financially included and vulnerable population.

The economy of Bangladesh is developing rapidly. In this developing economy, the financial sector plays a significant role. Efforts have been made to diversify financial products or services by considering the needs of the financially included and vulnerable population, with the aim of reducing economic inequality and developing an inclusive and sustainable financial sector. In line with the Government of the People's Republic of Bangladesh's goal of building 'Digital Bangladesh', to facilitate the availability of micro loans, encourage banks, and provide short-term interest/profit-based digital micro loans/investments while reducing bank fund expenditure, the Bangladesh Bank has formed a refinance scheme of Tk 100.00 (One Hundred) Crore. The following instructions are to be followed in the operation of this scheme:

1. Title: Refinance Scheme for providing 'Digital Nano Loan' facility.

2. Definition of Digital Nano Loan: 'Digital Nano Loan' refers to the provision of micro loans by scheduled banks using digital media (Internet banking, mobile apps, mobile financial services, e-wallets, etc.).

3. Source and Amount of Funds: Own funds of the Bangladesh Bank. The amount of the scheme is Tk 100 (One Hundred) Crore. The first tranche of Tk 50 (Fifty) Crore will be distributed from this scheme. Subject to the proper utilization of the loans distributed in the first tranche, a refinance facility of another Tk 50 (Fifty) Crore will be provided in the second tranche. The amount of this refinance may be increased in the future considering demand.

4. Tenure of Funds: The tenure of funds under this scheme will be 3 (three) years, and the funds will be recoverable (non-callable) within the specified period.

5. Participating Banks: All scheduled banks distributing digital micro loans will be considered eligible to avail this refinance facility. Banks interested in availing the refinance must enter into a Participation Agreement (Participation Agreement) with the Financial Inclusion Department (FID) of the Bangladesh Bank.

6. Fund Management: The overall supervision/operation/management of this scheme will be carried out by the Financial Inclusion Department, Bangladesh Bank, Head Office. The instructions provided by the Financial Inclusion Department regarding the application procedure for refinance, submission of required documents, and fund management must be followed.

7. Customer Eligibility for Loan Receipt and Loan Limit: (a) The loan will be distributed to digital micro loan recipients through scheduled banks; (b) Authorizing banks must follow the instructions mentioned in the approval letter issued by the Bangladesh Bank; (c) Scheduled banks will provide loans digitally using arrangements such as Internet banking, mobile banking apps, Mobile Financial Services (MFS), e-wallets, etc., from the loan processing stage to loan recovery; (d) Authorizing banks may provide loan facilities ranging from a minimum of Tk 500 (Five Hundred) to a maximum of Tk 50,000 (Fifty Thousand) to a single customer subject to eligibility verification of loan recipients. The Bangladesh Bank may reduce/increase the amount of loans provided to customers from time to time.

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8. Customer Interest Rate (Profit in the case of Shariah-based banks) and Other Charges: (a) The customer interest rate will be a maximum of 9%; (b) Interest must be levied on the diminishing balance of the customer's loan; and (c) No other type of charge or fee may be collected from the customer except for charges/fees mentioned in the existing policy regarding the Schedule of Charges issued by the Bangladesh Bank, along with the percentage/instructions mentioned in the permission letter obtained by the Bangladesh Bank for the micro loan program.

9. Bank Interest Rate: Interest will be levied on the refinance facility availed by banks from the Bangladesh Bank at a rate of 1%.

10. Loan Tenure: The loan tenure for both the bank and the customer will be a maximum of 06 (six) months.

11. Recovery and Supervision: (a) Participating banks will repay the principal along with interest to the Bangladesh Bank in quarterly installments. If there is any delay in repaying the principal and interest of the refinance to the Bangladesh Bank within the stipulated time, the amount will be recovered by adjusting it from the current account of the concerned bank kept with the Bangladesh Bank; (b) Banks will recover the principal along with interest from the customer according to the recovery schedule of the concerned loan; (c) All liabilities regarding the recovery of loans distributed to customers will rest with the loan-distributing bank. The Bangladesh Bank's receivables will not be linked with the recovery of customer loans; (d) The concerned bank will bear all risks related to the loan; (e) The authorizing bank will ensure the proper utilization of loans distributed under this scheme; (f) Participating banks will supply copies of information, documents, and papers related to the refinance to the Bangladesh Bank from time to time as requested; (g) The concerned bank will ensure matters related to the distribution, recovery, and proper utilization of digital nano loans through regular monitoring.

12. Other Conditions: (a) Islamic Shariah-based banks will provide investment to customers under this fund based on their approved investment methods without making any difference in the percentage; (b) The Bangladesh Bank reserves the right to add, delete, or modify any of the conditions mentioned regarding the refinance scheme.

These instructions are issued under Section 45 of the Bank-Company Act, 1991. These instructions will come into force immediately.

Yours faithfully,

(Maksuda Begum) Director (BRPD) Phone: 9530252.