Bangladesh Bank Orders Banks, MFSs To Suspend Services For Illegal Loan Apps

⚠ Bangladesh Bank has directed all scheduled banks, mobile financial service (MFS) providers, digital financial service institutions and payment service providers to immediately suspend payment services for 30 identified illegal loan apps. The central bank's order — backed by the Payment and Settlement Systems Act, 2024 — represents the most aggressive regulatory crackdown on unauthorised digital lending in Bangladesh's history, targeting apps that have been involved in extortion, data theft and financial fraud against vulnerable borrowers.

📜 The banking regulator also requested the Bangladesh Telecommunication Regulatory Commission (BTRC) and other relevant authorities to remove mobile apps involved in unauthorised online lending from online platforms, including the Google Play Store, and permanently stop their use and operation. The central bank issued separate letters to those authorities recently. BB also asked banks to take effective measures to raise public awareness against such apps and report the steps taken to its Payment Systems Supervision Department.

⚠ How Illegal Loan Apps Exploit Borrowers

In the letter, BB said some mobile apps operating on online platforms are providing loans at high interest rates, exposing borrowers to financial losses and harassment. It said such apps can gain access to users' phone contacts, personal and sensitive information, photos, videos and text messages without their knowledge. Borrowers who fail to repay loans may then face blackmail, threats to publish sensitive information and photographs on social media, and other forms of harassment, it added.

The exploitation model — gaining access to personal data through app permissions, then using that data for extortion when borrowers default — is a well-documented pattern in unauthorised digital lending across South and Southeast Asia. The apps typically request broad permissions during installation (contacts, photos, SMS access) that are not necessary for legitimate lending, then use this data as leverage against borrowers who cannot repay the exorbitant interest rates charged.

• 📜 Legal basis: Payment and Settlement Systems Act, 2024
• 📜 Section 15(2): No unauthorised lending platforms allowed
• 📜 Section 37(1): Punishable offence
• 📜 Section 19(4): BB directive to suspend payment services
• 📊 Illegal apps identified by BFIU: 30
• 🚫> Targeted: Banks, MFS, DFS, PSP institutions
• 📜> Also directed: BTRC (remove from Google Play Store)

🏛 Legal Framework: Payment And Settlement Systems Act 2024

Citing Section 15(2) of the Payment and Settlement Systems Act, 2024, Bangladesh Bank said no person can operate an online or offline platform involving investment collection, lending, fund custody or financial transactions without its approval. As the lending activities of the identified apps are being conducted without Bangladesh Bank approval, they are illegal and constitute a punishable offence under Section 37(1) of the law, it said.

The central bank warned that operators of such apps are directly involved in a punishable offence. It also said scheduled banks, MFS, digital financial service and payment service provider institutions that facilitate transactions related to such lending could be considered involved in the offence as financial transaction channels. Under Section 19(4) of the law, Bangladesh Bank therefore directed all institutions and individuals concerned, including the operators of the identified apps listed in an attachment, to immediately stop providing payment services to them.

📊 30 Illegal Apps Named By BFIU

Earlier, the Bangladesh Financial Intelligence Unit warned the public against taking loans through unauthorised mobile apps and digital platforms and named 30 illegal apps involved in extortion, data theft and financial fraud. The 30 unauthorised apps identified by the BFIU include: Sathi Loan, Pop Cash, FinCash, Quick Loan, Quick Taka, Dhaka Fin, LoanVibe, Dost Loan, Taka Cash Loan, KWANZA Loan, SSH Money, LoanBuddy, Cash-Hora, Alo Cash, Fast Loan, Easy Taka, Dhorjo Loan, Fin Dot Do, Taka Cash Loan, BongoCash, Asha Loan, Subidha Loan, Smart Loan BD, Online Loan BD, City Online Loan, BD Shohoj Loan, Cash Loan, Sonali, Loan Haat and Taka Nao.

The naming of 30 specific apps provides actionable intelligence for banks, MFS providers and the BTRC to execute the suspension order. However, the dynamic nature of app-based lending — where operators can rebrand and relaunch under new names within days — means that the regulatory response needs to be equally agile, with ongoing monitoring of app stores and financial transaction patterns to detect new entrants.

🌏 Broader Context: Digital Lending Regulation

Earlier, on August 24, The Daily Star published a report titled "Fake online loans lead borrowers into costly traps". The report said people are losing their hard-earned money to online scams that offer cheap loans and quick investment returns. It also said some unauthorised mobile apps are targeting people by offering digital loans. The investigative journalism that exposed the illegal lending ecosystem has now catalysed the most comprehensive regulatory response to date — demonstrating the role of media in driving financial sector enforcement.

For Bangladesh's broader digital financial ecosystem, the crackdown on illegal loan apps carries strategic significance. The unauthorised lending apps have been undermining trust in digital financial services — when vulnerable borrowers are exploited by apps that appear to be legitimate digital lending platforms, trust in the broader digital finance ecosystem erodes. By removing the illegal operators, Bangladesh Bank protects both individual borrowers and the credibility of the authorised digital lending sector that includes legitimate MFS providers and licensed digital lenders.

The coming months will reveal whether the suspension order — combined with BTRC's app removal — effectively eliminates the illegal lending apps, or whether operators rebrand and relaunch under new names. The sustainability of the regulatory response will depend on Bangladesh Bank's ability to maintain ongoing monitoring of the digital lending landscape and to act quickly against new entrants that replicate the exploitation model of the 30 identified apps.