Pvt sector investors can now set up credit bureau with Tk10 crore paid-up capital
Bangladesh Bank, for the first time, issued guidelines for operating and licensing credit bureaus
The Bangladesh Bank has issued guidelines for the first time allowing private sector investors to set up credit bureau companies with a minimum paid-up capital of Tk10 crore.
The guidelines aim to aid supervision, enhance stability, and facilitate more organised management of credit portfolios.
Currently, the Credit Information Bureau (CIB), run by the Bangladesh Bank, is the only authorised source of credit information for lenders.
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Under the new guideline issued on 5 June on the licensing, operation and regulation of credit bureaus, an individual or a company can now apply to its Payment Systems Department (PSD) for the license to operate a credit bureau.
The guideline aims to reduce information asymmetry about borrowers in the financial market, make positive client information — often kept confidential — available to other lenders, increase competition in the credit market, and benefit better credit applicants.
According to the guidelines, credit bureaus will reduce default rates and average interest rates, facilitated by increased credit information, leading towards increased lending.
The guidelines said it would encourage borrowers to maintain a strong credit history, ultimately lowering nonperforming loans (NPLs) and improving the credit portfolio's quality.
How credit bureaus will be established
A potential applicant who intends to apply to establish a credit bureau must be a limited company, according to the guidelines.
It also said investment from an individual or business entity incorporated outside Bangladesh is allowed.
The number of directors shall not exceed eleven, and at least two of the directors must have 10 years of banking experience.
At least two directors must have experience and academic background in technology-related businesses.
A shareholder holding more than two percent of the total shares will be eligible to become a director of the credit bureau.
The guidelines state that no individual may be a director in more than one credit bureau at any given time.
How credit bureaus will operate
The credit bureau will follow a mixed model, collecting and analysing information from existing registries, other regulated financial institutions, and available sources for credit reporting or scoring according to the guidelines
It will collect basic personal history data directly from a data subject with proper consent.
As per international best practices, the data subject is the owner of their data.
So, the data must be shared by the organisations holding it once the data subject has provided proper consent to the credit bureau.
The guidelines said the Bangladesh Bank's credit registry (CIB) will share basic credit information about borrowers or data subjects, and other necessary information may be collected from sources.
The credit bureau will collect, manage, store and process credit information related to the debtor (the data subject, in this case) with proper consent.
It may provide credit information and credit score of the data subject to the user, other credit bureaus, the Bangladesh Bank, govt organisations and other institutions allowed by this document in a manner so that the data subject's identity is protected.
The data-sharing scopes
No personal data of a data subject is to be shared among the institutions dealing with customer data. Only transactional data, credit data, data related to payment habits, public information, or any other relevant positive or negative information that may have relevance in assessing an entity's credit scoring can be shared.
However, no data related to the balance of deposit accounts is to be shared.
The guidelines said a licensed credit bureau shall be allowed to collect relevant information for permissible purposes only on the credit history relating to the data subject's commitment to determining their overall debt exposure, repayment behaviour, and other contractual obligations.
Whether regulated by the Bangladesh Bank or not, all data providers and users will be subject to the same rules and obligations as provided in these guidelines.
The guidelines said a credit bureau may collect data from any source, including banks and finance companies operating in Bangladesh, the CIB of the Bangladesh Bank, other credit bureaus licensed by the Bangladesh Bank, mortgage finance companies, finance companies, insurance companies, institutions that offer credit to medium, small, and micro-enterprises (micro-finance institutions), asset management companies, and courts.
In addition, it may also collect data from suppliers of goods and providers of services on a post-paid or installment payment basis, mobile financial service (MFS) providers, payment service providers, telecommunication service providers, and utility companies.
The credit bureau may also collect data from any other companies with credit or non-credit information about the subject matter and are willing to provide such information and other entities with relevant data and information that comply with permissible purposes and serve the purposes of the credit bureau.
