Utility of central bank's credit information bureau
Wednesday, 9 December 2009
The Bangladesh Bank, with the help of the UK's Department for International Development (DFID), last Sunday launched the implementation of a much-awaited project that would automate its credit information bureau (CIB). An Italian firm, entrusted with the responsibility of implementing the project, hopes to complete the automation job by June next. On completion, the project would help the banks and financial institutions to have credit information about their potential borrowers almost instantly. Its works were, actually, due to be completed by June last year. The online system would respond within seconds and offer complete historical information of each contract as well as overall summary.
Banks as well as their clients have been facing problems because of the delay in getting information from the CIB despite the fact the central bank has tried sincerely to expedite the process. Earlier, getting information from the bureau about a potential borrower used to take more than a month's time. Now it should take between one and two weeks because of the introduction of computer technology. Many people do need bank loans to meet their urgent financial needs. But the delay made at the CIB in making available necessary information to banks causes sufferings to such borrowers. In spite of their willingness, banks cannot disburse loans to their clients in time because of the delayed CIB clearance.
However, it would not be fair to blame alone the officials manning the CIB because of the fact that the process of getting information from, and transmitting, the same to banks about the borrowers is still done manually. The CIB is, actually, doing a hell of a job since the number of banks and their clients has increased manifold over the years. A few statistics would reveal the workload of the bureau. On average, it sent 3500 credit reports to banks per day during the last fiscal. The number has now increased to about 4500. The number of requests it had received from banks to furnish credit information was about 1.7 million in the fiscal 2008, representing a 26 per cent growth over that of the preceding year.
The importance of the CIB that was set up in 1992 in the backdrop of the accumulation of huge non-performing loans of the banks and other financial institutions, cannot, however, be underestimated. The main objective behind putting the bureau in place was to minimize the extent of default loans by making available the necessary credit information about loan applications to the banks and financial institutions and also to help the lending institutions avoid risks while offering loans and providing rescheduling facility. The utility of the CIB has been proved beyond doubt. Its automation would now certainly, enhance its capacity further to meet the requests from banks promptly. This is expected to reduce the difficulty faced by the borrowers because of the delay in transmission of credit reports to the banks.
Under the CIB automation project, online connectivity between the CIB and the head offices of banks and financial institutions would be established. However, not all commercial banks and other financial institutions are equally automated to reap the maximum benefit from the CIB automation. The state-owned banks having vast network across the country and some other private banks are yet to become fully automated. Credit requests from bank clients living outside Dhaka reach their respective headquarters manually and their disposal, frustratingly, take a lot of time. The establishment of intra-bank online facility would help expedite the processing of such loan applications. So, automation of the banks should be carried out in sync with the CIB automation. Besides, the quality and the performance of the system would largely depend on the quality of credit information provided by the banks to the bureau regularly.
Banks as well as their clients have been facing problems because of the delay in getting information from the CIB despite the fact the central bank has tried sincerely to expedite the process. Earlier, getting information from the bureau about a potential borrower used to take more than a month's time. Now it should take between one and two weeks because of the introduction of computer technology. Many people do need bank loans to meet their urgent financial needs. But the delay made at the CIB in making available necessary information to banks causes sufferings to such borrowers. In spite of their willingness, banks cannot disburse loans to their clients in time because of the delayed CIB clearance.
However, it would not be fair to blame alone the officials manning the CIB because of the fact that the process of getting information from, and transmitting, the same to banks about the borrowers is still done manually. The CIB is, actually, doing a hell of a job since the number of banks and their clients has increased manifold over the years. A few statistics would reveal the workload of the bureau. On average, it sent 3500 credit reports to banks per day during the last fiscal. The number has now increased to about 4500. The number of requests it had received from banks to furnish credit information was about 1.7 million in the fiscal 2008, representing a 26 per cent growth over that of the preceding year.
The importance of the CIB that was set up in 1992 in the backdrop of the accumulation of huge non-performing loans of the banks and other financial institutions, cannot, however, be underestimated. The main objective behind putting the bureau in place was to minimize the extent of default loans by making available the necessary credit information about loan applications to the banks and financial institutions and also to help the lending institutions avoid risks while offering loans and providing rescheduling facility. The utility of the CIB has been proved beyond doubt. Its automation would now certainly, enhance its capacity further to meet the requests from banks promptly. This is expected to reduce the difficulty faced by the borrowers because of the delay in transmission of credit reports to the banks.
Under the CIB automation project, online connectivity between the CIB and the head offices of banks and financial institutions would be established. However, not all commercial banks and other financial institutions are equally automated to reap the maximum benefit from the CIB automation. The state-owned banks having vast network across the country and some other private banks are yet to become fully automated. Credit requests from bank clients living outside Dhaka reach their respective headquarters manually and their disposal, frustratingly, take a lot of time. The establishment of intra-bank online facility would help expedite the processing of such loan applications. So, automation of the banks should be carried out in sync with the CIB automation. Besides, the quality and the performance of the system would largely depend on the quality of credit information provided by the banks to the bureau regularly.