Bangladesh Bank Issues Guidelines for Credit Bureaus: What You Need to Know
The Bangladesh Bank has taken a significant step by issuing guidelines for the operation and licensing of credit bureaus in the country. This move is aimed at improving the supervision, stability, and management of credit portfolios in the financial market.
One of the key highlights of the guidelines is the requirement for private sector investors to have a minimum paid-up capital of Tk10 crore to set up a credit bureau company. This will open up opportunities for more players in the market and promote healthy competition.
Currently, the Credit Information Bureau (CIB) operated by the Bangladesh Bank is the sole source of credit information for lenders. With the introduction of new guidelines, individuals and companies can now apply for a license to operate a credit bureau through the Payment Systems Department (PSD).
The establishment of credit bureaus will help reduce information asymmetry in the financial market, making positive client information available to other lenders. This will ultimately lead to lower default rates, average interest rates, and increased lending.
The guidelines also emphasize the importance of maintaining a strong credit history, which will help in lowering nonperforming loans (NPLs) and improving the overall quality of credit portfolios.
In terms of how credit bureaus will operate, they will follow a mixed model by collecting and analyzing information from existing registries, financial institutions, and other sources for credit reporting or scoring. Data subjects will have ownership of their information, and proper consent must be obtained before sharing any data.
Overall, the issuance of guidelines for credit bureaus by the Bangladesh Bank is a positive step towards enhancing transparency, efficiency, and competitiveness in the financial market. It will benefit both lenders and borrowers by providing access to reliable credit information and promoting responsible lending practices.
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