Bangladesh Bank established the Credit Information Bureau (CIB) in 1992. The objective was to bring all types of personal and institutional credit information distributed by banks and financial institutions within a specific framework, so that it is possible to reduce credit-related risks. Since the introduction of the online system in 2011, banks have started receiving CIB applications and information online, which has brought a revolutionary change. Since then, as the activities of CIB have expanded in various ways, it is now possible to get CIB reports within a few hours, from which banks can easily analyze all types of credit information of a customer and make decisions.
According to the latest report of Bangladesh Bank, the total amount of defaulted loans in the country at the end of March was 5 lakh 88 thousand 704 crore taka, which is 32.26 percent of the total loans disbursed. On the other hand, there are a lot of willful defaulters in the country’s banking sector, who are not repaying their loans despite having the ability. On the one hand, there are crores of taka in the deposit accounts of the willful defaulters, and on the other hand, they are in defaulted loans. The lending banks are not able to collect loans from them. Integrated Credit and Deposit Information Reporting (ICDIR) can resolve this complication.
How will ICDIR work?
ICDIR will be a modern version of the traditional CIB. This reporting system will not only report loan information like the CIB, but will also report information on all banking deposits of an individual or institution along with loans. In addition to current and past loan history, information on deposit accounts of all categories of individuals and institutions, information on personal and institutional utility debts, tax-related expenses and debts, loan repayment history, loan rescheduling information, vehicle ownership and immovable property information will also be included under NID (–), TIN (—) and BIN (—). In the traditional CIB, only banks and financial institutions report loan information.
Through ICDIR, banks as well as service providers such as the National Revenue Board, Land Office, Electricity Distribution Authorities, BRTA, Gas Transmission and Distribution Companies, and various regional water utilities will report the current status of their respective customers at regular intervals. ICDIR will use artificial intelligence from the data reported under it to create a rating of borrowers and propose decisions. In this way, if a customer defaults on a bank loan for a long time or is a wilful defaulter, the borrower’s bank will be able to search for information on the customer’s deposit accounts, movable and immovable properties, liabilities, etc. reported by other banks, financial institutions, and service providers under that customer. If necessary, the concerned bank will be able to apply through the Bangladesh Bank system to adjust its unpaid loans and adjust the total or partial amount of the related loan from the customer’s deposit account maintained in other institutions.
In the current context, the process of restructuring defaulted loans through collateral alone is legally complex, time-consuming and in most cases the success rate is not satisfactory. However, if ICDIR is introduced under Bangladesh Bank itself, it can become a very transparent, acceptable and effective step to reduce the amount of defaulted loans in the country’s banking sector.
Fruit
When a defaulting borrower (individual or institution)’s overall financial liabilities, as well as all deposits, are visible to the bank, the scope for over-borrowing and information concealment will be reduced. As a result, the amount of defaulted loans in the banking sector will decrease.
By using the ICDIR database, it will be possible to develop a framework for the central bank to formulate policies and establish a framework for repaying defaulted loans from the accumulated deposit accounts of an individual or institution. As a result, intentional defaulted loans will also be reduced.
Customers who repay their loans regularly will receive faster loan approval, creating opportunities for them to receive low-interest loans or larger amounts of credit.
ICDIR will make it possible to easily identify financial fraud, because then it will be possible to know the deposit status as well as the customer’s loan information.
