Center for Professional Advancement
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Discipline: Investment

Subject: CIB

Category: General

Level: Intermediate

An overview of CIB

1. Background

Credit Information Bureau (CIB) was set up in Bangladesh Bank (BB) in the year 1992 with the objective of minimizing the extent of default credit¹. CIB of BB collects credit related information of borrowers from banks and financial institutions (FIs) and maintain the information in its database. The banks and FIs can access online database of CIB and collect credit information of its customer, when needed. They use the information to analyze repayment behavior of customer and avoid financing to any defaulter.

2. Legal Basis

As per Bangladesh Bank Order, 1972 (Chapter IV), a clear legal and regulatory framework has been laid down which allows credit reporting and furnishing of credit reports to banks/FIs to function successfully.

As per section 27KaKa of Bank Company Act, 1991, every Bank Company/ Financial Institution is obliged to send to the Bangladesh Bank a list of debtors in default. Bangladesh Bank is obliged to send to all Bank Companies or Financial Institutions at their request information on the specific defaulter.

3. Benefit/Uses/Necessity of CIB Report

1. CIB report has substantial impact on decision making regarding sanctioning, renewal, rescheduling and adjustment of a credit facility by bank and FIs. It assists in knowing loan status and repayment behavior of a customer even he/she does not have any default investment/loan. It also facilitates in reducing loan-processing time, costs and probability of being default to a considerable extent.
2. As per section 27KaKa of Bank Company Act, 1991, no bank or financial institution can extend any credit facility favoring a defaulter. To comply with the above requirement, banks collect information from CIB to ascertain default status of a customer (BRPD Circular 13, 2000). As per BRPD Circular 2 dated 16 January 2014 on single borrower exposure limit (large loan), Banks shall collect the loan information on their borrowers from Credit Information Bureau (CIB) of Bangladesh Bank before sanctioning, renewing or rescheduling loans in order to ensure that credit facilities are not being provided to defaulters.
3. Information from CIB to be collected before taking effective steps on fresh loan-application of any borrower after receipt of the same or before renewal of regular loan account or rescheduling (CIB Circular 02, 1992 and CIB Circular 7, 1995).
4. CIB Report is required even before allowing non-funded facilities like LC, bank guarantee (BRPD Circular 13, 2000).
5. CIB Report should be collected though the customer provides 100% or more cash security against a facility. In fact, credit facility cannot be provided to a defaulter even if 100% or more cash margin is provided. As such, to avoid financing to a defaulter, CIB report should be obtained in such cases also.

4. Supplier of Information to CIB

Banks, Financial Institutions and Investment Corporation of Bangladesh (ICB) are currently participants of the CIB of Bangladesh Bank. These participants supply credit related information to CIB database.

5. Users of CIB

The main aim of the CIB is to provide service to the participants (banks/financial institutions) that need to assess credit risk when granting investment/ credit. To this end, these banks/ financial institutions have access to the total liabilities of each customer in the CIB database. In addition, the CIB of Bangladesh Bank provides following services:

1. Providing CIB reports to
   1. Bangladesh Investment Development Authority (BIDA) to assess risk of a domestic company/Joint Venture before giving permission for foreign loan.
   2. BRPD and DFIM for selection of director for different banks, for loan processing and issuing license to banks and FIs.
   3. Different departments of Bangladesh Bank.
2. Forwarding comments on defaulters to
   1. Election Commission office about the candidates contesting the Parliamentary/Municipal/City corporation/Upazilla elections;
   2. Ministry of Commerce, Ministry of Industry and Ministry of Expatriates’ Welfare and Overseas employment for selecting Commercially Important Person (CIP);
   3. National Board of Revenue (NRB) for selecting CIP in respect of highest tax payers as individual/company;
   4. Bangladesh Securities and Exchange Commission (BSEC) about the directors/companies before issuing IPO (Initial Public Offer), right shares.

   (Reference: Policies and Guidelines for New CIB Online Solution, 2015 (Draft))

6. Confidentiality of CIB Report:

CIB report contains credit information of a borrower which is very important, confidential and sensitive. In article 46 of Bangladesh Bank order, 1972, there are directions and guidance for restricted use of credit information. In this article, restrictions are also imposed for not to disclose any credit information to the clients or others. Furthermore, in this article, it is also said that even Bangladesh Bank and other commercial banks/FIs are not entitled to disclose or transfer any complete credit information of borrowers.

In case the CIB report in respect of the borrower/customer is found adverse, instead of handing over the CIB report itself or an extract thereof, the banks/FIs may inform the client or prospective client in writing, in a confidential letter using the following language:

"According to credit information available with us, you are identified to be in default in your account(s) with one or more lending institution(s). You may approach your current lending institution(s) to regularise the position with them." (CIB Circular 1 dated 08 January 2005).

7. Exemption from Reporting to CIB and collecting CIB Report:

1. If a customer has outstanding liability
   1. less than Tk. 10,000- if it is a credit card customer,
   2. less than or equal to Tk. 250,000-if it is short-term agricultural investment/loan customer given for crop cultivation
   3. less than Tk. 50,000 – if it is other than above two types of customer

   the bank/FIs are not required to report credit/investment information of the customer to CIB database of Bangladesh Bank.

2. CIB Report is not required for short-term agricultural credit/investment amounting to a maximum of Tk. 250,000 for the purpose of Crop Cultivation only. However, Bank/ FIs must ensure that the credit/investment facility is not given to a defaulter.

(CIB Circular 2 dated 04 May 2011 and Para 5.07 of Agricultural & Rural Credit Policy & Program for the FY 2016-17)

8. Legal Injunction:

Unscrupulous defaulters often obtain order of injunction from court restraining the Bangladesh Bank from publishing their name as a defaulter in the CIB report. By this way, they manage to hide their default status for time being.

9. Food for Thought:

As per section 42 (c)(ii), credit information includes the nature of security taken from any borrower for credit facilities granted to him. Based on this legal ground, Bangladesh Bank is going to prepare a database of mortgaged land properties.

(BB moves to prepare database of mortgaged land properties - The Financial Express, Oct 11, 2016)

Reference

CIB Circular 2 dated 27 December 1992

CIB Circular 7 dated 16 June 1995

CIB Circular 13 dated 26 October 2000

CIB Circular 1 dated 08 January 2005

CIB Circular 2 dated 04 May 2011

CIB Manual, 2011

CIB Policy (Draft), 2015

para 5.07 of Agricultural & Rural Credit Policy & Program for the FY 2017-18

BB Order, 1972

Section 27KaKa of Bank Company Act, 1991

BB moves to prepare database of mortgaged land properties - The Financial Express, Oct 11, 2016

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