ISLAMABAD: The Finance Ministry has got approved in principle a summary for legislating draft of Credit Bureau Act 2010 from the federal cabinet, impeccable sources told Customs Today on Monday.
Currently, only a couple of private credit bureaus are functioning, but they are without any legal framework or regulatory requirements which has raised concerns for the State Bank of Pakistan (SBP), especially due to the sensitivity of banking information maintained by these bureaus.
The aim of the Credit Bureau Act 2010 is to provide a legal framework for emerging credit bureaus through an act of parliament. The law would provide for incorporation and functioning of private credit bureaus to help borrowers and lenders with an enabling interface of credit worthiness. A well-placed source at Finance Ministry told this scribe here on Monday that the bill would become become law after being cleared by both houses of parliament.
The source further said that credit bureaus would be legally empowered to collect and be answerable for trustworthiness of credit information about debtors of banks, financial institutions, non-banking financing institutions (NBFIs), non-financial companies, modarabas, leasing companies, microfinance institutions and so on. “Credit bureaus the world over play a critical role and have an impact on financial decision making,” the source said, adding that lending and investment assessments by financial institutions, particularly banks, were crucial elements for a healthy credit culture in the country and Credit Bureaus would provide information for objective examination of the credit standing of the borrowers.
The sources said that despite widespread consumer financing and leasing of essential goods and services over the last two decades, there had been no central bank-regulated credit bureau and credit rating information services agency. Moreover, the source said that the SBP own Credit Information Bureau (CIB) published only consumer credit history of defaulters of bank loans exceeding Rs500, 000, and that too only after repeated goading by the Supreme Court of Pakistan.
”However, rapid growth in consumer lending has led to the creation of some private credit rating agencies, which had started providing such information, mostly to commercial banks, NBFIs and telecom service providers, but their activities and the quality of their information and credibility is a question mark for the central bank,” the source added.
Therefore, the source said that the proposed law would now regulate private credit bureaus as well as would provide comprehensive legal and regulatory framework for their incorporation and functioning.