Central bank devising collateral database to stem doc forgery

The central bank has started the process of developing a collateral database in order to prevent document forgery and corruption during sanctioning loans, officials said.

"We've taken the moves to check corruption in the country's banking system," a senior official of the Bangladesh Bank (BB) told the FE while explaining the main objective of establishing the database.

The central bank is now working to "go-live" the database by the end of this calendar year, the central banker hinted.

Dishonest people are using forged document and reusing collateral to get loans, according to the banking sector insiders.

They said the banks could not recover the loan amount in many cases when the borrower defaults on loans or flees.

Meanwhile, the central bank issued a circular on Thursday and asked the managing directors (MDs) and chief executive officers (CEO) of all scheduled banks and non-banking financial institutions (NBFIs) to collect collateral report of the security which is supposed to be mortgaged during sanctioning a loan.

It said development of collateral database will prevent fraud, forgery and corruption arising from mortgaging unlawfully the same property against more than one loans sanctioned by banks and NBFIs.

During sanctioning a loan, from collateral information system, it is mandatory for all banks and NBFIs to collect collateral report of the security which is supposed to be mortgaged, according to the notification.

Initially, only information on immovable collaterals such as land, flat, building and capital machineries will be included in collateral database, it added.

Without incorporating in the existing Credit Information Bureau (CIB) Online System, this database will be managed with a new system named as Collateral Information System.

The banks and NBFIs have been instructed to upload information on collaterals onto the system on quarterly basis.

However, March, 2018 'Collateral Batch Contribution' has to be uploaded to the system on or before May 31 of this calendar year.

"From June, 2018 Collateral Batch Contribution and onwards, every Quarterly Collateral Batch Contribution has to be uploaded to the system on or before 20th of the quarter ending following month," the BB added.

With a view to having well organised banking sector, the CIB, through developing CIB Online System, is already working for strengthening credit discipline and easing loan sanctioning process of banks and financial institutions.

On the other hand, the central bank revised the threshold of submission of credit information to the CIB database asking the banks and NBFIs to provide all credit information instead of outstanding loan worth Tk 50,000 or above and Tk 10,000 or above for credit card in its reporting system.

"We've taking the measures to ensure credit discipline in the country's banking system," the BB official explained.

He said such information for March, 2018 has to be uploaded to the system within May 10 this calendar year while date for April and onward will be uploaded by 10th of the following month.

The CIB was set up on August 18, 1992 at the central bank aiming to improve credit risks and reduce the extent of default loans.

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