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Kathmandu Monday February 26, 2001 Falgun 15, 2057.
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Credit Information Bureau to be restructured
Post Report
KATHMANDU, Feb 25 - Nepal Rastra Bank (NRB), in the second phase of the
financial sector reform, is going to restructure Credit Information Bureau (CIB),
following the hand-over of management contract to private sector.
According to Prem Shankar Shrestha, Chief of the Bureau, an internal
task-force has been studying on restructuring of the Bureau. The restructuring is being
done with a major assistance from the World Bank (WB), one of Nepal’s biggest donors.
The Asian Development Bank (ADB) and the International Monetary Fund (IMF) are also
helping in the process.
The Bureau, which is under the Nepal Bankers’ Association presently,
will be made an independent entity following its restructure. Currently 17 banks including
the commercial and the development are its members. In keeping with the increased banking
transactions of finance companies and cooperatives, they would also be brought under it,
says Shrestha.
The Bureau informs banks on the financial capacity of loan seekers, their
past banking transactions, their outstanding payment etc., depending on the information it
receives from the concerned banks, which in effect, discourages insolvent borrowers from
taking loans from other finance companies or cooperatives or banks.
However, all the banks, finance companies or cooperatives do not furnish
details of their borrowers to the Bureau regularly, which is creating difficulty in
updating the information it keeps, he says.
"There is no legal provision on taking actions against banks if they do
not provide such information regularly. This has made the activities of the Bureau
ineffective. That’s why this institution is in preliminary stage, though it is a
decade old," he says.
Earlier, Shrestha speaking at a seminar on ‘Credit Rating in
Nepal’, he had pointed out the need of formulating legal framework in order to
strengthen the restructuring of the Bureau.
"The central bank should formulate necessary laws and policy if the
Bureau has to be made effective", he suggests. If the Bureau is effective, it can
find out the financial condition of the loan seekers, which will be instrumental in
curbing the banking frauds, he said adding, it would bring down unproductive loan and flow
loans to right people/organizations.
The Bureau has blacklisted 1,300 borrowers defaulting loans exceeding Rs 2
million. Similarly, it has labeled 600 borrowers not repaying loans exceeding Rs .5 to 2
million as defaulters.
Speaking at the seminar organized by Nepal Economic Association and the
central bank, Governor Dipendra Purush Dhakal stressing on the efficacy of the Bureau said
for economic and financial reforms restructuring of the CIB is imperative. But so far as
credit rating is concerned, it is confined to concept only now, he said.
Deputy Governor, Ram Babu Pant said as the financial sector is expanding,
there is a need to have some organizational structure in order to win the confidence of
investors. For the effectiveness in the financial sector, establishment of credit rating
agency and restructuring of the CIB are but inevitable, he added.
Professor Bishwombhar Pyakurel, President of the Association, lauded the
central bank’s commitment for restructuring the Bureau. Vice-President of the
Association, Professor Madan Kumar Dahal emphasized on the need of regular interaction
among the experts, policy makers and the economists on credit rating.
Presenting a paper on credit rating, Rajesh Mirchandani of Dun and Bradstreet
India, said if credit rating is implemented, it would reduce banking transaction frauds to
a greater extent, although it may not bring down it to zero level.
He also said that while lending, banks should prioritize small and medium
enterprises. The small and medium industries are the fundamental factors pushing up the
economy but they have no other sources of getting loans. Therefore, banks can help in the
economic growth by providing loans to such industries, he added.
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