Bangladesh Bank moves to stop collateral fraud
Data repository to help lenders avoid risks from March 2019
04 Sep 2018, 09:01
Dhaka: Banks are not unfamiliar to unscrupulous borrowers who tend to secure loans by offering same piece of land property as collateral from multiple lenders.
A tricky situation arises when a certain bank wants to seize collateral to recoup its losses from defaulting borrower and suddenly finds out that multiple lenders have the lien on the same asset. This happens mostly because of forgery by unscrupulous borrowers, reports the UNB.
A simple way to get rid of such fraudulence can be maintaining a repository of data on mortgaged lands so that debtors cannot use the same property over and over again in securing loans from multiple creditors.
And Bangladesh’s central bank is now doing this to check collateral fraudulence, said officials.
Bangladesh Bank is now in the process of completing a data repository in the form of an ‘information bank’ which will act as deterrent if anyone tries to avail loans from different lenders showing the same land.
Recently, Bangladesh Bank has sent a letter to the Finance Ministry in this connection informing that the information bank will be ready to use by March, 2019.
Earlier, the Finance Minister in a letter asked the Bangladesh Bank to inform the Ministry about the development of the introduction of information bank to stop collateral forgery.
Bangladesh Bank has informed that the initiation work of the software of the information bank has been completed and collection of collateral information from various banks and financial institutions are on.
After getting necessary hardware it will be transformed to the software system and it will be tested then to see its performance.
The software of the collateral information system is likely to be delivered by this month.
After getting the software of the collateral information system it will take six months to finish the preparatory activities by the Credit Information Bureau (CIB).
Meanwhile, the central bank has also informed the Finance Ministry that the rules under Bangladesh Bank Order 1972 needed to be amended for opening the collateral-related information for the mass people.
As per the Sections 46 (1) and 46 (2) of the Bangladesh Bank Order 1972, the central bank cannot open the information to all except the names of banks and the names of borrowers.
As per Section 46 (3) this type of information can be delivered openly at the parliament. No Court, Tribunal or any other authority can compel the Bangladesh Bank to publish the information which is kept in the CIB database.
The central bank in the letter observed that to make the CIB information public, the Bangladesh Bank Order 1972 has to be amended.