What is CIB report ? How does it impact your creditworthiness ?

Many of us intend to apply for a loan, even though we have some knowledge of banking don't know anything about CIB report and how can it be used as the main source for decision making in the lending operation of the bank and other financial institution. 

In developed countries, financial institutions use a variety of methods to justify the creditworthiness of the loan applicant. But, in the countries where lending operations are not standard it is really hard for the analyst to find out the creditworthiness. Keeping this in consideration Bangladesh Bank, the central bank of the country,  wanted to develop a central credit database to identify the repayment behavior of the customers. It formed Credit Information Bureau (CIB) in 1992 to make the procedure easier for the financial institution and other lenders. The report provided by this authority is known as the CIB report. Bangladesh Bank has specific guidelines for using this CIB report. 

As per Bangladesh Bank Order, 1972 (Chapter V) every bank/financial institution is bound to send lending information of its customer to Bangladesh Bank. Bangladesh Bank is also liable to provide all the lending information to the banks or financial institutions as per the Banking Company Act,1991. 

CIB report is one of the primary decision-making facts that an analyst search for. When a customer intends to apply for a loan, he has to undertake the CIB form to that organization. The analyst searches the credit history of the applicant for the CIB database. If this report is not satisfactory he will go forward with this application. Only upon getting a satisfactory report, he will continue to process the file. 

Benefits of CIB report:

1. CIB report has a 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 the 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 through the customer provides 100% or more cash security against a facility. In fact, a 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

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 the 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).