KARACHI, Nov 6: The State Bank is actively working on a project to develop a policy and regulatory framework for credit bureaus as their role in efficient credit allocation through credit disbursement to SMEs and consumer sectors is attracting global attention.

The central bank has informed all banks and development finance institutions (DFIs) that it is developing a policy for credit bureaus to ensure their smooth functioning. "With the completion of this project and putting in place the necessary policy and regulatory framework, the credit bureaus would be in a better position to cater to credit information needs of their stakeholders," says Banking Supervision Department of the SBP in a circular issued on Saturday.

The circular says the central bank has, meanwhile, taken note of the complaints from businessmen regarding recording of their names in the lists of private credit bureaus of banks and DFIs.

To address these complaints, the central bank has issued the following instructions to banks and DFIs:

1. The reversals or write-offs as a consequence of settlement in writing, through mutual consent of the bank/DFI and the borrower, should not be reported as "write-offs" to a private credit bureau.

2. The amounts in dispute with the customers substantiated with the documentary evidence should be reported as "amounts under dispute" and not as "defaults" to a private credit bureau.

3. The banks/DFIs shall send an intimation letter to the borrower concerned before reporting his name as "defaulter" to a private credit bureau. Such letter shall, inter alia, inform the borrower about the implications of reporting his name to a private credit bureau as defaulter, and allow a reasonable time (at least 15 days) for reconciliation/settlement of overdue liability.

4. Whenever any further information/clarification regarding a borrower reported to the CIB (Credit Information Bureau of the State Bank) or private credit bureau is sought by the SBP, the bank or DFI concerned shall be required to provide such information/clarification to (Banking Supervision) Department within three working days of receipt of such query.

5. The banks/DFIs shall properly guide their customers as and when they approach them seeking information about their outstanding liabilities.

The SBP circular advises all banks and DFIs to ensure "meticulous compliance of the above instructions." "Failure to comply with these instructions shall render them liable for a punitive action," it warns.