State Bank of Pakistan (SBP) acting governor Saeed Ahmed on Wednesday tendered an apology to a parliamentary panel for bringing a draft bill full of ‘glaring flaws’, and not having relevant market information, eventually delaying the approval of the bill to the government’s disappointment.
It was for the third time that the National Assembly Standing Committee on Finance and Revenue had to postpone voting on the Credit Bureaus Act of 2015 due to ill-preparedness of the SBP officials.
“There are glaring loopholes in the draft bill even after it was returned twice by the standing committee,” said Omar Ayub Khan, chairman of the standing committee. The acting governor admitted that his team was not fully prepared and did not have the relevant information about the credit bureaus market and tendered an ‘apology’. The government wanted to get the bill passed through the standing committee, as a policy loan of the Asian Development Bank was tied with the passage of the bill from the parliament.
But despite its best efforts to clear the bill, the committee could not ignore the flaws in its drafting, highlighting increasing inefficiency of the government departments. It was an embarrassing day for both the government and the SBP. Finance Secretary Dr Waqar Masood pleaded to approve the bill. But neither the secretary nor acting governor and his team could address the pertinent questions asked by the public representatives.
Under a condition of the ADB, the government has moved the bill to allow establishment of credit information bureaus (CIBs) in the private sector and their regulation by the central bank. The CIBs will have a complete database of all the borrowers and will provide the same information on the request to the banks and other financial institutions for lending purposes. At present, a CIB run by the central bank has a database of 4.2 million borrowers.
“Even though the SBP is independent, the secretary finance knows more about the bill than the SBP officials,” said Ayub.
The main bone of contention was the minimum paid-up capital limit for setting up a CIB by a public limited company. The committee wanted to prescribe the minimum limit but the SBP wanted that this should be left on the regulator.
The members had apprehensions that the SBP could exploit these powers and may not allow the private sector companies to flourish, as the central bank was also running a CIB. The SBP was earning Rs60 per query while a private sector CIB Data Check was charging Rs70.
PML-N’s Danyal Aziz found a clear conflict of interest and was of the opinion that the central bank should restrict its role to only regulating the market.
There were four private CIBs, and to the surprise of the committee the central bank did not have the information about the paid-up capital of these companies, which are registered with the Securities and Exchange Commission of Pakistan.
The committee amended the proposed draft of the bill and inserted a sun set clause, binding the SBP to wind up its CIB within a year of the enforcement of the Credit Bureau Act. The committee also amended the bill to ensure rights of the borrowers as the proposed bill was only protecting the interests of the bankers. It also sought remedies to false CIBs which were creating problems for the borrowers.