In light of the verdict issued by High Court of Sindh (SHC), State Bank of Pakistan (SBP) has notified that the minimum paid-up capital to be maintained by Credit Bureaus in the private sector will be Rs. 225 million.
The Honorable High Court of Sindh (SHC), in a petition CP No. D-250 of 2017 M/s Data Check (Pvt.) Limited vs. State Bank of Pakistan and others, declared the minimum paid-up capital of Rs. 250 million mentioned in Section 6 of the Credit Bureaus Act 2015 as ultra vires.
The Honorable Court directed State Bank of Pakistan to decide and declare the minimum paid-up capital required for the purpose of Section 6 through a reasoned order, consistent with the judgment, within 60 days from the date of judgment.
The central bank has reviewed the local and global level costs of setting up credit bureaus in the private sector. The cost quoted by the international experts ranges from US$ 2 million to US$ 3 million, covering the following major items:
- Software implementation and license fee,
- Hardware infrastructure including disaster recovery site,
- Yearly support and maintenance charges
- Training and implementation cost.
Besides the cost of paid-up capital, the startup cost for the Credit Bureau may include legal fees and other costs.
SBP operates Credit Information Bureau (CIB) mainly to provide banks credit history and related details of customers to the banks. Due to the increasing customer base and services of banks, it issued Credit Bureaus Regulations and licensing criteria for setting up credit bureaus in private sector in April 2016.
Three private sector credit bureaus ‑ Datacheck, News-VIS CIB and ICIL/PakBizInfo — exist in the banking industry.
Indian Credit Bureaus
While reviewing the local and global practices of minimum paid-up capital requirement of Credit Bureaus, the practices prevailing in India where Credit Bureaus are regulated under “The Credit Information Companies (Regulation) Act 2005″ were also reviewed by State Bank of Pakistan.
Section 8 of the Indian Act stipulates that issued capital of a Credit Information Company shall not be less than Rs. 200 million whereas the minimum paid-up capital of every credit information company at any time shall not be less than seventy-ﬁve per cent of the issued capital. Therefore, the minimum capital in India is Rs. 150 million, which in Pakistani Rupees becomes more than Rs. 250 million. Similarly, a Credit Bureau in Cambodia was set up in 2012, at the cost of US$ 2 million.
Therefore, taking local and global practices and requirements into account, State Bank of Pakistan has decided to set the minimum paid-up capital at Rs. 225 million for Credit Bureaus to operate under the Credit Bureaus Act 2015.
It is also placed on record that SBP has already issued a conditional license to one of the companies to function as a credit bureau in private sector, which has met the minimum paid-up capital requirement of Rs. 250 million, which has been fully subscribed and deposited as paid-up capital of the company.