Mon­gol Bank: Nega­tive credit in­for­ma­tion can­not be mod­i­fied eas­ily

The UB Post - - Business & Economics -

The cen­tral bank re­cently an­nounced that it would be mod­i­fy­ing nega­tive credit in­for­ma­tion of 14,170 in­di­vid­u­als to nor­mal. In­di­vid­u­als that were late on their fi­nan­cial lease pay­ments once were in­cluded in the omis­sion of the nega­tive credit in­for­ma­tion on the pre­con­di­tion that their debt was paid off be­fore June 1 and they had no prior his­tory of over­due debt.

In­spec­tor D.Tur­bat of Mon­gol Bank’s Su­per­vi­sion De­part­ment sat down in a re­cent in­ter­view to dis­cuss the ex­act de­tails of the omis­sion.

The nega­tive credit in­for­ma­tion of 14,170 in­di­vid­u­als was mod­i­fied to nor­mal in the loan data­base re­cently. In March, 41,000 in­di­vid­u­als had their credit in­for­ma­tion mod­i­fied to nor­mal. Will these types of ac­tions be a reg­u­lar oc­cur­rence mov­ing for­ward?

In or­der to in­crease the op­por­tu­nity of in­di­vid­u­als to re­ceive bank­ing and fi­nan­cial ser­vices, Mon­gol Bank mod­i­fied the credit in­for­ma­tion of those who ful­filled cer­tain pre­con­di­tions. On Au­gust 1, in­di­vid­u­als who pos­sessed over­due fi­nance leas­ing debt who paid off their debt be­fore June 1 were in­cluded in this mod­i­fi­ca­tion. This en­com­passed 14,170 in­di­vid­u­als over­all. Last year, 25,621 in­di­vid­u­als had cer­tain nega­tive credit in­for­ma­tion omit­ted, and in March, 41,085 peo­ple were also pro­vided with the op­por­tu­nity to re­ceive fi­nan­cial ser­vices equally. Many peo­ple are grate­ful for the ac­tion that Mon­gol Bank has taken in this re­gard.

The Mon­gol Bank loan data­base is serv­ing its crit­i­cal role as an im­por­tant in­cen­tive for in­di­vid­u­als and busi­nesses to main­tain fi­nan­cial dis­ci­pline. The de­ci­sion to mod­ify credit in­for­ma­tion is very much de­pen­dent on cur­rent con­di­tions. There­fore, as the macroe­co­nomic per­for­mance of Mon­go­lia im­proves and the econ­omy sta­bi­lizes as a whole, the pub­lic must un­der­stand that the cen­tral bank will avoid these types of mod­i­fi­ca­tions mov­ing for­ward. The cen­tral bank urges those tak­ing out loans or other fi­nan­cial prod­ucts to fully un­der­stand and plan out the risks, to have a spe­cific goal in mind, and to have a drawn out plan on re­pay­ing the debt. Ba­si­cally, the pub­lic can­not ex­pect the cen­tral bank to take such ac­tions ev­ery year.

How many in­di­vid­u­als have nega­tive credit in­for­ma­tion in the loan data­base?

We can­not dis­close that in­for­ma­tion. In gen­eral, the con­scious re­spon­si­bil­ity of in­di­vid­u­als and busi­nesses that loans must be re­paid, the cul­ture of lend­ing, and over fi­nan­cial dis­ci­pline has been im­prov­ing sig­nif­i­cantly in the last few years.

The in­creas­ing as­pi­ra­tion of in­di­vid­u­als and busi­nesses to have a pos­i­tive credit in­for­ma­tion has been no­ticed by the cen­tral bank. This is ev­i­denced by the plethora of peo­ple who reach out to Mon­gol Bank try­ing to fix any nega­tive credit in­for­ma­tion. To­day, most peo­ple seem to have an un­der­stand­ing of what the loan data­base is, what it does, and what it is meant for. Peo­ple have be­gun to re­al­ize that nega­tive credit in­for­ma­tion is a sig­nif­i­cant ob­sta­cle in ob­tain­ing fu­ture loans.

Our loan data­base en­com­passes ev­ery loan that has been in­curred by an in­di­vid­ual or busi­ness. Cur­rently, there are over 600 or­ga­ni­za­tions that pro­vide in­for­ma­tion to the loan data­base.

What is the rate of debt re­pay­ment like?

Even though the amount of over­due loans has in­creased, the rate of loan re­pay­ment stands at around 92 to 94 per­cent.

There are many debtors who have in­curred sig­nif­i­cant fi­nan­cial dam­age due to tak­ing out joint loans. Are there any le­nien­cies re­gard­ing joint loans?

I wouldn’t say that joint debtors are vic­tims ex­actly. Some­times there are cases where joint debtors in­cur fi­nan­cial dam­age due to their prin­ci­pal debtors. Many peo­ple who take out loans as joint debtors do not have ad­e­quate rev­enue or col­lat­eral to in­cur large loans. There are cases where joint debtors neg­a­tively af­fect the credit in­for­ma­tion of prin­ci­pal debtors. In any case, when a prin­ci­pal debtor fully pays off a loan, the credit in­for­ma­tion of the joint debtor is erase from the loan data­base au­to­mat­i­cally.

In ad­di­tion, a prin­ci­pal debtor can choose to opt out of a joint loan with a co-debtor. For ex­am­ple, say you join as co-debtor in my joint loan. I can get in touch with the bank or fi­nan­cial or­ga­ni­za­tion and file a re­quest to re­move any co-debtors.

In the event that a per­son has nega­tive credit in­for­ma­tion in the loan data­base, is it pos­si­ble to amend it? There are mur­murs of peo­ple giv­ing money to re­move nega­tive credit in­for­ma­tion. Is this true?

I have been work­ing as an in­spec­tor for five years. This is­sue comes up reg­u­larly. It is not pos­si­ble to amend nega­tive credit in­for­ma­tion with money. Once the in­for­ma­tion is re­ceived by the loan data­base, it will not be erased. It will re­main there. How­ever, mod­i­fi­ca­tion or re­newal of in­for­ma­tion hap­pens on a daily ba­sis. One ex­am­ple of this is the cen­tral bank’s de­ci­sion to omit cer­tain loans. Gen­er­ally, any mod­i­fi­ca­tion or re­newal of credit in­for­ma­tion is the re­spon­si­bil­ity of the lender.

In ad­di­tion, the lender has a le­gal re­spon­si­bil­ity of pro­vid­ing cor­rect in­for­ma­tion. As stated by the law, any in­for­ma­tion in the Mon­gol Bank loan data­base will re­main there for 10 years. How­ever, the lenders or com­mer­cial banks only have the le­gal right to use the last six years of in­for­ma­tion as ref­er­ence for a po­ten­tial loan.

For in­stance, if it has been six years since you paid your over­due loan, banks can­not ac­cess that in­for­ma­tion. So, if you paid your over­due debt in 2012, the banks can­not ac­cess this in­for­ma­tion for ref­er­ence for a loan in 2018.

What are the clas­si­fi­ca­tions of the loan data­base? What is the most ideal clas­si­fi­ca­tion to be in?

The loan taken out is clas­si­fied de­pend­ing on whether it is over­due or not in ac­cor­dance to the as­set clas­si­fi­ca­tion, as­set risk fund es­tab­lish­ment and op­er­a­tion pro­ce­dure ap­proved by the Mon­gol Bank gov­er­nor and the fi­nance min­is­ter.

If paid within 15 days, the loan is clas­si­fied as nor­mal. Over­due re­pay­ment that has ex­ceeded 90 days is flagged as need­ing at­ten­tion. Re­pay­ment that has ex­ceeded 90 to 180 days is ab­nor­mal, 181 to 360 days is clas­si­fied as un­cer­tain. Any over­due pay­ments ex­ceed­ing 361 days is flagged as a bad loan.

In what cases can credit in­for­ma­tion be mod­i­fied at the re­quest of the in­di­vid­ual?

First, the debtor must make a for­mal re­quest to the lender in ac­cor­dance to the law. Mon­gol Bank will then con­sider the re­quest and de­cide if it has any ba­sis. Only if the loan has been paid off or the in­for­ma­tion is cor­rect, will the in­for­ma­tion be mod­i­fied. In ad­di­tion, any court de­ci­sion re­gard­ing mod­i­fi­ca­tions to the loan data­base must be en­acted by the cen­tral bank.

...Loan clas­si­fi­ca­tion is not about cre­at­ing nega­tive credit in­for­ma­tion about in­di­vid­u­als but to pre­vent loan loss and cre­ate risk man­age­ment fund to ad­dress non­per­form­ing loans...

What if there are cir­cum­stances out­side the con­trol of a debtor that pre­vents them from pay­ing their debt on time. Say a per­son takes out a salary loan and is late two days be­cause their em­ployer does not pro­vide their salary on time? Will they be clas­si­fied as hav­ing a non-per­form­ing loan?

A lender has the le­gal re­spon­si­bil­ity to clas­sify loans into three groups, nor­mal, over­due, and non-per­form­ing. Non-per­form­ing loans are clas­si­fied as ab­nor­mal, un­cer­tain, and bad. In ac­cor­dance to the pro­ce­dure of as­set clas­si­fi­ca­tion, be­ing be­hind one to two days on re­pay­ment will not cause the loan to be clas­si­fied as non-per­form­ing.

In ad­di­tion, there are a lot of cir­cum­stances out­side of the con­trol of the debtor that might re­sult in a day or two day de­lay in re­pay­ment. Due to this, loan clas­si­fi­ca­tion is con­ducted two times a month. There­fore, it is not pos­si­ble for a loan to be clas­si­fied as non-per­form­ing if re­pay­ment is late one to two days. Any over­due re­pay­ment that ex­ceeds 90 days must be clas­si­fied as non-per­form­ing by the lender.

Loan clas­si­fi­ca­tion is not about cre­at­ing nega­tive credit in­for­ma­tion about in­di­vid­u­als but to pre­vent loan loss and cre­ate risk man­age­ment fund to ad­dress non-per­form­ing loans.

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