The Central Bank of Nigeria (CBN) has issued new guidelines aimed at reducing non-performing loans in the banking sector and to monitor loan defaulters. The guidelines are expected to take off from August 1, 2020. The Global Standing Instruction (Individual) guidelines give banks the power to debit loan and accrued interest due from bank accounts of loan defaulters domiciled in Nigerian banks. The NIBSS will manage the entire operations of the GSI on behalf of banks using customers Bank Verification Numbers (BVN).
The objectives of GSI include:
- Facilitate an improved credit repayment culture;
- Reduce Non-Performing Loans (NPLs) in the banking industry; and
- Watch-listing consistent loan defaulters.
Requirements
- Bank borrowers are expected to sign a GSI mandate in hard copy or digital form. Once this is done all qualifying accounts are linked to the BVN.
- Qualifying accounts include savings accounts, current accounts, domiciliary accounts, domiciliary accounts, investment accounts and joint accounts.
- Once a borrower defaults on an outstanding principal and interest, the bank instructs NIBSS to debit the bank account of the defaulter.
Implications
With the latest approval granted by the CBN to banks, loan defaulters who have funds in accounts across any bank in the country should expect to be debited alert from any of their respective bank accounts. The new approval also means that for interested loan applicants, a new clause has been introduced, which mandates you to give consent to your bank to debit your accounts in any Nigerian bank where you have funds in the event of you defaulting..
Once a customer defaults on their loans, NIBSS will first recover the loans from the defaulter’s balance in any account within the bank. If that is not enough, it will proceed to other accounts deposited in other banks.
The guidelines apply to savings accounts, current accounts, domiciliary accounts, domiciliary accounts, investment accounts and joint accounts.
Read more. Download GSI guidelines today:
