Commercial banks and other financial institutions have been empowered by the Central Bank of Nigeria (CBN) to directly debit accounts of chronic loan defaulters.
The new loan recovery plan was contained in a CBN circular to all banks and other financial institutions tagged ‘Operational Guidelines on global standing instruction – Individuals.’
The Guidelines are expected to take off from August 1, 2020 will be implemented with in collaboration with the Nigeria Interbank Settlement System (NIBS).
The Global Standing Instruction under which the plan will run, empowers banks to debit borrower’s accounts wit the loan amount and accrued interest of defaulters across the Nigerian financial system.
Qualifying accounts include savings accounts, current accounts, domiciliary accounts, domiciliary accounts, investment accounts and joint accounts.
The NIBSS will manage the entire operations of the GSI on behalf of banks using customers Bank Verification Numbers (BVN). The circular, which was signed by the Director, Financial Policy and Regulation Department, CBN, Kelvin Amigo, stated,
“The Bankers’ Committee, at its meeting on February 18, 2020, approved the go-live on the Global Standing Instruction, which aimed at facilitating an improved credit repayment culture; reducing non-performing loans in the Nigerian banking system; and watch-listing consistent loan defaulters.”
“The banks would review and validate the GSI mandate instrument prior to loan disbursement,” Amigo added.
The CBN added that the banks would retain copies of physical or digital version of the executed GSI mandate and provide same when required. According to CBN, the participating financial institutions must execute the GSI mandate agreement with NIBSS.
It stated, “They must also ensure all qualifying accounts were properly maintained and visible to NIBSS on the industry customer accounts database or by any other service created or provisioned for this purpose.”
