No Hiding Place for Debtors as CBN Amend Rules Giving Commercial Banks Limitless Power to Recover Bad Loans

No Hiding Place for Debtors as CBN Amend Rules Giving Commercial Banks Limitless Power to Recover Bad Loans

  • In a move to ensure the number of non-performing loans in the country is reduced to the barest minimum the Central Bank of Nigeria has amended its loan recovery loan
  • The amended rule gives commercial banks limitless power to ensure customers who accessed loans pay back
  • CBN said the move was in furtherance of its mandate to promote financial system stability and reduce nonperforming loans

The Central Bank of Nigeria (CBN) has modified the Global Standing Instruction operational guidelines (GSI).

According to CBN the revised guidelines will allow for continuous and unrestricted loan recovery by Deposit Money Banks (DMBs) and financial institutions in the country.

CBN also said that GSI generates is a contractual mandate from an individual borrower in favor of a creditor bank to use funds standing to the borrower's credit in a third-party financial institution or electronic wallet to balance the borrower's debt obligations.

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No hiding place for debtors as CBN amend rules giving commercial banks limitless power to recover bad loans
CBN is committed towards bringing down the issue of non performing loans in the country
Source: Getty Images

The CBN announced this in a circular titled "Re: Global Standing Instruction (GSI) – Individuals," dated January 19, 2022, signed by Chibuzo Efobi, CBN Director, Policy and Regulations Department, and issued to all banks and other financial institutions.

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According to the Circular, the frequency of recovery attempts via the GSI platform has been changed from a set number to continuous and unlimited as a result of the adjustment.

The bank went on to say that the GSI's automated loan recovery function, which is applicable to all loans in the industry, would stay in force indefinitely during the life of the loan and/or until the debt is entirely repaid, ThisDay reports.

The guideline also included a list of fines that can be imposed on banks and financial institutions if the GSI is violated or misapplied.

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Back story

In July 2020, the central bank announced a GSI guideline targeted at improving debt recovery and monitoring chronic loan defaulters.

The project was created primarily to address the industry's recurring instances of deliberate loan default in order to identify and watch-list obstinate borrowers.

It also aims to improve loan recovery from all qualified and funded accounts/wallets in the banking sector, as well as to improve credit repayment culture and reduce Non-Performing Loans (NPLs) in the Nigerian banking system.

AMCON ready to disgrace 7,912 Nigerians who are notorious bank debtors

Meanwhile, the Asset Management Corporation of Nigeria is set to publish the names of 7,912 chronic debtors who have failed to repay the loans collected from banks.

AMCON, the body in charge of asset recovery in Nigeria has said it will name and shame loan defaulters from January.

The body gave the debtors time to schedule a payment plan to avoid the embarrassment of seeing their names in national dailies soon.

Source: Legit.ng

Authors:
Dave Ibemere avatar

Dave Ibemere (Senior Business Editor) Dave Ibemere is a senior business editor at Legit.ng. He is a financial journalist with over a decade of experience in print and online media. He also holds a Master's degree from the University of Lagos. He is a member of the African Academy for Open-Source Investigation (AAOSI), the Nigerian Institute of Public Relations and other media think tank groups. He previously worked with The Guardian, BusinessDay, and headed the business desk at Ripples Nigeria. Email: dave.ibemere@corp.legit.ng.