Debt Recovery: CBN Directs Banks To Debit Loan Defaulters From August I, 2020

Deposit Money Banks (DBMs) and other financial institutions in the country have been given a go ahead order to debit loans and accrued interest due from bank accounts of loan defaulters across the banking industry effective August 1, 2020. The directive came from the Central bank of Nigeria (CBN).

The CBN in a circular issued on its website to all banks and other financial institutions christened, “Operational Guidelines On Global Standing Instructions, GSI, – Individuals.” The Guidelines, which are expected to take off from August 1, 2020 will be implemented in collaboration with the Nigeria Interbank Settlement System (NIBSS).

The Global Standing Instruction (GSI), under which the plan will run, empowers banks to debit borrower’s accounts with 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.

According to the statement, the NIBSS will manage the entire operation of the GSI on behalf of the banks using customers Bank Verification Numbers (BVN). The circular, which was signed by Mr Kelvin Amugo, Director,  Financial Policy and Regulation, at the CBN further said, “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,” the Statement 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 purpose.”

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