A global standing instruction (GSI) guidelines published by the Central Bank of Nigeria (CBN) yesterday has made it possible for banks to debit the accounts of loan holders in other banks to settle defaults.
According to the CBN, the GSI, developed in collaboration with stakeholders, should however be the last resort used by a bank to settle loan defaults.
The Apex bank noted that that the directive should apply to eligible loans granted since the 28th of August, last year.
It was agreed at the meeting which held on the 26th of August, 2019.
The bankers committee of the CBN had agreed that loan defaults will be settled whenever customers make deposits in their accounts with other banks.
“The GSI shall serve as a last resort by a creditor bank, without recourse to the borrower, to recover past-due obligations (principal and accrued interest only, excluding any penal charges) from a defaulting borrower through a direct set-off from deposits/investments held in the borrower’s qualifying bank accounts with participating financial institutions,” the guideline document read.
The apex bank listed the objectives of the GSI to include facilitating an improved credit repayment culture, reducing non-performing loans (NPLs) in the banking industry and watch-listing consistent loan defaulters.
The CBN said banks must regularly report to the CBN on recoveries made through the GSI and releases made to other banks.
In the event of wrongful debit, the guideline provides that an erring bank would be made to take full liability and pay a flat fine of N500,000 per incident.