CBN RELEASES NEW GUIDELINES ON BAD LOANS TO BANKS

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The Central Bank of Nigeria (CBN) has released the operational guidelines on commencement of Global Standing Instruction (GSI) that mandates creditor banks to deduct bad loans from bank balances of defaulters in any bank in the country. The apex bank in a circular signed by Kevin N. Amugo, Director, Financial Policy and Regulation Department to deposit money banks (DMBs) and other financial institutions (OFIs) approved the go-live of the GSI.

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It further states that “where a participating financial institution fails to grant the GSI permission to debit an eligible account, the erring PFI shall pay a flat fine of N100,000.00 (per initial incident and each subsequent repeat request/instruction), regardless of the GSI Trigger Amount. The guidelines stipulate that participating banks will have to get their borrowers to sign a right of setoff against their balances across any bank. The right of set-off has existed among banks in the past but hasn’t been as effective as it should be. This arrangement should now make it easier for banks to benefit as NIBSS will basically operate it on their behalf. It would be recalled that the CBN in conjunction with the NIBSS and the Bankers’ Committee agreed to launch an initiative that will allow lenders to recover loans from deposit accounts of loan defaulters from any bank or financial institution in the country. Daily Trust reports this decision was announced by Aishah Ahmad, the Deputy Governor of the CBN at the end of the meeting of the Bankers’ Committee held in Abuja on Monday 26th of August, 2019.