The Central Bank of Nigeria (CBN) has directed banks and other financial institutions to start debiting accounts of chronic loan defaulters from August 1.
The new CBN loan recovery policy means that loan defaulters who have funds in accounts across any bank in Nigeria should expect debit alert from their banks from the commencement date.
The directive is contained in a circular to banks with theme: ‘Operational Guidelines on Global Standing Instruction (GSI)– Individuals,’ signed by CBN Director, Financial Policy & Regulations, Kelvin Amigo.
The GSI guidelines empowers banks to debit loan defaulters’ accounts, including taking the accrued interest for unpaid loans across the Nigerian financial system.
The execution of the exercise requires borrowers to sign a GSI mandate in hard copy or digital form, after which all qualifying accounts are linked to the borrower’s Bank Verification Number (BVN). The GSI mandate form authorises the recovery of an amount specified by the bank from any/all accounts maintained by the borrower across all financial institutions.
Amugo said the CBN is empowered to take the new action by Section 2 (d) of the Central Bank of Nigeria Act, 2007, requiring it to promote a sound financial system in Nigeria.
All CBN-licensed financial institutions connected to Nigeria Interbank Settlement System (NIBSS) Instant Payment (NIP) platform are included in the new loan recovery plan.
The automated GSI plan will be managed by NIBSS on behalf of banks using customers’ BVN.
Meanwhile, the CBN has unveiled guidelines for Non-Interest Financial Institutions under its Agri-Business, Small and Medium Enterprise Investment Scheme (AGSMEIS), Micro, Small and Medium Enterprises Development Fund (MSMEDF), the Accelerated Agricultural Development Scheme (AADS) and seven other intervention schemes.
The bank took the decision at its June meeting to unveil a framework that would integrate non-interest window in its intervention programmes aimed at supporting businesses and households that have been impacted negatively by the corona virus (COVID-19).
The guidelines stipulate that each Non-Interest Deposit Bank (full-fledged or window) is to set aside five per cent of its profit after tax (PAT) yearly as contribution to the Fund.
It added that each Non-Interest Deposit Bank is also to transfer its contribution to the CBN not later than 10 working days after the Annual General Meeting (AGM) of the participating bank.