CBN Authorises Banks to Seize Loan Defaulters’ Money

By Adedapo Adesanya

The Central Bank of Nigeria (CBN) has issued guidelines on the Global Standing Instruction (GSI) which enables banks to seize loan defaulters’ money in other banks from August 1, 2020.

This was disclosed in a circular signed by the Director, Financial Policy and Regulation Department, Mr Kevin Amugo, and issued to all banks and other financial institutions tagged Operational Guidelines on global standing instruction – Individuals.’

The apex bank said the GIS guideline was to enhance loan recovery in the banking sector, giving banks the power to debit loan and accrued interest due from bank accounts of loan defaulters across the Nigerian banking system.

This will be done by the Nigeria Interbank Settlement System (NIBSS) on behalf of owed banks using customers’ Bank Verification Numbers (BVN).

“The Bankers’ Committee, at its meeting on February 18, 2020, approved the go-live on the Global Standing Instruction, which aims at facilitating an improved credit repayment culture; reducing non-performing loans in the Nigerian banking system; and watch-listing consistent loan defaulters,” a part of the circular read.

“The banks would review and validate the GSI mandate instrument prior to loan disbursement. They would indemnify the Nigeria Inter-Bank Settlement System and other participating financial institutions from all liabilities that may arise from inappropriate use of the GSI infrastructure,” it added.

The CBN noted that the banks would retain copies of the physical or digital version of the executed GSI mandate and provide the same when required while adding that the participating financial institutions must execute the GSI mandate agreement with NIBSS.

“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 this purpose,” it stated.

The guideline also stated that they must “ensure that accounts in NIBSS’ ICAD are correctly tagged with the correct Bank Verification Number, and ensure and maintain connectivity to the Nigeria Central Switch.”

Each bank would be expected to also report regularly to the CBN on recoveries made through the GSI, as well as, releases made to other banks.