CBN gives banks approval to debit bank accounts of chronic loan defaulters starting August 1

The Central Bank of Nigeria (CBN) has issued guidelines aimed at reducing non-performing loans in the banking sector and to monitor chronic loan defaulters. This was disclosed in a circular the apex bank issued to all banks and other financial institutions tagged ‘Operational Guidelines on global standing instruction – Individuals.’
The Guidelines are expected to take off from August 1, 2020. The GSI guidelines give banks the power to debit loan and accrued interest due from bank accounts of loan defaulters across the Nigerian banking system. The NIBSS will manage the entire operations of the GSI on behalf of banks using customers Bank Verification Numbers (BVN).
The circular, which was signed by the Director, Financial Policy and Regulation Department, CBN, stated,
“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. 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 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 this purpose.”
The guidelines stated that they must “ensure that accounts in NIBSS’ ICAD are correctly tagged with correct Bank Verification Number, and ensure and maintain connectivity to the Nigeria Central Switch.