The Central Bank of Nigeria (CBN) has released a directive that will now enable Nigerian banks to go after debtors' accounts in other banks in order to recover their debt. The new CBN guidelines, global standing instruction, empowers the banks to directly liaise with other banks of which their debtors have account(s) to deduct their money.
The directive from the CBN will become effective from next month, August 1, 2020. It was stated that Nigerians banks - Access Bank, GTBank, Zenith Bank, UBA, First Bank, Fidelity Bank, and many others - will begin to enforce the directive on loans granted from last year August 28, 2019. However, the debit of third party bank account owned by the debtors will be a last resort by a creditor bank.
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“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.
AllNews learnt that other measures must have been taken before the banks enforce the new directive. Also, any bank that wrongfully debits any customer, will be fined N500,000 per incident. Also, banks are not allowed to use the GSI to recover penal charges accrued on a credit/loan and included as part of the outstanding balances/obligations of a borrower.
While all recoveries and releases through the CBN's new directive, GSI, must be reported to the CBN. Already, banks are sharing the credit history of their customers before approving loans, so the new directive is an upgrade empowering banks, even more, giving them control over customer's account.
According to the guidelines, the account types that the standing instruction can be applied to include individual and joint savings accounts, current accounts, domiciliary accounts, investment/deposit accounts (naira and foreign currency), and electronic wallets. The CBN believes the GSI will reduce non-performing loans (NPLs) in the banking industry, strengthen credit repayment among debtors and place loan defaulters on watch-list.