Debtors & Recovery | |
Debtors & Recovery | |
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Tuesday, July 14, 2020 10:55
PM / by Linda Jacobs of Silicon Nigeria / Header Image Credit: Fox Business
...As GSI guidelines takes off 1st August
The Central Bank of Nigeria (CBN) today moved a step
ahead of bank loan defaulters with a new guideline that allows seizing of their
funds in other accounts.
According to the Asset Management Corporation of
Nigeria (AMCON), 105 debtors were responsible for about Naira 4.5 trillion debt
affecting the financial health of the Nigeria banking industry.
According the apex bank's operational guidelines for
Global Standing Instruction (GSI), this allows financial institutions to access
funds of defaulting debtors that are deposited in other banks with effect from
August 1, 2020.
The Global Standing Instruction, which is a mandate
authorizing recovery of past due obligations from any and all deposit accounts
maintained by a defaulter. The GSI is limited to debt recovery only and is
limited to only individual accounts. Although it can be used recovery of
repayment amount, the GSI cannot be used to recover any additional fees,
charges or penal rate for default.
In a circular issued by the CBN Director, Financial
Policy and Regulation Department, Kevin Amugo the GSI is targeted at facilitating
an improved credit repayment system, reducing non-performing loans in the
Nigerian banking system and watch-listing consistent loan defaulters.
The CBN in collaboration with stakeholders had last
year developed the necessary protocols to facilitate a seamless implementation
of the GSI process, including eligible loans granted from August 28, 2019.
Accordingly, it had issued the guideline to regulate
the operations of the GSI which will be implemented with effect from August 1,
2020, as a way to enhance loan recovery across the banking sector.
The guideline states that 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.
To set up the mandate, customers will fill in their
BVN, Credit Risk Management System (CRMS) number, the full repayment amount,
the loan duration and the repayment account. The GSI is being maintained by
NIBSS which is the custodian of BVN and holds records of all bank accounts in
the country.
Once a debtor defaults on a loan, the GSI is triggered
with the creditor bank activating the mandate on GSI Module specifying the
recovery amount. Once triggered, the available accounts for recovery are
identified, available balances for the accounts are retrieved and funds from
the accounts according to Recover Logic are recovered.
Participating financial institutions by the GSI
mandate must honor all transactions from NIBSS with a valid GSI Mandate code.
The GSI Transactions can be triggered upon default on repayment, seven days
after scheduled repayment date or before application of penal rates.
Download
Here - Operational Guidelines on Global Standard
Instruction (GSI)
The post CBN
Orders Seizure of Loan Defaulters Funds Across Banks first appeared in Silicon Nigeria on
July 13, 2020
Related Links - Download PDFs
1.
Operational
Guidelines on Global Standard Instruction (GSI) - CBN, Jul 15, 2020
2.
Executive
Summary: NPLs & Bank Debtors - The Case for a New Industry Approach - May 14, 2020
3.
(PDF)
NPLs & Bad Debtors: - The Case for a New Industry Approach - Debtors
Africa, May 13, 2020
4.
AMCON and
Financial Services Debt Burden in Nigeria - Aug 17, 2018
5.
(PDF) -
Coronanomics and the Nigerian Economy - Jun 06, 2020
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