BEVERLY HILLS, July 14, (THEWILL) – Effective August 1, 2020, notorious loan defaulters on bank loans will have nowhere to hide anymore as the Central Bank of Nigeria (CBN) on Monday issued a guideline on Global Standing Instruction (GSI) to enhance loan recovery across the banking sector.
The guideline basically allows banks to go after monies belonging to loan defaulters domiciled in other banks.
The guideline contains lists of sanctions to be meted on banks and Other Financial Institution (OFIs) in case of violation.
The Bankers Committee, at its meeting on February 18, 2020 approved the go live on the GSI. The objectives of GSI include to facilitate an improved credit repayment culture; reduce Non-Performing Loans (NPLs) in the banking industry; and watch-listing consistent loan defaulters.
In a circular signed by Kevin Amugo, director, financial policy and regulation department, the CBN said it has in collaboration with stakeholders developed the necessary protocols to facilitate a seamless implementation of the GSI process, including eligible loans granted from August 28, 2019.
The GSI is expected to 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 implications of this rule could be likened to this message shared on social media by a user by the name Otunba Fad, after the announcement.
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“It applies to all financial institutions in the country. If you take a loan in any bank (say GTB) and you refuse to pay back, we would look for any other bank(s) in the country (say Access bank, and Sterling bank) where you have accounts and there is money, we would take the money from those accounts and pay GTB back.
E.g. you take 30k Loan from GTB and you fail to pay back. You have 10k in your Access bank account, 15k in your Sterling bank joint account with your wife and 8k in your child’s First bank account that you help her manage (because she is still a minor). We would sweep the 15k in your Sterling bank joint account with your wife, sweep the 10k in your Access Bank, and take 5k out of the 8k you have in your child’s First Bank account. We would send them all to GTB. The remaining 3k in your child’s First Bank account would not be touched. That’s a promise.
If we find out that you have an account that we should have moved money from but you have done chua-chua to not put your bvn on that account, then your BVN would be watchlisted. My brother, that is a major gbege! You are finished!
Only principal and interest would be swept from your other accounts. Penalty charges would not be included. CBN don try for us o.
If a bank wrongfully activates GSI on you (you have not defaulted on your loan and they go make the system sweep from your other accounts), the bank would pay a fine of 500k sharparly. No begging.
If you complain about a wrongful activation of GSI on your accounts, and the bank claims you are wrong, you then decide to request for arbitration. If the arbiter rules that you are correct, then the bank pays a fine of 10M. No story!
The GSI becomes effective from August 1st 2020.
This helps the system to fight serial loan defaulters and allows banks to more readily give out loans. As a matter of fact, a bank can now choose to give you a loan without you previously having an account with the bank.
It’s a new dawn in our country.”
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