Business

Banks To Seize Money Of Loan Defaulters’ In Other Banks From August 1

Loans to be retrieved across banks
Pinterest LinkedIn Tumblr

The Central Bank of says banks will now debit the accounts of loan holders from other banks to settle their defaults.

Banks To Seize Money Of Loan Defaulters' In Other Banks From August 1
Banks To Seize Money Of Loan Defaulters’ In Other Banks From August 1

This new step is included in the global standing instruction (GSI) guidelines published by the on Monday.

The apex bank said the directive would apply to eligible loans granted from August 28, 2019.

“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.

Bank setoff happens when a financial institution removes money from a deposit account to cover a missed payment on a loan.

The apex bank listed the objectives of the GSI to include facilitating an improved credit repayment culture, reducing non-performing loans (NPLs) in the banking industry and watch-listing consistent loan defaulters.

It warned banks not to use the GSI to recover penal charges that may have accrued on a credit/loan and included as part of outstanding balances/obligations of a borrower.

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 said banks must regularly report to the CBN on recoveries made through the GSI and releases made to other banks.

In the event of wrongful debit, the guideline provides that an erring bank would be made to take full liability and pay a flat fine of N500,000 per incident.

Adelowo Adegboyega
Link Up

Submit press release, news tips to us: [email protected] | Follow us @ODUNewsNG | Google News Publication