CBN orders banks, discount houses to crack down on delinquent debtors

Following the rising trend of non-performing loans (NPLs) in the banking industry, the Central Bank of Nigeria (CBN) has ordered deposit money banks and discount houses to crack down on delinquent debtors.

The banking industry’s volume of NPLs increased by N38.05 billion or 13.30 percent from N286.09 billion in December 2012 to N324.14 billion in December 2013.

In order to ensure that the industry NPL ratio does not exceed the prudential limit of 5 percent, and to improve the credit culture in the banking industry, the Apex bank on Friday directed banks and discount houses to observe prudent credit underwriting and monitoring standards.

Effective May 1, 2015, banks and discount houses are required to give the delinquent debtors three months of grace to turn their accounts from non-performing to performing status, Tokunbo Martins, director, of banking supervision CBN said in circular released on Friday.

Also bank and discount houses are required to publish the list of delinquent debtors that remain non-performing in at least three national daily newspapers quarterly.

The delinquent debtors are those whose accounts have been classified lost and include the persons, entities, directors, subsidiaries and other related parties. The list must be sent to the CBN as soon as the publication is made Martins said in the circular.

The CBN said it would blacklist the delinquent debtors and ban them from participating in the Nigeria Government securities market.

The CBN in collaboration with the Bankers Committee had taken a decision to restrict chronic borrowers from access to foreign exchange. The committee also said it would publish the names of these serial borrowers.

Razia Khan, Managing Director, Head – Africa Macro Global Research said, “While it appears to be one means of encouraging more responsible borrowing practices in Nigeria, the risk is that under current conditions it might further exacerbate perceptions of a shortfall in the availability of FX.  This is something that the authorities will need to guard against”.

 

HOPE MOSES-ASHIKE