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CBN issues new guideline to aid loan recovery

…lists penalties for violation of GSI by banks, OFIs

The Central Bank of Nigeria (CBN) on Monday issued a guideline on Global Standing Instruction (GSI) to enhance loan recovery across the banking sector, effective from August 1, 2020.

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.

According to the guideline, where a Creditor Bank activates a Global Standing Instruction mandate in error (including when it is inconsistent with Prudential Guidelines), the creditor bank assumes all liability thereto. The erring creditor bank shall pay a flat fine of N500,000.00 per incident. Associated GSI charges borne by the creditor bank shall not be refundable.

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