Ahead of the September 30 deadline given to deposit money banks to increase their Loan to Deposit Ratio (LDR) to 60 percent, the Central Bank of Nigeria (CBN) and the Bankers’ Committee on Monday came up with some initiatives targeted at stimulating lending in the economy.
One of such measures is the introduction of some clause to bank lending where the customers’ deposits will be used to repay loans in case of default.
Aisha Ahmad, CBN’s deputy governor, financial system stability, who addressed journalists after the meeting in Lagos, said the new clause would be included in the offer letters that would be granted by the banks going forward.
“In our view, if all the banks that are required to meet this requirement actually meet it, we will see growth of about a trillion added to the credit balance sheet. We also in addition to that pronouncement looked at the challenges and factors affecting banks’ willingness to lend,” Ahmad said.
The lending clause, which is going to be more or less a credit risk protection clause that will be in all the offer letters, will basically contain the Bank Verification Number (BVN) and Tax Identification Number (TIN) details of the customers.
“It will be a commitment by the customer that in taking the loan you agree and promise to repair the loan and that you also agree that should you default, the total amount of asset or deposit you have across the industry would be applied towards repaying the loan,” Ahmad explained.
“We are very optimistic that this will enable the banks to lend more with confidence and enable more Nigerians to get access to loan particularly in the SMEs, retail sectors. We are also looking at revitalising the mortgage sector,” she said.
The Bankers Committee also came up with mortgage interest drawback fund which is supposed to resolve the high cost of mortgages. This will help reward those that have the capacity to repay their loans and reduce the cost of mortgages by half.
The CBN and the Bankers Committee also introduced the mortgage guarantee company which is supposed to help de-risk the mortgage sector. This will help to get some funding back for mortgages that are bad. The mortgages that qualify for this are those that meet the underwriting standard required.
The mortgage guarantee company, which will be private sector-driven, is also expected to help all the mortgage institutions like the primary mortgage banks that have created mortgages based on the underwriting standards to be able to get part of their money when there is a default.
Ahmed Abdullahi, director, banking supervision of the CBN, said the committee was working on a credit scoring system whereby all obligors with a credit score would have easy access to credit and that would help improve the industry.
Others who addressed journalists include Herbert Wigwe, group managing director/CEO, Access Bank plc; Segun Agbaje, managing director/CEO, GTBank; Tomi Somefun, managing director, Unity Bank plc, and Isaac Okorafor, CBN director, corporate communication.
Wigwe said the Bankers Committee paid a lot of attention to the creative sector. He said the committee was collaborating with the Lagos State government on a pilot project to develop the adjoining area to the National Theatre and provide support to fashion, music, Nollywood and creation of an IT hub.
On his part, Agbaje said one of the things the CBN wants to do is pure consumer credit where customers start to get loans to be able to buy cars, where supermarkets start to extend credit. As an incentive to help the banks, he said, a multiple of 1.5 percent from the calculation of the 60 percent loan-to-deposit ratio would apply to consumer- and mortgage-type loans.
HOPE MOSES-ASHIKE
