Banks Increase Efforts to Recover Loans from Debtors
The Central Bank of Nigeria (CBN) and various banks are implementing new measures to ensure debtors pay back the loans they owe. One such measure is the activation of the Global Standing Instruction (GSI) which allows banks to debit the accounts of loan defaulters in order to recover the debts owed. This strategy is being used to recover a significant amount of outstanding debts that stem from over N10 trillion intervention funds disbursed to borrowers.
The CBN Governor, Dr. Olayemi Michael Cardoso, revealed that over N10 trillion has been loaned to customers under the intervention funds scheme. This includes the disbursement of funds to several agricultural projects, smallholder farmers, and large-scale agricultural projects under various programmes. However, with the economic pressures brought about by the COVID-19 pandemic, the World Bank has observed a decrease in private sectors in developing countries, including Nigeria.
As part of the efforts to recover outstanding debts, the CBN has made amendments to the guidelines on GSI, allowing for continuous and unrestricted recovery attempts via the GSI platform. The aim is to address willful loan default, enhance recovery from eligible and funded accounts, and improve credit repayment culture.
One of the implications of the GSI policy is that borrowers are required to sign a GSI mandate, linking their accounts to their Bank Verification Number (BVN) and authorizing the recovery of specified amounts from all their accounts across different financial institutions. This empowers banks to debit the accounts of chronic loan defaulters in any bank within the country, ultimately addressing the issue of non-performing loans and encouraging a culture of credit repayment.
The initiative has been embraced by banks, who are relying on the GSI policy to recover their funds amid losses caused by the pandemic. This strategy offers a coordinated approach to the issue of non-performing loans and aims to reignite banks’ willingness to lend and support domestic growth.
In conclusion, the GSI has proven to be a game changer in the pursuit of recovering outstanding debts associated with intervention funds. It is hoped that this policy will restore confidence in the lending sector and encourage a culture of credit repayment.
