CBN mandates banks to begin automatic debit of chronic debtors

The Central Bank of Nigeria (CBN) has mandated banks in the country to begin automatic debit of chronic debtors in the country.

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, revealed that over N10 trillion has been loaned to customers under various intervention schemes.

According to a circular titled ‘Re: Global Standing Instruction (GSI), Individuals’, CBN said the rate of recovery attempts through the GSI platform will continue unrestricted.

The circular said: “Consequently, please be informed that the frequency of recovery attempts via the GSI platform has been amended from a specific number to continuous and unrestricted.”

“In other words, the GSI automated loan recovery feature applicable to all loans in the industry will henceforth remain perpetually in place throughout the life of the loan and until the loan is fully repaid.”

The financial institution regulator said it conceived the initiative to address wilful loan default in the banking industry, watch list chronic loan defaulters, boost recovery from eligible and funded accounts in the sector and improve credit repayment culture.

The policy became effective in August 2020 as part of efforts to reduce the rate of non-performing loans in the banking sector.

Experts believe the GSI implementation has led to the banks expanding their loan base since they have CBN’s backing and GSI to recover their funds.

CBN stated that the exercise requires borrowers to agree to a GSI mandate in hard copy or digital form, after which eligible accounts are linked to the borrower’s Bank Verification Number (BVN).

The apex bank added that the GSI form authorizes the recovery of an amount stated by the bank from any/all accounts maintained by banks and other financial institutions to debit accounts of recalcitrant loan defaulters in any bank in Nigeria to alleviate the growth of non-performing loans.