The Central Bank of Nigeria (CBN) has mandated commercial and merchant banks to begin debiting various loan defaulters as it seeks to build back a better financial system.
According to a recent circular titled ‘Re: Global Standing Instruction (GSI), Individuals’, CBN said the rate of recovery attempts through the GSI platform will continue unrestricted.
The GSI guidelines were issued in July 2020 pursuant to Section 2 (d) of the Central Bank of Nigeria Act, 2007.
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.
These guidelines were issued in a bid to promote sound financial system stability in Nigeria and to enhance loan recovery across the banking sector.
The policy was introduced to improve credit repayment culture, reduce Non-Performing Loans (NPLs) in the banking industry; and identify and create a watchlist of consistent loan defaulters.
For the GSI to work, all bank accounts belonging to the borrower have to be linked to their Bank Verification Number (BVN) and National Identification Number (NIN).