GSI: Banks Makes Trendous Progress in Debts Recovery Within Nine Days

Nigerian banks recovered N50.32 million within nine days from debtors after the financial institutions began the Global Standing Instruction (GSI) which enables banks to retrieve their loans from debtors’ accounts in other banks.

The implementation of the GSI, which began on August 1, 2020, has seen an increase in the rate of recovery of debt following the challenges banks face with Non-Performing Loans.

Some debtors have been avoiding repayment and not servicing their debt – this promoted the Central Bank of Nigeria (CBN) to empower banks to apply the GSI.

While speaking about the exercise and impact it has had on the Nigerian industries, Director of financial policy and regulation, Kevin Amugo, said, “The CBN had introduced the GSI as part of measures to curtail the rising non-performing loans (NPLs) in the Nigerian banks and its impacts on the industry.

“It was specifically introduced to support the banking industry in reducing the rate of unserviced loans, improve loan recovery and recovery efforts of banks. The amount recovered was, however, insignificant compared with the total of N1.66 billion worth of bad debts by 26,057 customers triggered by the lending banks.

“The size of the recovered NPLs was due to the fact that the CBN was still working on the GSI protocol for non-individual debtors, which means the recovery was made from individual loan defaulters.

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“The CBN report showed that the NPLs ratio declined from 6.6 percent in April 2020 to 6.4 percent in June 2020; however the figure still remains above the 6 percent stipulated threshold by the CBN.

“Also, credit to the economy grew by N3.46 trillion, about 22 percent, of which new credit in June 2020 alone accounted for N773 billion, up from N412.7 billion in May 2020. The number of new borrowers similarly rose by about 42,000 to 93,578 from 51,700 in May.”

However, safety measures have been taken before the banks could enforce the new directive as any bank that wrongfully debits any customer, will be fined N500,000 per incident. Also, banks are not allowed to use the GSI to recover penal charges accrued on a credit/loan and included as part of the outstanding balances/obligations of a borrower.

While all recoveries and releases through the CBN’s new directive, GSI, must be reported to the CBN. Already, banks are sharing the credit history of their customers before approving loans, so the new directive is an upgrade empowering banks, even more, giving them control over the customer’s account.

According to the guidelines, the account types that the standing instruction can be applied includes: individual and joint savings accounts, current accounts, domiciliary accounts, investment/deposit accounts (naira and foreign currency), and electronic wallets.

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