The new Central Bank of Nigeria (CBN)’s Global Standing Instruction (GSI) policy is a big unification in the Nigerian lending ecosystem. The CBN has three core reasons for this policy, and they include facilitating an improved credit repayment culture, reducing Non-Performing Loans (NPLs) in the banking industry, and watch-listing consistent loan defaulters. The following types of accounts qualify for GSI: Individual Savings, Current, Domiciliary , e-wallets and investment/Deposit Accounts.
Thankfully, corporate accounts are not included as that would have resulted in a homo sapiens-zation of Nigerian companies where companies become human elements on lending transactions. Yes, every company bank account in Nigeria possibly has a BVN (Bank Verification Number) associated with it and including corporate accounts in GSI would have been troublesome! Premium Times explains the GSI.
Under the GSI, it will no more be possible for a bank customer to take a loan or credit from one bank and refuse to pay back, while continuing to maintain several other accounts in other banks with enough credit balance that could have paid back the debt of the first bank.
For instance, with the new policy, if a bank customer or account holder is granted a loan or credit by a bank (say GTB), and defaults in paying back when the facility becomes due in line with the agreed GSI repayment mandate, GTB can contact any other bank(s) in the country where the defaulting customer holds an account(s) with credit balance that is enough to offset the full value of the loan or credit and recover the loan or credit from there.
For instance, if a customer takes a loan or credit from GTB and defaults in repaying according to agreed repayment schedule, GTB can contact Zenith Bank, Access Bank and First Bank, if the customer has accounts with sufficient credit balances in those banks, and the accounts are linked by his or her bank verification number (BVN), to recover the full value of the loan or credit without any further recourse to the defaulting customer.
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Thanks, Prof EKEKWE, however I think most loan defaults are with company and business loans , so why is GSI only focused on individual loans.
Also, extending to joint accounts is not good as it makes Mr B, to be punished for the sin of Mr A
But the type of NPLs that usually cripple banks don’t come from individuals, rather from companies. How many middle-class or poor people in your neighbourhood managed to get a loan from the banks, let alone going home to sleep quietly?
The bulk of the fictitious loans don’t go to small guys, rather to the big guys via their amalgam of companies; I still don’t see how the GSI would tame that.
And as for individuals, the major point here would be to watch list serial defaulters, taking their money from any account may not be quite successful, because they can make the withdrawals ahead of time, leaving you with empty bank accounts all round…
And could this GSI make obtaining loans without collateral possible from commercial banks? If not, we haven’t achieved anything worthwhile with it, other than helping the banks to chase their defaulters around.
Nice submission!
This is awesome
Thoughtful especially your last point.
The number of depositors will reduce greatly due to that policy, some deptors may decide to decline from saving in the bank.
This is a one sided policy. Who own the companies? Humans and not ghosts. So, I feel that the policy would only more sense if every bank customer is involved in this whether individual or corporate. Like a commenter opined, NPLs are not from individuals but corporate businesses.