The Central Bank of Nigeria (CBN) and commercial banks in the
country have agreed that loan defaults will be settled using deposits
made in other banks.
Addressing journalists after the
Bankers Committee meeting on Monday, Aishah Ahmad, CBN’s deputy
governor, financial services system, said the directive is to encourage
banks to increase lending.
“We are not unaware of the
challenges/reasons why credit has not been growing. Part of that was the
appetite of banks to lend especially when you have customers that
willingly refuse to pay their loans,” she said
“In this respect,
we have come up with a new clause that will be included in the offer
letters that will be granted going forward.
“This is going to be a
credit risk protection clause. Basically, it will contain the BVN
details and TIN of the customers and more or less it will be a
commitment on the part of the customers that you agree that should you
default on the loan, the total amount of deposits you have across the
banking industry would be applied towards repaying the loan.
“This
is not uncommon because banks already have rights of set-off within a
bank. Which means you take money from a bank, the bank usually has a
clause in the letter that allows your bank to repay your loan from the
assets you have with the bank.
“This is just extending it across the industry.”
The
CBN deputy governor said the directive will enable banks to lend with
more confidence especially to those within the SME sector.
Speaking
further, Ahmad said the CBN is also guarding against increasing the
rate of non-performing loans in the system despite the recent directive
that banks should increase the loan to deposit ratio (LDR) to 60%.
Corroborating
her statement, Ahmed Abdullahi, CBN’s director of banking supervision,
said the directive will only apply to new loan applications.
In its recently released Consumer Protection Guidelines on Responsible Business Conduct document, the CBN had directed banks to
get the credit history of customers before approving loans.
0 Comments