The Central Bank of Nigeria has issued guidelines on the Global Standing Instruction (GSI), granting banks the right to seize defaulters’ funds in other banks.
The GSI guideline aims to enhance loan recovery, improve credit repayment culture, reduce Non-Performing Loans, and monitor consistent loan defaulters in the banking industry.
Eligible accounts for seizure include individual savings accounts, current accounts, domiciliary accounts, investment/deposit accounts in both Naira and foreign currencies, electronic wallets, and joint accounts.
The statement highlights that, “The GIS shall serve as the last resort by a creditor bank without recourse to the borrower to recover past due obligations principal and accrued interest only, excluding any penal charges from a defaulting borrower through a direct set-off from deposit/investments held in the borrower’s qualifying bank accounts with participating bank accounts.”
The Nigeria Inter-Bank Settlement System (NIBSS) and the apex bank must collaborate for the successful implementation of the guidelines. Banks are required to execute the GSI Mandate Agreement with the NIBSS and ensure that all qualifying accounts remain visible to NIBSS on the Industry Customer Accounts datab.
Accounts of borrowers must be linked to their Bank’s Verification Number (BVN). Failure to do so will result in such accounts being watch-listed when discovered. Banks are also obliged to honor all balance inquiry and debit advice received from NIBSS for GSI Trigger according to the master agreement, including GSI recall instructions.
CEOs of banks have been instructed to regularly update the Board of directors on the GSI process, including the frequency of use and amounts recovered or released. Banks have also been ordered to report regularly to the CBN on recoveries made through the GSI and releases made to other banks.
Creditors violating the guidelines will be fully liable and subject to a flat fine of N500m per incident.