Nigerian Banks Start Deduction of Loans from Chronic Debtors’ Accounts

The Deposit Money Banks are deducting debts owed by chronic debtors from their accounts in other banks to stop the growth of non-performing loans in the industry.

According to the CBN, the GSI, which commenced on August 1, 2020, allows banks to recover the outstanding principal and interest upon default from any account maintained by the debtor across all financial institutions in Nigeria.

It said the slight improvement reflected the strengthening of risk management practices, the GSI policy and regulatory forbearance that had allowed banks to restructure credits impacted by the COVID-19 pandemic.

Figures obtained from the NBS on banking sector for Q3 2020 showed that while the gross loans in the lending industry stood at N18.9tn, the total non-performing loans stood at N1.2tn.

The latest figures from the CBN showed that while the gross loans rose to N22.2tn, the NPLs fell slightly to N1.1tn.

The CBN said in the latest Monetary Policy Committee report that it would not raise the lending rates in the sector.

“On loosening, the committee felt that this would lower retail interest rates and improve the ability of obligors to repay their obligations, with a complementary reduction in NPLs,” it said.