CBN backs new measure to trim loan defaults in banks

The Central Bank of Nigeria (CBN) is working in concert with commercial banks in the country to foreshorten huge cases of loan repayment default by customers.

The new measure was made known Monday after the Bankers Committee met in Lagos.

The CBN Deputy Governor, Financial Services System, Aishah Ahmad, told the media shortly after the close door meeting that it has been agreed that henceforth banks can now deduct money owed by loan defaulters from deposits they made in other banks.

This directive she said was 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,” she added.

The Managing Director, Guaranty Trust Bank, Segun Agbaje, added that banks would soon start giving out more loans to the retail sector because they are important to grow the economy.

 “If you don’t pay the loans you collected from a bank, we will use your deposits in other banks to service your loans,” he said,

The Managing Director, Access Bank, Herbert Wigwe, said the Bankers Committee was increasing its lending to the creative sector.

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