CBN amends operational guidelines on GSI, seeks endless loan recoveries

The Central Bank of Nigeria (CBN) has amended the operational guidelines of the Global Standing Instruction (GSI) to allow for continuous and unrestricted loan recovery by Deposit Money Banks (DMBs) and financial institutions in the country.

The GSI creates a contractual mandate from an individual borrower, in favour of a creditor bank to apply monies standing to the credit of the borrower in a third-party financial institution or electronic wallet to offset the debt obligations of the borrower.

It helps to facilitate improved credit repayment culture.

The CBN, in a circular titled ‘Re: Global Standing Instruction (GSI) – Individuals,’ dated January 19, 2022, signed by CBN Director, Policy and Regulations Department, Chibuzo Efobi, and addressed to all banks and other financial institutions, stated that following the amendment, the frequency of recovery attempts via the GSI platform had been altered from a specific number to continuous and unrestricted.

The bank explained further that in effect, the GSI’s automated loan recovery feature, applicable to all loans in the industry, shall remain perpetually in place throughout the life of the loan and/or until the loan is fully repaid.

The guideline contains lists of sanctions to be meted on banks and financial institutions in the event of violation or misapplication of the GSI.

The circular reads in part, “In furtherance of its mandate to promote financial system stability, the CBN released the circular on the operational guidelines of the Global Standing Instruction (GSI) – Individual dated July 13, 2020.”

The apex bank stated further that the move was in furtherance of its mandate to promote financial system stability.

The Central Bank had in July 2020, issued a guideline on the GSI, which was aimed at enhancing loan recovery and monitoring chronic loan defaulters.

The initiative was fundamentally conceived to address the recurring instances of willful loan default in the industry with a view to identifying and watch-listing recalcitrant debtors, enhancing loan recovery from all eligible and funded accounts/wallets in the banking industry, improving credit repayment culture and reducing Non-Performing Loans (NPLs) in the Nigerian banking system.

However, CBN Governor, Mr Godwin Emefiele had, at the recent meeting of the Monetary Policy Committee (MPC), disclosed that total non-performing loans in the financial system had declined to about 4.85 per cent, the first in 10 years.

The updated framework is expected to further reduce incidences of loans going bad, thereby worsening NPLs position.