Bill to allow banks recover loans without borrowers consent passes Second Reading

The Senate on Tuesday, passed for second reading, a bill to allow banks recover loans from defaulters, place them on watchlist and eventually blacklist them without recourse to the borrowers.

The bill sponsored by Senator Sani Musa, was seeking an Act to establish unified scheme for a sound financial system that would facilitate and improve credit repayment culture by empowering creditors bank to track loan defaulters.

Senate empowers banks to recover loans without borrowers consent
Senate empowers banks to recover loans without borrowers consent

Musa said the creditor banks would be able to do so through the means of the defaulters’ Bank Verification Number.

He said the bill would empower the creditor banks to recover the said loans from other accounts operated by the defaulters without recourse to the loan borrowers.

He also said the bill would provide penalties for breaches and violation of obligations and enhance loan recovery across banking sectors in Nigeria.

Recall in July 2020 that the Global Standing Instruction (GSI) issued by the Central Bank of Nigeria already granted banks the right to seize loan defaulters’ monies kept in other banks.

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The GIS guideline according to CBN was issued to enhance loan recovery in the banking sector and to facilitate an improved credit repayment culture; reduce Non-Performing Loans in the banking industry; and watch-list consistent loan defaulters.

Accounts eligible for such seizure include individual savings accounts, current accounts, domiciliary accounts, investment /deposit accounts in both Naira, foreign currencies; as well as electronic wallets and joint accounts.

While the Nigeria Inter-Bank Settlement System (NIBSS) and the apex bank would be expected to work together for successful implementation of the guidelines, it is expected that all banks must execute the GSI Mandate Agreement with the NIBSS and ensure that all qualifying accounts remain visible to NIBSS on the Industry Customer Accounts database

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To make this work, accounts of borrowers must be linked to their Bank’s Verification Number (BVN), as failure to do so would attract such accounts being watch-listed when discovered.

It is also expects that all banks honour all balance inquiry and debit advice received from NIBSS for GSI Trigger in accordance with master agreement including GSI recall instructions.

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