About CBN Global Standing Instruction (GSI) and How it Affect Loan Defaulters
The Central Bank of Nigeria (CBN) has reeled out new guidelines aimed at curbing incessant loan defaulting in the banking sector. The new guidelines tagged “OPERATIONAL GUIDELINES ON GLOBAL STANDING INSTRUCTION – INDIVIDUALS” was disclosed by the apex bank in a circular issued to all financial institutions operating in the country and will take effect August 1, 2020.
The new CBN Global Standard Instruction (GSI) gives banks the authority to debit loan defaulters from accounts they operate in other banks in Nigeria. This new policy also gives banks the authority to debited a joint account a debtor holds with a family member or business associate.
The new CBN GSI policy will be managed by the Nigeria Inter-bank Settlement System (NIBSS) on behalf of the financial institutions using customer’s Bank Verification Number (BVN).
The new policy also protects bank customers against illegal debit with fines to the financial operators that debits a customer servicing their loan as and when due.
Objectives of Global Standing Instruction
- Facilitate an improved credit repayment culture;
- Reduce Non-Performing Loans (NPLs) in the banking industry; and
- Watch-listing consistent loan defaulters
The Global Standing Instruction Guidelines
According to circular released by the CBN Director of Financial Policy and Regulation, “The Bankers’ Committee, at its meeting on February 18, 2020, approved the go-live on the Global Standing Instruction, which aimed at facilitating an improved credit repayment culture; reducing non-performing loans in the Nigerian banking system; and watch-listing consistent loan defaulters.”
“The banks would review and validate the GSI mandate instrument prior to loan disbursement. They would indemnify the Nigeria Inter-Bank Settlement System and other participating financial institutions from all liabilities that may arise from inappropriate use of the GSI infrastructure”.
“They must also ensure all qualifying accounts were properly maintained and visible to NIBSS on the industry customer accounts database or by any other service created or provisioned for this purpose.”
Banks are to retain copies of the physical or digital version of the executed GSI mandate and provide the same when required. The participating financial institutions are mandated to execute the GSI mandate in agreement with NIBSS.
According to the guidelines, banks must ensure that accounts in NIBSS’ ICAD are correctly tagged with correct BVN as well as ensure and maintain connectivity to the Nigeria Central Switch.
Henceforth, before a bank customer can access a loan, the customer will be mandated to;
- Operate savings, current, investment, domiciliary, or a joint account that is linked to the customer’s Bank Verification Number (BVN).
- Fill out a GSI mandate form and sign both soft and hard versions. (This signed form gives the bank the authority to debit you from other sources in case of default.)
Should you default on paying up your loan or accrued interest upon maturity, and have no funds on the account you operate with the bank, they will instruct NIBSS to debit you from any other bank’s account you have funds in, be it joint or family account.
The new CBN policy also covers bank customers against inappropriate debit from the banks.
What do I mean?
- If a customer is not owing any bank but was debited either knowingly or not by the bank
- If a customer collects a loan, but have not defaulted in servicing such loan as agreed
But the bank debits your account with a GSI tag, if you complain to the bank and they do nothing about it, report to the CBN and if it is ascertained that the bank debited you wrongly, the CBN will fine the bank according to the guideline.
This is everything you need to know about the CBN Global Standing Instruction.
You may wish to read the full GSI Guidelines here.