The GSI, which was issued pursuant of the powers conferred on the Central Bank of Nigeria by Section 2 (d) of the apex bank Act, 2007, would help promote a sound financial system in Nigeria.
Specifically, the GSI is targeted at reducing non-performing loans in the banking system by enhancing loan recovery across the banking sector.
The CBN had mooted the idea last year during a meeting held in Lagos with members of the Bankers Committee.
During that meeting, it had granted Deposit Money Banks the approval to directly debit bank accounts belonging to loan defaulters across all banks in the country.
In the guidelines issued on Monday, the CBN said the objective was to facilitate an improved credit repayment culture; reduce non-performing loans in the banking industry; and watch-list consistent loan defaulters.
The guideline stated, “The GSI shall serve as a last resort by a Creditor bank, without recourse to the Borrower, to recover past due obligations (Principal and Accrued Interest only, excluding any Penal Charges) from a defaulting Borrower through a direct set-off from deposits/investments held in the Borrower’s qualifying bank accounts with participating financial institutions.
“The GSI shall not serve as a tool to recover any penal charges that may have accrued on a credit/loan and included as part of outstanding balances/obligations of a borrower.”
