The GSI policy will facilitate improved credit repayment culture in the country and reduce non-performing loans.
On August 1, a new policy that will deny serial bad debtors any cover to operate went live in the Nigerian banking system. The says the Global Standing Instruction policy will facilitate improved credit repayment culture in the country; reduce non-performing loans , and promote watch-listing of chronic loan defaulters in the Nigerian Banking System.
The following explainer is to highlight not only the importance and significance of the GSI to the country’s banking and financial system, it will also show how the policy will work and the role of the different parties involved. The banks are not allowed to deploy GSI as a tool to recover any penal charges that may have accrued or accumulated on a credit/loan by a customer included as part of outstanding balances or obligations he or she is owing. The GSI is a last resort by a creditor bank to recover its loan or credits.
Apart from the responsibility of executing the GSI mandate in hard copy or digital form, the CBN said the borrower is also responsible for ensuring that the terms and conditions of the mandate are clearly understood before execution. Each of the PFIs in the scheme shall conform to the minimum requirements, including being a financial institution duly licensed by the CBN; have adequate IT infrastructure to meet all the connectivity and protocol requirements at NIBSS and CBN; provide access to customers’ Nigeria Uniform Bank Account Number accounts.
For the PFIs, the CBN said they have the responsibility of executing the GSI mandate agreement with NIBSS; ensure all qualifying accounts are properly maintained and visible to NIBSS on the Banking Industry Customer Accounts Database , or by any other service created or provisioned for this purpose. The role of the NIBSS in the process is to execute the Master GSI agreement between PFIs; administer the back-end of the GSI services by utilizing NIP protocols where the creditor bank has initiated a balance enquiry, debit instructions on identified accounts and completes the GSI operations by instantly transferring the collated funds to the borrowers pre-designated repayment account in the creditor bank.
Any PFI that wrongly places a CBN approved restriction on an eligible account to shield it from the GSI Trigger, resulting in the GSI being unable to either perform an account status check enquiry or debit the account shall be liable to a fine equivalent to the amount in the ‘restricted/shielded’ eligible account, an amount that would not be considered as part of any subsequent GSI Trigger amount, whether successful or not.
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