The Central Bank of Nigeria (CBN) has pursuant to the power conferred on it to promote sound financial system, released the Global Standing Instructions (Individuals) (GSI) in Nigeria to enhance recovery of loan across the banking sector and reduce non-performing loans with effect from 1^st August 2020.

The GSI provides a process of loan recovery where a borrower executes a GSI mandate document prior to loan disbursement empowering the creditor bank through the Nigeria Inter-Bank Settlement System (NIBSS) to without recourse to the borrower, recover past due obligations through a direct set-off from deposits or investments held across the borrower’s accounts with licensed financial institutions connected to the NIBSS.

The GSI Stakeholders And Their Roles

Participating Financial Institutions (PFIs)

The PFIs are financial institutions licensed by the CBN which execute the GSI Mandate Agreement with Nigeria Inter Bank Settlement System (NIBSS). The execution of the GSI Mandate Agreement allows the NIBSS upon instruction or trigger by the creditor bank to undertake balance enquiry, debit instructions on identified accounts belonging to the borrower in all qualified PFIs and instantly transfer the collated funds to the borrower’s pre-designated repayment account in the creditor bank.

PFIs are to among other requirements, ensure all qualifying accounts of borrowers are properly maintained and visible to NIBSS and ensure the accounts are correctly tagged with correct BVN of borrowers.

The Creditor Bank

1. The Creditor bank is to ensure that all borrowers are educated about the GSI mandate and its implications, enshrine same in the loan application process, review and validate the GSI mandate prior to loan disbursement and retain executed copies of the GSI mandate.
2. The creditor bank will ensure that the amount to be directly deducted from borrowers’ accounts constitutes only the principal sum and interest excluding penalties which may be additional interests from default in repaying the loan as at when due.
3. The creditor bank will Indemnify NIBSS and other Participating Financial Institutions from all liabilities that may arise from inappropriate use of the GSI infrastructure.

The Borrower

The borrower is expected to read, understand and execute the GSI mandate and ensure all his qualifying accounts from where direct deductions will be made by the creditor bank in the event of default are linked to his BVN.

The NIBSS

The NIBSS is to ensure that upon trigger of the GSI mandate by the creditor bank, it undertakes 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 and ensure that the NIBSS Industry Customer Accounts Database (ICAD) is

uninterrupted for PFIs to update. The NIBSS is to render periodic reports as may be prescribed by the CBN.

The CBN

The CBN will ensure the availability of the Credit Risk Management System (CRMS) platform for participating institutions to submit specific information on borrowers.

GSI accounts from where direct Set-off can be made

Set-off can be made from the following type of accounts: Individual Savings Accounts; Individual Current Accounts; Individual Domiciliary Accounts; Investment/Deposit Accounts whether in naira or foreign currency; and Electronic Wallets. Withdrawals can also be made where any of the accounts is a joint account.

GSI Transaction Reports

The GSI provides for transaction reports to be issued to the creditor bank where it makes a request and requires monthly returns detailing the GSI transaction up to the amount recovered to be issued to the CBN by PFIs.

Penalties

The GSI guideline provides for penalties ranging from N100,000 to N500,000 for breaches and violations of the provisions of the GSI by PFIs and creditor banks. Some of these breaches are:

1. Activation a GSI in error
2. Where a PFI incorrectly places a CBN approved restriction on an eligible account in order to shield it from the GSI Trigger
3. Where a PFI fails to grant the GSI permission to debit an eligible account
4. Where an account is debited in error due to a PFI incorrectly tagging an account in NIBSS’ ICAD with the wrong unique identifier.
5. Where a PFI fails to grant the GSI permission to perform an Account Status Enquiry Check/Request.

For more on this, kindly send an email to uchechi@tonbofa.com