CBN to Expand GSI To Corporate Accounts And Microfinance Banks

The Central Bank of Nigeria says the Global Standing Instruction (GSI) would be expanded to corporate accounts and microfinance banks in the country.

The Director, Banking Supervision of the CBN, Mr Haruna Mustafa, said this at the 2021 Financial Correspondents Association of Nigeria workshop in Ibadan, Oyo State on Friday.

Global Standing Instruction (GSI) policy is meant to facilitate improved credit repayment culture in the country; reduce non-performing loans (NPLs), and promote watch-listing of chronic loan defaulters in the Nigerian Banking System.

What you should know about GSI
The Financial Policy and Regulation Department of the Central Bank of Nigeria (CBN) announced the operational guidelines for the new policy for individual bank customers in the country in circular No. FPRD/DIR/GEN/CIR/07/056 to all banks and other financial institutions on July 13, 2020.

The CBN released recommendations for all banks and other financial institutions on August 28, 2019, to ensure successful implementation of the GSI process, including eligible loans given by banks.
Under the GSI, a bank client will no longer be able to accept a loan or credit from one bank and refuse to pay it back while maintaining many other bank accounts with sufficient credit balances to pay off the amount owed to the first bank.

For example, under the new policy, if a bank customer or account holder is granted a loan or credit by a bank (say, First Bank) and fails to repay the loan or credit when it is due in accordance with the agreed-upon GSI repayment mandate, First Bank can contact any other bank(s) in the country where the defaulting customer holds an account(s) with sufficient credit balance to offset the full value of the loan or credit and recover the loan or credit from there.

What the CBN is saying
Mustapha, represented by Mr Adekunle Adeniji, the Assistant Director, Banking Supervision, CBN, said that “the GSI started with personal accounts but we are expanding to corporate accounts and microfinance banks.

“We understand that an individual can take a loan with commercial banks and choose not to fund his account and take his money to OFI,” he stated.

“Microfinance banks are going to be part of the Global Standing Instruction (GSI) policy but that phase would come gradually,” he added.

He also stated that the non-performing loan ratio decreased from 6.58% to 5.9% in August 2021. According to him, the Capital Adequacy Ratio (CAR) increased to 15.21% in August, while the Liquidity Ratio (LR) increased to 42.23%.

He said the N50 billion target credit facility for consumers and SMEs, as well as the re-enactment of the Banks and Other Financial Institutions Act (BOFIA 2020), will strengthen the regulatory and resolution architecture for banks and other financial institutions.