Banks Begin Direct Deduction From Chronic Debtors’ Accounts

Banks Begin Direct Deduction From Chronic Debtors’ Accounts

The development enables banks to reclaim overdue principal and interest from any account held by the debtor across all Nigerian financial institutions in the event of default.

According to data received from the Central Bank of Nigeria and the National Bureau of Statistics, bank NPLs decreased slightly from N1.2 trillion at the end of the second quarter of 2020 to N1.1 trillion at the end of July 2021.

This is despite an increase in the gross loans in the industry in the period. The CBN said the measures it introduced such as the Global Standing Instruction to reduce banking sector risks was helping to reduce the NPLs in the sector.

According to the CBN, the GSI, which commenced on August 1, 2020, the slight improvement reflected the strengthening of risk management practices, the GSI policy and regulatory forbearance that had allowed banks to restructure credits impacted by the COVID-19 pandemic.

Figures obtained from the NBS on the banking sector for Q3 2020 showed that while the gross loans in the lending industry stood at N18.9tn, the total non-performing loans stood at N1.2tn.

The latest figures from the CBN showed that while the gross loans rose to N22.2tn, the NPLs fell slightly to N1.1tn.

The CBN said in the latest Monetary Policy Committee report that it would not raise the lending rates in the sector.

“On loosening, the committee felt that this would lower retail interest rates and improve the ability of obligors to repay their obligations, with a complementary reduction in NPLs,” it said.

CBN added that for the banking industry, “Recent data also show that stability has been maintained and a smooth functioning of financial intermediation ensured.

“CBN staff report indicates that the banking sector’s non-performing loan ratio has fallen from 6.3 per cent in February to 6.0 per cent in March and further to 5.9 per cent in April.”

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