CBN issues new circular to financial institutions to tackle bad debtors | Ripples Nigeria
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CBN issues new circular to financial institutions to tackle bad debtors

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Financial institutions have been issued a new directive by the Central Bank of Nigeria (CBN) as the apex bank extends its clampdown on bad debtors beyond deposit money banks.

The CBN directed other financial institutions to implement the credit risk management system to forestall the threat of bad debtors to the financial system in Nigeria.

The decision was taken as non-performing loans increase in the banking system following the COVID-19 pandemic. The non-performing loans had risen to 6.3 percent as at March 2021, staying above the 5.0 percent prudential requirement of the CBN.

Part of the implementation will compel Development Finance Institutions, Microfinance Banks, Primary Mortgage Banks and other finance companies to report all credit facilities, including principal and interest to the CRMs.

Read also: CBN to freeze 194 accounts of BDCs, other companies; Here’s why

They are expected to update the system on monthly basis as the financial regulator will monitor the exercise to ensure compliance. The CBN is introducing this system due to its success in commercial banks over the years.

The CRMS will enable the apex bank track bad debtors across the financial system that jump from one institution to another for credit without fulfilling their debt obligations.

In the circular to other financial institutions dated April 8, 2021, which disclosed the directive, the apex bank said the system is part of its effort to safeguard “commercial, merchant and non-interest banks as well as to prevent predatory borrowers from undermining the banking system.”

It added that, “Accordingly, all DFIs, MfBs, PMBs and FCs are required to report all credit facilities (principal and interest) to the CRMs and to update same on monthly basis. OFIs shall note the Bank Verification Numbers and Tax Identification Numbers are the only basis for regulatory renditions.”

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