CBN extend moves against bank debtors in new circular

The Central Bank of Nigeria (CBN) has extended its move against chronic debtors in banks to mortgage banks, Microfinance banks and Finance Houses, It said that the move against bad debtors prompt the need to extend its Credit Risk Management System (CRMS) to the other financial institutions (OFIs) in the country. This follows the successful implementation of the CRMS in deposit money banks in the country.

This fresh move is in a new circular titled, ‘Credit Risk Management System: Commencement of Enrolment of all Development Finance Institutions, Microfinance Banks, Primary Mortgage Banks and Finance Companies, issued by the apex bank and signed by its Director, Financial Policy and Regulation Department, Kelvin Amugo, on April 8, 2021.

CBN in the circular noted that this policy is to help promote a safe and sound financial system in the country as well as prevent the bad debtors from undermining the banking system. The statement from the CBN’s circular reads, “As part of efforts to promote a safe and sound financial system in Nigeria, the CBN introduced the CRMS to improve credit risk management in commercial, merchant and non-interest banks as well as to prevent predatory borrowers from undermining the banking system. With the successful implementation of the CRMS in deposit money banks, it has become expedient to commence the enrolment of Other Financial Institutions on the CRMS platform.

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. To ensure full compliance, OFIs are reminded to conclude the tagging of ALL life credits files for ALL individual and non-individual borrowers with BVN and TIN respectively by May 14, 2021.’’ The apex bank in the circular also advised concerned OFIs to acquaint themselves with the regulatory guidelines for the operations of theredesigned CRMS for commercial, merchant and non-interest banks in the country.

While noting that it would monitor compliance with the requirements of this circular, the CBN said that appropriate sanctions would be applied for non-compliance. The CRMS was introduced due to rising cases of non-performing loans in banks and this contributed significantly to the financial distress in the banking sector. This was also compounded by the existence of predatory debtors in the banking system who are fond of abandoning their debt obligations in some banks only to move to contract new debts in other banks. This led to the need for a central database from which consolidated credit information on borrowers could be obtained. The CRMS is web-enabled thereby allowing banks and other stakeholders to dial directly into the CRMS database for the purpose of rendering statutory returns or conducting status enquiry on borrowers.