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CBN grants approval for banks to debit accounts of loan defaulters 

The CBN has finally granted DMBs the approval to directly debit bank accounts belonging to loan defaulters across all banks in the country.

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The Central Bank of Nigeria (CBN) has finally granted Deposit Money Banks the approval to directly debit bank accounts belonging to loan defaulters across all banks in the country.

The CBN Director, Banking Supervision, Ahmed Abdullahi made the disclosure on Thursday while briefing Journalists at the end of the bankers’ committee meeting.

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The details: According to the CBN, the approval became necessary as a new measure to mitigate the rising spate of Non-Performing Loans. It should also be noted that concerns had been mooted in recent times as the CBN’s new policy directed banks to lend up to 65% of deposits to the real sector of the economy.

[READ ALSO: Total loans in Nigeria’s banking sector hit N15.35 trillion]

Speaking after the banker’s committee meeting, the CBN Director stated that as the apex bank was encouraging banks to lend, the CBN was also poised to defend banks against possible future loan defaulters.

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A new Clause: At the end of the bankers’ meeting, it was also learned that the CBN approved that the clause permitting banks to apply the new measure as part of loan agreements to all customers.

Abdullahi’s statement reads: “To encourage the banks to lend, the CBN has agreed that there will be a clause that an obligor will sign that will enable the bank net off against any amount he or she has in any other bank.”

Reacting to the approval from the CBN, the Executive Director, Risk, Standard Chartered Bank, Mubola Faloye, reportedly said the new CBN 65% loan to deposit ratio would force banks to lend to some vulnerable sectors and it is important for the apex bank to help deposit money banks mitigate the risk.

“One of things the committee reiterated is that there are some vulnerable sectors the committee will be lending to and it’s important that we mitigate our risks and have what we call a credit cross-default clause that allows us to net off the obligations of defaulting party against any other money the defaulting party has in the industry. That is good support from the CBN for the banking community and it’s very important for us to include that clause in our loan agreement,” Faloye was quoted as saying.

The Backstory: Earlier in May 2019, as published on Nairametrics, the bankers’ committee disclosed plans to go tough on efforts to bring loan defaulters to book. According to the committee, plans have been perfected to go beyond publishing the names of defaulters. This time, all banks would be speaking with one voice, sharing information about those entities, and refusing to do further business with them until they settled their obligations.

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  • Similarly, the CEO addressed smear campaigns by defaulters which are always targeted at banks and their CEOs in a desperate bid to either delay repaying loans or avoid meeting their debt obligations completely.
  • While the banks have been increasing efforts to reduce bad loans, the CBN introduced a 65% loan to deposit ratio – a policy which means bad loans may surge.
  • Nairametrics was first to publish that the CBN had reviewed the earlier 60% LDR to 65%.
  • According to the CBN, the major reason for the newly revised LDR was the noticeable “growth in the level of the industry gross credit”.

[READ ALSO: A total of 34.7 million bank accounts are not yet linked to BVNs]

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How this affects you: With the latest approval granted by the CBN to banks, loan defaulters who have funds in accounts across any bank in the country should expect debit alert from their respective banks any moment from now.

  • The new approval also means that for interested loan applicants, a new clause has been introduced, which mandates you to give consent to your bank to debit your accounts in any Nigerian bank where you have funds in the event of you defaulting.
  • Although, the right to setoff account balances has existed among banks in the past but hasn’t been operational.
  • It was learned that once a customer defaults on their loans, relying on BVN, NIBSS will first recover the loans from the defaulter’s balance in any account within the bank. If that is not enough, it will proceed to other accounts deposited in other banks.

In the meantime, this move by the CBN is expected to drive down the huge non-performing loans in Nigerian banks and also strengthen the country’s financial sector.

 

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

6 Comments

6 Comments

  1. Anonymous

    October 4, 2019 at 1:59 pm

    Good move by the apex bank. Does this apply to MFBs too, as they do lots of lending too

  2. adekunle

    October 4, 2019 at 8:01 pm

    i believe will also apply Microfinance

  3. Anonymous

    October 5, 2019 at 3:24 pm

    Microfinance banking is full reserve banking. I doubt it.

  4. Anonymous

    October 6, 2019 at 12:01 pm

    Nigerians will beat the system still. People will hide their monies in their spouses accounts, in their children’s accounts, etc. The environment for doing business in Nigeria encourages defaulting. A barber runs his generator 24/7. And so do most businesses. Money spent buying diesel in coldrooms can pay off loans. Nigerian government is not serious. Banks will still cry.

  5. Anonymous

    October 16, 2019 at 7:52 am

    ^^^This your reason does not justify defaulting on loans. It is an agreement between parties that must be honored.

  6. Anonymous

    October 17, 2019 at 1:55 pm

    The business environment in Nigeria is terrible. U take a loan for a business, and now no electricity Inthe environ for upward of 6mths. The generator purchased to support PHCN has finally broken down due to overuse. The road to your business has become so bad that the only means of transporting goods was to hire transport cos company vehicle is now unserviceable, customers are not ready to come around cos of bad road unless u deliver. Imagine the additional cost on production cost which u cannot pass to customers cos of competition. Remember unexpected increase in vat, bank deposit/withdraw charges etc. In Nigeria as SME, u are not protected. The disposable income of ur customers is limited perhaps reducing. Hence d default to loan repayment. I suggest BOI should do due diligence and spread loan repayment over a longer period and if possible, reschedule the loan for a soft landing.

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Business

LIRS further extends deadline for filing annual tax returns by one month

“We constantly debated what other measures could be taken as an organization to support individuals and businesses at this time, hence, the additional one-month extension from June 1, to June 30, 2020.” – Ayodele Subair

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LIRS further extends deadline for filing annual return by one month

The Lagos State Internal Revenue Service (LIRS) has again extended the deadline for filing of Annual Tax Returns from May 31 2020 to June 30, 2020.

This is part of the state government’s effort to provide relief to taxpayers in light of the economic impact of the Covid-19 pandemic. With this development, annual returns for individuals, both employees and self-employed persons, can be filed anytime before June 30, 2020.

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In a press release signed by Monsurat Amasa, the head of LIRS’ Corporate Communications Department, the agency urged taxpayers to take advantage of the magnanimity of the government and file their returns. The LIRS’ Executive Chairman, Mr. Ayodele Subair, explained the extension thus:

“As the Lagos State Government keeps abreast of global best practices in containing the Covid-19 pandemic and eases the effects of an economic downturn on taxpayers and residents of the State, LIRS had initially extended the deadline for filing annual tax returns for two months, from the statutory March 31st of every fiscal year to May 31, 2020.  

“We constantly debated what other measures could be taken as an organization to support individuals and businesses at this time, hence, the additional one-month extension from June 1, to June 30, 2020.”

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(READ MORE: COVID-19: Lagos issues new guidelines, considers full reopening of economy)

He further explained that taxpayers can file the annual returns from the comfort of their homes and offices using the LIRS eTax platforms. They can also generate assessment and payment schedule, and other tax administration matters on the same platform. Updates on business operations and alternative payment platforms are to be found on the verified handles, and the LIRS website.

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Business

Where to invest in May

Post-COVID-19 lockdown, Nigerians need to send their money on the right errands in May 2019, if they will not be caught napping the expected recession.  

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This May, post-COVID-19 lockdown, Nigerians need to send their money on the right errands, if they don’t want to be caught napping during the anticipated recession.

When listing out assets that should make up the ideal portfolio in May 2020, founder of Nairametrics, Ugochukwu “Ugodre” Obi-Chukwu, explained that investors should consider choice stocks in the Nigerian and foreign stock exchanges, as well as investments in money market instruments where some decent profits can be made.

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Ugodre said this during the maiden edition of the Nairametrics Monthly Investment Guide Webinar.

According to him, this will also be the time to look into Agri-Tech investments, using crowdsourcing platforms, after which you can sit back and watch your funds grow over a time span of 5 months to a year.

According to him, it is also important to invest in foreign currencies and crypto-currencies to balance one’s portfolios.

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He noted that foreign direct investments have reduced over the last couple of years due to reduced trust in Nigeria’s economic policies, and the desire of foreign investors to cash out their funds with ease. This also explains why portfolio investments grew by 38% in 2019.

He said, “Foreign investors love portfolio investments because when they put their money in, they can easily take it out as well.”

(READ MORE:   CrowdFunding: Who is qualified according to new SEC Guidelines)

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Finding the right stocks

On the stock market, he noted that quite some stocks improved in the month of April and could improve in the coming months. He listed 20 suggested shares, including six stocks which he described as COVID-19 proof.

Agritech,Errands you can send your money in May 2020  

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Dangote Sugar Refinery, May & Baker Nigeria Plc, GSK, Neimeth International Pharm, Nestle Nigeria, and Cadbury Nigeria Plc are fast-moving consumer goods companies that are expected to be resistant to pressure from the pandemic.

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He advised investors to track stocks that are liquid, have good financials and good corporate governance, in order to limit risks borne by investors. Valuation of the shares, he said, could be done by comparing stock value and earnings per share.

Working around cryptocurrency volatility 

While making a presentation on “Why Bitcoin should be in your portfolio,” Yele Badamosi, CEO of Bundle stated that foremost cryptocurrency, Bitcoin, had maintained a steady appreciation over the last decade giving investors high yields.

Although the market is highly speculative and unregulated, its high returns and high risk indicate that investors with high-risk appetites could find the market more attractive.

To avoid being on the wrong side, he advised users to consider time-based rebalancing, or tolerance rebalancing to reduce risks and rebalance one’s portfolio.

(READ MORE: AfCFTA delay: A bane to Africa’s $3.4 trillion economic bloc)

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“There are reputable people in the space, but it is important to do your research, start small, and buy regularly. Be wary of get-rich-schemes and unrealistic guaranteed returns,” he advised.  cryptocurrency,Cryptocurrencies and its usage in Africa, Errands you can send your money in May 2020  

 

With applications like Bundle Africa on Google Play Store, buying cryptocurrencies is as easy as selecting the buy button and having it saved in your bundle wallet.

What to expect in Q2 2020

According to Wale, an economist, who also spoke at the webinar, the demand for crude oil will remain low as several countries and businesses are still in lockdown, even though OPEC has cut down production.

Interest rates may remain low, though, despite this, Nigerian business entrepreneurs cannot expect single-digit interest rates.

Foreign reserve and government reserves will remain under pressure in the coming months. The World Bank says that this is the worst year so far, going back to the great depression and this is what I think as well. This is probably going to be the worst economic crisis we have seen,” Wale said.

He added that with the exception of industries in the Healthcare sector, telco companies, digital technology companies, and food producers, other sectors could very well expect a big hit.

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Business

Why risk your life when you can bank with V by VFD (VBank or V)

Unlike other apps that are laced with either unbidden and hidden charges, V is free, as there are no charges for customers whether they are transferring money to another customer of V or another bank.

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VFD MFB closes gap with bank customers, launches new app, Why risk your life when you can bank with V by VFD (VBank or V)

The recent lifting of the lockdown has seen Nigerians rush to the banks to execute banking transactions that they have missed in the last five weeks.

Saying that this action or mis-action contravenes the physical distancing preached by the health agencies and government, is only stating the obvious. By doing this, they endanger themselves, and other family members whom they return to after their day at the bank.
But what if it was possible to do all your banking from your phone?

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V to the rescue
V disrupted the banking industry when earlier this year, it launched a highly optimized virtual bank app that enables users to carry out all banking transactions with ease and from their phones.
Users are able to create and set up a bank account with the app within 5 minutes and start carrying out transactions immediately.
Of course it doesn’t matter if you already have an account with the traditional banks. There’s always room for pleasant disruptions, aren’t there?

What they offer
VBank was launched as Nigeria’s first fully virtual bank to close the gap which hitherto existed between established traditional banks and their customers. That means there are no barriers between the bank and its teeming customers and potential customers.
Unlike other apps that are laced with either unbidden and hidden charges, V is free, as there are no charges for customers whether they are transferring money to another customer of V or another bank.

(READ MORE: VFD Group meets nutritional needs of residents of Olowogbowo community)

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According to Azubike Emodi, MD/CEO, VFD Microfinance Bank, experts behind V are taking a consumer-centric approach with an aggressive feedback collection mechanism to build an app that meets the objectives of the customer.
The app, which is available for download on App store and google playstore allows users to monitor expenses and income, categorize budgets, and set spending limits. V is available to download by searching for “V by VFD” on App Store and Google Play store.

Why risk your life when you can bank with V by VFD (VBank or V)
What else could one ask for in a bank?
Another landmark feature of V is referral functionality (Veelage), which is also connected to monthly financial reward. It allows interested users of V to earn income and advance though the V community simply by getting account holders signed up with a unique ID and maintaining an average balance.

About this unique feature, Olukunle Salami, Business Performance Manager, VFD Group Plc would say that It is a 2-way value proposition that ensures individuals can earn consistently for several months beyond the initial referral point.

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Whoever guessed that we could earn from our bank?

 

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