- Loan Defaulters: Lenders to Seize Deposits in Other Banks
As Nigerian banks moved towards implementing the new 60 percent loan-to-deposit ratio directive in September, lenders and central bank have agreed to seize bank accounts of loan defaulters in other financial institutions and use their deposits to offset or service their unpaid loans.
This was discussed and agreed as the way forward during the 345th Bankers Committee meeting in Lagos on Monday.
The bankers said borrowers would be asked to sign an agreement form that stated, if they defaulted, the lender would have the right to access their accounts domiciled with other banks.
Speaking after the meeting, Segun Agbaje, the Managing Director, Guaranty Trust Bank, said financial institutions would start giving loans to businesses in an effort to stimulate growth.
However, if borrowers defaulted appropriate measures as discussed in the meeting today would be taken to retrieve procured loans.
“If you don’t pay the loans you collected from a bank, we will use your deposits in other banks to service your loans,” he said.
He explained that its the only way banks can continue to serve others in need, adding that huge non-performing loan crippled operations and the financial system as a whole.
Aishah Ahmad, Deputy Governor, CBN, said banks’ ability to lend had been curtailed by a large number of defaulters.
A recent report from the National Bureau of Statistics (NBS) put the total loans in the financial system at N15.35 trillion and non-performing loans at N1.676 trillion.
Last year, Asset Management Corporation of Nigeria (AMCON) approached the Federal High Court in Abuja to seek assistance with over N5.4 trillion debt owed the corporation.
“My Lords, it is clear to us now that we (AMCON) cannot go very far without the support of the courts because AMCON obligors deliberately raise technicalities in courts to elongate and delay their cases with AMCON,” stated Mr. Ahmed Kuru, the Managing Director/Chief Executive Officer (AMCON).
With banks now mandated to increase lending to meet the Central Bank of Nigeria’s new directive, experts are worried that the size of non-performing loans could surge even more given the current headwinds.
While this measure may help curtail intentional defaulters, it won’t do much for those with zero other accounts or deposits. The ability of borrowers to repay loans is tied to the healthiness of the economy.