BVN 2.0: CBN AND BANKS AGREE ON SWEEPING LOAN REPAYMENT MEASURE

Central Bank of Nigeria Headquarters, Abuja FCT

Nigeria is evolving and processes are being improved upon. Remember how people can take loans from Bank A, default on the loan, but Bank A can't do anything actually until the customer's account with them is credited before they can withdraw back their money from it? Well, that has now changed!

The CBN and commercial banks have decided to add a new clause in loan offer letters to the effect that if the customer defaults in repaying the loan, then Bank A can use the customer's BVN to search for and recover the money from any other account(s) held by the customer in other banks.

Aishah Ahmad, CBN Deputy Governor (financial services system) 

The new measure was announced by the CBN's deputy governor financial services system, Aishah Ahmad, after the Bankers Committee meeting held on Monday. This measure is expected to encourage commercial banks to lend more.

She said, “We are not unaware of the challenges/reasons why credit has not been growing. Part of that was the appetite of banks to lend especially when you have customers that willingly refuse to pay their loans,” she said. 

“In this respect, we have come up with a new clause that will be included in the offer letters that will be granted going forward.

“This is going to be a credit risk protection clause. Basically, it will contain the BVN details and TIN of the customers and more or less it will be a commitment on the part of the customers that you agree that should you default on the loan, the total amount of deposits you have across the banking industry would be applied towards repaying the loan.

“This is not uncommon because banks already have rights of set-off within a bank. Which means you take money from a bank, the bank usually has a clause in the letter that allows your bank to repay your loan from the assets you have with the bank. This is just extending it across the industry.”

This new measure makes it easier for commercial banks to be able to follow CBN's recent directive for them to lend up to 60% of the deposits they hold at a given time. This is expected to free up as much as N1.5 trillion for the real sector.