As part of the regulatory strides to reduce the vast non-performing loans (NPLs) in the Nigerian banking system, the Central Bank of Nigeria (CBN) on 13 July 2020, published the Operational Guidelines on Global Standing Instruction for Individuals (the Guideline) which was approved by the Banker’s Committee on 18 February 2020 with the aim of:
(i) facilitating an improved credit repayment culture;
(ii) reducing the NPLs in the Nigerian banking system;
and (iii) watch-listing consistent loan defaulters.
In a nutshell, the global standing instruction (GSI) creates a contractual mandate from an individual borrower, in favour of a creditor bank to apply monies standing to the credit of the borrower in a third-party financial institution or electronic wallet to offset the debt obligations of the borrower. The Guideline therefore provides the mechanics for implementation of the GSI and details the applicable penalty associated with the erroneous implementation by creditor banks.