The Central Bank of Nigeria, CBN, has released a new clause that mandates borrowers to agree that their loan balances would be offset from their bank balances across the industry.
The Deputy Governor, Financial System stability (2020), Aishah Ahmad, disclosed this at the end of the 345th bankers committee meeting in Lagos State.
The New clause to be included in offer letters henceforth would require the provision of the Bank Verification Number (BVN) and signing the clause that allows for a bank wide set off of loan balances.
The Deputy Governor said the credit protection clause in addition to the recent directive to banks to achieve 60 percent loan to deposit ratio by September 30th was expected to spur lending by adding additional N1 trillion to the credit balance sheet of the banks.
Ahmad said: “In taking loans, you agree to repay the loan, should you default, the total amount of deposit you have across the industry will be applied towards repaying the loans.
“This enable banks to lend with more confidence”, she said, adding that banks were already resolving issues of SME collateral.
She noted that part of the reasons that there was no enough credit was because of risk aversion.
“We came up with this because we do not want LDR directive to raise Non Performing Loan (NPLs) in the industry,” Ahmad added.
