BANKS are carrying a heavy load of Non-Performing Loans (NPLs), which rose 78 per cent year-on-year to N649.63 billion last May.
The “worrisome” trend should be tackled, Central Bank of Nigeria (CBN) Governor Godwin Emefiele said yesterday.
He was speaking at the third National Credit Reporting Conference organised by the Credit Bureau Association of Nigeria (CBAN) in Lagos.
To him, the state of bad loans in the sector implies that efforts need to be doubled in credit information sharing to stem this “worrisome” trend.
He said the apex bank had made it mandatory for all financial institutions to have data exchange agreements with at least two credit bureaux. “All banks are required to obtain credit report from at least two credit bureaux before granting any facility to their customers whilst quarterly portfolio checks must also be carried out to enable them determine borrowers’ current exposure to the financial system,” Emefiele said.
Emefiele, who was represented by the Branch Controller at CBN Lagos Office, James Iyari, said the apex bank had also approved the payment of one-off sign-on fees with credit bureaux for all the microfinance banks and other micro financial institutions licensed by the CBN.
This, he said, would support effective use of the infrastructure provided by the private credit bureaux with a view to deepening the subsector.
Emefiele warned that bank customers who continuously issue dud cheques to their clients will have their cheque booklets withdrawn by their banks, which have the right to withdraw them from customers who record three defaults.
According to the CBN boss, since it is difficult to prosecute serial dud cheque issuers, the right thing for banks to do is withdraw the booklets form such offenders.
He said after the defaulting customer records the third dud cheque issuance, it would have become clearer that such a person is unfit to have cheque books and will have the booklets withdrawn – in line with the provisions of the Dishonoured (Dud) Cheques Act of 1977.
The names of the offenders are also to be forwarded to the three private credit bureaux and the Credit Risk Management System (CRMS). Except with the prior written approval of the CBN, such names will not be removed from the CRMS.
Emefiele said: “There is a dud cheque Act, and the CBN receives returns on dud cheques, which is passed to credit bureaux. We want the credit bureaux at their own end to capture those bank customers that consistently issue dud cheques. If you issue dud cheques, you are a bad customer.”
He said the CBN will continue to supervise the credit bureau industry to ensure that the financial sector is robust and safer.
Speaking on the theme: “Credit bureau and access to finance: Nigeria’s success story”, Emefiele said this year marks the 25th year anniversary of credit reporting in the country. It has no doubt contributed to the resilient financial system that is propelling the growth of the nation, he added.
“The CBN is saddled with the responsibility of ensuring the stability of financial system and has been formulating policies aimed at achieving a sound and stable financial system. In realisation of this objective, it has vigorously pursued the development of the key financial infrastructure such as the payments and credit reporting systems,” he said.
The CBN chief disclosed that the National Assembly was considering a bill on National Credit Reporting that will bring all stakeholders under one regulatory platform.
To make the proposed Bill meet international standards, the CBN, in collaboration with the International Finance Corporation and the CBAN, reviewed the draft Bill and articulated some amendments to the document. “The recommended amendments would be presented to the National Assembly during the public hearing on the Bill for adoption into the Credit Reporting Bill,” he said.
The three licensed private credit bureaux have been performing their functions and this has complemented the CBN’s CRMS in ensuring the effective management of credit risk within the banking system.
CBAN Chairman Mrs. Jameelah Sharrieff-Ayedun said the group will continuously project the use of credit information as a viable tool for access to finance. She said credit bureau remains critical in nation-building as it ensures that only people with integrity get access to credit. Credit bureaux are key in stimulating economic growth through the provision of critical risk management and fraud prevention services to the financial services sector, Mrs Sharrieff-Ayedun said.
The sector, she added, is making it possible for more people within the population to have access to credit.