To get firm grip on serial loan defaulters, the Central Bank of Nigeria (CBN) has given all loan and credit disbursing financial institutions till the 20th of June, 2022 to transmit all their customers’ details to the Industry Customer Accounts Database (ICAD).
In a circular, the CBN ordered all Other Financial Institutions (OFIs) “to ensure that all their customer accounts comply with the 10-digit Nigeria Uniform Bank Account Number (NUBAN) format, are tagged with Bank Verification Number (BVN) or Taxpayer Identification Number (TIN) for individual and non-individual accounts respectively of the account holder”.
These same information the CBN said, is to be “profiled on Nigeria Inter-Bank Settlement System Plc (NIBSS)’ Industry Customer Accounts Database (ICAD) not later than June 20, 2022″.
The CBN noted that these remain the prerequisites for the enrollment onto the Credit Risk Management System (CRMS).
This instruction, the CBN said has activated the provisions of the Regulatory Guidelines for the Redesigned Credit Risk Management System for Commercial, Merchant, and Non-Interest Banks in Nigeria issued on February 27, 2017 and the Additional Regulatory Guidelines for the operation of the Redesigned CRMS issued on September 10, 2018 to all OFls.
As part of efforts to promote a safe and sound financial system in Nigeria, the CBN introduced the CRMS to improve credit risk management in commercial, merchant and non-interest banks as well as prevent predatory borrowers from undermining the banking system.
With the successful implementation of the CRMS in deposit money banks, the CBN felt “it has become expedient to commence the enrollment of Other Financial Institutions (OFIs) on the CRMS Platform”.
Accordingly, all Development Finance Institutions (DFls), Microfinance Banks (MFBs), Primary Mortgage Banks (PMBs) and Finance Companies (FCs) were in 2017 required to report ALL credit facilities (principal and interest) to the CRMS and to update same on monthly basis.
OFls were advised to “note that Bank Verification Numbers (BVN) and Tax ldentification Numbers (TIN) are the only basis for regulatory renditions”.
To ensure full compliance, OFls were reminded “to conclude the tagging of all live credit files for all individual and non-individual borrowers with BVN and TIN respectively by May 14, 2021”.
Furthermore, the concerned OFls were urged to acquaint themselves with the Regulatory Guidelines for the Operations of the Redesigned CRMS for Commercial, Merchant and Non-Interest Banks in Nigeria (February 2017) and the additional regulatory guidelines of September 2017.
The regulatory guideline for the redesigned CRMS is underpinned by the following: required rendition of customers details on the CRMS before disbursement of any loan or credit facility.
According to the CBN “this process of submission does not interfere with any Participating Bank’s decision to extend a loan or credit to its customer. Consequently, rendition is only required after approval to disburse is given”.
Another reason for redesigning the CRMS was because of “concerns over recurring poor lending practices as captured in bank examination reports”.
Under established Know Your Customer (KYC) regulation, banks and other financial institutions are expected to demonstrate a sound knowledge of their customers’ background, more especially when it involves extension of loan/credit.
In addition, Section257 (a) of CAMA (Disqualification for directorship) specifically disqualifies “a person under the age of 18years” from being a director. In this regard, only individuals and legally registered or established entities (non-individuals) that can enter into valid and legally binding contracts are expected to be beneficiaries of loans/credits.
The objectives of the guidelines is the establishment of the Credit Risk Management System (CRMS), aimed at identifying and minimizing the activities of serial defaulting borrowers in the financial services industry and to assist in strengthening the credit appraisal processes of Participating Institutions.
There is also the need to: ensure that the beneficiary of any loan or credit extended by any regulated financial institutions in Nigeria is uniquely identified; provide broad guidelines, minimum standards and requirements for the operation of the CRMS database in Nigeria.
There is also the need to: identify the stakeholders of the CBN CRMS and specify their roles and responsibilities on the operations of the CRMS; provide an enabling environment (business and technological) for the operation of the CRMS and specify the scope of reporting for the purpose of CRMS return rendition; and to specify minimum technical and business requirements for various stakeholders in the CRMS operations in Nigeria.