Bill on loan recovery passes second reading in Senate

Loan defaulters may no longer have any escape route as a bill to empower banks to deduct money from their accounts has passed second reading in the Senate. The bill is seeking to allow creditor banks to track the account (s) of loan defaulters through Bank Verification Number (BVN) and recover past and due obligation without recourse to the borrower.

Also, the proposed legislation is seeking to watch frequent loan defaulters with a view to tracking and blacklisting them.

It also provides penalties for breaches and violations of obligations towards enhancing loan recovery across the banking sector in Nigeria.

The bill, sponsored by Muhammed Sani Musa (Niger State) passed second reading after a brief deliberation.

Leading the debate, Musa said the essence of the bill was to establish a unified scheme for a sound financial system that would facilitate and improve credit repayment culture as well as streamline loan recovery.

According to him, the initiative is necessary because credit is seen as the bloodstream of the banking business and the situation of Nigeria today demands injection of a healthy bank credit and recovery system that will effectively fasten the pace of the growth.

“However, every lending institution finds itself, from time to time, with loans of which the risk of loss is greater than anticipated. In every lending environment, there are two types of borrowers–the good and the bad.

“Lest we forget, before the deregulation of our banking system, the ability of our banks to recover loans had been the bedrock behind the collapse of many commercial banks. Most economies have experienced high rate of unemployment as a result of such negligence of the credit system,” he explained.

To Musa, the situation in Nigeria today has become very serious and seemingly intractable, frustrating our efforts as a nation towards private-driven economy as well as economic diversification and growth.

The lawmaker also noted that there is a court judgement that gives banks the right to take back their money from defaulters from any of the banks where they have deposits.

The bill was referred to the Senate Committee on Banking, Finance and Other Financial Institutions for further legislative work. The committee is to report back in four weeks.