November 01, (THEWILL) – Deposit Money Banks have commenced recovering debts owed by chronic debtors from their accounts in other banks to curb the growth of non-performing loans (NPLs) in the industry.
According to a report, the figures obtained from the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS) show that banks’ NPLs declined slightly from N1.2tn at the end of the second quarter of 2020 to N1.1tn at the end of July 2021.
The CBN said measures, such as the Global Standing Instruction (GSI), introduced to reduce banking sector risks are helping to reduce the NPLs in the sector.
The GSI, which started on August 1, 2020, allows banks to recover outstanding principal and interest upon default from any account maintained by the debtor across all financial institutions in Nigeria.
Also the CBN has stated in the latest Monetary Policy Committee (MPC) report that there will be no increase in lending rates in the sector.
“On loosening, the committee felt that this would lower retail interest rates and improve the ability of obligors to repay their obligations, with a complementary reduction in NPLs,” it said.
CBN added that for the banking industry, “recent data also show that stability has been maintained and a smooth functioning of financial intermediation ensured.
“CBN staff report indicates that the banking sector’s non-performing loan ratio has fallen from 6.3 per cent in February to 6.0 per cent in March and further to 5.9 per cent in April.”
The MPC noted that the capital adequacy ratio and the liquidity ratio both remained above the prudential limits at 15.2 and 41.7 per cent, respectively at the end of July 2021.
The committee also welcomed the improvement in the NPL ratio at 5.4 per cent in July 2021, compared to 5.7 per cent in June.
It urged the banks to sustain current efforts to bring the NPLs below the 5.0 per cent prudential benchmark.
