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CBN Orders Banks to Restrict New Credit for Large Loan Defaulters
CBN directs commercial banks to restrict access to loans, letters of credit, and guarantees for large-ticket borrowers with non-performing facilities.
The Central Bank of Nigeria (CBN) has directed commercial banks to block loan defaulters — particularly large-ticket borrowers — from obtaining new credit, aiming to protect the stability of the nation’s banking sector.
According to a circular seen by Vanguard on Friday, the measure targets individuals or companies with significant outstanding debts that could pose systemic risks.
The directive follows a recent CBN instruction requiring banks to perform stress tests to safeguard the financial system.
“In furtherance of its mandate to promote a sound financial system, protect depositors, and enhance prudential compliance within the banking sector, the Central Bank of Nigeria (CBN) hereby directs all banks to restrict non-performing large ticket obligors, whose activities pose systemic risk to the financial system, from accessing specified banking services,” the circular reads.
It further explains: “Any large-ticket obligor with a non-performing facility recorded in the CRMS and/or any licensed private credit bureau shall not be granted additional credit facilities. This includes loans, letters of credit, performance bonds, advance payment guarantees, and other contingent liabilities.”
The circular also instructs banks to enhance collateral coverage for existing exposures by obtaining additional realisable collateral from affected borrowers.
Large-ticket obligors are defined under Clause 3.2(d) of the Prudential Guidelines for Deposit Money Banks (2010) and include borrowers whose combined exposures across institutions exceed the Single Obligor Limit (SOL) and materially affect a bank’s Capital Adequacy Ratio (CAR).
“This directive reinforces the 2014 circular on prohibiting loan defaulters from further access to credit facilities, ensuring consistency and curbing credit abuse by large-ticket obligors,” the CBN added.
The apex bank confirmed it will closely monitor compliance across all banks and warned that institutions failing to implement the directive will face sanctions under the Banks and Other Financial Institutions Act (BOFIA) 2020.
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