Global Standing Instruction (GSI) could be described as a policy authorizing participating banks to debit accounts of loan defaulters in other banks to settle the default.
The CBN, as the apex regulator for the financial sector in Nigeria, has implemented a Global Standing Instruction (GSI) Guideline.
The GSI policy involves a synergy between different Nigerian regulators. First, the CBN implements and regulates, with the target creditor bank which seeks to reclaim the loan debt, and the NIBSS, serves as the gateway for access to customer data.
The GSI guidelines in Nigeria are made pursuant to the powers conferred on the CBN to churn out guidelines regulating the financial services industry from time to time.
Importantly, this is one strategy the CBN has developed to aid the recovery of loans by participating entities. This is an exception to the sanctity and privity of contractual relations that make contracts generally binding between the parties involved. However, to circumvent the bottlenecks that the privity of contract may pose, customers who may become potential borrowers sign off confidentiality waiver clauses. Therefore, participating banks may share customer data to that effect.
The CBN has a comprehensive guideline on GSI that all participants must comply with. This is particularly important given Nigeria’s renewed commitment to data protection and security.
Banks and fintechs would do well to seek bespoke legal advice on this subject to avoid any hassle that non-compliance may pose. In our next post, we will discuss important details in the CBN Guidelines.
References
1. https://legal.businessday.ng/2020/09/04/legality-and-practicability-of-
the-guidelines-on-gsi-the-central-bank-of-nigeria-got-it-
right/#:~:text=the%20creditor%20bank%20has%20a,in%20the%20loan%20a
pplication%20process accessed on April 20 2023
2. https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.th
ecable.ng/gsi-loan-recovery-feature-will-now-be-continuous-until-debts-are-fully-paid-says-cbn/amp&ved=2ahUKEwjdt5uBhLj-AhXK_rsIHYhUB9QQFnoECC8QAQ&usg=AOvVaw3-OHAzJ9AkCRXP9rqrhnqa accessed on April 20 2023
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