What is Global Standing Instruction (GSI)?

  • GSIs could be described as a policy authorizing participating banks to debit accounts of loan defaulters in other banks to settle the default.
  • The CBN being the apex regulator for the financial sector in Nigeria hasimplemented a Global Standing Instruction (GSI) Guideline.
  • The GSI policy involves a synergy between different Nigerian regulators. First, the CBN who implements and regulates, with the target creditor bank who seeks to reclaim the loan debt and the NIBSS, serving as the gateway for access to customer data.
  • The GSI guidelines in Nigeria is made pursuant to the powers conferred on the CBN to churn out from time to time guidelines regulating the financial services industry.
  • 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 waivers clauses and so 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 in light of Nigeria’s renewed commitment to data protection and security.
  • Banks and fintechs would do well to seek bespoke legal advisory on this subject to avoid any hassle that non compliance may pose. We would be discussing important details in the CBN Guidelines in our next post.

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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