Non-Performing Loans: NDIC Warns Banks
BY COBHAM NSA, ABUJA – The Nigeria Deposit Insurance Corporation (NDIC) has threatened severe sanctions against Deposit Money Banks (DMBs) that flout prudential guidelines in granting loans to corporate or private customers.
According to the Corporation, penalties for non-adherence to existing rules will include instant blacklisting and take-over of such defaulting banks by the Asset Management Corporation of Nigeria (AMCON).
Speaking at this year’s NDIC annual workshop for Business Editors and Finance Correspondents in Kano, Director, Banks Examination Department of the Corporation, Mr Adedapo Adeleke said the disturbing figure of Non-Performing Loans (NPLs) must be urgent addressed to checkmate any crisis in the banking sector.
He disclosed that as at 2016, the NPLs’ level stood at 20 per cent, a figure far above the five per cent acceptable threshold in the industry and warned banks to desist from unwholesome practices that threaten the health of Nigeria’s financial sector.
In a presentation on ‘Curtailing the Growth of Non-Performing Loans (NPLs) in banks: The Role of Regulators and Supervisors’, Adeleke noted that the rising figure is becoming frightening as it represents about 80 per cent growth from the 11.12 per cent witnessed in 2015.
He warned that continuation of this disturbing trend would put undue pressure on the affected banks with the regulators having no choice than inviting AMCON to save the situation by buying over the bad debts.
Describing such development as unhealthy and something the regulators would not want to happen in the industry, Adeleke said NPLs of all the affected banks represents 38 per cent ratio of their share capital.
He said given the current tottering nature of the economy as it struggles to maintain steady growth, it is imperative for DMBs to accommodate risks within tolerable limits so that depositors’ funds are not exposed to undue danger.
The Director warned that industry’s regulators and supervisors would no longer accept a situation where NPLs move above the stipulated five per cent threshold because such development portends clear danger signals to Nigeria’s financial system.
