A bill that would provide the needed respite and impetus to banks to recover their bad loans from customers scaled through a second reading at the Senate today.
This was occasioned by the adoption of a motion moved by the sponsor of the bill, Sen. Sani Musa (APC-Niger) during the plenary.
In the debate to consider the general principles of the bill, Hon. Musa was quite optimistic that the proposed law would help banks to recover their past-due obligations without recourse to their borrowers as well as provide penalties for breaches.
According to him, “The legislation had become necessary because credit was seen as the life wire of the banking business and the current situation in Nigeria demanded an injection of a healthy bank credit and recovery system that would effectively fasten the pace of growth in the financial sector.
“It is unfortunate that every lending institution finds itself from time to time with loans of which the risk of loss is greater than anticipated. In every lending environment, there are two types of borrowers – the good and the bad.
“Before the deregulation of our banking system, the ability of our banks to recover loans has been the factor behind the collapse of many commercial banks.
“Today, the situation in Nigeria has become very serious and seemingly intractable and thereby frustrating our efforts as a nation towards private sector-driven economy.”
The plenary session was presided over by Deputy Senate President, Ovie Omo-Agege, who referred the bill to the Senate Committee on Banking, Insurance and Financial Institutions for further legislative works to report back in four weeks.
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What this means
When this bill is fully passed into law, it would empower the banks to pursue any legitimate means to recover the loans from their recalcitrant customers without further recourse.
Bad loans have remained the greatest challenge and nightmare for most banks and they could be quite huge to bring any big bank down.
Bad loans are undesirable plagues in the banking industry which when resolved could go a long way in making the banks run more profitably and create more opportunities for new loans with improved liquidity from recoveries.