7/3/2017/Thisday

By Damilola Oyedele in Abuja

The Nigeria Deposit Insurance Corporation (NDIC) has said insider loans, which constitute a higher percentage of non- performing loans in the industry, have negatively affected the sector.

This is as the agency called for the enactment of legislation to prohibit insider loans, such as bank owners or directors taking loans from their own banks, except for housing and car loans, which should first be approved by the Central Bank of Nigeria (CBN).

The Board Secretary /Director (Legal) of the NDIC, Mr. Belema Taribo said these in his submission at the public hearing on four critical economic bills, by the House of Representatives Committee on Banking and Currency, yesterday.

He however did not disclose the worth of the non-performing insider loans. The committee is chaired by Hon. Jones Chukwudi Onyereri.

Taribo was making a submission on the bill “a bill for an Act to Amend the Banks and Other Financial Institutions Act, to among other things, establish a Deposit Fund at the CBN, for Standardisation and Management of Dormant Accounts, to conform with international best practice and eliminate the possibility of banks converting dormant accounts balances into income and to strengthen risk management and internal control processes.

Taribo also advised that accounts operated by government ministries, departments and agencies should not be exempted from the legislation regarding dormancy of accounts.
This, he said was necessary, due to the unscrupulous practice by heads of some of the MDAs, who secretly lodge government funds in commercial banks.

Some of such accounts have become dormant for various reasons like the sudden sack of the head of the agency, or demise.

“Even though we have the TSA (Treasury Single Account) now, these accounts (belonging to MDAs) are still all over the place,” he said.

An official of the CBN, Mr. Kofo Abdulsalam, who lauded the proposal for the legislation, however pointed out several limitations of the bill, and expressed readiness of officials of the apex bank to work with the committee to fine-tune relevant details.

Abdulsalam said the committee apex bank is concerned about the protection of depositors, and urged that banks be required to disclose all details regarding dormancy of accounts to potential customers at the point of signing on.

“There should be clarifications on how such funds would be accessed and specific provisions on where such dormant funds should be invested in,” he said.

He also noted that the scope of accounts that can be exempted from being declared dormant should be well specified as banks can explore loopholes to disregard the legislation.