Banks should be blamed for NPLs, says former ACB MD

Banks in the country should be blamed for the growing rate of non-performing loans, said Mr. Emma Nwosu, former Managing Director of defunct ACB International.

He reasoned that commercial lenders have failed in their obligations of reviewing the transactions underlining these credits and ensuring that prerequisites for granting them were met.

“Three things are very important when it comes to granting credits: the credibility of the issuing bank, the bank officer and that of the borrower in understanding from the same perspective the underlining transaction.

“So, when a credit goes bad, it is really the fault of these three parties, not just the borrower even though it is the obligation of the borrower to pay,” he noted.

Mr. Nwosu explained that if banks had been professional and did not compromise the requirement for granting these loans and at the same time regularly monitoring and advising the customers on what they need to do per time, most credits won’t have gone bad.

It would be recalled that last week banks in the Nigeria published names of the delinquent customers in national dailies in compliance to the Central Bank of Nigeria’s (CBN) directive.

The summation of the non-performing loans that banks have so far published runs into hundreds of billions of naira and the CBN had disclosed in April that NPL in the financial sector stood at 3.7 per cent while the allowable limit is 5 per cent.

The former bank boss stated that most banks failed to perfect the required collateral for credits that was why they don’t have something to back on when credits go bad.

“If you look at these transactions, there is an expectation of business and cash flow that they will bring. So, when securities were not perfected money still left. And due to economic changes in the macro and micro economy, their expectations did not materialized, the borrower and the bank are stocked,” he further explained.

According to him, the publishing of the names of chronic debtors by banks amounts to shifting the entire blame on the borrower.

He said the banks should also beam a searchlight on themselves rather cast all the blame on the customers with NPLs.

“If they can improve their lending practice going further, we would not have this kind of ugly situation.”

Meanwhile, some banks have  disclosed that they would continue to publish the names of the delinquent debtors periodically.

However, some customers whose names were published as chronic debtors have instituted legal actions against the banks.

Mrs. Dabike Dabiri-Erewa, a former member of the House of Representative last week sued Diamond Bank and Punch Newspaper for publishing that she was owing the bank N100 million.

The former lawmaker claimed that she does not any link with the company through which the alleged loan was granted.

The bank had on Friday published a rejoined, claiming that Mrs. Dabiri-Erewa’s name was published among chronic debtors in error.

Dec Oil Limited also had also refuted the claim by Union Bank that it was owing the bank over N15.7 billion, a credit which it said as granted in July 1999 to help the oil serving company finance a contract.