Global Standing Instruction: Everything you need to know

Global Standing Instruction (GSI) in Nigeria

On July 13, 2020 the CBN released a Circular on the operational guidelines on the Global Standing Instruction . In this article we will explain some key features of the Global Standing Instruction guidelines and how they affect you.

 

What is Global Standing Instruction?

The GSI is a service of last resort which can be employed by a Bank to recover outstanding debts from its customers who borrow money from it and default. A Bank is able to activate a Global Standing Instruction without recourse to the customer, by  a direct set-off against deposits/investments held which the customer has in accounts with other banks.

In order words if you borrow from Bank A and default, and Bank A does all it can to recover the funds from you, if all fails, the Global Standing Instruction allows Bank A to check if you have any funds in any other banks e.g. Bank B, and if you do, it allows Bank A to debit your account in Bank B automatically.

 

What can be recovered?

The Bank can only recover the principal and interest amounts by using the mandate. It cannot recover penalties.

The funds can be recovered from savings account, current accounts, domiciliary accounts, investment/deposit accounts, and e-wallets. This includes all joint accounts as well.

 

How does the Global Standing Instruction work?

The mandate is included in the loan application process and it must be fully explained to the customer before he/she signs the mandate. This is only for individual customers, it does not cover corporate customers. The CBN is yet to release any guidelines for corporate customers. It takes effect from August 1, 2020.  However, the CBN Guidelines says it covers all eligible loans granted to customers from August 28, 2019.

 

What happens where it is incorrectly used?

Where a Bank activates a Global Standing Instruction mandate in error it must pay a fine of N500,000. Where there is a disputed Global Standing Instruction Transaction, it is meant to be dealt with by arbitration initially, and where the Bank is at fault, the Bank shall pay a fine of N10m or 10% of the amount in dispute (whichever is higher).

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We hope you have found this information helpfulPlease note that this information is provided for general informational purposes only and is not intended to be legal advice. No lawyer-client relationship is formed nor should any such relationship be implied. It is not intended to substitute for the advice of a qualified lawyer. If you require legal advice, please consult with a qualified lawyer.

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