Written by Sarah NEGEDU

CBN cautions MFBs against sales of naira notes

All micro finance banks, MFBs, operating in the country have been warned against selling and hoarding of lower denomination currencies.

The warning is part of the latest intervention of the Central Bank of Nigeria of monitoring the industry and ensures sustained circulation of lower denomination in the economy.

The CBN gave the warning, when it released its guidelines for the disbursement of lower denominations of the naira through microfinance banks across the country.

A circular issued by the Director, Currency Operations Department of the bank, Mrs Patricia Eleje, said all microfinance banks must have a composite risk rating of above average in the most recent Risk Based Supervision target examination before they would be considered for the scheme.

This, according to the CBN, was to ensure that only MFBs with good corporate governance practices took part.

“The participating MFBs must be willing to accept a mixture of new and other banknotes, and that the MFBs shall give 20 per cent of any withdrawal in lower denomination notes subject to a maximum of N50,000,” it stated.

Where beneficiaries withdrew more than once in a day, the circular said that disbursement would only apply to one transaction per day.

The MFBs were allowed to exchange notes subjected to a maximum of N50,000 for customers with bank accounts and N10, 000 for customers without bank accounts.

In that situation, the banks must not exchange for same beneficiaries more than once a week, it stated.

It also instructed the banks to put in place effective control measures that would ensure that banknotes disbursed to customers with or without accounts were not sold.

Meanwhile, a consumer protection guidelines on ‘Responsible business conduct’ released by the apex bank warned the banks against imposing insurers on borrowers.

It ask banks to stop compelling borrowers to patronise specific underwriting companies to buy insurance covers that are mandatory to access some loans.

Part of the guidelines read, “Financial institutions shall not compel a consumer to buy a product or service, such as insurance or valuation service from a particular provider as a pre -condition for the grant of a credit facility.”

It said some banks usually ask borrowers to take insurance covers to protect the loans they planned to obtain, against unforeseen circumstances that may hinder their ability to repay the loans.

Such circumstance could be permanent disability, death or other forms of losses.

To ensure that consumers’ capability to repay credits were efficiently assessed, the CBN stated that financial institutions must comply with its specific requirements.

It stated that the requirements were described in credit risk assessment procedures, the type and circumstances for which a credit would be suitable, as well as clear lines of authority for approving the product.

The requirements also assessed the capability of customers to repay a credit in a sustainable manner, taking into consideration the customers’ financial circumstances.

As part of the banks’ regular monitoring of loan performance and upon early detection of signs of repayment difficulties, the CBN said they must inform consumers of the importance of timely engagement with the financial institutions to discuss alternative repayment measures.

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