Banking Lending Policies and Recovery Procedure in Nigeria

Banking Lending Policies and Recovery Procedure in Nigeria

Banking play important role in the economy of a nation, in development countries like Nigeria for example, banks act as agent of development. They provide loans and advances inducing a variety of facilities, which could either, be long term or short term. This also explains why credit guidelines contained in government monetary circulation as well as the sector allocation which bank: and other financial institutions must adhere  to during a fiscal year.
The type of bank to deposit base coupled with existing credit guidelines will determine the credit creation potentials of that bank. Commercial banks because of their traditional role and the native of their deposits fund will be more machined to providing short term facilities, to meet seasonal peaks by industrial merchant and development banks to provide long term loans specially tied to financing fixed assests for industrial projects has assumed greater proportion due to development programmes embarked upon by the government in recent times.
Bank have witnessed a phenomenal growth in terms of loans a their portfolios as a result of equity interest, which the federal government has in most banks and the need to finance industrial projects inline with the nations rapid industrlization. Some of the facilities generally provided by banks include.
1.    Short medium and long-term loans.
2.    Building /mortgage loans.
3.    Advance against procedure.
4.    Bills discounting.
5.    Direct credit facility.

A policy s a code, guide of general rule which stipulates the preferred procedure to in handle a recurring situation or in exercising a delegated authority. It serves as a guide to decision making as it defines a range where in decision may be made as such it enables the management to delegate authority while maintaining the control  through the policy statement.
Theoretically, the underlying purpose of all policies is to ensure that decision support organizational objectives and designed desired plans in a co-ordinate and consistent manner. In the policy formation process it is crucial to explain the chosen strategy in terms of policies that are compatible and workable policies should be developed forkey functional decisions in the following areas:
i.    Operations
ii.    Finance/Accounting
iii.    Personnel
iv.    Marketing

A good policy has the following characteristic.
i.    It reflects the plans and objectives of a management.
ii.    It represents a consistent pattern of a thought.
iii.    It is stable but subject to change when change is required. Accommodate conditions which are numeral or unforeseen.
v.    It is well communicated and understood by those to be guided
vi.    It is carefully thought out and dearly written.
vii.    It is controlled and consistently enforced.

The bank adapts the following procedure for taking security for lending.

These include savings bank accounts, fixed deposit accounts, current deposit balances.
A.    SAVING BANK ACCOUNT:- A customer who wishes to offer his savings bank account balance as security for bank lending is required to do the following:
i.    Issue a letter of authority to transfer money from the account to the bank.
ii.    Surrender the pass book to the bank.
iii.    Sign and issue a blank withdrawal from without date and amount to the bank.
i.    Issue a letter of authority to the bank empowering it to transfer money from the current account offset the loan account.
ii.    Sign and issue to the bank a blank cheque without date and amount.

i.    Issue the bank a letter of authority to transfer money from the fixed deposit account to offset the loan account.
ii.    Fixed deposit receipt/certificate is surrendered to the bank.
iii.    If the receipt/certificate expires before the loans maturity, it is renewed and the customer invited to endorse the renewed documents.

The following procedure is adopted
i.    Application for loan offering to secure the loan with life policy.
ii.    The customer surrenders the certificate to the bank.
iii.    The bank certifies the following before the certificate.
a.    The viability of the insurance company.
b.    The beneficiary clause ie whether the customer is the gercire beneficiary.
c.    The amount
d.    Surrender value
e.    Period
f.    Whether the premium is paid up to date.
iv.    The deed of mortgage assignment is completed, and the bank becomes the beneficiary.
v.    The bank gives a notice to the insurance company about the deed of mortgage of assignment.
vi.    The insurance company acknowledges the receipt of the notice of the assignment.

i.    The customer signs a memorandum of deposit. This confers on the bank the right of ownership including the right of disposal if the customer defaults in repayment.
ii.    The customer transfers his title to the shares to the bank by completing the dead of transfer of the stick exchange.
iii.    Conducts a search on the ministry of land to verify the authenticity of deed.
iv.    If the bank is satisfied with the security, the bank takes a legal mortgage on the asset.

A guarantee is a written promise made by one person to be collaterally answerable for the debts, defaults or miscarriage of another. The banks usually require the guarantee to support his promise with cash securities.

This article was extracted from a Project Research Work Topic


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