Kenyan Banks get CBK’s nod to start blacklisting loan defaulters at CRBs
The Central Bank of Kenya (CBK) has opted not to extend the six-month freeze for listing loan defaulters with credit reference bureaus (CRBs), paving the way for blacklisting of thousands of borrowers from today.
CBK governor Patrick Njoroge Wednesday gave the banks the green light to blacklist borrowers who have defaulted in the wake of the coronavirus economic fallout.
But the defaulters look set to appear in the books of Kenya’s three CRBs — Metropol, TransUnion and Creditinfo International—from January after the expiry of the 90-day notice.
The CBK announced the suspension of CRB listing for loans that were defaulted after April 1, and the relief was to last for six months to September 30.
The CRB listing relief was part of a stimulus package announced on March 25 to cushion distressed businesses and households from the effects of the coronavirus pandemic, which has hit consumer demand and forced businesses to shed jobs and cut back their operations.
The end of the CRB listing freeze comes at a time when the banking sector is struggling with mounting unpaid loans whose share has risen to the highest level since August 2007.
EXPIRY OF THE SUSPENSION OF THE LISTING OF NEGATIVE CREDIT INFORMATION FOR BORROWERS
On April 14, 2020, the Central Bank of Kenya (CBK) announced the suspension, for a period of six months, of the listing of negative credit information with credit reference bureaus (CRBs) for borrowers whose loans were performing previously and had become non-performing after April 1, 2020. The suspension did not apply to loans that were non-performing before April 1, for which the regular procedures continued to apply.
The six-month suspension ended on September 30, 2020, following which the existing procedures for risk classification of loans with respect to their performance and subsequent listing with CRBs would apply. Specifically, financial institutions will from October 1, 2020, assess the performance of all loans that were performing before April 1. For those loans that went into arrears after that date, the period for determining their performance begins on October 1, 2020. If a loan is in arrears after 60 days from October 1, a financial institution will, in accordance with the existing procedures, give the borrowers notice of the intention to list them with the CRBs. If the loan has not been regularized after the 30-day notice period, the financial institution will then list the non-performing loan with the CRBs. Consequently, borrowers whose loans were performing before April 1 and subsequently went into arrears, will have three months (up to end December 2020) in accordance with existing procedures to regularize their loans before they are listed with CRBs.
As communicated before, borrowers are always required to fully service their loan obligations on a timely basis and engage their lenders in case of any concerns.
CENTRAL BANK OF KENYA
October 1, 2020
