Banks will begin to forward names of loan defaulters to credit reference bureaus (CRBs) for blacklisting according to a statement from the Central Bank of Kenya.
The financial regulator has opened the way for banks to follow the existing procedures for risk classification of loans with respect to their performance and subsequent listing with CRBs.
The announcement follows the reopening of the economy and a slowdown in the daily virus infection rates.
In the past six months, CBK reports that banks have rescheduled personal and business loans to the tune of KSh 1.1 trillion.
“The point here is to emphasize we are going back to the normal operations, the way things used to happen and that’s where we will be from October 1. They will give you 30 days so you have three months to regularise whatever you had not paid,” Dr Patrick Njoroge, Central Bank of Kenya(CBK) Governor.
While those listed with Credit Reference Bureaus (CRBs) reached 3.2 Million, this number is expected to rise in the coming months.
On April 14, 2020, the CBK announced the suspension, for six months, the listing of adverse 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 still applied.
Now, 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,” said CBK in a press statement.
The financial regulator said that 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 until the end of December 2020, to regularize their loans before they are listed with CRBs.
CBK has told financially distressed borrowers to engage with lenders.