Don’t Give Loans to Customers—CBN Orders Payment Service Banks

Monday, August 31,2020

Payment Service Banks (PSBs) operating in the country have been directed not to grant loans to their customers because they are not authorised to do so.

This directive was contained in the guidelines for licencing and regulation of PSBs released a few days ago by the Central Bank of Nigeria (CBN).

In the guidelines analysed by Business Post, the apex bank said operators in the sector “shall not…grant any form of loans, advances and guarantees (directly or indirectly)” in the country, stressing that “as such, the provisions for the management of credit risk applicable to Deposit Money Banks (DMBs) shall not apply to PSBs.”

Also, the central bank said PSBs are not allowed to accept foreign currency deposits, deal in the foreign exchange market except the sale of foreign currencies realized from inbound cross-border personal remittances to authorized foreign exchange dealers.

In addition, they are prohibited from doing insurance underwriting, undertake any other transaction which is not prescribed by the guidelines or accept any closed scheme electronic value like airtime as a form deposit or payment or establish any subsidiary except as prescribed in the CBN Regulation on the Scope of Banking and Ancillary Matters, No 3, 2010.

However, the PSBs are permitted to accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; and carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria.

In addition, they are authorised to issue debit and pre-paid cards on their names; operate electronic wallet; render financial advisory services; invest in FGN and CBN securities; and carry out such other activities as may be prescribed by the CBN from time to time.

The CBN said to commence operations in Nigeria, A PSB must pay a non-refundable application fee of N500,000; pay another non-refundable licensing fee N2 million and then have a minimum capital of N5 billion alongside other key requirements.

The central bank said operators must adhere to some fair competition clauses, warning that failure to comply “may lead to revocation of the license of the PSB.”

Business Post reports that PSBs have the mandate to promote a sound financial system in Nigeria and make financial services accessible to low-income earners and unbanked segments of the society so as to make the financial services sector more robust.

They are established to enhance financial inclusion by increasing access to deposit products and payment/remittance services to small businesses, low-income households and other financially excluded entities through high-volume low-value transactions in a secured technology-driven environment.

They are expected to operate mostly in the rural areas and unbanked locations, targeting financially excluded persons, with not less than 25 per cent financial service touch points in such rural areas as defined by the CBN from time to time

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