Blacklisting of loan defaulters resumes

CBK Governor and chairman of Monetary Policy Committee (MPC) Patrick Njoroge. [File, Standard]

The Central Bank of Kenya (CBK) has ended a six-month freeze on the listing of loan defaulters and directed financial institutions to start sharing the information with Credit Reference Bureaus (CRBs).

After the virus struck, most borrowers were given an extension of between six months and one year in a deal struck with the regulator to help them weather the Covid-19 storm - in terms of offering them some breathing space in loan repayment.

CBK issued a six-month suspension of the listing of negative credit information with CRBs for borrowers whose loans were performing previously and became non-performing after April 1, 2020.

The suspension however did not apply to loans that were non-performing before April 1, for which regular procedures continued to apply.

The suspension ended on September 30, 2020, effecting the application of standing procedures for risk classification of loans with respect to their performance and subsequent listing with CRBs.

From October 1, financial institutions will 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 borrower notice of the intention to list them with the CRBs. If the loan has not been regularised after the 30-day notice period, the financial institution will then list the non-performing loan with the CRBs,” said CBK in a statement to the press.

Borrowers whose loans were performing before April 1 and went into arrears, will have until December 31, 2020, in accordance with existing procedures to regularise their loans before they are listed with the CRBs.

"Borrowers are always required to fully service their loan obligations on a timely basis and engage their lender in case of any concerns,” added CBK.