CBN rolls out sanctions on loan diversion, defaults

The Central Bank of Nigeria (CBN) has warned that the era of diversion, non-disbursal of funds, non-rendition of returns and repayment defaults on intervention funds by banks was over. 
The apex bank stated this in a circular: “N300 billion power and airline intervention fund revised guidelines,” made available on its website last week.
According to the CBN, diversion of funds by participating banks would attract a penalty of the bank’s average lending rate at the time of infraction, adding that, such banks would be barred from further participation under the fund.
The apex bank warned that any bank which fails to disburse the fund within 14 days of receipt to the borrower would be charged the maximum lending rate of the bank as penalty for the period the fund was not disbursed, while non-rendition of returns or rendition of false returns attract the penalty stipulated by Banks and Other Financial Institutions Act (BOFIA) section 60.
Participating banks are required to charge commercial interest rate on the amount of default in the event of default in loan repayment, which includes principal and interest.
Under the revised guidelines, the CBN said  refinancing of existing loans for captive power projects under its Power and Airline Intervention Fund (PAIF) for corporate entities, which are not power companies, will only be eligible, if the investments are not older than two years from the date of application.