The Nigeria Deposit Insurance Corporation has announced the adoption of the Nigeria Inter-Bank Settlement System for processing payments to insured depositors of the defunct Heritage Bank.
This decision comes in response to identified limitations within the Remita payment platform, which hindered efficient disbursement.
This was disclosed by the Deputy Director of the NDIC at the Enugu Zonal Office, during a workshop for business editors and members of the Finance Correspondents Association of Nigeria held in Lagos, according to Nairametrics.
She highlighted the switch to the NIBSS as a strategic move to enhance the efficiency of payments to insured depositors of the now-defunct Heritage Bank.
Roberts explained that the NDIC had utilized the Remita platform for payments since 2013.
However, she noted that the system faced challenges, especially in managing large-scale payouts, prompting the transition to the more NIBSS for disbursing funds to insured depositors of Heritage Bank.
She said “The Corporation had used Remita to effect payments from 2013 which had a few limitations in terms of uploading of payments, validity of account name and number etc. During the insured payments of Heritage Bank, the Corporation explored the option of using the NIBSS payment platform to facilitate larger number of payments at one time.”
Roberts further highlighted that Remita’s stringent verification process could result in the entire batch of payments being rejected if there was any mismatch between an account name and the corresponding record.
This issue caused significant delays in payouts, necessitating manual intervention and further complicating the disbursement process.
Despite the transition to NIBSS, the NDIC faced additional challenges related to the Bank Verification Number (BVN) system.
Roberts noted that not all depositors were adequately captured in the NIBSS data, which restricted the ability to process automatic payments effectively.
She said “It was observed that the data dumps that were received from NIBSS did not capture all BVN account holders in the bank. Thus, limiting the number of depositors that could be paid automatically.
“The data dump of all account holders in the defunct bank that were tied to a BVN, for providing alternate accounts for payment of the depositor’s insured sum revealed that many depositors had accounts solely with the failed bank.”
She also mentioned that some payments were delayed due to legal restrictions such as Post-No-Debit (PND) status on certain accounts, resulting from court rulings or liens.
The NDIC also reported that it has successfully paid 84.98% of depositors from Heritage Bank whose accounts were linked to their Bank Verification Numbers.
NDIC Managing Director and CEO, Bello Hassan, shared this update at the workshop, emphasizing the corporation’s dedication to protecting depositors and ensuring timely compensation.
Hassan emphasized that this achievement aligns with the International Association of Deposit Insurers (IADI) Core Principle 15, which mandates timely payouts to depositors of failed banks.
He explained that the NDIC, acting as the liquidator, effectively managed the orderly resolution of Heritage Bank and initiated payouts to depositors in accordance with the Banks and Other Financial Institutions Act 2020 and the NDIC Act 2023.
He said “In the discharge of this critical role of depositor reimbursement, the corporation began the payment of the insured deposits of N5 million maximum per depositor within a record time of four days of the bank’s closure.
“This was achieved using Bank Verification Numbers (BVN) as a unique identifier to locate depositors’ alternate accounts in other banks without the need to fill forms or visits the NDIC offices.
“This innovative approach has indeed, enabled the payment of 84.98% of depositors with BVN linked accounts to date.”
Hassan noted that the prompt payments helped mitigate the impact of Heritage Bank’s failure, particularly during a time of economic uncertainty.
While a significant number of depositors have received their insured deposits, he reiterated that the NDIC is committed to reimbursing those with balances exceeding the N5 million insurance limit.
To this end, the NDIC has initiated debt recovery processes and is working on realizing Heritage Bank’s physical assets to facilitate the payment of uninsured deposits.
“These uninsured deposits represent a significant portion of the total deposits in Heritage Bank,” he added, emphasizing that the NDIC is committed to reimbursing these depositors once asset recovery efforts are complete.
