Kenya Deposit Insurance Corporation (KDIC) Launches Pursuit for Loan defaulters of the collapsed 27 banks.

Individuals and businesses that defaulted on loans tapped from 27 collapsed banks like Chase, Imperial and Dubai Bank among other lenders put under liquidation since 1993.

Some 17 of the 27 banks collapsed between 199 and 1999 under the cloud of weak supervision, with Postbank Credit, Trade Bank, Kenya Finance Bank, Trade Finance and Heritage Bank being among the affected.

This was then followed up with the collapse of Prudential, Reliance and Fortune banks in 2000 before Kenya’s banking sector experienced about five years of stability following the tightening of supervision.

The agency is seeking a management company to auction or run the operations of the firms in defaults to recover unpaid loans in failed banks. At the end of June 2018,  KDIC data showed unpaid loans of Sh45.51 billion excluding those from Chase bank and Imperial bank.

Many individuals and businesses stopped servicing their loans once distressed banks were placed under receivership, hurting the ability of depositors to recover their savings. The agency has now evoked Section 50 and 55 of the KDIC Act 2012 that allows it to recover billions of shillings in unpaid loans, overdrafts and other credit facilities linked to the collapsed banks.

KDIC had by end of June 2018 recovered Sh10.12 billion, being an equivalent of about a fifth of the entire outstanding loan book at the time the banks fell into liquidation, showing the extend of defaults. 

Central Bank of Kenya had in 2018 said large borrowers in Chase Bank stopped servicing loans making about Sh20 billion to go into bad debt status. Such defaulters will be among those to be pursued by KDIC.

The agency is seeking a management company to auction or run the operations of the firms in defaults to recover unpaid loans in failed banks. The management company picked by KDIC will be required to be registered with the Institute of Certified Public Accountants of Kenya, meaning that audit and advisory firms are in line for this job.

The management company will be required to step up loan recoveries and also secure possession of the assets of the respective defaulters for the interest of depositors. And where considered appropriate, the company be allowed to sell the defaulting companies’ assets and distribute the realised money to depositors and other creditors.

For the victims – Embrace yourselves for tough times ahead.