Banks Directed To Give 60% Of Deposits As Loans To Customers – CBN

In order to increase the Nigerian economy through investment in the real sector, the Central Bank of Nigeria (CBN) has mandated deposit money banks in the country to give out 60% of deposits as loans by September 30, 2019.

This directive was contained in a letter signed by Ahmad Abdullahi, director of banking supervision to all DMB’s in the country on Wednesday.

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Failure to comply with the banking regulators directive according to the letter, will result in a levy of additional cash reserve ratio (CRR).

CRR is the minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank.

This explains that the CBN will be taking more of the bank’s customers deposit as a means of punishing the DMB’s that violate the directive.

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“To encourage lending to small businesses and consumers and more mortgages, these sectors shall be assigned a weight of 150% in computing the LDR,” the letter read.

“Failure to meet the above minimum LDR by the specified date shall result in a levy of additional Cash Reserve Requirement equal to 50% of the lending shortfall of the target LDR.”

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