GTB Accuses CBN Of Not Penalising Banks That Flout Loan Policy

Guaranty Trust Bank has accused the Central Bank of Nigeria of not penalising Deposit Money Banks that lately flouted its policy on Loan to Deposit Ratio.

The lender made the position in a document titled ‘Nigeria Macro-economic and Banking Sector Themes For 2021.’

The LDR is the amount of customer deposits banks operating in the country are required to give as loan to individuals and businesses.

The CBN raised the LDR of banks to 65 per cent from 60 percent of deposits with December 31, 2020 as deadline line to meet the requirement.

GTB said, “The CBN also appears to have eased on the enforcement of its minimum Loan Deposit Ratio of 65 per cent as no bank has been penalised of late for non-compliance.”

CBN is expected to charge defaulting banks a levy of additional Cash Reserve Requirement equal to 50 per cent of the lending shortfall implied by the target LDR.

For instance, in December 2019, the apex bank debited banks up to the tune of N650bn in CRR as the levy for failure to meet the 65 per cent LDR.

In July, CBN withdrew a total of N118bn from the accounts of banks due to LDR default.

Also, in October 2020, Nigerian banks suffered a total of N926.4bn in CRR debits following LDR default.

The policy which targets at encouraging SMEs, Retail, Mortgage and Consumer Lending, has helped to increase bank credit in the economy to N25.02trn in 2020.

In the report, GTB explained that following the introduction of minimum LDR and the restriction of OMO bills investment in 2019, the CBN was able to sustain its management of system liquidity through monetary policies.