CBN mandates increase in loan requirements for banks

CBN mandates increase in loan requirements for banks

The Central Bank of Nigeria (CBN) has mandated an increase in requirements for loaning by banks for the second time in three months.

CBN also revealed that banks that miss the target will face higher cash-reserve requirements.

In a September 30 circular made available to the press; the apex financial body ordered commercial banks to increase their minimum loan-to-deposit ratio to 65% from 60%, which was set in July.

It said those who fall short of the new target by December would have to maintain higher cash reserves.

Also Read: FG will take 100m Nigerians out of poverty in next 10 years—Osinbajo

The mandate also disclosed that the lending target takes effect immediately and will be reviewed quarterly.

The central bank said loans grew by 5.3% to 16.40 trillion as at the end of September; the deadline it earlier set for lenders to boost their minimum loan-to-deposit ratios to 60%.

The latest measure is designed to sustain the momentum, the CBN explained.

This is also part of the efforts aimed at getting banks to play a bigger role in helping revive the economy.

However; analysts worry that growing credit quickly in a weak economy could impact asset quality and weaken banks capital positions.

On Wednesday, October 2, banking stocks fell 4.44%, to its lowest level in three weeks.

The CBN in July shifted policy from tight liquidity to prop up the naira to trying to get banks to support the economy by growing loans.

The bank wants to channel loans to small firms, mortgage and consumer lending.

Mayowa Oladeji

A writer with a keen interest in human stories and topical issues around the world.
Mayowa Oladeji

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