CBN to Review Banks’ Loan-to-Deposit Ratios Monthly

By Modupe Gbadeyanka

Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, has disclosed that from October 2019, the loan-to-deposit ratios of commercial banks in the country would be subjected to monthly review.

Earlier this month, the apex bank chief gave lenders till September 30, 2019 to increase their loan-to-deposit to a minimum of 60 percent.

Yesterday, Mr Emefiele, while addressing newsmen in Abuja after a two-day Monetary Policy Committee (MPC) meeting, said after the expiration of the deadline, the CBN will consider reviewing the LDR if the 60 percent is not met.

He said at the moment, the loan-to-deposit ratio of the banking industry in the country was at 57 percent, lower than some countries around the world.

The CBN Governor said the LDR of the banking sector in Brazil stands at 70 percent) the United States at 75 percent, China at 71.2 percent, India at 75 percent, South Africa at 91 percent, Kenya at 76 percent and Japan at 70 percent.

“We need everybody’s support to achieve growth in Nigeria. When the monetary policy raised the concern, we had a flat loan-deposit ratio.

“We would apply certain sanctions that involve asking the 50 percent of the ‘un-lent’ portions of their loans into the CRR.

“The deadline is 30th of September. After September 30, we are going to begin a month-by-month monitoring and then prescription of deposit loan ratio for the banks,” Mr Emefiele said at the media briefing on Tuesday.

The central bank Governor, while reading the communiqué yesterday, said the committee emphasised on the “need to boost output growth through sustained increase in consumer credit and mortgage loans and granting loans to our Small and Medium Enterprises companies.”

According to him, members of the MPC also “observed that the management of the bank had started the prescription of using benchmark loan-to-deposit ratios to redirect the banks focus to lending.”

He said the committee agreed that to mitigate credit risk, the CBN was advised to “de-risk the financial markets, via the development of a reliable credit scoring system, similar to what applies in the advanced countries as this will encourage Deposit Money Banks (DMBs) to safely grow their credit portfolios.”