Central bank of Nigeria (CBN) Governor Godwin Emefiele, has said that banks that fail to meet its directive on the 60 per cent Loan Deposit Ratio (LDR) would be penalised at the expiration of the deadline.
CBN on July 3, 2019, directed the banks to maintain a minimum of 60 per cent by September 30, 2019.
The LDR, which was being reviewed quarterly to improve lending to the real sector, was 58.5 per cent as at May.
It has now been raised to 65 per cent for the last quarter of the year.
The apex banks disclosed that it has fined 12 major banks N499.1billion and lose the money at source from their Cash Reserve Requirement (CRR) with the CBN.
According to an approved debit instruction, the affected banks and the amount they will pay are: Citibank (N100,743,055, 321); First Bank of Nigeria (N74,668,880,480); FBNQuest Merchant Bank (N2, 697,456,144); First City Monument Bank (FCMB), (N14, 371,064, 742) and Guaranty Trust Bank (N25, 147, 933, 628).
Others are Jaiz Bank (N7, 525, 165,552); Keystone Bank (N4, 162, 938, 879); Rand Merchant Bank (N2, 823,177,399); Standard Chartered Bank (N30,027,137,984); SunTrust Bank (N1,703,205,427); United Bank for Africa (N99,676,181,916) and Zenith Bank (N135,629,337,625).
The banks will lose the money at source from their Cash Reserve Requirement (CRR) with the CBN.
The CRR is a portion of the banks’ deposits kept with the CBN for regulatory reasons.
A CBN circular: “Regulatory Measures to Improve Lending to the Real Sector of the Nigerian Economy,” says in order to ramp up economic growth through investment in real sector, the CBN approved that all banks should maintain a minimum LDR of 60 per cent by September 30.
Based on the guidelines, failure to meet the minimum loan to deposit ratio of 60 per cent by October 1 would attract a levy of fine which is additional CRR equal to 50 per cent of the lending shortfall of the target.
“Failure to meet the above minimum LDR by the specified date shall result in levy or additional Cash Reserve Requirement equal to 50 per cent of the lending shortfall of the target,” CBN Director, Banking Supervision, Ahmad Abdullahi, said in the July 3 circular.”