Now Is The Time To Apply For Loans, Know Why And How.

Now is the time to apply for loans from your bank(s).

The Central Bank of Nigeria has newly revised the LDR (Loan to Deposit Ratio). This decision was informed by the noticeable growth in the level of the industry gross credit and the purpose of the directive is to grow the economy by improving investments in the real sector.

The apex bank has been making significant effort to improve lending to the real sector, this it hopes, will spur economic growth.

What You Need To Know.

The Central Bank of Nigeria (CBN) has reviewed the loan to deposit ratio (LDR) for banks upwards to 65% from the present 60%, the major aim of this is to improve lending to the real sector of the economy.

The Central Bank set a deadline for December for all banks to meet the new LDR. This revised LDR was informed by the growth in the level of industry gross credit.

In a circular addressed to banks titled ‘Regulatory measures to improve lending to the real sector of the Nigerian economy’, the apex bank set a December deadline to meet the new LDR.

A few excerpts from the memo addressed to banks titled ‘Regulatory measures to improve lending to the real sector of the Nigerian economy’.

“The Central Bank of Nigeria (CBN) has noted the appreciable growth in the level of the industry gross credit, which increased by N829.40 billion or 5.33% from N15,567.66 billion at end-May 2019 to N16,397.06 billion as of September 26, 2019, following its pronouncements on the above initiative,”

“In order to sustain the momentum and in line with the provisions of our earlier letter. the minimum Loan to Deposit Ratio (LDR) target for all Deposit Money Banks (DMBs) is hereby reviewed upwards from 60% to 65%”.

“Consequently, all DMBs are required to attain a minimum LDR of 65% by December 31, 2019, and this ratio shall be subject to quarterly review. To encourage SMEs, Retail, Mortgage and Consumer Lending, these sectors shall be assigned a weight of 150% in computing the LDR for this purpose.

“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 implied by the target LDR.”

What Happens To Deposit Money Banks That Fail To Comply?

In July. the Central Bank of Nigeria (CBN) had mandated deposit money banks in the country to give out 60% of deposits as loans. In its letter to banks, the apex bank said banks that do not comply with the directive would have their cash reserve ratios increased.

The cash reserve ratio is the share of customers deposit that is kept with the central bank for regulatory reasons.

What Banks Are Currently Probed?

The Central Bank of Nigeria (CBN) says 12 banks have been debited N499 billion for failing to give out 60% of their deposits as loans. The cash reserve of the banks held by the CBN has been debited.

The affected banks 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
  • Guaranty Trust Bank – N25,147,933, 628
  • 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
  • Zenith Bank – N135,629,337,625

Read more on affected banks here.

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