A review of Nigerian banks loan-to-deposit ratio (LDR) from 65 percent to 50 percent has been announced by the Central Bank of Nigeria to align with the current monetary tightening.
The apex bank disclosed the reduction in a circular released and signed Wednesday by Adetona Adedeji, its acting director of the banking supervision department titled ‘Re: Regulatory Measures to Improve Lending to the Sector of the Nigerian Economy’.
“Following a shift in the Bank’s policy stance towards a more contractionary approach, it is imperative to review the loan-to-deposit ratio (LDR) policy to align with the current monetary tightening by the CBN,” the circular partly reads.
“Accordingly, the CBN has decided to reduce the LDR by 15 percentage points to 50%, in a similar proportion to the increase in the CRR rate for banks.
“All DMBs are required to maintain this level and are further advised that average daily figures shall continue to be applied to assess compliance.
“While DMBs are encouraged to maintain strong risk management practices regarding their lending operations, the CBN shall continue to monitor compliance, review market developments, and make alterations in the LDR as it deems appropriate.”
CBNhad earlier said it would stop daily cash reserve ratio (CRR) debits of deposits in commercial banks, and the last monetary policy committee (MPC) meeting on March 26 saw CBN retain the CRR at 45 percent and the liquidity rate at 30 percent.
However, the monetary policy rate (MPR) was raised by 200 basis points to 24.75 percent.
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