CBN mandates banks to give 60% of deposits as loans – TheNigerialawyer

The Central Bank of Nigeria (CBN) has mandated deposit money
banks in the country to give out 60% of deposits as loans.

In a letter to banks, the apex bank said banks that did not
comply with the directive would have their cash reserve ratios
increased.

Cash reserve ratio is the share of customers deposit that is
kept with the central bank.

According to the letter, which was signed by Ahmad Abdullahi,
director of banking supervision,the purpose of the directive is to
grow the economy by improving investments in the real sector.

“To encourage lending to small businesses and consumers and more
mortgages, these sectors shall be assigned a weight of 150% in
computing the LDR,” the letter read.

“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 of the target LDR.”

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

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