CBN mandates banks to give 60% of deposits as loans or risk increase in CRR

Central Bank of Nigeria (CBN), has mandated Deposit Money Banks (DMBs) in the country to give 60 percent of deposits as loans to businesses

The CBN which gave the order in a letter signed by Ahmad Abdullahi, its director of banking supervision, said banks that did not comply with the directive would have their cash reserve ratios (CRR)  increased.

The letter said 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.”