CBN retains Loan to Deposit Ratio at 65 percent

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The Central Bank of Nigeria (CBN) has retained the Loan-to-Deposit Ratio (LDR) policy for banks at 65 percent and set the March 31 deadline for the banks to comply.

Ahmad Abdullahi, CBN Director of Banking Supervision, in a statement, said:

“The CBN  has noticed a remarkable increase in the size of gross credit by the Deposit Money Banks (DMBs) to customers. Accordingly, the CBN has decided to retain the minimum 65 percent Loan to Deposit Ratio (LDR) in the interim.

All DMBs are required to maintain this level and are further advised that average daily figures shall be applied to assess compliance going forward.”

He explained that the incentive, which assigns a weight of 150 percent for lending to Small and Medium Enterprises (SMEs), retail, mortgage, and consumer lending shall continue to apply.

According to Abdullahi, failure to achieve the target shall continue to attract a levy of additional Cash Reserve Requirement of 50 percent of the lending shortfall of the target LDR on or before March 31.

The CBN further encouraged banks to maintain strong risk management practices regarding their lending operations.

“The CBN shall continue to monitor compliance, review market developments and make further alterations in the LDR as it deems appropriate,” Abdullahi added.

The apex bank, on July 3, last year, directed banks to maintain an LDR of 60 percent by September 30, last year.

The LDR was further increased to 65 percent, with a compliance deadline of last December.

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