LDR: CBN Refunds Part of N500b Fined DMBs

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  • LDR: CBN Refunds Part of N500b Fined DMBs

The Central Bank of Nigeria (CBN) has started refunding Deposit Money Banks (DMBs) part of the N500 billion or $1.4 billion deducted from their cash reserves for failing to meet 60 percent loan-to-deposit ratio target.

Ahmad Abdullahi, the head of banking supervision, CBN, disclosed this to Bloomberg correspondents on Thursday.

“Most of them that were involved got a refund,” after they met the requirement at the end of September, he stated.

Zenith Bank Plc and Citigroup Inc. were among lenders fined in September for not providing enough credit to the private sector.

The apex bank debit DMBs combined N500 billion on September 26 for falling short of 60 percent loan-to-deposit ratio directive introduced in July.

The directive introduced to stimulate growth in the private sector and boost new job creation with the help of lenders has now been increased to 65 percent after data show more money going into the real economy.

“In order to sustain the momentum and in line with the provisions of our earlier letters, the minimum Loan to Deposit Ratio target for all Deposit Money Banks is hereby reviewed upwards from 60 per cent to 65 per cent,” the apex bank stated in a statement signed and released by Mr Bello Hassan, the Director of Banking and Supervision, earlier this month.

“It is not a penalty where a bank is to forfeit money,” Abdullahi said. Lenders are now given December 31, 2019, to meet the new 65 percent directive or face similar action.

“Consequently, all DMBs are required to attain a minimum LDR of 65 per cent by December 31, 2019 and this ratio shall be subject to quarterly review. To encourage Small and Medium Enterprises, retail mortgage and consumer lending, these sectors shall be assigned a weight of 150 per cent in computing the LDR for this purpose,” the CBN stated.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

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