The Central Bank of Nigeria (CBN) has reduced the Loan-to-Deposit Ratio (LDR) of deposit money banks from 65 percent to 50 percent.
This is according to a letter by CBN’s Acting Director, Banking Supervision Department, Dr Adetona Adedeji, addressed to all banks.
Adedeji said that the reduction is in similar proportion to the Cash Reserved Ratio of banks, which is 45 percent.
He said that the directive is part of measures to deepen monetary policy tightening and improve lending in the real sector of the economy.
“Following a shift in policy stance towards a more contractionary approach, it is imperative for the LDR policy to align with the current monetary tightening of the CBN.
“Accordingly, the CBN has decided to reduce the LDR by 15 percentage points to 50 per cent, in a similar proportion to the increase in the CRR rates for banks.
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“All deposit money banks are required to maintain this level and are further advised that average daily figures shall continue to be applied to access compliance,” he said.
He encouraged the deposit money banks to maintain strong risk management practices regarding their lending operations.
Adedeji said that the CBN would continue to monitor compliance, review market developments and make alterations in the LDR as it deems appropriate.
According to the new directive, deposit money banks are now allowed to lend 50 percent of deposits to their customers.
NAN
