The Central Bank of Nigeria (CBN) has implemented a new policy imposing a 50% Cash Reserve Requirement (CRR) levy on banks that fail to meet the minimum Loan to Deposit Ratio (LDR). This move, communicated through a circular titled “Cash Reserve Requirement (CRR) Framework Implementation Guidelines,” aims to bolster operational efficiency within the banking sector.
As per the new guidelines, commercial banks are now required to maintain 32.5% of their deposits as cash liquidity, while the figure stands at 10% for merchant banks. The CBN has also discontinued the practice of daily debits to enable better planning and monitoring of banks’ financial records.
The CBN’s circular stated, “The determination of the segment of deposits subject to sterilization with the CBN as CRR will follow the processes outlined below: Phase 1 – Utilization of the Incremental Approach, applying extant ratios to increases in the banks’ weekly average adjusted deposits. Phase 2 – Implementation of a 50% CRR levy on the lending shortfall for banks failing to meet the minimum LDR, as previously communicated to all banks.”
The CBN assured banks that detailed information regarding the applied charges and their calculation rationale would be provided to facilitate compliance with the new policy.
This significant development in Nigeria’s banking sector reflects the CBN’s commitment to fostering a robust and stable financial environment, while aligning with global best practices in monetary policy and banking regulations.
