CBN intensifies pressure on banks to lend to the economy
limits remunerable bank deposits to N2bn
By Babajide Komolafe
In a bid to further stimulate lending to the economy, the Central Bank of Nigeria, CBN, yesterday, said bank deposit placement through its Standing Deposit Facility, SDF, in excess of N2 billion will not attract interest payment.
This represents a 73 per cent reduction from the previous limit of N7.5 billion introduced in 2014.
The CBN disclosed this in a circular entitled: “Re: Guidelines on Accessing the CBN Standing Deposit Facility,” signed by Director, Financial Markets Departments, Dr Angela Sere-Ejembi.
The circular stated: “The remunerable daily placements by banks at the SDF shall not exceed N2 billion. The SDF deposit of N2 billion shall be remunerated at the interest rate prescribed by the Monetary Policy Committee, MPC, from time to time. Any deposit by a bank in excess of N2 billion shall not be remunerated.
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The provisions of this circular take effect from Thursday, July 11, 2019.”
This development represents the second reduction in the remunerable deposit placement by banks through SDF since 2014. The CBN in November 2014 reduced the remunerable bank deposit placement to N7.5 billion. According to the CBN, the reduction was to encourage banks to lend to the productive sectors of the economy.
The development represents the second measure by CBN, within two weeks, to unlock lending to the economy. Last week, the apex bank issued a directive to banks, to give out 60 per cent of their deposits as loans.
The apex bank, in a letter to all banks entitled, “Regulatory measures to improve lending to economy,” signed by Ahmad Abdullahi, Director, Banking Supervision, CBN, stated: “In order to ramp up growth in the Nigerian economy through investment in the real sector, CBN has approved the following measures: All DMBs are hereby required to maintain a minimum Loan to Deposit Ratio, LDR, of 60 per cent by September 30, 2019. This ratio shall be subject to quarterly review.”
“To encourage SMEs, 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 shall provide a framework for classification of enterprises/businesses that fall under these categories. “Failure to meet the above minimum LDR by the specified date shall result in a levy of additional Cash Reserve Requirement equal to 50 per cent of the lending shortfall of the target LDR.”