Banks Reduce Lending

Commercial banks have reduced the amount of money they lend to customers due to the rise in Non-Performing Loans (NPLs).

The banks said the inability of some category of customers to pay back loans has necessitated a review.

As at July 2016, NPLs made up 19.1 percent on the books of commercial banks compared to 13.0 percent recorded at the same period in 2015.

Total loans which were given out by banks in the month of July 2016 stood at GH¢32.2 billion.

Some debts owed Volta River Authority (VRA) and Bulk Oil Distribution Companies (BDCs) by government have also contributed to high NPLs.

Government owes about 17 Bulk Distribution Companies (BDCs) in excess of GH¢500 million.

And the majority of the BDCs contracted loans from commercial banks in Ghana to facilitate their operations, but have since failed to pay back the loans due to government’s indebtedness.

Recently, government entered into an agreement with some 12 local banks to pool resources together to help offset its debts.

This led to the release of some GH¢250 million by the Ministry of Finance to settle part of the debts, leaving about GH¢2.05 billion.

Central Bank Governor Dr. Abdul Nashir Issahaku, at a recent press briefing, complained about the high NPLs of banks.

Dr. Issahaku explained that the figure does not incorporate the recent payment of GH¢250 million VRA debt to the banks.

He expressed the belief that the figure would reduce further next month because government had paid GH¢250 million of VRA debt, adding that government was also in the process of paying the debt owed BDCs so they could also pay the  banks.

Banks’ Asset

Total assets of the banking industry as at the end of July 2016 was GH¢67 billion, up from GH¢66.3 billion recorded in June, representing about 24.6 percent annual growth.

Total deposit as at the end of July 2016 was GH¢42.2, representing 23.7 percent growth, while total gross advances were GH¢32.1 billion which represented 17.2 percent growth.

Source: Daily Guide