CBN Debits Banks N349.72Bn for Failing to Meet CRR

Central Bank of Nigeria (CBN) debited about 23 Deposit Money Banks (DMBs) in the country N349.72 billion towards the end of last week, for failing to meet Cash Reserve Ratio (CRR) targets.

According to a Nairametrics, in its bid to curb inflation and naira instability, the CBN’s Monetary Policy Committee (MPC) had increased the CRR by 500 basis points from 22.5 per cent to 27.5 per cent at its meeting in January this year.

The CRR is the minimum amount banks are expected to retain with the CBN from customer deposits.

Thus, as a way of soaking up liquidity from the banking system, the apex bank, in the last eleven months, has frequently debited lenders that fall short of the CRR targets. In fact, towards the end of last month, the CBN debited some lenders a total of N226 billion for not meeting the CRR target.

Similarly, in the previous month, several DMBs were hit with a total of N917.5billion in CRR debits.

Analysts estimate that between January and August this year, the CBN has sequestered about N5.12trillionfrom DMBs with excess cash holdings.

Financial experts point out that apart from the CRR debits, lenders have also been frequently hit with debits by the apex bank since July year for non-compliance with its 65 per cent Loan to Deposit Ratio (LDR) policy.

The CBN had in July last year, directed lenders to maintain a minimum LDR of 60 per cent effective from September 30, 2019. However, at the end of September, the minimum LDR was raised to 65 per cent, with a fresh deadline of December 31, 2019.

It said the move was part of measures to drive credit growth, especially to the real sector of the economy.

Although some analysts claim that the CRR debits lead to increases in the effective cost of funds across the banking system, the CBN insists that the policy is achieving the desired results.

It will be recalled that in the communiqué issued at the end of their meeting in September, members of the MPC attributed the increase in lending in the economy to the CRR and LDR policy and urged the CBN to intensify such measures