CBN to punish banks that refuse lending to customers ― Emefiele

Central Bank of Nigeria (CBN) says it will increase the cash reserve ratio (CRR) of banks that refuse to meet the minimum lending threshold to customers to 50 per cent as from September 30, 2019.

“After September 30, we are going to begin a month by month monitoring of the prescription of deposit loan ratio for the banks. It’s because we all must work together as Nigerians to do everything that is possible to grow this economy.”

CBN Governor, Godwin Emefiele who stated on Tuesday while answering questions shortly after the Monetary Policy Committee (MPC) meeting said the bank’s management was seeking to obey a directive of MPC to compel banks to lend to the economy instead of investing only in government securities.

“You will recall that at last MPC may 2019, given that we observed there was a flat position in lending by deposit money banks to the industry MPC mandated management to look into how the banks can be refocused to do more of lending to the real sector to grow the economy.

“The only set of institutions or persons, by law that can conduct financial intermediation, real intermediation from the surplus side to deficit sectors are banks.

“If they cannot provide the possibility, then we have a problem. We won’t deposit money banks as financial intermediators to play this role, because must be seen to catalyse growth in Nigeria economy.

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“In an attempt to do that, weeks ago we released a guideline that prescribed the minimum lending for banks, because we will no longer allow a situation where, when banks receive deposit from customers, all they do is just bring the money to CBN or government, invest in instruments and after 90 days, 180 days, one year, they come to CBN, we cut them a cheque and they put it as income in to their balance sheet and they declared billions of naira. I’m a banker myself”, he stated.

In that guideline, CBN gave banks “certain carrots or incentives that when they lend to the consumer credit, mortgage credit, the SMEs, that we will grant them certain dispensation they would be happier about.

“But if they do not, we would apply certain sanctions that involve asking that 50 % of the unlent portion of their loans into CRR, the deadline is 30th of September”, Emefiele declared.

According to him, CBN in conjunction with banks who are the monetary side of the policy must be seen to play this role adding “if we don’t play this role, then we have failed in our responsibility.

“They must know that that is where we want them to invest the money. We don’t want them to invest their monies in treasury bills. It doesn’t mean that the banks are bad.”

He, however, clarified that there were no plans to ban banks from TB and open market operations (OMO).