Commercial banks in Ghana have pledged to reduce interest rates and improve lending to businesses if the Bank of Ghana (BoG) revises the Cash Reserve Ratio (CRR) requirements for financial institutions.
This assurance comes as banks continue to grapple with the impact of the regulatory measure on their liquidity and loan portfolios.
The Managing Director and Chief Executive Officer of First Bank Ghana, Victor Yaw Asante, made this known during an interview on PM Express Business Edition on February 27, 2025, with host George Wiafe.
In 2024, the Bank of Ghana introduced a new CRR regime that links reserve requirements to banks’ Loan-to-Deposit Ratios (LDRs). The policy was designed to control excess liquidity in the banking sector.
The CRR framework was structured as follows:
- 25% CRR for banks with LDRs below 40%
- 20% CRR for banks with LDRs between 40% and 55%
- 15% CRR for banks with LDRs above 55%
During the interview, Mr. Asante emphasized that adjusting the CRR would significantly enhance banks’ operational efficiency and improve lending conditions for businesses.
“We have made a passionate appeal to the Bank of Ghana, and we are hopeful that this concern will be addressed soon,” he stated.
Mr. Asante also touched on the performance of the Ghanaian cedi, noting that it has remained relatively stable against the US dollar in recent months.
He stressed the need for measures to boost the country’s export earnings, which would, in turn, strengthen Ghana’s foreign exchange reserves.
“We need to implement strategic interventions to address foreign exchange challenges without direct interference in the market,” he advised.
He further noted that managing market expectations and building trust in the financial system would play a crucial role in stabilizing the cedi.
Commenting on the treasury bills market, Mr. Asante attributed the recent moderation in demand for dollars to an improved supply of foreign exchange.
He explained that treasury bill auctions should be viewed as a demand-and-supply-driven mechanism.
He also pointed out that a sustained decline in treasury bill rates could lead to a reduction in borrowing costs for businesses, ultimately influencing lending rates.
“If the downward trend in treasury bill rates continues, it could positively impact the cost of credit and lead to lower lending rates,” he observed.
Commercial banks remain optimistic that a revision of the CRR policy by the Bank of Ghana will provide them with more liquidity, enabling them to reduce interest rates and expand credit to businesses.
The banking sector is also closely monitoring developments in the foreign exchange and treasury bills markets, as these factors influence lending rates and overall economic stability.
