In a move to enhance lending capacity, the Central Bank of Nigeria (CBN) has decreased the Loan-to-Deposit Ratio (LDR) of deposit money banks from 65% to 50%.
Dr. Adetona Adedeji, the Acting Director of the Banking Supervision Department at CBN, communicated this change to all banks in a recent letter.
Aligning with banks’ Cash Reserve Ratio of 45%, the reduction in LDR is part of CBN’s efforts to strengthen monetary policy and foster increased lending in the real sector.
Highlighting the need to adjust the LDR policy in line with the current tightening of monetary policy, CBN has decided on a 15-percentage point reduction to bring the LDR to 50%, mirroring the recent hike in banks’ CRR.
All deposit money banks must adhere to this revised ratio, with a requirement to maintain this level and ensure daily figures are in compliance.
This alteration allows banks to lend up to 50% of their deposits to customers, aiming to stimulate lending activities.
The adjustment follows CBN’s recent decision to increase banks’ minimum capital requirements by at least 100%.