Banks reject costly deposits over CBN’s policy
The CBN had announced pro-growth measures, such as requiring banks to report loan-to-deposit ratios of 60 per cent in a bid to make them lend more money to boost the local economy.
Sanusi said: “There are two stands; one of them is, if I am falling short of the loan to deposit ratio which most banks are, I would increase my loans by converting my positions of investments in treasury bills and bonds to high risk or loans to private sector. This, he said, could raise the non-performing loans.”
Treasury bills yields remained pressured as average yield across tenors dipped further by 51 basis points week-on-week to settle at 13.3 per cent on Friday from 13.8 per cent the previous week.“So, it is neither here nor there depending on the stand the bank takes. You can increase your risk asset which can likely increase your non-performing loan ratio. But that may not happen if you start lending to good sectors or creating assets that are good,” he said.
He said: “A lot of manufacturing companies suffered interest rates at 23 per cent before the end of recession. That affected a lot of the profitability and capability to payback their loans and default rate increased. With this policy, banks have started to create a restructuring and a longer term loan that those businesses deserve.
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