The Nigerian Central Bank said that it will no longer be debiting daily amounts from the Cash Reserve Ratio and will instead be implementing an improved Cash Reserve Requirement method.
The CBN stated that the action is meant to make it easier for banks to organize, keep an eye on, and synchronize their records with those of the central bank. This was disclosed by the CBN on Friday in a circular entitled “Cash Reserve Requirement Framework Implementation Guidelines,” which was signed by Dr. Adetona Adedeji, acting director of the department in charge of banking supervision.
The Cash Reserve Ratio is the proportion of needed cash held in reserves to total deposits made by the bank. The Central Bank of Nigeria (CBN) has defined a systematic method for the implementation of the new framework for cash reserve requirements.
The statement read, “The determination of the segment of deposits subject to sterilisation with the CBN as CRR will follow the processes outlined below: “Phase 1 – Utilisation of the Incremental Approach: The extant ratios (commercial banks 32.5% and merchant banks 10%) will be applied to increases in the banks’ weekly average adjusted deposits.
“Phase 2 — CRR levy of 50% of the lending shortfall will be enforced for banks that do not meet the minimum Loan to Deposit Ratio (LDR) as per our correspondence to all banks referenced BSD/DIR/GEN/LAB/12/049 dated September 30, 2019.” The CBN added that it will provide banks with details of the applied charges and their underlying computation rationale.
