In a strategic move to bolster operational efficiency in the banking sector, the Central Bank of Nigeria (CBN) has introduced a groundbreaking 50-cent Cash Reserve Requirement (CRR) levy. This levy is aimed at banks that fall short of the minimum Loan to Deposit Ratio (LDR), as outlined in the recent circular titled “Cash Reserve Requirement (CRR) Framework Implementation Guidelines.”
The CBN has set the new CRR percentages at 32.5% for commercial banks and 10% for merchant banks, requiring them to maintain these levels of cash liquidity against their deposits. This policy shift aims to enhance the overall functioning of the banking sector.
In addition to the CRR adjustments, the CBN has ceased daily debits, providing banks with a more structured approach for planning, monitoring, and aligning their records with the regulatory framework. The circular outlines a two-phase mechanism for determining the segment of deposits subject to sterilization with the CBN.
The first phase involves utilizing the incremental approach, applying existing ratios to increases in banks’ weekly average adjusted deposits. The second phase introduces a 50% CRR levy on the lending shortfall for banks failing to meet the minimum LDR, as communicated in the CBN’s previous correspondence dated September 30, 2019 (reference: BSD/DIR/GEN/LAB/12/049).
As this transformative CRR policy takes effect, the CBN will provide detailed information on the applied charges and their computation rationale to each bank, ushering in a new era in banking regulations and financial planning.
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