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CBN retains 65% loan deposit ratio

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The Central Bank of Nigeria (CBN) Wednesday announced it had retained the Loan to Deposit Ratio (LDR) for Deposit Money Banks (DMB) at 65%.

LDR measures a bank’s liquidity by comparing its total loans to its total deposits for the same period.

The disclosure was made in a circular signed by Ahmad Abdullahi, CBN’s Director of Banking Supervision in Abuja.

The CBN had last month, through its Director, Financial Policy and Regulation Department, Hassan Mahmoud, said it would up banks’ LDR to 70% this year though the circular it released today note that it would retain it at 65% in the interim.

The apex bank urged DMBs to sustain this level in addition to making certain that average daily figures were applied to evaluate compliance.

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“The incentive which assigns a weight of 150 per cent in respect of lending to Small and Medium Enterprises, retail, mortgage as well as consumer lending shall continue to apply.

“While failure to achieve the target shall continue to attract a levy of additional cash reserve requirement of 50 per cent of the lending shortfall of the target LDR on or before March 31, 2020.

“DMBs are further encouraged to maintain strong risk management practices regarding their lending operations,” the circular read.

The CBN promised to continue monitoring performance, review development in the market and make modify the LDR when necessary.

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