The Bank of Ghana has directed commercial banks to reduce their non-performing loan (NPL) ratios to below 10% by the end of 2026. This directive aims to strengthen financial stability, improve credit growth, and support sustainable financing of businesses.
Banks Face NPL Deadline: A Step Towards Financial Stability
The Central Bank said the reduction was necessary to address the high levels of non-performing loans that constrained banks' ability to extend new credit, increased recovery costs, and absorbed capital. According to Dr Johnson Pandit Asiama, Governor of the Bank of Ghana, NPL ratios had declined to 16.1% by June 2026 from more than 23% in 2025.
Regulatory Measures to Support NPL Reduction
In June 2025, the Central Bank directed all regulated financial institutions (RFIs) to keep NPL ratios at or below 10%. Institutions that would breach the directive after December 2026 must notify the regulator within 10 days and submit a board-approved reduction plan. Dr Asiama noted that the regulatory measures introduced by the Central Bank had led to a decline in NPL ratios, but more work was needed to achieve the target of 10%.
Distressed Companies and Rescue Financing
Dr Asiama emphasized the importance of reducing NPLs, not only as a supervisory requirement but also as part of efforts to support Ghana's broader economic development objectives. He encouraged banks to ring-fence and monitor new financing provided to distressed companies, ensuring that such funds were directed towards productive activities. Dr Asiama also called for a predictable and risk-sensitive framework for rescue financing, urging collaboration among insolvency practitioners, bankers, accountants, and regulators to establish clear rules, roles, and accountability mechanisms.
Concerns Over Regulatory Measures
Dr Ishmael Yamson, Chairman of the occasion and Board Chair of Scancom PLC (MTN Ghana), acknowledged the decline in NPLs but expressed concerns that some regulatory measures could discourage banks from providing rescue financing. He suggested that the commencement financing should be carved out from the NPL ratio calculation and from the January 2027 loan portfolio growth restriction, for a defined rescue period.
What's Next?
The deadline for banks to reduce their NPL ratios to below 10% is set for the end of 2026. The Central Bank will closely monitor the progress of commercial banks in achieving this target. The success of this initiative will have significant implications for the Ghanaian economy, as it will improve financial stability, enhance credit growth, and support sustainable financing of businesses.
Source: Joy Online
