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CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% - Business (2) - Nairaland

Nairaland Forum / Nairaland / General / Business / CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% (10141 Views)

FG Orders Google, Apple To Deactivate ‘illegal’ Online Banks, Loan Apps / CBN To Begin Monthly Review Of Banks’ Loan-to-deposit Ratios… Retains Interest R / Sterling Bank Grows Profit After Tax By 65% To N8.521bn (2) (3) (4)

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Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by Cmeo(m): 5:16pm On Apr 17
Yemi is very good at this job of monetary regulations, I swear.

2 Likes

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by SmartyPants(m): 5:18pm On Apr 17
Nazgul:

This is the major thing Tinubu needs to do if he wants to reduce the burden of hardship on the masses. You can't tell an importer to pay over 5m as import duty for a single car. That's day light robbery.

Go and buy from Innoson or Nord.

2 Likes

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by richard870(m): 5:18pm On Apr 17
blowjohn:



What did u study in school?
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by jayce232: 5:19pm On Apr 17
Antoeni:
This New CBN Gov.Cardoso Get Sense Pass Ex Gov Emeifele By Far
All these sycophancy will lead u people no where. What is the CBN gov doing differently from Emiefele??
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by rinzaugustine: 5:20pm On Apr 17
Appletek:


See them.
Container economy. grin
Consumption to production.

Anything apart from trading no dey enter una head.

Na why una Oga use 10 years study 4 year course.

If na NOUN Peter Obi go, he go still dey there till now.

how will local industries thrive without electricity? Or you expect a person to spend their own money to import to sell lower to you as your baba salah? Make you Dey try use common sense small
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by Nazgul: 5:22pm On Apr 17
SmartyPants:

Go and buy from Innoson or Nord.
Do your leaders buy from those brands you mentioned?

You can't force people to buy what they don't like with their money. Besides those brands you mentioned don't sell used cars. Their cars don't have second hand value.

So the here is how many Nigerians can afford their brand new products?

Besides cars aren't the only commodity we import. We import electronics, phones, clothes, furnitures, toilet and kitchen setups...etc. Are you going to force us to buy them from Nigeria as well?

2 Likes

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by EleventhWeirdo: 5:24pm On Apr 17
Adaiobanyi1:
Anyone who understands this should kindly explain to me.

It simply means that banks can no longer give out more than 50% of deposits kept with them by customers as loans

8 Likes

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by Scentedgrance: 5:24pm On Apr 17
Boogyman557:
Holly Gram cool bros my waist de pain me serious!


E get one slim ASHAWO girl way I NACK last night, in fact na she NACK me!


This girls give me SNAKE in the MONKEY SHADOW style!


This girl use her too legs leg take tie my waist !


Naso my PREEK de shift shift inside her TOTTO ..


The worst part be say, her TOTO wide well well.


The sound of her TOTTO come de sound like wer dem de play snooker..


The sound be like dis.


IKPAKA IKPAKA IKPAKA


my waist de pain me 4 here ooo


LITE UP my WEED in peace


WTF MAN!
Does this your write up makes any sense?
Jux asking,this Fo rum has really gone to the dogs.

1 Like

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by bayplus: 5:32pm On Apr 17
Scentedgrance:

Does this your write up makes any sense?
Jux asking,this Fo rum has really gone to the dogs.

Why giving him the attention he did not deserve?

Everyone else ignored him. 🙁

1 Like

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by ecomalchemistt(m): 5:33pm On Apr 17
Money fit me , I don’t wanna be poor !
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by OkoEmm: 5:34pm On Apr 17
Adaiobanyi1:
Anyone who understands this should kindly explain to me.

If I send you 100k today to your zenith bank account from my Uba account. Zenith bank is meant to loan out 65% of that 100k.

That's basically what loan to deposit ratio is.

So imagine if zenith bank receives total customer deposits of 1 trillion naira in a year, cbn mandates them to loan out 65% of that money.

You know customer deposits appears as liabilities on a bank balance sheet while bank loans appears as assets on their balanced sheet

During Emefieles era, banks were penalised for not meeting the target. Basically a high loan to deposit ratio helps to stimulate lending to the "real economy".

But right now, inflation is at 30%, interest rates are so high which basically discourages customers from borrowing loans, hence the reason for the CBN directive.

9 Likes 1 Share

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by AndroBlaze: 5:34pm On Apr 17
Adaiobanyi1:
Anyone who understands this should kindly explain to me.

It reduces the ability of commercial banks to give loans which is meant again to reduce the amount of naira flowing around in the system. The idea is we have too much naira around chasing too few goods, which is what he blames for causing both inflation and the depreciation of the naira.

3 Likes 1 Share

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by Scentedgrance: 5:34pm On Apr 17
I find his comments utterly disgusting and appalling
bayplus:


Why giving him the attention he did not deserve?

Everyone else ignored him. 🙁
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by BeigJawnson(m): 5:40pm On Apr 17
Max24:

Can you channel that request to your Twitter president, Obi. Or is he no longer your president?


Why talking like a kid... Is obi the president? Learn to stop doing politics with hatred. People like you are reasons this country is where it is. So, as a citizen, one can't air his/her opinion becos your candidate is the president? More over, did your candidate choose people he wanted to govern in Nigeria when he said EMILOKAN? EMILOKAN to rule the yorubas or his supporters and those who voted him alone? Grow up boy

1 Like

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by Yankee101: 5:40pm On Apr 17
You’re trying to reduce the money in circulation to curb inflation and your increasing the flow of money?

Cardoso na real trial and error

I hope they don’t reverse it soon again
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by fidel2(m): 5:45pm On Apr 17
Boogyman557:
Holly Gram cool bros my waist de pain me serious!


E get one slim ASHAWO girl way I NACK last night, in fact na she NACK me!


This girls give me SNAKE in the MONKEY SHADOW style!


This girl use her too legs leg take tie my waist !


Naso my PREEK de shift shift inside her TOTTO ..


The worst part be say, her TOTO wide well well.


The sound of her TOTTO come de sound like wer dem de play snooker..


The sound be like dis.


IKPAKA IKPAKA IKPAKA


my waist de pain me 4 here ooo


LITE UP my WEED in peace


WTF MAN!



Guy why na ..... ??
🤣🤣🤣🤣🤣🤣

2 Likes

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by blaquey01: 5:46pm On Apr 17
Adaiobanyi1:
Anyone who understands this should kindly explain to me.
What it means is that banks should not give out loans once they are more than the deposits they get from customers.

Before now the maximum amount of loans given out at any point in time should be 65% of customers money (Customer's deposit) that the bank has with them - that is money you and i have in the bank.

Now that it has been reduced to 50%, simply to restrict the amount of money in circulation.

Banks can maintain the new ratio by giving out less loans while sourcing for more customer deposits or get a large number of deposits to give out more loans.

4 Likes

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by presiade(m): 5:52pm On Apr 17
Ezemarcel:
They should reduce import duties
On the contrary, they should either maintain or increase it. That way, they can reduce people’s appetite for imported goods and encourage local manufacturers. In the long run, the benefits will show. It’s not easy, but nothing good comes easy!

1 Like

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by PoeticMind: 6:08pm On Apr 17
Adaiobanyi1:
Anyone who understands this should kindly explain to me.

Firstly, Loan to deposit ratio (LDR) refers to the ratio of all the total loans (risk assets) a bank gives out versus its total deposit balance at a particular pint in time. Hence, if, for instance, bank A for has total customer deposit balance of N1 million, under the previous policy, they were required to give out loans to the tune of N650 thousand naira or face sanctions from CBN, whereas now they will only be required to lend out only N500 thousand, providing the bank with more liquidity for other non-lending activities.

In theory, this should help abate inflation, by reducing the volume of loans created and concurrently, reducing the volume of money in circulation. It will also help banks manage their risks better and keep their books cleaner in terms of bad loans.

This is a simple analysis though, there are a few more intricacies not factored in here like the CBN's Cash reserve ratio (CRR), liquidity reserves etc.

2 Likes 1 Share

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by Ten06(m): 6:10pm On Apr 17
hadelany:



I'm beginning to like this Cardoso guy

Please, what is the benefit of this to individual who want to apply for loan from the bank?
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by yungboss(m): 6:11pm On Apr 17
hadelany:



I'm beginning to like this Cardoso guy
lol. It means bankers should reduce their appetite for loan and get more deposits. So more deposit targets for bankers...
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by gentlekeny(m): 6:12pm On Apr 17
When the CBN reduces the loan-to-deposit ratio requirement for banks, it typically means that banks are required to hold a higher proportion of their deposits in reserves rather than lending them out. This has several potential effects on business people and credit:

First, it reduces the capacity to lend money to businesses and individuals. Credit crunch.
This could lead to a tightening of credit conditions, making it more difficult for businesses to obtain loans for expansion, investment, or day-to-day operations.

Secondly, due to scarcity of credit, the interest rates will likely go up. So if you use to borrow 500k at 20% interest, it will spike higher to like 25% or more.

Thirdly, it will slow down capital projects because businesses will find it hard to access loans to finance their projects.

2 Likes 1 Share

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by yungboss(m): 6:13pm On Apr 17
Ten06:


Please, what is the benefit of this to individual who want to apply for loan from the bank?
on the big picture, CBN wants banks to get more deposits rather than book more loans. For an individual, it may not matter much...but for large corporates who seek loans in 100s of millions, this policy may stall the process or cause more bureaucracy e.g, adjusting interest rates upwards, pegging limits etc.

2 Likes

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by Ijaya123: 6:21pm On Apr 17
Ezemarcel:
They should reduce import duties

Why not set up a company and produce here what you want to import?
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by Believeintruth: 6:24pm On Apr 17
hadelany:



I'm beginning to like this Cardoso guy

How? They increased MPR by 600 basis points which means lending rates have increased and you reduce the loan to deposit ratio of banks to encourage lending. Please lending to who? At a rate of more than 30% makes it too expensive for the Nigerian.
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by Believeintruth: 6:27pm On Apr 17
LegendHero:
Cardoso my man.

Baba dey para. Banks and BDC go know say it’s not business as usual.

Na wah for una. You keep commenting on things you have no knowledge of. He reduced the loan to deposit ratio of banks to 50% from 65%, at the same vein he had already increased the MPR rate by 600 basis points earlier which meant the cost of lending has increased. So the question now is who can afford the high lending rate, where Banks are giving loans at 30% and above as interest on loans, so what is the use of reducing the loan to deposit ratio when the loans are far too expensive?

1 Like

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by Believeintruth: 6:30pm On Apr 17
OkoEmm:


If I send you 100k today to your zenith bank account from my Uba account. Zenith bank is meant to loan out 65% of that 100k.

That's basically what loan to deposit ratio is.

So imagine if zenith bank receives total customer deposits of 1 trillion naira in a year, cbn mandates them to loan out 65% of that money.

You know customer deposits appears as liabilities on a bank balance sheet while bank loans appears as assets on their balanced sheet

During Emefieles era, banks were penalised for not meeting the target. Basically a high loan to deposit ratio helps to stimulate lending to the "real economy".

But right now, inflation is at 30%, interest rates are so high which basically discourages customers from borrowing loans, hence the reason for the CBN directive.




But this move makes no sense because the interst rates are high so lowering the loan to deposit ratio will still not encourage people to take loans at very high interest rates.
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by AndroBlaze: 7:14pm On Apr 17
Believeintruth:


But this move makes no sense because the interst rates are high so lowering the loan to deposit ratio will still not encourage people to take loans at very high interest rates.
Take your time and read the information people have provided.

He is not trying to encourage people to take loans. People taking loans increases the money supply and CBN under him have stated countless times that their is too much money in circulation (not necessarily because there were too many loans given out, but because he claims Emefiele was just printing money anyhow and spending it). Basic monetary economics says when money supply increases irrationally, prices go up as the money loses its worth, and that is what he is trying to stop. He is trying to control the supply of money (take money out of the system) and thats what practically all the policies he has unleashed (raising lending rates, increasing Treasury and Bond yields and now curbing commercial banks ability to lend by reducing LDR) are aimed at.

Its textbook economics, but could still fail if it turns out to be an overkill

2 Likes

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by ceejayluv(m): 8:01pm On Apr 17
[
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by trudpo: 8:25pm On Apr 17
It means loans to customers is reduced.
For example, Loan = 52m and Deposit = 80m Therefore, Loan to Deposit = 52/80*100 = 65%

But now,

Loan = 40m and Deposit = 80m
Then, Loan to Deposit = 40/80*100 = 50%

Impact
Control money in circulation
Marginal impact on businesses than need financing

Adaiobanyi1:
Anyone who understands this should kindly explain to me.

2 Likes

Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by CaptainGo: 9:05pm On Apr 17
Yankee101:
You’re trying to reduce the money in circulation to curb inflation and your increasing the flow of money?

Cardoso na real trial and error

I hope they don’t reverse it soon again

You don't even know what you're saying. undecided

The poster below understands it better.

The policy is actually meant to reduce the amount of money in circulation.


blaquey01:

What it means is that banks should not give out loans once they are more than the deposits they get from customers.

Before now the maximum amount of loans given out at any point in time should be 65% of customers money (Customer's deposit) that the bank has with them - that is money you and i have in the bank.

Now that it has been reduced to 50%, simply to restrict the amount of money in circulation.

Banks can maintain the new ratio by giving out less loans while sourcing for more customer deposits or get a large number of deposits to give out more loans.
Re: CBN Reduces Banks' Loan To Deposit Ratio From 65% To 50% by CaptainGo: 9:12pm On Apr 17
Believeintruth:


Na wah for una. You keep commenting on things you have no knowledge of. He reduced the loan to deposit ratio of banks to 50% from 65%, at the same vein he had already increased the MPR rate by 600 basis points earlier which meant the cost of lending has increased. So the question now is who can afford the high lending rate, where Banks are giving loans at 30% and above as interest on loans, so what is the use of reducing the loan to deposit ratio when the loans are far too expensive?

What are you on about?

By this new policy, the CBN is actually reducing loans by bank not encouraging it.

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