The Central Bank of Nigeria (CBN) has introduced a modified mechanism for the implementation of the cash reserve requirement (CRR) for all banks in the country.
CRR is one of the monetary policy tools the apex bank adopts to help limit money circulation or supply in the economy to tackle banks’ liquidity flow challenges.
In a letter titled: “Cash Reserve Requirement Framework Implementation Guidelines” to all banks on Friday, and signed by Acting Director of Banking Supervision Department, Adetona Adedeji, the Apex Bank said the introduction of the new policy framework was to boost the capacity of the banks to plan, monitor and align their records with the CBN to ensure a smooth handling of the persisting liquidity problem in the financial system.
The regulator said the determination of the segment deposits subject to its sterilisation as CRR would be determined in two phases.
“Phase 1 – Utilization of the incremental Approach: The extant ratio (commercial banks 32.5% and merchant banks 10%) will be applied in the bank’s 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/CEN/LAB/12/049 dated September 30, 2019.
“The CBN will provide your bank with details of the applied charges and their underlying computation rationale,” the letter said.
