Ghana’s banking sector is urging the Bank of Ghana (BoG) to reduce mandatory cash reserve requirements, a move industry leaders argue could unlock cheaper loans for businesses and households while revitalizing economic growth.
The appeal centers on the central bank’s tiered Cash Reserve Ratio (CRR), introduced in 2024, which ties reserve levels to banks’ loan-to-deposit ratios (LDRs).
Under current rules, banks with LDRs below 40% must hold 25% of customer deposits as reserves at the BoG, while those with ratios above 55% maintain a lower 15% reserve. Financial institutions claim the policy stifles lending capacity, particularly for banks struggling to meet LDR thresholds amid cautious borrower demand. Victor Yaw Asante, Managing Director of First Bank Ghana, emphasized that lowering the CRR would free up capital for loans, enabling banks to “respond more efficiently to market conditions” and reduce interest rates.
“A revised CRR framework would enhance operational flexibility, drive competition, and support sectors like manufacturing and agriculture that rely on affordable credit,” Asante told local media. He added that banks have formally petitioned the BoG for adjustments, though the central bank has yet to signal its stance.
Economists suggest that easing reserve rules could inject liquidity into Ghana’s economy, where high borrowing costs have long constrained small businesses. With more funds available, banks might lower lending rates, potentially stimulating job creation and consumer spending. The push comes as treasury bill rates decline—a trend Asante noted could further reduce borrowing costs if sustained.
Meanwhile, Asante highlighted the relative stability of the Ghanaian cedi in recent months but urged export-focused strategies to bolster foreign exchange reserves. “Strategic interventions, without direct market interference, are critical to maintaining this stability,” he said, advocating for policies to curb reliance on external financing.
Banking analysts caution that while CRR cuts could spur growth, the BoG must balance liquidity boosts with safeguards against inflation and currency volatility. The central bank’s decision will hinge on broader economic indicators, including inflation, which remains a persistent concern.
As businesses and households await potential relief, the financial sector’s call underscores a pivotal moment for Ghana’s economy. A recalibrated CRR could mark a turning point, aligning monetary policy with private sector needs—if regulators deem the risks manageable. For now, the ball rests firmly in the BoG’s court.
