Bank of Ghana: Bad Loan Limit Directive to Tackle Non-Performing Loans

• The Bank of Ghana has directed regulated financial institutions to reduce their non-performing loans (NPLs) to not more than 10 percent by the end of December 2026.
• High levels of bad loans have been constraining lending and impacting Ghana's economic development, according to Governor Dr. Johnson Pandit Asiama.
• The new target of 10 percent NPLs by 2026 is seen as an achievable goal, given the progress made so far.
• Failure to comply with the new target may result in regulatory action, including fines and penalties.

The reduction of non-performing loans is critical for the growth and stability of Ghana's banking sector.

The Bank of Ghana has issued a directive to regulated financial institutions to reduce their non-performing loans (NPLs) to not more than 10 percent by the end of December 2026. This move is aimed at addressing the high levels of bad loans that have been constraining lending and impacting Ghana's economic development, according to Governor Dr. Johnson Pandit Asiama. The directive is a significant step in the ongoing efforts to reform the banking sector in Ghana. The BoG has been working to reduce the burden of non-performing loans on banks, which has led to increased provisioning for bad debts and reduced profitability. The new target of 10 percent NPLs by 2026 is seen as an achievable goal, given the progress made so far. However, achieving this target will require sustained efforts from banks to improve their risk management practices and enhance their credit assessment processes.

The directive issued by the BoG is in line with existing regulations that require banks to maintain a certain level of capital adequacy and liquidity. The Prudential Regulation and Supervision Department (PRSD) of the BoG has been monitoring the NPLs of regulated financial institutions and has identified high levels of bad loans as a major concern. The PRSD has also been working with banks to improve their risk management practices and enhance their credit assessment processes. The new directive is expected to be enforced through regular monitoring and reporting by the BoG, which will help to ensure compliance by regulated financial institutions. Failure to comply with the new target may result in regulatory action, including fines and penalties.

The reduction of non-performing loans is critical for the growth and stability of Ghana's banking sector. High levels of bad loans can lead to reduced profitability, increased provisioning for bad debts, and ultimately, bank failures. The new directive issued by the BoG is expected to improve the risk management practices of banks and enhance their credit assessment processes, which will help to reduce the burden of non-performing loans on the banking sector. Lawyers advising banks in Ghana should monitor the implementation and enforcement of this new directive, as failure to comply could lead to regulatory action and reputational damage.

Lawyers advising banks in Ghana should monitor the implementation and enforcement of this new directive, as failure to comply could lead to regulatory action and reputational damage.

Source: Original reporting via BoG directs banks to cut bad loans to 10% by end of 2026