The central bank of Ghana has introduced a new law to sanitize the country's banking sector

desmond frimpong

April 25, 2018 11:17 AM

The Bank of Ghana has instituted a new borrowers and lenders law which bars customers of commercial banks without credible loan repayment track record from borrowing.

This new development follows the strict enforcement of the new Borrowers and Lenders Act, by commercial banks in the country.The central bank is working around the clock to repeal the current law on borrowing and lending.Passed by Parliament for about a decade now, the Borrowers and Lenders Act amongst others provides the legal framework for credit and sets improved standards of disclosure of information by borrowers and lenders.The Act also acts as a check on certain credit practices which may be injurious for the banking sector.But with the prevailing challenges facing the banking industry, it has become apparent to review aspects of the law to cater for how wrongful loan disbursements could be minimized if not completely eradicated.Addressing stakeholders at a focus meeting aimed at creating a robust financial sector, the Second Deputy Governor of the Bank of Ghana, Elsie Addo Awadzi mentioned of the borrowers and lenders act being underway.“We also hope that banks will do their part so that the entire current infrastructure in place is working well. We are actually proposing a repeal of the Borrowers and Lenders Act and the replacement of the Act. It is early days yet as the law is currently going around the major stakeholders for their inputs,” she stated.

The banking sector report for January 2018 showed that the share of non-performing loans of commercial banks increased from 6.14 billion cedis to 8.58 billion cedis between December 2016 and the same period in 2016.This translates into an NPL ratio of 22.7 percent in December 2017 from 17.3 percent the previous year.This came despite a reduction in loans and advances issued to businesses which stood at an estimated 38 billion cedis.

desmond frimpong