This was contained in the latest banking sector report released by the BoG.
The Central Bank said it has taken 5 major decisions that will stabilize the financial sector against any effect from the coronavirus pandemic and also protect depositors’ funds.
The BoG said that the decision to lower the Monetary Policy Rate by 150 basis points to 14.5% is expected to reduce interest rates and the challenges in securing credit at reasonable rates for individuals and businesses.
The central bank is also optimistic that the Reduction in Primary Reserve Requirements from 10% to 8% will increase the coverage of channeling additional funds to support lending to all critical sectors of the economy including the informal sector.
The third major decision is the reduction in prudential limit of Capital Adequacy Ratio from 13.0% to 11.5%. The BoG said it is hopeful this will help boost credit expansion to support the economy by complementing the reduction in primary reserves.
The report added that the decline in provisions for loans in the “Other Loans Especially Mentioned” category from 10% to 5% could reduce the impact of the potential challenges of Non-Performing Loans on loan loss provisions and profit margins of banks, while the classification of loan repayments past due for Microfinance Institutions increased to 30 days as current, will help minimize the impact of loan repayment challenges on Microfinance Institutions.
The BoG has said that it will ensure that the additional liquidity released from these policies does not end up as investment in government securities and paying of dividends to shareholders.