Central Bank of Nigeria (CBN) on Friday announced the discontinuation of daily Cash Reserve Requirements (CRR) debits and introduced a revised mechanism.
This was announced in a circular to all banks, dated February 2, 2024 and signed by Adetona S. Adedeji, acting director, banking supervision department.
Reserve requirements are the amount of funds that a bank holds in reserve to ensure that it is able to meet liabilities in case of sudden withdrawals.
The move aims to enhance commercial banks’ planning, monitoring, and aligning records with the directives of the CBN.
The implementation of the new Cash Reserve Requirement framework will follow a structured process, as outlined by the banking and financial institutions regulator.
Consequently, the CBN said the existing ratio of 32.5 percent will be applied to increases in the weekly average adjusted deposits of banks. This incremental approach seeks to provide a measured adjustment to the CRR in relation to the growth in banks’ deposits.
In a bid to encourage lending activities, the CBN will enforce a CRR levy of 50 percent on the lending shortfall for banks that fail to meet the minimum Loan to Deposit Ratio (LDR) requirement. This enforcement is in line with the CBN’s previous communication to all banks, referenced BSD/DIR/GEN/LAB/12/049, dated September 30, 2019.
The CBN assures banks that detailed information regarding the applied charges and the computation rationale behind them will be provided to ensure transparency and understanding.
In the circular, the CBN aims to streamline the CRR framework to facilitate better compliance, transparency, and efficiency in the banking sector.
Banks are advised to adapt their systems and procedures accordingly to adhere to the updated Cash Reserve Requirement guidelines.
