BoG insist banks cut NPLs to 10%

The Bank of Ghana (BoG) has instructed commercial banks to decrease their non-performing loan (NPL) ratios below 10 per cent by the end of 2026. This move is aimed at enhancing financial stability, boosting credit growth, and ensuring sustainable financing for businesses. BoG Governor Dr Johnson Pandit Asiama emphasized the need for this reduction during a forum organized by the Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP) in Accra.

Following the directive in June 2025, NPL ratios have fallen to 16.1 per cent in June 2026, down from over 23 per cent in 2025, thanks to various regulatory measures introduced by the Central Bank. While this progress is commendable, Asiama noted that 16.1 per cent remains a concern and is still above the desired threshold.

High levels of NPLs pose challenges for banks, such as limiting their capacity to extend new credit, increasing recovery costs, and consuming capital. These effects are particularly pronounced for smaller and higher-risk borrowers. Asiama stressed that reducing NPLs is not just a supervisory requirement but also a vital component of Ghana's broader economic development goals.

In the context of financing distressed companies, Asiama highlighted that Ghana's Insolvency and Restructuring Act offers a framework for restructuring viable businesses instead of liquidating them. He stressed the importance of distinguishing between companies facing temporary cash flow issues and those on a path to inevitable failure.

Asiama cautioned against concealing losses and weakening credit discipline by not conducting credible viability assessments before extending loans. He urged banks to ring-fence and monitor new financing provided to distressed companies, ensuring these funds are allocated towards productive activities like retaining employees, securing inputs, and completing contracts.

Furthermore, Asiama called for a predictable and risk-sensitive framework for rescue financing, advocating for collaboration among insolvency practitioners, bankers, accountants, and regulators. He proposed carving out commencement financing from the NPL ratio calculation and from the loan portfolio growth restriction for a defined rescue period. This approach would prevent banks providing rescue financing from being penalized by a directive intended to address the problem.

Dr Ishmael Yamson, Chairman of the event and Board Chair of Scancom PLC (MTN Ghana), acknowledged the reduction in NPLs but cautioned that some regulatory measures might discourage banks from providing rescue financing. He suggested excluding commencement financing from the NPL ratio calculation and the loan portfolio growth restriction for a designated rescue period to ensure that banks financing sanctioned rescue plans are not penalized by a directive aimed at resolving the issue.