Dr. Gideon Boako, Member of Parliament for Tano North, has declared that the Bank of Ghana’s revised Cash Reserve Ratio (CRR) policy will increase banking costs for customers. The new rules mandate that banks hold 20% of their deposits with the central bank. This includes both local currency and foreign exchange deposits.
This revised policy means banks must keep a larger portion of customer funds locked at the Bank of Ghana. These funds cannot be used for lending or investment. Dr. Boako stated the Ghana Association of Banks requested an urgent meeting with the Governor of the Bank of Ghana. This shows the policy is already putting pressure on bank liquidity and foreign exchange operations.
The Bank of Ghana’s move aims to control money supply, manage inflation, and strengthen the Ghana cedi (GHS). The central bank often uses instruments like the CRR to influence economic stability. Previous adjustments to reserve requirements have also impacted bank operations and lending capacity. This action follows continuous efforts by the central bank to manage economic pressures in Ghana.
Dr. Boako, Deputy Ranking Member on Parliament’s Finance Committee, explained the policy’s impact. He said, “For banks with high loan-to-deposit ratios, the move significantly increases operating costs because more funds are tied up without earning interest.” Even banks with lower lending exposure face challenges, as they still pay interest on deposits while reserve funds remain idle. This creates an imbalance that banks will likely pass on to customers.
A major concern is the extension of reserve requirements to foreign exchange deposits. Banks must now keep 20% of the cedi equivalent of foreign currency deposits with the Bank of Ghana. This could reduce available funds for trade finance. It may also discourage banks from accepting more foreign currency deposits.
The likely outcome includes higher banking charges, stricter lending conditions, and tighter handling of foreign exchange accounts. Some banks are already signaling upward adjustments in service charges for June. This directly affects businesses and individuals needing foreign currency for trade or personal use. Customers with dollar accounts may soon experience higher fees and longer processing times.
Dr. Boako believes a complete reversal of the policy is unlikely. He expects the Bank of Ghana to consider partial concessions. This could include a gradual rollout or arrangements to pay interest on these mandatory reserves. Such measures would help ease the financial burden on banks. The Ghana Association of Banks is expected to push for these changes to mitigate the policy’s impact.
The Bank of Ghana’s objective to control liquidity and tame inflation is critical. However, Dr. Boako warned that a harsh implementation could create a credit crunch. It could also lead to a foreign exchange shortage. This could slow down economic growth significantly. Businesses and individuals will face more limited access to credit and foreign currency. This might hinder investment and trade activities across Ghana.