CBN adopts new cash reserve measure

The Central Bank of Nigeria has said that it is stopping daily Cash Reserve Ratio debits and will be adopting an updated Cash Reserve Requirement mechanism.

The CBN noted that the move is intended to facilitate banks’ capacity for planning, monitoring, and aligning their records with the apex bank.

The CBN made this known in a circular titled ‘Cash Reserve Requirement Framework Implementation Guidelines’ signed by its Acting Director, Banking Supervision Department, Dr Adetona Adedeji, on Friday.

The percentage of cash required to be kept in reserves as against the bank’s total deposits is called the Cash Reserve Ratio.

The implementation of the new Cash Reserve Requirement framework will follow a structured process, as outlined by the CBN.

The statement read, “The determination of the segment of deposits subject to sterilisation with the CBN as CRR will follow the processes outlined below:

“Phase 1 – Utilisation of the Incremental Approach: The extant ratios (commercial banks 32.5% and merchant banks 10%) will be applied to increases in the banks’ weekly average adjusted deposits.

“Phase 2 — CRR levy of 50% of the lending shortfall will be enforced for banks that do not meet the minimum Loan to Deposit Ratio (LDR) as per our correspondence to all banks referenced BSD/DIR/GEN/LAB/12/049 dated September 30, 2019.”

The CBN added that it will provide banks with details of the applied charges and their underlying computation rationale.

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