Banks ready to ease credit stance for private sector

Banks have signalled their readiness to extend credit to the private sector following months of sluggish credit demand and supply conditions due to the pandemic, the latest credit conditions survey by the Bank of Ghana has shown.

Private sector credit growth slowed in the first two months of the year due to constrained demand for credit. Real private sector credit contracted by 2.7 percent compared to a growth of 12.9 percent over the same period last year.

Nevertheless, banks have signalled an ease in credit stance over the next two months, according to the monetary policy press statement issued on Monday, while there is an expectation of increased demand for credit from the private sector.

Notwithstanding the sluggish credit conditions due to the pandemic, the central bank’s COVID-related regulatory reliefs and policy measures continue to support lending, with new advances for the first two months of 2021 totalling GH¢4.7 billion.

An emerging issue, however, is the rise in the Non-Performing Loans (NPL) ratio from 13.8 percent in February 2020 to 15.3 percent in February 2021, arising partly from the general pandemic-induced repayment challenges as well as some bank-specific loan recovery challenges.

Banking sector performance

The performance of the banking sector remained strong through end-February 2021, with robust growth in total assets, deposits and investments.

Total assets increased by 18.5 percent on a year-on-year basis to GH¢152 billion, reflecting strong growth in investments in government securities by 45.9 percent to GH¢67.9 billion.

Total deposits recorded a year-on-year growth of 25.1 percent to GH¢104bn, reflecting strong liquidity flows emanating from the COVID-19 fiscal stimulus, payments to contractors, SDI depositors, and clients of SEC-licensed fund managers.

The central bank noted that the impact of the pandemic on the industry’s performance seems moderate as banks remain liquid, profitable and well-capitalised.