NIB adopts three-prong initiative to reduce bad debts

Accra, April 27, GNA - National Investment Bank is introducing a three-prong initiative to reduce the high provisions for bad and doubtful debts.

The bank's bad and doubtful debt provision increased from 36 billion in 2004 to 74.1 billion, last year, representing a rise of 106 per cent. Dr Charles Jebuni, Board Chairman of the Bank told shareholders at the 37th Annual General Meeting, that a risk management unit had been created as part of a strategic thrust to approach risk management from a bank-wide angle.

The move is also to take into account credit and operational risk issues as preparation towards Basel II Accord, which calls for adoption of prudent measures to guarantee the integrity of the financial system. Dr Jebuni said the bank was also establishing a portfolio committee to vet all loans applications with the view to minimize the risk of failure of borrowers to repay the loans. Besides branch managers of the bank had been warned of various degrees of penalty and sanctions for inaccurate assessment of loan applicants, leading to default in repayment. Dr Jebuni said the 2005 provision was high because of the huge volumes of loans to customers. In addition, the new Banking Act cut down on the number of days in which a loan should be classified as bad from 560 days to 360 days, necessitating a classification of all loans within the period as bad and doubtful.

He assured the shareholders that these steps by the Bank are to ensure a reduction in non-performing loans and to enhance shareholder value.

Commenting on the operational performance of the Bank, Dr Jebuni said the bank's deposit base increased from 857.42 billion at the end of December 2004 to 1.2 trillion cedis within the same period last year. Similarly, total assets grew by 29.1 per cent to 1.9 trillion cedis last year compared to 1.4 trillion cedis in 2004. He attributed the impressive results through a strong posture of the bank through enhancement of building structures, commissioning of new as well as relocation of some branches in ultra modern premises in order to improve service delivery.

The bank, Dr Jebuni, said commenced a 30-million dollar support programme under an arrangement with the Ministry of Road Transport and BHF bank to provide road construction equipment to increase the capacity of Ghanaian road contractors in the execution of road projects. The Bank declared a dividend of 325 cedis amounting to 17.3 billion cedis.