Naira scarcity: CBN adjusts CRR mechanism
Central Bank of Nigeria (CBN) has disclosed of plans to end the daily Cash Reserve Requirement (CRR) debits regime, as it also said it will adopt an updated mechanism.
According to the regulatory bank, the decision follows on the heels of its series of push to mitigate the currency challenges facing the country in the recent weeks.
A letter to that effect addressed to deposit money banks (DMBs) or commercial banks dated February 02, 2024, stated that the action is intended to facilitate its capacity for planning, monitoring, and aligning their records with the CBN.
According to the letter, the determination of the segment of deposits subject to sterilisation with the CBN as CRR will now follow two processes with the first phase being 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.
In phase two, 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 contained in a correspondence to all banks referenced BSD/DIR/GEN/LAB/12/049 dated September 30, 2019.
CBN’s Acting Director Banking Supervision Department, Adetona Adedeji, in the letter further stated that the regulatory bank will provide DMBs with details of the applied charges and their underlying computation rationale.