All Financial Institutions Have Up to Dec. 2026 to Cut NPLs to 10% or Face the Heat – New BoG Directive

As part of measures to address the albatross of Non-Performing Loans (NPLs) hanging on the country’s financial sector, the Bank of Ghana (BoG) has issued a firm directive to all Regulated Financial Institutions (RFIs) to clean up their loan books by December 2026.

The bank says failure of these regulated financial institutions to comply with this directive will result in severe actions.

Non-Performing Loans (NPLs) are loans that borrowers stop paying back, either interest, principal, or both, for a long period, usually 90 days or more. They are basically “bad loans” that weigh down banks.

The financial sector of the country is struggling to deal with the high NPL levels. The Central Bank says the menace is a critical threat to the sector’s solvency, stability, and profitability.

To address this, a notice served to the sector has ordered all RFIs to reduce their ratio of Non-Performing Loans (NPLs) to gross loans to 10 percent or lower by the end of 2026.

However, for microfinance institutions, the bar is even tighter, with the existing prudential limit of 5 percent still in force.

“RFIs shall ensure that the level of NPLs to gross loans (NPL ratio) does not exceed 10 percent, or such other levels as may be prescribed by the BOG from time to time. Microfinance Institutions are, however, required to comply with their existing prudential NPL ratio limit of 5%. RFIs shall comply with the above prudential limit by the end of December 2026,” the notice cited by The High Street Journal noted.

The bank says that from January 2027, any institution that fails to comply must, within 10 working days, report its violation to the Bank of Ghana.

Even more, it must submit a Board-approved recovery plan within 30 days detailing how it intends to bring its NPLs back within the 10 percent ceiling within a year.

As part of the detailed plan, the RFIs are expected to establish dedicated work-out and arrears support units, staffed with skilled professionals, to chase recoveries and properly manage risky or restructured accounts.

Boards are also expected to allocate real resources, not just paper commitments, to tackling the rot in their loan portfolios.

The added, “RFIs in breach of this limit shall notify BOG of the violation within 10 working days and subsequently submit a Board-approved plan, within 30 days of the breach, to reduce their NPL ratio to 10 percent or below. The Board-approved NPL reduction plan shall be aimed at returning the RFI to full compliance within one (1) year.”

This ultimatum could mean tighter loan assessments, stricter repayment monitoring, and increased follow-ups from lenders.

But in the long run, it is expected to protect and safeguard depositors’ funds and restore confidence in banks and microfinance institutions that have been the lifeline of rural communities and small businesses.

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