Ghana: banks write off $225m as bad debt

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Commercial banks in Ghana wrote off a total amount $225 million (GH¢1.1 billion) in the first 10 months of 2018 as bad debt, the country’s central bank has said.

The provision for bad debt was made up of loan losses, depreciation, among others, Bank of Ghana latest Banking Sector report said.

The industry’s adjusted non-performing loans (NPLs) ratio – NPLs adjusted for fully-provisioned loss-loans category – increased to 11.4 percent from January to October 2018 from 10.5 percent within same period in 2017.

This reflected the decline in the loss loan category as a result of the write-offs by banks that were given approval by the Bank of Ghana.

To reduce the size of the loss loan component of the industry’s NPLs, the Bank of Ghana in June 2018 issued a directive to all banks to submit a schedule of loss loans that were past due for more than two years to activate the write-off policy.

This directive was in line with Section 75(2) and 92(2) ii of the Banks and Specialized Deposits-taking Institutions Act, 2016 (Act 930).

Following that, the central bank gave approval to some banks to write-off their loss loans totalling a maximum of GH¢1.2 billion by August 2018. The banks that received approvals to write-off their loss loans were required to submit quarterly reports on recoveries made on the loans that have been written off to Bank of Ghana to ensure full loan recovery.

The stock of NPLs in the banking industry declined to GH¢7.14 billion in October 2018 from GH¢8.3 billion in October 2017, representing 14 percent contraction compared with the 27.2 percent growth a year ago.

Consequently, the ratio of NPLs to gross advances declined to 20.1 percent from 21.6 percent during the same period under review.

The stock of NPLs in the banking industry declined to GH¢7.14 billion in October 2018 from GH¢8.3 billion in October 2017, representing 14 per cent contraction compared with the 27.2 percent growth a year ago.

Consequently, the ratio of NPLs to gross advances declined to 20.1 percent from 21.6 percent during the same period under review.

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