BoG Announces Tougher Rules to Slash Bad Loans in Banks
The Bank of Ghana (BoG) has rolled out tougher regulatory measures to rein in rising non-performing loans (NPLs) across banks, specialised deposit-taking institutions (SDIs), and non-bank financial institutions (NBFIs), warning that persistently high bad loans threaten profitability, liquidity, and financial stability.
Under the new directive, all regulated financial institutions are required to keep their NPL ratios below 10 percent by December 2026, with microfinance institutions maintaining a stricter 5 percent threshold. Institutions that breach the limit will face restrictions on dividend payments, bonuses, and loan growth from January 2027.
The central bank says the measures, issued under Act 930 and Act 774, reinforce existing prudential rules while introducing additional safeguards aligned with international best practice. Boards of financial institutions are now expected to take stronger ownership of credit risk management, including approving and reviewing credit strategies at least annually.
As part of the reforms, BoG is compelling institutions to immediately write off fully provisioned loans and facilities with no realistic chance of recovery, subject to regulatory approval. While such write-offs do not extinguish borrowers’ legal obligations, banks are required to continue recovery efforts through collections, asset sales, or loan transfers.
The directive takes a particularly hard stance on loans linked to directors, key management personnel, and significant shareholders. Where such facilities remain in default beyond 180 days, the affected individuals risk being declared unfit to hold leadership positions in regulated institutions, alongside mandatory divestment of shareholdings to offset outstanding debts.
To improve transparency and accountability, banks must publish lists of wilful defaulters twice a year in national newspapers and on their websites. These defaulters will be barred from accessing new credit across the financial system for extended periods, even after repayment, depending on the severity and duration of default.
BoG has also directed institutions to establish dedicated work-out and arrears management units, backed by clear targets and reporting structures, to accelerate recoveries and manage distressed assets more effectively. Institutions with NPL ratios above seven percent will now submit monthly reports to the central bank, alongside enhanced disclosures in their annual financial statements.
In addition, financial institutions are required to pursue the timely realisation of collateral on written-off loans, failing which the BoG may impose further remedial actions, including mandatory recovery plans and supervisory sanctions.
The central bank says the measures are aimed at strengthening credit discipline, restoring confidence in the banking system, and ensuring that declining interest rates translate into sustainable private-sector lending rather than a fresh build-up of bad loans.
With Ghana’s economy gradually stabilising, the BoG insists that tighter credit oversight is critical to protecting financial sector gains and supporting long-term growth.
