Banks in Ghana are considering suspending new loans to public sector workers paid through the Controller and Accountant-General’s Department (CAGD) payroll system over rising loan repayment defaults.
Chief Executive of the Ghana Association of Banks, John Awuah, said the proposed move follows persistent challenges with the remittance of loan repayments deducted from workers’ salaries.
Speaking to journalists at the Association’s Annual General Meeting, Mr Awuah said banks could no longer sustain a situation where salaries were paid but loan repayments were not remitted to lenders.
“We have begun discussions and in the coming weeks and days we are going to take an action to suspend total lending to public sector workers under the Controller and Accountant Generals payroll. This is serious because we cannot continue to do this to the industry [banking] where salaries are being paid but our loan repayments are not remitted,” he said.
He added that the Association had previously delayed the action following interventions from senior officials, but warned that banks were now prepared to proceed.
The move follows a directive from Bank of Ghana Governor Dr Johnson Asiama for banks to reduce non-performing loans to below 10% by next year.
Mr Awuah said the growing number of defaulting public sector borrowers had become a major concern for the banking industry and could influence lending rates going forward.
The Association has also been tasked to work with the Bank of Ghana to develop a framework for the full implementation of the Borrowers and Lenders Act.
