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CRR: CBN stops daily cash reserve requirement

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Former chairman of Citibank Nigeria Yemi Cardoso will succeed Godwin Emefiele as CBN Governor

The Central Bank of Nigeria (CBN) has stopped daily Cash Reserve Requirement (CRR) debits for banks and will be adopting an updated CRR mechanism that is intended to facilitate banks’ capacity for planning, monitoring and aligning with records, the apex bank said on Friday.

A statement by Adetona Adedeji, acting director, Banking Supervision Department, noted that the determination of the segment of deposits is now subject to sterilization with the CBN as CRR will follow two new processes.

The CBN added that the determination of the segment of deposits subject to sterilization with the CBN as CRR will follow two the processes outlined below:

Phase 1 – Utilization 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.

Phase 2 – 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 per our correspondence to all banks referenced BSD/DIR/GEN/LAB/12/049 dated September 30, 2019.

“The CBN will provide your bank with details of the applied charges and their underlying computation rationale,” the statement said.

According to Investopia, reserve requirements are the amount of funds that a bank holds in reserve to ensure that it is able to meet liabilities in case of sudden withdrawals. Reserve requirements are a tool used by the central bank to increase or decrease the money supply in the economy and influence interest rates.

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