The Ghana Association of Banks (GAB) has warned that it may suspend new loans to public sector workers within weeks if the Controller and Accountant-General's Department (CAGD) does not clear a backlog of unremitted loan repayments. GAB Chief Executive Officer John Awuah stated that the potential action is a last resort after years of failed attempts to resolve the delays. The situation arises from salary deductions for loan repayments being taken from public sector workers, but the CAGD has not passed those funds on to the banks.
According to Awuah, the outstanding arrears stretch back three months as of October, and banks are being forced to record impairments on what should have been settled debts. He described the situation as a financial burden the industry can no longer sustain. The problem has recurred for over a decade, with a prior suspension averted after the Chief Director of the Ministry of Finance personally intervened and committed to resolving the matter.
The threat comes at a time when the Bank of Ghana is pushing commercial banks to bring their non-performing loan (NPL) ratio down to 10%, a target that makes the unremitted deductions an increasingly pressing concern for the sector. Awuah cautioned against drawing comparisons between Ghana's lending rates and those of other countries in the sub-region without accounting for the differences in their NPL ratios.
Awuah expressed hope that the CAGD would act swiftly to transfer the outstanding funds and avoid a suspension that would directly affect public sector workers seeking credit. He emphasized that resolving the remittance delays remained the most straightforward path to sustaining affordable lending and supporting broader economic growth.
The Ghana Association of Banks maintained that it is committed to a stronger banking system, but it cannot achieve this when the profit it makes is eaten away by avoidable impairments. The association is urging the CAGD to take immediate action to resolve the issue.
The issue affects various public sector workers, including teachers, nurses, and doctors, who may face difficulties accessing credit if the suspension is implemented. The GAB is working to find a solution to the problem and ensure that public sector workers can continue to access loans.
The banking sector in Ghana provides various loan options, including mortgages, to help qualified customers purchase, build, complete, or renovate houses. Applicants generally need a stable income, good property documents, and the ability to make monthly repayments. Comparing interest rates, deposits, fees, and repayment periods is essential before choosing a home loan.
Key points
- The Ghana Association of Banks may suspend new loans to public sector workers due to delayed loan repayment remittances from the Controller and Accountant-General's Department.
