The Bank of Ghana (BoG) said it remains committed to reforming its dynamic cash reserve ratio (CRR) system, emphasizing its role in supporting credit growth while carefully managing liquidity.
Speaking at a press briefing following the 128th Monetary Policy Committee (MPC) meeting in January, Governor Dr. Johnson Asiama addressed concerns about the dynamic CRR, introduced to incentivize banks to extend credit rather than hold excess liquidity or overinvest in government securities.
“The dynamic cash reserve ratio was introduced some time ago. The objectives that were announced at the time were to support lending by the banks… we are still committed to those reforms,” Asiama said.
He noted that the Bank of Ghana has begun reviewing the framework and adjusted reserve requirements to align with the currency in which deposits are held, and cautioned that reforms must be balanced with liquidity management.
“Going forward, we will see how to get on with that reform without compromising on our liquidity management efforts,” he said. “The good part is that we have seen a recovery in private sector credit… that is the way to go.”
Asiama added that even if reserve requirements are eventually phased out, the overall goal of increased credit extension, the original purpose of the dynamic CRR, could still be achieved.
The dynamic CRR regime was introduced some years ago to make reserve requirements responsive to banks’ lending behaviour. Under the system, banks with loan-to-deposit ratios (LDRs) below 40% faced a CRR as high as 25%, while those with LDRs above 55% were charged a lower CRR, often near 15%, to encourage lending.
At the May 2025 MPC meeting, the Bank of Ghana amended the framework to address balance sheet vulnerabilities by requiring banks to hold reserves in the same currency as their deposits, for example, cedi‑denominated deposits backed by cedi reserves and foreign currency deposits matched with foreign currency reserves.
The adjustments aimed to reduce currency mismatch risk on bank balance sheets and strengthen the transmission of monetary policy amid volatile foreign exchange conditions.
The dynamic CRR, both before and after the May 2025 revision, has served as a key liquidity tool for the central bank, helping absorb excess system liquidity while encouraging banks to expand private sector credit.
With the ongoing review and careful adjustments, the BoG’s reaffirmation of the framework signals that the central bank is committed to balancing credit growth with financial stability, ensuring that the dynamic CRR continues to support lending while safeguarding liquidity.
