From January 2027, banks and financial institutions that fail to comply with the new Bank of Ghana directive on Non-Performing Loans (NPLs) but allow bad loans to pile up beyond acceptable limits will be forced to tighten their belts.
This won’t affect only the board and management; shareholders and staff will also be affected.
The Bank of Ghana (BoG) has announced that any Regulated Financial Institution (RFI) with a Non-Performing Loan (NPL) ratio above 10 percent and 5 percent for microfinance, will face restrictions on paying dividends to shareholders and bonuses to staff.
The move is part of a wider effort to clean up loan books and safeguard depositors’ funds.
“RFIs with NPL ratios exceeding the prudential limit shall, from 1st January 2027, be restricted from the payment of dividends and bonuses as well as growing their loan portfolio (lending to related parties and sectors of the RFI’s credit portfolio with NPL ratios above the prudential limit etc., except for cash-backed facilities),” the new directive announced.
Here’s how it works:
The new directive, cited by The High Street Journal, noted that if a bank’s NPL ratio is above 10% but below 15%, it will be allowed a grace period of only two years. If it fails to fix the problem within that time, the ban on dividends and bonuses kicks in.
However, if the NPL ratio is 15% or higher, the sanctions will be applied immediately, no grace, no excuses.
This implies that from 2027, shareholders of struggling banks should not expect dividend payouts, while employees cannot count on juicy bonuses if their institutions fail to manage bad loans.
For customers, the new rule could mean stricter lending practices, as banks will be extra cautious to avoid giving out loans that may not be repaid.
Already, financial analysts such as Dr. Richmond Atuahene have called on the BoG to deploy drastic measures to address the rising NPLs. This move is a strong signal that the central bank will no longer tolerate lax credit practices that put the stability of the financial sector at risk.
With about 16 months to 2027, regulated financial institutions have a grace period to clean up bad loans or lose the privilege of rewarding those who keep the wheels turning.
