Rabat:The Ghana Association of Banks (GAB) has announced the possibility of halting loans to government workers who receive their salaries through the Controller and Accountant-General's Department, due to unresolved payment delays.
According to Ghana Web, John Awuah, the Chief Executive Officer of GAB, highlighted that the banking sector is incurring losses from these delays, which could exacerbate the non-performing loan (NPL) ratio, already under pressure to be reduced to 10 percent as mandated by the central bank.
Awuah, speaking at the association's 43rd Annual General Meeting, emphasized that the sector's ability to meet the central bank's NPL target is compromised by ongoing delays and 'willful defaults' in the economic system. He described the issue as a long-standing problem that requires urgent attention.
He detailed that banks currently provide loans to various public sector workers, such as teachers, nurses, and doctors, expecting timely repayments. However, repayment delays occur even when these workers have received their salaries, forcing banks to absorb the financial strain.
The Chief Director of the Ministry of Finance intervened previously when GAB considered this drastic step, but the issue remains unresolved. Awuah noted that banks are currently facing a backlog of three months, further impacting their financial stability.
He concluded by pointing out that while some delays are understandable when public sector salaries are in arrears, it becomes problematic when salaries have been disbursed yet loan repayments remain outstanding.