Sanaa:Public sector workers in Ghana may soon face difficulties in securing bank loans as commercial banks are preparing to suspend lending under the Controller and Accountant-General's Department (CAGD) payroll scheme. This move is in response to delays in loan repayment transfers to banks.
According to Ghana Web, the Ghana Association of Banks (GAB) has expressed concern over the issue, stating that banks can no longer sustain loan offerings to government employees without timely repayment deductions. John Awuah, Chief Executive Officer of the Association, highlighted this issue during the Association's Annual General Meeting, warning that banks might act soon if the problem persists.
The delays in repayment transfers contribute to the rising number of non-performing loans, which pressures the banking sector and hampers its lending capacity. Awuah stated that discussions have begun, and actions to suspend lending to public sector workers could be imminent.
Awuah also explained that although salaries are paid to workers, the expected loan repayments are not reaching the banks. The Association had considered suspending lending three months prior but delayed due to interventions from senior officials. However, they are now unwilling to wait any longer without a resolution.
The Bank of Ghana has urged banks to reduce non-performing loans to below 10% by next year, prompting banks to take stringent measures to recover loans and minimize losses. The potential suspension could significantly impact thousands of public sector workers relying on such loans for personal and financial needs.
Furthermore, the Association plans to collaborate with the Bank of Ghana to develop a framework for implementing the Lenders and Borrowers Act. Although the proposed suspension has not yet been enacted, it underscores growing concerns among banks regarding delayed loan repayments under the government payroll system.