The Bank of Ghana (BoG) has instructed commercial banks, specialized deposit-taking institutions (SDIs), and non-bank financial institutions to reduce their non-performing loan (NPL) ratios to a maximum of 10 percent by the end of December 2026.
The directive comes as part of a targeted supervisory push to clean up balance sheets, curb systemic credit risks, and safeguard financial sector stability following years of elevated bad loans across the banking industry. Under the new guidance, microfinance institutions face an even tighter NPL cap of 5 percent.
Escalating Penalties for Non-Compliance
Financial institutions failing to meet the December 2026 threshold will face immediate regulatory consequences.
According to the central bank's framework:
Breach Notifications: Institutions exceeding the 10 percent cap after the deadline must notify the BoG within 10 working days.
Recovery Plans: Non-compliant lenders must submit a Board-approved recovery plan within 30 days of the breach, outlining strategies to achieve compliance within 12 months.
Dividend and Bonus Freezes: Starting January 1, 2027, institutions remaining in violation will be prohibited from distributing dividends to shareholders and paying executive bonuses.
Lending Restrictions: Violators will face caps on expanding their loan portfolios, specifically regarding credit extended to related parties and high-risk business sectors.
Mandatory Write-Offs and Loan Restructuring Rules
To prevent institutions from carrying unrecoverable debt indefinitely, the BoG is mandating the write-off of bad loans. Lenders are required subject to central bank written approval to write off loans classified under the "loss" category, as well as substandard and doubtful loans showing no realistic prospect of cash recovery.
The directive also establishes stricter standards for loan restructuring. A defaulted loan cannot be reclassified as "performing" immediately after restructuring. Instead, the borrower must demonstrate sustained financial recovery by completing:
Monthly & Quarterly Loans: Six consecutive full payments of both principal and interest.
Semi-Annual Loans: Four consecutive full repayments.
Tackling Asset Quality Pressures
The regulatory push targets a persistent vulnerability in the nation's financial system. While overall banking solvency has stabilized, NPL ratios have remained high, hovering near 19.5 percent in late 2025 after peaking above 24 percent in prior years. The private sector accounts for more than 95 percent of these non-performing assets.
BoG officials emphasized that as benchmark interest rates normalize and returns on government securities moderate, financial institutions must rely on healthy credit portfolios rather than high-yield government paper to sustain earnings. Regulators maintain that enforcing credit discipline now is critical to ensuring long-term bank liquidity and protecting depositor funds.
