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BOG CRR Policy: Banks Reject Dollar Deposits as Panic Withdrawal Sets in

Banks are rejecting deposits of foreign currencies because it increases the amount of reserves they must keep with BoG, leading to significant forex withdrawals.

Banks in Ghana are rejecting dollar deposits from customers due to complications arising from the Bank of Ghana’s (BoG) new Cash Reserve Ratio (CRR) policy. In an attempt to mitigate the issue, some banks have introduced charges on forex deposits, causing confusion and significant withdrawals by customers.

In its March post-Monetary Policy Committee meeting press conference, the BoG announced a revision in the CRR, which dictates the amount of money banks must keep with the BoG and cannot lend to customers. According to this new directive, banks with a Loan-to-Deposit ratio above 55 percent must meet a CRR of 15 percent, those with a Loan to Deposit ratio between 40 percent and 55 percent must meet a CRR of 20 percent, and banks with a Loan to Deposit ratio below 40 percent are required to hold a CRR of 25 percent.

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This policy means that the more deposits a bank has, the lower the loan-to-deposit ratio and the higher the reserve it must maintain with the Central Bank. The measure aims to reduce the money in circulation to combat inflation. However, this policy has severely limited banks’ funds, leaving them with little to lend to the private sector.

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Accepting forex deposits from the public, amidst a rapidly depreciating cedi, means that the cedi equivalent of the funds banks must keep will increase significantly. Consequently, banks will be required to hold a higher reserve with the BoG, making forex deposits a major disincentive for banks. This has led banks to either reject forex deposits or impose charges on customers bringing in dollars, prompting many customers to withdraw their existing foreign currency in panic.

Sources from The Accra Times clarified that existing foreign currency accounts are not affected. Additionally, people receiving foreign currency through export proceeds or foreign transfers are not impacted and are still welcome by banks.

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The Central Bank has been stringent in its dealings with banks recently to curb the rising dollar and inflation. It has enforced strict compliance with forex regulations, instilling fear among many bank officials.

The Central Bank’s strict approach has also affected forex bureaux operators, to the extent that the Ghana Forex Bureaux Association no longer publishes indicative rates on its website. There have also been instances of the BoG reversing forex trades on the interbank market, causing most forex traders to remain inactive. This led to a drop in the dollar rate for three consecutive days.

However, with demand for the dollar still outstripping supply, the dollar rate rose again on Friday. Trades were around GH¢14.95 and GH¢15.10 to the dollar, compared to GH¢14.95 and GH¢15.05 on Thursday.

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