Banks Non-Performing Loans: Police interrogate loan defaulters

Some banks have taken a bold initiative to deal with defaulting loan customers whose activities are affecting the smooth operations of the affected banks.

Investigations by the Times Business revealed that some of the affected banks are collaborating with each other, the Ghana Police Service and the Controller and Accountant General’s Department to fish out the defaulters.

A source close to the recent move by the banks told this paper that the police recently invited some defaulting loan customers of the Bank of Africa, in the Suame enclave of the Ashanti Region, for questioning.

Officials of the bank when contacted yesterday declined to comment on the development. However, a source who prefers to remain anonymous, corroborated the move by the bank to address the situation, stating that some personal loan defaulters have been invited by the police for interrogation.

The source said the statements of the defaulting loan customers have been taken and the necessary criminal action would be taken against them in due course.

 Industry-wide investigations also confirmed that the situation is prevalent in at least six commercial banks and some Savings & Loans as well as community & rural banks leading to a blot on the balance sheet of the banks.

The Banking Sector Report released by the Bank of Ghana indicates that the total value of Non-Performing Loans (NPLs) has reduced considerably to about GH¢7 billion by the end of June this year.

The figure stood at 23.5 percent in April 2018 but saw a sharp decline to 18.9 percent in April 2019. Even though there is some improvement, the current ratio still remains very high and is a source of concern for the industry’s asset quality.

The drop in the Non-Performing Loans is large as a result of the exercise carried out by the Bank of Ghana to clean up the financial sector and ensure sanity in the banking industry. There are deliberate actions to curtail and clamp down on bad loans to further reduce the industry NPL.

According to the Central Bank, the decline in the NPL signals a slowdown in the deterioration of loans across all banks. Credit can be given to improved corporate governance structures as introduced by the Regulator.

Checks further indicate that effective credit portfolio analysis and monitoring, to a large extent, also contributed to the reduction in bad loans.

Despite all the efforts by the BoG to clean up the banking sector, some customers have resolved to borrow from banks for personal use but with the intent of not paying back.

Investigations indicate that some customers are deliberately defaulting in the repayment of their personal loans with some Commercial Banks, Savings & Loans and Rural Banks.

These customers allegedly fake letterheads of these financial institutions and are able to move their salaries from their existing creditor banks to other banks in order to avoid the repayment for their loans to be deducted.

Source: Ghanaian Times