Ghanaian banks threaten to suspend public sector payroll loans

The Ghana Association of Banks (GAB) has announced plans to suspend new loans to public sector workers whose salaries are processed through the Controller and Accountant-General’s Department (CAGD). The decision follows persistent delays in the remittance of loan deductions that have already been taken from employees' salaries.

John Awuah, CEO of the GAB, stated that banks are facing significant financial pressure due to these unpaid remittances, which have been in arrears for approximately three months. The suspension aims to protect the banking industry from avoidable impairments and rising non-performing loans (NPLs).

This move aligns with a directive from the Bank of Ghana, which requires commercial banks to reduce their NPL ratios to below 10 percent by December 2026. While the industry's NPL ratio has shown improvement, it remains above the central bank's target. The potential suspension could impact various government employees, including teachers, nurses, and doctors, who rely on payroll-linked credit for personal and household needs.