In a bid to comply with the new directive by the Central Bank of Nigeria (CBN) mandating Deposit Money Banks (DMBs) to lend to the country’s real sectors, the banks are now relying on credit bureau operators in order to meet the 60% Loan to Deposit Ratio policy.
CRC Credit Bureau’s Managing Director/CEO, Tunde Popoola, made the disclosure recently. According to him, the banks are currently working in partnership with the credit bureau to figure out how the credit facility would best be disbursed. He explained how this is being worked out, thus;
“Historically, banks can look at your transactions and collect information from credit bureau operators, which they can put together and look for other additional information. They may have to generate information that will enable them to know whether you are credible to have loans, and what kind of loans, and how much you will be able to cope with based on the data that they have. Then of course, based on the credit score they are already familiar with, determine the rate at which the customer can access such loans.”
The CRC Credit Bureau boss further disclosed that the email notification from banks to customers on the availability of loans were products of well-thought-out research and data mining on customers’ accounts.
“They are not mistakingly sent emails. You will discover that the amount they tell you that you can have access to, will be different from what they give someone else. And so, because their risk profiles are different, they have been able to do that effectively, leveraging on the availability of data.”
Prior to this development, the apex bank had made known that its directive for DMBs to lend out a minimum of 60 percent of their deposits to the country’s real sector, will take effect from Monday, September 30, 2019.
Understanding the LDR: Loan to Deposit Ratio (LDR) is an instrument deployed to assess a bank’s liquidity by comparing its total loans to its total deposits over the same period. In this process, if the ration appears too high, it means that the bank may not have enough liquidity to cover any unforeseen fund requirements, especially if the loan repayments fall short of schedule. Conversely, if the ratio is too low, the bank may not be earning as much as it can from the deposits it had taken at a cost.