VENTURES AFRICA  – The Bank of Ghana (BOG), the regular of Ghana’s financial industry, has decided to increase the minimum capital of Rural and Community Banks (RCBs) from GH¢150,000 ($71,000) to GH¢300,000 ($146,000).

Apart from the main universal banks and other micro-finance institutions, Ghana has a many other community and rural banks which serve the lower class and operate in rural parts of the country.

According to the Head of Banking Supervision Department of the BOG, Franklin BeLnye,  “Notification to that effect will soon be issued with a time frame for compliance”.

The BOG earlier increased the minimum capital of the RCBs from GH¢50,000 to GH¢150,000 in 2008 “with a flexible time frame for compliance,” as a condition for paying dividends and opening new branches.

The upward adjustment had become necessary because “capital is the lifeblood of any viable banking institution and the more the better”, Mr BeInye explained.

“It is unfortunate some RCBs have still not been able to meet the revised (2008) minimum capital requirement,” he said.

He further said that “In today’s computerised world, appropriate re-tooling to deploy the right technologies for efficient delivery cannot be done without adequate capital.”

He explained that the BoG expects the “shareholders and directors” to exert efforts to meet the revised statutory minimum capital when it comes into effect.

Mr BeInye raised concern that a double digits non-performing loan (NPLs) of RCBs was also a major source of concern because it led to further erosion of capital.

An analysis of NPLs in RCBs showed a predominance of poor risk management practices, information asymmetry between lenders and borrowers, leading to high interest charges which precipitated delinquency, he added.

Mr Belnye, however, reminded them that their survival in the new financial market depended on the adoption of good corporate governance practices and strong risk management to outwit fraudsters.

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