The Chief Executive Officer of the Ghana Association of Banks, John Awuah, has explained that high lending rates are a major cause of the increase in Non-Performing Loans (NPLs).

He noted that when rates are high, loans become expensive, leading to defaults.

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According to him, although banks are ready to increase lending volumes, regulators must ensure that lending rates are reduced.

“Banks want to lend, but if the environment doesn’t foster lending…in a bid to protect depositors' funds, we will be careful. We hold the view that higher lending rates also contribute to higher default rates because the facility becomes unaffordable. If the rate comes down and lending follows in tandem, then the propensity to perform on the loan will be enhanced,” he told citinewsroom.com.

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Awuah stressed that high levels of NPLs discourage banks from lending, since defaults affect customers' deposits.

“Banks have always been ready. With the default rate where it is, you can be as ready as you like, but if you are confronted with a 22% Non-Performing Loan ratio, you will also be careful. You are playing with depositors' money, and you don’t want to be throwing money out when the expectation for recovery is that low.

"We are calling on all key players whose decision-making—or lack thereof—affects banks' ability to recover from distressed accounts; they should all be watching the space,” he added.

The Ghana Reference Rate (GRR) stood at 19.67% in August 2025, a significant 10.05 percentage point drop since the beginning of the year.

While the Bank of Ghana has cut the monetary policy rate to 25%, banks are also expected to lower lending rates.

SSD/MA