Bank of Ghana Imposes Dividend and Bonus Bans on Banks Exceeding 10% NPL Threshold as Bad Loans Surge to GH¢26 Billion

The Bank of Ghana has imposed tough sanctions on banks exceeding a 10% non-performing loan threshold after bad loans surged to 25% in 2025, restricting dividends, bonuses and lending while demanding aggressive write-offs and faster recoveries . In response to the development, the BoG has swung its regulatory hammer, instituting some of the strictest supervisory measures the industry has seen in recent history, aimed at forcing commercial banks to clean up their portfolios .

The GH¢26 Billion Albatross

The latest PwC Ghana Banking Sector report reveals that the numbers behind the bad loans are eye-watering. Impaired loans ballooned by 68% to reach GH¢26.0 billion in 2025, heavily outpacing a 24% growth in gross loans and advances . The industry’s NPL ratio spiked from 18% in 2024 to a staggering 25% in 2025, despite a supportive macroeconomic recovery .

A key culprit remains the construction sector, where borrowers continue to face severe liquidity constraints in servicing their debts. This is heavily linked to what Dr. Philip Oti-Mensah, CEO of Universal Merchant Bank, describes as the sovereign payment bottleneck . Dr. Oti-Mensah flags that many bank assets are tied directly to government projects, only for a new administration to assume power and declare it cannot pay, immediately crippling loan recoveries .

Data from the Ghana Association of Banks confirms the concentration of NPLs in the Services, Commerce and Finance, Construction, and Agriculture sectors, which collectively account for more than three-quarters of industry NPLs, indicating that asset quality challenges are closely linked to sector-specific economic conditions rather than solely to bank-level credit risk management practices .

A Hit Where It Hurts

To halt this asset decay, the Bank of Ghana has drawn a line in the sand by establishing a 10% prudential NPL limit. For any bank breaching this 10% ceiling, the central bank’s sanctions are swift :

• Restrictions on paying out dividends to shareholders 

• Freezing bonuses for executives and staff 

• Capping future loan growth 

Banks exceeding the prescribed limit face supervisory restrictions that may include intensified regulatory oversight, mandatory corrective action plans, enhanced provisioning requirements, and other prudential measures considered necessary by the Bank of Ghana . Institutions with NPL ratios between 10% and 15% will be given a two-year window to clean up their loan books before sanctions take effect, while those with NPLs of 15% or higher face immediate restrictions .

Furthermore, the BoG has issued direct mandates ordering banks to write off fully provisioned loans that have no realistic recovery prospects and to restructure qualifying NPLs in an aggressive effort to purge bad debt from their books once and for all .

The Paradox of Protected Profits

In a surprising twist, this massive bad loan spike has not yet triggered a disaster for bank profitability. Net impairment losses across the sector plummeted by 75.9%, falling from GH¢3.5 billion in 2024 to just GH¢841 million in 2025 . This paradox exists because the affected facilities were adequately collateralised and fully provisioned beforehand, insulating banks from immediate credit losses .

However, relying on collateral-backed defaults is a risky and slow game. The banking sector has made measurable progress in reducing NPLs, with the ratio declining from 23.1% in June 2025 to 16.1% in June 2026 . The industry remains well above the regulator’s 10% ceiling, meaning that a further reduction of roughly 6.1 percentage points is required within the remaining months of 2026 .

Banking consultant Dr Richmond Atuahene has called for urgent repayment of GH¢35 billion—around 5.8% of GDP—for non-energy sector debt and US$1.6 billion, or 2.8% of GDP, in energy sector arrears, arguing that without this, any recapitalisation would be “meaningless” .

The Slow Wheel of Justice

A major structural challenge is the sluggish pace of debt recovery through the courts. John Awuah, CEO of the Ghana Association of Banks, points out a critical bottleneck within the credit ecosystem: the judiciary .

We need the judiciary to work efficiently and recognise that recovery matters,” Awuah noted, explaining that banks can spend “years in court trying to recover a loan,” which directly inflates the risk premium and raises the cost of borrowing for all other honest businesses . He has raised concerns over legal challenges encountered in loan recovery, particularly the use of tactical court filings by some borrowers to delay or prevent foreclosure proceedings .

The leadership of the Ghana National Association of Bankers has engaged the Chief Justice, His Lordship Justice Paul Baffoe-Bonnie, in discussions focused on addressing challenges associated with loan recovery and strengthening collaboration between the banking sector and the Judiciary . The Chief Justice acknowledged these concerns and clarified that the Judiciary does not shield defaulters but operates within the principles of natural justice, which require that all parties be heard before decisions are made .

The New Era of Discipline

The era of easy interest margins is rapidly coming to an end. As Treasury bill yields slide and lending rates recede, banks can no longer afford to carry non-performing assets on their books . Furthermore, a uniform 20% Cash Reserve Ratio instituted by the BoG will restrict the volume of deployable earning assets .

Fitch Ratings concluded in late 2025 that the vast majority of Ghanaian banks should be capable of reducing their NPL ratios below 15% by the end of 2026, largely through recoveries and write-offs, although only a handful were already below the ultimate 10% threshold . Fitch nevertheless cautioned that a small number of institutions could experience capital pressure as regulatory forbearance expires .

To survive and thrive in this low-interest environment, bank leaders must heed the advice of PwC Financial Services Leader Kingsford Arthur that banks must focus “not simply to grow, but to grow sustainably” .

Finance and tax analyst Nelson Cudjoe Kuagbedzi has expressed confidence that banks can meet the Bank of Ghana’s directive, describing the target as both achievable and essential for safeguarding financial stability . The banking sector is the engine that fuels the economy. Therefore, if you have a banking sector with high non-performing loans, it is a source of concern,” he said .

Source: Accra Street Journal 

Last Updated on August 24, 2026 by Samuel Kwame Boadu

Samuel Kwame Boadu

Samuel Kwame Boadu is a Ghanaian media entrepreneur and storyteller with a passion for amplifying urban voices and uncovering everyday truths. He is the Editor-in-Chief and Founder of Accra Street Journal, a dynamic digital platform dedicated to capturing the pulse of Ghana’s capital—its people, culture, challenges, business, sports and innovations.

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