The Bank of Ghana (BoG) has disclosed that Non-Performing Loans (NPL), that is credit that have gone bad in the banking sector increased by 49.4 percent to GH¢20.4 billion in June 2024, up from GH¢13.7 billion in the same period last year.

This, the central bank lamented reflects a deterioration in both domestic and foreign currency-denominated loans in the period under review.

“The asset quality of the banking industry declined during the period under review. The industry’s NPL ratio rose to 24.2 percent in June 2024, from 18.7 percent in June 2023”, the BoG said in its latest Monetary Policy Report.

The report explained that when adjusted for the fully provisioned loan loss category, the industry’s NPL ratio still increased to 10.8 percent in June 2024, from 7.8 percent, reflecting increasing stock of all categories of nonperforming loans.

“The rise in the NPL ratio during the period under review was explained by the higher growth in the NPL stock relative to the growth in total loans”.

Private sector contribution to NPL

The report showed that the private sector accounted for the largest share of the non-performing loans, being the largest recipient of the industry’s credit.

The proportion of NPLs attributable to the private sector rose marginally to 95.6 percent in June 2024, from 95.5 percent in June 2023, while that of the public sector declined to 4.4 percent, from 4.5 percent in a similar period last year.

It further revealed that the agriculture, forestry, and fishing sector recorded the highest NPL ratio of 56.4 percent (an increase from 30.0 percent a year ago), followed by the transportation, storage and communication sector with an NPL ratio of 49.1 percent (from 22.1 percent a year earlier).

The NPL ratio of the construction sector rose to 36.8 percent (from 32.8 percent), followed by the electricity, water and gas sector at 20.6 percent (from 7.8 percent), and then the commerce and finance sector unchanged at 20.2 percent.

The mining and quarrying sector accounted for the lowest NPL ratio of 13.7 percent in June 2024 (from 12.7 percent a year earlier)