Managing Director of OmniBank, Philip Oti-Mensah is urging banks to be cautious about lending to prevent the sector from collapse.

According to him, the high indebtedness of banks is partly blamed on customers’ failure to honour their financial obligations to banks on time.

“In Ghana that is the challenge, many entrepreneurs take loans and they don’t want to pay so banks should be very careful about the lending because once your loan book goes bad, you start losing your capital,” he stated.

His comment follows reports that high loan defaults and bad corporate governance practices were to blame for the collapse of UT and Capital Bank. 

The Bank of Ghana in its latest industry report cited rising loan default as one of the biggest threats to the sector’s stability. 

The regulator, for instance, puts the total stock of loans that banks fear may go bad at almost 8 billion cedis ending June this year.

Based on this background, Mr. Philip Oti-Mensah speaking at the 5th Conclave of the Masterminds Social Capital Network in Accra, expressed concern about the loan repayment culture in Ghana, following the collapse of the two local banks.

He said industry players have to be "aggressive" in recovering loans because data on non-performing loan ratio in the banking industry is alarming.

The OmniBank MD however, faulted the management of the two banks for not giving away ownership when the regulator was sounding the alarm.

“It took too long for those banks to respond to whatever challenges they had. When you face challenges and the regulator comes to you and starts discussing, sometimes you have to simply give away ownership so that the brand can stay,” he added.

Conceding that all banks across the world face challenges, Mr. Oti-Mensah said prudent policies by bank managers and owners could save it from collapse.

“Bank Managers and Bank owners must have good policies around lending, take the right decisions to ensure individuals repay their loans,” he stated.

Philip Mr. Oti-Mensah said the collapse of UT and Capital Banks is a lesson for all banks to be on red alert.