Government has being urged to absorb the bad debt recorded by banks in 2020 because of the impact of covid-19 on their businesses.

According to Banking Consultant and former Managing Director of Bank of Africa, Menson Torkonoo, this is necessary because of the support provided by the banks to the economy during the peak of the covid-19 pandemic.

The commercial banks wrote-off about GH¢384 million in bad debt in the first two months of this year, though a little higher than the same period last year.

Mr. Torkonoo tells Joy Business banks have played a critical role in supporting the economy during the covid-19 pandemic, hence it’s necessary for government to absorb their debts.

“Now they [banks] have a healthy balance sheet in terms of even the capital that they have. The only thing that we can project is government should try and pay this debt; once they pay the banks will also benefit from it”.

“Otherwise their profit will be eroded. We don’t want to come to the point where there will be rationalization in banks again. There is always a dialogue between the universal banks and the Bank of Ghana. I always come from the point of view that when the debt are bad you [bank] better show it so that you can show a healthy balance sheet”, he explained.

Banks bad debt grows because of covid-19

Banks wrote off a little above GH¢384 million in the first two months of this year, according to the Profitability Statement of Banks published by the Bank of Ghana.

The provisioning for bad debt was classified as loan losses, depreciation and others.

It was slightly above the GH¢225 million recorded during the same period last year, due to covid-19 impact on the economy.

However the growth of the bad loans slowed down considerably, largely because of the suspension of loan repayments and loan restructuring by banks to customers during the covid-19 pandemic.